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MARCH 2014 VOL. 103 NO.03

EDUCATING MINING PROFESSIONALS SHIPPING ON THE GREAT LAKES INTERVIEW WITH

JAMES H.I. WEAKLEY PRESIDENT OF

Lake Carriers’ Association America’s industrial heartland still needs Great Lakes shipping

INSIDE STATISTICS MINING INDUSTRY SHIPPING MINING INDUSTRY FINANCE MINING INDUSTRY PEOPLE

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Profiles in Mining Mr. James H. I. Weakley President, Lake Carriers’ Association For the March 2014 issue of Skillings Mining Review, we interviewed President of the Lake Carriers Association, James H. I. Weakly. Mr. Weakley has served as the President of the Lake Carriers’ Association since January 16, 2003. As chief spokesman for U.S.-flag Great Lakes carriers, he represents 57 deep-draft vessels from 17 companies on a wide range of issues. A 1984 graduate of the U.S. Coast Guard Academy, he sailed as an engineering officer. Shoreside assignments included Pollution Response and Vessel Inspection, as well as Search and Rescue (SAR).

In 1993, he joined The Interlake Steamship Company as Personnel Director and advanced to the position of Operations Manager. Recalled to active duty after the 9/11 attacks, he managed the Coast Guard’s Great Lakes Crisis Action Center. Mr. Weakley earned a Masters of Business Administration from the Executive Program at Case Western Reserve University in 1999. With 23 years of active duty and reserve service he has been awarded numerous personal awards and unit citations. The Lake Carriers’ Association was founded in 1880. As such, it is one

of the oldest active trade associations in the country. LCA promotes the common interests of its members, with special emphasis on legislative and regulatory matters. In all that it does LCA strives to maximize the efficiencies of waterborne commerce on the Great Lakes in a manner that respects the environment and the natural treasure these freshwater seas represent. LCA maintains statistical information about the number of ships in service and tracks shipments of major commodities.

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.

PUBLISHER CHARLES PITTS chas.pitts@skillings.net ASSOCIATE PUBLISHER JOHN EDWARD john.edward@cfxnetwork.com SENIOR SALES MANAGER STAN SALMI stan.salmi@skillings.net CONTRIBUTING EDITORS ANNA GRANT anna.grant@cfxnetwork.com MARY CLAIRE WHITAKER mc.whitaker@cfxnetwork.com ART DIRECTOR MO SHINE mo.shine@cfxnetwork.com CIRCULATION & SUBSCRIPTIONS subscriptions@skillings.net SALES & MARKETING CHRISTINE MARIE advertising@skillings.net www.skillings.net

MARCH 2014 VOL. 103 NO.03

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Content SHIPPING ON GREAT LAKES............. 10 EDUCATING MINING PROFESSIONALS................................ 18 U.S. STEEL GET EXTENSION PERMITS FOR MINNTAC.................... 26 GREEN ACTIVISTS MAKE MINING GROUPS SEE `RED’.............. 27

THE PUBLISHER'S NOTE...... 5 PROFILES IN MINING........... 6 “AMERICA’S INDUSTRIAL HEARTLAND STILL NEEDS GREAT LAKES SHIPPING” James H.I. WeakleyPresident, Lake Carriers’ Association COAL Possible Taxpayers Shelled Out $200 Million in Lost Revenue..............................................................14 Investment Needed to Boost Coal Mining in South Africa......................................14

MINING INDUSTRY FINANCE Mining Equipment Market: Recovery In Medium Term, For Now Still Flat..........17 2014 May See A Boost in M&A..................................21

COPPER Copper Mining Companies Focus on Growth and Expansion..............................................15

MINING MATTERS BHP Billiton Commits To Trinidad and Tobago.........21 U.S. Silica Announces Expansions to Supply Chain Network...............................................21

IRON RANGE REGION Hearing Evaluates Pros and Cons of PolyMet Copper Mine................................................16

MINING INDUSTRY SHIPPING Congress Calls Attention To Great Lakes Maintenance Backlog............................24

IRON ORE Mixed Happenings in the Iron Ore Industry........................................................22 Australian Movement On Iron Ore Projects In West Africa, Brazil..................................................23 Tata Steel Could Be Investing in Iron Ore in North America.........................................22

STEEL Red Metal Resources Turns Up New Copper Result ....................................................26 Essar Steel Settles Trinity Coal Bankruptcy...............26 STATISTICS ............................................................ 28-29 MINING INDUSTRY PEOPLE ...................................... 30 ADVERTISING INDEX................................................. 30

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THE PUBLISHER'S NOTE Rarely do we see the faces behind today’s headlines. It’s important to know the individuals and families that are personally impacted by decisions and opinions presented by groups that move from one issue to another. Even though the following letter has been circulated before, it contains a message that can’t be told enough. Charles Pitts Publisher

DANA WAHLBERG

I

grew up on the Iron Range, and mining has been my bread and butter for many of my 55 years. My dad was a professional mining engineer. He started in the Pioneer Mine in Ely and was the last engineer at the TowerSoudan Underground Mine prior to its closing in the early 1960s. Our family then relocated from Ely to Virginia, where Dad eventually retired from Minntac as an operations superintendent. Now in his mid-80s, Dad continues to consult in the mining industry, giving him the opportunity to contract with numerous varieties of mining operations around the world, his expertise utilized as it relates to the restoration of areas where mining is occurring or has occurred. The Iron Range thrived in the 1960s and ’70s while I was growing up. Mining, construction and other business boomed. Schools were large, extracurricular activities abundant, and opportunities diverse. Population on the Iron Range was more than double what it is now. Today, sleepy ghost towns linger where prosperous, successful communities existed previously. As a family we camped every weekend. My dad introduced my brother and me to hunting, fishing, and snowmobiling and taught us how to both enjoy and respect the pristine environment in our backyard. My husband’s roots also are in Ely. We have a modest home there now and often frequent the Boundary Waters Canoe Area Wilderness and other areas of Northeastern Minnesota to enjoy the peaceful surroundings and the pastimes they afford. This is particularly important to us because the decline in the Northeastern Minnesota economy has brought me, like scores of others, to work in Minnesota’s metro in the Twin Cities area. I commute weekly to and from my job, bouncing between St. Paul, our primary residence in Duluth and our home in the Ely area. But we remain encouraged the PolyMet project will begin, and, with that, our homeland will revitalize. Three co-lead agencies — the U.S. Army Corps of Engineers, the Minnesota Department of Natural Resources and the U.S. Forest Service — have completed a comprehensive environmental analysis of the project. The agencies meticulously reviewed and responded to the concerns of the project’s opponents. Are we really going to continue to question the expertise of this combined team and challenge the 2,169-page document on which they collaborated for so many years to cover every base of this project both during and after its operation? It is time for us to stop questioning these skilled experts. Nickel and

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other metals play a major role in our everyday lives. The list of nickel-containing materials is almost endless. The use of nickel is growing at 4 percent a year while nickel- containing stainless steel grows at 6 percent annually. Copper-nickel alloys are used extensively as well. Virtually every aspect of our living relies on the presence of these metals that can be mined safely in Minnesota. This is something to be proud of, not something to oppose. The enormity of these coppernickel deposits, some of the largest in the world, will have an effect on both a national and international scale. If PolyMet can meet state and federal standards, by all means, let’s proceed. Tourists and we as Minnesotans enjoy recreational areas such as Portsmouth in the Crosby area and Lake OreBe-Gone, a 140-acre artificial lake in Gilbert that was formed by the flooding of three open-pit mines. These places are havens for camping, diving, fishing, swimming, canoeing, and kayaking. Wildlife abounds as does the natural beauty that one conjures when “Minnesota” is spoken. PolyMet’s environmental review has been long and arduous and very painful for many of us to endure. Mining, wetlands, wildlife, air and water all have co-existed in Minnesota for more than 100 years. When mining subsided, so did our economy and our lifestyles. We all want clean water, and we all want the BWCAW and adjoining forests and waterways protected. Minnesotans have upheld some of the strictest standards in the nation. At the same time we want to see a revitalized Northeastern Minnesota, where jobs that pay decent and respectable wages for families to live on are more plentiful. A diversified economy is always preferable to an economy that’s seasonal and service-based. If we cannot mine safely in the most industrialized nation in the world, where should we mine to obtain needed minerals? Should we not mine? Or should we only mine in someone else’s backyard? Enough is enough. Let’s embrace PolyMet. And let’s continue to enjoy all of the natural beauty that has coexisted with more than 100 years of mining in Minnesota and that will continue to abound in harmony with the PolyMet project. Dana Wahlberg and her husband, Rick, live in Duluth and have a home in the Ely area. She commutes weekly to St. Paul for her job as the state’s 911 Program Manager for the Minnesota Department of Public Safety. March 2014 SKILLINGS MINING REVIEW | 5


SMR: How has “the dredging crisis” impacted your members in terms of the shipping of iron ore and coal?

members are spending more than $70 million to get their vessels ready for 2014.

JW: The dredging crisis has significantly reduced the amount of cargo our members can carry each trip. Back in 1997, when water levels were near record highs, the 1,000-footers often were able to carry more than 70,000 tons each trip.

SMR: Members of Congress, Republican and Democrat alike, voicing an ongoing commitment to end the dredging crisis was seen as a positive move in 2013. What do you envision will happen in 2014 and will we see an end to the dredging issue this year?

