Cutifani pitches long-term view
Anglo American CEO Mark Cutifani did not mince words when speaking about the mining industry’s lack of long-term vision at the World Mining Congress in
Montreal last month.
He explained that while mines can claim an abundance of resources, they have not been able to convert them into reserves, as many mineral deposits are
declining in scope and quality. “We have selectively developed our mines with short-term economic performance in mind,” he said. “We have preferentially
depleted low-cost resources, leaving the world to bear the brunt of increasing commodity prices driven by the compounding cost increases of extracting
these lower quality resources.
“We, as an industry, are woefully under-spending on innovation and business improvement programs, given the state of our extraction challenges,” he said,
adding the mining industry spends 80 per cent less on technology research and innovation than the petroleum sector on a revenue-to-revenue basis.
“If we, as leaders in the mining industry, continue with our traditional conversations around incremental innovation and change, the mining houses of today will simply become subsidiaries of grander and more efficient industrial conglomerates,” he said. “What I am challenging everyone in this room to do is put aside our petty competitive issues and concerns and start thinking about the much bigger picture that we’re all a part of.”
As for Anglo American, Cutifani said the company needs to see the potential of new technologies and adapt them more quickly than its competitors. While
long-term thinking can be difficult to reconcile with a CEO’s role of immediately making shareholders money, Cutifani told CIM Magazine that it comes down
to balancing short-term priorities with long-term investments. “Sometimes we have to make tough calls and not everybody will agree with us. But if the CEO
won’t do it, who will?” he said. “I think it’s a little too easy for people to make the easy calls and not back the long term on the basis that they might
not be there for more than five years. I think that’s a short-term view and, in the end, it’s hurt our industry.”
– Herb Mathisen
The collapse of one of two major global potash export partnerships has thrown markets into disarray and raised questions over major investments in Canada.
In late July, Russian fertilizer company Uralkali stopped exports through its BPC joint venture with Belaruskali, leading to a decline in potash prices and
share volatility for producers. Uralkali predicts potash prices will fall by about 25 per cent to below US$300 per tonne.
That leaves Canpotex, which exports for PotashCorp, Mosaic and Agrium, and accounts for about one third of the global trade of fertilizer, as the remaining
cartel. PotashCorp CEO Bill Doyle played down the impact of Uralkali’s announcement, pointing out that rifts have happened before and saying this latest
one is unlikely to have a major impact on North America. “Uralkali is not going to determine what the price is in the U.S.,” Doyle said in a company
release. “They are not in a position to do that.” He added that he does not “see any change in Canpotex whatsoever.”
A number of other miners with projects in the pipeline are surely hoping Doyle is correct. Goldman Sachs estimates that BHP Billiton’s Jansen project in
Saskatchewan will have a capex in the vicinity of $12 billion with a resource base of over three billion tonnes. To date, BHP Billiton has spent about $1.2
billion of pre-commitment capital on the project, which could produce eight million tonnes per annum in 2020. In late August, the company announced it
would invest an additional $2.6 billion into Jansen for surface infrastructure construction and to complete production and service shafts. K+S’s Legacy
project has projected investment of $4.1 billion for a new Saskatchewan mine. In its second-quarter earnings statement, the company said the project had
advanced according to plan and that it “will continuously monitor the competitive environment, include findings in our planning and prepare for potential
changes” to its operations.
– Anna Reitman
Rio Tinto decides diamonds may be forever after all
Rio Tinto has appointed a new managing director for the diamond division it was trying to sell as recently as this summer. Jean-Marc Lieberherr is stepping
into the role after serving as the division’s chief commercial officer. He has worked for the diamond division since 2005, having got his start in the
The company operates three diamond mines: the wholly owned Argyle mine in Australia; the 60-per-cent-owned Diavik mine in Canada; and the 78-per-cent-owned
Murowa mine in Zimbabwe. An advanced exploration project in India is also part of its diamond business. The company put the whole division on the market in
March 2012, but the sale was complicated by the fact that Rio’s partner at Diavik, Dominion Diamond Corporation, has right of first refusal on Rio’s stake
in that mine.
Rio Tinto took the division off the market in June, stating that “the medium- to long-term market fundamentals for diamonds remain robust, fuelled by
growing demand for luxury goods in Asia and continuing strong demand in North America.” The company opened an underground mine at Argyle in April, after
operating the mine as an open pit for 27 years.
