B.C. buys coal licences to defuse First Nations conflict
The government of British Columbia recently took unusual action to calm an ongoing dispute between Fortune Minerals and the Tahltan First Nation. On April 30 the province purchased 61 coal licences in the Klappan Valley from the Ontario-based company for about $18 million.
Since 2002 Fortune Minerals (later joined by its Korean joint venture partner POSCO Canada) has been developing its Arctos anthracite metallurgical coal project in northwestern B.C., with a vision to ship the coal by rail to tidewater at Prince Rupert. The plan to mine Mount Klappan was met with immediate opposition by occupants of the nearby Tahltan village of Iskut, which claims the area as traditional territory and relies on the immediate area for its subsistence moose hunting.
The acrimony has been further inflamed by First Nation and B.C. activists who have dubbed the surrounding area the “Sacred Headwaters” in reference to the nearby headwaters of the northwest’s three biggest salmon rivers.
This solution will see the province pay the two companies just over $18 million to transfer ownership of the coal licences to BC Rail as a holding company. The agreement will allow the former owners to repurchase the assets at the same price right up to 2025, on the condition that the province and the Tahltan can reach a consensus on how mining in the area will proceed.
Fortune Minerals president and CEO Robin Goad said in a statement that the purchase was a “good outcome” for the company given the current market conditions for coal.
The province maintains that the purchase was required because the mine development schedule was moving ahead far faster than discussions with the Tahltan about development in the Klappan Valley. “This is a fair solution that recognizes the investment made by the companies,” said B.C. Energy and Mines Minister Bill Bennett. “[It] secures the potential value of these assets for the future and respects the position of the Tahltan Nation.”
– Christopher Pollon
PwC unveils B.C. mining survey
Last year was a troubled one for mining in British Columbia, according to PwC’s BC Mining Industry Survey for 2014. The professional services network released this year’s iteration of the annual report at a BC Mining Week breakfast event on May 5, which was attended by 150 members of industry and media.
The report found that the continued Chinese slowdown and a corresponding glut of supply have decimated metallurgical coal production. With the price for met coal below US$100 per tonne, the heady days of 2011, when prices hit US$330 per tonne, are long forgotten as several B.C. mines were forced to suspend operations in 2014, including Walter Energy’s Wolverine and Anglo American’s Trend mines.
Copper was a happier story. It comprised 32 per cent of the B.C. industry’s net revenue in 2014 (tied with met coal) and remained well over US$3 per pound throughout much of the year, hitting a high of more than US$3.20 per pound in the summer. But by late in the year it had dropped below the US$3 per-pound-mark (down from a 2011 zenith of US$4.60), weighed by fears of oversupply.
A drop in 2014 revenue and margins for B.C.-based companies came with the commodity price doldrums. Net income before taxes dropped to $288 million, down from $1.4 billion in 2013, while capital expenditures fell to $1.5 billion from $1.8 billion.
Meanwhile, the ability of junior mining exploration companies to raise capital continued to lag: a companion PwC report (launched the same day as the BC survey) reviewing the top 100 junior mining companies on the TSX Venture Exchange showed that just $685 million was raised through equity financings in the year ended June 30, 2014, down by more than $100 million from the previous year.
B.C’s Energy and Mines Minister, Bill Bennett, was the guest speaker at the event and he did his best to lift the mood. Despite commodity prices being a “wet blanket,” he reminded the industry attendees that B.C. has come a long way from the meltdown in 2008 and that the last five years have seen gross mining revenues, net revenues, total assets and employment generally up from where they were in 2010.
Government continues to solidly back the industry, Bennett said. Corporate taxes in the province remain the second lowest in Canada, and Bennett’s Energy and Mines budget is growing by 40 per cent this year. Expediting permits remains a priority while the B.C. government continues to invest in ports, highways, airports and grids. He concluded that last year’s completion of the Northwest Transmission Line, coupled with the infrastructure that has made Imperial Metals’ Red Chris 2015 production possible, bodes well for ensuring that future PwC surveys are more upbeat.
“The Northwest Transmission Line is an important part of our infrastructure,” he said, “especially given that you have roughly 25 per cent of the most exciting major mining projects in the northwest part of the province that will now have access to power.”
Sudbury funds ultra-deep mining innovation
The Centre for Excellence in Mining Innovation (CEMI) is getting a big boost from public coffers to continue its work on ultra-deep mining research and development.
The Greater Sudbury city council and its economic development arm, the Greater Sudbury Development Corporation, unanimously voted in April to grant a total of $1 million worth of tax dollars over the next five years to CEMI’s new commercialization attainment project.