Since then, most cargos have been less than 66,000 tons. Water levels were so low at the beginning of 2013 that some loads were less than 60,000 tons. This is not just an issue for iron ore and coal. It’s impacting every trade: Limestone, cement, salt, grain...When the vessels aren’t carrying full loads, the carrier can’t offer the best freight rate. And in periods of high demand, this “lightloading” can make it very difficult for our members to meet all their customers’ requirements.

SMR: What measures have the Lake Carriers’ Association members taken to mitigate the effects of the crisis? JW: There really isn’t a lot a vessel operator can do. We have a fixed navigation season through the Soo Locks: March 25-January 15, and there isn’t much flexibility with those dates. The vessels are already operating at their optimum speed, so you really can’t make more trips each season. And since vessels operate 24/7, they need to take the boats out of service for a while in the winter to do maintenance and modernization. This winter our 6 | SKILLINGS MINING REVIEW March 2014

JW: The House and Senate will soon conference over their respective versions of the Water Resources Reform and Development Act. We are certainly hopeful that the key provisions of each will be retained in the final bill. Both the House and Senate have called for increased funding for dredging. Right now the Federal government is spending only one of every two tax dollars it collects for dredging on dredging. That’s why the Harbor Maintenance Trust Fund has a surplus of nearly $8 billion. The House version also designates the www.skillings.net


“America’s Industrial Heartland still Needs Great Lakes shipping” James H.I. Weakley

President, Lake Carriers’ Association

Great Lakes as a system in terms of dredging. This is critical to putting the Lakes on an even footing with other waterways. Currently the Corps views the Lakes as 60 individual ports and pits them against one another for dredging dollars. Taking the Lakes as a whole should bring back more dredging dollars. The Great Lakes delegation has been incredibly supportive, but two legislators in particular have been honed in on ending the dredging crisis, Senator Carl Levin and Congresswoman Candice Miller, both from Michigan. Another key player has been Minnesota Senator Amy Klobuchar. In recognition of that, Great Lakes Maritime Task Force, the largest labor/management coalition promoting Lakes/Seaway shipping, named her Great Lakes legislator of the Year for 2013. With a backlog of more than 17 million cubic yards of sediment, the dredging crisis can’t be resolved in www.skillings.net

one year, but there’s enough dredging capacity on the Lakes to get the job done in a few years if the Corps gets sufficient funding and we have enough Confined Disposal Facility capacity.

SMR: What was the state of the water level in St. Mary’s River in 2013 and how did it impact drafting for this year? JW: Water levels did rebound a bit in 2013 and that allowed for deeper drafts, but the real issue here is the St. Marys River has not been dredged since 2008. As a result, the water level in the St. Marys River pretty much dictates how much cargo will move each trip. Even when Lake Michigan hit a record low, it was still the St. Marys River that set the draft for vessels moving Lake Superior iron ore to Indiana Harbor, Burns Harbor and Gary. One of the 1,000-foot-long vessels forfeited nearly 3 feet of draft when she delivered her final iron ore cargo in January 2013 because of low water levels in the St. Marys River. That meant nearly 10,000 tons of Minnesota iron ore stayed at the loading dock.

SMR: Since the steel industry is the Great Lakes’ largest shipping customer and you also use steel as the primary material in maintaining and modernizing the fleet, where is the majority of steel procured from each year? JW: That’s a question that only the shipyards can answer in detail, but collectively our members will use more than 1,100 tons of steel maintaining and modernizing their vessels this winter. March 2014 SKILLINGS MINING REVIEW | 7


SMR: The coffer dams for the new chamber which will act as a substitute if there is a failure at Poe Lock, but completion is delayed. You mentioned that the hindrance of the project is a result of flawed benefit/cost (b/c) studies. What are the setback issues that surround the study? JW: The greatest error in the current assessment is the conclusion that the railroads can move the iron ore the fleet hauls if the Poe Lock is out of service for a lengthy period of time.That’s wrong on two counts.First, the railroads do not have enough rolling stock to fill in for the Lakes fleet while the Poe is being repaired. Second, many steel mills cannot receive iron ore by rail. The connections just aren’t there. Nor do the railroads have the capacity to handle all the western coal. Remember too, Great Lakes shipping is the most cost-effective mode of transportation. The U.S. Army Corps of Engineers estimates Great Lakes shipping annually saves its customers $3.6 billion in freight costs compared to the next least costly mode of transportation. That’s why so many steel mills front the Lakes. A prolonged outage of the Poe Lock will have crippling effects for many industries.

SMR: How does the Lake Carriers’ Association view the planned augmentation by Calumet Specialty Products of its Superior Wisconsin dock to accommodate carriage of heavy crude / tar sands over the Great Lakes? JW: We have had no involvement in this project and understand it is on hold, but we would welcome any new commerce on

the Lakes. The liquid-bulk trade has a long record of safe operation.

SMR: Do you anticipate in the near future any new types of vessels carrying heavy crude across the Great Lakes and would they be candidates to join the Lake Carriers’ Association? JW: It is not for a trade association to speculate on business developments or trends, but if a new U.S.-flag operator came to the Lakes, they would be welcome to join LCA.

SMR: What was the overall outcome of the December 2013 weather, were there any teachable “take aways” and did the occurrence of the “polar vortex” in January also set LCA members back? JW: The early and brutal winter had a major impact on cargo movement. Lakeswide the iron ore trade was down 21 percent in December. Shipments of coal from Lake Superior in December were down almost as much. LCA members had been on track to register a slight increase over 2012, but the delays and cancelled cargos in December produced a yearend total of 89.2 million tons, a slight decrease from 2012. Iron ore shipments this January were down 37 percent compared to a year ago. The primary takeaway is that we can’t be lulled into a sense of false security by mild winters. We still and always will need U.S. and Canadian icebreakers to keep the shipping lanes open. Winters are like water levels, they vary, but we should always plan for the worst. That’s why we are so pleased that the Coast Guard will start modernizing the 140-footlong icebreaking tugs this year. The first 140 will go to the Coast Guard’s yard in Baltimore in May. When that vessel is done, it will return to the Lakes and another 140 will go to the yard. The whole process should take about 5 years.

SMR: How are Lake Carriers’ Association members able to make up for lost shipments due to harsher-than-normal December 2013 and January 2014 weather patterns? JW: As I said before, there are not a lot of options with the fixed navigation season and finite vessel capacity. If the weather permits, I would anticipate some vessels might get underway early in March, but some trades, limestone for example, can’t really start early unless the weather is extremely mild. A lot of the stone that moves on the Lakes is rinsed prior to loading, so that trade can’t commence until temperatures are consistently above freezing.

SMR: Virtually every U.S. flag laker is a “selfunloader” which essentially means that unloading of cargo is almost completely automated. Can you explain the technology behind this? JW: There are gates at the bottom of the holds that open and the cargo drops onto conveyor belts that lead to a boom on the spar deck that is swung over and positioned where the customer wants the cargo unloaded. Selfunloading allows our members to make more trips each season because it’s quicker than being dug out with Huletts or clamshell unloaders. Also, self-unloading means just about any waterfront property can become a working dock 8 | SKILLINGS MINING REVIEW March 2014

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with very little investment required in shoreside equipment or personnel.

SMR: Iron ore trade is dependent on icebreaking, why is this model the most significant influencer for iron trading versus other commerce? JW: It’s a mistake to say that iron ore is the primary factor driving icebreaking. Coal continues to ship from Lake Superior until the locks close, and the Lake Erie coal trade goes even longer if demand is there. Lots of cement and salt move in the ice season. Shipping during the ice season is important to many industries, not just iron mining and steelmaking.

SMR: In retrospect, why was 2013 a better or worse year for cargo movement compared to 2012 when cargo movement remained below pre-recession levels? JW: As I noted, the early and harsh winter denied LCA’s members the opportunity to register an increase over 2012, but 89.2 million tons of cargo is nothing to be ashamed of. It’s proof positive that America’s industrial heartland still needs Great Lakes shipping to deliver its raw materials. It’s proof positive that we need adequate icebreaking resources and a second Poesized lock. And most importantly, it’s proof positive that we need Federal regulations and policies that promote waterborne commerce. Ships are the low-cost provider for bulk raw materials and they move with them with the smallest carbon footprint.

SMR: Why did coal to be shipped in 2013 (whether the shipment was actually made or not) increase so much in 2013 over 2012? JW: Again, it’s not for a trade association to analyze cargo movement in great detail, but the fact is that most of the coal that moves on the Lakes is for power generation, so obviously the utilities needed more coal last year.Also, Superior Midwest Energy Terminal exported 1.4 million tons overseas.

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SHIPPING ON THE GREAT LAKES By Anna Grant, Mary Claire Whitaker and John Edward

The Great Lakes shipping season has ended with Cason.J. Callaway along with Mesabi Miner and Kaye E.Barker making their entries. For Mike Ojard, owner of the Heritage Marine, the winter has been a long one with his team breaking ice to escort these late season ships safely home. Founded in the year 2007, and headquartered in Knife River, Minnesota, the company offers ice breaking services along with ship assisting and escorting, and lake towing. With a team adept at handling ship, barge, dredge etc. the company’s vessels are equipped to stand up against the toughest winters. The company routinely handles the largest container ships that enter the Great Lakes and every year, during winter, the company gets busy, providing ice breaking commercial services.

