SMR April 2016

April Review 2 0 1 6

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Vol:104.No:4

1912-2

016

GLOBAL IRON ORE PRICES P 06

PROFILES IN MINING

DONALD ELSENHEIMER

ECONOMIC GEOLOGIST MINNESOTA DEPARTMENT OF NATURAL RESOURCES’ DIVISION OF LANDS AND MINERALS P 12

INSIDE STATISTICS MINING INDUSTRY SHIPPING MINING INDUSTRY FINANCE

15415 | 03.07.16

Al Hodnik, Chairman, President and Chief Executive Officer ALLETE | Minnesota Power

Minnesota Power is

PROUD TO SUPPORT MINING

Minnesota Power delivers the energy that keeps northeastern Minnesota working. We’re the source for safe and reliable electricity that powers the taconite mines and other large industries in our region and keeps them competitive on a global scale. We‘re also pleased that PolyMet Mining has met the state’s environmental review standards and is moving closer to a new age of mining for copper and other strategic metals.

With a recent upgrade, our largest generating unit, Boswell 4, stands ready to supply the mines of Minnesota’s Iron Range with cleaner, competitively priced energy for years to come.

The project reduces mercury emissions by about 90 percent and also reduces emissions of sulfur and particulates.

Minnesota Power supports environmentally responsible mining in northeastern Minnesota.

We support mining because mining supports us.

MNPOWER.COM/ENERGYFORWARD

MARCH 2016 VOL.104. NO.4

...From the Editorial Desk

Rally, or Mirage?

W

hen some figures in the mining business speak, the entire industry stops to pay attention. such figure.

Sam Walsh, CEO

of

Rio Tinto, is

one

Walsh recently poured gasoline onto the fires of

debate about whether or not iron, as well as its sister base metals, will

to gain through 2016 by declaring that the 55% rally that iron has enjoyed this year is due to “fizzle out”. It’s a powerful statement from the man atop the organization chart of the world’s second-largest iron exporter, believing that the gains made in the first quarter are unsustainable.

continue

Skillings Mining Review publishes comprehensive information on global mining, iron ore markets and critical industry issues via our monthly magazine, weekly E-newsletter, annual mining directory and real time website.

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In the annual shareholders meeting in London, the CEO expressed skepticism, although his company’s performance may suggest there is more than meets the eye. Rio Tinto is forecasted to hit a new high of 350 million metric tons of iron this year, a benchmark that would make the company the number one producer in the world ahead of Brazil’s Vale. Yet Walsh believes the iron rally serves as an indication of the metal’s volatility rather than a comeback. Some in the business agree: a Bloomberg poll had an average figure of $44 per ton for iron by the conclusion of the year.

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April 2016 SKILLINGS MINING REVIEW | 3

IN THIS ISSUE

PROFILES IN MINING

GLOBAL IRON ORE PRICES P 06

DONALD ELSENHEIMER ECONOMIC GEOLOGIST MINNESOTA DEPARTMENT OF NATURAL RESOURCES’ DIVISION OF LANDS AND MINERALS

P 18

HUMAN RESOURCES: RECRUITING SKILLED WORKERS

P 12

COVERSTORY

IRON ORE

Global Iron Ore Prices.................................................... 06

Steel Mills Are Over-Capacity........................................ 17

Human Resources: Recruiting Skilled Workers............ 18

FINANCE

PROFILES IN MINING

Financial Analysts Hold Differing Opinions

Donald Elsenheimer: Economic Geologist

On The Trajectory That The Price Of Iron Ore.............. 05

Minnesota Department of Natural Resources’

Recovery To Last Into The 2nd Half Of 2016................ 09

Division of Lands and Minerals..................................... 12

SAFETY

MINING INDUSTRY NEWS

Miner Killed in Fall of Ground Incident.......................... 09

In-depth: Essar Steel late on $10 Million

STEEL

Reimbursement to the State of Minnesota.................. 10

In-depth: Essar Steel late on $10 Million

Global Shipping & Great Lakes ..................................... 08

Reimbursement to the State of Minnesota.................. 16

Statistics.............................................................. 20/21

4 | SKILLINGS MINING REVIEW April 2016

Mining People............................................................ 21

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FINANCE

Financial Analysts Hold Differing Opinions On The Trajectory That The Price Of Iron Ore

F

inancial

Analysts hold differing

opinions on the trajectory that the price of iron ore will take

during the balance of

2016. The

financial predictors were surprised by iron ore's

23% gain over last year's After all, the last three years price drops, mainly due to the

price. saw

abundance of product and China's drop in steel demand.

McKinsey & Co. forecast a return to $US45 a ton because it anticipates both plentiful supplies and that China's reduction in domestical steel demand will

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remain. McKinsey's forecast came at the same that China compared its weak demand to a new "ice age". According to Goldman Sachs, the price per ton will stay around $US35. Citigroup sees a little brighter year, averaging $US38 a ton for 2016, decreasing to $US35 during the following two years.

Australia produces most of the iron ore that China makes into steel. The reopening of China's steel plants to 89% capacity in April 2016 was an increase over last year's 80% capacity. This increase in production means Australia's iron ore will likely continue to make Chinese steel.