The project will support the organization’s $47-million business-driven Ultra-Deep Mining Network (UDMN), which aims to solve challenges in mineral extraction more than 2.5 kilometres underground. Financial opportunities will be offered to local small- and medium-sized firms to help them identify, develop and test future deep-mining tools and technologies.
According to Eric Maag, director of innovation and prosperity at CEMI, the funds will help back 29 different projects in four main areas of innovation: rock stress risk reduction, energy reduction, operational efficiency and comfort for workers in deep mines.
“The majority of projects we work with have a short-term focus, a solid market and are close to commercialization,” said Maag. One such project is Jannatec Technologies’ personal protection equipment (PPE), which provides connected, wearable gear that will allow miners to regulate their body temperature, monitor vital signs and communicate with an above-ground operator while they are deep below the surface. Jannatec unveiled its PPE at CIM Convention 2015 in May and anticipates having the gear on the market within the next two years.
“Ultra-deep mining is of great interest to Sudbury residents,” said Greater Sudbury Mayor Brian Bigger after the city’s approval. “Council’s decision to support the commercialization attainment program underscores the vital role our mining and mining supply and services sector plays in our economic prosperity.”
Last year the federal government awarded the UDMN $15 million in funding.
– Michael Yang
Noront executive passes away
Paul Semple, chief operating officer of Noront Resources and a 30-year veteran of the mining industry, passed away on April 15 from complications arising from kidney disease at the age of 55.
Considered to be the face and voice of the Ring of Fire junior miner over the past half decade, Semple helped the company stake its claim in the mineral-rich James Bay Lowlands and spearheaded the advancement of its Eagle’s Nest nickel-copper-platinum deposit towards becoming a world-class flagship mine.
But for many people who worked with him, he was much more than a business partner. “Paul truly believed in the need to build relationships that ran deeper than in just a business sense,” said Mark Baker, vice-president of projects at Noront. “He understood that so much more could be achieved, for both parties, when you build a partnership from the ground up.”
According to Baker, Semple had an innate ability to understand, connect and care about those around him. “No matter who you were or when you were with him, Paul always made time to talk and it always seemed like you were talking to a friend,” he said.
Prior to joining Noront in 2009, Semple spent most of his career working on international mine developments as vice-president and general manager of Kilborn Engineering, and later as vice-president for SNC-Lavalin until 2001. After that, he co-founded Penguin Automated Systems and was vice-president of projects for Western Goldfields. Semple was also an active member of CIM and received a Past-President’s Medal in 2005.
In his memory, close friends and family are pairing with DAREarts, a charity he had been involved with since 2007, and CIM to establish the Paul Semple Scholarship Fund for Innovative Mines. The scholarship will support northern Ontario youth who show an innovative spirit and a keen interest in mining practices and technology. “The scholarship represents things that Paul loved: the northern Ontario communities he called home, the bright future of its youth, innovation, and the mining industry,” said Baker. Parties interested in donating can do so by contacting DAREarts.
Feds fund surface mining simulators
In anticipation of two diamond mine expansions and a new open pit mine in the Northwest Territories, the federal government is investing up to $550,000 in surface-mining simulator technology to train the next generation of miners.
Environment Minister Leona Aglukkaq, who is also minister of the Canadian Northern Economic Development Agency, announced the investment in early May. It will be combined with funding from the territory and industry to create the Surface Miner Training program offered at Yellowknife-based Aurora College. The not-for-profit Mine Training Society (MTS), which has stick-handled fundraising for the program, will work with industry to recruit candidates and support them with job coaching.
Fashioned after the existing Underground Miner Training program, it will use ThoroughTec’s Cybermine simulators as part of a wider curriculum that will be up and running by next June. The simulators will enable employees in training to learn how to drive trucks and operate heavy machinery with safety in mind, said Hilary Jones, general manager of MTS. “We can throw rockfalls, tire blow-outs, fires, and all sorts of stuff at the students, so they can develop the safety muscle memory,” she explained.
Only candidates that have been recruited by the expanding Diavik and Ekati diamond mines, as well as the Gahcho Kué project will be admitted as students. Once they have successfully completed the program, the companies will formally make them job offers.
Aglukkaq said in a statement that the federal investment will help spur job creation in a territory where mining is a key employer.
Gold heist at McEwen mine
An estimated eight heavily armed robbers broke in and stole roughly 900 kilograms of gold concentrate containing 7,000 ounces of gold from McEwen Mining’s El Gallo 1 open pit mine in the Mexican state of Sinaloa in April. CEO Rob McEwen confirmed that the stolen concentrate was worth US$8 million. No employees were injured during the robbery, nor was any equipment at the mine damaged.
