Category Archives: diamonds
Technology set to unleash mining innovation – Anglo’s O’Neill
16th August 2017 BY: MARTIN CREAMER
CREAMER MEDIA EDITOR
JOHANNESBURG (miningweekly.com) – In the next ten years, technology is set to unleash a wave of mining innovation, with the sweet spot centred on changing the thinking around orebodies and processing plants rather than much-spoken-about automation.
“Our focus has changed from hunting technologies to hunting value,” Anglo American technical director Tony O’Neill told Creamer Media’s Mining Weekly Online in an exclusive interview.
Three-dimensional metal printing, nonexplosive breakage of rock and microwave preconditioning of rock, as well as medical imaging equipment, are finding rapid application in mineral mining and processing.
The word in the industry is that mining companies that embrace the new era will be successful and the ones that do not will ultimately not survive. Anticipated are mines with footprints that can more readily coexist alongside a community in much the same way as farming.
The good news is that pathways are already starting to develop that change the current mining and processing paradigm.
Technologies are being reconfigured to make mining and processing far more precise, which offers massive potential reward.
Currently, much larger volumes of waste are brought to surface, compared with the scenario more than a century ago. This is because, outside of safety improvements, old methods are still being used today. For instance, in 1900, to obtain 40 kg of copper, 2 t of material had to be mined using 3 m3 of water and 10 kWh of energy, compared with currently having to mine 16 times more material, using 16 times more energy and drawing on double the volume of water.
“It’s risen at such a rate that it’s becoming unsustainable,” O’Neill commented to Mining Weekly Online.
While mining was, in the past, content to be a research and development laggard, other industries were not – and they shot ahead on the technological front, proving up technology that is now available off the shelf for mining to implement.
A successful pilot plant is already pointing the way for the more widespread introduction of coarse-particle recovery, which brings considerably larger-sized particles to surface and slashes water use.
Moreover, with the maturing of robotics technology, research is also being conducted into the introduction of swarm robotic mining, involving the use of small robots that will bring ultra-precision to a hugely wasteful industry.
As more precise mining methods gather momentum, those 40 kg of copper used to illustrate mining’s deteriorating position may one day be mined without any waste at all.
Coarse-particle recovery and advanced fragmentation (using smart blasting technologies) are good examples of putting existing technologies into new configurations to deliver value right now.
None of the technologies used is unproven, but what Anglo has managed to do is configure them in a way that adds immense value, with minimal additional capital investment.
While technology will have to be honed specifically for mining at some stage, a surfeit of technologies is ready for instant application.
“It’s more about a mindset change than having to make massive investments,” Anglo American technology development head Donovan Waller added to Mining Weekly Online.
Much of the improvement is being driven by data science and the modern world’s ability to analyse increasing volumes of data to a very high degree.
Virtually all the technologies needed have come of age; one of the biggest being the stabilisation of information technology, in which other industries have tended to advance much faster than the mining industry. These other industries include consumer electronics, manufacturing, automotive engineering and the pharmaceutical sector.
The coarse-particle recovery process captures coarse particles that are not recoverable using conventional flotation.
By needing to grind to only 500 micron instead of 170 micron, capacity is increased. Less energy is required in the crushing and grinding and water is more easily extracted from the larger particles and then recycled, significantly reducing the need for fresh water. The extraction of interstitial water results in a dry product, which can be dry-stacked, ultimately eliminating the need for tailings dams.
In copper, coarse-particle flotation has the potential to change the cost curve of the industry by allowing for 30% to 40% more throughput at a recovery loss of 2% to 3%, a 20% energy saving and 30% to 40% less water.
This is already a significant achievement for Anglo American in copper, and the company is hopeful of migrating it to other commodities, including platinum in South Africa, where testwork is still at an early stage.
If, for example, platinum ore can be pre-sorted in advance and be presented at a grade of 10 g/t instead of 4 g/t, output can be increased by two-and-a-half times from the exact same capital invested.
SWARM ROBOTIC MINING
Swarm robotic mining descales mining to make it much more precise, mimicking the actions of a swarm of locusts devouring a field or an army of ants working independently to execute tasks.
The technology envisages highly selective mining of ore types linked to real-time algorithms across a broad spectrum that includes constraints in energy, prices and associated issues.
As many people as possible are taken out of harm’s way in a remotely controlled environment.
Small operational teams will communicate with each other, without the need for a big-brother view from the surface that controls each of those small operational elements independently in self-learning operations.
Currently, the industry spends a lot of time adding water to its processes and even more time trying to get the water out afterwards.
A pathway has been developed to end up with a waterless mine through the adoption of a closed loop, using only a fixed amount of water that is then recycled time and again. Anglo already recycles or re-uses more than 60% of its water requirements.
Ultimately, the aim is to arrive at potentially chemical means that allow for the liberation of particles without having to add water to them, to arrive at a waterless process.
SUN, WIND, GRAVITY AND SMALL, GREEN NUCLEAR
In terms of energy, the focus is on using renewables for energy self-sufficiency.
The solutions will be a combination of sun and wind. As the sun does not shine at night and the wind does not always blow, other energy forms, including gravity, will take advantage of the mining sector having depth as one of those solutions.
Ultimately, nuclear may be incorporated should it become “greener”, smaller and more modular, as is expected.
Instead of spending billions to build one big plant, small modular plants will be built and scaled up quickly, with the lifespan of the modules being influenced by the next step up in technology.
Mines will move away from using the same technology for long periods of time and outlaying large capital expenditure on plants that last for 50 years and more.
Smaller, modular, cheaper units will allow for technology upgrades every five years, providing scalability as well as the opportunity to ramp up on new technology that has arisen.
Although mining is not an industry that has been used to technological change, there is no reason why it should not, from now on, accelerate advancing technology quickly, as other industries do.
