June/July 2013

Industry at a glance

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By Ryan Bergen, Peter Braul and Herb Mathisen

Mining for Miracles chair Jason Weber takes a pie in the face from his son, Adam, at the 13th Teck Celebrity Pie Throw in downtown Vancouver, on May 2. The event raised more than $1 million for the B.C. Children’s Hospital Foundation | Courtesy of Jason Weber

Miners take it on the chin

Junior miners take note: a group in British Columbia was able to raise more than $1 million, equipped with nothing more than some pies and a few famous faces. Held May 2 in downtown Vancouver, the Teck Celebrity Pie Throw, in its 13th year, was organized by Mining for Miracles, a group of B.C. mining professionals that raises funds for the B.C. Children’s Hospital Foundation. Mining executives and public figures got pied for a good cause, with money raised primarily through internal pledge drives at companies and organizations.

“It originally started as a Teck fundraiser and then they took it public and invited everybody in,” said Jason Weber, Mining for Miracles chair and CEO of Kiska Metals Corporation. This year, Teck, Goldcorp and Silver Wheaton were just a few of the companies whose executives were temporarily defaced for donations.

Participants got creative with their fundraising, in order to bring in more contributions. “What Ausenco did was have an internal competition within their organization to see who got to throw the pie at one of their executives,” said Weber. Mining Association of B.C. CEO Karina Briño and Association for Mineral Exploration B.C. president Gavin Dirom challenged each other, agreeing that whoever raised the most money would get to throw a pie at the other. “But what we ended up doing was we made them both receive a pie,” said Weber, who himself took a pie to the face from his own son on behalf of the hockey team he coaches.

The funds raised will go towards purchasing a pediatric biobank for the children’s hospital. “The biobank really res­­onates within our community be­cause I just look at it as a big core shack,” said Weber, explaining that it is the biological equivalent of having every mineral sample in the world in one place. Biological specimens from around the world will be collected and used by researchers to find cures for pediatric diseases.

– Herb Mathisen

Progress on deep-sea mining licences

The United Nations’ International Seabed Authority (ISA) could start receiving mining licence applications for polymetallic nodule exploitation as soon as 2016. On May 15, the organization revealed its plan to develop a regulatory regime over the mining of the long sought-after nodule resources. So far, ISA has issued 17 exploration permits in international waters, but companies currently cannot submit applications to actually mine resources they discover on the international seabed.

In Papua New Guinea’s national waters, the country has already issued a mining licence to Nautilus Minerals, which, according to ISA, spurred the decision to develop a system for its international jurisdiction. Coastal countries control an exclusive economic zone of up to 370 kilometres from the coastline or further, if the continental shelf extends beyond that limit. But the rest of the entire seabed is administered by ISA, which estimates global manganese nodule re­serves at around 10 billion tonnes.

ISA is preparing a white paper on the regulatory regime for polymetallic nodules this year. The organization plans to review it in 2014, with implementation slated for some time in 2015.

– Peter Braul

Tunnel collapse kills 28 miners at Grasberg complex

On May 14, a tunnel collapse killed 28 miners at an underground training facility near the Big Gossan mine, one of three mines that comprise PT Freeport Indonesia’s massive Grasberg operation in the Papua province of Indonesia. Rescuers were able to save 10 of the 38 company and contract employees caught in the rock fall. It took a week to recover the remains of those killed.

According to reports from The New York Times, Freeport McMoRan CEO Richard Adkerson said the training facility did not have a history of problems. “We had no concerns or fears about its safety, so that’s why we need to understand why this happened,” he said. All mining operations at the complex, which normally produces 222,000 tonnes per day of ore from one open pit and two underground mines, were put on hold following the collapse. During the shutdown, the milling facilities processed stockpiled ore.

– Ryan Bergen

Chile’s environment regulator fines Barrick $16M

Construction work at Barrick Gold’s Pascua-Lama mine in Chile was suspended May 24 until the company builds components of the mine’s water management system, which were supposed to have already been in operation. A $16-million fine has been levied and comes at the end of a four-month investigation by Chile’s environmental regulator. Juan Carlos Mockenberg, Chile’s superintendent of the environment, told the Associated Press his agency was only given enforcement power in December and that these are the first sanctions he has given out.

