Dec '13/Jan '14

Industry at a glance

By Peter Braul and Herb Mathisen

Canada, China compare notes on mining valuation

A group of Canadian mining professionals welcomed a delegation from China’s mining valuation authority to Toronto, in mid-October, for the Canada-China Mine Valuation Workshop. The purpose of the workshop, according to Keith Spence, the co-chair of CIM’s special committee on valuation of mining properties, was for both Canadian and Chinese professionals to share how each group values mining projects in the exploration, development and production stages. “I think really the focus was to broaden the relationship that we have with them,” he said, adding that because China is investing in Canada, it will also help companies understand what matrices Chinese investors use when making decisions.

Chinese representatives presented their approaches to project valuations before a crowd of geologists, bankers, CEOs and lawyers, said Spence. Some differences in practice became apparent. “In general, in the way we approach valuation, we might have some advantages over China, but in the way they regulate valuation, I think they have some advantages over us,” Spence said. “They have a better accreditation process both for companies that do valuations in China and for individuals.” Canada, however, is better equipped to use a market-based approach to add credibility to a project’s valuation, noted Spence. This is due, in part, to the fact that Canada has more publicly traded companies, but also because “our capital markets have a history of being relativity free and open, and I think their capital market is fairly young and they don’t have the database and the historical numbers, or even the large quantities that we have, to draw upon.”

– Herb Mathisen

Feds okay Gahcho Kué diamond project

The outlook for Northwest Territories’ diamond future got a little brighter after the federal government approved the Gahcho Kué joint venture project on October 22, following conditional approval from the Mackenzie Valley Environmental Impact Review Board last summer. De Beers owns 51 per cent of the project, with Mountain Province Diamonds holding the rest. The territory’s regulatory board had recommended that the project, located 280 kilometres northeast of Yellowknife, could proceed only if further environmental mitigation measures to reduce potential impacts posed to local caribou herds are incorporated. Mountain Province Diamonds CEO Patrick Evans said the recommendations “haven’t impacted either the design or constructions plans,” adding the ­measures relate to caribou monitoring. “Whether or not these measures had been attached to the approval, the joint venture would have undertaken this work over the normal course of business,” he explained.

The joint venture applied for its land use and water permits the day after the federal government’s ap­proval, and Evans said it expected an interim land use permit before the end of November, at which time the project’s 24-month construction stage would begin. This winter’s construction will focus on building a permanent airstrip at the remote site, along with earthworks for a permanent construction camp. Evans added that 1,000 truck-loads of equipment will be sent up the ice road in March, including materials to build the camp and elements of the power-generating system. The company expects to employ nearly 700 workers during construction and almost 400 workers through its 11-year mine life.

– H.M.

PotashCorp profits dip in Q3

Following last summer’s potash market upheaval, Saskatoon’s PotashCorp saw its profits fall in the third quarter to $356 million from $645 million during the same period in 2012. “The most recent quarter can best be characterized as a predictable response to an unpredicted event,” PotashCorp CEO Bill Doyle said in a release, referring to Russian potash producer Uralkali’s withdrawal from a European potash export partnership, an action that disrupted the global potash trade. According to Doyle, Uralkali’s move caused demand to stall as customers – particularly contract customers in India and China – waited for prices to drop. And they did, with potash selling for the realized price average of $307 per tonne in the third quarter of 2013, down from $429 in the same quarter of 2012. “As a result, our potash shipments to domestic and offshore markets declined,” said Doyle. With quarterly production dropping 27 per cent year-on-year, Doyle added that PotashCorp would reduce its yearly outlook from between 8.5 and 9.2 million tonnes to between 8.0 and 8.4 million tonnes. Despite the drab quarter, Doyle asserted that the company – along with its export partner Canpotex – would benefit from Uralkali’s move in the long run, suggesting the Russian company had hurt its reputation by taking such dramatic action in July.

– H.M.

New rules on projects requiring environmental assessments

New potash and graphite mines, oil sands processing plants and metal smelters will not automatically be subject to environmental assessments, based on regulations released by the federal government in late October. Following a six-month review that began last April, as part of an overhaul of the Canadian Environmental Assessment Act, the federal government finalized its regulations that set out which projects – and project expansions – would be subject to the environmental assessment process.