“Our FutureSmart Mining programme is about far more than technologies alone. It is end-to-end innovation, in its broadest sense, addressing all aspects of sustainability for the business – safety, health, the environment, the needs of our communities and host governments, and the reliable delivery of our products to customers. Those that innovate and are agile will thrive in this industry. That is mining’s new future.” O’Neill concluded.
Miners Built on Wildcat Culture Now Want to Share the Risk
By Thomas Biesheuvel
August 10, 2017, 5:00 PM CST August 11, 2017, 2:07 AM CST
- Chastened by metals slump, new projects idle awaiting partners
- Industry made by swashbuckling gamblers ‘has lost its nerve’
Swashbuckling gamblers abound in the mining business, where billions are spent searching for mother lodes in some of the most inhospitable places on the planet. But a prolonged slump in metals and big losses on earlier solo projects are turning top producers into risk-avoiding wallflowers.
“The mining industry has lost its nerve,” said Mark Bristow, chief executive officer of Randgold Resource Ltd., a London-listed producer of gold in Africa. “The new fad in town is joint ventures. It’s very strange if you’re a major miner. They should be comfortable in their ability.”
At a time when prices are recovering — helping to make new projects viable again — metals producers including Anglo American Plc, BHP Billiton Ltd. and Rio Tinto Groupare seeking partners to share the investment risk rather than going it alone as they have in the past. While the more-cautious approach is a consequence of the near-death experience of the 2015 commodity crash, it could limit the payoff for shareholders during a metals rally.
The shift to more conservative financing comes as the industry confronts a core dilemma: the richest mines in the safest or most-accessible places have mostly been found and built. That means companies are increasingly looking to develop ore bodies that are of lesser quality and may be in higher-risk countries.
“They have to spend more to mine less,” said Rob Crayford, a fund manager at CQS Asset Management Ltd.’s New City Investment Managers in London. “A lot of the projects out there aren’t that great.”
Still, while prices remain well below their post-recession peaks, they’re up enough in the past year or so for companies to consider dusting off expansion plans they shelved during the glut. The London Metal Exchange index of six base metals, including copper and aluminum, has rallied almost 50 percent from a low in January 2016. Gold is heading for the biggest annual gain since 2010, and iron ore has almost doubled from the all-time lows reached in 2015.
S&P Global Market Intelligence estimates that exploration drilling for metals has risen for five straight quarters, off to its fastest start to a year since 2009, and there are signs the pace is accelerating.
Anglo American, a London-based producer that has been mining metal for more than a century, says its No. 1 new project is the giant Quellaveco copper deposit in Peru. But the company wants a partner before development starts, and says it will seek joint ventures for all future new mines, known as greenfield developments.
Melbourne-based BHP, the world’s largest mining company, is set to commit to the $13 billion Jansen potash mine in Canada after years of study, but says it wants to bring in a partner to help share the risk. London-based Rio Tinto also is seeking partners for future developments, while Glencore Plc says it won’t build any new mines at all.
“I’m not excited about greenfield,” said Chief Executive Officer Ivan Glasenberg, noting that over-development in years past created the oversupply and low prices that led to huge losses for the industry. “Unless something changes in the world, I don’t see Glencore doing greenfield for awhile.”
Acquisitions are more likely, Glasenberg said, because it doesn’t make sense to “bring new tons into the market which cannibalizes your existing production.”
The industry is still smarting from the self-inflicted wounds. Anglo’s giant Minas Rio iron-ore mine in Brazil cost $14 billion to buy and build, but it became an expensive mistake as prices plunged by more than half. Barrick Gold Corp., the largest bullion producer, spent $8.5 billion on the Pascua Lama project high in the Andes that has been stalled since 2013. The company recently signed a deal with China’s Handong Gold Group that may lead to a joint venture on the project.
It’s not just new mines that are making the industry more cautious. Some companies made investment mistakes that compounded the losses when prices fell. BHP has said its $20 billion spending on shale deposits was a mistake, while Glencore took a $7.7 billion writedown on its Xstrata Plc takeover. Rio Tinto bought coal assets in Mozambique for $3.1 billion that it later sold for $50 million.
To be sure, joint ventures aren’t a new idea. The giant Escondida copper mine in Chile is operated by BHP but also owned by Rio Tinto and Japanese companies including Mitsubishi Corp. But the push to share more of the risk is a marked contrast to the expansion during the previous bull market.
Still, the more swashbuckling method of going solo on projects may be the most beneficial for shareholders, according to Randgold’s Bristow, whose company built all of its three mines from scratch, including a joint venture with Johannesburg-based AngloGold Ashanti Ltd.
“Greenfield is absolutely where you should put all your money,” Bristow said. “But a lot of these companies are still dealing with their over-exuberant growth during the super cycle.”
Shore Gold proposes name change to Shore Diamond Corp.
ALEX MACPHERSON, SASKATOON STARPHOENIX
Published on: August 9, 2017 | Last Updated: August 9, 2017 5:31 PM CST
An aerial view of Shore Gold Inc.’s Star-Orion South diamond project east of Prince Albert.
SHORE GOLD INC. / SASKATOON
A Saskatoon-based diamond exploration and development company that has spent the last two decades working to build a mine in the Fort à la Corne forest east of Prince Albert wants to change its name and move its “registered office” to Alberta.
Shore Gold Inc. shareholders are expected to vote on two resolutions — including one that would change the company’s name to Shore Diamond Corp. — at its annual meeting, which was scheduled for June 30 but postponed to Sept. 6.
The company’s executives and directors recommended in their management information circular — a document all public firms must publish ahead of their annual meetings — that shareholders cast their ballots in favour of both resolutions.