S

o while companies like Heritage Marine, make hay while the sun does not shine, this last year has been an especially trying one, in terms of really high levels of ice. Seeing the positive side, environmentalists link high levels of ice to heavy water content in lakes, especially in times when these lakes have displayed depleting water levels. But John D. Lenters, Senior Scientist with Limno Tech says that this may not really be true. Comparing the behavior 10 | SKILLINGS MINING REVIEW March 2014

of the lakes to human sweating, Lenters says, “The sweat, when it evaporates, it cools your skin quite rapidly. That is actually one of the most effective ways your body loses heat. And the lakes are really no different. They are a giant body of water. And so when they evaporate a lot, that is actually when they are most effective at cooling the lakes,” Sharing excerpts from his recent report `Assessing the Impacts of Climate Variability and Change on Great Lakes Evaporation’ and in an exclusive

interview with SMR, John Lenters says that the highest evaporation rates on the Great Lakes typically occur in late fall and early winter, when conditions are much colder. The icy winter has had its largest impact on the Great Lakes. Freighters here typically carry heavy cargo like ores and minerals and the ice prevents ships from reaching their destination on time. It is the responsibility of the U.S. Coast Guard to ensure that shipping lanes remain open and they have been kept www.skillings.net


really busy this last winter. Lt.Kenny Pepper who is Captain of the USCGC Morro Bay says that the coasts guards have helped nearly 30 vessels which were stuck in the ice. “It has been about 150 hours dedicated to those assists, not to mention all the others spent just doing preventative ice breaking.” Operations Specialist, Galen Witham says that many of the captains have not seen so much ice for the last 25 years. Carl Watras, Wisconsin Department of Natural Resources says that based on a recent research, there are indications that ebbing and flowing of the Great Lakes has shown signs of inconsistency in the last ten years or so. The study also says that these fluctuations have been influenced by atmospheric trends hatched as far away as the northern Pacific Ocean. Keeping in mind both these studies, it is obvious that changing climatic conditions is playing a huge role in water levels in the Great Lakes. “The two big factors are precipitation and evaporation,” said Watras, who is also a Research Fellow with the University of Wisconsin’s Center for Limnology. “The question is with regard to the future. What will happen as the climate evolves? Will we get more ice or less water?” “Rising temperatures will ensure that more water continues to evaporate and this will result in water levels dropping.” says Don Scavia, Director, Graham Sustainability Institute, University of Michigan. This university is overseeing the research project led by Lenters. The research report says that evaporation could lead to thicker ice cover during winter. But the cold temperature could delay the evaporation process in the following season.

John D. Lenters, Senior Scientist with Limno Tech

“These nuances have to be monitored to predict evaporation expansion” says Drew Gonewold, Hydrologist with the National Oceanic and Atmospheric Administration’s Great Lakes Environmental Research Laboratory. A healthy study will provide data six months ahead for the U.S. Corps. Keeping in mind the important role that Great Lakes has on the shipping industry and the need for a good predictive system to be in place, researchers are collecting data from inland lakes to study the amount of power that the climate has on water levels.

Coast Guard Busy, But Some Shipments Still Halted

Coast Guard Straits of Mackinac Ice

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With ice coverage across the Great Lakes is 30 percent higher this winter season than the long-term average, Lake Superior was 73 percent covered as of January 31, and by midFebruary coverage had climbed to 93 percent. Ice coverage across the Lakes was averaging around 87 percent. At more than twice the coverage reached in the winter of 2012-2013, ice-over started early this winter, with the Lakes beginning to freeze around November 25, 2013, compared to mid-December in recent years. Lake Superior, nearing total ice-over, has broken its previous record of 91 percent, set in 1994. For the Great Lakes as a whole, 1979 was the iciest year on record, when 94.7 of the Lakes were covered. Mark Barker, president of Interlake Steamship Co., which transports coal, iron ore and limestone, told Minnesota newspapers that in icey winters, lake transport depends on March 2014 SKILLINGS MINING REVIEW | 11


the US Coast Guard to cut pathways through the ice, at least in the most critical areas. However, this winter season is testing that resource. The US Coast Guard employs nine icebreakers to clear the paths. However, one of them has been under repair and a second suffered a collison after one chunk of ice proved more solid than it appeared. Furthermore, the US Coast Guard does not clear ice at night for safety reasons. Only one of its icebreakers, its newest, the Mackinaw, is heavy-duty. “In this case,” Barker aid, “we have heavy ice over multiple locations. That takes those assets and spreads them thin.” Although many ports do not receive shipments for a certain period every winter, due to routine maintenance closures, up to 20 percent of iron ore is nevertheless shipped during between December and April each year. For the ports closed for part of the season, the ice is expected to create problems for “breakout,” when they re-open in March. “Ships [have] had to be escorted in convoys by both the US Coast Guard and the Canadian Coast Guard, so that’s really when the

whole system slows down considerably because you have to get in line-ups to go anywhere,” said Robert LewisManning, president of the Canadian Shipowners Association. Canada supplies two icebreakers in addition to the US Coast Guard’s fleet of nine. Shipments of iron ore on the Great Lakes were around 37 percent less this January than in January of 2013. In addition to lost productivity, shipping companies incur the costs when their ships become stuck and coastal rescue authorities must cut them out. Ice blocked two main passages, for example, for ships carrying iron ore from the Iron Range to steel mills in northwestern Indiana, the Straits of Mackinac and the St. Mary’s River. Between 25 and 35 million of the 50-60 million tons of iron ore shipped annually accross the Great Lakes are destined for northwestern Indiana ports. The typically 2.5-day voyage was taking up to five days. Seventeen American companies operate around 60 cargo ships on the Lakes. The operations of about one third of those boats were cancelled prior to the January 15 end of the regular shipping season. Glen Neksavil of the Lake Carrier’s Association observed that the cancellations not only affect the shippers but also their customers. “When you cancel a cargo, it can mean as much as 60,000 tons of cargo. 60,000 tons of iron ore, for example, that would keep the blast furnaces here in Cleveland going on 4 to 5 days,” Neksavil said.

Polar Vortex Accelerated Freezing The polar vortex phenomenon experienced by southern Canada and the eastern and midwestern US this winter is related but not entirely responsible for the freezing of the Lakes. The vortex, described by meteorology experts as a semipermanent, low-pressure air mass that normally hovers in the upper

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atmosphere above Canada’s Baffin Island and northeastern Siberia. “In the case of this outbreak, a large piece of the vortex broke off and was forced well to the south over Ontario and the northern Great Lakes,” explained Jon Erdman of the online weather portal Wunderground. The cold air has been pushed southward off and on since December due to a diversion of the high-pressure Pacific jet stream. The resulting cold weather experienced around the Great Lakes kept temperatures at around five degrees below normal. The rapid growth has been due to the fact that temperatures have remained below freezing almost constantly. Lower wind speeds around the Great Lakes have also accelerated growth.

Great Lakes: A Viable Option To Ship Oil? According to recent reports, oil companies are increasingly considering the Great Lakes as a viable means of transporting crude oil. The interest can be traced to the fact that both North Dakota and western Canada are producing the organic compound faster than it can be shipped to refineries. Crews are working around the clock in North Dakota, which has a lot of oil under the Bakken Shale formation, and in the Alberta tar sands area in western Canada, where there’s tens of billions of gallons more. Rail car manufacturers cannot keep pace as they cannot make new tank cars fast enough, and new pipeline proposals face long delays over environmental concerns. “As domestic production of crude oil from unconventional shale plays, such as the Bakken formation, among others, continues to increase, so too will the need to identify the safest, most reliable methods by which to transport crude oil to our nation’s refining centers,” says Noel Ryan, a spokesman for Calumet Specialty Products Partners, an energy company based in Indiana. Calumet wants to spend $20 million to upgrade

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a dock next to a refinery in Superior, Wis., where surplus oil could be transferred from pipeline onto barges, then shipped over the waters of Lake Superior to refineries in the Midwest and eastern U.S. “Given a lack of sufficient pipeline and rail capacity to transport crude oil from northern production fields to key refining centers, this project has received significant indications of interest from our customers,” according to a company statement. However, the proposed solution to ship the oil by barge over the Great Lakes has generated a fair amount of controversy. “Shipping the oil by barge brings potential economic benefits and jobs. But there are special risks with heavy crude”, says Lyman Welch, water quality program director of the conservation group Alliance for the Great Lakes. “A spill in the open waters of Lake Superior would be very difficult if not impossible to clean up,” Welch says. “Tar sands crude oil is heavier than water, so much of it sinks to the bottom of a river or lake water body if there is a spill.” Some oil is already shipped over the lakes, but not the heavy tar sands crude. Regulations still need to be developed for the latter. Before any shipping of tar sands crude begins, many permits and approvals will need to be granted by various government agencies, says Jerry Popiel of the Coast Guard, who oversees incidents such as oil spills in the region. The first to come would be the Wisconsin Department of Natural Resources approving the dock upgrades. Popiel agrees heavy tar sands crude presents unique challenges. But he also says if shipping were to be approved, the Coast Guard would strictly enforce safety regulations. Previously, the Wisconsin Department of Natural Resources had dismissed an application for a loading dock rehabilitation in December 2013. This is being viewed as the first step towards building a $25 million crude oil complex meant to facilitate shipments of tar sands crude across Lake Superior starting as soon as next year. As the first permit to pave the way for tar sands shipping on the Great Lakes, the proposal had broad implications for the region. Before the project can proceed, the DNR has instead ordered a comprehensive Environmental Assessment of the entire dock project, something many called for during a public informational hearing in November attended by about 50 residents from both Wisconsin and Minnesota. “Area residents really care about Lake Superior and they want to make sure this unique resource is not threatened by costly and harmful spills of this dangerous type of crude oil,” said Andrew Slade, Northeast Program Coordinator for the Minnesota Environmental Partnership. “This demonstrates how, when citizens speak up on such important water issues, government agencies can actually respond.” The applicant, Elkhorn Industries, may re-apply for the permit under conditions set by the DNR in its Dec. 23, 2013 letter to the company. The letter says public comments from the meeting played a role in its decision, and states that the agency “will need significantly more information about the plans and activities proposed for the site.” The DNR cited two other issues as having a role in its dismissal of the application, including that Elkhorn Industries does not own the entire waterfront property necessary to complete the proposed project and could not legally apply for work on the property it does not own.