The downside is that China dumps the steel it produces on the world market if it cannot consume the steel domestically. So what appears good news for Australia's iron ore industry might be terrible news for the rest of the iron ore industry -- and, at some point, even Australia's steel producers.

April 2016 SKILLINGS MINING REVIEW | 5

COVERSTORY

GLOBAL IRON ORE

PRICES

Just six months ago, iron at $60 looked like oil at $100 or gold at $1500: a nice pipe dream that may happen ten years down the line, but nothing to hold your breath about.

Yet consecutive days of gains have turned into consecutive weeks of gains and iron has seen the rally surge about 55% for 2016, closing at $59.90 per ton, nearly matching the commodity's 52-week highs. There's no shortage of bulls and bears alike when it comes to iron, some who say that it's the tip of a comeback and some who say that it's a mirage.

But just why is iron doing so well at a time when most commodity composite indexes are getting clobbered?

DOLLARS AND CENTS One critical factor that is boosting iron is a global lack of currency confidence.

Questions about Britain leaving the EU have given the Euro a black eye, while the Chinese stock market debacle has greatly devalued the yuan. Canada and Switzerland, furthermore, are either headed towards recession or recovering from one.

The dollar has done quite well in the past few years, but appears to have peaked, especially as the Fed announces that there will be future interest rate hikes in the future to prevent investors from sitting on cash rather than returning it into the economy. While iron ore isn't nearly a hedge against currency like precious metals -- note that gold has done even better than iron -- it becomes

6 | SKILLINGS MINING REVIEW April 2016

more valuable when currencies begin to dip. The dollar index is down by nearly five percent since February, a small but salient shift away from the strength of the greenback.

CHINA GROWTH The Chinese economy may very well never again single-handedly power a metal boom thanks to double-digit GDP growth. Yet their economy is still growing, and is growing much faster than most other nations in the world.

The Chinese still consume 70% of all the world's seaborne steel and with the advent of the nation's new Five-Year Plan for the economy, there's been a small bubble in spending anew on raw goods.

Benchmark Shanghai rebar, for instance, hit its highest level in nearly a full year

in April, while the Steel Index pan-Asian import price is running on a fifteenmonth high. Chinese imports have risen by fifteen percent in March compared to February; December imports reached a record 96 million tons.

This comes at the same time that the Chinese have lowered their domestic output of iron and steel, meaning that they will look to foreign producers to fill their construction and manufacturing holes. That's welcome news for many countries, but most especially Australia, who has gone into recession as the Chinese economy slows.

OUTPUT SLOWDOWN A lot of mining companies saw how badly they were left in the red in 2015 and decided it was time to cut costs.

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Whether it was payroll or operations or R+D, the end result is that much less ore is headed to the market this year than was last year. Rio Tinto lost nearly $900 million dollars in 2015 (after clearing over six billion net profit in 2014) and decided that they would handle the loss of cash flow by slashing about billion dollars this year and in 2017 from the company budget.

The impact hasn't just hit the mining industry, but the industries dependent on mining companies as customers. Fenner, for instance, manufactures conveyor belts for mines, and saw their 2015 revenue drop by a near-catastrophic 35%. In the span of only eight months, Caterpillar watched their stock prices drop by fifty percent as fewer and fewer miners invested in heavy equipment and tools.

With so many companies restricting their ability to put iron on the market, prices have risen due to depressed supply. Economists remind everyone that there are still lots of surpluses that keep prices of iron from inflating too much: the port inventories of Chinese iron now sit at about 90 million tons, a gain of fifteen million tons since summer of 2015. Since this represents some five billion dollars worth of iron, the clog will take a long time to get through, meaning that iron prices still face an uphill battle. Even so, the overall gains are nothing to sniff at -- especially for companies that dreaded the thought that 2016 might look an awful lot like 2015 all over again.

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April 2016 SKILLINGS MINING REVIEW | 7

Mining Industry News

Global Shipping & Great Lakes

E

ssar

S teel A lgoma

is now

reviewing bids for strapped operation in

Marie, Ontario.

This is going to be the decision that ultimately decides if the company is going to be restructured or sold

to quickly come to a decision to start the restructuring process.

completely. employs

The company currently 2,700 people and has been

been received and the company will now start the review process to see if they are going to accept any of them.

The goal is to find a successful bidder that will help satisfy negotiations for the stakeholder groups.

under protection from creditors since

November of 2015. The slump and need for protection comes from the decreasing steel prices. Bids for operation have

The aim is to help pull the company out of the rut that it is currently in in hopes to regain some of the former glory of the company.

The company is working

The Fate of Essar Steel Minnesota Under Current Speculation

E

Steel has revealed the future of their Nashwauk, Minn. Project. The funds needed to complete the project are about $1.9 billion ssar

dollars and their parent company has helped with interim financing.

The goal is to raise enough capital to complete the Nashwauk project and start to work on other projects to recover financially from the fall in steel prices.

The parent company, Essar Group, intends to offer money as the company needs it rather than offering the entire sum at the start. The hope is that the successful completion of the project will help draw in new investors, new projects, and help to improve the overall finance and standing of the company at large.

