Dec '14/Jan '15

Industry at a glance

By Chris Balcom, Graham Chandler, Alexandra Lopez-Pacheco, Kelsey Rolfe

Golden opportunity for Lundin Group

The Lundin Group this fall took a step towards developing its gold business when it obtained the Fruta del Norte project from Kinross Gold Corporation. On Oct. 21, Lundin Group member Fortress Minerals Corp. agreed to acquire the project in Ecuador through the purchase of Aurelian Resources Inc. shares from Kinross for US$240 million in cash and equity.

“It is just a fantastic ore body, considered by many to be one of the top undeveloped gold projects in the world right now,” said Fortress chairman Ron Hochstein. Kinross was enthusiastic too when it acquired the project in 2008 in a share exchange with Aurelian worth $1.2 billion. But after extensive negotiations with the Ecuadorian government, mainly surrounding a 70 per cent windfall profits tax, Kinross pulled out in 2013. Ecuador then commissioned global consultancy Wood Mackenzie to evaluate its mining policy competitiveness. The government later decided to abolish the crippling windfall tax. “It wasn’t the trigger but it was certainly a contributing factor to give us the comfort level to move forward,” said Hochstein.

Fortress recognizes the government risks and feels it has addressed them. “If you look at the history of the Lundin Group, it has been very successful going into countries early on or with perceived difficult governments,” said Hochstein. Examples include Sudan, Libya, and the Democratic Republic of Congo. “Where we’ve been successful is where there’s a rule of law and you make sure your contract is strong, so that even if things can get a little wobbly with the government you still have a good solid contract to fall back on.”

Upon closing the deal with Kinross, Fortress will change its name to Lundin Gold Inc. With the promised, much-improved tax regime and extensive development already in place to build upon – work camp, roads, 150 kilometres of drill cores – Lundin expects Fruta del Norte to start producing from its reserves of 7.3 million Indicated and 2.6 million Inferred ounces of gold in 2018.

Mining Hall of Fame inducts four industry greats

 Peter Bradshaw Ian Telfer Mackenzie Watson
Courtesy of Orvana Minerals Corp. Courtesy of Goldcorp Inc.  Mackenzie Watson Courtesy of Frances Litman Photgraphy Inc

Peter Bradshaw, Ian Telfer, Mackenzie Watson and Ron Netolitzky (left to right) will be inducted into the Canadian Mining Hall of Fame in January 2015.

Four industry titans are set to be recognized in the new year for their life-long dedication to mining. Peter Bradshaw, Ian Telfer, Mackenzie Watson and Ron Netolitzky will be formally inducted into the Canadian Mining Hall of Fame at the annual induction dinner on Jan. 15 in Toronto.

Mackenzie Watson is the first and only two-time winner of the Bill Dennis Award for a Canadian mineral discovery or prospecting success. He played a leading role in the discovery of countless major deposits in the past decade including both the Strange Lake rare earths project in Quebec and the Ring of Fire chromite reserves.

“[The Canadian Mining Hall of Fame] is something very special in our industry, and I feel fortunate to be one of [the inductees],” Watson said. “I feel very honoured and humbled knowing who has gone before me.”

Ian Telfer, for his part, is an icon of mining finance. With a keen eye for opportunity, he has achieved remarkable success through skilfully manoeuvred mergers and acquisitions, notably the absorption of his company, Wheaton River Minerals, by Goldcorp in 2005. Now Goldcorp’s chairman of the board, Telfer led several mining companies throughout his career and had a hand in launching many more including Tahoe Resources and Primero Mining.

Peter Bradshaw has made enormous contributions to the industry as a researcher and entrepreneur, and helped set up the Mineral Deposit Research Unit at the University of British Columbia. Bradshaw produced groundbreaking work on geochemical exploration and was instrumental in the development of several operations including Barrick’s Porgera mine in Papua New Guinea.

Ron Netolitzky has enjoyed tremendous success as a geologist and prospector. Netolikzky has been a key player in the development of several projects in Canada and abroad, including his notable success with the Snip and Eskay Creek properties in northern B.C.

Fresh goals for saving water in the oil sands

Canada’s Oil Sands Innovation Alliance (COSIA) has issued the first in a series of performance goals for its members. The 13 members of the alliance have agreed to reduce usage of fresh water consumption for in situ oil sands production from a 2012 average of 0.4 barrels of water per barrel of produced bitumen by half, to 0.2 by 2022.

Establishing the goal was a collaborative effort, said Dan Wicklum, COSIA’s chief executive. “It is the companies that have driven this; they’ve developed and own that goal.” The target levels are “basically a trade off between setting a realistic goal and being ambitious and aggressive,” he said. The base year was chosen as 2012 because that was when the newly formed COSIA started collecting data. At the end of 2012, in situ operators were using about 275,000 barrels of fresh water daily.

