Mining a New Face.

If there ever was a proclaimed “second” oldest profession in the world one may suggest that it exists in the long history of mining. Since the beginning of time man has utilized the physical earth and its geological provisions for the advancement of civilizations around the world. From the basic flint in sparking a fire to the refining of rare metals producing space age gizmos, mining has evolved in partnership with technology. Today’s mines, with the advancement of technology, operate deeper, faster, and with fewer people. So while miners are cutting new faces deep below the earth is it any surprise that mining promoters are working on a new face of their own. Facebook.

In the information age, filled with rapidly advancing technologies, a popular social networking site known as Facebook has become the latest tool for mining promoters to reach investors around the world. Promotion has always been about getting the word to the street and top end investment relations personnel appear to have not missed a beat. It seems only yesterday that bullboards and costly private investment forums were cutting edge developments for investors to seek information and discuss updates regarding their prized resource stocks. Today it is the world of Facebook that is making its mark as a free and easy to access reference for info hungry investors.

Cypress Development Corp. (CYP.V), a Vancouver based junior mining company has become one of the pathfinder companies to take advantage of a free social networking site in order to get information to the investor. The group consists of approximately 130 members from around the world including places such as Canada, Bulgaria and China. More importantly, the group can be viewed by anyone with access to Facebook and not just the groups active members. Information is readily available in a convenient format covering the basics of company information and recent updates. Investor relations personnel have gone as far as to post updates on current drill project status inclusive of depths and targets in near real time. Furthermore the social networking capabilities of facebook make it possible for individual investors from far away to not only converse but understand who each other are.

So if you’re looking for up to date information or further resources on your favourite company, log on and search a little because you may be surprised at not only what but who you find. Cypress Development Corp. closed yesterday up $0.075 or 30% on 1,584,780 shares traded.

Canadian budget and mining

So the Canadian government released it's set-back, revised and altered budget earlier this week. The impact it has on Canadian miners is mixed, although it does help it could of gone further to help the industry that has made this one of the biggest economies in the world.

The 15% mineral exploration tax stays put until 2010, which is good. I don't see why they have to stop it in 2010 though, unless they simply like to announce it every year to remind us we have it. The elimination of import tariffs on large mining equipment is very welcomed as well, although we produce a large amount of mining equipment we buy from places like Germany and the US for some specialty equipment.

And well, that's it, it certainly could of gone a lot further. Pretty dull if you ask me, but then again so was the entire Canadian budget in my opinion. At least we didn't get a bailout like it was rumoured a while ago though.

Protectionism

"All politics is local"

A popular phrase usually uttered to explain the short-sighted outlook of politicians, the reality of that simple saying has become blatantly clear in recent weeks and it scares me.

Globalization and balanced budgets be damned, protectionist issues and Keynesian economics have taken over the world. America's proposed Buy America clause along with Brazil's newly implemented tariffs and Europe's dairy subsidy seems to only be the beginning of new protectionist tactics to preserve jobs within nations. Of course, every economist in the world sees the harm in this, it is widely accepted that the tariffs implemented during the Great Depression helped in worsening the situation. Yet...what are we seeing here? It's like watching a car crash in front of you in slow motion and you can't apply the brakes, you know that this will end badly but you can't do a thing about it. It is incredibly narrow minded to believe that other nations won't retaliate with their own tariffs or clauses if a major importer/exporter does so first, at the same time it is ridiculous for other nations to retaliate, because that would only make it worse. All we're seeing is politicians trying to score points for their own constituents, they are trying to show that they are doing everything they can to save their jobs and guarantee them a future. All they are doing though is saving a select few jobs and risking a slew of others, but it's easier to blame others for the loss of those jobs right? How can you blame the guy who saved the steel making industry for the job loss of the farmer or software engineer?

I sincerely hope that the Americans revisit there steel and iron clause and especially back away from the proposed "manufactured goods" extension the senate is flogging. Globalization and free trade has built, sustained and helped millions attain wealth, to abandon it when the economy needs it the most is self-centered and ignorant of basic economic principles.

A lesson on economics from an unlikely source

Here is a exert from a speech at the Davos World Economic Forum, a G20 world leader said this, guess which one?

"Esteemed colleagues, one is sorely tempted to make simple and popular decisions in times of crisis. However, we could face far greater complications if we merely treat the symptoms of the disease.

Naturally, all national governments and business leaders must take resolute actions. Nevertheless, it is important to avoid making decisions, even in such force majeure circumstances, that we will regret in the future.