In addition to elements not yet built, one canal failed in January, forcing the company to rebuild portions of it. Barrick was found to be in “very serious” violations of its environmental permit and to have inaccurately reported what was taking place on site, according to the AP. Components of the water management system that caused concern include a canal to divert rainwater from waste rock, meant to minimize acid rock drainage.

In a written response, Barrick indicated the company was in the process of reviewing the ruling, adding it was “fully committed to complying with all aspects of the resolution and to operating at the highest environmental standards.”

– P.B.

Driller outlasts spring storm in Nunavut

A driller working on Agnico-Eagle’s Meliadine gold project, near Rankin Inlet, Nunavut, was rescued alive and in good health after getting lost on his way to the worksite during bad weather. Co-workers reported Michel Justin Pilon, a Boart Longyear employee from Timmins, Ontario, missing early on the morning of May 14, after he did not arrive at the drill site. Pilon had been last in a group of snowmobilers travelling during a winter storm, with poor visibility conditions.

The spring blizzard ultimately dumped nearly a metre of snow on the area and brought high winds, frustrating search efforts. Pilon, who was trained in survival techniques, used pieces of his snowmobile to build a snow shelter and weathered the storm that lasted more than two days. He was found at about 10:30 p.m. on May 16, as he made his way back to the Meliadine camp.

– R.B.

Islamist attack at Areva mine

Islamist militants killed one em­ployee and injured 13 others with a suicide car bomb at Areva’s Somaïr uranium mine in Niger on May 23. The mine was damaged in the attack, and production was suspended. The attack occurred nearly simultaneously with a car bomb at a nearby army barracks that killed 19.

Luc Oursel, president and CEO of Areva, travelled to Niger the day after the attacks to meet with employees and representatives of the government. The company has three mines in Niger, and has had operations in the country for more than 50 years.

The Movement for Unity and Jihad in West Africa (MUJAO) claimed responsibility for the mine attack. MUJAO is an al-Qaeda-linked group that France drove out of northern Mali in January. The group specifically targeted Areva and Niger because of their allegiance with France.

Areva’s operations in the region have been the target of Islamist groups before. Seven French workers were taken hostage by al-Qaeda in the Islamic Maghreb, an affiliate of MUJAO, in the fall of 2010. Though they are known to be alive, four have still not been released.

– P.B.

Chinese workers approved for HD Mining

Embroiled in controversy since its permits were issued last October, Chinese miner HD Mining got the green light on May 21 to import 201 temporary foreign workers for its Murray River coal project in British Columbia. Two B.C. unions brought the company to federal court, saying HD Mining did not put sufficient effort into hiring Canadians, but their concerns were dismissed.

Nevertheless, both unions are claiming victory for having brought light to the issue. “Trades unions have exposed a fundamentally broken temporary foreign worker program and won in the most important court, the court of public opinion,” said Brian Cochrane, business manager of the International Union of Operating Engineers Local 115.

The federal government announced in April that it will no longer allow temporary foreign workers to make 15 per cent less than their Canadian counterparts, and suspended the accelerated labour market opinion pro­cess. There are now more stringent requirements on companies to plan a transition to Canadian labour, and the court ruled that HD Mining needs to make progress in that regard.

“This case is about showing Canadians the truth about the temporary foreign worker program and asking them to demand that the federal government make significant changes to fix the problems,” said Mark Olsen, business manager for the Construction and Specialized Workers Union [Labourers’ Union] Local 1611. “On that we have succeeded.”

– P.B.

Caterpillar not immune to mining slump

Suppliers to the mining industry are feeling the squeeze of sluggish financial results in the sector. Global equipment giant Caterpillar saw both its sales and profits fall in the first quarter of 2013. Profits decreased from $1.58 billion in the first quarter of 2012 to $880 million for the same period this year.