– Virginia Heffernan
Agnico Eagle to cut spending at Meliadine
Toronto-based Agnico Eagle Mines announced in its second-quarter financial report that it would cut roughly $200 million in capital spending in 2014, with
the bulk of the cuts coming at its Meliadine gold project in development near Rankin Inlet, Nunavut. Spending will be reduced from an estimated $125
million at Meliadine to $45 million next year. The company plans to cut $10 million there this year as well. “I think what’s important is that $45 million
is essentially for the ramp,” said CEO Sean Boyd in an investors’ call. “We’re continuing to ramp development to open up the ore body, access the deposit,
and that leaves us flexibility in the schedule that, if our board gives approval to the project about a year from now, we can still meet the start-up
target date of late-2018.” The falling price of gold was cited as a factor in the decision. Agnico Eagle is currently working on the mine’s feasibility
study, which is expected to be completed in the first half of 2014.
N.W.T. projects moving ahead
Good things come in threes, or at least they did for project developers in the Northwest Territories. In the span of one week in July, three different mine
projects got approvals from review boards or governments.
On July 19, the Mackenzie Valley Environmental Impact Review Board (MVEIRB) gave conditional approval of the proposed Gahcho Kué diamond mine, a joint
venture between De Beers and Mountain Province Diamonds, 280 kilometres northeast of Yellowknife. After evaluating its environmental impact review, the
board recommended the federal government allow the project to proceed to permitting and licensing, but only if the owners meet a series of conditions,
including mine and winter road mitigation measures to reduce “significant” impacts posed to local caribou herds.
That same day, Fortune Minerals got the thumbs up from the federal and Tlicho governments on its proposed Nico gold, cobalt, bismuth and copper mine, 150
kilometres northwest of Yellowknife. This allows the company to move the project into the permitting phase. Fortune hopes to begin construction on Nico in
Then, on July 26, MVEIRB approved Avalon Rare Metals’ environmental assessment for its Nechalacho rare earth element project, subject to water management
and wildlife protection and monitoring conditions. The 220-page report stated the company must also complete a socio-economic agreement with the
territorial government on jobs and training for local residents. Avalon must now wait for the minister of Aboriginal Affairs and Northern Development to
decide whether to approve the project or not.
TransCanada turns east
TransCanada announced it will seek approvals for the 1.1-million barrel per day Energy East Pipeline project. The C$12 billion project involves converting
3,000 kilometres of natural gas pipeline so it can carry oil. It would stretch to 4,400 kilometres when completed, linking Alberta with refineries in
Eastern Canada. TransCanada said there was “strong market support” for 900,000 barrels per day of firm, long-term contracts to transport western crude out
east. This supply would replace foreign imports and allow for export across the Atlantic.
Whether or not the pipeline receives political support remains to be seen, considering the stiff opposition to other proposals such as Keystone XL, which
is awaiting a final report from the U.S. State Department before the end of the year. TransCanada president and CEO Russ Girling said both pipelines are
required to transport growing supplies of Canadian and U.S. crude oil to existing North American markets.
Pending public and regulatory reviews, Energy East’s planned starting point is a new tank terminal in Hardisty, Alberta. Three other terminals in
Saskatchewan, Quebec City, and Saint John, will be built along the route and oil will be delivered to existing refineries in Montreal, Quebec City, and
Saint John. The pipeline would terminate at Canaport, New Brunswick, where TransCanada and Irving Oil have formed a joint venture to build and operate a
new deep water marine terminal. Regulatory applications for approvals will start in 2014, and the pipeline is anticipated to be in service by late-2017
for deliveries in Quebec, and in 2018 for New Brunswick
Victoria project advances
KGHM and Vale have reached an agreement on the Victoria polymetallic exploration project in Sudbury, Ontario. KGHM will build and operate Victoria as the
sole owner of the project, and Vale will take a 2.2 per cent net smelter return royalty on all future production. KGHM declined to provide further detail
on the confidential agreement. The estimated value of the first five years of the offtake deal, though, is $1.17 billion.
Polish copper miner KGHM International acquired mineral rights to Quadra FNX’s global operations, including Victoria, for about $3 billion in 2012. Adrian
McFadden, vice-president of underground operations for KGHM, said the deposit on the southwestern rim starts at one kilometre below surface and is similar
to Glencore Xstrata’s Nickel Rim South deep high-grade deposit. The Victoria project’s Inferred Resource is 14.5 million tonnes at 2.4 per cent copper, 2.5
per cent nickel and 7.4 grams per tonne of total precious metals, which includes platinum, palladium and gold.
The company’s focus will now turn to finalizing arrangements with local First Nations and to obtaining the required permits and capital approvals to move
the project forward. It is expected that site preparation and construction will begin later this year. McFadden explained that the first phase of the
project will include the sinking of an exploration shaft along with surface construction that will allow for underground drilling. The delineation of the
ore body will help determine if the project will be further developed into a full-scale production mine.