Essar is currently working to restructure the debt that the company currently holds in the form of tens of millions of dollars owed to contractors as well as a loan to the state of Minnesota to which they owe $66 million.

8 | SKILLINGS MINING REVIEW April 2016

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Finance/Safety

Recovery To Last Into The 2nd Half Of 2016

D

o not expect to see iron ore mining's surprising price per ton recovery to

2016. At least, that's what Rio Tinto's CEO says. The world's second-largest exporter of iron ore says the price increase will not last because China's last into the second half of

will result in downward pressure on iron ore prices in the second half of 2016. Some financial analysts believe that China's first quarter demands were front-loaded anyway, unsustainable throughout the rest of 2016. Bloomberg expects iron ore prices will fall to $44 a ton by the last quarter of this year.

steel export policies

Miner Killed in Fall of Ground Incident

M

ining is a tricky business at

Meanwhile, mine stock prices remain volatile. Rio dropped .8% last week but this week is up 11%. BHP is up 19% over last week and Fortesque Metals Group, LTD is up 14% this week. Last Friday, Fortesque lost 4.7%. Expect quick ups and then downs for the balance of this year.

best and earlier this month a rock drill operator at

Harmony’s Phakisa mine lost his life in a fall of ground incident. T he miner was working at Harmony Gold’s Phakisa mine near Welkom. This is one of the first reported fatalities this

year at the mine and was followed shortly by another reported fatality at the Kusasalethu mine belonging to the same company.

All current drilling and blasting operations are on hold at the mine for an undetermined amount of time until the investigation into the accident is concluded. Fall of ground incidents are not as uncommon as one might think, the longer a mine is in operation, the less stable the ground is likely to become making fall of ground incidents more common. The incident occurred on April, 11th, 2016 and the company is currently investigating to find out the cause and to update safety for future operations.

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April 2016 SKILLINGS MINING REVIEW | 9

IRON RANGE REGION

Madhu Vuppuluri, President and CEO of Essar Steel Minnesota.

In-depth: Essar Steel late on $10 Million Reimbursement to the State of Minnesota Essar Steel is currently in hot water over another late payment to the state of Minnesota on their $66 million debt. The money was initially loaned to the company as part of the Nashwauk project. The project however failed to meet several deadlines and the $66 million in incentives is now owed back to the state.

The first payment of $10 million was due at the end of March and the company has yet to give the state the money they owe. Jeff Walker, the Itasca county auditor states that he has yet to receive the money as he was charged with collecting and turning the money over to the state as payments are made.

Essar Steel has yet to address this late

10 | SKILLINGS MINING REVIEW April 2016

payment and is currently declining to comment on the situation. Essar Steel is owned by Essar Global which is based in Mumbai and is not the only North American operation for the company.

Currently, Essar Steel Algoma, based out of Sault Ste. Marie, Ontario is in bankruptcy and

is working to restructure debt. There are several companies that are interested in buying the operation and bids have been placed that would combine and help make the fifth largest steel producer in North America. Minnesota State Rep. Tom Anzelc believes that Essar Steel Minnesota could also benefit from bankruptcy. The other options are

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foreclosure on the real estate assets of the company or turning over the project to new investors. Essar has struggled to create and open new taconite plants as well in the area and the state estimates that the Nashwauk project is only 60% completed after more than 8 years of working to get the operation up and running.

The mine broke ground in 2008 and promised an impressive $1.8 billion mine that would process iron ore and include a steel mill that would be complete in 2011. Neither projects have been completed. Contractors of the state are owed $35 to $40 million. These funds are much needed to keep these contractors afloat and to help rehabilitate the Iron Range after the fall in steel prices.

Komatsu America Corporation and Ziegler CAT, two implement companies from which Essar has purchased equipment to complete the Nashwauk project, are also owed $25 to $28 million for equipment. Great Lakes Gas Transmission Co. sued Essar for nonpayment and got a settlement of $32 million. Essar recently hired Guggenheim Partners LLC. And the law firm White and Case LLP to help restructure the debt and get started on paying it back.

Time is the only way that anyone will know if the immense debt that has been accrued by Essar is going to be paid back of it further legal action is going to be required to get the funds. This is a disturbing development as many assumed that the Iron range was beginning to recover after a disastrous fall in steel prices due to the undercutting of Asian companies. Essar has several other holdings in North American and none of them are doing particularly well either.

NORTH AMERICAN MARKET (LTU) Company Ore Type Cliffs Natural Resources Inc. Cliffs Natural Resources Inc.