COSIA – which comprises oil sands producers like BP Canada, Syncrude, Teck Resources and Total E&P Canada – will publicly disseminate performance results for the water reduction initiative in annual updates starting in November.

Wicklum said the alliance is finalizing similar targets for oil sands mining operators. “These goals are too important to do quickly,” he pointed out. “We want to do them right.”

Water is one of COSIA’s four environmental priority areas. Performance goals are in the works for the other three as well: tailings, land, and greenhouse gases emissions.

Barrick names company president for China

The world’s leading gold producer is seeking closer ties with the world’s leading gold consumer. On Sept. 18, Woo C. Lee joined Barrick Gold Corporation as its first president for China.

The new position reflects the company’s desire to build enduring partnerships in China that advance its long-term business objectives, and its view that a dedicated presence is critical to accomplishing that goal. “To build the type of relationships we seek, it is important that we have a permanent presence in the region, engaging local partners on a continual basis,” said Andy Lloyd, vice-president of communications at Barrick. “Woo will be Barrick’s representative on the ground, working with the Chinese government, mining companies, investors and suppliers in pursuit of opportunities in China and the surrounding region.”

Lloyd did not disclose specific geographic areas or companies of interest, but they should soon materialize; Lee has considerable business experience in the country. He worked for 20 years in China and East Asia, during which time he spent 10 years focused full-time on China including six years in residence in Beijing. Most recently he was a senior advisor at JL Thornton & Co., where he led government, commercial and non-profit projects in China and advised the firm’s founder, John Thornton, who became Barrick’s chairman of the board in December 2013. In his new position at Barrick, Lee should be able to leverage experience and contacts he gained during 16 years with the U.S. State Department, where he held senior posts at embassies and consulates in China, Japan, and Australia. “He has worked closely with government officials, community leaders, non-governmental organizations, media and other stakeholders,” added Lloyd.

Provinces push for female representation on boards

This fall, securities regulators in all but three provinces announced they would adopt legislation to create transparency around female representation in management positions at certain companies. Regulators in Newfoundland and Labrador, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan, the Northwest Territories, and Nunavut announced in October they will join the Ontario Securities Commission (OSC) in implementing amendments to National Instrument 58-101 - Disclosure of Corporate Governance Practices.

Under the proposed “comply or explain” rules, publicly traded companies would have to report annually on the representation of women in senior management and board roles. Rather than quotas, the new rules will require companies to confirm they have a policy for evaluating women for higher level positions and provide details on it or explain why they do not and identify risks or opportunity costs associated with not having a policy.

“We certainly welcome the changes made by the OSC,” said Ryan Montpellier, executive director of the Mining Industry Human Resources Council. “I believe it will start having a meaningful impact on our industry by highlighting those companies that don’t necessarily have diversity policies and really force them to explain why.”

Since all publicly traded companies on the Toronto Stock Exchange are regulated by the OSC regardless of where they are headquartered, the six provinces’ and two territories’ decisions are primarily seen as a sign of support. So far, B.C., Alberta, and P.E.I. have chosen to not jump on board.

Montpellier explained that while larger companies listed on the exchange often have specific policies around diversity, they tend to be focused on the lower ranks versus board and executive roles. “I think this will force them to take a more proactive role and I believe it will create an environment where they will want to develop diversity policies,” he said. “There’s strong evidence out there that demonstrates diversity on boards leads to improved shareholder value. This is a good move for mining companies.”

Subject to ministerial approval, the amendments will come into effect on Dec. 31, 2014.

New study shows mining suppliers are key contributors to Ontario’s economy

Considered a “hidden” sector by the Conference Board of Canada, the mining services and supply (MSS) sector contributes about one per cent to Ontario’s GDP, according to a new study released in late October by the Canadian Association of Mining Equipment and Services for Export (CAMESE).

The study, conducted by PricewaterhouseCoopers for CAMESE, found the MSS sector accounted for roughly $6.2 billion of Ontario’s total GDP of $655 billion in 2011, with around $3.9 billion in direct impact alone. It also showed the industry contributed 41,000 direct and 27,000 indirect jobs that year, for a total of 68,000.

“The mining services and supply sector is much larger than anybody’s ever really seen, in terms of numbers,” said Ryan McEachern, CAMESE’s managing director. “So we’ve been able to provide better clarity to [the sector’s] economic contribution, and also the number of companies and the number of employees in the sector.”

