In the miningweekly.com article below, Simon Rees reminds us that Canada's transport bottlenecks to our share of growing Asia markets, including sales of value-added product, are due to the limited capacity and competition for domestic rail and pipelines.

Ontario has a great opportunity to create jobs, increase it's revenues and spur 100 years of economic development for all of Ontario. Stop the political goofing around with northern development!

Rather than including the area First Nations as Devco participants from the beginning, the province of Ontario continues to make the same frustrating mistakes made in 2012.

Putting the $10B Nickel cart before the $50B Chromite horse?

Ontario's $1B ROF commitment predicates a solution to which form, (road, rail or slurry pipeline) and which route or combination there of, (Northern East West, Southern East West or North South), is best for transporting chromite ore from the Ring of Fire to supply and deliver chromium concentrate, ferrochrome, and nickel at the lowest long term competitive world price. Apart from transportation. the other significant product cost component is energy. This begs the question: What Blend of Electrical and Natural Gas To Fuel The Ring of Fire and surrounding communities?

Honourable Minister Rickford has explained that matching funds for ROF infrastructure will flow only after a firm written commitment, by both the First Nations and the government of Ontario, to select and develop the proper regional infrastructure network, including mine chromite delivery, is signed and a detailed business plan is made available.

Ontario hired Deloitte to recommend infrastructure decisions but there is still no indication when or if their report will become public. That report will be forced to acknowledge facts; unlike nickel concentrate, chromite can not economically travel a public east west route due to the volume requirements, distance and terrain. Without a marketing solution for the $50B worth of chromite, the return on the $10B worth of nickel will not carry the cost of the total ROF community infrastructure.

Simultaneous development of an East West road integrated into a North South rail or slurry pipeline with a natural gas direct reduction process of chromite ore, translates into the most economic, social and environmental ROF transport infrastructure for Ontario. The East West road should service all nine First Nation communities who signed the Matawa framework agreement.

KWG Resources has offered to transfer it's corridor mining claims for public use into the "James Bay & Lowlands Ports Authority" or "Devco" and help facilitate private financing the ROF railway or chromite slurry pipeline.

It would be able to privately fund it's proposed natural gas powered chromite reducer and chromite mine, all located in Ontario. This would lead to a revitalized Ontario steel industry.

Canadians and Ontarians should not be forced to pay for a large part of the private mine 'road rail or pipeline' infrastructure, subsidize corporate electrical power rates and see a large part of semi-processed natural resources leave Canada. That goes for KWG Resources too, who have said they don't need government handouts to develop their chromite in the Ring of Fire.

US growth to boost metals uptake despite muted prices




Photo: Bloomberg


US growth to boost metals uptake despite muted prices
By: Simon Rees
3rd October 2014


TORONTO (miningweekly.com) – The US’s economic recovery is continuing to gather pace, supporting the physical demand for metals, Export Development Canada VP and chief economist Peter Hall told members of the Canadian Institute of Mining’s Management and Economics Society last week.

However, investment in metals and the mining industry is likely to remain muted as money continues to move away from commodities or commodities-focussed companies into other sectors promising higher returns.

REBORN IN THE USA

Hall highlighted US housing starts as a positive leading economic indicator and one that also bodes well for mining as new homes require metal-intensive fixtures and fittings. “As a leading indicator, housing starts are exciting because it’s about all the stuff that goes into homes, all the furnishings, appliances and so forth,” he said on September 25.

US auto sales continue to improve and support metals uptake. “Auto sales have been doing well as Americans have been doing something that’s very un-American for several years now – they’ve been driving around in clunkers and not buying new vehicles.”

“Better yet, there’s still some way to go here as the average US automobile is over ten years old, even with the pace of the recent buying activity factored in,” he added.

In addition, US manufacturing continues to improve. “The beleaguered US manufacturing sector, which is not supposed to come back for another five or six years, is growing,” Hall said.

Given the growth, companies will have to invest in additional capacity as increases in production use up spare capacity. “We’re now on the threshold of a dramatic increase in business investment. In fact, it’s happening already,” Hall said.

Growth for 2014 will be comparatively robust. “I’d say the USA will achieve between 3% and 3.5% sustained growth, and I think it will be towards the higher end of that. Next year is looking strong too,” he said.

The debate about tapering and an end of quantitative easing (QE) were positive signs as well. “After all, nobody would be talking about tapering and the end of quantitative easing if it wasn’t for growth,” Hall said.

However, the full effects of the tapering will not be immediately apparent. “QE has never been done before and neither has the withdrawal of QE,” he explained.

“Central banks might say: ‘It’s just the mechanism reverse – why’s everyone so worried?’ Well not so fast; there’s the potential for unintended damage … We have entered virgin territory, shifting economic gears at the same time,” he added.

“Regarding interest rates, our forecast is for US levels to start rising in late March 2015, followed by a sequence of increases occurring over the following two-and-a-half years, taking rates up to 4% nominal. Canada is about six months behind that curve,” he added.

MONEY MATTERS

But not all developments stemming from the current growth will have a positive effect on the mining sector; money is seeking returns from higher-yielding sectors and its withdrawal away from mining and metals is likely to continue.

“The past few years witnessed a flood of liquidity looking for yields. But where did the money go? Well a lot of it went into your space, the mining sector,” Hall said. “I believe this created huge mispricing over the past five years, building the illusion that it was real.”

“Today, chief financial officers have noticed the growth and are saying: “Investing in the thing we do best is finally looking more attractive.” So what do they do? Well they go back to their normal [pre-recessionary] activities,” he explained.

However, the blow of money exiting the system will be tempered as industrial production rises and the level of physical uptake improves on this. “But the two elements don’t exactly balance each other out,” Hall said. “We believe there will still be a downward drift in commodity prices despite the global economy’s revival.”

“Precious metals are likely to face a bit more of a drubbing. Incidentally, I’ve received quite a lot of hate mail for speculating that gold will be at a triple-digit level in three years,” he quipped.

Copper is likely to remain on a downward trend. “We believe something below the $6 600 /t [London Metal Exchange] level is where it will land. The turnaround would not occur until somewhere around 2016, with modest appreciations from there,” he said.

“With oil, we’re looking at a low-$90 level for a barrel of WTI [West Texas Intermediate]. That speaks to how much capacity was created and bought into the system due to the previous high prices,” Hall said. “Geopolitical concerns notwithstanding, and Russia notwithstanding, we believe these prices will be quite well behaved.”

BOTTLENECKS

Other factors likely to affect the extractive industries’ outlook relate to infrastructure. Both Canada and the USA have rail capacity issues, with oil shipments often prioritised due to the absence of pipeline capacity.

“This means you might have a hard time getting your ore or minerals onto a train and transported to the coast or south across the border [for Canadian companies exporting to the US] because track space is being subscribed by something else,” Hall said.

For Canada, the portside capacity is vital as the country continues increasing the level and percentage of exports into the emerging markets, particularly in Asia. “Since 2003 something remarkable has been transforming the Canadian trade picture; our trade with the emerging markets is now at 12% and growing. This includes high value-added, medium and primary products,” Hall said.

“But the difficulty with infrastructure is that it can’t be put into place immediately and most of the shovel-ready stuff we had was completed during the stimulus,” he cautioned. “And remember that it’s not the government’s total responsibility as business has a stake too.”

“These things are well understood in Ottawa [Canada’s federal capital],” he continued. “The government knows that exports are the engine that will drive Canada forward and that they need to facilitate them as much as possible.”

Edited by: Creamer Media Reporter