October 2013

Industry at a glance

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By Peter Braul, Herb Mathisen, Andrea Nichiporuk, Dinah Zeldin

New Australian PM vows to revive mining

Tony_AbbottRecently elected Australian Prime Minister Tony Abbott is seen as mining-friendly, having campaigned to abolish the country’s controversial mining tax | Courtesy of Troy Constable

Tony Abbott rode into Australia’s top office in September on promises of stoking the country’s economic fires. The first conservative prime minister Australia has seen in six years, Abbott takes the helm at a time when the country’s economic growth is faltering, due in part to reduced demand for the country’s natural resources.

In the second quarter of 2012, the Australian economy grew 3.7 per cent over the same quarter a year earlier, but this year that number shrank to 2.6 per cent during the same period.

“The challenges are considerable,” Abbott said. “We must scrap the carbon tax, we must build the roads, we must get the budget back into the black.” Mining taxes have been a central issue of debate for many Australian prime ministers in recent memory. Kevin Rudd, Abbott’s predecessor, lost the leadership of the Labour party to Julia Gillard in 2010 over his proposed super-tax of 40 per cent on all extractive activities. Gillard, who served as prime minister from 2010 until late-June 2013, wound up instituting a 30 per cent tax on profits above AU$75 million, before Rudd regained the role of party leader this summer, prior to the September election.

It remains to be seen whether Abbott’s campaign assurances that he will abolish both Gillard’s mining tax and the country’s carbon tax will kick-start the minerals industry and bring the economy around.

– Peter Braul

Contractor cleans up crew despite death threats

Faced with a few bad apples, Leonard Banga, owner of Saskatoon-based Xtreme Mining and Demolition Inc., laid off all 200 of his workers in June. The drastic measure followed a series of threats, assaults and confrontations that were documented in a harassment and workplace safety investigation from the Ministry of Labour Relations and Workplace Safety. According to The Star Phoenix, a Saskatoon newspaper, Banga only rehired those who passed an extensive screening procedure, meant to weed out the Hells Angels among his ranks.

When Xtreme won its first contracts in 1998, Banga hired experienced employees from previous contractors’ crews, over half a dozen of whom were members of the notorious motorcycle gang. Business went smoothly at first, with Xtreme securing contracts at several Saskatchewan potash mines, including Allan, Agrium, Mosaic Esterhazy and a number of PotashCorp operations.

Trouble, however, surfaced last fall when an Agrium Vanscoy worker caught an Xtreme employee sleeping on the job. The Agrium employee was threatened with violence should he report the incident, which he did anyway, and Banga dismissed the dozy biker, beginning an effort to clean up his crew despite enduring threats and violence himself.

In January, Banga requested the ministry conduct a safety investigation of his company, which ultimately revealed a number of incidents of harassment and threats, as well as reluctance from Xtreme employees to speak out about the problem. As a result, one Hells Angels member was banned from working as a mine supervisor in Saskatchewan. Following the rehiring process, Xtreme employees have reported that they feel safer on the job, but Banga is not in the clear. The Saskatoon Police have since warned him that he may be in danger.

– Dinah Zeldin

Escondida to spend $3.5B on desalination

Work began this summer on a new reverse-osmosis desalination plant for Escondida, near Antofagasta, Chile. The investment is designed to provide 2,500 litres per second of desalinated seawater for the mine’s new 152,000-tonne-per-day concentrator facility, known as OGP1. The mine has been desalinating process water since 2006.

“Securing a sustainable water supply in the Atacama desert is a major priority for all Chilean copper producers,” said Peter Beaven, BHP Billiton copper president, adding that the new facility will minimize the operation’s reliance on the arid region’s aquifers. BHP Billiton is the majority owner of the mine with a 57.5 per cent interest.

Korea’s Doosan Heavy Industries received a contract worth $106 million to supply and install the plant, and to supervise its construction and commissioning. Fresh water could begin to flow from the new plant three years from now, according to company estimates.

The mine has benefitted from both higher ore grades this year and the completion of major maintenance work, resulting in a 28 per cent increase in copper production from last year. The new concentrator facility being developed will not only add capacity at the mine, but demolishing the old Los Colorados facility will provide access to further high grade ore.

– P.B.

Saami protest Swedish iron ore mine

Swedish police removed a blockade of indigenous Saami who had prevented access to U.K.-based Beowulf Mining’s Kallak iron ore exploration project, roughly 1,000 kilometres north of Stockholm, in August. The protests targeted test mining that Beowulf needs to carry out in order to evaluate its resource. The Saami have traditionally herded reindeer in the area.