The study also showed that the MSS sector is not strictly located in northern Ontario. One third of the companies surveyed were based there, but 21 per cent were located in the greater Toronto area, and roughly half were scattered across the province.

The results are based on the survey responses of 913 Ontario companies that self identified as mining suppliers in 2011.

The MSS sector is not directly measured by Statistics Canada, as it classifies companies based on the general services they provide, such as engineering or manufacturing, rather than in which industry their services are used, thus hiding the contributions of the MSS sector within the statistics of other industries. CAMESE defines the sector as including jobs that assist mining, namely engineering firms, consultants and mining-specific bank and legal work.

CAMESE next hopes to conduct a pan-Canadian study. “We clearly showed the importance of it in Ontario,” said McEachern, who joined the organization last September. “My expectation is to have [a country-wide study] happen, and I will work towards that.”

AMTA closes its doors

The Aboriginal Mentoring and Training Association (AMTA) closed its doors in November, just four and a half years after its founding. Over that time, the B.C.-based organization successfully trained and found placement for more than 1,000 aboriginals in resource sector jobs. AMTA cited the termination of federal financing as the reason for closure. “Funding AMTA has been the biggest challenge we’ve had since we opened our doors in 2009,” said former CEO Laurie Sterritt.

Ottawa did not give AMTA specific reasons for ending its funding this year, said Sterritt. Of its roughly $5 million annual budget, she said the federal government provided AMTA with $3.5 million in 2013. The organization was able to attract donations for the rest, as well as industry partners’ in-kind contributions like on-site training programs and staff to oversee projects. Although AMTA was able to secure charitable donations for $1.5 million of the 2014 budget, making up the $3.5 million shortfall proved impossible. “We certainly have been trying,” said Sterritt.

AMTA was created through collaboration by the mining industry, the federal government’s Aboriginal Skills and Employment Partnership program, educators and First Nations. The organization was originally named the British Columbia Aboriginal Mine Training Association to provide employment opportunities for aboriginals and help the mining sector meet its workforce needs. It was renamed AMTA last February when it expanded into other resource sectors.

Broadening AMTA’s scope was an attempt to attract the province and other companies to contribute. But, “it’s definitely a challenge to get commitments in this economic situation,” Sterritt said.

Nonetheless, Sterritt remains proud of the impact AMTA had on individuals, their families and communities. “There are a lot of really good stories,” she said.

Waterloo students come first at mining competition

University of Waterloo student
University of Waterloo student at the final 
presentation of the third annual 
National Mining Competition held in 
Saskatoon, Saskatchewan | David Stobbe

A team of engineering students from the University of Waterloo won the third annual National Mining Competition in early November, beating out 15 other teams.

Over a 36-hour period beginning on Oct. 31, the teams of four were challenged to come up with the best five-to-10-year strategy for a fictional Canadian copper mining company with assets in Yukon, British Columbia, and Chile.

The groups were given the company’s financial statements, asset production levels, reserves and resources, and were told to take into account current commodity prices and demand predictions.

The University of Waterloo team, composed of chemical engineering students Seung-Youn Lee, Marco Chan, Vincent Zhu and Andrew Jiang, had a strong financial analysis and paid attention to the weighted cost of capital, said competition co-chair Cooper Meadows. “They also brought in some engineering- and mining-specific information that really impressed the judges,” he added. They received their award from Wayne Brownlee, CFO of Potash Corp., the title sponsor of the event.

The teams, made up of undergraduate university students from schools in five different countries, were given an opportunity to consult with industry representatives from local mining companies for three minutes each during a “speed-dating consulting session,” Meadows said, where they could get advice on their strategies for the main interdisciplinary case. They also competed in a smaller crisis response challenge, where they were given a scenario and had to respond in a limited amount of time.

The National Mining Competition, hosted at the University of Sask­atchewan, is the country’s first undergraduate mining case competition. “What we’re trying to do is give students an opportunity to integrate business and engineering and geology,” Meadows said. “It’s not typically something they get a chance to see firsthand ... until [they] get into the industry.”

N.W.T. government hatches plan to spur mineral investment

In October the government of the Northwest Territories released a plan to support its 2013 mineral development strategy. The government is hoping the plan will lead to a more positive mining investment climate in the territory, according to N.W.T. Minister of Justice and Industry, Tourism and Investment David Ramsay.

While mining has generated thousands of jobs and billions of dollars of revenue in the N.W.T., explained Tom Hoefer, executive director of the N.W.T. and Nunavut Chamber of Mines, “over the past seven or so years, we have seen mineral investment in the territory languish, while our neighbours and other jurisdictions were doing very well. That was an indication that the problem was of our own making.” Hoefer’s organization partnered with the N.W.T. government in developing both the strategy and plan.

