May 2013

Industry at a glance

By Herb Mathisen


Kearl starts up

The massive $12.9-billion Kearl oil sands mine produced its first bitumen froth in early April and, as production trains started up, was expected to produce its first diluted bitumen soon after. The project, located 70 kilometres north of Fort McMurray, is a joint venture of Imperial Oil and ExxonMobil Canada, and is expected to produce 110,000 barrels per day (bpd) during its initial development stage, and 345,000 bpd by 2020.

“We continue to believe volumes from the Kearl initial development can be accommodated in the existing pipeline system and the blended bitumen market,” said Pius Rolheiser, an Imperial Oil spokesperson. “However, volumes from Kearl will be subject to the same forces currently constraining other bitumen volumes. Imperial and ExxonMobil’s own refineries in North America provide us an additional degree of flexibility and options not available to all producers.”

– Herb Mathisen

A tale of two surveys

Leading up to the Quebec government’s mining royalties forum in March (see Quebec proposes raising royalty rates), surveys from two different organizations painted contradicting pictures of Quebecers’ willingness to increase mining royalties.

La Fédération des Chambres de Commerce du Québec (FCCQ) released survey results in late February, reporting that 80 per cent of Quebec respondents opposed increases to mining royalties, with 57 per cent believing the industry paid its fair share. A week later, the Canadian Boreal Initiative (CBI) released results from its own survey that showed little support for the province’s mining industry, with 55 per cent of respondents indicating that the current royalty regime was too weak.

On closer inspection, FCCQ’s survey employed a mutually exclusive option, giving respondents a choice between government spending money more carefully or raising taxes on all businesses and mining companies in particular. CBI, on the other hand, cited in a preamble to its question the fact that in 2010 and 2011, $14.9 billion worth of materials were extracted in Quebec and $667 million was paid in taxes and royalties by mining companies. It also explained that companies pay royalties on profits after deductions, before asking respondents if they thought the regime was fair, too weak or too strong.

– H.M.

No detours for Detour

There is no getting around the progress being made at the Detour Lake gold mine. After pouring its first four gold bars in mid-February, Detour Gold was in the process of commissioning its second production line last month, putting it on course to begin commercial production by the third quarter of 2013.

“We are very excited about what we have accomplished in six years, from completing the acquisition of the property on January 31, 2007, to our first gold pour,” stated Gerald Panneton, Detour Gold president and CEO, in a release. “We are looking forward to the future as we move closer to becoming Canada’s leading intermediate gold producer.”

Located roughly 260 kilometres northeast of Timmins, Ontario, the Detour Lake operation is poised to become Canada’s largest operating gold mine, according to the company. While it expects to produce between 350,000 to 400,000 ounces of gold this year, the company aims to produce 657,000 ounces per year once the mine reaches full-scale production. The mine life is projected for 21.5 years, with open pit mineral reserves of 15.6 million ounces of gold.

– H.M.

Brunswick mine to close in May

After nearly 50 years of operation, Xstrata’s Brunswick mine near Bathurst, New Brunswick, has put the last of its ore through the mill. The zinc mine first opened in 1964 and, over its 49 years, operators mined 136 million tonnes from the no. 12 ore body and put 148 million tonnes of ore through its mill. The mine has outlived expectations.

“We’ve been able to stay productive and cost-effective in mining essentially low-grade ore that was left behind and was never part of any of the mining plans,” said James Cormier, superintendant for the environment and community affairs. The mine is currently working through its transition plan, hoisting all of its underground equipment to the surface for recycling and re-use.

A third-party company will be demolishing the mine’s infrastructure and the tailings basin will be secured. “All in all, it’s a five-year project for the reclamation of the site, which then basically puts us into a care-and-maintenance mode that will go into perpetuity,” said Cormier.

“It’s a big loss,” said Yvon Godin, NDP member of parliament for Acadie-Bathurst and a former Brunswick mine miner. “It was one of the biggest zinc mines in the world. At one point in time, it was employing 1,700 workers.”

– H.M.

Suncor grounds Voyageur

In late March, Calgary’s Suncor Energy announced its intention to scrap the construction of its planned Voyageur upgrading plant near Fort McMurray. The project, with a 2008 price tag of about $11 billion, was a joint venture between Suncor (51 per cent) and France’s Total SA (49 per cent). It proposed to upgrade product from Suncor’s mines at a rate of 200,000 barrels per day into premium synthetic crude, ultra-low sulphur diesel and low sulphur diluent.

“The global market has shifted,” said Sneh Seetal, spokesperson for Suncor. “A rise of tight oil has increased competition for light sweet refining capacity and margins are decreasing.” Suncor took a writedown of $1.48 billion on the project last February.

“We considered our commitment to allocate capital according to our priorities of funding the base business, developing higher-return growth projects and accelerating the return of cash to shareholders through dividends and share buybacks,” said Seetal.

– H.M.

Vote for mining in B.C.

To prepare for British Columbia’s May 14 election, mining organizations in the province have teamed up to raise voter awareness about mining issues. The Mining Association of BC (MABC), the Association for Mineral Exploration BC, Mining Suppliers Association of BC and the Coal Association of Canada are behind the website, a resource where residents can access facts and information about the importance of a thriving mining industry to the province and its economy.

“This is not intended to support the election of a particular party,” said Zoë Younger, MABC vice-president of corporate affairs. “It’s intended to be entirely non-partisan but focused on the objective of supporting the industry.” Younger added the election will feature many first-time candidates and the website can inform those new candidates about the mining industry. It will provide party leaders with a collaborative list of the mining industry’s key issues and priorities. The group will be active on Twitter and other social media platforms to engage voters and to dispel murky perceptions about mining.