IRON ORE PRICE REPORT

Pellets, FOB Michigan Mines Pellets, FOB Minnesota Upper Lakes Port Source: CLIFFS NATURAL RESOURCES INC.

www.skillings.net

Per Iron Unit $1.49

Per Gross Ton at 64% $95.36

Per Ton at 64% Reporting Date 12/31/15

$1.08

$69.12

12/31/15

April 2016 SKILLINGS MINING REVIEW | 11

PROFILES IN MINING

PROFILES IN MINING

DONALD

ELSENHEIMER Economic Geologist

Minnesota Department of Natural Resources’ Division of Lands and Minerals SMR: Your current charge, The Minnesota Department of Natural Resources (DNR), is responsible for administering more than twelve million acres of State -owned, State-managed mineral rights and your previous tenure at the Geological Survey of Japan (GSJ), the mission was to promote a safe and sustainable society. As an Economic Geologist concerned with earth materials that can be used for economic and industrial purposes, with a significant discovery on your watch and now the oversight of the Gold Mineralization Project and Regional Gold Surveys, is this model and objective feasible for other regions in the US and globally?

DE: The DNR’s approach towards mineral exploration fits within its broader mission to integrate and sustain the interdependent values of a healthy environment, a sustainable economy, and livable communities within Minnesota.

DNR’s integrated resource management strategy shares stewardship responsibility with citizens and partners to manage for multiple interests.

Trusts established to benefit local schools and governments are one of these multiple interests, since they own

12 | SKILLINGS MINING REVIEW April 2016

a good portion of the mineral rights managed by the DNR. As the trustee of this mineral estate, we have a fiduciary obligation to generate revenue from these holdings. Now, neither the State of Minnesota nor the Trusts have the financial resources and risk tolerance that is required to discover, delineate and potentially develop a revenue-generating mineral deposit. So we’ve adopted a far more conservative management model, that has State-employed geologists like myself working with relatively modest budgets to search for areas within the mineral estate that have high potential for developable ore bodies.

The goal is to attract private exploration companies to come to Minnesota and invest the necessary capital to discover and delineate mineral deposits on state-leased mineral rights. This pro-active approach also supports broader land management strategies, and better enables us to conserve those areas of highest mineral potential for future exploration and development. I think that it has worked well for both the State of Minnesota and the Trusts.

SMR: In 2007, you filed the first Gold Mineralization Project 370 report which compiled data in the St. Louis

County, Minnesota area indicating concentrations of gold in the soil. What has occurred over the past 9 years to indicate the project remains applicable and advances DNR’s objectives?

DE: As a State of Minnesota geologist, I have the luxury of starting each new mineral potential project with a wealth of historical exploration data and archived drill core already in hand.

Mineral explorers are required by law to submit a portion of drill core from every exploratory borehole in Minnesota to our public drill core library in Hibbing (a modern, heated facility that provides public access to more than 3 million feet of drill core from thousands of drill holes).

A company exploring for minerals on State-managed mineral rights is also required to provide copies of any maps, laboratory reports, or other exploration-related data to the State upon lease termination. Our basic strategy over the past decade has been to go into areas where there has been historical exploration, and to leverage this publically-available exploration data and archived drill core with new assays and new geochemical data, typically using maps, exploration methods, and miner-

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Our basic strategy over the past decade has been to go into areas where there has been historical exploration, and to leverage this publically-available exploration data and archived drill core with new assays and new geochemical data, typically using maps, exploration methods, and mineralization models that weren’t available back in the day.

alization models that weren’t available back in the day.

One possible indication that this approach has been successful is the fact that private exploration companies have come in behind each of my projects and actively leased these areas for gold exploration. Now, I certainly can’t take all (or even most of the credit) for generating this level of interest; these were all areas of historical gold exploration, and Minnesota certainly wasn’t the only region to see increased levels of gold exploration over the past decade. But I can say that the new data does add value to the state’s mineral estate, and, more generally, that mineral exploration stimulates private investment and boosts local economies (often in parts of the State where that help is needed the most).

SMR: Now that the PolyMet Environmental Impact Statement has been completed and deemed Adequate, what are the remaining steps and timetable for DNR’s Pollution Control Agency environmental permitting process?

DE: The State of Minnesota has just rolled out a new website (mn.gov/ polymet) to provide up-to-date information about the on-going regulatory process and the project-related state permits that would be issued by the DNR or the Minnesota Pollution Control Agency (MPCA).

SMR: D e p a r t m e nt o f N at u ra l Resources contractor, Overburden Drilling, Ltd. has been brought on board for the Gold Mineralization Project. What is the significance of their skills and the latest achievement directly attributed to their presence?

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April 2016 SKILLINGS MINING REVIEW | 13

DE: My DNR project work supports mineral lease sales and attracts private company investment and exploration within Minnesota. It is also used to support and defend DNR land management decisions, sometimes involving parcels that have competing interests. Having all of our laboratory work and sample processing completed by industry-respected external laboratories and contractors helps maintain high levels of public and private stakeholder confidence in the validity and integrity of our findings.

So we have a third party count the gold grains for us. Of course, contracting with external vendors is also extremely cost-effective when they can provide services that require specific expertise and/or expensive equipment.

The State of Minnesota uses an open Professional/Technical Contract system to obtain third-party laboratory services; ODM has held the state contract to provide gold grain counts and heavy mineral concentrate processing for as long as I’ve been at the DNR. The reasons for this go beyond cost-competitiveness; ODM has widely-recognized expertise in this specific mineral exploration method. We really value the confidence that the exploration community places on their work, and (by extension) on the sample results for our projects.