COAL

Possible Taxpayers Shelled Out $200 Million in Lost Revenue By Anna Grant

Last year, fluctuating iron ore prices, caused by demand from China and production related issues dominated mining news in the U.S. Now, this year, coal takes center stage as Congressional investigators have unearthed issues with that could have cost taxpayers $200 million in lost revenue. Based on a Goverment Accountability Office report, United States Massachusetts Senator Ed Markey has called for all sales to be stopped till pending and new issues are rectified.

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early 40 percent of U.S. coal production which amounts to more than 450 million tons annually comes from nonprivate lands taken on lease by mining companies from the government and covered by the nearly 100 year-old Mineral Leasing Act. This act ensures that $1 billion annual revenue hits the coffers every year. While over the last few years, demand for coal has surged, especially demand from Asian countries, the laws governing the Mineral Act have remained, by and large, unchanged. This has raised the concern, that miners could be buying coal at cheaper prices from the government and selling it at a good price overseas. A nearly 24 month long study conducted by the Government Accountability Office (GAO) on the country’s coal leasing program has revealed several wide

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gaps and inconsistencies some of them stretching back to the year 1990. The study has found that there is almost complete lack of competition in the selection process and nearly 90 percent of the 110 leased coals lands have been decided on the basis of single bids. If the coal leasing process had been managed correctly, the government’s coal sales could have brought at least another $200 million

in added revenue. Sen. Markey claims coal miners are benefiting by penalizing tax papers. While coal companies are reaping benefits, this coal is actually being burned abroad, causing climate changes, he asserts. The lost-revenue figures are based on calculations made in Markey’s office based on recent coal lease agreements.

Investment Needed to Boost Coal Mining in South Africa By Anna Grant

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n South Africa, where coal mining is the main source of revenue, there is now an urgent requirement for investment in new collieries. However, the industry is at a standstill as investors await news on revised mining laws. The South African government had indicated earlier last year, that it might implement a new carbon tax in 2015 and this worries investors. Other worries relate to labor unrest and coal’s ongoing status as the main source of energy. Whatever the worries, coal mining performed well in 2013

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and the industry recorded 700 million tons of coal exports. However, investors are unable to rest easy with the looming fear for the future of coal as a result of the impact of shale gas in the U.S. According to XMP Consulting’s Senior Coal Analyst, Xavier Prevost, South Africa has a large number of new and small coal mining firms. These mining firms typically produce around 1mt of coal in a year. But they too face growth related challenges caused by insufficient funds. According to Mr. Prevost, the coal

industry in South Africa has seven major players who produce between 10 and 35 mt coal per year. While these companies have dominated the industry for long, he worries that they are getting old and will be dead in a decade or so. According to him, if the smaller firms are enabled to grow, they would be able to take on the additional load at that time. Some of the areas where depletion could occur in the next decade include Emalahleni, Mddelburg and Emelo. www.skillings.net


COPPER

Copper Mining Companies Focus on Growth and Expansion By Anna Grant

In 2013, in spite of falling prices, some copper mines did not slow down production. Freeport-McMoRan, for example, grew production by approximately 13 percent and Southern Copper grew production by nearly 6 percent in the last two quarters of 2013. Southern Copper also states that it expects to grow production by 5.5 percent in 2014. These market savvy companies, should have experienced losses when prices fell, but now with demand for copper increasing, these same companies enjoy reversed pricing.

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iding this wave, Mining Group has assayed 7.73 percent copper from mine shaft sampling at El Robe in Chile. Hillgrove Resources from South Australia has registered a record quarterly copper production at its Kanmantoo copper mine. Hillgrove’s copper production went up by almost 35 percent in the last quarter of 2013. Overall, the company experienced an 80 percent increase in the total amount of copper mined. Hillgroves attributes this jump in production to the implementation of a new owner operated mining plan. Along with production increment, the mill also saw the quality of copper going up by .083% and recovery of nearly 93 percent. On a similar note, Glencore Xstrata reported a 26 percent increase in copper production. This increase translates into 1.5million tonnes. Driving the company’s overall profit margin by 30 percent, the increased copper production was a result of its Congolese mines and Collahuasi in Chile, which is a joint venture between Xstrata and Anglo American. Copper mines like Cerro Verde, in Peru, are on an expansion track with the company, recently approving nearly $5 bn for the expansion of this project. The expansion which is likely to commence in 2016 will help the company to achieve a copper production of 300,000 tons per year. The above snippets indicate that the copper industry is stabilizing with miners anticipating better results this year.

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Kanmantoo copper mine in the Adelaide Hills region of South Australia

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IRON RANGE REGION

Hearing Evaluates Pros and Cons of PolyMet Copper Mine By Anna Grant

Minnesota's Department of Natural Resources (DNR) is studying the financial side of state laws to protect future generations of Minnesota from associated environmental mining costs. According to Jess Richards, Director of Lands & Minerals, DNR, who held the meeting for more than six hours recently, “ the state’s laws are robust and designed to protect taxpayers now and in the future.."

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he $650 million copper mine project from PolyMet Mining Corp which could well result in 300 long term and a host of temporary jobs has been the subject for discussion. For the residents of Minnesota this project spells jobs, increased tax revenue and community benefits, even though environmentalists are still worried about the long term effects of copper. In recent meetings Jess Richards said that regulatory authorities are in the process of reviewing hundreds of

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mines across the U.S. which have a very sophisticated financial agreement called `financial assurance’ that ensures that unprecedented environmental damage will be rectified by miners at their costs and not from the taxpayers money. In this case, environmentalists maintain that copper which contains sulfides, when mined, could produce acid drainage in ground and surface water. This process requires technically superior water treatment plants which need to be operational even

after the mine officially shuts down. PolyMet has been more than willing to understand and appreciate such concerns and says that it will ensure to put in place long-term water treatment and modern mining techniques to safeguard water. Brad Moore, PolyMet’s Vice President of Public Affairs, said that state procedures allow for decisions on financial assurance to be decided if and when the company applied for a permit to mine.

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MINING INDUSTRY FINANCE

Mining Equipment Market: Recovery In Medium Term, For Now Still Flat By Mary Claire Whitaker

While the short term has dragged for the mining equipment market, with several companies showing losses and making cutbacks in 2013, new market reports predict that demand for mining equipment will in fact pick up between now and 2017. The forecast, made by the market research company Freedonia Group, anticipates average annual growth of 8.6 percent as construction markets and subsequent materials demand accelerate. Another report by the consulting firm Lucintel similarly anticipated growth in the market, of around 7.5 percent annually.

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apid gains in mining equipment demand,” the Freedonia report said, “will occur in large developing markets, with China being the largest purchaser by a wide margin.” The report said this demand increase is in addition to expected increased demand for equipment other resource-producing countries. Mining equipment demand, it said, will be spurred by increased steel and aluminum output, as well as higher demand for construction aggregates and fertilizers like phosphate. Weaker demand for coal in the developed world will be more than made up for by greater energy demand on a global level, and overall coal mining machinery sales should increase. In this respect, the report flags the increased mechanization of coal mining operations in China as a prominent factor. In terms of specific products it remarked that the most widely-used equipment across mining operations is expected to fare best in the demand recovery: drills, breakers, and trituration and screening equipment. Other market forecasters and even some of the companies themselves, however, remained less optimistic, at least for early 2014. Motley Fool analyst Lior Cohen observed that Joy Global’s backlog was reduced by 40 percent, for example. However, Cohen also noted that increased coal, steel and iron ore production could help both companies. A rise in revenue for Joy Global, however, was not predicted come the close of first quarter, and Caterpillar did not expect a rise during 2014, www.skillings.net

specifically because it anticipated fewer resource industry orders counteracting more construction industry orders. At the end of 2013, that company was not only receiving fewer mining customer orders, but its dealers were also reducing their inventories. Another top mining supplier, Metso, announced in February that it was projecting “satisfactory” mining demand due to its large installed equipment base, which it indicated would drive demand for its line of services. Atlas Copco issued statements projecting that weak mining sales seen at the end of 2013 would continue

in the beginning of 2014, “due to continued low investments in mining equipment.” Sandvik largely agreed that demand was not picking up. “In the fourth quarter, the global market situation remained largely on par with the preceding quarter, and the dramatic fall-off in demand appears to have been halted,” said Olof Faxander, CEO of Sandvik. The mining market size was estimated at $71.5 billion in 2012. For 2017, the total size of the mining equipment market projected by Freedonia and Lucintel is $135 billion and $104 billion, respectively.

