The Financial Post: Canadian copper producers on a tear as metal rallies again

Base-metal analysts and tarnished copper miners are optimistic on a potential bull trend in copper amid optimism around U.S.-China trade talks and growing scarcity of the metal that’s offsetting concerns about a Chinese economic slowdown.

Copper hit an all-time high of US$10,190 per ton in 2011, but has been on a roller coaster ever since. The metal, considered a key barometer of the global economy given its various uses, hit a four-year high of US$7,348 last June before plunging to US$5,725 in early January. Since then it has clawed its way back to US$6,426.50 per ton, up 7.7 per cent since the start of the year.

 

The upturn comes as a relief for the Canadian copper industry, which produces approximately 600,000 tonnes annually — three per cent of global supply.

Canadian companies such as Hudbay Minerals Inc. (up 52.61 per cent year-to-date), Imperial Metals Corp. (up 71.88 per cent), Taseko Mines Ltd. (up 10 per cent) and Capstone Mining Corp. (up 6.5 per cent) are among some of the major copper producers riding the latest copper rally.

Brain Bergot, vice-president investor relations at Taseko, which owns 75 per cent of B.C.’s Gibraltar Mine, says he’s optimistic about an industry readjustment, fuelled by shrinking copper supply and a sliding loonie. But he’s concerned about China’s economic slowdown.

“We believe the fundamentals for copper are getting stronger every day,” he said.
“There’s limited new supply, and copper demand continues to grow at historic levels — around two per cent a year.”

Bergot estimated a 350,000-tonne global supply deficit this year, a good indicator for copper producers and investors. A struggling Canadian dollar is also helping domestic copper suppliers.

“For Taseko, 80 per cent of our costs are in Canadian dollars, and our revenue is in U.S. dollars,” he said. “And the outlook for the Canadian dollar is not bullish.”

But Bergot believes the U.S.-China trade dispute, and China’s economy are holding back copper prices.

“We believe the tariff problem, and questions around Chinese government stimulus spending are an overhang for the price of copper,” the 20-year resource sector veteran said.

“People don’t know how it’s going to affect copper demand, and until that’s resolved there’s an uncertainty. Copper should be at a higher price today given the fundamentals.”

In a recent report, RBC Capital Markets analysts said they are cautious towards copper and mining equities given a slowing global economy. Governments and central banks are helping absorb the economic downside — and the physical market for copper remains relatively tight.

The analysts expect Teck Resources Ltd. (up 9 per cent year-to-date), First Quantum Minerals Ltd. (up 47.44 per cent), Lundin Mining Corp. (up 13.34 per cent) and Ivanhoe Mines Ltd. (up 37 per cent) among Canadian producers that are positioned to benefit from the rally.

RBC increased its 2019 copper price slightly to US$2.75 per ounce from US$2.63 per ounce, following a stronger-than-expected performance this year, but warn that cuts in Chinese or European demand could mean a copper surplus.

Still, if the electrification theme in autos and the electrical grid plays out this could offset slowing demand from China as could growth in other emerging markets, RBC analysts said. “We continue to see the need for more supply growth sometime in the mid-2020s, which would require a higher copper price.”

Ross Strachan, a senior metals analyst at Capital Economics, agrees that copper scarcity is supporting prices and creating optimism.

“Copper is the base metal that we are most positive about in the longer term,” he explained. “And a key part of that is the lack of supply growth due to the restricted capital expenditures that have been in the copper market over a number of years.”

A recent Danske Bank report said that China is showing signs of a moderate recovery this year on the back of stimulus, which is reducing uncertainty. The Danish bank expects a U.S.-China trade deal in the coming months, and forecasts  more upside in emerging market assets.

David Cole, CEO of EMX Royalty Corp., which holds 38 per cent of its mining portfolio in copper, says that copper scarcity will drive prices long after the U.S.–China trade negotiations are over.

“The U.S.–China trade talks have consequence with respect to perception and short-term trading patterns,” the 30-year mining veteran said. “I don’t think it’s consequential to long-term copper demand.”

Cole explained that worldwide copper consumption has risen to the point of needing the equivalent of one new Bingham Canyon Mine every year.

Utah’s Bingham Canyon Mine, owned by Rio Tinto Group, is the largest man-made excavation on earth, and has produced more copper than any other mine in history — more than 19 million tons.

“Over the course of the next quarter century, we will produce and consume the equivalent of all the copper that has ever been produced in human history,” said Cole.

jsnell@postmedia.com

The Western Producer: A new type of farm boss eager to take charge

Change is constant on the Prairies, starting with new life and then shifting to growth, development, maturation and eventually renewal.