In many cases, the report sets project thresholds associated with anticipated production targets. Depending on whether a project proponent estimates production to be above or below the threshold, it would or would not have to submit a project description, which the Canadian Environmental Assessment Agency (CEEA) would review to determine whether the project requires an environmental assessment or not. While potash and graphite mines and oil sands processing plants do not have to submit such a project description, the act “allows the minister of the environment to order an assessment for a project not listed in the regulations where there may be adverse environmental effects related to federal jurisdiction,” said Sharleen Bannon, CEAA’s senior communications advisor. The regulations also require diamond mines with a production capacity of 3,000 tonnes per day or more to submit a project description and they also lower the threshold for rare earth mineral mines to 600-tonnes-per-day production capacity.

– H.M.

Business boost for North Bay

Northern Ontario companies got some help in September, with the opening of the Innovation Centre for Advanced Manufacturing (ICAMP) in North Bay’s Canadore College. With its goal of encouraging local product development and process improvements, while keeping businesses and jobs in northern Ontario, ICAMP has already seen uptake by the local mining sector. “We’ve already started to work on some projects with some mining companies which are really interesting,” said Charles Gagnon, the college’s manager of corporate relations.

The centre provides hi-tech equipment and laboratory facilities for companies to use when designing, testing and improving new products and processes. For instance, Gagnon said, the centre will soon have a scanning electron microscope and trained staff to provide expertise to smaller firms wishing to access the expensive technology. “There are big mining companies that have them, but they’re not accessible for the smaller mining companies that can’t even think about affording them,” he said. ICAMP has developed partnerships with funding organizations to provide incentives for local businesses to work with the centre and also made connections with similar facilities in surrounding regions such as the Material Joining Innovation Centre in Kirkland Lake. “We’re developing partnerships to make sure that we’re able to provide the best service for companies,” said Gagnon.

– H.M.

Tough cases at National Mining Competition

More than 50 students from 11 post-secondary institutions took part in the second annual National Mining Competition in Saskatoon, from October 31 to November 3. The undergraduate mining case study contest, hosted by the University of Saskatchewan’s Edwards School of Business, challenges business, geology and engineering students to work together to develop a strategy when presented with a business problem facing a fictional mining company. Each team must consider political, environmental and economic risks inherent with its scenario, which this year focused on the development of a gold company’s mineral property. Teams had 38 hours to put together their strategies, and as part of the competition, they could ask questions of 11 different consultants, ranging from tech service to supply chain to investor relations professionals, to help inform their business cases. Following a preliminary presentation, three teams moved on to present to a final panel of judges, which included CFOs, executives and a former CEO from the mining industry, in a boardroom-style presentation where the judges could question and challenge the teams as they made their presentation. “Our goal,” said Cole Thorpe, co-chair of the event, “is to try to simulate what the mining business is actually like.” The Michigan Tech team won the competition, and event co-chair Kent Janostin said that team benefited from one of its members having recently completed a work term with Barrick Gold. Both Thorpe and Janostin are excited for next year’s event, after seeing overall participation jump from 36 to 56 students this year.

– H.M.

Barrick suspends Pascua-Lama

Plagued in the last year by legal challenges, environmental issues and even a recent work stoppage, Barrick suspended the construction of its massive $8.5-billion Pascua-Lama gold project in late October. The move, which the company indicated was temporary, will save the gold miner as much as $1 billion in capital costs in 2014, said CEO Jamie Sokalsky. “We have determined that the prudent course – at this stage – is to suspend the project, but naturally we will maintain our option to resume construction and finish the project when improvements to its current challenges have been attained,” he said. The company will continue all the environmental compliance work and social obligations associated with Pascua-Lama, Sokalsky said, adding Barrick will still spend an estimated $250 to $300 million on the project next year. In its third-quarter financial report, Barrick announced it also plans to raise roughly $3 billion through a stock sale.

– H.M.

Trade deal to eliminate E.U. import tariffs

Canadian exporters will stop paying roughly 98 per cent of the tariffs on shipments to Europe once the Comprehensive Economic and Trade Agreement between Canada and the E.U. is implemented. Prime Minister Stephen Harper and José Manuel Barroso, the president of the European Commission, reached an agreement over the terms of the deal in October. The implementation process is expected to take 18 to 24 months, and eventually, all of the tariffs on mineral products will be eliminated. The agreement will not affect Canada’s most significant mining exports to Europe – precious metals and gems – because those do not currently face any tariffs. However, the aluminum, nickel, iron and steel and non-ferrous metals sectors will all see major benefits.

Pierre Gratton, president and CEO of the Mining Association of Canada, said the agreement will “help facilitate labour mobility and encourage European investment in the Canadian mining sector.” European foreign direct investment in Canada is expected to see a boost, as the agreement also includes provisions that relate to regulatory cooperation. Currently investment in the Canadian mining industry accounts for nine per cent of all foreign direct investment into the country.