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Educating Mining Professionals

Mining Technology.

By Anna Grant, Mary Claire Whitaker and John Edward

The mining industry has always had a requirement for skilled professionals and over the years, these professionals have been trained and have often had their skills upgraded. However, in the last five years, mining development has become more complex and technical and today’s mining engineer, for example, requires skills and technical know-how, very different from what was required in the past. This trend is well likely to continue into the future, too. How do the engineering schools keep pace, and continue to turn out “competent professionals possessing sophisticated knowledge and advanced technical and leadership skills?”

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he answer is pretty clear. Mining education is a self-adjusting system, fine tuned to the needs of the industry and therefore, continuously evolving. To give an example, we need to look at metallurgy. Four decades ago, this was a sought after program and the Departments of Metallurgical Engineering had more students and less seats. But that is not the case any longer. As the numbers to metallurgy program dwindle, the number of students joining Departments of Materials Science and Engineering is increasing. In some universities, mining engineering is not a separate branch, but is a part of a more comprehensive course like civil or resources engineering. This evolution or change in pattern is a dictate of the industry. The situation also changes from country to country. Once again, to look at examples, in industrial cities, 18 | SKILLINGS MINING REVIEW March 2014

where mining is not a leading industry, mining engineering is on the decline or is offered as an optional course. In Japan, two decades ago, mining engineering was taught in several leading institutions, but now it is being replaced by other streams. In several parts of Europe and even in America, mining which was once a hot program is now dwindling in importance. But does education guarantee a job in the mining industry? Unfortunately, the answer is a `no’ according to Susan Kihn of CareerMine. “Many mining companies will expect you to have some qualifications relevant to the resources industry, and preferably some proven work experience. The mining industry is extremely competitive, and there are a lot of other job seekers with no skills or onsite experience who you are going to be competing against,

for a handful of entry level positions.” She says. To ensure that the mining industry does not suffer as a result of unskilled labor and at the same time is not burdened with book-knowledge workers, the mining industry has to play a balanced role in human resource management. It needs to have a good mix of both skilled employees with limited educational backing and educated mining professionals with less experience. This combination would be ideal to ensure that the more important roles related to mining safety are left in the hands of the experienced, while the younger, educated breed brings new thinking and innovation to this age old industry. What is also important is for mining companies to constantly monitor and train employees on safety rules to ensure that accidents are avoided. www.skillings.net


The mining industry is extremely competitive, and there are a lot of other job seekers with no skills or onsite experience who you are going to be competing against, for a handful of entry level positions. Christopher Guy, Andrew Petter, John Hepburn and Bern Klien

Canadian Institute Applies Mining As Economic Development Tool The University of British Columbia (UBC), the Simon Fraser University and Quebec’s École Polytechnique de Montréal recently joined up to form the Canadian International Institute for Extractive Industries and Development (CIIEID) in Vancouver, launched at the end of January 2014. Bern Klein, CIIEID interim executive director and UBC professor of mining engineering explained that the center’s “focus is in and around how can socioeconomic development leverage the extractive industries” in developing countries. This can include helping mining sectors develop regulatory structures, providing technical assistance in mining industry programs, or helping develop mining supply chains locally. Nations want to develop their mineral, oil and gas resources, Klein said. “The institute convenes information and experience,” he said, explaining that knowledge is “centered on governance, integrated resource management, and economic development activities.” Canadian students have a valuable hands-on opportunity for research with the institute’s markets. Furthrmore, not only can countries engage the center for its expertise, but applied research students from other countries may also develop at CIIEID an understanding of specific industry mechanisms for use back home. Klein pointed out that those same students then become future liaisons between the institute and their home countries. As Klein explained, the institute is a “convener and focal point where information can be received and distributed.” He emphasized that expanding on the technical knowledge and practical experience of www.skillings.net

CIIEID’s three coalition schools is the interdisciplinary reach of the program, spread among those schools. For example, students involved in health or international development could be attracted to the program, alongside those with background in engineering or geology. One project opportunity the CIIEID is developing is to work in support of the African Minerals Development Center’s activities across the African Union. One project possibility with them could be assisting them work with African countries to establish mineral auditing agencies. CIIEID affiliates would contribute expertise in technical and economic components, for example resource valuation, where people developing the agencies do not have a lot of experience. The CIIEID received funding support from the Canadian federal government, the institute’s three partner schools, and strategic industry partners that range from other academic institutions and NGOs to mining industry associations and mining companies. CIIEID’s private industry partners are a mix of Canadian and international companies. Of the ten partner companies, six are Canadian including Teck Resources and Gold Corp. The other four are Uganda-based Audeamus; African Minerals, Ltd.; Fresnillo PLC of Mexico; and the Vale Institute of Technology, part of the Brazilian mega-miner Vale. CIIEID also counts the UN among its strategic partners, as well as several international organizations, and government agencies of Mexico, Uganda, Ireland, the Ivory Coast, Mongolia and Ecuador. As the institute is new, most of its projects are in initial phases, but Klein was able to say that one, alreadyestablished role of these strategic partners is to provide “regional and thematic knowledge” on extractive

sectors with which the institute works. The partners also help assure that CIIEID does not duplicate any work in the local markets. Klein believes that the institute will continue to build on the track record of UBC’s mining engineering program, the Norman B. Keevil Institute of Mining Engineering, known for its well-rounded approach to mining and its place within communities. Talking to CBC radio last summer, Klein emphasized that CIIEID’s coalition partners bring to the table like-minded, complementary experience. One of CIIEID’s programs, the Engagement and Dialogue Centre, “was spearheaded by a group at Simon Fraser University who’d been working in areas of conflict at the community level for a long time,” he said.

Maritime Academies Receive $7 Million The U.S. Department of Transportation’s Maritime Administration (MARAD) announced on January 29, 2014 that six state maritime academies — California Maritime Academy, Great Lakes Maritime Academy, Maine Maritime Academy, Massachusetts Maritime Academy, SUNY Maritime College and Texas Maritime Academy — and the U.S. Merchant Marine Academy (USMMA) in Kings Point, N.Y., each will receive $1 million from a government program that recycles obsolete vessels. The funding is aimed at ensuring that well-educated and highly skilled U.S. Merchant Marine officers are available to meet the nation’s national security and economic needs. “The most important element in our U.S. Merchant Marine fleet is our people,” said U.S. Transportation Secretary Anthony Foxx. “This funding will help ensure that dedicated men and women of our maritime academies continue to March 2014 SKILLINGS MINING REVIEW | 19


have the resources that make them the best educated and most highly trained mariners anywhere.” The money for the current round of funding came from the sale of obsolete vessels from MARAD’s National Defense Reserve Fleet, which were purchased for recycling. In general, the Maritime Administration’s National Defense Reserve Fleet comprises of 120 vessels that serve as a reserve of ships for national defense and national emergencies. “The money will be used to support the training elements of the annual training cruise, which includes fuel and port fees, as well as other aspects of hands-on mariner training,” said MMA director of college relations Jennifer DeJoy. The annual training cruise is a two-month voyage where MMA students practice skills they’ve learned in the classroom. The money for the donation comes from vessels that are no longer needed by the National Defense reserve fleet, which are sold to companies that dismantle the ships so that the steel can be repurposed, sometimes for the

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construction of new ships, according to a Department of Transportation spokesperson. Unlike other recycling operations, the dismantling of ships from the National Defense Reserve Fleet must take place in the United States. According to the DOT spokesperson, the city of Brownsville, Texas, has become somewhat of a hub of ship dismantling. MMA president William Brennan said in an email that he was “extremely pleased that the Maritime Administration has made this distribution.” “It’s a demonstration of the foresight of acting maritime administrator Paul ‘Chip’ Jaenichen, who recognizes the importance of the state maritime academies to the future of maritime education,” he said. Rep. Mike Michaud also was pleased with the donation. “The academy produces some of the best mariners in the world, and it is conducting cutting-edge research that will benefit Maine’s economy as a whole,” he said in a prepared statement. As required by the National Maritime Heritage Act, a quarter of the profit from sales is distributed to

maritime academies for facility and training ship maintenance, repair, and modernization, and for the purchase of simulators and fuel; another quarter is provided to the National Park Service, which provides grants for maritime heritage activities through the National Maritime Heritage Grants Program; and 50 percent funds the acquisition, maintenance, and repair of vessels in the National Defense Reserve Fleet. “The Maritime Administration continues to focus on the future of our maritime industry,” said Acting Maritime Administrator Paul “Chip” Jaenichen. “We’re proud to support the education that prepares the next generation of maritime professionals for the challenges they will face.” The nation’s maritime academies train young men and women for service in the American Merchant Marine, the U.S. armed forces and the nation’s intermodal transportation system. Since 2009, MARAD has provided more than $8.9 million in funding generated from vessel sales to the state academies and the Merchant Marine Academy.