TeddiAnn Skibsted is on the cusp of one such change as one of Canada’s youngest up-and-coming farm bosses.

Skibsted Farms operates 4,500 acres near Drumheller, Alta. The farm has three employees, three dogs, one horse, one donkey, several cats and dozens of gophers. Continue reading “The Western Producer: A new type of farm boss eager to take charge”

While BC mining sector resurrects, small miners are being left behind.

 

Gold prospector Dan Hurd prepares for a day of exploration in central B.C.

David Makepeace is fighting to advance the re-opening of a 100 ton per day silver-lead-zinc mine. But the “never-ending permitting and environmental reports” have exhausted the sixty-five-year-old senior project geologist with Klondike Silver Corp. in Sandon B.C.

“When you transition from exploration to an active mine permit, there is a quantum leap in the amount of paperwork,” said Makepeace, who has a graduate degree in environmental engineering.

“Our tiny operation is considered the same as a major operating mine like Highland Valley Copper, which produces over 100,000 tons a day,” he explained.

The B.C. Government requires Makepeace to produce the same paperwork and environmental studies. Right now, he’s writing a 200-page annual reclamation report, which “diverts my attention from exploration and helping raise money for the company.”

“Klondike Silver could’ve begun production three years ago,” Makepeace said. “Instead, we spent $4 million of shareholders’ money to do nothing.”

Despite Makepeace’s struggle, the B.C. Ministry of Energy, Mines and Petroleum reported in their Mineral and Coal Exploration Survey that 2018 was the second consecutive year of grass-roots mineral exploration growth, with project spending up 62 per cent from 2016 – totalling $330.2 million. They said total drilled metres were up 17 per cent from 626,897m to 730,500m – a robust increase that saw early-stage exploration spending rise nine per cent.

Iain Thompson, Canadian Mining and Metals Leader with Ernst & Young (EY) said that it’s getting much more challenging – globally – to get mining exploration projects through the approvals phase.

“It’s not just a B.C. issue,” he said.

“Obtaining social license is now part of the process – it’s jumped from number seven to number one in global risk.”

However, Thompson said a recent EY study put B.C. in a positive light.

“From a total investment dollars perspective, we certainly are seeing an increase in expenditure in B C,” he explained.

“Three years ago, there was an expectation for a reset, which was a return to early-stage exploration in B.C. We’ve seen that hold somewhat true as Canada captures a larger portion of global mining investment.”

From the 60s to the 90s, the B.C. mining business was like a live theatre that showcased thousands of penny-stock mining companies — many of which were successful in transforming Vancouver into a global mining centre.

The stars of the show were bombastic geologists, Cadillac driving mining promoters, and trophy investment bankers. Men with money blasting their way to riches or bankruptcy.

Decades later things have changed.

Seeking sustainability, successive NDP and Liberal governments have added environmental red tape, making it difficult to advance mining projects from discovery to production. Although B.C. maintains a healthy baseline of producing mines, such as New Afton in Kamloops and Highland Valley Copper near Logan Lake, many mineral explorers are leaving Canada.

According to a Mining Association of Canada report, innovation dollars are steadily leaving for countries like Australia, Germany and South Africa.

Statistics Canada reported that B.C. mineral exploration and deposit appraisal expenditures dropped by $113.4 billion between 2014 and 2018. The Mining Association of Canada reported the number of active projects in Canada is down by almost one-half since 2011. Only two new mining projects were submitted for federal environmental assessment in 2016 according to the MAC.

Daniel Lui, a 17-year veteran of the B.C. mining sector, is one of the exploration geologists who’ve stayed in Canada. He’s grateful that exploration permitting has been streamlined with the use of multi-year area-based permitting, “a system that authorizes flexible exploration work for up to five years on mineral or coal tenures – where (drilling) rigs are sometimes allowed to change planned locations without having to re-permit.”

“But there aren’t many exploration programs left in B.C.,” Lui said.

The situation might be improving. The B.C. Mineral and Coal Exploration Survey said that early stage mineral exploration influences the outlook for the mining and metals sector. Five years ago, the prospects for discoveries leading to new mines appeared bleak, with few investments being made in grass-roots exploration. According to the survey, the mining sector has been going through a reset over the last two years – 2018 denotes 5 years of increases in early stage exploration as a share of total exploration.

Rob Stevens, vice president, regulatory and technical policy, for the Association for Mineral Exploration B.C., said the provincial government has accepted approximately 25 new recommendations via the final report of the association’s Mining Jobs Taskforce.

