February 2016


By David Chen, Kate Sheridan, Katelyn Spidle

Despite a favourable ruling from Greece’s top administrative court in January, Eldorado said it will still put the Skouries mine on care and maintenance | Courtesy of Eldorado

Eldorado to write down value of Greek assets

Eldorado Gold will write down the value of its Greek assets by between US$1.2 and US$1.6 billion, the company said in a 2016 preliminary report released at the end of January. The announcement came just a week after Greece’s top administrative court reversed a government decision to revoke Eldorado’s mining license in northern Greece.

Despite the win, the company confirmed in the report it has put the Skouries project in the Halkidiki region on care and maintenance, affecting most of the site’s 688 employees.

At a mid-January press event, Eldorado CEO Paul Wright indicated that he does not want to build projects through the courts, and said the company needs the support of the government.

“I’m very reluctant to go back at it with a full work force until we can see a clear path to completion,” Wright told reporters. “Simply having a council of state decision, which gives us access to the building permit, is not sufficient for us to just go back to Skouries and hire everybody back here.”

Eldorado, however, has earmarked US$155 million for its Olympias project, also in Halkidiki. But along with announcing the closure of Skouries in mid-January, the company threatened to shutter Olympias by the end of March and lay off another 500 people if it does not receive an outstanding installation permit from the government. The company also put its Perama Hill and Sapes projects in Thrace on care and maintenance, after waiting more than two years for an environmental approval and drilling permit.

Greece’s environment and energy minister Panos Skourletis accused Eldorado of sending “blackmail ultimatums” in an interview with a local radio station, and stressed that the government wants investments in Halkidiki, but in accordance with Greek laws.

Eldorado’s announcements and the court decision are the latest in a long series of clashes between the company and the Greek government. Though Eldorado was given the green light to develop in 2011, it has since faced a series of delays getting permits, beginning in 2012. Last year, the government revoked a key building permit for the Skouries project.

The developments are also controversial within the region; many locals believe mining activity will harm the environment and tourism.

– David Chen

Samarco executives take leave to prepare for criminal trial

Two top executives of Samarco Mineração SA, the mining company responsible for what the Brazilian government is calling the worst environmental disaster in the country’s history, are taking leaves of absence.

According to Samarco, chief executive Ricardo Vescovi and operations chief Kleber Terra are stepping aside to prepare their defence against criminal charges from the Brazilian federal police. Along with five other executives and engineers, they have been accused of environmental crimes relating to last year’s deadly failure of two tailings dams at Samarco’s open-pit iron ore mine in the southeastern Minas Gerais province. Formal charges have not yet been filed.

Since the disaster there have been questions surrounding possibilities of mismanagement. The latest came from an unpublished government document obtained by Brazil’s TV Globo, which shows Samarco consultants warned the company about compromised safety at the dam in 2013.

Samarco, its technical consulting firm Vogbr, and Brazil-based Vale SA have also been accused in the ongoing investigation. Samarco is a joint venture of Vale and Australia’s BHP Billiton, which each own 50 per cent stakes.

The dam erupted on Nov. 5 and left at least 17 dead, two missing and hundreds homeless. It also released a flood of mud and mine waste into the River Doce, an 800-kilometre-long river that flows across two states and into the Atlantic Ocean. Initial estimations put the volume of the tailings spill at 60 million cubic metres, which was downgraded in January to 32 million cubic metres by Samarco’s satellite assessment.

The Brazilian government is currently suing the company for 20 billion reals – the equivalent of around $7 billion – in damages from the catastrophe. A federal judge froze the Brazilian assets of BHP and Vale in December, noting that Samarco is estimated by the prosecution to have only enough funding to cover half the damages.

Vale argued that because Samarco is an independent legal entity and a sizeable company, it alone should be responsible for the disaster and the ensuing fines and damages. But Judge Marcelo Aguiar Machado determined the two companies, as controllers of Samarco, could also be held accountable for the incident.

– D. Chen

No charges for Imperial Metals in Mount Polley tailings dam failure

After British Columbia announced in December it will not charge Imperial Metals for the tailings dam failure at its Mount Polley mine, the company is pointing fingers at the government.

Imperial Metals’ vice-president of corporate affairs Steve Robertson said the water level was high at the tailings facility because the provincial government did not give the company permission to discharge water on time. He said the water was only slightly off drinking quality and found the delay to be “inexcusable.”