“The name Shore Gold Inc., while a connection to the history of the corporation, no longer reflects the current focus of the business (and) rebranding will ensure that investors and stakeholders will better understand the … core business,” the circular states.
The second resolution, which would amend Shore Gold’s articles of incorporation to state that its registered office is in Alberta, does not provide a reason for the proposed change or a more specific location in the western province.
Shore Gold representatives did not immediately respond to a request for comment on Wednesday.
At Shore Gold’s last annual meeting, a group of shareholders concerned about communication from the company’s board and executives came close to unseating three of its directors in a move the firm’s chairman deemed illegal.
Two months ago, Shore Gold consolidated ownership of its Star-Orion South property before signing an option agreement with a Rio Tinto Group subsidiary worth up to $75 million over the next seven and a half years.
If Rio Tinto Exploration Canada Ltd. chooses to exercise all four phases of the option agreement, it is expected to end up with a 60 per cent ownership stake in the project.
Independent diamond industry analyst Paul Zimnisky told the Saskatoon StarPhoenix last month that the world’s second-largest mining company got a good deal, as Shore Gold likely needed a major partner to bring the project into production.
August 8, 2017
After decades of being called “gold” while exploring and developing the world’s largest “diamond” deposit just east of Prince Albert, SK in Fort a la Corne, Shore Gold will become Shore Diamonds.
Management and the Board believe that the name Shore Gold Inc., while a connection to the history of the Corporation, no longer reflects the current focus of the business. Management and the Board of Shore Gold Inc. believe that rebranding will ensure that investors and stakeholders will better understand the Corporation’s core business. As a result, the Corporation is proposing to changes its name to Shore Diamond Corporation.
Also, given Shore’s recent agreement with Rio Tinto, it is worth noting that Shore’s Board of Directors is proposed to include Peter Ravenscroft. According to the Circular on page 8:
He previously was Head of Global Exploration for Cliffs Natural Resources Inc. as well as Managing Director, Technical Evaluation Group at Rio Tinto based in London, with global accountability for internal technical reviews of all major capital projects going before the Rio Tinto board. Also group accountability for the compliance of all Rio Tinto companies’ mineral resource and ore reserve reporting. Mr. Ravenscroft was with Rio Tinto for seventeen years, in a variety of roles in the UK, Australia and Canada, with particular involvement in diamond projects and operations. Before joining Rio Tinto, Mr. Ravenscroft was involved in the southern African mining industry, with De Beers, Anglo American and Gencor, and as a geostatistical consultant.
Claims staked by diamond exploration companies suggest diamonds may exist near Maple Creek Saskatchewan
Diamonds in the Bluffs?
Claims staked by diamond exploration companies suggest high likelihood the precious gems exist near Maple Creek
August 8, 2017
NEWS PHOTO DOMINIQUE LIBOIRON
Diamond Projects Inc. has staked mining claims covering 400,000 acres south of the Cypress Hills with an eye on making a diamond discovery.
Maple Creek News
Diamonds are that one gem everyone wants.
Some of us hope to buy one for a significant other one day, while some of us yearn to receive one.
But most of us also tend to see diamonds as something far away, something to strive for.
So, it could come as quite a surprise to some in Maple Creek that the most precious of precious stones might just be in their proverbial own backyard.
According to Sean Spelliscy of Diamond Projects, a subsidiary of Gem Oil, Stornoway Diamond Corporation recently staked a claim to an area south of Maple Creek, about 25 kms down Highway 271.
It isn’t known what methods the company used to identify the area as a possible diamond source, but Spelliscy says they don’t stake claims unless they have solid evidence to do so.
“(Stornoway) found a commodity there of something potentially valuable,” says Spelliscy, a 30-year veteran of resource exploration. “
So, they found some indication that a resource exists.
And these aren’t your garden-variety explorers, they are the best there are.
“They recently found the Pikoo Diamond Field in north-central Saskatchewan, which is an amazingly rich small deposit.
The Stornoway team is second to none, so that’s very encouraging, not only to Maple Creek but to the entire province.”
Diamonds are found in an igneous rock called kimberlite, formed as chimneys of magma cool down following volcanic eruptions, which the trusty Internet says exists aplenty in Siberia and South Africa.
Apparently, Stornoway thinks there is also kimberlite in southwest Saskatchewan.
Spelliscy says his company has been actively exploring for diamond in Saskatchewan since about 1990, staking claim to finding the Star kimberlite, found at Fort à la Corne east of Prince Albert in central Saskatchewan.
The Star is the largest diamondiferous kimberlite in the world and currently being explored by mining giant Rio Tinto under option from Shore Gold Inc.
He says diamond giant De Beers had been looking for diamonds in south Saskatchewan for decades, and was rumoured to have once found a small kimberlite pipe near Gergovia, 170 kms southeast of Maple Creek.
Speculative mining capital was scared off in mid-90s by a scandal involving a former penny stock company called Bre-X, which announced what turned out to be a fraudulent discovery that sent the small company’s total capitalization to more than $6 billion.
The scandal made risk capital hard to come by and Spelliscy says the claims near Maple Creek were all but forgotten.
Now suddenly, activity has resurfaced.
Spelliscy says his company staked a few claims in the area back in February 2017 based on a report by geophysical interpreter Laurie Reed, and now Stornoway’s claims all but confirm something is there worth getting serious about.
“Across the border in Montana, there’s always been a few diamonds showing up (among the gold),” Spelliscy says.
“So, there has always been the idea of diamonds (in this area), and I’ve talked to a lot of diamond exploration professionals who have always sort of been intrigued by the possibility if southern Saskatchewan.”
Southern Saskatchewan sits on the Wyoming Craton, a section of the earth’s crust where Spelliscy says kimberlites have been found before, specifically referring to a past group found in Montana.