SMR: You recently stated in January of this year, “We (DNR) have an obligation to generate revenue from the trust lands and to manage all of the trust lands in a way that is consistent with state priorities,” Acknowledging the possibilities, what plans are envisioned to generate revenue for the state of Minnesota and what is the economic potential and benefit for the mining region?

DE: Most of the revenue generated for the Trusts comes from taconite production on state-managed mineral rights. One step that the State has recently taken to support the Iron Range during this tough period of depressed demand is to temporarily

14 | SKILLINGS MINING REVIEW April 2016

cut royalty rates for the three taconite producers who currently mine ore on state-managed mineral rights. Over the longer term, the state has recognized the need to look beyond the iron mining that has supported the regional economy for more than a century. It’s even acknowledged in state statute, with a declaration that it is state policy to provide for the diversification of the state’s mineral economy through long-term support of mineral exploration, evaluation, and development.

This kind of support underwrites my mineral potential work, and underscores the need for public nonferrous metallic mineral lease sales. Our last sale in November resulted in 43 new leases issued to three companies, and initial planning for a 2016 lease sale has begun.

SMR: Not of the news headline caliber but still very important to the mission of DNR; under your auspices are Geochemical Analysis, Descriptions and Interpretation of Glacial Sediment, Soil Survey Testing Methods and Heavy Mineral Concentrate Assays projects throughout the state of Minnesota. What is the status of these projects and what are the management resources allocated to maintain accountability?

DE: I’m going to use this question as an opportunity to note DNR mineral evaluations on state-managed mineral rights extend far beyond my work on gold potential. I have colleagues who add value to Minnesota’s mineral estate with projects evaluating aggregate potential and dimension stone prospects.

Accountability is paramount for anyone working in the public sector, and doubly so when your work involves potentially contentious areas like mineral exploration and mine regulation on state-managed

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lands. It can’t be easy to manage a department like the DNR, which has such a diverse set of missions. I guess the fact that I’m still able to do my work, while other DNR staff are busy battling aquatic invasive species, or protecting terrestrial native endangered species, is a testament to nimble (and effective) management. And I should also note that the DNR is itself held accountable for its decisions through oversight from the State’s Executive Council, its Legislature, and by the public comment process.

SMR: It’s clear that gold mining operations won’t take place in the state unless environmental impacts are addressed and mitigated however there are already existing camps of environmentalists on one side with possible mining ventures on the other. Since gold has a special attraction, what happens if a new technology, similar to what fracking did to natural gas, emerges for gold location and extraction. How would the DNR react?

DE: Very, very cautiously.

First, with respect to a new gold exploration technology… it’s hard for me to imagine using an exploration tool that is as controversial as fracking, even if I was 100% convinced that it was safe for the environment. The citizens of Minnesota take justifiable pride in the state’s natural resources.

It’s a fiercely-protected birthright that is guarded by strong (and strongly-enforced) environmental rules and regulations. Continued public support for mineral exploration on state-owned or state-managed mineral rights hinges, in no small part, on the DNR’s ability to credibly state that typical exploration activities are temporary, low-impact, and not harmful to the environment.

Think of it as an extension of the idea of “social license” to mine…it’s a social license to explore. Steering clear of a controversial (but revolutionary) mineral exploration tool would be a small price to pay in order to maintain that social license, as well as the public’s trust.

Now, if the issue involved a new gold extraction technology, we can look at an existing example for guidance. While open-air heap leaching is a permitted extraction method in some jurisdictions, Minnesota’s administrative rules governing non-ferrous metallic mineral mining essentially limit cyanide processing to closed tank systems. There would need to be new rules promulgated to allow an emergent extraction technology, and I would expect any project proposing such a technology to face a high amount of scrutiny during the environmental review process.

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In-Depth: ArcelorMittal to Sell Three US Steel Mills In an industry that is faltering with steel prices plunging, it stands to reason that big name steel producer ArcelorMittal is looking to sell three mills that are part of its current US operations. ArcelorMittal LaPlace, Steelton and Vinton are all slated to go up for sale this year stated the company in late February 2016. The company is looking to sell these mills in an effort to draw in and really focus on other operations.

T

he company confirmed that they were in talks with several companies and we're currently

discussing what price the mills would be sold for. The mills will be valuated and the selling price determined before they are out up for sale to potential buyers. It is uncertain as to

how much each mI'll will be offered up for when they go on the market.

The sale may or may not be met

16 | SKILLINGS MINING REVIEW April 2016

with eager buyers but at this point the offers are still on the table. The company reported a $7.9 billion dollar loss in 2015 and said that operations in that region had an overall operating loss of $74 billion during the 2015 year. Steelton is located in Harrisburg, Pennsylvania and makes major railway rails.

The mill operates on an electric furnace and lead furnace which is unique. LaPlace is a mini mill in LaPlace,

Louisiana and produces angles, channel, flats, beams, and rebar for structural shapes merchants and rebar markets. The mill is geared toward creating these steel structures for both fabrication markets and for individual merchants and the greater market at large. This mill does work off of an electric arc furnace and is a medium section mill.