At the B.C. energy and mines ministry’s mid-December announcement, where it released a report on the results of a 16-month investigation, B.C.’s chief mines inspector Al Hoffman concluded the August 2014 disaster was ultimately caused by undetected weak glacial soils beneath the dam’s foundation. But he also laid blame on poor design and practices that left very little margin of risk, the latter of which Imperial Metals disputes.

“The operation of both the tailings facility and the mine in general was done to the highest standard,” Robertson told CIM Magazine. “I don’t know what you can do about the water level if you don’t have a permit to discharge water from the site.”

B.C. energy minister Bill Bennett said the report acknowledges that Mount Polley waited for a permit for a long time. But he found Imperial Metals’ narrative to be “a bit misleading.”

“It’s a little rich for the company to say that one of the reasons we had the accident is because the government wouldn’t give them a discharge permit,” Bennett said. “You have to provide a lot of good information to the ministry of environment to get a water discharge permit.

“My understanding is that the company did not meet the standards.”

According to a B.C. environment ministry spokesperson, Mount Polley first asked to discharge water in 2009 and was approved in 2012. A subsequent request to release more water was submitted in July 2014. It was being processed when the failure occurred. The ministry said it will review its permitting process to improve regulatory integration as recommended by the chief mines inspector.

The report also detailed 18 other recommended regulatory changes that Bennett said will reduce the risk of tailings dam failure in the future. These include requiring every mine with a tailings facility to each designate a safety manager and form an independent review board to provide additional scrutiny over dam designs and operations.

Bennett also said he plans to expand the government’s compliance and enforcement reach through legislative changes. He declined to get into details but said he hopes to get all the changes into the legislature by the spring session after the review of B.C.’s health and safety code for mines comes back to him in late January.

– D. Chen

David Garofalo to replace Chuck Jeannes as Goldcorp CEO

David Garofalo, former president and CEO of Hudbay Minerals, will be taking over at Goldcorp when current CEO Chuck Jeannes retires this April. Jeannes worked at junior miner Glamis Gold until it was taken over by Goldcorp in 2006 and then rose to Goldcorp’s top job in late 2008.

“[Jeannes] has been a tireless champion of our industry and instrumental to Goldcorp’s growth during a critical period of the company’s development,” said Ian Telfer, Goldcorp’s chairman of the board in a press release. Recent developments for the company include reaching commercial production at the Quebec-based Éléonore mine, which began last April. The mine was expected to produce 250,000 and 270,000 ounces of gold in 2015. In August, the company created a new joint venture by combining their Chilean copper and gold El Morro project with Teck’s neighbouring copper and molybdenum Relincho project. Construction costs for the new project, dubbed Project Corridor, were estimated at US$3.5 billion.

“I have had the privilege of working with an exceptional group of leaders as we built the foundations for long-lasting success at Goldcorp, including two key new mines that will drive strong, low-cost production for many years,” Jeannes stated.

Hudbay’s COO since 2012, Alan Hair, has filled Garofalo’s shoes as president and CEO since January 1. Garofalo, who is currently traveling and visiting Goldcorp mine sites, has been CEO of Hudbay since 2010. Previously, he served as CFO for Agnico Eagle. Hudbay’s copper production increased during Garofalo’s tenure thanks to the takeover of Norsemont Mining and its Peruvian copper project, Constancia, in 2011. The mine began commercial production in April 2015. 

“I am very proud of all we have been able to accomplish and I will miss the wonderful culture we have built at Hudbay,” Garofalo said in a press release issued by Hudbay. “I am confident in the company’s continued success under the leadership of Alan Hair and the very effective Hudbay team.”

– Kate Sheridan

Industry associations commit to improving tailings management

An independent review of MAC’s Towards Sustainable Mining (TSM) tailings management guidelines recommends miners be subject to more stringent audits and assessments, among other changes.

The report was tabled in December by an independent task force MAC commissioned last March, following the release of a British Columbia government-commissioned investigation into the 2014 Mount Polley tailings breach.

According to MAC spokeswoman Jessica Draker, the task force studied TSM’s protocol and guides to produce 29 recommendations. TSM, created in 2004, has six protocols – each with a set of indicators – that offer mining companies a framework to evaluate the performance of facility-level management systems.