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MINING INDUSTRY FINANCE

2014 May See A Boost in M&A By John Edward

It is expected that global mining assets will be the prime focus of mergers and acquisitions as an estimated $8 billion pool of privateequity money is pumped into the market on the heels of attractive valuations and predictions of resilient demand for raw materials. Experts aver that some of the industry’s biggest names have shown interest in buying assets. Concurrently, the world’s largest producers including the Rio Tinto Group, BHP Billiton Ltd. (BHP) and Anglo American Plc (AAL) seem inclined to shun unwanted mines as part of an industry-wide push to trim expenses and bolster profits.

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here is talk that former chief executive officers Mick Davis of Xstrata Plc and Barrick Gold Corp.’s Aaron Regent are plotting a return to the business by buying mining projects with the help of private funding. It comes as no surprise then that two new mining investment ventures were started the last week of January 2013 one backed by Warburg Pincus LLC, the other founded by two former JPMorgan Chase & Co. bankers. While buyout firms have been showing an ever

increasing interest in targeting mining since 2012, only about 14 percent of the almost $10 billion raised in the last two years has been deployed, according to data compiled by Bloomberg Industries. This could very well change if investors pressurize the key players to act, says Michael Rawlinson - co-head of mining and metals investment banking at Barclays Plc. The optimism for a revival in mergers and acquisitions seems to be bolstered this year as nearly 8,000 executives,

bankers and analysts descend on Cape Town for the annual Mining Indaba conference. “Private equity is now looking at the sector with stronger interest, which it hasn’t really done before,” adds Raj Khatri, senior managing director, head of metals and mining for Europe at Macquarie Group Ltd.’s investment bank in London. “There’s an increasing wall of money now focused on the sector. For the right assets at the right price, it’s a really excellent time to buy.”

MINING MATTERS

BHP Billiton Commits To Trinidad and Tobago Energy giant BHP Billiton has taken a leap of faith in the potential of Trinidad and Tobago’s largely untested deep water acreages by committing to investing up to US$1 billion to exploration. In June 2013, BHP Billiton and the Ministry of Energy had signed production sharing contracts for five deep water blocks off the east coast of Trinidad.

U.S. Silica Announces Expansions to Supply Chain Network U.S. Silica Holdings, Inc. announced on February 11, 2014 that it has entered into an agreement with Union Pacific Railroad (UP) to build a new, unit train capable silica sand storage facility in Odessa, Texas. In addition, the Company has completed modifications to its resincoated sand facility in Rochelle, Illinois. www.skillings.net

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IRON ORE

Mixed Happenings in the Iron Ore Industry By Anna Grant

Labrador Iron Mines reported a loss of $31.3 million at the end of December 2013 and attributes this loss to the falling grade and consistency of iron ore in the mine. This led to a shortfall of cash generation during 2013 and the company has already begun renegotiating terms with contractors and support providers. Before suspension of all activities, Labrador is hoping to raise money.

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f Labrador has cash problems and is debating on closure, Cliff Natural Resources has already closed its Wabush Scully Mine operations in Newfoundland. High operating costs are cited as the reason for this decision. “With costs unsustainably high, including fourth-quarter 2013 cash costs of $143 per ton, it is not economically viable to continue running this operation,� Cliffs said in a statement. The mine which has been in an idle state since June will be officially closed in March 2014 and the fate of 500 employees remains uncertain. The sad part is the Wabush mine has been in operation since 1965 and for those who have worked here; this news could be pretty disturbing. While some news remains bleak, Gogebic Taconite is pursuing drilling and is also readying for bulk sampling. According to Bob Seitz, G-Tac spokesman, the company is using two

drilling rigs in different locations at the proposed mine site, and is drilling nearly double the amount of holes it did before. So where does this leave the iron ore industry and how does it look in 2014? According to experts, the outlook is positive and demand from China could push prices up. With the American construction and automobile industries picking up, there are additional positive indicators. While Cliffs has closed one operation, it expanded its Empire and Tilden mines and increased stakes in the United Taconite mine in Minnesota. Vale, another large player in the iron ore industry is also increasing production and expansion is also possible this year. In the last quarter of 2013, the company shipped nearly 84 million tons. Vale is also on an aggressive cost control program to manage expenses and increase profits.

TATA STEEL COULD BE INVESTING IN IRON ORE IN NORTH AMERICA 22 | SKILLINGS MINING REVIEW March 2014

Last but not least is BHP Billiton. The company’s Pilbara ensured that the first quarter of 2014 has been really good and production reached 46 million tons. Add its other production facilities in Brazil, and the total output is 192 million tons.

Final thoughts And so in the evolution of mining operations, some plants have to go away, some are right in the middle of their best phase while others like Geobic Taconite are in the process of starting. What is more important is the fact that demand is expected to increase and this is the main trigger for the industry and is important for prices to remain up. Lessons from past years have been hard, but companies have also benefited from the experiences.

By Anna Grant

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ata Steel Minerals Canada (TSMC) announced recently that it would soon make a major investment decision regarding a low-grade iron ore (taconite) mining project in the semi-Arctic region of North America. The company is currently reviewing the feasibility study on two deposits and determining its financial model

as it takes on this large scale project. The two deposits under consideration are LabMag and KeMag which have around 30 percent iron content. They lie along the 150 kilometer Millennium Iron Range in Northern Canada. Initial project evaluation puts the investment figure at approximately $4.5 billion and $5 billion each respectively. TSMC which is a joint

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Australian Movement On Iron Ore Projects In West Africa, Brazil By Mary Claire Whitaker

Australians Apollo Minerals Limited and the joint venture of BC Iron Ltd and Cleveland Mining Company are working on new iron ore projects abroad. Apollo has announced acquisition of significant stake in the high-grade Kango North Iron Project, in the Gabonese Republic. Meanwhile BC Iron Ltd and the Cleveland Mining Company in an alliance are exploring three promising Brazilian iron ore projects. pollo in February announced Apollo currently has a technical team billion tons of itabirite iron ore type that it was increasing its inter- in Gabon working on exploration at the between the three sites. est in Kango North to 82.5 site and regulatory planning procedures The alliance’s earn-in agreement is percent, with third-party with the Gabonese government. Study structured to treat the three projects interests owning the remaining shares. work is focused on designing a low-cost as two companies, covering the two At the same time, Apollo has signed a start-up model. Salvador de Bahia projects as one memorandum of understanding with “a company, with a second company to major international group” as a strategic BC and Cleveland Allied for handle Minas Novas. In phase one of partner to fund $4 million for drilling the earn-in agreement, the alliance is Exploration in Brazil and delineation of the site’s direct-ship funding exploration activities with no and beneficiable iron ore. The unnamed limit to spending. BC Iron Ltd and Cleveland Mining partner could earn up to 50.01 percent Providing it ascertains promising Company are financing exploration interest in the project. resources in first-phase exploration, the together of three early-stage iron alliance will acquire an initial 10 percent Executive director of Apollo Minerals projects in Brazil. The joint venture interest in the projects for a $2 million Richard Shemesian said in a statement, formalized in September 2013 the payment to Bahmex, which BC Iron and “The acquisition companies’ commitment to gradually Cleveland would split evenly. increases Apollo’s stake in the acquire up to 80 percent of shares in Exploration was to have begun Project to 82.5% and at the same time the projects from the Brazilian company by January of 2014 with mapping, consolidates the ownership structure, Bahmex. The three projects were sampling and logistics preparations to making it easier to attract investor selected after consideration of over 50 determine the depths of main targets, finance. “Apollo shareholders have sites. The Caetite and Silvestre projects focusing on the Salvador de Bahia exposure to a high quality asset with a are in the state of Salvador de Bahia, projects first. According to original significant exploration target... which and the third project, Minas Novas, is in samples collected by Coffey Mining has straightforward metallurgy and the the state of Minas Gerais. Group, Caetite has the most significant potential to produce a premium 69% The alliance expects to target 30 to exploration potential. iron ore product,” Shemesian said. 45 percent iron content in up to one

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venture between Tata Steel and New Millennium Iron Corp was established in 2010. While TSMC owns 80 percent of the shares, NML owns the remaining 20 percent. TSMC is one of the flagship companies of Tata Steel Group, a Fortune 500 company and one of the top ten producers of world steel and has over 80,000 employees. Other related project costs such as a 600 kilometer ferro-duct

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to transport iron ore slurry and terminal handling facilities have not been included in the present costing. Dean Journeaux, CEO of NML also says that the infrastructure costs would be funded by `specialized’ long-term financing at extremely competitive interest rates and the final report would also include such options. Summarizing this initiative, Dean says, “We believe that the results of

this study are positive.” A well-recognized international consultancy firm is working on the project details and Tata Steel is awaiting positive reassurance from them about the project’s outcome. In the meantime, the company has not remained idle and has instead put together the financial models for the project, including after-tax projection.