He says a lot of variables have to be in place for diamond to be formed, such as what temperatures were in place close to the surface when volcanic eruptions occurred.
If those were not cool enough, the kimberlites would not be able to preserve their diamonds, and the diamond would turn to carbon.
“But the main thing is finding the right rock. If you find the right rock, which is the kimberlite, then you have to test it.”
An advantage to this area, as opposed to exploration in northern Saskatchewan for example, is the easy access.
Spelliscy says the simple existence of roads can cut the costs in half, adding to the viability of any search.
“If you can truck everything in … your costs will just whittle down, which is great. It’s the ultimate place in the world to find something.”
And if that something is diamonds, it’s going to mean a lot more than romance for the people of southwest Saskatchewan.
The average value of a diamond mine is $11 billion US with a capital development cost of $1.7 billion US.
Box 1111, Regina, Saskatchewan S4P 3B2
C (306) 541-5678 T (306) 543-5678
Mining industry can now predict opposition to projects before it’s too late
August 7, 2017
It’s sounds too good to be true, but a new company is proving miners they can foresee opposition or any other form of social conflict related to their projects, before they even attempt going through a licencing process.
Chalkstone, a UK-based company founded by Donald Bray, a political anthropologist and academic at the University of Cambridge, bases its success in a very unique method, applying what’s known as “granular social intelligence.”
“We take a systemic approach and mix methodologies, combining big data and quantitative analysis with ethnography, qualitative interviews and focus groups, all of which help us dig deep into particular issues and accurately define the social stance of a target group,” Bray explains on the phone from his home in Paris.
“We are not interested if the community is, in any way, being taken advantage of” — Donald Bray.
Before going further, he’s quick to note that the goal of his company is not just to help mining companies get what they want, but to assist them in building mutual trust with the groups living in the areas in which they operate.
“We are not interested if the community is, in any way, being taken advantage of,” he says. “Our due diligence runs in a number of different directions.”
The expert, with more than 15 years of experience working across the globe, particularly in conflict zones, is not saying mining companies are the “bad guys” in the story.
“It’s not that firms don’t care about CSR [corporate social responsibility] or don’t want to invest in it. The problem is that most tools currently available don’t really help them grasp the human aspect of their projects,” he says.
Donald Bray, Chalkstone founder.
Half of all risks faced by extractives companies are non-technical ones, which in turn account for nearly 75% of all projects delays. “For a mid to large sized mining company, the costs of these delays (socio-political and community risks) can add up to some $20 million a week,” says Bray. “This is huge and it deserves far more attention than mere box-ticking or forms of corporate philanthropy.”
Chalkstone already has a known success story under its belt. After an intensive study on a ruby mine and a copper deposit in Afghanistan, applying counter-insurgency tactics used by deployed troops, Bray was hired in 2015 by Gemfields (LON:GEM), the world’s largest emerald and ruby miner. At the time, the precious gems firm had committed to building an emerald mine in Colombia.
Part of Chalkstone’s work to help Gemfields enter the market was the creation of a communications platform based in text messaging, which allowed the mining company and local communities to talk freely to one another.
Named by the community as “Suna Verde” (meaning “Green Pathway” in the Muisca aboriginal language), the system kept locals updated on everything from job-training initiatives to when the “health brigade” (a team of doctors and nurses that travel around the countryside) would be in each village. Soon, says Bray, Suna Verde was rivalling the radio as the region’s main source of news and other information.
“The experience showed us that communities want jobs, roads, hospitals and clinics, schools, and any other benefit offered by mining companies, but they want to be actively involved in their decisions. They don’t want to be just beneficiaries of someone else’s goodwill,” says Bray. “This is one of the most important lessons I’ve learned and which is transferrable to almost any community in the world.”
During the first months of work for Gemfields in Colombia, Chalkstone warned the company there was opposition brewing for another international mining firm in the region. Only four months later, that miner was hit by protests and even armed attacks.
“When you invite thousands of voices into a conversation, you need to be prepared for dissenting opinions (…) By listening to all of them, you’re able to get in front of the risks. That’s what happened in Colombia… we were able to see things that you wouldn’t normally see and we told Gemfields about it.”
While Gemfields decided in May to leave Colombia and Sri Lanka to focus on its African projects, the fact the company didn’t face hostility from community members is a testament to Chalkstone’s work, says Bray.
The company, currently involved in mining and oil and gas projects in East Africa, as well as a new venture in Colombia, believes its novel approach could also be useful to investors.
“Given that nearly 66% of shareholder value in a junior miner is linked directly to socio-political and community risks, according to some calculations, investing in understanding the social environment in which a miner will operate shouldn’t be an afterthought or something people turn their minds to only when times get tough,” Bray warns. “Trust is valuable,” he concludes.
These are a few examples of conflicts an approach such as Chalkstone’s could have prevented:
Shore Gold’s partner in the Fort a la Corne SK diamond play is doing well!
Rio Tinto doubles first half earnings, adds $1-billion share buyback
JAMES REGAN AND BARBARA LEWIS
SYDNEY/LONDON — Reuters
Published Wednesday, Aug. 02, 2017 6:27AM EDT
Last updated Wednesday, Aug. 02, 2017 6:29AM EDT
Global miner Rio Tinto more than doubled its first-half profit and rewarded shareholders with a record interim dividend and a further $1-billion (U.S.) in share buybacks, citing strong demand for industrial commodities.
Underlying earnings for the six months to June 30 of $3.94-billion missed forecasts for $4.19-billion, according to Thomson Reuters I/B/E/S, but were well above last year’s $1.56-billion on a recovery in iron ore and other commodity prices.
Rio Tinto declared a record-high half-year dividend of $1.10 a share, equivalent to $2-billion, up from 45 cents a share a year ago. The latest buyback comes on top of a $500-million programme announced in February.