According to Draker, one recommendation would see MAC create new criteria for TSM’s tailings management rating scale, including more stringent internal and external audits and assessments for companies with established tailings management systems. Another recommendation calls for a deadline to be set for all participating companies to achieve a more stringent baseline for their tailings management facilities.

She also highlighted a recommendation which would create a separate indicator for company engagement with indigenous and other communities affected by tailings facility management.

A fourth recommendation proposed developing guidance on independent review mechanisms and proper management of tailings facilities.

Draker said MAC’s board was “very supportive” of the recommendations, and intends to incorporate all of them into the tailings management guide.

To ensure the association sticks to its word, Draker said it will work with members of the independent task force, as well as consult civil society and industry stakeholders, including its independent community advisory panel, comprised of indigenous groups, environmental NGOs, financial and labour organizations and others. It will also consult the Canadian Dam Association.

The International Council on Mining and Metals (ICMM) announced in December it would also begin a global review of tailings storage facility standards and the management of individual health and safety risks among its member companies. The announcement came on the heels of the Samarco tailings dam failure in Brazil in November.

“Our constant aim is to raise the performance standards of the industry by learning from past experiences and sharing best practice,” ICMM CEO Tom Butler wrote in an email. “While this review is timely, it is also part of our ongoing work to support members.”

ICMM’s review, which Butler projects will be completed by mid-2016, will focus on helping companies meet industry standards, identify health and safety risks at their mine sites and prevent catastrophes.

The review will also evaluate member companies’ governance and emergency preparedness. Butler said it will draw upon the technical expertise of its members and experts, and added that ICMM will consult MAC’s task force report during its review.

– Katelyn Spidle

Planetary Resources brings space metals within reach

Meteorite Courtesy of Planetary Resources

The next frontier in resource extraction – space mining – may be a lot closer than expected. The first ever 3D printed object from asteroid metals was unveiled in January at the 2016 Consumer Electronic Show in Las Vegas by Planetary Resources, a hopeful asteroid miner.

For president and CEO Chris Lewicki, a former NASA aerospace engineer, the object symbolizes the expansion of the human economy beyond Earth.

“What we’re doing isn’t necessarily to change mining but to extend and continue it,” Lewicki said. “We’re combining the space and mining worlds into what we see as one of the biggest opportunities in resources that humanity has ever known.”

The oddly-shaped object, meant to illustrate how source metals can be engineered into building material and what structures might look like if built without gravity constraints, is made of iron, nickel and cobalt extracted from Argentina’s Campo Del Cielo meteorite impact, estimated to have landed on earth more than four thousand years ago. The metals used in the project were melted in a vacuum and turned into powder for 3D printing.

Lewicki anticipates that we will see mining development on asteroids midway into the next decade.

– D. Chen

Teck pilots LNG in haul trucks at Fording River

Teck announced in December that it has begun a six-month pilot project at its Fording River steelmaking coal mine in southeastern British Columbia to test if liquefied natural gas (LNG) could work as an alternative fuel source. It is the first time a Canadian mining company will use LNG to fuel its haul trucks.

Of the 50 haul trucks in operation at Fording River, six will be tested in the pilot. “The trucks are using a blend of LNG and diesel,” Teck spokesman Chris Stannell explained. “The trucks are installed with a conversion kit and this allows us to use existing haul truck engines with a modification rather than an entirely new engine.”

To prepare for the pilot, Teck partnered with energy company FortisBC to upgrade its operation’s truck maintenance shop, acquire engine conversion kits and install fuelling facilities. It also implemented a safety program – including new policies and emergency response planning – to ensure mine personnel are fully trained in the safe handling of LNG fuel. The bulk of the preparatory work began last June, and the pilot is expected to run until June 2016.

 LNG vs Diesel
Courtesy of Teck

The pilot is just one step that the company is taking to reduce its annual greenhouse gas emissions by 450,000 tonnes by 2030. According to Stannell, Teck sees the potential to eliminate approximately 35,000 tonnes of annual greenhouse gas emissions and reduce its transportation costs by more than $20 million by adopting an LNG-diesel hybrid fuel system across its six coal mining operations. “We’re excited about the project,” Stannell said. “It will provide more information on the benefits of potential broader usage.”