“It’s really about trying to help inform the discussion and the thinking about our industry,” Younger said. “We’re not always looking for a positive response to some of our proposed projects, but we certainly want a well-informed, fact-based decision when we get to one.”

– H.M.

Canadian mineral production value drops

After reaching record heights in 2011, the overall value of Canada’s mineral production fell last year due mainly to weakened demand and lower commodity prices brought on by the pervading uncertainty in global markets. In new numbers released by Natural Resources Canada (NRCan), mineral production values in Canada fell 7.9 per cent last year, from $50.9 billion in 2011 to $46.9 billion in 2012, even though production decreases were far less significant.

Values for metals and non-metals fell 7.7 and 5.9 per cent, respectively. Coal was hit hard, with its value declining 14.5 per cent year-on-year due to a drop in prices. Overall nickel production value fell 28.6 per cent, diamonds dropped 20.1 per cent and uranium shrank 20.4 per cent in 2012. Gold value, however, gained 9.3 per cent, as overall production rose 1.7 per cent from 2011. Potash remained Canada’s top commodity in terms of production value, reaching $6.98 billion in 2012.

– H.M.

Polish copper miners rescued

An earthquake near the Rudna copper mine in Poland caused an underground collapse, stranding 19 miners for nearly nine hours. When the tremor hit at 10:09 p.m., 42 miners were in the G-3 Rudna Central mine; 23 of the miners were able to evacuate the area and get to safety. According to KGHM, the company that owns the mine, one of those who escaped was injured, with a cut to the head.

For the next seven hours, mine rescue workers tried to reach the trapped miners, who were cut off from communications. Finally, at 5 a.m., the rescue workers made a breakthrough and by 7 a.m., nine hours after the tremor, all 19 stranded miners were accounted for on the surface; only one of them was injured.

The mine, located roughly 400 kilometres southwest of Warsaw, has been in operation since 1974. The company has set up a commission to look into the collapse.

– H.M.

Uranium decision bad news for Strateco

Quebec uranium exploration company Strateco came out swinging after the province decided to call for a public environmental review on uranium mining this fall. The process – known in Quebec as a BAPE, or bureau d’audiences publique sur l’environment – will put permitting on hold until it is completed.

Strateco is no stranger to governmental delays. In January, the company took legal action against Quebec’s Environment Ministry, arguing it had been waiting since August 2011 for a decision on whether it could proceed with its underground Matoush exploration project. Guy Hébert, president and CEO of Strateco, said the government’s latest announcement, timed just prior to the four-day Easter holiday, came as a surprise. “We are still working with our lawyers regarding our legal options,” he said in early April.

To date, Strateco said it has invested $120 million into its project. The Matoush project has faced opposition from the Eeyou Istchee Cree, who have called for a moratorium on uranium mining in the region. Strateco’s share price dropped from $0.12 to $0.04 after the announcement, rebounding to $0.06 by the end of that week.

– H.M.

Western Potash gets provincial thumbs up

The Milestone Solution Potash project, located 30 kilometres southeast of Regina, has cleared another hurdle after Saskatchewan’s Ministry of Environment approved owner Western Potash Corp.’s environmental assessment. “It’s the culmination of two and a half years of work,” said Dean Pekeski, the company’s executive vice-president. In early 2010, Western Potash engaged Golder Associates to assist with the environmental baseline study.

“Now that we have environmental approval, really, the project is technically de-risked and is ready to commence construction subject to, and conditional on, financing,” Pekeski said. All exploration work, along with prefeasibility and feasibility studies – conducted by AMEC showing 2.8 million tonnes over 40 years – has been completed, he added.

Pekeski said the initial capital required to build the project is $2.9 billion. “In today’s economic times and the state of the world economically, large capital projects like this can be a little bit challenging,” he said, adding the company was talking to various groups from around the world about different financing scenarios. “It’s taking some time to do that, but ultimately we’re satisfied with the progress we’re making. We feel that when we do get financing in place, our project is going to be very robust,” he said. Pekeski added that the payback period on the mine is estimated at 5.6 years, saying the project construction period would be roughly 3.5 years. A best-case scenario would see production begin by the fourth quarter of 2016.

– H.M.

Injured Canadian mine worker wins record settlement

It is probably not the way he wanted to make history, but 14 years after being injured at work, Luciano Branco, 62, has finally been compensated for his injuries in what legal firm Fasken Martineau said is the largest punitive award against an insurance company ever in Canada.

In 1999, Branco was working as a welding supervisor at the then Cameco Corporation-owned Kumtor gold mine in Kyrgyzstan, when a large steel plate fell and landed on his foot. According to court documents, Branco was concerned his toes may have been chopped off, but he finished his shift and when he removed his boot, he found “his foot was still intact.” Branco has had difficulty walking ever since and has also developed reflex sympathetic dystrophy, said Alex Kotkas, a Fasken Martineau lawyer, who represented Branco during the trial.

Kotkas said the insurance companies received many medical reports indicating that Branco was disabled – including reports from their own doctors – but they just refused to pay him. Branco sued the two companies: AIG and Zurich Life Insurance Company Ltd. “After he sued, one of the insurance companies [AIG] started to pay, but only periodically, and then they would keep cutting off his benefits for reasons that made no sense. Finally, they just stopped paying him altogether,” said Kotkas. “Zurich just never paid him.” In early April, the Court of Queen’s Bench for Saskatchewan ordered AIG to pay Branco $1.5 million and Zurich Life Insurance to pay him $3 million.

– H.M.

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