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SHIPPING

Congress Calls Attention To Great Lakes Maintenance Backlog By Mary Claire Whitaker

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n addition to heavy ice coverage experienced over the winter, the Great Lakes navigation system has faced other troubles throughout the year particularly with dredging and lock maintenance concerns. Recently, Great Lakes region senators and representatives agreed to allocate additional funding to the US Army Corps of Engineers (USACE) that could be applied to such maintenance, as part of the January 16 congressional appropriations omnibus. Providing background, Lake Carriers Association vice president Glen Nekvasil emphasized the need for dredging, saying, “the Great Lakes Navigation System is choking on the 17 million cubic yards of sediment that have collected in ports and waterways because of chronic underfunding of dredging.” Because of the collected

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sediment, combined with reduced water levels on the lakes, the largest vessels are unable to operate at full capacity. “At times,” said Nekvasil, “our largest vessels have been forfeiting more than 10,000 tons of cargo each trip.” In a letter jointly addressed to the USACE chief of engineers Lt. Gen. Thomas Bostick and Jo-Ellen Darcy, civilian head of the Army’s Civil Works division, a coalition of 13 senators urged the Army to consider allocation of an additional $30 million in USACE’s 2014 budget towards dredging the Great Lakes. A total of $200 million in additional funding was granted to the USACE in the appropriations bill. “Lake Carriers Association appreciates the efforts of our Great Lakes senators,” Nekvasil said. “The additional funds will help reduce the

dredging backlog and allow vessels of all flags to carry more cargo on the Lakes.” The USACE is currently one of 16 agencies involved in the Great Lakes Restoration Initiative begun in 2010. That initiative targets primarily environmental problems in the Great Lakes watershed rather than specifically commercial concerns. It has allocated funding towards “strategic navigation dredging” projects to remove contaminated sediment in navigational areas, but those project allocations amounted to approximately $700 thousand in 2013. The Lake Carriers Association pointed out that in addition to eligible USACE allocations, the annual Harbor Maintenance Trust Fund in 2013 was experiencing a surplus of seven billion dollars.

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STEEL

Red Metal Resources Turns Up New Copper Result By Mary Claire Whitaker

The junior mining company Red Metal Resources, operated by Canadian principals and based in Ontario but registered and traded in the US, focuses on development of Chilean resources, particularly copper. The company has been active in its current incarnation since 2008. Its Chilean subsidiary, registered as Minera Polymet Limitada, owns the Farellon property near the town of Vallenar, as well as the Mateo and Perth properties, also in the “III” region on the Chilean coastal mountain range.

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hile the later two properties are in early-stage exploration, Farellon, the company’s flagship project, is in advanced exploration, and Red Metal has recently announced drilling results on the copper-gold project. Farellon is 1,053 hectares and consists of seven concessions for mining and exploration. As of late 2013 it had completed 6,786 meters of drilling in three programs, along a 1.7 kilometer strike length. It announced in November of that year that it had completed two reverse circulation drill holes, targeting a previously-drilled area. “The two new drill holes,” the company said in a press release, were “intended to aid in identifying the most prospective area on the site to initiate small-scale production.” They were drilled 25 meters along strike. Red Metal announced that one of the new holes, known as FAR-13-002, contained 2.5 percent copper over

seven meters, with 0.28 grams per ton of gold. The other hole, FAR-13001, also returned gold and copper, at 0.20 grams per ton and 0.7 percent respectively, over six meters. The company had already applied for mining permits on the land when it begun this last round of drilling, as well as hired a mining contractor, Minera Farellon Limitada, run by Kevin Mitchell, who is listed as the head of operations in Red Metal corporate materials. “Once permits are issued,” said Red Metal in a release, “Minera Farellon Limitada will commence mining activities.” The company will be permitted to transport up to 500 tons per month for local processing. “Minera Farellon Limitada will be transporting and selling the ore to ENAMI, the national mining company’s local processing facility in Vallenar,” approximately 75 kilometers south of the mine. Red Metal is led by Caitlin Jeffs, of Thunder Bay, Ontario. “We

are excited to see our 100 percent owned copper-gold project moving forward with this permit application and engagement of a local mining contractor,” Jeffs said when the permitting announcement was made in October. The company has said in presentations it makes public on its website that it plans to complete a competitive inferred resource for 50 million tons. Jeffs is also director of Kesselrun Resources, a gold explorer in northwestern Ontario. Jeffs and her husband, Red Metal’s vice president of exploration Michael Thompson, also head up the company Fladgate Exploration Consulting Corporation, which provides technical support like 3D modeling and resource estimation alongside geologists of various expertise areas who assist in planning, implementing and managing exploration programs. Mitchell is also Canadian, and has lived in Chile for over 20 years.

Essar Steel Settles Trinity Coal Bankruptcy By Mary Claire Whitaker

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ssar Steel, the Indiaheadquartered global steel company, has negotiated its subsidiary Trinity Coal Partners out of bankruptcy. Trinity, originally acquired by Essar in 2010 for $600 million, provides Essar Steel Algoma, in Canada, with metallurgical coal, and will supply Essar’s Minnesota www.skillings.net

taconite plant when that ramps up in 2015. Trinity filed involuntarily for bankruptcy in February 2013, to resolve payment of $103 million in loans by creditors Credit Agricole SA, ING Groep NV, and Natixis. The company reviewed non-binding offers from 14 potential buyers last summer, but in August a Kentucky judge granted

Trinity time to look at a restructuring agreement with Essar. “The strategic intent is still strong. With all plans in place, we firmly believe that we will turn around this company into a profit-making entity very soon,” an Essar Group spokesperson said. Essar negotiated a 50 percent write-off of

principle owed to the aforementioned creditors, and with payments other smaller creditors payed off $325 million, to secure 100 percent of Trinity common equity as of February 3. A spokesperson for Essar Steel Algoma said that Trinity has continued to meet its contractual supply obligations during the bankruptcy process. March 2014 SKILLINGS MINING REVIEW | 25


U.S. Steel Get Extension Permits For Minntac By Anna Grant

In February, a couple of days after judges convened to discuss and decide whether an environmental policy is necessary for U.S. Steel to extend its operations by another 483 acres, the Minnesota Pollution Control Agency (MPCA) and the Minnesota Department of Natural Resources (DNR) granted approval and issued necessary permits for extending the project. U.S. Steel has operated iron mines in northeastern Minnesota for more than 100 years and is the state’s largest producer of iron ore pellets.

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aving been in operation since 1967, the company has expanded its plant twice and this third proposal will ensure that it can maintain its production level for another 20 years. Minnesota’s Department of Natural Resources had originally prepared an environmental assessment for the mine’s expansion as a result of its concerns regarding Minntac’s 8,000-acre tailings basin. State studies have found that metals and sulphates, a result of mining activity, have leaked into nearby watersheds. But these same studies highlight the face that Minntac has provided full cooperation to state pollution bodies and is focused on managing discharges, recycling seepage water and monitoring water quality on an ongoing basis.

home and even the food cans in the kitchen”. • Along with its direct impact on livelihood and income generation, the project is expected to bolster education across the state of Minnesota as iron ore mines contribute to Minnesota’s Permanent School Fund, which in turn distributes money to public schools within the State of Minnesota. To give an idea about numbers, in 2013, U.S. Steel contributed nearly 54 million, almost 95 percent, only in royalty payments to the trust fund.

Benefits of the expansion • With the approval and permits in place, this 483 acre extension, should help the mining company to not only continue its existing mining operation but also extend to produce taconite pellets for the next 16 years or so. These are exciting times, as this extension could also result in generating another 100 jobs for a company which already employs more than 1400 workers. John Rebrovich, Sub-District Director of United Steelworkers District 11 and Co-Chair of the Iron Ore Alliance says, “The ferrous mining industry is critical to northeastern Minnesota’s economy. This expansion provides high-quality, well-paying jobs in our region.” • Along with the employment opportunity, the project requires U.S.Steel to invest at least US$ 440 million only for its Minnesota operations. A large portion of this investment will go towards production machinery like shovels, trucks and loading units. Thus, along with regular mining jobs, these support services will also see a lot of activity and income generation during the duration of the project. • Summarizing its importance, Chris Masciantonio, Co-Chair of the Iron Ore Alliance and GM of Governmental Affairs, U.S. Steel says that iron ore mining is critical to the daily lives of people. “We use metals for all our needs, from the vehicles we drive to the appliances we use at 26 | SKILLINGS MINING REVIEW March 2014

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Green Activists Make Mining Groups See ‘Red‘ By Anna Grant

The Tasmanian Minerals and Energy Council is seeing red as it demands stronger laws against `green’ activists, it believes are actually trying to push the mining industry out of Western Tasmania Australia. The Tasmanian Minerals and Energy Council is demanding that the Coalition government put a full stop through expanded green law reforms to ensure that activities do not oppose mines on a `philosophical basis’.

