Category Archives: diamonds

Canadian Mining Report for 2016 Released

A return to optimism in mining puts Canada at a crossroads

February 16, 2017

The Canadian Mining Association

http://mining.ca/news-events/press-releases/return-optimism-mining-puts-canada-crossroads

To download a copy of Facts & Figures 2016, go HERE

 

Action needed for Canada to capitalize on potential rebound 

 

Cautious optimism is returning to the global mining industry, which could spur mining companies to make new and significant investments. However, a new report from the Mining Association of Canada (MAC) shows evidence of declining Canadian competitiveness and the prospect for major exploration and mining investments to flow offshore.

“Very simply, Canada is not as attractive as it used to be for mineral investment, and competition for those dollars is growing globally. The recent elimination of federal mining tax incentives, regulatory delays and uncertainty, combined with major infrastructure deficits in northern Canada are all contributing factors that can explain Canada’s declining attractiveness. The time is now to put the right policy pieces in place to better compete for those investments and regain our leadership in mining,” stated Pierre Gratton, President and CEO, MAC.

MAC’s Facts & Figures 2016 report notes several indicators that reveal that Canada is not as competitive as it once was. Foreign direct investment into Canada’s mining sector dropped by more than 50 percent year-over-year in 2015. This is disproportionate to Canadian mining direct investment abroad, which only experienced a 6 percent decline. This imbalance indicates that companies are investing in project development, but may be less interested in doing so in Canada. Canada also no longer attracts the single-largest share of total global mineral exploration spending, having conceded first place to Australia in 2015. Further, no new mining projects entered the federal environmental assessment stage in 2016. If these trends continue, there will be fewer discoveries made and fewer projects that become operational mines in Canada.

“The policy landscape in Canada is full of uncertainty as we await the outcomes of major government decisions. The federal government is reviewing federal environmental legislation, is implementing a pan-Canadian climate change policy, and is working to address long-standing transportation and infrastructure issues. These are all necessary and positive steps, but they must result in boosting Canada’s attractiveness as a place to do business. At risk is a key sector of our economy, and one that leads the world in sustainable mining practices,” stated Gratton.

MAC’s report also revealed the mining industry remained a strong contributor to the Canadian economy despite the downturn in 2015. The industry directly employed more than 370,000 people across Canada and remained the largest private sector employer of Aboriginal people on a proportional basis. An additional 190,000 worked indirectly in mining, with more than 3,700 companies supplying goods and services to the Canadian mining industry. In 2015, the mining industry accounted for $56 billion of Canada’s GDP and minerals and metals accounted for 19% of Canadian goods exports.

Policies that improve Canada’s mining competitiveness:

1)   Improve the federal project review process –  the process should be effective and timely, from pre-environmental assessment (EA) to post-EA permitting, with meaningful consultation with Aboriginal communities.

2)   Invest in critical infrastructure in remote and northern regions – introduce strategic tax measures and ensure the new Canada Infrastructure Bank has a strong economic development focus for northern Canada.

3)   Improve access to trade – ensure trade policies provide access to new and important markets, including China, and improve Canada’s transportation network to more efficiently move mineral and metal products to market.

4)   Address climate change while protecting Canadian businesses – adopt policies that lead to meaningful greenhouse gas emissions while protecting emissions intensive and trade-exposed industries (EITI), like the mining industry. Failing to protect EITI sectors will result in “carbon leakage”—the shifting of production and the associated economic benefits from countries that are taking action on climate to those that are not.

5)   Help expedite industry innovation – The Canada Mining Innovation Council is seeking a $50 million investment for the Towards Zero Waste Mining innovation strategy from the Government of Canada to accelerate the adoption of disruptive technologies that will support the transition to a lower carbon future.

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To download a copy of Facts & Figures 2016, go HERE

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About MAC

The Mining Association of Canada is the national organization for the Canadian mining industry.  Its members account for most of Canada’s production of base and precious metals, uranium, diamonds, metallurgical coal, mined oil sands and industrial minerals and are actively engaged in mineral exploration, mining, smelting, refining and semi-fabrication. Please visit www.mining.ca.

 

Canada losing ground as mining investment destination

Canada losing ground as mining investment destination

Cecilia Jamasmie

Feb 16, 2017

Mining.com

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Source: MAC’s Facts & Figures 2016.

While optimism is slowly but steadily returning to the global mining industry, Canada doesn’t seem to be in a good position to benefit from the increasing number of companies ready to make new and significant investments.

At least that is the conclusion from a report released Thursday by the Mining Association of Canada (MAC), which also warns of the possibility of seeing major exploration and mining investments flow offshore.

“Very simply, Canada is not as attractive as it used to be for mineral investment, and competition for those dollars is growing globally,” MAC President and CEO Pierre Gratton said.

