Friday 28th October 2016

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Posts tagged ‘zimbabwe’

Myanmar’s dirty ‘state secret’

October 26th, 2015

Environmental and human rights abuses taint the most prestigious type of jade

by Greg Klein

One of the planet’s most precious gems, the highest-quality jade can sell for over $13,000 a kilo. What that meant to Myanmar last year alone was at least $12 billion in production, more likely up to $31 billion, according to Global Witness. That figure represents about 48% of the impoverished country’s GDP and 46 times the expenditures on health care. But, the human rights group maintains, most of the money goes to government insiders and military officers, their families and cronies, and the war efforts of both sides in an independence struggle that’s left thousands dead since 2011.

It’s another story of conflict minerals from a deeply troubled part of the world. Yet Chinese appetite persists for jade in both its forms, the more expensive but often ethically tainted jadeite from next-door Myanmar and the more modestly priced nephrite jade, of which British Columbia supplies about 75% of world supply. As Myanmar prepares for its first elections since the military junta ended in 2011, Global Witness released an October 23 study calling for thorough reform of the jadeite industry, possibly “the biggest natural resources heist in modern history.”

It centres around Hpakant in Kachin state, the world’s biggest jade mining district and described by a community leader as “one of the most valuable places on earth because you can earn billions from a very small area… and yet only a small number of people are getting advantages.”

“If openly, fairly and sustainably managed, this industry could transform the fortunes of the Kachin population and help drive development across Myanmar,” Global Witness states. “Instead, the people of Kachin state are seeing their livelihoods disappear and their landscape shattered by the intensifying scramble for their most prized asset. Conditions in jade mines are often fatally dangerous, while those who stand in the way of the guns and machines face land grabs, intimidation and violence.”

As heavy equipment and explosives demolish hills of jade, “mountains have become valleys and valleys have become mountains,” one source said. Polluted rivers, water-filled craters, deforestation, landslides and flooding now characterize Hpakant.

As for the beneficiaries, Global Witness’ 12-month investigation revealed a list that “reads like a who’s who from the darkest days of junta rule.” They include families of high-ranking military and government figures, some dating to the dictatorship, others with the current cabinet. At least four “army companies” exploit jade to provide “off-budget finance for secret military projects and an income stream for retired army officers.” Tycoons with junta connections lead a third category of “crony companies.” Drug lords control a fourth category.

The four can overlap. Drug lords, according to one source, can bribe an army officer for his assistance in securing a jade concession. “If the licence comes through, this general or one of his family members will get a share in the mining company.”

They do very well indeed, at Hpakant’s expense. Jade companies linked to former military dictator Than Shwe, current government minister Ohn Myint, drug lord Wei Hsueh Kang and government crony Aike Htwe “recorded around US$430 million in pre-tax sales at the 2014 official government jade sale alone.”

Jade also provides the main source of income for two rebel groups, the Kachin Independence Army and the Kachin Independence Organization. That makes “the battle for control of jade revenues a strategic priority for both sides in the conflict.” Apart from having killed thousands of people since 2011, the struggle has displaced another 100,000, Global Witness reports. Like the government military, the rebels stand accused of war crimes.

When many fear hardliners may finance sectarian violence and dirty tricks, Myanmar’s citizens urgently need to know where the jade money is going.

With the industry playing an integral role in both motivating and financing the struggle, peace depends on addressing “the question of who benefits from Kachin state’s jade.”

Until the early 1990s, when the junta got involved in jade concessions, small-scale operations with local miners benefited. Now, with a “massive upswing” in jade extraction over the last year, local people fear resource depletion could leave nothing for future generations.

That adds a sense of urgency to Global Witness’ call for reform. So does the impending November 8 election. “When many fear hardliners may finance sectarian violence and dirty tricks, Myanmar’s citizens urgently need to know where the jade money is going.”

Global Witness describes its mission as investigating and campaigning “to change the system by exposing the economic networks behind conflict, corruption and environmental destruction.” Among other projects, previous Global Witness campaigns have targeted conflict diamonds in Zimbabwe and the Central African Republic, and conflict gold and tantalum in the Democratic Republic of Congo.

Download Jade: Myanmar’s “Big State Secret”.

November 22 update: A landslide at a Myanmar jade mining site kills over 100 people.