– Peter Braul

Public reviews for southern Quebec rare earth element projects?

Though the Parti Quebecois’ mining law revisions have been quashed, regulations affecting the environmental review process for rare earth element (REE) projects may go ahead without a vote. Quebec’s Environment Minister Yves-François Blanchet has said he intends to work without the support of opposition parties to establish a public evaluation process for all REE projects in the south of the province, regardless of their size. The process, called the Bureau d’audiences publique sur l’environnement, or BAPE, is currently only applicable to projects that produce more than 7,000 tonnes per day, which is very large for an REE project.

At least two exploration companies, Matamec and Quest Rare Minerals, have written to Blanchet to pledge their willingness to participate in the BAPE process. “They want to work to assure themselves of the social acceptability of their projects,” Blanchet told La Presse in November. He said the involvement of mining companies has motivated him to move the process along quickly.

Implementing the BAPE process would bring the environmental consultation process for southern projects in line with what is already in place for their northern counterparts. “The north has its own environmental assessment process, the COMEX (Comité d’examen), which has a similar role to the BAPE,” said Frédéric Gauthier, sustainability director for REE explorer GéoMégA. “In James Bay and Northern Quebec Agreement territory, all mining projects are subject to the COMEX.”

– P.B.

$13.5B Fort Hills oil sands mine to proceed

The Fort Hills oil sands mine is going ahead, after its three partners voted to build the $13.5-billion project, located roughly 90 kilometres north of Fort McMurray. Suncor, which owns a 40.8 per cent interest in the project, will be the developer and operator of the 3.3-billion-barrel project. Total E&P Canada controls 39.2 per cent of Fort Hills and Teck Resources holds the remaining 20 per cent stake. “Fort Hills is the best undeveloped oil sands mining asset in the Athabasca region,” Suncor CEO Steve Williams told investors on October 31. “The project will benefit from our depth of mining experience and our well-established infrastructure in the region.” First oil production is anticipated in the fourth quarter of 2017, with full capacity expected to be 180,000 barrels per day. Suncor estimates the mine life to be more than 50 years.

– H.M.

Canadian Mining Hall of Fame welcomes four new members

On January 16, the Canadian Mining Hall of Fame will induct John McOuat, Mark Rebagliati, Kathleen Rice and David Robertson at its annual induction dinner in Toronto. Collectively, the careers of this year’s crop span over a century.

Born in 1882, Kathleen Rice’s discoveries went beyond the important claims she staked in Manitoba and Saskatchewan. During a time when women were not legally considered “persons,” she found prospecting was a way of life that she could excel at, saying, “No woman need hesitate about entering the mining field because she’s a woman.”

More recently, Mark Rebagliati, born in 1943, made his mark as a legendary explorer, having been part of the discovery of major deposits like Red Chris, Mount Milligan, Kemess and others. David Robertson was instrumental in establishing the Potash Corporation of Saskatchewan as a crown corporation. His work spanned a multitude of commodities and countries, and his expertise was valued for decades, both as a partner at Coopers & Lybrand and as an independent consultant. Another consulting giant, John McOuat was one of the founding partners of Canada’s longest-running independent geological and mining consultants: Watts, Griffis and McOuat. A geological engineer by training, he gained a reputation for facilitating large-scale international projects and putting Canadian expertise to work worldwide.

– P.B.

Global comminution efficiency working group launched

Robert McIvor, general manager and chief metallurgist of grinding systems at Metcom Technologies, is heading up a new working group to refine and formalize best practices for applying the Bond method for quantifying comminution efficiency. The group, A Standard for Industrial Comminution Efficiency, also aims to provide a database of benchmarking data for use across the industry.

Since energy used in comminution is calculated in different ways, it is difficult for operations to compare efficiencies in a meaningful way. “There are many sources of experimental and sample error,” McIvor said. However, if measurements are standardized and easy to understand, he hopes operations will be able to make more informed business decisions regarding the modification of their mill circuits.

“The idea of this standard is to give business managers, plant superintendents and vice-presidents of technology a tool,” he said, adding the Bond standard can quantify the efficiency of any circuit, whether it uses ball mills, rod mills, high-pressure grinding rolls or any other technology.

The group is now recruiting members and encourages interested parties to contact them through their website, available through the Global Mining Standards and Guidelines site. The first physical meeting of the efficiency standards working group will be held at the SME Annual Meeting and Exhibit in Salt Lake City in February.

– P.B.

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