Elimination of federal mining tax incentives, regulatory delays, uncertainty and major infrastructure deficits in northern Canada are all contributing to the country’s declining appeal.

The recent elimination of federal mining tax incentives, regulatory delays and uncertainty, combined with major infrastructure deficits in northern Canada are all contributing factors that can explain Canada’s declining attractiveness, Gratton noted.

The report also highlights the policy areas that Canada needs to pay attention to in order to seize future growth opportunities and re-gain its leadership in mining.

Some of the figures included in the report are quite telling. In 2015, foreign direct investment into Canada’s mining industry dropped by more than 50% from the previous year. In contrast, the country’s resources sector direct investment abroad only experienced a 6% decline.

According the industry body, such imbalance proves that Canada no longer attracts the single-largest share of total global mineral exploration spending, a top place it lost to Australia in 2015. Further, MAC says, no new mining projects entered the federal environmental assessment stage in 2016.

If these trends continue, the association warns, there will be fewer discoveries made and fewer projects to become operational mines in Canada.

Despite the challenges, the sector remains a key contributor to the Canadian economy, employing more than 370,000 people across the country and being the largest private sector employer of Aboriginal people on a proportional basis.

In 2015, the mining industry accounted for $56 billion of Canada’s GDP and minerals and metals accounted for 19% of Canadian goods exports.

 

 

 

Perfect storm for Saskatchewan diamonds evolving?

Perfect storm for Saskatchewan diamonds evolving?

 

Global diamond shortage looming HERE (so the world may need our diamonds)

RIO has $5-billion to spend HERE (a major diamond miner has the cash to develop the project and they were rumored to have been close to a deal for our diamonds a few years ago)

RIO’s CEO wants more diamonds HERE (see above)

Trump threatening conflict mineral imports/disclosure HERE (our diamonds are some of the few which are not conflict related)

 

This Trump move could help Saskatchewan’s diamond and Rare Earth prospects

White House eyeing executive order on ‘conflict minerals’ rule: sources

SARAH N. LYNCH AND EMILY STEPHENSON

WASHINGTON — Reuters

Published Wednesday, Feb. 08, 2017 8:19AM EST

Last updated Wednesday, Feb. 08, 2017 8:21AM EST

 

President Donald Trump is planning to issue an executive order targeting a controversial Dodd-Frank rule that requires companies to disclose whether their products contain “conflict minerals” from a war-torn part of Africa, according to sources familiar with the administration’s thinking.

Reuters could not learn the precise timing of when the order will be issued, or exactly what it will say.

However, the 2010 Dodd-Frank law explicitly gives the president authority to order the Securities and Exchange Commission to temporarily suspend or revise the rule for two years if it is in the national security interest of the United States.

The sources spoke anonymously because it is not public and they were not authorized to speak on the record.

The plan for the executive order comes on the heels of another order issued by the White House last week that takes aim more broadly at the Dodd-Frank rules put into place after the 2007-2009 financial crisis.

That order did not single out any one particular rule, but it called on the Treasury Secretary to consult with other regulators, including the SEC, and to come back with a report outlining possible regulatory changes and legislation.

The conflict minerals rule is one of several disclosure regulations that was tucked into Dodd-Frank that are unrelated to the financial crisis itself.

A second Dodd-Frank SEC disclosure rule that required oil, gas and mining companies to disclose payments to foreign governments, meanwhile, was repealed by the Republican-controlled Congress last week.

The conflict minerals rule was pushed by human rights groups who want companies to tell investors if their products contain tantalum, tin, gold or tungsten mined from the Democratic Republic of Congo, in the hopes it will help curb the funding of armed groups.

But business groups have staunchly opposed the measure, saying it forces companies to furnish politically-charged information that is irrelevant to making investment decisions.

They have also complained it costs too much money for companies to trace the source of the minerals through the supply chain.

In 2014, a U.S. appeals court struck down a part of the conflict minerals law after the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Manufacturers sued the SEC over the rule.

The court found part of it violated the free speech rights of companies by forcing them to publicly state that their products are not conflict free.

The rest of the rule, however, remained intact and companies are still required to carry out due diligence and report the details of those inquiries in public reports filed with the SEC.

The SEC cannot permanently repeal the rule without a law passed by Congress. However, it can use its broad exemptive powers to scale back some of the requirements or stop enforcing the rule entirely.

Last week, Acting SEC Chair Michael Piwowar took steps toward doing just that, by announcing he has asked SEC staff to reconsider how companies should comply with it and whether “additional relief” is warranted.

Piwowar did not explicitly ask Trump to utilize his powers under Dodd-Frank to temporality suspend the rule; however, in his statement, he spoke about how he had traveled to Africa to study the rule’s impact and raised concerns about its effect on national security

 

 

 

Time to step up – resource sectors need Canada’s media more than ever

Time to step up: resource sectors need Canada’s media more than ever

 [Download the report HERE]

In this age of thought-leadership reports and white paper discussions that flutter around our lives like so much wedding confetti, there’s one document out there that deserves immediate attention – particularly in Canada’s resource sectors.