This is why I would first like to mention specific measures which should be avoided and which will not be implemented by BLANK. We must not revert to isolationism and unrestrained economic egotism. The leaders of the world's largest economies agreed during the November 2008 G20 summit not to create barriers hindering global trade and capital flows. BLANK shares these principles. Although additional protectionism will prove inevitable during the crisis, all of us must display a sense of proportion. Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent. Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state. And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."

I've been busy lately, as you may have noticed. I'll be back and posting regularly a little more from now on.

Rusoro makes bid for Gold Reserve

This just gets worse and worse to watch. Rusoro is now launching and all share bid for Gold Reserve, read the details of the proposed deal here. The offer values GRZ and its Las Brisas property at a buck 8. Yes, that's a possible 10 million ounces of gold worth...61 million dollars? Am I doing my math right? Rusoro obviously talks like they are doing something great here offering them a 108% premium to Friday's closing price and over 200% premium to the last 30 days trading but my goodness. They are obviously avoiding the fact that the reason the stock is worth garbage is because they entered into an agreement with the Venezuelan government in November announcing they were going to rob Gold Reserve and Crystallex of the land they have been working so hard on developing all these years.

This is an insult to the mining and investment community. Venezuela and Rusoro created the stock collapse of GRZ, it was purely fabricated so they could sweep in and "legally" take over the asset. Worse part is that I have no doubt that those snakes bought at those low, low prices, they knew exactly what they were going to do, not only will they be stealing a huge gold deposit but they will make millions in the process. It's lunacy! How can we sit and watch this unfold without acting, this will set a dangerous precedent if it is allowed to develop the way it is going and we as investors and miners will be setting ourselves up for more of it unless we take a hard stand.

It's one thing to accept your losses and move on but it is another to submit yourself to the will of others. Gold Reserve deserves better, I doubt they will receive it, but this just isn't right.

Barrick, taking the lead in innovation

This is a story that I enjoy very much, Barrick last year announced they were going to award a $10 million prize to the winner of a contest. The goal? to improve their silver recoveries at their Veladero gold mine in Argentina where they were struggling with 6 to 7% recovery of the metal. Barrick was unlocking a fraction of its estimated 180 million ounces of silver at the mine so they decided to let the general public and scientific community help them out in finding environmentally safe and economic ways to better the extraction process.

So far nine finalist have advanced to the final testing process and they have each been given a $25,000 prize, the remainder of the research and test costs will be covered by Barrick.

I wish all the candidates the best of luck and hope that the winning method greatly improves the silver recoveries.

Mining bailout?

Am I reading this right? The Canadian Conservative government wants to add the mining industry to its proposed bailout list? It doesn't make a whole lot of sense to me right now but we also haven't really seen what they are proposing, it's not like they can give money to big producers who made bad decisions and force them to keep mines open. Unless they can manipulate the commodity prices there's not much a government can do.

If subsidies is what they're after it's a different story and it's about damn time we get the respect we deserve, as Canada's leading industry, mining is what makes us a world power and it's what makes our economy one of the strongest in the world. For too long we were taken for granted to provide high paying stable jobs and generate millions in taxes.

When the times for mining are good we're ignored and they try to squeeze every penny out of us. Now the times are bad and they are reversing course to "save jobs", it's all become a big show. Facts and basic economics are being ignored for the sake of a stimulus package that is being forced down the throats of Canadians. I'm sorry, but I'm not buying it. Mining in Canada is controlled by investors and the cycles of commodity prices, not by governments.

Shareholders sue Crystallex

So shareholders of Crystallex have launched a class action law suit against the company claiming fraud. As has become common practice lately when a company gets screwed, the shareholders think they were entitled to certainty and security and want some of their lost money back. Sorry, but you invested in an extremely volatile sector (junior mining) in an extremely risky part of the world (Venezuela). You knew your investment was a big risk, if you didn't know and believed every word the company said well I'm afraid you've just been taught a big lesson in due diligence.

Yes, you were robbed, Venezuela played you and Crystallex for chumps, good luck in your other investments. I hope this case gets thrown out of court though, Crystallex will be busy enough fighting (and failing) to win their claims to Las Cristinas in courts. They don't need this side drama.

Labour shortages in mining, continued

As the onslaught of negative news from miners flood the news, from Rio Tinto cutting 14,000 jobs to Sudbury losing more mines and Cameco laying off staff, closures and project cancellations are everywhere. Good, skilled workers are sent to the streets to look for more work and the lucky ones get severance or early retirement packages. These aren't average jobs or low paying wages either, the mining industry is the highest paying industry in Canada with weekly salaries at over $1000 on average.