Diamonds not forever

March 13th, 2015

The gems failed to enrich Zimbabwe and now its resources are running out

by Greg Klein

Zimbabwe’s vow to merge all the country’s diamond miners into one state-led entity follows reports that the country’s largest diamond-producing region has largely played out. The Marange fields, once considered the world’s biggest diamond-producing area by volume, has left Zimbabwe little if anything to show. Much blame has been directed at the government. Now that same government rationalizes its planned merger on the basis of transparency.

The mining minister’s announcement, reported by Reuters on March 12, gives companies until March 16 to respond. The idea had been discussed previously but was originally directed at six companies working in the Marange, where the government already holds a slightly better than 50% stake. The plan now encompasses every diamond miner in the country, including Rio Tinto’s NYE:RIO 78%-held Murowa mine.

The gems failed to enrich Zimbabwe and now its resources are running out

Earlier this month Zimbabwean finance minister Patrick Chinamasa told parliament he’s not expecting diamond revenue this year because, as stated, Marange’s resources are depleted and miners have no capacity to dig deeper. The journal added, “When the Marange diamonds were ‘discovered’ around 2005, then-mines minister Obert Mpofu claimed that Zimbabwe would earn $2 billion annually from the gems. Mpofu famously boasted that the country would never again need to beg for financial help.”

Yet Zimbabwe still depends on handouts from the West and China, which has invested widely in the country. Meanwhile accusations of corruption persist. In one example, president Robert Mugabe’s inner circle stands accused of “perhaps the biggest single plunder of diamonds the world has seen since Cecil Rhodes,” stated human rights watchdog Partnership Africa Canada in November 2012. “Conservative estimates place the losses due to illicit activity at over $2 billion since 2008.”

PAC noted Mpofu’s “unexplained wealth,” exhibited by a conservative estimate of $20 million in personal spending, mostly in cash, over the previous three years.

Accusations hardly stop there. Last July Mpofu tried to deflect charges of demanding a $10-million bribe from diamond miners by pointing out his accusers also faced charges—of defrauding the government of $2 billion, the Zimbabwe Herald reported.

After Chinamasa announced Marange’s depletion earlier this month, opposition critics again raised accusations of government corruption. Chinamasa didn’t deny the allegations, but offered a strange rationale. “Sanctions have caused corruption and other vices you are talking about,” quoted him. “Business is no longer done directly due to sanctions and for your own information these illegal measures were put on us not because of human rights violations but because we had taken back our land.”

The sanctions followed concerns from organizations like PAC, which called Zimbabwe and Angola “the main perpetrators of diamonds-related human rights abuses, as their governments have waged violent campaigns to control lucrative diamond fields.”

Nor did Zimbabwe do well after the EU lifted its embargo in 2013. Last September Belgian authorities confiscated Zimbabwean diamonds up for auction in Antwerp, following a $500-million suit by Amari Platinum Holdings over a cancelled mining concession. The following month diamond miners warned they would face “collapse” if Zimbabwe adds a new 15% dividend to their government payments.

Analyst Paul Zimnisky estimates 2013 Marange output at nearly 17 million carats. Pointing out that neither the government nor miners release production figures, he stated anecdotal evidence suggests this year’s production will fall to between six million and 10 million carats averaging a low $45 per carat. Continued U.S. sanctions, he stated, “has resulted in Marange diamonds trading at a discount to global market prices.”

As for the planned miners’ merger, it would come under a Zimbabwean government affiliate, Zimbabwe Mining Development Corp, “which has mining partnership agreements with quasi-private entities, most of which are thought to have ties with Zimbabwe ex-military and political officials,” Zimnisky added.

A diamond-rich neighbour has fared considerably better. Botswana took advantage of its resources to face up to the once-indomitable De Beers, taking a 15% share of the global giant. Through 50/50 joint ventures with De Beers, the country holds a bigger stake in its Botswana mines. The country won another historic victory when it persuaded De Beers to transfer its sorting and sales operations to the capital city of Gaborone. The move was part of a government goal to make the country a global “mines-to-market hub.”

De Beers credited diamonds with 25% of Botswana’s GDP in 2013 and 75% of exports that year. But in last November’s state of the nation address, President Seretse Khama Ian Khama called for greater diversification, warning that diamonds alone can’t sustain the economy, reported. Even so, “We will remain a leading global producer over the next three decades until at least 2050.”