For those sectors read: energy, mining, forestry and agriculture – the industries that are the supporting vertebrae of Canada’s economic backbone.

The sectors everybody increasingly seems to want to despise.

Every senior management team and board of directors in companies that derive their livelihoods from those various sectors should make this particular report required strategic reading. It will give them profound insights into what happens when a business model collapses dramatically in a way that directly impacts their own businesses, especially in terms of public perception.

And it may guide them to proactively support the policy pushes necessary to bring back Canada’s media sector from the brink of extinction.

Entitled The Shattered Mirror,  [Download the report HERE] it’s the product of research and consultation by the Public Policy Forum. It critically examines the state of Canadian media. The prognosis isn’t good. It paints a troubling picture of the diminished role Canadian media plays in mediating and shaping the discourses and narratives that define socioeconomic and political conversations. Commissioned by Heritage Canada, The Shattered Mirroris more than a casual query into how digital forces are battering a largely analogue sector. It probes deeply into the costs our democracy and civil society face when institutions like newspapers are abandoned in droves.

Unfortunately, most resource executives are predisposed to crap on media. And I mean crap, in every smelly and repugnant sense of the word. There’s no way to put it elegantly.

Indeed, “media” has been largely indicted by those same leaders for being part of, if not entirely responsible for, the poor public image resource sector executives and managers argue plague their respective industries.

What the resource sector “C-Suite” doesn’t get is that it has been in some measure responsible, even if unwittingly so, for silencing of the very voices whose now-diminished importance resulted in such horrible conditions of public perception. Each resource sector languishes under the burden of its own special version of “social licence…”

…to operate.

…to log.

…to mine.

…to plant.

The mainstream media is partially to blame for its own problems, of course, but it’s challenging to do “the job” when your business can barely keep its head above water. In recent times, you would think resource companies would be more emphatic.

What those resource companies and media organizations share is a common burden: being considered increasingly irrelevant by a society which generally has no clue as to how relevant the products are to our daily lives.

But at a time when resource players should have been embracing media, they instead chose (largely) to adopt adversarial relations, thinking they could bypass reporters and editorial boards. In short, they thought they could become content creators themselves. What was missing is the ability to set trusted context.

There’s no free ride for context – and that’s what separates mere “content” from quality journalism.

It’s media context-setting that defines a progressive society’s means of processing issues of major importance. Those debates are not always pretty, of course, and they sometimes cause hurt feelings. But in most cases, they advance substantive issues to some form of resolution.

Put bluntly, Facebook does not give a rat’s ass about Canada’s oilsands industry, by way of one example. In fact, it’s quite the opposite, in that Facebook provides a curation-free platform for the voices which shout in opposition to energy development (or farming, or logging, or mining) with no burden of actually proving the merits (or facts) of their perspectives.

No judgment. No context. No facts.

Fake news was around long before Donald Trump made it a thing – and it was hitting hard at the country’s resource bases.

 It’s a good bet that the editorial team at the Calgary Herald cares about oilsands development, though, because it cares about the way society works.

That doesn’t mean the sector is guaranteed a free ride in terms of fawning features. Constructive and consistent coverage and analysis makes companies and sectors better. If the Herald staff today what it was five years ago, the “coverage” would be more balanced, more deeply contextualized and more subtly nuanced. And we would have a better oilsands sector for it.

But every cancelled subscription and un-bought advertisement hobbles The Herald’s ability to be doing what it ought to: curating, coordinating and yes, even mediating.

But there’s another, more insidious, problem: strong (not social) media makes for a more literate public. And at a time when Joe Average Citizen needs to be learning about Canada’s resource challenges, the teacher is phoning in sick and there’s no substitute available.

There’s another millennial twist worth noting: too many resource companies fell over themselves establishing social media strategies at the behest of millennial communicators who promised that tweets and Facebook postings would bring Canadians around. In many cases, just the opposite happened. Corporate social media efforts were met with the opprobrium of a vocal few. In other words, what corporate (resource) Canada didn’t get is that when it comes to discussing something rationally social media is largely just a bullhorn for banality and bullshit. The problem is that people tend to believe social media because they distrust they way resource sector companies communicate.

Canada’s resource sectors are now firmly behind the eight ball in terms of public opinion. And the very media institutions that might have helped them turn the corner in public opinion are on life support.

 Here’s betting the resource bosses are longing for the good old days when a reporter with a notepad showed up. That’s a lot simpler than dealing with the flow of Twitter dreck that seems to hypnotize the average Canadian the same way a rabbit hypnotizes a snake – before it gobbles the hapless creature whole.