“The success of Phase 1 would result in the mine being in operation well into the 2030s, with capital expenditure in excess of $1 billion and have the
potential for hundreds of jobs in the community,” McFadden added.
Asteroids close enough to mine?
Researchers in Scotland have identified a dozen asteroids they say could be maneuvered into accessible orbit and then mined. Working with a database of
9,000 “near-earth objects,” a team at the University of Strathclyde in Glasgow, found 12 space rocks that could be moved to points where the gravitational
forces of the sun and Earth are in
balance, making it possible to mine the asteroids. Published in the August edition of Celestial Mechanics and Dynamical Astronomy, the research includes a
search and ranking methodology to find future candidates for mining.
“Their methodology is interesting and relevant,” says Chris Lewicki, president of Planetary Resources, the Seattle-based company working to explore and
eventually mine asteroids using robotic spacecraft. “But, with the exception of one, the asteroids in their report are very small, just a few metres in
diameter, much smaller than objects we would consider from a resource standpoint.”
Lewicki says the economic viability of asteroids depends on size, accessibility and composition. Asteroids, he said, should be at least 50 metres in
diameter to make sense financially.
“Our near-term interest is asteroids that have volatiles on them and most specifically water. Broadly speaking, that means we are looking for carbonaceous
asteroids,” he added. Water, in space, can be used as a propellant to fuel spacecraft and also as protection from solar radiation.
Yukon mine to shut down this winter
To avoid selling silver at its current weaker price, Alexco Resource Corp. announced in July that it will shut down its Bellekeno silver mine over the
winter. The news comes on the heels of second-quarter production of 576,155 silver ounces – an increase of 52 per cent from the previous quarter. According
to Vicki Veltkamp, vice-president of investor relations, the company has not yet set a date to reopen the mine. “We will spend the [time] focusing on
changing the parameters of what is now a high fixed cost operation to lower some of those costs,” she said, adding it will also develop a plan to
potentially produce silver at other deposits on its large Keno Hill property. “If we can attain those goals, along with some strength in the silver market,
we would anticipate going back into production next year.” She added that production costs are more volume-driven than seasonally driven at Bellekeno,
meaning it is not significantly more expensive to operate in winter than in summer. Silver had been trading as high as US$35 per ounce last October, but
closed at US$19.41 per ounce on July 17, when the decision was announced.
Feds pony up for Ring of Fire mine training
The Canadian government has committed more than $5.9 million to provide mining sector training for First Nations groups in northern Ontario. An agreement
creating the Ring of Fire Aboriginal Training Alliance (RoFATA) was signed by the Matawa First Nations, Kiikenomaga Kikenjigewen Employment and Training
Services (KKETS), Noront Resources and Confederation College of Applied Arts and Technology.
Noront’s chairman and interim CEO Paul Parisotto said having access to a trained local workforce as it develops and operates the Eagle’s Nest nickel,
copper, platinum and palladium deposit is a priority for the company. Aside from Eagle’s Nest, the Ring of Fire is home to massive chromite deposits, but
miners continue to tackle infrastructure challenges and work to gain trust in the region’s remote communities.
Greg Rickford, minister responsible for the Ring of Fire, said that by working with organizations such as KKETS, which will be assessing training applicant
interest and qualifications, the federal government is “ensuring that the members of our local aboriginal communities can take full advantage of the
opportunities being generated by the rapidly growing mining industry the Ring of Fire has to offer.” RoFATA partners will travel this fall to Matawa First
Nations’ nine communities to promote and discuss training programs that will be delivered in Thunder Bay.
Perron to lead Thompson Creek
Former St. Andrew Goldfields president and CEO Jacques Perron will lead Thompson Creek Metals into a new era as production at the Mount Milligan copper
mine in British Columbia begins. Perron will succeed Kevin Loughrey, who is retiring as CEO at the beginning of November. Director Timothy Haddon will
The open pit copper-gold mine is expected to reach full production by the end of the year. Once fully ramped up, Mount Milligan is slated to produce an
average of 81 million pounds of copper and 194,500 ounces of gold annually, over a 22-year mine life, employing about 350 people during operations.
Perron will also oversee Thompson Creek’s other assets in North America, including two operating molybdenum mines (Thompson Creek in Idaho, and Endako in
B.C.), a stand-alone metals roasting facility (Langeloth in Pennsylvania), and a number of properties in various stages of development. Perron has a
bachelor of science in mining engineering from Montreal’s École Polytechnique and has worked in the mining industry for almost 30 years.