“The Chinese economy has performed well in 2017 and the outlook signs for 2018 are positive,” Chief Executive Jean-Sebastien Jacques told reporters. “Beyond China, global economies have both improved in Europe and the U.S.”
Rio’s London-listed shares were trading down 1.8 per cent in early trade, with analysts citing some disappointment over the miss in earnings, linked to the cost of paying down debt early.
“The balance sheet is in great shape … suggesting that there is some flexibility in regards further capital management upscaling for the full year,” said Shaw and Partners analyst Peter O’Connor.
Iron ore, which generated $3.255-billion in underlying earnings in the first half, has been on a roller coaster ride this year, with prices trading between $53 and $95 a tonne and now just under $74..
The market has been underpinned by a resurgence in Chinese steel production, which depends heavily on high grade imported iron ore, providing Rio Tinto and other producers with ample margins on shipments.
Long time iron ore bear Goldman Sachs recently raised its 2017 iron ore forecast to $70 a tonne from $55.
Rio Tinto’s full-year dividend is typically weighted towards the second half, which could see an even greater payout, given the company is scheduled to receive payment of $2.69-billion for the sale of its coal & Allied division in Australia to Yancoal Australia Rio Tinto said capital spending should rise by around $500-million to $5.5-billion in both 2018 and 2019.
Rio Tinto’s focus on shareholder returns could place pressure on rival BHP Billiton to seek ways to better reward its shareholders. BHP is under pressure from activist shareholder U.S. fund Elliott Management to beef up its cash management policy and remove underperforming businesses from its portfolio.
BHP will report its full-year results on Aug. 22.
Supreme Court of Canada confirms First Nations have no veto power over resource projects
By Nelson Bennett, Business in Vancouver
July 28, 2017, 2:45 p.m.
Image: Kinder Morgan Canada
Just days after the new NDP government said it would work to implement a declaration that ostensibly gives First Nations in B.C. a veto over projects like the Trans Mountain pipeline expansion, the Supreme Court of Canada ruled no such veto exists.
“Overall, the decisions are positive for project development in Canada,” said Robin Junger, an expert in aboriginal law for McMillan LLP and former head of the B.C. Environmental Assessment Office.
On one hand, David Eby, the NDP’s new attorney general, confirmed last week what Junger has previously said to be the case – that his government doesn’t have the legal authority to deny permits for the pipeline expansion.
Those are statutory decisions made by civil servants, not political decisions to be made by cabinet ministers.
On the other hand, last week Premier John Horgan issued a mandate to Scott Fraser, minister of Indigenous Relations and Reconciliation, to work with First Nations “to establish a clear, cross-government vision of reconciliation to guide the adoption of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).”
That declaration has a clause that states that indigenous people have the right to “free prior and informed consent” on development projects within their asserted territory.
On the surface, that sounds like the NDP would be handing the Tsleil-Waututh of Burrard Inlet a veto, since they deny the federal government’s and Kinder Morgan Canada’s right to expand the pipeline in their territory – the Burrard Inlet in Burnaby.
But as the federal Liberals discovered when they too promised to implement UNDRIP, actually giving it legal force would require a constitutional amendment, which is why the federal Liberals abandoned it.
Two Supreme Court of Canada decisions issued on July 26 made it abundantly clear that, while the federal government has a duty to consult, that does not mean that First Nations can veto a project.
In one ruling, the Supreme Court of Canada ruled that regulators like the National Energy Board (NEB) can represent the federal Crown in executing the duty to consult First Nations, but that those consultations must be real, not lip-service.
In the Clyde River Inuit case, the Supreme Court ruled that the NEB has the authority to represent the Crown in executing its duty to consult, but that, in that particular case, it had failed to do so properly. The court ruled the NEB’s consultation failed to properly address the Clyde River Inuit’s concerns.
The other case, involving the Chippewas of the Thames First Nation decision, is particularly relevant to the Trans Mountain pipeline expansion. In that case, the court ruled that the consultation with the Chippewas had been adequate.
The Chippewas were objecting to a reversal and expansion of a pipeline owned by Enbridge. The Supreme Court ruled against the Chippewas in that case and in doing so affirmed that, provided consultations are adequate, First Nations don’t have the legal authority to stop developments in their territory.
“The duty to consult does not provide a ‘veto’ for indigenous peoples over Crown decision,” Blake, Cassels & Graydon LLP explains in a legal brief on the two cases.
So what does that mean for the NDP’s promise to implement UNDRIP? Junger said it is clear that it has no legal force.
“This is the law,” Junger said. “No elected person can change the law by statements.”
“Courts have interpreted Section 35 of our Constitution as saying there’s no veto. So I think don’t any government would have the power, even by legislation, to make that change. It would have to be a constitutional amendment. You can’t make it law by saying you endorse it.”
Why Commodity Traders Are Fleeing the Business
The number of trading houses has dwindled, and the institutional, pure-play commodity hedge funds that remain are few.
By Shelley Goldberg
July 12, 2017, 3:00 AM CST July 12, 2017, 11:32 AM CST
Copper, the “beast” of commodities.