“They are going to implement all of the various recommendations,” Stevens said.

“The aim of the taskforce was to position B.C. as essentially the most interactive jurisdiction in the country for exploration and mining. They (provincial government) have made tax incentives for flow-through investment permanent.”

Stevens said there are two types of incentives — one for investors, and one for companies – which are able to write-off a portion of their exploration activities. The provincial government has also provided funding for an initiative called the B.C. Regional Mining Allowance, a pilot program that is a collaboration between First Nations, the province, several exploration companies, and the AME.

“The idea was to attend investment forums – to bring forward a consolidated front where everybody is working towards advancing exploration and mining in B.C,” Stevens said.

BCIT graduate, and independent prospector Dan Hurd, 45, has over 20 gold tenures throughout the interior of B.C.

“There’s lots of small-scale exploration to be done out there. That’s easy to do. Moving beyond that is where it starts getting tricky,” said Hurd.

“That’s where the bureaucracy comes into it. We have some fairly strict (environmental) rules here in B.C. Well-natured rules. For a good reason.”

Hurd said that moving beyond hand-digging involves the same approval processes as open pit mining.

“That’s where it gets tough for the little guys,” he explained.

“It really hampers that mid-stage of prospecting. And First Nations consultations can cost thousands. Pretty much everyone now is having to do an archeological study.”

The Government of B.C. website stipulates, “proponents are generally encouraged to engage with First Nations as early as possible in the planning stages to build relationships, and for information sharing purposes that may support consultation processes.”

Hurd said that following the amorphous rules is a near impossibility for some prospectors.

“People are losing their shirts in the process,” he lamented.

 

The Financial Post: Persistent deficits and higher spending raising Canada’s economic ‘vulnerability’: Fitch

A raft of new spending items in the federal budget aims to stimulate an economy that’s lost momentum, with some analysts predicting a recession on the way. Sean Kilpatrick/The Canadian Press

The Liberal government’s preference for continued deficits and increasing program spending “could increase the vulnerability of public finances to a faster economic slowdown or sudden shock,” according to Fitch Ratings.

Canada has the second largest gross government debt of ‘AAA’ rated countries after the United States, which is ‘incompatible’ with its gold-plated rating, according to the ratings agency.

While the credit agency concedes that increased spending and projected deficits in Canada’s latest budget remain consistent with a falling federal debt burden, the forecast assumes the economy will avoid a recession.

Continue reading “The Financial Post: Persistent deficits and higher spending raising Canada’s economic ‘vulnerability’: Fitch”

The Weal: Canadian diamond shines bright at Carnegie Hall

Adversity is like a furnace. It can burn, consume and reduce solid constituents to charcoal, ashes, smoke and heat. What goes into the fire of sorrow and difficulty always exits as something different and potentially useful.

Ashes can be scattered to fertilize new growth. Charcoal can become an art medium. Heat can warm entire civilizations. Smoke can become the ambient medium of memory and love.

From time to time – in the fires of life – the divine hand reaches down, opens the furnace door and feeds the flames with broken dreams, spent arrogance and misplaced sophistication.

It’s during those times – when the door is open – that sparks fly out.

Arlen Hlusko, a 26-year-old cellist fellow with Ensemble Connect at Carnegie Hall in New York City, is one of the sparks that rolled across the utility room of life, landed in the wall, and set the house ablaze.

Continue reading “The Weal: Canadian diamond shines bright at Carnegie Hall”

You’re not working hard enough – Finance Minister Bill Morneau

The Canadian economy is like an aging quarter horse – prone to standing still for extended periods, with the capacity to run on occasion. Farmers, foresters, miners and energy workers are the heart of the animal – foot-soldiers of wealth generation in the richest country on earth. Teachers, entrepreneurs, and emergency services are the eyes and hooves that guide us to the feed-trough and carry us away from danger.  Continue reading “You’re not working hard enough – Finance Minister Bill Morneau”

The Press: Decision to proceed with Olympic plebiscite caps a wild six-day ride for council

After nearly 48 hours of day and night debate and consultation, city council voted on Wednesday, Oct. 31 to proceed with a non-binding plebiscite on whether Calgary should host the 2026 Winter Olympics.

Eight councillors, a bare majority of council voted to withdraw the Nov. 13 plebiscite, while seven others, including Mayor Naheed Nenshi, voted to continue.

Continue reading “The Press: Decision to proceed with Olympic plebiscite caps a wild six-day ride for council”