Equity crowdfunding: the future of capital raising? - Mineweb
Editor-In-Chief, The Northern Miner
Instead, Canadians woke up to a new political landscape, with voters having taken the middle ground by rebuking the worn-out, pro-big-business Tories, but not wanting to roll the dice on the more left-leaning, inexperienced NDP.
Shown the door were the two most recent ministers of natural resources -- Conservative Greg Rickford lost his seat in Kenora, Ont., to Liberal Bob Nault, who had a close race with the former provincial NDP leader Howard Hampton; and previous Minister of Natural Resources and current Finance Minister Joe Oliver lost his seat in Toronto. Nault was quick to give some credit for his victory to First Nations communities in the the Kenora region, who mobilized to support him.
Indeed, one theme of the election was the growing political strength shown by aboriginal communities in Canada, with a record 10 indigenous people elected as members of Parliament, up three from 2011, and with a shift to Liberal from Conservative and NDP.
What should miners expect from a Liberal government?
With regard to corporate taxes, the Liberals have pledged to keep them at current levels andretain the 15 per cent flow-through credit for mineral explorers. Most of the taxation changes will come at the personal level. For example, Canadians with taxable income between $44,700 and $89,400 will see their federal income tax rate fall to 20.5 per cent from 22 per cent, while those making more than $200,000 will see it rise to 33 per cent from 29 per cent.
Perhaps the biggest change that mine developers will see with the new government is the Liberals' determination to reverse the Conservatives' streamlining of environmental approvals by skipping the federal approval process, if the project had already met environmental approvals at the provincial level.
The Conservatives saw the two-stage approval process as an expensive and time-consuming duplication of effort, while the Liberals and NDP saw it as necessary oversight, with the federal government not being subject to the more parochial political pressures sometimes applied to provincial regulators.
Another change miners might see is an improved relationship between the federal government and aboriginal communities in Canada, who need to be on-side for many resource development projects to proceed in remote parts of Canada. But it's hard to generalize on the topic, as relationships can vary from community to community across the country.
The new Liberal government has pledged to allow members of the federal civil service to speak out and attend conferences, in contrast to the much-resented muzzling of federal scientists and related bureaucrats under the Conservative regime. (Here at the Miner, in the early years of the Harper government, we'd repeatedly get federal scientists eagerly offering to write op-ed pieces or serve as expert interviewees, only to have them come back months later frustrated and embarrassed upon learning they were not permitted to talk to us. As the years passed, the emails and phone calls from federal scientists stopped completely.)
It's hard to say if the Liberals' pledge for a new round of massive spending on infrastructure will benefit miners (beyond aggregate miners), as most of the plan relates to public transit, social housing and green infrastructure.
Another development we might see is the retabling in a new form of the private member's bill by then-opposition Liberal MP John McKay (who was just re-elected) to strengthen federal government oversight of the corporate social responsibility activities of Canadian mining companies operating overseas.
In naming a cabinet, we strongly recommend that newly elected Liberal MP Maryann Mihychuk in Winnipeg be considered for Minister of Natural Resources. Mihychuk is a professional geoscientist and businesswoman who served with distinction as Manitoba's Mines Minister and Minister of Intergovernmental Affairs in the early 2000s. More recently she has been director of regulatory affairs for the Prospectors & Developers Association of Canada, as well as a consultant to mining firms such as Hudbay Minerals and Carlisle Goldfields, among her many mining endeavours.
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Commodity traders know that gold is highly cyclical, and that it takes significant changes in the fundamentals and sentiment to change the long-term price trend. That said, the latest news on gold is cautiously optimistic for those waiting for a rebound in the precious metal. Over the last few days, gold has broken through its 200-day moving average to reach its highest price in three months at just short of $1,200 per oz.
This type of technical breakthrough is rare: over the last six years, gold has touched its 200-day moving average on the upswing six different times. Each time gold emerged from these technical circumstances, the downward momentum of the gold price would remain unaffected.
The most recent breakthrough was in early 2015, but gold subsequently fell back through its moving average to finish off -14% lower than it started six months earlier. In 2012 and 2014, similar technical breakthroughs also occurred, ending in similar bearish fates.
The subsequent trading was particularly nasty in 2012. After the technical event happened that year, the gold price continued to fall over the course of 16 months by a whopping -28%.
That said, crossing the 200-day moving average is still regarded as an important technical event to traders. If you need proof, look back to gold's largest run in recent memory, which occurred in the aftermath of the Financial Crisis. Gold crossed its 200-day moving average while it was worth a measly $860/oz and soared 124% in value over the next 32 months. It would reach roughly $1,900 per oz, its highest price (in absolute terms) of all time.
So will crossing the 200-day moving average mean anything this time around? It's impossible to say, but there is certainly no shortage of other indicators that may suggest that it is time for investors to pile back into gold stocks.
At the time of the oil and gas acquisitions in December 2012 Freeport was worth more than $30 billionThe Phoenix-based company announced on Tuesday that it's trimming its board and is reviewing its oil and gas business in a return to its roots as a copper-focused miner.