As Joni Mitchell once crooned in Big Yellow Taxi, “…you don’t know what you got ’til it’s gone.”

Shore Gold Diamond Project Environmental Assessment Update

January 26, 2017

Stock Symbol: SGF: TSX

Saskatoon, Saskatchewan

STAR-ORION SOUTH DIAMOND PROJECT UPDATE FROM SASKATCHEWAN MINISTER OF ENVIRONMENT ON ENVIRONMENTAL ASSESSMENT

George H. Read, P. Geo., Senior Vice President Exploration and Development of Shore Gold Inc. (“Shore” or the “Company”) announces that the Company has recently been informed by the Saskatchewan Minister of Environment that additional consultation is required between the government and First Nation and Métis communities for the government to meet its legal obligation with respect to duty to consult and accommodate process. The Company has been informed by the Minister that the government is proceeding with a work plan that they anticipate will enable them to complete this required consultation process within six months. To this end, an Order in Council by the province also announced that a grant, not to exceed $137,000, is being provided to the James Smith Cree Nation for the purpose of consultation with the province for the period January 2017 to March 2017, relating to the duty to consult process.

Minister of Environment Scott Moe indicated to Shore that once consultations with potentially impacted First Nation and Métis communities are thorough and completed, all pertinent information will be reviewed before a decision under The Environmental Assessment Act is made.

Senior Vice President Exploration and Development, George Read, states: “The Company is pleased to receive this update from the Minister of Environment, which provides Shore and our shareholders with an approximate timeline for the completion the Environmental Impact Statement (“EIS”) review process by the province. Shore awaits the province to complete its duty to consult as presently no additional information or activity has been requested from Shore towards the approval of the EIS.”

The Star-Orion South Diamond Project is located in central Saskatchewan some 60 kilometres east of the city of Prince Albert. The Project is in close proximity to established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future mine development. The Technical Report on the Revised Resource Estimate for the Star-Orion South Diamond Project dated November 9, 2015 provided an updated Mineral Resource Estimate for the Star and Orion South kimberlite deposits: Indicated Mineral Resource of 393 million tonnes containing 55.4 million carats of diamonds at a weighted average price of US$210 per carat. In addition to the Indicated Mineral Resource Estimate, the Star and Orion South Kimberlites include Inferred Resources containing 11.5 million carats.

Shore is a Canadian based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Exchange under the trading symbol “SGF”.

 

 

2016 was a comeback year for natural resources

Private capital rotating into mining and metals

Frik Els

Mining.com

Jan 11, 2016

 

After four-plus years of declines, 2016 was a comeback year for natural resources and the oil and mining industries – with only a couple of exceptions, energy, metal and mineral prices rallied last year.

According to a new report by private capital tracker Preqin, the improving conditions of last year did not filter through to all sectors.

Overall fundraising for natural resources investment actually declined declined by a fifth in 2016 to the lowest since 2012.

Coming off a record 2015, 70 funds raised a total of $58bn for investment in natural resources in 2016 (a figure that could go higher as more information becomes available says Preqin).

In 2015 mining and metals made up a paltry 0.6% of funds raised

But mining and metals enjoyed a much better year. In 2015 mining and metals made up a paltry 0.6% of funds raised with just two funds closing on $400 million in 2015. Last year five funds managed to raise $2.1 billion.

That’s still small beer compared to the money going into oil and gas however. Of the top 10 largest natural resources funds that reached a final close in 2016, all 10 are focused on energy-related assets, and all but one focus on projects in the US.

Together, these 10 funds alone raised $38bn, two-thirds of all natural resources capital raised through the year according to the report. So called dry powder – money ready to be invested – for natural resources now total $173 billion. Dry powder destined for mining stood at around $7 billion last year.

fudning

In 2017, across natural resources 250 funds are look to raise just under $120 billion. Of those only 13 are primarily focused on metals and mining and are hoping to raise $10bn (although some of $2.9bn for diversified funds could go into mining). The biggest mining-focused fund is China’s Power Capital which is seeking $3bn to invest in Asia. Diversified US-based Energy and Minerals Group is looking for $4 billion.

Tom Carr, Preqin’s head of real assets products, says there is more diversity present among those funds that are currently in market: “In particular, large vehicles focused on
mining and agriculture may see these sectors account for a greater proportion of activity than in 2016.”

Private capital encompasses a range of investment vehicles and strategies including traditional private equity such as buyout, venture capital and turnaround funds, private debt including distressed debt and direct lending, and private real estate, infrastructure and natural resources funds.

A total of $602bn were raised by 1,228 funds across all strategies and sectors in 2016 according to Preqin data.