Photographer: John Guillemin/Bloomberg
Profiting from commodity trading often requires a combination of market knowledge, luck, and most importantly, strong risk management. But the number of commodity trading houses has dwindled over the years, and the institutional, pure-play commodity hedge funds that remain — and actually make money — can be counted on two hands. Here is a list of some of the larger commodity blow-ups:
The largest and most successful commodity trading house in its day caved, triggered by copper trading
The New York branch of this large German conglomerate lost $1.5 billion in heating oil and gasoline derivatives
Yasuo Hamanaka blamed for $2.6 billion loss in copper scandal
Dissolves after misreporting natural gas trades, resulting in Arthur Andersen, a ‘Big 5’ accounting firm’s fall from grace
Energy hedge fund folds after losing over $6 billion on natural gas futures
One of the best-performing hedge funds in 2011, closed its doors in 2012, shrinking from $2 billion to $1.2 billion on crude oil bets
Brevan Howard Asset Management
One of the largest hedge funds globally. Closed its $630 million commodity fund after having run well over $1 billion of a $42 billion fund
The sister and energy trading arm of Phillip Brothers, ranked (1980) the 15thlargest U.S. company, dissolves
Vermillion Asset Management
Private-equity firm Carlyle Group LP split with the founders of its Vermillion commodity hedge fund, which shrank from $2 billion to less than $50 million.
Amid the mayhem, banks held tightly to their commodity desks in the belief that there was money to be made in this dynamic sector. The trend continued until the implementation of the Volcker rule, part of the Dodd-Frank Act, which went into effect in April 2014 and disallowed short-term proprietary trading of securities, derivatives, commodity futures and options for banks’ own accounts. As a result, banks pared down their commodity desks, but maintained the business.
Last week, however, Bloomberg reported that Goldman Sachs was “reviewing the direction of the business” after a multi-year slump and yet another quarter of weak commodity prices.
In the 1990s boom years, commodity bid-ask spreads were so wide you could drive a freight truck through them. Volatility came and went, but when it came it was with a vengeance, and traders made and lost fortunes. Commodity portfolios could be up or down about 20 percent within months, if not weeks. Although advanced trading technologies and greater access to information have played a role in the narrowing of spreads, there are other reasons specific to the commodities market driving the decision to exit. Here are the main culprits:
- Low volatility: Gold bounces between $1,200 and $1,300 an ounce, WTI crude straddles $45 to $50 per barrel, and corn is wedged between $3.25 and $4 a bushel. Volatility is what traders live and breathe by, and the good old days of 60 percent and 80 percent are now hard to come by. Greater efficiency in commodity production and consumption, better logistics, substitutes and advancements in recycling have reduced the concern about global shortages. Previously, commodity curves could swing from a steep contango (normal curve) to a steep backwardation (inverted curve) overnight, and with seasonality added to the mix, curves resembled spaghetti.
- Correlation: Commodities have long been considered a good portfolio diversifier given their non-correlated returns with traditional asset classes. Yet today there’s greater evidence of positive correlations between equities and crude oil and Treasuries and gold.
- Crowded trades: These are positions that attract a large number of investors, typically in the same direction. Large commodity funds are known to hold huge positions, even if these only represent a small percent of their overall portfolio. And a decision to reverse the trade in unison can wipe out businesses. In efforts to eke out market inefficiencies, more sophisticated traders will structure complex derivatives with multiple legs (futures, options, swaps) requiring high-level expertise.
- Leverage: Margin requirements for commodities are much lower than for equities, meaning the potential for losses (and profits) is much greater in commodities.
- Liquidity: Some commodities lack liquidity, particularly when traded further out along the curve, to the extent there may be little to no volume in certain contracts. Futures exchanges will bootstrap contract values when the markets close, resulting in valuations that may not reflect physical markets and grossly swing the valuations on marked-to-market portfolios. Additionally, investment managers are restricted from exceeding a percentage of a contract’s open interest, meaning large funds are unable to trade the more niche commodities such as tin or cotton.
- Regulation: The Commodity Futures Trading Commission and the Securities and Exchange Commission have struggled and competed for years over how to better regulate the commodities markets. The financial side is far more straightforward, but the physical side poses many insurmountable challenges. As such, the acts of “squeezing” markets through hoarding and other mechanisms still exist. While the word “manipulation” is verboten in the industry, it has reared its head over time. Even with heightened regulation, there’s still room for large players to maneuver prices — for example, Russians in platinum and palladium, cocoa via a London trader coined “Chocfinger,” and a handful of Houston traders with “inside” information on natural gas.
- Cartels: Price control is not only a fact in crude oil, with prices influenced by the Organization of Petroleum Exporting Countries but with other, more loosely defined cartels that perpetuate in markets such as diamonds and potash.
- It’s downright difficult: Why was copper termed “the beast” of commodities, a name later applied to natural gas? Because it’s seriously challenging to make money trading commodities. For one, their idiosyncratic characteristics can make price forecasting practically impossible. Weather events such as hurricanes and droughts, and their ramifications, are difficult to predict. Unanticipated government policy, such as currency devaluation and the implementation of tariffs and quotas, can cause huge commodity price swings. And labor movements, particularly strikes, can turn an industry on its head. Finally, unlike equity prices, which tend to trend up gradually like a hot air balloon but face steep declines (typically from negative news), commodities have the reverse effect — prices typically descend gradually, but surge when there’s a sudden supply shortage.
What are the impacts? The number of participants in the sector will likely drop further, but largely from the fundamental side, as there’s still a good number of systematic commodity traders who aren’t concerned with supply and demand but only with the market’s technical aspects. This will keep volatility low and reduce liquidity in some of the smaller markets. But this is a structural trend that feasibly could reverse over time. The drop in the number of market makers will result in inefficient markets, more volatility and thus, more opportunity. And the reversal could come about faster should President Donald Trump succeed in jettisoning Dodd-Frank regulations.
(Corrects attribution of Goldman’s review of commodity operations in third paragraph.)
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Further troubles lie ahead as Ottawa’s attempt at modernizing major resource project approval processes reveals a divided Canada
Further troubles lie ahead as Ottawa’s attempt at modernizing major resource project approval processes reveals a divided Canada
By Darrell Stonehouse
June 29, 2017, 1:21 p.m.
Image: Kinder Morgan Canada
Call it an exercise in herding cats.