The Vinton mill is also a mini mill and is products rebar for commercial

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Steel Mills Are Over-Capacity

T

he first quarter of

2016

may have seen iron ore

prices rebound significantly; however,

Company (China's

Angang Steel

fourth largest steel producer)

says that it expects to post a significant loss in the neigh-

615 million yuan for the quarter that ended March 31, 2016. In US dollars, that loss translates to about

borhood of

$95 million. In comparison, the company posted net income in 2015 of 19 million yuan. That's quite a swing. Angang reported last month that it faced an "ice age". Steel mills are over-capacity and confronting stiff competition and falling steel prices. The company imposed cost saving measures but they were not enough in light of the falling steel prices. Angang stock prices dropped 1.9 percent at the close of trading Thursday.

That was the biggest stock dip for the company this month.

In comparison, Angang's stock declined 36 percent during the past 12-month period. construction as well. This facility is located in El Paso, Texas.

ArcelorMittal failed to state if they are going to take over production at these plants after the sale or if they are going to cut all ties and leave the plants.

The company is slowly but surely working to divest the US capacity that it currently holds as it idled its Indiana Harbor long carbon facility in August of 2015 and closed its wire rod facility in Georgetown, South Carolina last year as well.

Like so many different companies, many have started to pull out of American steel production as a way to combat the slump in sales and in prices as a result of undercutting by the Asian steel market. Many American companies are suffering as well and many have sold off holdings, have started to restructure debt, and are working to make the most of the falling market.

Time will tell if the company is going to pull out of the country all together or if they are simply reducing their presence in an effort to focus on projects that are more lucrative. The steel industry is currently improving and hopefully in time the industry will be recovered enough that companies can begin to invest again.

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ULTIMATE MINING NEWS COLLECTIVE F O R

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April 2016 SKILLINGS MINING REVIEW | 17

COVER STORY 2

H U M A N

R E S O U R C E S

Recruiting Skilled Workers In an economy where unemployment is hovering around five percent, it’s typical for many industries to complain that there’s a difficulty finding the skilled workers needed for their operations. As the mining sector reels from the downturn of commodity prices, it becomes especially difficult to lure new graduates with the promises of the sky-high salaries of yesteryear - such as the famous example of the high-school dropout mine workers who could make six-figures during the peak of the metals boom.

I

t’s not all bad news, however, as many universities and colleges are pumping out new graduates capable

of filling in the gaps where needed.

ENGINEERING GROWTH Perhaps the greatest success story in recruiting skilled workers for the mining industry comes from engineering programs in the United States. Despite the belt-tightening that many companies are subjecting themselves to, almost every mine needs more engineers for tasks ranging from surveying to mine

18 | SKILLINGS MINING REVIEW April 2016

planning to developing transportation networks above and below ground. US universities are seeing something of an engineering boom as students looking for a good return on their investment choose courses of study where employers are all but begging for applicants (Microsoft, for instance, claims that half of their 6000 open jobs are for engineers). The 2016 SME Guide to Minerals and Materials Science Schools reports that mining engineering is a pretty hot commodity at the moment. US graduates are up by 20% compared to the previous year,

hitting levels not seen since the mid 1980s. The US awarded no fewer than 427 sheepskins for mining engineering, including bachelor’s, master’s, and doctoral degrees. Though this is a high figure, it still pales in comparison to overall engineering in the United States, where just under 100,000 students graduate with engineering degrees overall.

The increase in engineering graduates is juxtaposed by the decrease in the number of universities offering mining education programs. Some schools are phasing out mining education altogether, while others in mineral-rich parts of the country rely on mining courses for most or even all of their curriculum. While the starting salaries aren’t as high for mining engineers as they would have been in 2010 or 2011, there’s ample vacancies.

Many current mining engineers are getting long in the tooth: the swell of baby-boomer retirement has created a large talent deficit for American mining companies in search of replacement

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workers. Industry forecasts predict consistent mining job growth over the next twenty years, giving today’s graduates ample job security as well as options for work.

INTEREST IN MINING There will always be a difficulty connecting the right applicant to the right job, both from the employer’s point of view and from the recruiter’s point of view. Every recruiter has their own story to tell, but not all talk only about mining. Scott Birkhead of Futurestep is one such recruiter who does nothing except funnel talent towards the industry. Birkhead works with Fortune 200 companies across the United States, and especially in the mining hub of

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Denver, Colorado, to fill vacancies. His outlook on the current jobs issues facing the industry is at times both glum and upbeat: he emphasizes that there’s ample interest in working with mines, but that the industry fails to project a message to skilled workers in order to bring in skilled tradesmen like electricians and mechanical operators.

While Birkhead sees a big push towards the mining sector in Canada, there’s much less notoriety to be found in the US. One of the problems is finding employees who aren’t interested in the traditional 9 to 5 career: short of the occasional office worker, most mine workers need to work as many as 15 hours in a shift. Birkhead notes how different recruitment is for a mine

compared to other industries. Most future miners aren’t exactly plugged into LinkedIn, for instance. They may get news about a job opening by word of mouth rather than by online job boards.