 

 

 

What Mining Giants From Barrick to Teck Are Watching For In 2017

 

What Mining Giants From Barrick to Teck Are Watching For In 2017

by  Danielle Bochove

December 22, 2016, 4:55 AM CST December 22, 2016, 8:16 AM CST

https://www.bloomberg.com/news/articles/2016-12-22/barrick-to-teck-give-outlooks-for-miners-rocked-by-brexit-trump

It’s been a turbulent year for miners, with metal prices starting near multi-year lows as executives drew from a common playbook: slashing spending, costs and debt. Then came Brexit and the U.S. election and gold and base metals diverged.

What does 2017 hold? Bloomberg asked the heads of some of the biggest producers including Barrick Gold Corp., Newmont Mining Corp. and Teck Resources Ltd. Opinions vary, but there’s broad agreement that gold faces near-term headwinds from the Fed; that industrial metals have bottomed out but the dizzying 2016 rally may falter; and that miners will begin to spend more, possibly on deals, while keeping an eye on balance sheets.

Barrick’s Kelvin Dushnisky:

“If we see an opportunity to acquire something, to increase our margin, earnings, NAV, then we’ll consider it. But if it’s just a matter of adding to our production base, we’re not interested.”

Market Outlook:
* Global economic uncertainty and loose monetary policy are supportive of gold prices in 2017; volatility around Fed affects near-term prices
* Mid to longer term, supply-demand fundamentals bullish for gold

Sector Outlook:
* Costs can be lowered further although “low hanging fruit has been harvested”
* May see more M&A activity, depending on valuations
* Gold below $1,000 an ounce could pose survival challenge for some miners

Barrick in 2017:
* Making “good progress” to drive all-in cost below $700 by 2019
* Looked at a number of acquisition possibilities in 2016 and will continue to act on acquisition “mandate” in 2017
* Any gold weakness could provide acquisition opportunities
* “We may do some increased exploration in 2017, both a combination of mine-ex around the existing mines and greenfield”
* Used $1,000 gold price for budgeting in 2016. For 2017, “I’ll be surprised if we’re not in that same range”
* Barrick shares are up 85 percent this year

Newmont’s Gary Goldberg:

“As I look at where we’re at today, it feels a lot like where we were a year ago with the Fed having just raised interest rates and the potential for other increases going forward.”

Market Outlook:
* Mid- and long-term fundamentals for gold are good
* Near term, prices could fall further before the market “finds its center”
* Pickup on buy side likely to support falling prices

Sector Outlook:
* Biggest latent risk is under-investment during down cycle
* Past focus on the best quality ore amid low prices may “come back to roost in higher operating costs, cash costs, over the next year or so”
* Expects 6-7 percent decline in mine supply by 2021

Newmont in 2017:
* Positioned to perform well through all cycles; focus on internal projects
* Lower gold prices could provide asset-buying opportunities
* Higher prices would benefit shareholders through new dividend structure
* Recently cut price for 2017 budgeting to $1,100 from $1,200
* Newmont shares are up 75 percent this year

Agnico Eagle’s Sean Boyd:

“The next big cost item that needs to be taken out of the industry is overhead. There’s too many players for the number of good opportunities that are around.”

Market Outlook:
* Bullish on 2017 and beyond as market builds off average 2016 price around $1,140
* Rising global protectionism and financial-system debt, with only moderate rate increases in the U.S., will be supportive of higher gold prices: “I could see gold at $1,300, $1,350 in 2017 and that isn’t a stretch because nothing has really been addressed from a financial system risk perspective”

Sector Outlook:
* If gold does fall below $1,100, sees more M&A as some miners still vulnerable
* Industry needs to see more M&A at asset and corporate level
* “The biggest challenge is the pipeline. Finding enough quality assets that not just sustain production levels but actually allow you to improve the quality of the business”

Agnico Eagle in 2017:
* Company can increase production by 400,000 to 500,000 ounces by 2020 or 2021 through internal projects; internal pipeline can supply growth for five to six years
* Would consider acquisitions that added to production profile after 2022
* Sees local currency weakness (CAD, Euro, Mexican Peso) supporting growth
* Using $1,200 for budget purposes
* Agnico shares are up 41 percent this year

Yamana’s Peter Marrone:

“Within the next couple of years to five years we will be seeing gold prices that are meaningfully higher than where they are today and where they were at their last highs several years ago.”

Market Outlook:
* Prices could be choppy in 2017 but mid- and long-term prognosis very strong
* Sees gold exceeding 2011 high of $1,900 in 2-5 years
* Global economic and geopolitical uncertainty, higher inflation supportive long term

Sector Outlook:
* Still sees room for industry to cut costs further, find more efficiencies
* Industry can’t rush capex; projects and M&A depend on technical merits

Yamana Gold in 2017:
* Focused on developing Cerro Morro deposit and internal exploration projects
* Higher gold prices would allow cash buildup for internal investment beyond 2018
* If extra cash, “special distributions to shareholders are a good way to go”
* Likely to use gold price near 2016 average for 2017 budgeting
* Yamana shares are up 35 percent this year

Teck’s Don Lindsay:

“The zinc concentrate market is so tight that zinc smelters are going to run out.”