Much of the loss reflected the poor mining market, as “mining companies continued to reduce capital expenditures, and new orders continued to be weak and were well below the first quarter of 2012,” a press release from the company noted. Caterpillar’s resource industries business segment, which is primarily made up of the mining sector, saw sales of $3.67 billion in the first quarter of 2013, down 23 per cent from the first quarter of 2012. Profits in this business segment fell to $477 million from $1.168 ­billion year-on-year during the same period.

The downturn has also caused the company to revise its 2013 outlook. “While expectations for construction industries and power systems are similar to our previous outlook, our expectations for mining have decreased significantly,” said Caterpillar CEO Doug Oberhelman in a release, adding the company anticipates a 50 per cent decline from 2012 for mining equipment sales.

– H.M.

Avalon completes feasibility study

In completing the feasibility study for its Nechalacho project in mid-April, Avalon Rare Metals became the first company to do so for a major heavy rare earth project outside of China. The $60-million study, conducted by SNC-Lavalin, pegged mine construction costs at $1.575 billion, with more than $1.15 billion for infrastructure in the Northwest Territories, and $423 million for a refinery in Louisiana. Average operating costs were estimated at $264.5 million annually, with revenues coming in at $645.8 million per year. The payback period is expected to be 4.3 years, with an internal rate of return after tax of 19.6 per cent.

Avalon CFO Jim Anderson said the company’s next step is lining up project financing. “As you can appreciate, the markets are kind of challenging right now,” he said. “We think, really, the key success factor for us is to identify a strategic partner, a large end-user that has the wherewithal to support the development of the project.” Anderson said Avalon has already signed six confidential, non-binding MOUs with different parties, which are now busy working through the project’s 10,000-page study.

Anderson said Nechalacho is particularly attractive to prospective partners seeking secure supplies of five critical rare earth oxides that are expected to be increasingly in demand in coming years: europium, terbium, dysprosium, yttrium and neodymium.

“If people are concerned about security of supply and they are thinking that China’s going to be in a situation whereby it’s going to be consuming more of these elements than they actually have, the exports are going to get choked off,” he said. Production is targeted to begin in late-2016, with early commercial sales in 2017.

– H.M.

Impact of Kennecott landslide spreads

The operators of Kennecott Utah Copper’s Bingham Canyon mine are laying off staff, have urged others to take vacation or unpaid leave and offered US$20,000 buyouts to employees as they continue to recover from a massive pit wall collapse at the Utah mine in April.

Slope monitoring equipment tipped the miners off that the northeastern wall was failing and work in the pit had been suspended and equipment moved in anticipation of the slide. Despite the preparation, three shovels, 14 haul trucks and a number of drills and other equipment were caught up in the slide that carried an estimated 150 million tonnes of rock into the pit.

Mining has since resumed, but the company is continuing to cut costs as copper production from the mine is expected to be half of the earlier projected 2013 output. The mine pro­duced 163,000 tonnes of copper, 9,400 tonnes of molybdenum and 279,000 ounces of gold last year.

– R.B.

Vista nears construction

Coalspur Mines Ltd. has secured a $350-million funding agreement, which could see the company begin construction on its Vista Coal project near Hinton, Alberta, later this summer. EIG Global Energy Partners has agreed to provide the funding with a senior secured debt facility, which nearly fulfills the C$445 million Coalspur requires to build stage one of the Vista project. At this stage, Vista would produce three million tonnes of thermal coal per year, once completed in the first half of 2015. “The EIG facility will allow us to begin construction, and we will start before the full $445 million is raised,” said David Montpetit, vice-president of external affairs and logistics.

Chris Borowski, investor relations manager, said the company will hold a vote on June 27 for shareholders to approve the $350-million funding arrangement. Coalspur is also working on getting permits approved as part of the regulatory process for construction. When stage two of the thermal coal project is completed, Vista is expected to ramp up production to 12 million tonnes per year. The life of the mine is 29 years.

– H.M.

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