Clive Sinclair-Poulton, Beowulf’s chairman, said he believes coexistence is possible. “If there are issues that the Saami have when it comes to reindeer herding, let’s go ahead and discuss it and see if we can come up with a compromise,” he told the Proactiveinvestors newsletter.

The Swedish government recently ruled that mining has a larger public interest than reindeer herding, and granted Nickel Mountain AB three mining concessions for its Rönnbäcken project, located near Beowulf’s resource.

– P.B.

Mo money, no problem

With November fast approaching, men from around the world are gearing up to grow moustaches for Movember. The global event sees men, or Mo Bros, grow moustaches and gather donations that benefit prostate and testicular cancer research and mental health programs. Women, or Mo Sistas, while not expected to grow moustaches, are also encouraged to take part and raise awareness for men’s health issues. Last year in Canada’s mining sector, 22 teams made up of 343 miners joined efforts and raised $141,208. And with that, the Great Canadian Mining Challenge was born.

“It was an idea sparked by a Mo Bro to unite the industry’s efforts and showcase the amazing support by their community for men’s health,” said Movember Canada’s Jeff Lohnes. “The key teams that led the charge in making it possible were the good folks from Teck Resources, Kinross Gold and Aecon Mining. Mo Bros from each of these companies really stepped up with amazing support of Movember.”

Matt Rosales, who joined one of Teck’s 12 teams, was proud to contribute to the cause. “The act of growing a moustache makes each one of us a billboard for men’s health issues, and encourages our colleagues, friends and families to take a moment to think about their health and wellness,” he said. “The combination of fun, camaraderie, awareness and fundraising makes this month-long event a good fit for Teck and its employees.” To support your mining Mo Bros and Mo Sistas, visit movember.com and search for the Great Canadian Mining Challenge.

– Andrea Nichiporuk

Anglo American pushes ahead with B.C. coal project

In August, Anglo American broke ground on its Trend-Roman project, a $200-million expansion of the Trend metallurgical coal mine near Tumbler Ridge, in northeastern B.C. Through the construction of the open-pit operation adjacent to the current Trend mine, the project is expected to increase the life of the facility by 16 years and boost output from 1.6 million to 2.5 million tonnes per annum.

The company received an environmental assessment certificate from the B.C. government last December and was granted a mining permit amend­ment in early August. Some work, including timber clearing, construction of water management facilities, sediment control structures and access roads, is already underway. “We want to make sure we can use the construction season as much as possible,” said Federico Velásquez, Canadian director of external affairs.

The granting of a second permit amendment, expected in the first quarter of 2014, will allow Anglo American to proceed with Phase 2 of construction. This will include the creation of three additional pits, a network of mine access and haul roads, waste rock dams and additional water management structures.

In the interim, the company is concluding deals with local First Nations. Economic benefit agreements with the West Moberly First Nation and the McLeod Lake Indian Band have been finalized, as has an agreement-in-principle with the Halfway River First Nations, and a negotiations agreement with the Saulteau First Nations.

– D.Z.

Uralkali CEO behind bars

Moscow-based Uralkali shook up the potash industry this summer when it announced it would be withdrawing from the trading partnership it had with the Belarus state-owned Bela­ruskali. Now the company’s CEO, Vladislav Baumgertner, has time to reflect on the decision following his arrest during a visit with the Belarusian prime minister in late August. The Russian government has demanded his immediate release, but at the time of writing, the head of the world’s largest potash producer remains in prison in Minsk, Belarus, accused of “abuse of power and office.”

Baumgertner’s arrest came weeks after he announced Uralkali’s withdrawal from Belarus Potash Co., a trading joint trading venture with Belaruskali. Uralkali’s move, allegedly motivated by its partner’s trading outside of their deal, left Belaruskali with limited global trading infrastructure and upset global potash markets. Belarusian authorities claim that Uralkali managers and shareholders sold off some of their shares before quitting the joint venture and bought them back after prices sank. Baumgertner and other Uralkali staff are alleged to have misused US$100 million and caused damage to the state.

According to Uralkali, the arrest was politically motivated and was made “in order to cause damage to Uralkali, which is the main competitor of state-owned Belaruskali.” Baumgertner’s lawyer, Dmitry Goryachko, said he will continue to appeal the decision in the Minsk city court.