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South Africa is a tough place to do business as a miner. Labor uprisings and tense relations between unions and mining companies are threatening mines' long-term survival.
Mines may close or become mechanized in the years ahead, and production could drop substantially during this rough transition.
The "old way" of mining in South Africa will probably disappear, says Andy Jackson, an exploration geologist at Sprott Global Resource Investments Ltd.
He believes that many mines will shut down if they can't replace workers with machines.
Around 8% of South Africa's economy depends on mining.1 South Africa is the 6th largest gold-mining country in the world, producing around 165 tons in 2014.2 It is also the world's largest platinum producer, accounting for 78% of the world's platinum production in 2013.3
Andy, originally from Zimbabwe, foresees for South Africa "an irregular and bitter downward spiral of both the mining industry and the country's economy."
Andy explains why he sees this decline in gold and platinum mining, and who may benefit:
The precious metals mining industry in South Africa is going from bad to worse. Political changes, low metals prices, and mines that are getting deeper and tougher to mine are slowly killing the gold sector.
The South African labor unions, in particular the dominant National Union of Mineworkers (NUM), have always demanded outrageous wage increases (30-120%, in a 5-6% inflation environment) during annual negotiations. Employers, acting through the Chamber of Mines, would counter with an increase of around the inflation rate.
After a bunch of posturing from both sides, they would agree to increase wages to be even with inflation, plus a few percentage points.
But this annual pantomime has been totally disrupted by the arrival of the Association of Mineworkers and Construction Union (AMCU).
AMCU says that its established rival NUM has been getting too cozy with the government and with mining companies. This smaller union is saying that the average mineworker in South Africa has seen no significant improvement to his lot in life since the end of apartheid. Of course, they're largely correct on that front.
And the AMCU is preaching a much more radical approach, which has been rapidly luring workers away from the more established NUM. Julius Malema, the leader of radical populist party the Economic Freedom Fighters, has thrown his support behind AMCU.
Last year, we saw the conflict between AMCU and NUM come to a head in the platinum sector.
The Rustenburg platinum mines suffered a 5-month strike over wages.
AMCU had demanded even more outrageous increases than NUM in order to outdo its rival. It then refused to play the usual charade of reaching a compromise. The result was many months of minimal production, and violence between AMCU and NUM. NUM lost a bunch more members to AMCU.
Those who wanted to keep working bore the brunt of the violence and the mining companies eventually crumbled (probably hoping to use the situation to allow them to close some loss-making shafts).
Anglo American Platinum, which owned the mines, reported that it had lost a third of annual production because of the strike. It even announced plans to sell mines after the strike ended,4 a decision that it has now followed through with. Around a week ago, it sold several South African mines to Sibanye Gold for $330 million in cash and stock. 5
But the damage won't end there.
Now AMCU is turning its attention to the gold sector. NUM can't afford another face-losing confrontation, so it has upped its ante, demanding larger increases and negotiating more strenuously. Neither union has much regard for how low commodity prices reduce the overall profitability of these mines.
There was a great quote in an interview with a NUM official last month. He said something along the lines of: "We know the mining companies can't afford a big increase, but I am mandated by my members to get a big increase. So we must strike."
The main mining companies have increased their offers and NUM has accepted the improved terms. The Solidarity Union (mainly made up of skilled and semi-skilled workers) has also accepted, but the Chamber of Mines says it has to be accepted by all the unions before it can be implemented. AMCU has rejected the offer and so is again controlling the game.
AMCU is also appealing a Labor Court decision last year that any strike at AngloGold Ashanti, Harmony, and Sibanye's gold operations would be considered 'unprotected.' They were bound by an earlier collective bargaining agreement that they were party to. That appeal is still in court.
Gold mining companies are warning that the wage increases, coupled with a low gold price, will result in layoffs. AMCU views possible layoffs as a threat targeted towards its members. It has recently vowed to oppose downsizing in both gold and platinum industries. They have threatened to take action if layoffs occur.
The South African government is trying to please both sides. Mines produce revenue but the votes come from labor.
So we're seeing a 4-way struggle between the mining companies, NUM, AMCU and the South African government.
It appears that in the long term there's no escaping the problems that ail these mines. Work conditions are increasingly harsh as the mines become deeper and hotter, but they are too unprofitable to pay workers high salaries.
Unless some new technological innovation occurs that allows mechanized mining in economically-stretched gold and narrow-reef platinum mines, they will go the way of 19th-century whalers.
And if mechanization and automation do save the mining industry, it will be a rocky changeover, with unions lashing out against escalating layoffs.
Over the next few years, expect more discontent and unrest as mines continue to pay low wages, shut down, or move towards automation.
Is there an upside?
New mines that are developed using automation, employing a low number of skilled and highly-paid workers from the outset, might avoid the turmoil that will affect older gold and platinum mines in South Africa. New mechanized platinum mines, which employ fewer people and offer better pay and superior working conditions, might stand to benefit.
The world is dependent on new platinum supply for industrial uses, and the price of platinum could rise as production at older mines decreases.
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