Zimbabwe’s diamond mining industry faces “collapse”

October 20th, 2014

by Greg Klein | October 20, 2014

Government demands for money could kill off Zimbabwe diamond mining, sources told the Harare Herald. According to an October 17 story, banks have been ordered to deduct an additional 15% dividend from gross diamond sales retroactive to April, when new regulations were passed.

Zimbabwe’s diamond mining industry faces collapse

“Officials in the sector said they will end up having more than 50% of gross sales going to taxes, inclusive of royalties, management and depletion fees, with corporate tax chewing at least 25% at the end of each year,” the Herald reported.

“That was a killer, it’s like adding a huge load on top of an ailing horse,” the paper quoted Marange Resources acting CEO Mark Mabhudhu. “Already we have royalties at 15% as well before looking at other costs which leaves me with nothing as Marange Resources.”

Exacerbating the problem, Belgian authorities last month seized roughly $40 million of Zimbabwean diamonds at an Antwerp auction pending settlement of a $500-million suit by Amari Platinum Holdings over a cancelled mining concession.

Referring to a meeting with the Ministry of Mines, Diamond Mining Company general manager Ramsey Malik told the Herald, “All the mining companies present confirmed that operations will stop if the directive is enforced.”

An anonymous source with Mbada Diamonds added, “What it means is that if government takes 15% special dividend, the other shareholder will also take 15% because you cannot declare dividend on one shareholder and leave the other. That will take our total tax costs to almost 60%.”

In July the Herald stated Zimbabwe intended to merge the country’s diamond miners with the intention of “curbing leakage in diamond revenue and enhance transparency in diamond mining,” as mines minister Walter Chidhakwa put it.

But Farai Maguwu, director of a monitoring group called Center for Community Development, predicted efforts will fail because of “strong and powerful people who are untouchable.”

The Herald also stated, “The industry has been mired in controversy over non-remittance to the national treasury and its ownership structure has never been clear, with civil groups accusing top government and military officials of pocketing revenue and committing human rights abuses in the local Marange and Chiadzwa areas.”

The Herald added, “Some independent groups that investigated the Chiadzwa dealings, including Partnership Africa Canada, accused the Mugabe regime of operating a ‘parallel government’ funded by proceeds from illegal diamond sales.”

Diamond authority Paul Zimnisky attributes last year’s Marange diamond fields production at nearly 17 million carats, or 13% of global supply by volume. But the alluvial resources are dwindling quickly. “In 2014, Marange production is estimated to drop to 8 to 12 million carats or less.”

Diamonds in demand

September 17th, 2014

Supply can’t keep up so the quest continues for new deposits, says De Beers

by Greg Klein

Growing diamond demand “will almost certainly outstrip growth in carat production, given the lack of major new discoveries in the last decade and the projected slowdown in several existing mines.” That’s among the findings of the first annual Diamond Insight Report released September 17 by De Beers, the global giant of the gem’s mining and vertical integration. A moderate increase in supply will fail to match demand up to 2020. Then, “unless major new discoveries are made in the coming years, supply can be expected to decline gradually.”

Between 2008 and 2013, consumer demand for polished diamonds rose nearly 5% in compound annual growth, driven largely by China, India and the U.S., according to De Beers. The company estimates last year’s rough diamond production at 146 million carats globally, representing a 7% increase in volume over 2012 and a 3% rise in value to US$18 billion. Even so, volume fell far below the 2005 peak, which surpassed 176 million carats.

Supply can’t keep up so the quest continues for new deposits, says De Beers

Not surprisingly, exploration spending “is expected to remain high as the chase to find the next major source of diamonds intensifies,” the report states. Most diamond exploration now takes place “in historically underexplored African countries such as Angola, the Democratic Republic of Congo and Zimbabwe, as well as the vast swaths of arctic Siberia and Canada.”

Yet exploration for diamonds hasn’t kept pace with that of other natural resources, De Beers maintains. Although last year’s global spending hit 250% above the 2001 figures, that amount fell to “practically half the record levels seen in 2007, when the industry was spending almost US$1 billion per year on diamond exploration.”

“The trend here differs from the mining sector in general, where 2013 expenditure, although lower than in 2012, remains well above 2007/2008 levels.”