Market Outlook:
* Concentrate shortage means he’s bullish on zinc
* Metallurgical coal to be strong for at least first half
* Eventually, supply re-balancing to push down coal with $150 a ton “pretty safe” long term
* Copper could slip to $2-$2.25 a pound before strengthening as market moves into deficit in 2018 or 2019

Sector Outlook:
* Continued focus on costs and productivity in the face of increasingly volatile markets
* Growing investment in technology to improve efficiency and environmental performance

Teck in 2017:
* Will consider changing dividend policy in April
* Priority is reducing debt to $5 billion or less in first quarter or shortly thereafter
* 2017 focus on internal pipeline, including Fort Hills
* Quebrada Blanca expansion well timed for higher copper prices
* Teck shares are up more than 400 percent this year

Lundin’s Paul Conibear:

“Everybody’s capex should be up. It’s not necessarily discretionary anymore.”

Market Outlook:
* Copper prices likely to slip; Lundin using $2.25 a pound for 2017 budget
* Zinc may soften slightly “but a good zinc price is here to stay”
* Nickel to be relatively weak for another 1.5 years
*“I would caution those who think we’re back in a bull market: we’re not”

Sector Outlook:
* Strong Q4 earnings to flow through entire industry cost structure and “take some of the handcuffs off spending”
* Operating and capital expenditures to rise as companies reinvest in equipment, repairs
* For next 1-3 years, grades will drop, stripping increase, after miners “pushed their mines as hard as they could” during downturn
* Resurgence in exploration likely as miners hunt for new scarce production
* Slow reintroduction of dividends but share buybacks unlikely given share strength

Lundin Mining in 2017:
* Company’s assets all make money at current metal prices
* Will consider special dividend when receives proceeds from Tenke sale
* Hoping to do acquisitions but can be patient
* Lundin Mining shares up 77 percent this year

 

 

BAIN The Global Diamond Industry 2016: The Enduring Allure of Timeless Gems

The Global Diamond Industry 2016: The Enduring Allure of Timeless Gems

December 05, 2016 Bain report

By Olya Linde, Aleksey Martynov, Ari Epstein and Stephane Fischler

From:  http://www.bain.com/publications/articles/global-diamond-industry-report-2016.aspx

DOWNLOAD FULL REPORT HERE

Welcome to the sixth annual report on the global diamond jewelry prepared by the Antwerp World Diamond Centre (AWDC) and Bain & Company. This year’s edition covers industry developments in 2015 and early 2016 and takes a close look at the millennial generation (roughly speaking, people born between 1980 and the early 2000s) as a new category of diamond buyers. We begin with key developments along the value chain. In subsequent sections, we review factors that influenced rough-diamond production and sales, midstream performance and global diamond jewelry demand in major markets.

We then share diamond jewelry consumer insights from our proprietary research across China, India and the US, highlighting the attitudes and behaviors of millennials. We also provide an update on the long-term outlook for the diamond industry through 2030. The 2030 supply-demand forecast considers recent changes in mining operations and expected global macroeconomic effects.:

  • Following a period of growth from 2012 through 2014, diamond jewelry consumption has entered a moderation phase.In 2015, retail sales of diamond jewelry grew 3% at constant exchange rates but declined about 2% in US dollar terms. The US remained the sales growth engine of the global diamond jewelry market, as the same-store revenues of mainstream US jewelry retailers improved, reflecting strong middle-class consumption. Greater China is still rebalancing as slowing tourist flows to Hong Kong and Macao offset otherwise positive dynamics in mainland China. Europe and Japan in 2015 benefited from the shift of spending by Chinese consumers from Hong Kong and Macao. This shift was reflected in positive consumption growth in euro and yen terms. Strong macro-demographic trends powered positive consumption dynamics in India. The strong US dollar nonetheless pushed growth in those markets into negative territory in dollar terms.
  • Midstream US dollar revenues tracked the retail sector’s performance in 2015, declining 2%.Slowing demand and a drop in polished prices resulted in some of the lowest profit margins in years, as well as high inventory levels, accumulated since 2013. As the year came to a close, cutters and polishers significantly reduced rough-diamond purchases and off-loaded about $5 billion of inventories to improve cash flows.
  • Major rough-diamond producers in 2015 reacted to the challenging circumstances of their customersby reducing output, increasing their own inventory levels and providing more flexible purchasing terms while cutting rough-diamond prices. As a result, rough-diamond sales fell 24% in 2015.
  • The industry is rebounding in 2016.Restocking by midstream players, following their inventory sell-off in late 2015, produced growth of around 20% in rough-diamond sales during the first half of 2016. However, strong rough-diamond sales in 2016 may again lead to swollen midstream inventories if retail demand does not strengthen proportionately. Declining sales at major jewelry retailers in the first half of 2016 indicate a possible demand slowdown in the US and China. The final growth trajectory for 2016 and the strength of midstream and rough-diamond sales in the beginning of 2017 will be determined by the performance of the diamond jewelry retail segment during the year-end holiday season.
  • A new generation of consumers—the millennials—represents a compelling opportunity for the diamond industry.The population of millennials in China, India and the US totaled roughly 900 million in 2015, and their combined gross income amounted to approximately $8 trillion. Millennials appear to resemble other age groups in their preferences for diamond jewelry but not in their shopping behaviors. To fully capture millennials’ demand over the longer term, industry players need to invest in both category marketing and brand-building efforts and redefine the customer experience in the retail environment.
  • The key challenges facing the diamond industry remain the same as in previous years.The midstream sector still needs to secure access to financing and continue to improve its business model to sustain profitability amid potential price volatility. Over the longer term, consumption may continue to slow in China, and there is a risk of a cyclical recession in the US. Synthetic diamonds as an emerging competing category to diamonds remain a risk, but diamond industry participants are determined to reduce the threat from synthetics by marketing the emotional attributes of natural stones. The recently formed Diamond Producers Association (DPA) is reviving industry-wide generic marketing efforts.
  • The long-term outlook for the diamond market remains positive.For the next three years, the supply of rough diamonds is expected to maintain a tight balance with demand. We expect demand for rough diamonds to recover from the recent downturn and return to a long-term growth trajectory of about 2% to 5% per year on average, relying on strong fundamentals in the US and the continued growth of the middle class in China and India. The supply of rough diamonds is expected to decline annually by 1% to 2% in value terms through 2030.

 

Quebec government’s infrastructure initiative pays-off with diamond mine production

  • 26 Oct 2016
  • National Post – (Latest Edition)
  • Damon van der Linde in Lac Lagopède, Que.

Quebec’s Plan Nord yields first jewel

DIAMOND MINE MARKS MILESTONE IN PLAN TO BOOST DEVELOPMENT IN PROVINCE’S NORTH

Stornoway Diamond Corp. CEO Matt Manson stands over a glass display case containing piles of shimmering stones destined for rings and necklaces around the world.

The diamonds are sorted by size, colour and shape, and using a pair of tweezers, Manson picks up one of the biggest: a clear eight- sided stone estimated to be worth more than $100,000.

“Diamonds are a mined product that people use to commemorate the most important personal moments of their lives,” he said at the inauguration of the Renard mine in north- central Quebec last Wednesday.

Although the entire 20,000- carat haul could fit inside a wedding party punch bowl, it took 450 workers six days to produce and is valued between $ 3 million and $5 million.

The piles of gems were not only to display the potential of Quebec’s first diamond mine — they also represent the initial spoils of the provincial government’s Plan Nord initiative.

Manson says that when Renard is fully operational, it should be able to produce the amount on display in less than three days throughout the project’s estimated 14-year lifespan.

“Mines really are made, not discovered,” he says.

Stornoway flew investors, analysts, media and politicians to its opening ceremony at the site more than 800 kilometres north of the company’s head office in Longueuil, Que., on Montreal’s South Shore.

From the small airport built by Stornoway, a wide gravel road passes between stands of tall, thin spruce trees and pale green moss of the rocky Boreal landscape. It’s mid- October and the ground is already speckled with frost.

Parts of the forest where vegetation is sparse allow views of Lake Lagopède, framed by rolling hills into the distance.

The end of the road opens to the mine site, where exploration first began in 2001 through a joint venture between Ashton Mining Canada and SOQUEM Inc. Stornoway acquired Ashton in January 2007 and the remaining interest in the project in April 2011. After breaking ground just under three years ago, the mine came online two months early and under budget, costing just $ 775 million to complete, compared to its original budget of $811 million.

For the Quebec government, the symbolism of Stornoway’s launch goes beyond opening a new mine with a new resource. It represents the first project to be completed under the auspices of the Plan Nord, a provincial initiative to invest about $1.3 billion in infrastructure and other projects over the next five years in hopes of attracting $ 22 billion in private- sector investment north of the 49th parallel.

In March 2014, Stornoway completed $944 million in financing transactions: $ 220 million in funding through the provincerun Investissement Québec, $105 million from the Caisse de dépôt et placement du Québec pension managers and US$ 360 million from the privately owned Orion Mine Finance.