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eferring to the activists as the `green-left’, a Coalition Reforms submission seeks reforms from the miners saying that these activities use legal terms to challenge and put roadblocks in the way of mining. `Save the Tarkine’ is one such group which has angered mining groups. The Council is angered by the fight that green activists launched against a new iron ore mine by Shree Minerals - a fight which they took to Tasmania’s federal court. The Tasmanian Minerals and Energy Council now says that it will go to any lengths and take any required action to put a full stop to these kinds of activists and their protests. The mining group says “This is the typical behavioral pattern of environmentalists who will go to any length to get their way. For example, if they do not meet with success at the legislative or regulatory level, with regard to a project, they will go to the tribunals or even to the federal court to prevent a project from taking off.” The `Save the Tarkine’ campaign’s coordinator Scott Jordan however, denies these claims and says “Tarkine works at the grass root level and it is not easy to go to court as legal activities require funds which are hard to come by”. Over the years, environmentalists and `green’ activists have become extremely powerful and even large corporations worry about the kinds of hurdles they could face from such activists. However, no matter what the hurdle is, it has always been the activists who initiate some kind of action and mining groups react to the same. This incident stands out as a unique example, where miners are rebelling against activists. Undeterred by this, Chris says rather composedly, “What we have opposed is new mines in the existing reserves within the Tarkine. We make no apologies about standing up against that.” Shree Mines was due for opening last year and finally, late 2013, the new Federal Minister reapproved Shree Mines iron mine project in the Tarkine Region. Environment Minister Mark Butler approved the $20 million project but only on 30 strict conditions. Summarizing his reasons,

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Butler said, “Considering the impact the development might have on a number of flora and fauna species I have imposed conditions that I am confident will protect those species”. The bone of contention for the Tarkine project is the Tasmanian Devil, a carnivorous marsupial of the Dasyundae family, found only in the Australian island of Tasmania, and categorized as an endangered species.

March 2014 SKILLINGS MINING REVIEW | 27


STATISTICS CRUDE STEEL PRODUCTION, DECEMBER 2013

CRUDE STEEL PRODUCTION, DECEMBER 2013

Monthly Crude Steel Production in the 65 Countries included in the report, in thousands of metric tons Source – World Steel Association

Monthly Crude Steel Production in the 65 Countries included in the report, in thousands of metric tons Source – World Steel Association

COUNTRY Canada

DECEMBER NOVEMBER DECEMBER % CHANGE 2013 2013 2012 DEC- 13/12 1,050 e

1,015 e

1,022

2.8

Cuba

30 e

30 e

23

28.8

El Salvador

10 e

10 e

5

92.3

Guatemala

30 e

35 e

33

-8.3

Mexico

1,625 e

1,570 e

1,550

4.8

Total (65 countries)

129,191

127,364

121,529

6.3

e­ – estimate. r – revised. The 65 countries included in this table accounted for approximately 98% of total world crude steel production in 2011.

IRON ORE PRICE REPORT NORTH AMERICAN MARKET (LTU). Source: CLIFFS NATURAL RESOURCES INC. COMPANY

PER IRON UNIT

ORE TYPE

PER TON AT 64%

PER GROSS TON AT 64%

REPORTING DATE

Trinidad and Tobago

57

55 e

60

-4.3

United States

7,197

7,140

7,171

0.4

Total - North America

9,999

9,855

9,863

1.4

Argentina

434

469

334

29.9

Brazil

2,655

2,708

2,552

4.0

Chile

100 e

105 e

128

-21.9

Colombia

120 e

115 e

90

33.8

Ecuador

55 e

50 e

27

100.3

Paraguay

5e

5e

5

1.4

Peru

95 e

95 e

87

9.3

Uruguay

10 e

10 e

3

237.2

Venezuela

150 e

145 e

115

30.6

Total - South America

3,624

3,702

3,341

8.5

Algeria

35 e

30 e

65

-46.0

Egypt

562

534

587

-4.2

Morocco

27

43

56

-52.9

South Africa

615 e

640 e

446

37.9

Total - Africa

1,309

1,317

1,203

8.8

U.S. RAW STEEL PRODUCTION

Iran

1,350

1,375

1,189

13.6

In thousands of Net Tons – Source - American Iron and Steel Institute

Qatar

162

162

176

-8.0

Saudi Arabia

461

389

451

2.2

Total - Middle East

2,214

2,174

2,055

7.7

China

62,350

60,879

58,545

6.5

India

6,908

6,250 e

6,530

5.8

Japan

9,336

9,263

8,567

9.0

South Korea

5,857

5,594

5,763

1.6

Taiwan, China

1,880 e

1,780 e

1,767

6.4

Total - Asia

86,332

83,767

81,171

6.4

Australia

327 e

380

368

-11.2

New Zealand

80 e

77

83

-3.2

Total - Oceania

407

457

450

-9.7

Total European Union (27)

13,124

14,255

11,771

11.5

Total - Other Europe

3,026

3,275

2,981

1.5

Total - C.I.S. (6)

9,157

8,561

8,693

5.3

28 | SKILLINGS MINING REVIEW March 2014

Cliffs Natural Resources Inc

Pellets, FOB $ 2.01 Michigan Mines

128.64

12/31/13

Cliffs Natural Resources Inc

Pellets, FOB Minnesota $1.62 Upper Lakes Port

$103.68

12/31/13

WEEKLY U.S. RAW STEEL PRODUCTION BY DISTRICT In thousands of Net Tons – Source – American Iron and Steel Institute

WEEK ENDING

DISTRICT

2/8

2/1

1/25

1/18

North East

211

212

209

204

Great Lakes

655

654

658

642

Midwest

244

247

250

261

Southern

639

598

623

641

Western

90

93

84

88

Total

1,839

1,804

1,824

1,836

WEEKLY PRODUCTION WEEK ENDING

PRODUC- PERCENT TION CHANGE*

YEAR-TO-DATE PRODUCTION

CAPABILITY PRODUC- PERCENT UTILIZATION TION CHANGE RATE

February 8, 2014

1,839

1.9

76.8

10,174

- 0.7

76.2

Previous Year

1,875

- 1.9

78.3

10,247

-

77.3

February 1, 2014

1,804

- 1.1

75.3

8,335

- 0.4

76.1

Previous Year

1,839

- 1.9

76.5

8,371

-

76.5

January 25, 2014

1,824

- 0.7

76.1

6,531

0.0

76.3

Previous Year

1,832

- 0.4

76.5

6,533

-

76.5

January 18, 2014

1,836

0.3

76.6

4,707

0.1

76.4

Previous Year

1,832

0.2

76.5

4,700

-

76.5

* 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.

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Preliminary USGS Iron Ore Statistics for August 2013 By John Edward

A

ccording to the U.S. Geological Survey (USGS) report by Mineral Commodity Specialist Christopher A. Tuck, U.S. mine production of iron ore in August 2013 was 4.61 million metric tons (Mt), 5% greater than that in July. Production was 149,000 metric tons (t) on a daily average basis, 5% greater than that of July 2013 and 6% more than that of August 2012. U.S. iron ore shipments were 5.43 Mt in August 2013, 4% less than those in July 2013.

Shipments were 175,000 t on a daily average basis, 4% less than those of July and 4% more than those of August 2012. Mine stocks at the end of August 2013 were 20% less than those held

in July and 11% more than those in August 2012. U.S. exports of iron ore were 808,000 t in August 2013, 13% less than those in July 2013 and 22% less than those of August 2012.

2013 Crude Steel Production By John Edward

W

orld crude steel production reached 1,607 megatonnes (Mt) for the year 2013, up by 3.5% compared to 2012. The growth came mainly from Asia and Middle East while crude steel production in all other regions decreased in 2013 compared to 2012. In December 2013, world crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 129.2Mt, an increase of 6.3% compared to December 2012. The crude steel capacity utilisation ratio of the 65 countries in December 2013 declined to 74.2% from 75.8% in November 2013. It is 2.2 percentage points higher than December 2012. The average capacity utilisation in 2013 was 78.1% compared to 76.2% in 2012. In 2013, crude steel production in North America was 119.3 Mt, a decrease of -1.9% on 2012. The US produced 87.0 Mt of crude steel, down by -2.0% compared to 2012. Annual production for Asia was 1,080.9Mt of crude steel in 2013, an increase of 6.0% compared to 2012. The region’s share of world steel production increased slightly from 65.7% in 2012 to 67.3% in 2013. China’s crude steel production in 2013 reached 779.0 Mt, an increase of 7.5% on 2012. China’s share of world crude steel production increased from 46.7% in 2012 to 48.5% in 2013. Japan produced 110.6 Mt in 2013, a 3.1% increase from 2012. South Korea’s crude steel production was 66.0 Mt, a decrease of -4.4% compared to 2012.

Statistics based on World Steel Association Report released on January 23, 2013. www.skillings.net

March 2014 SKILLINGS MINING REVIEW | 29


MINING INDUSTRY PEOPLE Northern Iron Corp. appointed Ms. Annie Storey, CA to its Board of Directors. Ms. Storey brings over 25 years of experience to her role, having provided accounting, financial reporting and corporate services to public and private companies with operations around the world in such industries as mining and exploration, oil and gas, technology, entertainment, manufacturing, real estate and biotechnology.

Gentor Resources Inc. has made several corporate and board changes effective immediately. Mr. Arnold Kondrat, currently Executive Vice-President, has been appointed President and Chief Executive Officer of the Company replacing Dr. Peter Ruxton. Two new directors, Mr. Richard Lachcik and Mr. Bill Wilson, have been appointed to Gentor’s board replacing Mr. David Twist and Mr. Rudolph de Bruin.

Lions Gate Metals Inc. appointed Mr. Alexander Helmel to the Board of Directors of the Company as an independent director. Mr. Helmel will fill the vacancy left by the resignation of director Mr. Murray Oliver. Mr. Helmel is an independent management consultant with specific expertise working with resource based companies within the Canadian Capital Markets.

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Skillings Mining Review March 2014  

Skillings Mining Review - Mining Industry Trade Magazine - Issue March 2014 Editorial Themes: a) Educating Mining Professionals b) Shipping...

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