When asked how the company will recover from the incident, McEwen said it already has. “Production is back up to speed and on track to make our guidance for the year,” he said. El Gallo 1 is expected to produce 50,000 ounces of gold in 2015.
The stolen concentrate made up a sizeable portion of 30 days’ worth of overstock, as production was up 60 per cent in the first quarter. While the amount is substantial, McEwen confirmed that the company has insurance that will cover most – but not all – of the losses.
Mexican authorities are investigating the crime, but no leads had been reported in the weeks following the incident. McEwen noted that there is no telling how long the company can expect an investigation to continue.
El Gallo 1 achieved commercial production in January 2013 and produced about 38,000 ounces of gold and 26,000 ounces of silver in 2014.
– Katelyn Spidle
The crushing cost of northern development
Tapping into Canada’s vast northern mineral wealth is a costly nation-building project that will require sweeping new tax breaks and government infrastructure-building support if it is to be fully realized.
That is the conclusion of a report published in April, which found the cost to explore and build new mines is up to 2.5 times higher in Northern Canada – defined as Canada’s territories and northern provincial fringes – compared to southern areas. The biggest challenges include severe weather, sparse population and the lack of infrastructure including ports, power plants and roads.
“Smart investments and a positive tax regime to overcome the unique obstacles of these regions will be the best way to catalyze more mineral investments,” said Pierre Gratton, president and CEO of the Mining Association of Canada, which co-authored the report entitled “Levelling the Playing Field: Supporting Mineral Exploration and Mining in Remote and Northern Canada” with PDAC, the Yukon Chamber of Mines, the N.W.T. & Nunavut Chamber of Mines, and the Association of Consulting Engineering Companies (Canada).
The report makes a series of policy recommendations to address the “cost premium” of operating in the North. These include increasing the Mineral Exploration Tax Credit to 25 per cent and emulating an Australian incentive program that provides qualified companies with a 50 per cent grant for drilling costs (with 80 per cent paid upon completion of drilling, 20 per cent upon receipt of a final report).
When it comes to developing mines, the authors recommend that all companies earn a basic 10 per cent investment tax credit on all capital expenditures (not just infrastructure) associated with a project, with a further 15 per cent investment tax credit on eligible infrastructure such as roads, bridges, ports, dams and rail lines.
The report also calls for the creation of a new federal crown corporation – comparable to the Alaska Industrial Development and Export Authority – to provide the long-term financing needed to build infrastructure.
Alamos and AuRico merge
Two Toronto-based mining companies have announced a friendly merger with the aim of establishing the new company among the ranks of intermediate gold producers. Alamos Gold and AuRico Gold signed a US$1.5-billion deal in April to become a single company under the Alamos name with operating assets in Ontario and Mexico and a minority stake in a spinoff firm.
Under the terms of the deal, shares of the new Alamos will be split evenly between shareholders of both smaller companies. The new company will own AuRico’s Young-Davidson mine in Ontario as well as its Chanate mine and Alamos’ Mulatos mine, both of which are located in Mexico. It will also own 4.9 per cent of the spinoff, called AuRico Metals, and its Kemess copper-gold project in northern B.C. Shareholders of the former Alamos and AuRico will split the remaining shares.
“The combination of diversified production from three mines and a pipeline of low-cost growth projects in safe jurisdictions equate to a leading gold intermediate,” said Alamos chief executive John McCluskey, who will be CEO of the new company. “We believe the New Alamos will be one of the most attractive [investment] vehicles among the intermediate gold producers.”
The move is the latest in a trend where smaller miners are joining forces to take advantage of cost-saving opportunities to deal with higher costs and falling gold prices, which hovered at around US$1,200 per ounce at the end of April. According to an RBC Capital Markets report released in late March, mergers and acquisitions in the mining sector are expected to increase significantly over the next couple of years resulting in “fewer, albeit better-financed, companies” as the gold sector weathers the downturn.
Earlier this year, Tahoe Resources and Rio Alto Mining combined in a friendly $1.2-billion agreement, and Canadian miners Centerra Gold and Premier Gold Mines agreed to cooperatively develop Premier’s flagship gold project and other properties in northern Ontario.
AuRico chief executive Scott Perry, who will become executive chairman of AuRico Metals, said the decision to separate the companies made sense since the Kemess project is a copper-gold development.
“When you look at all the operating assets and development projects within [New Alamos], they’re all pure-gold assets,” said Perry in a conference call with analysts. “We looked at Kemess and thought it’s not a perfect fit.
The new Alamos is expected to produce 375,000 to 425,000 ounces of gold in 2015, with the potential to grow to 700,000.
Nautilus Minerals awards support vessel contracts