If there are more of the really big Tier 1 deposits to be found, they remain elusive. The world has only seven such mines currently. The largest of eight projects coming onstream has a relatively modest peak production estimate of five million carats a year. That’s the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture in the Northwest Territories’ Lac de Gras region. Just one other projected operation, the Grib mine in Russia, comes close with an estimated four million carats annually. The other six, in Canada, Russia, India and Botswana, have estimates ranging from two million carats per year down to 400,000 carats.

But the report cautions that “no amount of investment in exploration guarantees the discovery of deposits on which sustainable mining operations can be built.” Furthermore new discoveries take considerable time to move into production. “From 1950 to today, it took an average of 14 years between the discovery of a diamond deposit and the start of production.” More recently, that timeline has been expanding. Gahcho Kué, slated to begin operations in 2016, was discovered in 1995.

Exploration will likely focus on “those areas where the prospectivity potential is highest and where the least exploration has been conducted to date, such as central Africa, Russia and Canada.” Additional carats might still be found in South Africa and Zimbabwe, despite their long histories of diamond mining, thanks to advances in geophysical technology.

The challenges of discovery and development “in some of the world’s most inhospitable places are astonishing feats of engineering and human ingenuity.” De Beers, active in both the NWT’s Gahcho Kué development project and Snap Lake mine, ranks the Canadian sub-Arctic among the world’s “more hostile natural environments.” But it’s also “home to some of the largest recent developments of diamond mines.”

[Diamond exploration will likely focus on] those areas where the prospectivity potential is highest and where the least exploration has been conducted to date, such as central Africa, Russia and Canada.—De Beers’ Diamond Insight Report 2014

“Such operations are inherently more complex to run and involve greater infrastructure investments,” the report continues. “Miners go to extraordinary lengths to bring diamonds to market. This has always been the case and supply will continue to increase as demand grows. However, this cannot happen without substantial effort and investment. The cost and complexity of mining diamonds will continue to increase, and diamonds will remain one of the most coveted of earth’s products.”

Apart from Snap Lake, Canada’s sub-Arctic hosts the Ekati mine (majority-held by Dominion Diamond TSX:DDC) and Diavik (Rio Tinto NYE:RIO/Dominion). All three mines, as well as Gahcho Kué, lie within the NWT’s Lac de Gras region, the site of substantial junior exploration activity.

De Beers also runs the Victor mine in northern Ontario as well as operations in Botswana, Namibia and South Africa. Last year the company, once a cartel that controlled most of the global diamond industry, handled 33% of the world’s rough diamond sales by value.

De Beers’ supply/demand forecasts generally echo Bain & Company’s Global Diamond Report 2013, which estimated supply growth of 2% annually for 10 years contrasting with demand growth of 5.1% as “existing mines get depleted and no major new deposits come online.”

Download the Diamond Insight Report 2014.

Opportunities in opulence

March 7th, 2014

From Canada to Antwerp, diamond explorers, miners and traders serve a thriving market

by Greg Klein

For giant miners and junior explorers alike, diamonds upheld their market lustre in 2013 and show further encouragement this year. So it wasn’t quite an industry-wide shock when one record-shattering sale fell through. A group of investors fronted by New York diamond cutter Isaac Wolf defaulted on last November’s $83.2-million bid for the Pink Star, Sotheby’s revealed late last month. Now the auctioneer’s out the $60 million guaranteed to the anonymous seller. But the company retains the stone, to which it attributes an “inventory” value of $72 million. Meanwhile, undeterred by the caprice of the super-rich, efforts continue to find, mine and market opulence for the affluent.

This month Rio Tinto NYE:RIO heads to Antwerp and Israel for the company’s first rough diamond tender of 2014. Rio says this offer of 124 lots “showcases a unique combination of white and fancy-coloured rough diamonds” from its mines in Australia, the Northwest Territories and Zimbabwe. Among notable stones from the NWT’s Diavik, Rio’s peddling a 70-carat white diamond, several purple diamonds and some “fancy and intense” yellow diamonds.

From Canada to Antwerp, diamond explorers, miners and traders serve a thriving market

Kennady Diamonds has infill drilling underway
at its Northwest Territories diamond project.