Two other Canadian mining companies are also making the move toward LNG fuel. Western Copper and Gold plans to transport LNG from Fort Nelson, B.C. to be used for power generation at its Casino project in central Yukon. Stornoway Diamonds released a positive feasibility study in 2013, which examined the use of LNG to power its Renard project in Quebec. The LNG power plant project is currently under construction and expected to be operational this summer, and will have diesel generator sets to meet peak demand. Chieftain Metals is also considering powering its future Tulsequah Chief Project in northwestern B.C. with LNG-diesel hybrid generators.

– K. Spidle

PDAC holds international interest


Despite the downturn in the mining industry, the PDAC’s annual trade show and convention will be back in the vast space it has grown to occupy at the Metro Toronto Convention Centre over the last couple of years.

PDAC president Rod Thomas said he still expects a large turnout, in part due to the show’s international reputation.

“The industry is going through some pretty bad times. We fully expect that the numbers will be down from last year,” he told CIM Magazine. “But one of the saving graces of the PDAC is the fact that we do have a tremendous international component to it.

“The early indicator is that international registrations are tracking well.”

The conference, slated to run from March 6 to 9, will be bringing back familiar sessions on capital markets, and the technical and aboriginal programs. The keynote session, titled “2026, the future of exploration and development,” will feature remarks from Canada’s new minister of natural resources, James Carr.

One highly anticipated event is the finale of Integra Gold’s Gold Rush Challenge on March 6. The crowd-sourcing contest, announced last September, gave contestants access to 75 years of data with the hopes of uncovering new value in two dormant gold mine sites in Val-d’Or, Quebec. The top five finalists will face industry leaders in a Dragon’s Den-style finale for cash prizes worth up to $1 million.

Brent Cook of Exploration Insights; Chantal Gosselin, a director at Silver Wheaton; Rob McEwen, chairman and CEO of McEwen Mining; Sean Roosen, CEO of Osisko Gold Royalties; and Randy Smallwood of Silver Wheaton will judge the finalists’ submissions.

New to this year’s trade show is a display of Royal Ontario Museum’s Kirwin minerals collection. There will also be a Tesla Model S on display at the Investors Exchange to show off how many mined products are used in the popular electric car.

– D. Chen

De Beers puts Snap Lake diamond mine on ice

Snap Lake
Along with Snap Lake, De Beers announced in December it would
close or scale back production on two Botswana diamond mines | Courtesy of De Beers

De Beers’ Snap Lake diamond mine in the Northwest Territories is going into care and maintenance, the company announced on Dec. 4.

Decreasing prices for diamonds, the strength of the U.S. dollar making diamonds more expensive for foreign buyers, as well as less credit available for diamond cutters and polishers and weakened consumption patterns for luxury goods are some of the market forces that forced De Beers to consider closing Snap Lake, confirmed company spokesperson Tom Ormsby.

Snap Lake is Canada’s only fully underground diamond mine and De Beers’ first diamond mine located outside of Africa. But it had not been profitable since it opened in 2008, and changes in the market made it less likely Snap Lake would become profitable within a manageable timeline – about three years, according to Ormsby – for the company.

Snap Lake’s estimated mine life was approximately 20 years when it opened. The mine produced 1.2 million carats in 2014 and cost $2.2 billion to construct and operate as of Dec. 31, 2014, according to the company’s website.

Workers at Snap Lake have begun to prepare the mine for closure, though it could take up to nine months to suspend some operations. The company will reevaluate the market and their options for Snap Lake in late 2016.

Up to 100 employees could be transferred to De Beers’ Gahcho Kué mine, also in the Northwest Territories. Over 400 employees have been laid off. The economic impact in the territory could be substantial: the company invested $1.5 billion in the local economy as part of the Snap Lake construction and operations, and was expected to spend another billion over the life of the mine.

The company is evaluating the market forces that led them to mothball Snap Lake as part of a broader strategy, Ormsby said. Weeks after the company’s plans for Snap Lake became public it announced two diamond mines in Botswana, which De Beers and the government of Botswana jointly own, will also be closing or scaling back production, according to reports from the local media.

“These are global conditions we’re responding to,” Ormsby said of the market. “Each one of our business units around the world has had to adjust to what has been lower sales and lower prices.”

– K. Sheridan

Coal in China infographic

Alors que les prix des marchandises atteignent leur niveau de 2002, les sociétés minières réduisent leurs dividendes,
licencient leurs employés et se débarrassent de leurs actifs

In this issue
     Project Profile
    Upfront: Copper
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