Miners Look to Gold For Stability

Seeking to find greater financial stability amidst turbulent economic conditions, miners of all sizes are investing in gold operations, the Wall Street Journal reports today.

The US dollar's rise in recent months has resulted in lower production costs (in nations whose currencies have dropped against the dollar) and created a favorable seller's market for the metal.

Unlike base metals such as copper and nickel, whose prices have been hit dramatically due to an approaching global recession, precious metals like gold and silver prices still enjoy a positive mid-to-long term outlook.

> Some Miners Expand Efforts in Gold Market [WSJ via metalprices.com]

Vale Cuts Iron Ore Production

Vale (formerly CVRD), the Brazilian mining giant and world's top producer of iron has announced that it will slash its annual production of ore by 30 million tons, which accounts for roughly nine percent of its 2008 forecast.

The reduction comes as the credit crisis has forced steelmakers to cut their own production quotas by 20 percent, on average -- a potent indicator of the economic conditions that are still yet to come.

The company also plans to trim production for aluminum and manganese ore.

> Vale adjusts to the new global economic scenario [official press release]

BHP, Rio Forced to Share Pilbara Railways

It seems as though Fortescue Metals, considered a "third force" in Australia's Pilbara, has succeeded in its bid to secure acceess to the region's strategically-significant railyway lines, currently operated soley by heavyweights BHP Billiton and Rio Tinto.

Australian Federal Treasurer Wayne Swan today opened three key lines to third-party access, forcing the current duopoly to negotiate with other mining firms for entry contracts for the next 20 years.

Fortescue truly entered the big league of iron when it delivered its first shipment of Pilbara ore to China in May of this year.

(For just an idea of how much tonnage the special delivery trains can haul, watch this YouTube video)

> BHP Billiton, Rio Rinto angry on open Pilbara rail line [Herald Sun via news.com.au]

Unconventional "Mines"

MetalMiner, a great blog I started reading recently, carries a fascinating post on "landfill mining".

True or false: U.S. landfills could provide enough steel to equal four full years of American steel production. The surprising answer? True. Already consuming approximately 100 million metric tons of scrap steel each year, the U.S. steel industry recognizes that landfill mining is estimated to uncover more than 400 million metric tons of steel. Further, some experts estimate that there’s more aluminum in landfills than the concentrations in iron ore, and trashed computers could provide more gold, copper and mercury. Landfills, it seems, are evolving into gold mines.

This idea reminds me of a Reuters article from earlier this year about "urban mining" in Japan. What the nation lacks in physical resources, it makes up in recycling efficiency. Firms like Dowa's Eco-System Recycling Co. might be pinched as metals prices fall to earth, but future upswings in commodities markets (perhaps as soon as H2 2009) could prompt greater innovation and growth potential for this promising niche sector.

Flurry of Controversy Surrounds Alaska Mine

The run-up to the US presidential election has highlighted a number of wildly divergent views on how best to make use of America's natural resources.

Alaska has, of course, been a big flash-point in the debate. While hydrocarbon extraction invariably comes up in discussions of Alaska's economy, two of the state's other big industries are presently locked in a vigorous battle over lands that hold great bounties of non-petroleum riches.

The Pebble Mine, located at the mouth of Bristol Bay, is the site of significant interest for both commercial fishing operations and a handful of mining companies, including the US unit of Anglo American. The bay is a major spawning ground for wild salmon; the mine promises access to vast reserves of copper and gold.

If state regulators give their approval, mining companies plan to carve an open pit that would rival the world’s largest mines, descending half a mile and taking as much energy to operate daily as the city of Anchorage. That prospect has ignited a war between Alaska’s two historic industries, mining and fishing.

Scientists and former state and federal biologists warn that toxic residue from the project, known as Pebble Mine, would irreparably harm a centuries-old salmon fishing industry that employs 17,000 and hauls in $100 million annually.

Gov. Sarah Palin has witnessed the simmering tension between the two sides since the start of her term, her position on the matter officially neutral. Yet mining companies have already paid to fly Todd Palin out to tour mines in the area on a fact-finding mission, and several prominent lawmakers have alleged that the state government has been involved with inappropriate arrangements with native leaders who reside in surrounding communities.

Amidst all of the controversy, the fate of the Pebble Mine is uncertain at this point, but as the NYT reports: "Alaska regulators, however, have never rejected an application for a large mine, according to state officials."

> Palin's Hand Seen in Battle Over Mine in Alaska [NYT]
> Pebble Partnership [official site]

Credit Crisis Hits African Projects

The rush to exploit Africa's vast reserves of natural resources is expected to slow dramatically as the current financial crisis forces sharp cutbacks in exploration budgets. A weakening outlook for African oil is already being seen. Major mineral projects on the continent are now expected to be postponed or scrapped altogether as mining firms confront the twin blows of decreasing demand for raw materials and unfavorable financing terms.

The impact of this credit crisis on the leading economies Africa will be enormous, where mining activities have accounted for signifcant recent growth. The downturn is expected to hit mineral-rich Guinea and Congo (DR) especially hard.

> Financing pinch may squeeze Africa mining projects [Reuters]

Financial Crisis Spurs Commodities Slowdown

"Is it the end of the party for natural resources?" This is the question that BusinessWeek poses today, and it's a legitimate one considering all that has happened in the global financial markets in the last couple of weeks.

It might be tempting to abandon all hope in the markets given the current economic climate, but I'm inclined to say no, I don't think that the commodities boom has seen its end yet. It's true that slowing demand for raw materials has resulted in price weakness for many metals, but I think large industrial projects in both China and India will power sustained growth for the sector in the long term.

> Mining Tries to Dig Its Way Out [BW]