Fortnight in Review: A Mining & Exploration Retrospect (Dec 22 - Jan 4)

By ResourceClips


From risk to risk

“Although some companies and the province laud Ontario as being one of the best mining-friendly jurisdictions in the world,” that reputation is changing, according to a Thunder Bay-based drilling contractor. In the January 2 edition of Northern Ontario Business, Barb Courte, president of Cobra Drilling and North Star Drilling, said the province is facing a downturn in early-stage exploration.

The article stated, “In conversation with her industry colleagues, Ontario is considered a ‘risk area’ for investment, based on some high-profile First Nations-industry conflicts, along with the uncertainty of how the new Mining Act plans and permits regulations will play out.”

Regulations that take full effect in April will give native bands more power to block drilling on Crown land.

Courte told Northern Ontario Business her companies did well in 2012 but business has now dropped by about 50%.

A supplier dates the drilling downturn to last April. Hugh Paxton, GM of Wire Rope Industries Distribution, told the paper, “It’s the lowest numbers we’ve seen for drilling supplies since we’ve been [in] it for the last four years.”

Courte, meanwhile, hopes to make up for lost business in the Caribbean. Unigold [V.UGD] has contracted her to send four drills to the Dominican Republic in autumn and she’s getting inquiries from other companies operating in the country, the story stated.

Unigold calls the country a “premier mining destination.” The company’s most recent (November 28) news release stated the government “supports development and exploration in the mining sector. In addition, the country has well-established mining laws and environmental laws.”

Two days later, however, Mining Weekly offered a different perspective. A spokesperson for the Xstrata Nickel subsidiary Falcondo told the publication, “Security in the country has seen a gradual deterioration, which has forced us to significantly increase our security costs. They have tripled in the past few years.”

Mining Weekly added, “Dominican President Danilo Medina has acknowledged the problems and promised in a televised speech to the nation on [November 27] to improve security and reform the country’s police force. According to the World Economic Forum’s latest Global Competitiveness Index released in October, the Dominican Republic ranked 143rd out of 144 countries worldwide in reliability of its police force.”

New mega-company consolidating China’s rare earths production

A planned 12-company takeover could mark the first step in creating “a massive rare earth enterprise that will integrate light rare earth resources” in northern China. According to a December 28 China Daily article, newly signed framework agreements would have the companies and their shareholders hand over a combined 51% interest for free to the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co (REHT). In return, REHT would provide management, technology and funding, while setting production and export quotas. The agreement allows one year for the deals to be consummated.

“If the first step goes well, REHT will eventually team up with major rare earth producers in Gansu, Sichuan and Shandong provinces to form the China North Rare Earth Hi-Tech Co,” China Daily reported. “Authorities expect bigger enterprises to churn out products with higher added value and shoulder more responsibility in environmental protection.”

With just 23% of the world’s rare earths reserves, China supplies over 90% of global demand, the paper added.

Can placer miners meet B.C.’s environmental code?

An enduring legacy of the Fraser and Cariboo gold rushes, placer mining remains a British Columbian institution. But now that a forgotten 2011 environmental report has come to light, the miners are worried.

An audit from B.C.’s Ministry of the Environment found 74% of 23 placer operations inspected in 2010 didn’t comply with land restoration requirements and 43% of miners “were also working in streams without authorization,” the Vancouver Sun reported on December 26.

“The placer mines range from one-person operations to larger operations that employ dozens of people and use heavy equipment to extract gold from sand and gravel,” said the story.

The report, which resurfaced through a freedom of information request, provoked a bureaucratic turf war. B.C.’s Ministry of Energy, Mines and Natural Gas accused environmental staff of overstepping their jurisdiction and even breaking the law. According to Energy and Mines, the enviro ministry came to conclusions “without conducting file reviews, consulting with a mine inspector or the Mines Act, seeking advice on mining methods [or] having mine site reclamation experience.” But, the Sun said, “the ministries are planning to launch joint inspections next spring.”

An industry group learned about the audit only a few months ago. In the Cariboo Mining Association’s January/February newsletter, association president Chris Winther said the audit “has information from the past when we were much less regulated. Today in general most miners are following the rules.” He suggested the report “could kill the placer industry if it is perceived as truth.” The CMA has a meeting scheduled this month with environmental officials, he stated.

Rodger Stewart, director of resource management for B.C.’s Ministry of the Environment, told the Sun, “Certainly we have to recognize we are working with a sector that tends to be a mom-and-pop operation—not necessarily as sophisticated as a major [company].”

The Sun related Energy and Mines estimates that B.C. has 75 to 100 placer mines employing 90 to 130 people with annual gold revenue of $22 million to $30 million and provincial mineral taxes of $110,000 to $150,000.

Possible delisting looms for two companies in Toronto, New York

The TSX has given Cline Mining [T.CMK] 60 days to reattain listing requirements, the company announced on January 4. Cline is attempting a financial restructuring with Marret Asset Management after having failed to make a December 17 interest payment on US$2.5 million in bonds.

Last July Cline suspended operations at its New Elk metallurgical coal mine in Colorado “due to economic and recessionary pressures.” The suspension took effect one week after the company filed a resource update showing a 59% increase in the measured and indicated categories and a 360% inferred increase. New Elk was the company’s sole source of revenue.

Also on January 4, Gold Reserve Inc [V.GRZ] announced it would appeal a delisting application by the NYSE. The company attributes its woes to Venezuela’s confiscation of Las Brisas gold-copper project in 2009. But Gold Reserve stated it hopes to regain status as an NYSE operating company through an April option agreement to earn a 51% interest in La Tortuga property, “a copper and gold prospect located in Jalisco state, Mexico.”

Meanwhile, down on the pink sheets

The U.S. Securities and Exchange Commission suspended trading of Southridge Enterprises on December 27, one day after the company claimed it had formed a “joint partnership” with Kinross Gold [T.K] on Southridge’s Cinco Minas and Gran Cabrera projects in Mexico. That claim followed a December 13 announcement that Southridge had signed a confidentiality agreement regarding the two projects.

On December 27 Kinross responded that Southridge’s joint partnership claims “are, to the best of Kinross’ knowledge, without any basis in fact.”

A subsequent Southridge e-mail to the Globe and Mail (subscription required) stated, “What we can say is that Southridge Enterprises does have two signed agreements from [Kinross exploration manager] Mr. Martin Moscosa, and we have e-mails … confirming his direct quotation,” the paper reported on January 1.

Kinross spokesperson Steve Mitchell then informed the G&M, “We will confirm once again that we are aware of no communications which establish any partnership or joint venture between Southridge and Kinross.”

But such was the excitement that Southridge stock almost reached a penny. The company’s OTC shares opened December 13, the day of its initial CA announcement, at
.0054. On December 26, the day of Southridge’s Kinross announcement, the shares soared to a staggering
.0096. The following day’s trading halt saw Southridge droop to a close of