The main structure at Renard is a complex of connected buildings, housing the offices, security post and a trio of navy blue, three-storey residences to house i ts eventual 525 employees. Beyond the operations centre is an underground mine that dives 250 metres into the earth, though it could reach as far as 710 metres during the mine’s lifespan. There’s also an openpit mine nearly half a kilometre wide and more than 60 metres deep.

From there, dump trucks haul the ore to a processing plant. Inside the plant conveyor belts carry the rocks from machine to machine — breaking, crushing, washing and sorting 6,000 tonnes of kimberlite a day. The company says this will increase to 7,000 tonnes by 2018. Stornoway finds about one carat of diamond — or 0.2 grams — for each tonne of ore taken from the ground.

The company says production is two months ahead of schedule, with the first sale of diamonds from Quebec taking place on Nov. 14 in Antwerp, Belgium.

Manson says the mine should be profitable by the end of 2017 and, according to March 2016 estimates, the project will net $974 million throughout its lifespan.

“Stornoway is an extraordinary example of the vision we had as a government,” said Pierre Arcand, Quebec’s Minister of Energy and Natural Resources, who is also responsible for overseeing Plan Nord.

“This is the best partnership there is. It’s a partnership with passionate developers, an involved community and a government that helps to confer the project.”

First conceived by then- premier Jean Charest in 2011, Plan Nord called for $ 80 billion in public and private investment over 25 years. But critics pointed out that many of the projects would have gone ahead anyway and that the whole operation was a convenient way for Charest to grab some headlines.

Four years later, the current Liberal government dusted off Plan Nord and relaunched it in April 2015. By 2035, the provincial government anticipates a total of $50 billion in private and public investments, of which at least $ 2.5 billion will be public money.

About $ 20 billion will come from Hydro- Québec from new projects and $ 2 billion will be spent on roads, airports and other public infrastructure. The remaining $28 billion is expected in the form of private- sector investment, largely in the mining sector, like the 29 per cent ownership in the Renard mine.

Although Stornoway says financial assistance was crucial in getting Renard operational, the road was one of the most simple but beneficial contributions from Plan Nord.

In 2012, t he government loaned Stornoway $ 77 million to complete a 240-kilometre extension of Route 167, giving allseason access by way of the Chibougamau and Mistissini communities. The road, championed publicly by Charest as a centrepiece of Plan Nord, became a political lightning rod after costs ballooned from the initial $260 million estimate to more than $470 million.

While every site visit used to mean flying in by float plane or helicopter, Route 167 has allowed Stornoway to drive in crews and equipment, as well as liquefied natural gas to power the mine operations.

Nochane Rousseau, the Mining Leader for Quebec at the PwC consulting firm, says the road will open the potential mining projects that previously could not be easily accessed. It also allows for exploration work that relies less on costly helicopter flights.

“When you have a new mine with new infrastructure you open the territory and decrease the exploration work,” Rousseau said.

At the opening ceremony, Arcand announced the government will continue Route 167 to connect with Route Transtaïga — a road that runs much of the way across the province 100 kilometres north of Renard.

“If they do that, they open northern Quebec,” Rousseau said. “(Arcand) did not say when they’re going to do it, but he said that they’re going to work on it.”

The Plan Nord covers 1.2 million square kilometres, representing 72 per cent of Quebec’s land mass but, with only 120,000 people — about a third of whom are First Nations — it’s less than two per cent of Quebec’s population.

Although the Renard mine is built on what is designated as public land, it is considered to be territory of the Cree First Nations.

The Cree do not have any direct investment and there is no financial compensation for having the Renard mine on the land.

Chief of the Mistissini Cree Nation, Richard Shecapio, says the community does benefit from training and employment, including business for contractors during the construction, operation and closure of the project. Though the mine’s staff come from more than 20 different countries, 92 per cent of workers have come from Quebec, 26 per cent of whom are Mistissini Cree.

“When there’s careful consultation with the population, it smooths out the resource development opportunities for companies,” Shecapio said, adding that this was the case with Renard.

When the mine’s resources are exhausted, Renard will close. Stornoway says it will leave the airport for the community, along with the access created by Route 167, which Shecapio says could mean more commercial investment as well as easier travel to traditional trap lines.

The Plan Nord has been criticized for focusing too heavily on the resource sector as the price of metals and minerals have fallen in recent years due to global economic factors the government describes as “cyclical.”

Manson says Stornoway’s revenue is set apart from these trends as 99 per cent of the stones at Renard will be sold as gems, with the last one per cent for industrial uses. While diamond prices have fluctuated over the years along with supply and demand, Manson says the market is more stable than copper, zinc and other minerals.

“These gifting traditions for diamonds are cross-cultural and across demographics. Human society needs there to be something like this,” he said.

Stornoway is now looking for more projects, exploring a site 100 km south of Renard as well as in Saskatchewan and Nunavut. For the moment Manson says the company is focusing most of its effort on this diamond mine.

 

 

 

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