Baumgertner faces two months in a pretrial detention centre and up to 10 years in prison if found guilty. Belarusian officials have also issued arrest warrants for principal Uralkali shareholder, Suleiman Kerimov, and four other company executives who the Belarusian Investigative Committee believes to be implicated.

– D.Z.

New developments at New Prosperity

Fish Lake was once again the centre of attention during Taseko’s New Prosperity environmental assessment panel hearing this summer. Local First Nations, members of the public, politicians and environmental groups weighed in with their opinions of the proposed B.C. open pit gold-copper project throughout the 30-day review session, held as part of the environmental review process by the Canadian Environmental Assessment Agency. This marked Taseko’s second attempt to get the federal government’s approval for its project. In November 2010, the project was turned down due, in part, to potential impacts on fish and grizzly bear habitats. The initial project design, which would see Taseko drain Fish Lake to use as a tailings area, received provincial approval.

In the lead-up to the review, Taseko CEO and President Russell Hallbauer touted the benefits of the $1-billion project, which he expects will create roughly 700 jobs through its 20-year mine life. He added that Taseko had committed to an additional $300 million in spending with its redesigned plans to move the tailings dam and mine waste away from Fish Lake.

Some First Nations have opposed the project due to worries that the retooled operation will still negatively affect fish habitat in Fish Lake. To allay these concerns, the company proposed recirculating outflows from Fish Lake into a creek to combat eutrophication and preserve fish habitat. However, three federal departments – Environment Canada, Natural Resources Canada and the Department of Fisheries and Oceans – questioned the new method and asked for more information and data on the proposed recirculation plans. “Environment Canada is concerned that the recirculation mitigation measure proposed to manage water quality and the biological productivity of Fish Lake is unproven at this scale, and may require additional intervention to ensure success,” the department noted in a written submission. “The high level of uncertainty regarding the proponent’s proposed recirculation scheme is a particular concern given the stated goal of preserving Fish Lake.” Taseko responded by committing to provide more data and increase future monitoring efforts. The federal government is expected to decide on the project later this year.

– Herb Mathisen

African Barrick CEO, COO quit

It has been quite a month for African Barrick Gold. Greg Hawkins resigned as the company’s chief executive on August 21 and less than one month later, September 11, the company’s chief operating officer, Marco Zolezzi, also left. The resignations come after the company posted a US$729-million net loss, on the back of a US$741-million asset writedown in the first half of 2013.

Hawkins was replaced by Bradley Gordon who has 30 years of gold sector experience. Gordon was a senior executive with Placer Dome and CEO of Intrepid Mines, an exploration and development company with most of its projects in Indonesia. London-based African Barrick Gold, of which Barrick Gold is a 74-per-cent owner, has three operating mines in Tanzania, with additional exploration and development projects in Africa. The company was being shopped around as recently as January, before Barrick declined to sell it to China National Gold Group.

In its first-half financial report, African Barrick Gold also announced it had identified roughly $185 million in potential cost savings as part of its plan to reduce spending, $100 million of which would likely be realized this year. “It is imperative that we implement and further expand upon the initiatives identified in the operational review,” said Gordon, upon his appointment.

– H.M.

Canadian exploration VP released by kidnappers

After being held captive for 221 days, Canadian Gernot Wober was released by Colombian guerrillas in late August. Wober, vice-president of exploration for Braeval Mining Corporation, was taken hostage by the National Liberation Army (ELN) while conducting exploration work at the company’s Snow mine project in Colombia, on January 18. ELN had called for the company to halt its work in the Bolivar region. In July, Braeval cancelled its four Snow mine titles, effectively abandoning the project.

Chris Eby, a company spokesperson, said Wober declined to discuss his seven-month ordeal but stated he will stay on with the company. “Gernot has decided that he wants to focus on the future and is eager to get back in the field to look at mining properties for Braeval to develop,” said Eby.

– H.M.

Rio Tinto Alcan to close Shawinigan smelter early

On August 7, Rio Tinto Alcan announced it would close its smelter in Shawinigan, Quebec, a year early by immediately reducing aluminum production by 50,000 tonnes and incrementally reducing the remaining production completely by November. Aluminum prices reached a five-year high in April 2011, when they hit US$2,667.42 per tonne but had fallen to US$1769.61 by July 2013. This was cited as a factor in the decision to shut down the 72-year-old plant. “Due to dated technology and continued weakness in aluminum prices, Shawinigan’s primary aluminum capacity is not currently sustainable,” said Claudine Gagnon, communication advisor. More than 400 workers were employed at the smelter at the time of the announcement.

– H.M.

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