Keeping an eye on Communist, Totalitarian China, and its influence both globally, and we as Canadians. I have come to the opinion that we are rarely privy to truth regarding the real goal, the agenda of Red China, and it's implications for Canada [and North America as a whole]. No more can we rely on our media as more and more information on China is actively being swept under the carpet - not for consumption.
Tuesday, April 16, 2019
The world’s most insatiable consumer digs deep into Canadian miners
The world’s most insatiable consumer digs deep into Canadian miners
How Chinese investment and pull increasingly drive our mining sector
July 27, 2018
After spending billions of dollars and two decades trying — and failing — to build a mine on the border of Chile and Argentina, Toronto-based Barrick Gold Corp. is reverting to a predictable strategy: it wants to partner with a Chinese company.
Earlier this month, the largest gold miner in the world announced that it asked Shandong Gold Group Co. Ltd, a smaller, younger, less well-known state-owned Chinese company, to study whether its long-delayed Pascua-Lama mine could be economically built if the Chilean part of the deposit were left in the ground — something Barrick’s own geologists and engineers thus far have not justified to management’s satisfaction.
They have a huge appetite and a lot of money, so for the Canadian mining industry to ignore that would be foolish
Pierre Gratton, president of the Mining Association of Canada
It is far from Barrick’s first partnership with a Chinese company, but in the past it partnered by selling stakes in its mines and forming joint ventures. Now, Barrick is pivoting from asset sales for debt reduction to growth, and bringing a Chinese company into its fold this time as a source of technical expertise and influence, in addition to capital.
Across Canada, as mining companies have struggled to raise money, many have turned to Chinese, often state-owned, companies, which have evolved from a source of capital into various types of partnerships and leadership roles. Many mining executives see these relationships as a key to future growth and vital to meet their financing needs, noting China is the world’s most insatiable commodity consumer.
“There’s no question that China’s the biggest consumer of metals and minerals on the planet today,” said Pierre Gratton, president of the Mining Association of Canada. “They have a huge appetite and a lot of money, so for the Canadian mining industry to ignore that would be foolish.”
One recent study by the market research firm CRU Group looked at 16 key commodities, from aluminum and steel to phosphates, gold and copper. It found that on average, China consumes 45 per cent of each mineral or metal.
That demand, Gratton said, means that miners are going to find opportunities with Chinese companies.
He also noted that historically foreign investment has been crucial to the development of the Canadian mining sector, even though the government is concerned and even unsure about investments from Chinese state-owned entities — evident, for instance, in restrictions placed on investments in the Canadian oilsands and in the recent rejection of a $1.5 billion takeover of Aecon Group Ltd.
But such investments are not unprecedented, Gratton said, pointing to a state-backed French company that has invested in Canadian uranium projects.
He added that with Canada’s normal partner, the United States, now erecting tariffs on a growing list of minerals including steel, aluminum, and recently uranium, Canadian miners are surprisingly switching to China which is of concern owing to China's hostility towards Canada lately.
Worrying, neither the Natural Resources Canada ministry nor the Innovation, Sciences and Economic Development Canada ministry could provide data on the exact size of Chinese investments in the Canadian mining sector.
So far, quietly Chinese investments in the mining sector has not showed up in headlines in the same way as previous foreign takeovers, such as Brazil-based Vale S.A.’s $19 billion purchase of Toronto-based Inco Ltd, or Swiss-based Xstrata Plc $24.8 billion purchase of Falconbridge Ltd., both in 2006.
“Those were two Canadian mining standards that we had — the Brazilians and the Swiss come in and takeover and I haven’t seen anything of that nature,” said Randy Smallwood, chief executive of Vancouver-based Wheaton Precious Metals Corp.
Instead, many Canadian companies have found Chinese companies as delighted eager investors and partners, Smallwood said. Globally, these companies are state-owned, and are willing to tap their government network as the source of influence to obtain permits or operating licenses, he said.
“They’re also eager to pay a bit morethan others ,” Smallwood said.
He surmised that China’s trade surplus with the U.S. means it has an excess of U.S. dollars, which can be diverted into resource projects rather than deposited in a bank.
In recent years, Chinese capital has been able to fill in a gap for mining companies as they have struggled to raise money. Between 2011 and 2016, equity fundraising by mineral companies around the world declined from US$53.7 billion to US$26.8 billion, rising only slightly in 2017 to US$29.2 billion, according to data from S&P Intelligence and the Prospector’s and Developers Association.