Once pulled out of the ground, about 80% of the world’s diamonds go to Antwerp, the undisputed capital of global trade since the 15th century. The city handles about $11.2 billion worth of rough stones annually, out of a global total of $14.2 billion, according to the Antwerp World Diamond Centre. Vying for a piece of the action are some 1,850 local companies crowded into their own fabled district with “Flemish, Orthodox Jewish and Indian diamantaires working alongside manufacturers, rough and polished dealers, buyers and services providers from almost every country in which diamonds are mined, processed, bought and sold.”

The centre characterized last January as an “excellent 2014 kick-off” in which the value of exports jumped 27.7% and imports 21% over the same month last year. Exports showed “an all-around increase, principally to the usual consumer markets India, the United Arab Emirates and Hong Kong.”

Polished diamonds picked up too. January exports improved 9.69% and imports 13.79% in value over the same month in 2013.

Although the stones’ esthetic vagaries complicate matters, diamond prices remained relatively stable last year, avoiding the declines seen in precious metals. Giants did well, with Rio reporting a 15% increase in diamond revenue over 2012. De Beers proclaimed 2013 “a strong year of growth” for its Forevermark diamond brand, “driven predominantly by continued consumer demand in core markets, China, U.S., India and Japan.” Many Canadian-listed juniors and mid-tiers rose well above the malaise suffered by their counterparts in other commodities.

Among activity within Canada, Kennady Diamonds TSXV:KDI continues working towards a maiden resource for its eponymous project in the NWT. Infill drilling began last week, according to a March 6 statement, part of a plan to better define the Kelvin kimberlite body prior to a mini-bulk sample of 25 to 30 tonnes. Last year a 4.3-tonne sample from Kelvin showed 5.38 carats per tonne with the three largest diamonds comprising “a 2.48-carat off-white transparent octahedral, 1.06-carat off-white broken aggregate and a 0.9-carat off-white transparent irregular,” Kennady stated.

The March 6 update also reported an amended exploration agreement with the Lutsel K’e Dene First Nation and receipt of a five-year land use permit and seven-year water licence.

The same day Shore Gold TSX:SGF announced a “target for further exploration” for its central Saskatchewan properties. A TFFE uses exploration data to disclose potential quantity and grade that might not be realized in an eventual resource estimate. On that basis, Shore’s TFFE for seven kimberlites “is estimated to include between 983 million and 1.17 billion tonnes of kimberlite containing between 52 and 90 million carats.”

The seven kimberlites spread over two properties, Shore’s wholly-owned Star-Orion South project and the adjacent Fort à la Corne, a joint venture shared 67%/33% between Shore and Newmont Mining Corp of Canada TSX:NMC.

A 2011 feasibility study showed a probable reserve for the Star and Orion South deposits:

  • Star: 165.89 million tonnes averaging 12.3 carats per hundred tonnes for 20.386 million carats of diamonds

  • Orion South: 113.09 million tonnes averaging 12.4 cpht for 13.994 million carats

  • Total: 278.98 million tonnes averaging 12.3 cpht for 34.38 million carats

The two deposits also have inferred resources totalling 9.1 million carats.

In other Canadian diamond activity, North Arrow Minerals TSXV:NAR closed a $5-million private placement late last month to fund three projects, two of them 80% options with Stornoway Diamond TSX:SWY. The Qilalugaq property in Nunavut is slated for a 1,500-tonne bulk sample and an Antwerp valuation next summer. Pikoo, a Saskatchewan project heralded for its diamond discovery in November, is expected to undergo till sampling this year to seek out additional kimberlites.

On the earlier-stage Redemption project in the NWT, North Arrow holds a 55% option with Arctic Star Exploration TSXV:ADD. This year’s plans include till sampling and geophysics at the 11,493-hectare project, 32 kilometres from the Ekati mine and 47 from the Diavik mine.

Dominion Diamond TSX:DDC looms large in the region, holding an 80% interest in Ekati, 58.8% of the mine’s Buffer zone and 40% of Diavik. Chuck Fipke and Stewart Blusson, two pioneers of Canadian diamond exploration, each hold 10% of Ekati, while Rio holds 60% of Diavik. Dominion ranks fourth worldwide for diamond production by value.

An Antwerp report that came through in late February evaluated a 1,013.5-carat parcel of commercial-size stones for Peregrine Diamonds TSX:PGD. Taken from the CH-6 kimberlite pipe in Nunavut, the gems were priced at an average of $213 per carat for a total of $215,605. Peregrine has a resource scheduled for CH-6 by the end of Q2.