To address the problems, the plan includes attention to infrastructure development: $31 million toward a three-year energy program and $600 million for a 10-year strategic transportation plan, for example. It also includes an incentive program that will award $400,000 in initial funding to prospectors and exploration companies.

Despite the weak global marketplace, Hoefer is optimistic about the future in the N.W.T.: “We are seeing encouraging investments, particularly around diamonds and gold.” The healthy signs include the development of the Prairie Creek (base and precious metals), Gahcho Kue (diamonds), NICO (polymetallic) and Nechalacho (rare earth elements) projects, all of which have moved through the permitting phase and are now seeking investment to construct mines. “Our largest diamond mining company has just released its plan for a $650 million investment to extend the life of its Ekati mine by 10 or more years,” he added.

The N.W.T. government intends to update its implementation plan annually for the next 10 to 15 years.

Balmoral awarded prospectors of the year in Quebec

In October Balmoral Resources Ltd. received the Prospectors of the Year Award in Quebec for the second consecutive year from L’Association de l’exploration minière du Québec in recognition of its Grasset discovery in the company’s 700-square-kilometre Detour Trend project. Earlier this year, Balmoral discovered the Grasset nickel-copper-platinum-palladium system, located in west-central Quebec, 55 kilometres (km) west of Mattagami.

In 2013 Balmoral received the same award for its high-grade gold discovery just 40 km from Grasset at the Bug Lake/Martiniere Gold system, making it the first company to receive the award two years in a row. Balmoral began actively exploring in the province about four years ago.

In November shortly after receiving the award, the company closed a $10-million flow-through private placement with a syndicate of underwriters led by Canaccord Genuity Corp. that includes RBC Capital Markets and PI Financial Corp. “This means an aggressive, drill-focused $10 million 2015 exploration program for the company at a time when most continue to cut back,” said Darin Wagner, president and CEO of Balmoral. “Focus will be on expansion of the discoveries at Grasset and Martiniere as we march them toward initial resource statements.

“There may come a time in 2015 to consider joint venturing or selling one of the two assets to a third party, but we are funded for the work we need to do through 2015 and beyond, so we plan to drive forward on our own for now unless someone makes us an offer we can’t refuse.”

Turmoil in Burkina Faso

Map of producing mines in Burkina Faso as of 2013
Producing mines in Burkina Faso as of 2013, according to the Burkina Faso Ministry of Mines, Careers and Energy

Hundreds of thousands of Burkinabè took to the streets of their capital Ouagadougou and other major cities in late October, angry at President Blaise Compaoré’s efforts to extend his time in office by amending constitutional laws on term limits. Compaoré won four disputed elections during his 27 years in power.

In the ensuing chaos, at least five protestors were killed by security forces and demonstrators occupied and torched several buildings including Burkina Faso’s parliament. On Oct. 31, less than a week after demonstrations began, Compaoré resigned and fled to the Ivory Coast. The military quickly seized control and has since appointed former foreign minister Michel Kafando as interim civilian president. Lieutenant Colonel Isaac Zida has said that elections will take place late next year. In the meantime, the military has taken control of six key ministries including the ministry of mines, while the others have been delegated to civilian authorities.

The rapid transformation of the country’s political landscape and intensity of popular frustration with the regime took many by surprise. Burkina Faso was seen as relatively stable by many investors, in part due to the perceived durability of Compaoré’s regime and his close alignment with the West.

The political struggle affected the operations of at least one Canadian miner. Ottawa-based Orezone Gold suspended work at its Bomboré property, 85 kilometres east of Ouagadougou, from Nov. 3 to 10. When operations resumed, the company announced it had sustained some minor damages. “Work is underway at the Bomboré field camp to fully assess the damages and clean up and repair broken windows and office furniture,” reported Orezone in a press release, claiming the vandalism had been committed by artisanal miners. Other Canadian mining companies in the country like Iamgold and SEMAFO continued their operations without interruption.

Burkina Faso has significant gold deposits, and Compaoré’s government made an effort to attract foreign mining investment. While most Canadian and other foreign mining companies in the country have been carrying on as usual, recent events have raised some concern about the future.

Mining in Burkina Faso

7 Number of active gold mines in Burkina Faso as of 2013, all of which began producing after 2007

39 Approximate tonnage of gold mined in the country in 2013 

4th largest producer of gold in Africa

7 Number of Canadian mining companies currently active in Burkina Faso

$410 million Revenue from all mining taxes and licensing fees in 2013

71% Gold as a share of Burkina Faso’s exports

Changes in mining legislation around the world

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