Only one year into the federal government’s efforts to reshape Canada’s environmental and regulatory processes surrounding resource development, and it’s already revealed a country deeply divided on how to assess environmental concerns with new projects and how to regulate industry to mitigate any issues.
The federal government launched its multi-department review last June after instituting a temporary system in January for projects already under environmental assessment. The goal is to replace the environmental assessment legislation put in place by Stephen Harper’s Conservatives in 2012, while modernizing the National Energy Board (NEB), Fisheries Act, and Navigation Protection Act.
The rationale for the review is to “restore Canadians’ trust in environmental assessments,” said Catherine McKenna, the federal minister of environment and climate change.
“The review of Canada’s environmental and regulatory practices will ensure that decisions are based on science, facts and evidence,” added Kirsty Duncan, the federal minister of science.
Over the last year, the government has been gathering submissions and holding public hearings to get input from Canadians across the country. In early April, the expert panel reviewing the environmental assessment process released its recommendations. A similar report concerning the modernization of the NEB was released in mid-May.
The preliminary results from the environmental review show the challenges of trying to balance environmental stewardship with industrial growth.
“Views about federal environmental assessment across the various interests ranged from support to all-out opposition,” the environmental panel said in its report to the government.
The view from industry
Industry was looking for a number of things from the review, including assurances that any new regulations wouldn’t further harm the country’s competitiveness.
“Canada is competing globally for capital investment in our oil and gas resources, and it is imperative for the Canadian economy that Canada remain competitive with other jurisdictions,” Jim Campbell, Cenovus Energy’s vice-president of government and community affairs, told the task force on behalf of his company.
Campbell pointed to a recent study and survey showing the Canadian industry is falling behind competitors when it comes to competing for capital. “Primary reasons cited Canada’s decline include regulatory duplication and inconsistencies and complexity of environmental regulations,” he noted.
In its submission to the task force, Suncor Energy, like most others from industry who offered input, said the federal review process should dovetail with, rather than overlap, provincial and local review processes. The process should, “accent, not duplicate, provincial reviews,” said Suncor. “One project, one assessment. Duplicate reviews do not add additional protections and can add years to project applications.”
The federal assessment “should be a process to assess residual environmental risks in areas of federal jurisdiction,” Suncor added.
Cenovus, with most of its primary assets in Alberta, agreed primary responsibility for environmental assessments should remain with the provinces.
“Local regulators have the experience and technical expertise to best evaluate projects, work with local communities and perform follow-up monitoring and compliance,” noted Campbell.
Campbell also said federal and provincial environmental assessment processes should be streamlined by allowing for substitution and equivalency agreements based on the principles of the best-placed regulator to do the work and a single-window approach.
When it comes to addressing First Nations’ concerns, Suncor said the federal government, rather than industry, must take a leadership role, pointing out that the review “must ensure the Crown is upholding its duty to consult.”
“Proponents have the responsibility to support the Crown through direct engagement and partnership with affected communities, incorporating traditional knowledge through applications and developing projects in a sustainable manner,” Suncor added.
The oilsands giant said the people and communities closest to projects should be at the front of the line when it comes to consultations in environmental assessments.
“Reviews must allow those most directly affected by the outcome of a particular project to have the greatest opportunity to participate and have a voice in the process,” it noted. “Input from affected stakeholders can get diluted when the process is used for purposes other than gathering information on a specific project.”
Suncor and other resource companies and associations also said they don’t believe the review process should be hijacked by groups wanting to debate larger public concerns outside the boundaries of the project. Governments should first set public policy direction on these broader issues like climate change, and then the review process should ensure public policy standards are met.
“The review process is not the appropriate venue for debating broader public policy,” the company said.
Another key element for industry and provinces with resource-based economies in the review process was ensuring the designated projects section of the Canadian Environmental Assessment Act, 2012 remained in place. Projects including minerals mining (such as potash), linear developments (transmission lines and highways) that do not cross provincial boundaries, extraction of non-potable groundwater, in situ oilsands developments and natural gas facilities were removed from the list of projects requiring federal assessments in the 2012 legislation.
“Removing these projects from federal [environmental assessment] review saved time and cost by greatly reducing unnecessary duplication of [assessments] and other regulatory processes, reducing red tape for proponents while maintaining robust provincial environmental safeguards,” said the government of Saskatchewan in its submission. “The province advocates for the exclusion of such projects from federal review, recognizing mature and effective provincial environmental regulatory review processes.”
Green groups, First Nations look for greater participation in process
While industry looked to streamline the environmental assessment process and provide certainty to investors, environmentalists and First Nations looked for greater input into the process and for the federal government to expand the list of designated projects that require federal approval. Many also requested a climate test be included in the process.
West Coast Environmental Law said it was looking for a “next-generation assessment law” that accounted for the economic, ecological and social aspects of sustainability, that respected First Nations authority and governance, that provided for full public participation, and that connected the assessment, decision-making and action of different levels of government.
They also wanted the law to “address the causes and effects of climate change, include strategic and regional assessment as fundamental components, and to require appropriate assessment of the thousands of smaller projects currently not being studied.”
“This isn’t the time to make small adjustments to a deeply flawed process—we need a new law that ensures the health of Canadians and the environment, and this is our chance to get it right,” said Stephen Hazell, the director of conservation and general counsel at Nature Canada.
Recommendations favour expansion of federal role in assessments
The initial report from the expert panel is promising many of the big changes environmentalists and others who submitted opinions wanted. The first is a major expansion in the assessment process beyond the environmental impacts of a project.