He emphasizes the need for a physical connection: to meet prospective workers in person, to hand over business cards, to get referrals through the company itself. In addition, Birkhead must sell the idea of a multifaceted career path: the truck driver, for instance, may need to get out of his truck and help with everything from digging to unloading equipment. Finding employees with the versatility and the willingness to go beyond the job description represents a challenge each day and for each job opening.

April 2016 SKILLINGS MINING REVIEW | 19

Statistics

March 2016 Crude Steel Production

By John Edward, Associate Publisher

W

orld crude steel produc tion for the

66

countries

reporting to the W orld Steel Association (worldsteel) was 137 million tonnes (M t ) in M arch 2016, a -0.5% decrease compared to March 2015. The crude steel capacity utilisation ratio of the 66 countries in March 2016 was 70.5%. This is -1.3

percentage points lower than March 2015. Compared to February 2016, it is 3.9 percentage points higher.

World crude steel production was 385.7 Mt in the first three months of 2016, down by -3.6% compared to the same period in 2015. Asia produced 263.6 Mt of crude steel, a decrease of -3.1% over the first quarter of 2015. The EU produced 40.9

Statistics based on World Steel Association Report released on April 20, 2016 

Mt of crude steel in the first quarter of 2016, down by -7.0% compared to the same quarter of 2015. North America’s crude steel production in the first three months of 2016 was 27.5 Mt, a decrease of -1.1% compared to the first quarter of 2015. The C.I.S. produced 25.0 Mt of crude steel in the first three months of 2016, a decrease of -0.4% over the same months of 2015. China’s crude steel production for March 2016 was 70.7 Mt, an increase of 2.9% compared to March 2015. Elsewhere in Asia, Japan produced 8.6 Mt of crude steel in March 2016, a decrease of -6.8% compared to March 2015. India’s crude steel production was 8.1 Mt in March 2016, up by 3.4% on March 2015. In the EU, Germany produced 3.8 Mt of crude

steel in March 2016, a decrease of -1.6% compared to March 2015. Italy produced 2.0 Mt of crude steel, down by -3.5% on March 2015. France produced 1.1 Mt of crude steel, down by -21.4% compared to March 2015.

Turkey’s crude steel production for March 2016 was 2.7 Mt, up by 1.3% on March 2015. In March 2016, Russia produced 6.0 Mt of crude steel, down by -2.0% over March 2015. Ukraine produced 2.2 Mt of crude steel, up by 28.1% compared to the same month in 2015. The US produced 6.7 Mt of crude steel in March 2016, an increase of 4.9% compared to March 2015. Brazil’s crude steel production for March 2016 was 2.5 Mt, down by -9.5% on March 2015..

Preliminary USGS Iron Ore Statistics for December 2015

By John Edward, Associate Publisher

A

U.S. Geological Survey (USGS) report by Mineral Commodity Specialist Christopher A. Tuck, U.S. mine production and shipments of iron ore in December 2015 were 3.23 million metric tons (Mt) and 3.29 Mt, respectively.

Average daily production of iron ore was 104,000 metric tons (t), 15% less than that of November 2015 ccording to the

and 32% less than that of December 2014. Average daily shipments of iron ore were 106,000 t, slightly less than those of November and 42% less than those in December 2014.

Mine stocks at the end of December 2015 were slightly less than those held in November and 38% greater than those held in December 2014. As of December 2015, six iron ore mines and one direct-reduced iron (DRI) facility were either shut down or idled, resulting in reduced production, reduced shipments, and increased stocks compared with 2014. Four pellet operations, one tailings reclamation operation, and one DRI facility were operational during the month.

20 | SKILLINGS MINING REVIEW April 2016

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FEB 2016

MARCH 2015

% CHANGE MARCH – 16/15

Total - European Union (28) 14,124

13,081

15,474

-8.7

-45.4

Total - Other Europe

2,951

2,587

2,929

0.7

8

17.8

Total - C.I.S. (6)

8,742

8,154

8,546

2.3

25 e

28

8.8

Total (66 countries)

1,535 e

1,330 e

1,558

-1.5

0

0

37

-100.0

United States

6,748

6,366

6,434

4.9

e – estimate | r – revised Monthly Crude Steel Production in the 66 Countries included in the report, in thousands of metric tons. The 65 countries included in this table accounted for approximately 98% of total world crude steel production in 2011.