The valuation was conducted by WWW International Diamond Consultants, a company that’s familiar with Canadian projects and currently evaluating diamonds for Gahcho Kué in the NWT. JV partners De Beers (51%) and Mountain Province Diamonds TSX:MPV (49%) plan to use the data in a feasibility update scheduled for release by the end of March. Gahcho Kué’s expected to become Canada’s next diamond mine.

Read more about diamond mining and exploration in Canada here and here.

Alberta most attractive mining destination in Canada, third worldwide

March 3rd, 2014

by Cecilia Jamasmie | March 3, 2014 | Reprinted by permission of

Alberta most attractive mining destination in Canada, third worldwide

Oilsands development in northern Alberta.


For the second consecutive year, Alberta—home to the booming and controversial oilsands industry—ranked first in the country and third worldwide as the most attractive jurisdiction for mining investors in the Fraser Institute’s annual global survey of mining executives.

The study, released March 3 as the Prospectors and Developers Association of Canada convention kicked off in Toronto, is based on input from 690 mineral exploration and development company executives.

Sweden and Finland scored the top places in this year’s survey, which spotlighted 112 jurisdictions worldwide. Kyrgyzstan and Venezuela were named the worst two countries to venture.

“Miners praise Alberta for its transparent and productive approach to mining policy. The province offers competitive taxation regimes, sound legal systems and relatively low uncertainty around land claims. That’s what miners look for,” said Kenneth Green, Fraser Institute senior director of energy and natural resources.

Two other Canadian jurisdictions—New Brunswick (7), and Newfoundland and Labrador (9)—ranked in the top 10 worldwide, followed by Saskatchewan (12), Yukon (19), Quebec (21), Manitoba (26), Ontario (28), Nova Scotia (29), British Columbia (32), Nunavut (44) and the Northwest Territories (47).

Quebec, once the darling of mining investors, continued to fall down the rabbit hole. From 2007 to 2009, the French-speaking district topped the survey, then dropped to fifth in 2011, 11th in 2012 and finally 21st worldwide in 2013, due in part to amendments to Quebec’s mining act and recent tax policy changes.

“If Quebec wants to renew confidence in the global mining sector, it should reduce red tape, minimize the risk associated with policy changes and tax increases, and respect negotiated contracts,” Green said.

B.C. dropped to 32nd from 31st in 2012, though the survey recorded improved perceptions regarding the western province’s political stability and availability of labour and skills.

The Canadian public policy think tank also identified the 10 places mining enthusiasts should avoid. From the bottom, they are Kyrgyzstan, Venezuela, Philippines, Argentina (La Rioja and Mendoza), Angola, Zimbabwe, Ivory Coast, Indonesia and Madagascar.

Reprinted by permission of

Zimbabwe may have to stop producing diamonds

December 10th, 2013

by Cecilia Jamasmie | December 10, 2013 | Reprinted by permission of

Zimbabwe, one of the world’s top diamond-producing countries, may soon have to wave its gem extraction industry goodbye as miners operating at Marange and Chiadzwa fields claim it has become economically unviable for them to dig any deeper for the precious stones.

Zimbabwe may have to stop producing diamonds

Diamond miners claim they have neither the expertise nor the resources to search for deposits underground. (Screenshot from Voice of America video)

According to the state-run Herald newspaper, Mines Minister Walter Chidhakwa was told last week that alluvial diamonds—which are easily extractable through open cast mining—have run out and existing miners say they have neither the expertise nor the resources to search for new deposits underground.

If confirmed, the news could be devastating for the southern African nation’s economy, which is counting on its diamonds to boost its weak economy, hurt by years of mismanagement and corruption.

Zimbabwe ranks today among the world’s top 10 diamond producers, with the government holding a 50% interest in most of the Marange mining operations.

Since their discovery in 2006, the country’s alluvial diamond deposits have been heavily extracted, providing generous revenues to miners and the government. But as the resource is depleting, revenue has begun to decline.

The director of Anjin Investments, one of the seven companies licensed to mine diamonds in Chiadzwa, told the paper his firm is operating below the break-even point.

“Our ore is much deeper to depths of about 40 metres and some of the areas we have had to abandon mining because it was no longer commercially viable,” he said.