“We outline that, in our view, assessment processes must move beyond the bio-physical environment to encompass all impacts likely to result from a project, both positive and negative. Therefore, what is now ‘environmental assessment’ should become ‘impact assessment,’” the panel said. “Changing the name of the federal process to impact assessment underscores the shift in thinking necessary to enable practitioners and Canadians to understand the substantive changes being proposed in our report.”
This new assessment process would cover what the panel calls the “five pillars of sustainability: environmental, social, economic, health and cultural impacts.”
While industry said it would like to see public input limited to those most affected by the project, the panel also sided with environmental groups wanting to see broader public input. The panel also said that more meaningful public participation in the assessment process is a must.
“An overarching criterion of public participation opportunities in impact assessment processes is that these opportunities must be meaningful,” the report added. “A meaningful participation process needs to have the inherent potential to influence decisions made throughout the assessment, provide inclusive and accessible opportunities for early and ongoing engagement from the public and indigenous groups, and provide the capacity required for active participation in the engagement.”
The panel said current rules regarding public participation are lacking and have been perceived as having been designed to “limit public participation in the assessment process.”
The panel believes the NEB’s adoption of the “standing test” has greatly hindered trust in its assessments.
“The degree to which this test has limited participation is evident through NEB participation data. The outcome of this is not an efficient assessment process or timely incorporation of public input into a decision-making process,” the panel said. “In the case of the Trans Mountain Expansion project review, a ministerial panel was convened after the NEB assessment process was completed, at least in part to hear from those who felt shut out of the initial process. In short, limiting public participation reduces the trust and confidence in assessment processes without bringing any obvious process efficiency.”
“The panel recommends that…legislation require that [an impact assessment] provide early and ongoing participation opportunities that are open to all,” the report said. “Results of public participation should have the potential to impact decisions.”
The expert panel also questioned the need for time limits on the review process, suggesting that instead, the time frame of the review process be project-specific. The current process, put in place in 2012, requires environmental assessments of projects that occur on federal lands, such as pipelines, to be completed within one or two years, depending on the project’s size and complexity.
“This has not met the objective of delivering cost- and time-certainty to proponents,” the report said. “Our recommended approach seeks to build public confidence in the assessment process. We believe that public trust can lead to more efficient and timely reviews. It may also support getting resources to market.”
The expert panel also recommended a number of ways to increase First Nations participation in the assessment process, including implementing the principles of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), “especially with respect to the manner in which environmental assessment processes can be used to address potential impacts to potential or established aboriginal or treaty rights.”
The panel recognized that there are broader discussions that need to occur between the federal government and indigenous peoples with respect to nation-to-nation relationships, overlapping and unresolved claims to aboriginal rights and titles, reconciliation, treaty implementation and the broader implementation of UNDRIP. According to the panel, many of these discussions will be necessary prerequisites for the full and effective implementation of the recommendations contained in the report.
Among its recommendations regarding indigenous people, the panel suggested that indigenous peoples be included in “decision-making at all stages of the assessment process, in accordance with their own laws and customs.”
It also suggests First Nations be funded adequately to allow meaningful participation in the process and be given the time to review information.
The panel report defines the criteria for the type of projects that should be federally reviewed and limits the criteria of projects that are included for federal review in the designated projects list.
“Many participants favoured the continued use of a project list approach to trigger federal assessments because it is predictable and clear and places the focus on major resource projects,” wrote the panel.
“Requiring an assessment for projects with minor impacts was described as too burdensome and time-consuming for proponents and lacking proportionality. Participants also said, however, that the current project list is too focused on certain industries, such as mining, and should be revisited to ensure that the list more accurately reflects projects with the highest potential for adverse effects, with some participants indicating that in situ oilsands projects and hydraulic fracturing activities should be included.”
The committee recommended only projects that affect federal interests should be included on the list. This differs from the current approach that includes projects that may not affect matters of federal interest. And it said there should be an appropriate threshold for effects on federal interests so that a trivial impact does not trigger an assessment.
“A new project list should be created that would include only projects that are likely to adversely impact matters of federal interest in a way that is consequential for present and future generations,” said the committee.
On the issue of government jurisdiction, there was widespread support for the idea of “one project, one assessment.”
However, a key goal of the assessment process is to leverage the knowledge of all government levels.
“In Canada, many jurisdictions have the expertise, knowledge, best practices and capacity to contribute to impact assessments,” said the panel. “For example, the federal and provincial governments may focus on closely related issues, such as impacts to water quality versus impacts to a fishery. Yet indigenous groups also have relevant knowledge on these topics related to the practice of their aboriginal and treaty rights, their traditional and ongoing land use, and their laws, customs and institutions. Similarly, municipalities are the custodians of land use and the full range of local impacts that affect residents and their communities.”
The committee said it believes the best way to connect all these areas of expertise is through a co-operative approach.
“To date, the best examples of co-operation among jurisdictions have been joint-review panels backed up by general co-operation agreements between Canada and many provinces,” said the committee. “As such, expanding the co-operation model to include all relevant jurisdictions is the preferred method to carry out jurisdictional co-ordination.”
Climate change a sticky issue
The expert panel said the issue of climate change has proved difficult to address under existing environmental assessment regulations.
“Current processes and interim principles take into account some aspects of climate change, but there is an urgent national need for clarity and consistency on how to consider climate change in project and regional assessments,” it said.
The panel said criteria, modelling and methodology must be established to assess a project’s contribution to climate change, consider how climate change may impact the future environmental setting of a project, and consider a project’s or region’s long-term sustainability and resiliency in a changing environmental setting.
Industry is concerned the issue of climate change has sidelined project assessments and turned them into debates over government policy. The panel addressed this issue by recommending the federal government lead a strategic impact assessment or similar co-operative and collaborative mechanism on the Pan-Canadian Framework on Clean Growth and Climate Change to provide direction on how to implement the framework and related initiatives in future federal project and regional assessments.