Total - North America

9,483

8,809

9,154

3.6

U.S. RAW STEEL PRODUCTION

318

339

430

-26.1

Brazil

2,506

2,434

2,768

-9.5

Chile

105 e

95 e

83

26.3

Colombia

90 e

70 e

92

-2.3

Production

Percent Change*

Capability Utilization Rate

Production

CRUDE STEEL PRODUCTION, MARCH 2016. Source – World Steel Association FEB 2016

MARCH 2015

% CHANGE MARCH – 16/15

1,145 e

1,065 e

1,061

7.9

Cuba

15 e

15 e

27

El Salvador

10 e

8e

Guatemala

30 e

Ecuador

50 e

45 e

56

-10.6

April 16, 2016

1,693

2.2

72.4

26,529

- 2.4

70.5

Paraguay

5e

1e

3

44.1

Previous Year

1,649

2.7

69.8

27,194

-

71.5

Peru

70 e

85 e

92

-24.2

April 9, 2016

1,656

0.4

70.8

24,836

- 2.8

70.4

Uruguay

7e

1e

7

-1.8

Venezuela

60 e

110 e

170

-64.8

Previous Year

1,649

0.4

69.8

25,544

-

71.5

Total - South America

3,211

3,180

3,703

-13.3

April 2, 2016

1,650

- 1.5

70.6

23,180

-3.0

70.3

Egypt

424

360 e

555

-23.7

Previous Year

1,615

2.2

68.3

23,895

-

71.6

Libya

43

52

25

72.1

March 26, 2016

1,675

0.4

71.6

21,530

-3.4

70.3

Morocco

30 e

25 e

38

-21.3

Previous Year

1,601

4.6

67.7

22,280

-

72.1

South Africa

536 e

475 e

629

-14.8

Total - Africa

1,032

912

1,247

-17.2

Iran

1,455 e

1,360

1,315

10.6

Qatar

200 e

185 e

229

-12.7

In thousands of Net Tons – Source - American Iron and Steel Institute * Percent Change is a comparison between a given week and the previous week.

The % change figure in the previous year row refers to the change from a given week compared with the corresponding week of the previous year.

AISI’s estimates are based on reports from companies representing about 50% of the Industry’s Raw Steel Capability and include revisions for previous months.

Saudi Arabia (HADEED only)

400 e

375 e

432

-7.4

WEEKLY U.S. RAW STEEL PRODUCTION BY DISTRICT

Total - Middle East

2,324

2,175

2,236

3.9

China (estimate by CISA)

70,650 58,515 e 68,659

2.9

India

8,059

6,940 e

7,797

3.4

Japan

8,648

8,355

9,282

-6.8

South Korea

5,430 e

5,300 e

5,927

-8.4

Taiwan, China

1,775 e

1,500 e

2,081

Total - Asia

95,072

81,085

Australia

340

New Zealand

42 e

Canada

Mexico Trinidad and Tobago

Argentina

Total - Oceania

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382

MARCH 2016

COUNTRY

137,322 120,412 138,002

Weekly Production WEEK ENDING

DISTRICT

-0.5

Year-to-Date Production

Percent Change*

MARCH 2016

COUNTRY

WEEK ENDING 4/16

4/9

4/2

3/26

North East

206

204

203

199

Great Lakes

639

624

681

670

-14.7

Midwest

188

191

184

185

94,309

0.8

Southern

571

552

499

536

390

334

1.7

Western

89

85

83

85

39 e

69

-39.2

1,693

1,656

-

1,675

429

403

-5.3

Total

In thousands of Net Tons – Source – American Iron & Steel Institute.

April 2016 SKILLINGS MINING REVIEW | 21

MINING INDUSTRY PEOPLE

ADVERTISING INDEX Azcon.......................................... 11

Cordoba Minerals Corp. appointed Peter Meredith, Govind Friedland and Tony Makuch to its Board of Directors. Peter Meredith, who will assume the role as Chairman of the Board of Cordoba, is the former Deputy Chairman and Chief Financial Officer of Ivanhoe Mines Ltd. (now Turquoise Hill Resources Ltd.), where he was involved in overseeing Ivanhoe’s business development and government relations. Tony Makuch was the Chief Executive Officer of Lake Shore Gold prior to the recent acquisition by Tahoe Resources. Since joining Lake Shore Gold in 2008, Mr. Makuch had overseen the company’s progression from exploration to annual production of approximately 180,000 ounces of gold. Govind Friedland is the Executive Chairman of the Board of Directors of GoviEx Uranium and a principal and co-founder of Ivanhoe Industries, the parent company of I-Pulse Inc., a hi-tech company providing innovative solutions for mining, oil & gas, and advanced manufacturing sectors based in Toulouse (France).

Newmont Mining Corporation announced that Noreen Doyle was appointed to succeed Vincent Calarco as Chair of Newmont’s Board of Directors. Mr. Calarco will continue as a Newmont Director and work closely with Ms. Doyle to ensure a smooth leadership transition. Ms. Doyle has been a Director with the Company since 2005 and previously served as Vice Chair and head of the Board’s Audit Committee. Her experience includes top executive leadership roles at the European Bank for Reconstruction and Development and board leadership roles, including as Vice Chair and Lead Independent Director of the Board of Credit Suisse.

Barr Engineering......................... 09 CR Meyers.................................. 15 Global Minerals Engineering..... 22 Golder Associates...................... 20 Hallett Dock Company............... 19 Krech Ojard & Associates, P.A...... 11 Lake Superior Chapter ISEE....... 11 L & S Electric Inc........................ 05 Malton Electric Company..............

Mielke Electric Works................. 05 Minnesota Power....................... 02 Naylor Pipe................................. 24 NBC............................................. 11 Neo Solutions............................. 14 Noramco Engineering Corp....... 22 Northern Engine & Supply......... 22 S.E.H........................................... 08 SME............................................. 23 WP & RS Mars............................ 23

22 | SKILLINGS MINING REVIEW April 2016

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