The Marange diamond fields, 400 kilometres east of the capital Harare, have been a focus of controversy since 20,000 small-scale miners invaded the area in 2008, being removed later by soldiers and police.

Human rights groups say up to 200 people were killed during the process, charges denied by the previous coalition government formed by President Robert Mugabe and long-time opponent Morgan Tsvangirai.

Reprinted by permission of

Precious, practical and fickle

November 13th, 2013

Platinum’s supply shortage won’t boost its near-term price, a report cautions

by Greg Klein

Forecasts that platinum prices would break free of gold have so far proved premature. True, the metal now attracts strong ETF interest in addition to industrial uses, not to mention jewelry and bullion. Demand is set to hit record levels this year, pushing supply further into deficit. But a comprehensive study of the metal’s 2013 performance finds it “increasingly unresponsive to supply-side concerns.”

Indeed, “after rising above $1,700 in February, platinum was dragged below $1,400 following a sharp fall in the gold price.” That comes from the Platinum 2013 Interim Review released November 12 by Johnson Matthey, self-described as “the world’s leading authority on platinum group metals.” The 40-page report compiled by an 11-person research team tracks the year’s PGM performance in supply, demand and price by jurisdiction and use. While the study finds considerable push and pull from other forces, the vagaries that trouble gold seem to afflict platinum too.

Yet this year’s supply deficit is forecast at 605,000 ounces, compared to 340,000 ounces in 2012, thanks to ETFs and industry. The latter includes automotive catalytic converters as well as chemical, electrical, glass, petroleum and medical/biomedical uses.

Platinum’s supply shortage won’t boost its near-term price, a report cautions

The researchers say an 11.5% increase in industrial demand will come largely from chemical uses while catalyst demand will drop. As for ETFs, “unprecedented offtake” in South Africa, along with ETFs from other regions as well as bars and coins, “will lift investment demand to a record 765,000 ounces.”

Most of that came from “pent-up demand” in SA where the new Absa Capital ETF rose to 660,000 ounces between its April launch and the end of September, Johnson Matthey points out. The rand-denominated, Johannesburg-traded product attracted institutions that face limits on foreign investments, but also anyone who could afford the 1/100th-ounce minimum purchase.

Along with supply concerns, that ETF partly offset the precious metals plunge that started in April. But by the end of September, the report indicates, platinum’s performance often mimicked gold’s rise and fall in response to speculations about the Fed, quantitative easing and the U.S. debt ceiling. The study tracks platinum’s progress to a September 27 low of $1,411. Still, that’s an improvement over $1,323 in June following the spring precious metals crash that coincided with a weakening auto sector in Europe. Platinum began November 13 at $1,436.

The anticipated breakout from gold hasn’t happened. Even so the year’s platinum mine supply forecast comes to 5.74 million ounces (up 1.6% from 2012), plus 2.07 million ounces from recycling, versus 8.42 million ounces of demand (up 4.9%). Commodity price explanations don’t come easily, especially with precious metals. And platinum is considered both precious and industrial, potentially pulled in different directions by opposite forces. Johnson Matthey attributes about 9% of 2013 demand to investment and 32% to jewelry.

Looking ahead, the report sees a third consecutive deficit next year but “this may not be sufficient to support higher platinum prices.” The predicament of South Africa, the world’s leading producer but with dwindling reserves and uncertain labour conditions, might have been expected to push platinum prices further. “But investor fatigue appears to have set in and sporadic strikes in 2013 have had increasingly little influence on the price.”

[A not-yet launched Johannesburg-traded ETF comprises] the biggest uncertainty facing the palladium market next year.—Johnson Matthey’s
Platinum 2013 Interim Review

The report sees palladium ($741 an ounce on November 13) showing a smaller but still significant 2013 deficit of 740,000 ounces. The metal’s mined for catalysts, largely for gas engines, as opposed to diesel motor catalysts that use platinum. Other key consumers are the chemical, dental and electrical industries.

The mine supply forecast shows 6.43 million ounces, down about 1.5% from last year. Recycling brings in another 2.46 million. Demand comes to 9.63 million, down 3.4%. About 7.8% of demand comes from investment and 4% from jewelry.