“Its a period where China is very aggressively investing outside its borders,” said Alan Coutts, president and chief executive of Noront Resources Ltd. “And because Canada has very big mineral endowments, so of course they are eagerlyand quietly investing here.”
Noront is developing the Ring of Fire district in Northern Ontario’s James Bay lowlands, considered one of the largest mineral discoveries in Canada in recent decades, and will initially include a nickel-copper-palladium mine and a chromite mine.
Not surprisingly, the massive project has received Chinese support. In 2011, Baosteel Resources International Inc, a Hong Kong-based, Chinese state-owned company invested $17.7 million for a 9.9 per cent stake in Noront — since reduced to seven per cent — and a board seat. Coutts said that as the company looks to raise close to $2 billion to build its mines and a ferrochrome smelter, it will likely see if Baosteel would invest again.
“Having a long term arrangement with the Chinese and their insatiable demand and state run - deep pockets is not a bad strategy,” he said.
Other major companies such as Teck Resources Ltd, the country’s largest diversified miner, and even emerging mining companies, such as Pretium Resources Inc., a fast-growing gold company in British Columbia, have also relied on large Chinese investments.
In June, China’s CITIC Metal Co. invested $723 million in Vancouver-based Ivanhoe Mines Ltd., which is developing copper and platinum projects in Africa, to become the biggest shareholder with a 19.9 per cent stake in the company.
But it’s not only Chinese mining companies investing in Canada’s miners and exploration companies.
Even as the U.S. earlier this year put uranium on a list of “strategic” minerals, because of its importance to nuclear power and national security, China has assured supply from Canada through a stake and a purchase agreement between one if its utilities and an explorer here.
Under that deal, Saskatchewan-based Fission Uranium Ltd., which is developing a deposit in the Athabasca basin, took an $82 million investment from China’s General Nuclear Power Group — which it described as that country’s largest builder of nuclear power plants — for 19.9 per cent of the company. CGN also has an offtake agreement to purchase 20 per cent of a Fission mine’s uranium, once it begins producing, with options for more.
Not all Chinese investments in Canada have gone smoothly. In British Columbia, HD Mining International Ltd.’s announcement that it intended to bring in temporary workers from China was met with fierce opposition from the community, and in Nunavut, China Minmetals Corp’ backed MMG Limited has spent years trying to develop a zinc project.
“I think generally they’ve become more sophisticated in understanding how the traditional western mining businesses operate,” said Gratton, of the Mining Association of Canada.
It’s all part of China’s global expansion to ensure commodity security. To fuel the economy — expected to be largest in the world soon — Beijing’s state-owned enterprises have developed partnerships and investments in large mining companies including Rio Tinto Plc and Glencore Plc.
In Canada, no company has been more vocal or active about its intent to partner with Chinese companies than Barrick. Its executive chairman John Thornton, who previously worked for Goldman Sachs in Asia, said he consulted the Chinese government before even joining the Toronto gold company.
“I went to the senior Chinese leadership and said, ‘Listen, I’ve been asked to take this role, I’m inclined to do it but I’m only going to do it if you want me to do it,” Thornton said in 2016 at a conference in New York.
In 2015, Barrick sold 50 per cent of its interest in the Porgera mine in Papua New Guinea to China’s Zijin Mining Corp. for $298 million; and in 2017, it sold Shandong 50 per cent of its Veladero mine in Argentina for US$960 million.
Andrew Kaip, an analyst with BMO capital markets, said both deals provided Barrick with generous value given gold prices and prevailing market conditions at the time.
Its latest proposal to have Shandong study building its Pascua-Lama mine only in Argentina, or the “Lama” part of the project, comes after Barrick clashed with regulators in Chile. Last year, the regulators ordered Barrick to permanently close all its mining activities there, which had been halted since 2013.
Smallwood, whose company invested US$625 million in the project in 2009 for a silver stream, says the problem is the majority of the deposit lies on the Chilean side of the border — 70 per cent by his company’s analysis including the most profitable high grade gold.
That’s why he said he doesn’t believe mining the Argentina side alone will be feasible, and hopes Chinese influence will be able to restore relationships in Chile, and revive a promising gold project, in which he estimated nearly $7 billion has already been sunk.
A Barrick spokesman, however, said that for the moment, Shandong is interested in studying an Argentina-only option.
“I’m just happy to have someone putting focus on this project,” Smallwood said. “To me, as I’ve happily described it, it’s the best half-built gold mine in the world. It’s actually more than half-built.”