Both industrial and investor demand have dropped despite “significant inflows into palladium ETFs in the first two months.” But the authors note that Absa Capital has received SA regulatory approval for a Johannesburg-traded palladium ETF, a “wild card” that’s “the biggest uncertainty facing the palladium market next year.” The ETF’s launch date hasn’t been announced.

Rhodium, also used for catalysts and in the chemical, electrical and glass industries, began November 13 at $980. That’s barely above July’s nine-year low of $975, despite demand reaching a six-year high. The report attributes the contradiction to a “large hangover of surplus metal that accumulated between 2008 and 2011.” Today’s small deficits are “entirely due to the movement of market stocks into physically-backed investment products” from a Deutsche Bank rhodium ETF as well as rhodium bars sold in North America and Europe.

Prices for ruthenium and iridium, both used for electrical, chemical and (of course) electro-chemical uses, dropped sharply this year. The report attributes “a long-term imbalance between primary production and consumer offtake.”

Examining supply by jurisdiction, South Africa shows little change in platinum production, a result of depleting deposits and labour unrest. Only Zimbabwe, a country fraught with jurisdictional risk, is likely to increase its platinum output in 2014.

Russia’s platinum production will see a slight decline. Palladium too, because of reduced sales from government stockpiles, “now an insignificant part of the overall palladium supply picture.”

Nor will Canadian production see much change. Lower output from North American Palladium’s TSX:PDL Lac des Iles mine in northwestern Ontario will be offset by increased palladium byproduct from nickel operations at Glencore Xstrata’s Raglan mine in northern Quebec and Vale’s Sudbury operations, the report states.

Rating the risks

February 28th, 2013

A Fraser Institute survey shows how miners and explorers see the world they work in

by Greg Klein

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“Great mineral assets, highly corrupt government….” That’s sometimes the conundrum under which exploration and mining companies operate. And that was just one comment published by the Fraser Institute as it evaluated a world of challenges and opportunities in its annual Survey of Mining Companies released on February 28.

Between October 2012 and January 2013, 742 companies rated 96 jurisdictions which included countries and, in the case of Canada, Australia, the U.S. and Argentina, provinces, states and territories. Respondents considered 15 policy factors affecting investment decisions in those jurisdictions, for a possible maximum score of 100. Some factors included regulations, corruption, taxation, aboriginal land claims, infrastructure, the local workforce, political stability and physical security.

While the full report provides breakdowns by category, here are the top 10 jurisdictions for overall scores. The 2011-to-2012 rankings are in parentheses.

A Fraser Institute survey shows how miners and explorers see the world they work in

The Fraser Institute’s annual survey rates jurisdictional risk
for a number of factors concerning mining and exploration.

1. Finland (New Brunswick)
2. Sweden (Finland)
3. Alberta (Alberta)
4. New Brunswick (Wyoming)
5. Wyoming (Quebec)
6. Ireland (Saskatchewan)
7. Nevada (Sweden)
8. Yukon (Nevada)
9. Utah (Ireland)
10. Norway (Yukon)

Last but least, here are the bottom 10:

87. Greece (Vietnam)
88. Philippines (Indonesia)
89. Guatemala (Ecuador)
90. Bolivia (Kyrgyzstan)
91. Zimbabwe (Philippines)
92. Kyrgyzstan (India)
93. Democratic Republic of the Congo (Venezuela)
94. Venezuela (Bolivia)
95. Vietnam (Guatemala)
96. Indonesia (Honduras)

Utah and Norway knocked Saskatchewan and Quebec out of the top 10. Greece was added to the survey for the first time, only to join Zimbabwe and the Democratic Republic of the Congo for their bottom 10 debut. Another first-timer, French Guiana placed 27th overall, a fairly impressive ranking for a newcomer and non-First-World country.

Crisis-torn South Africa dropped to 64th place overall compared to 54th last year, retaining its fourth-from-last spot for “labour regulations, employment agreements and labour militancy or work disruptions.”

Of Canadian jurisdictions, Nunavut ranked worst at number 37.

Some anonymous concerns listed under “horror stories” ranged from uncertainty about native rights in Ontario to potential corruption in Quebec. One response stated that “endless ‘community consultation’” in the Northwest Territories costs the company more than exploration. Others noted confiscation of mining rights in Indonesia and expropriation in Bolivia.

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Week in review

February 2nd, 2013

A mining and exploration retrospect for January 26 to February 1, 2013

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

A mining and exploration retrospect

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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