Miners shell out big bucks to grab top talent, experienced engineers, geologist, drillers, miners, heavy equipment operators and metallurgist can easily make over $100,000 a year. Forestry workers were flooding over to mining in the last few years, students at Universities were hired before graduating and promised jobs making $300+ a day. But the sad reality is that this industry is hard on people and a lot of individuals can't cut it and quit after a few years or months. The isolation, long rotations and harsh environments can take a tole on any person.

I remember working 90 or 95 days without ever having a day off. Stuck in a shack no bigger than a living room for months on end through a northern Ontario winter. I remember pulling rods from the top of a drill tower at 2am on a cold November night and I remember getting ready for a big staking rush the very next week. I recall walking through a swamp with my map over my head for fear of getting it wet and I remember (3 hours ago) trying to map over a mile underground, with 2 scoops loading trucks and a jumbo drilling right by my side. The air was dusty and it must of been 40 degrees or more with the exhaust of the equipment running. For some, they thrive in this environment, others just can't be bothered.

Many mines or exploration projects are located in isolated areas and long rotations are a given, being away from family and friends just isn't worth it for some people. Fortescue in Australia just recently announced they wanted to reduce the amount of fly in fly out people, too many marriages and families were being broken they claimed. They are 100% right too, anyone who's worked in mining for a while knows of someone who's gone through something like this. The big mines in Sudbury or Timmins don't have a hard time getting staff, it's the ones in the Arctic or northern Saskatchewan that do.

Whatever the case, someone who works in mining has to be passionate about what they do, otherwise no amount of money will keep them working.

Labour shortages in mining

The skilled worker shortage that has gripped mines, exploration companies, contracting firms, mining supply chains and every thing else related to mining was a very big issue for the last few years and it will be an even larger one by the time the next commodities boom arrives. Having a lack of qualified and trained engineers, geologist, miners, drillers and other important mining personnel can cripple, delay, make them less efficient or profitable or even downright shut them down. As cliché as it sounds, the most important thing for any company is not its assets, properties or cash reserves, it is the men and women who make up its workforce.

This latest crash in commodities has been devastating for skilled mining industry workers but the huge shortage of people that was already in place has helped people in finding new work. Most mines were operating short an engineer or geologist, two or three in some cases. Good miners and drillers were harder to find than deposits and it wasn’t uncommon to find exploration companies delay drilling programs because they had no one to log the core. The causes of these shortages were numerous; the infrastructure to train and educate mining industry people simply didn’t exist or were woefully inadequate and underfunded being the biggest factor. Most older geologist will talk of the early 1990’s when jobs for geologist were almost non-existent, this pushed many to look for work in different industries. Enrollment into Mining Engineering or Geology programs dropped drastically and funding for those programs were greatly reduced. By the time Universities and Colleges caught up with the industry it was almost too late. Just last year Confederation College in Thunder Bay started offering diamond drilling and line cutting courses. A good idea but 5 years too late, I wouldn’t be surprised if the program gets cut or its funding reduced in a year or two when no one signs up for it.

It’s a terribly frustrating cycle, but the next boom will be even worse because of our ever aging workforce. It’s no secret that our skilled workers are primarily made up of people close to retirement age, this crash will probably speed up the process and force many into retirement. By the time the next boom comes along, and be sure that it will come, we will be so unprepared and short of workers it’ll be a scary place out there. For geologists like me, it’ll be great, but for an investor, mine manager or project manager, it'll be a hard fight to get the few qualified and experienced personnel running their projects and most will suffer as a result. Many drill programs will be delayed, many mines will be inefficiently run and a lot of job postings will be featured on InfoMine.

Be sure of it.

Gold prices and the Canadian dollar, now and then

The price of Gold has gone up exponentially in the last 6 or 7 years, from $300 to $1000 the change has been dramatic and a big welcome to Gold miners around the world. But for Canadian, Australian and other world miners, the change of price hasn't been as great as it may seem and its fall from $1000 is not really a fall at all. I'll focus on Canada for this post but the calculations can be applied for any other currency.

When the dollars are at par, the price of Gold is the price of Gold, simple enough.
So using ($1USD)/($CDN) x (price of gold).

In 2001 when Gold was $300 and the dollar at .65, Gold was actually at $461
in 2003 when Gold was $430 and the dollar at .75, Gold was actually at $573
in 2006 when Gold was $650 and the dollar .87, Gold was actually at $747
in 2007 when Gold was $800 and the dollar .98, Gold was actually at $816
in 2008 when Gold was $1000 and the dollar 1.05, Gold was actually at $952
Today, when Gold is at $815 and the dollar at 0.81, Gold is actually at $1006

$1000 Gold was nice for Canadian producers, but cheaper gas, a lower dollar and $815 Gold is even better. If Gold returns to $1000 dollars and the Canadian dollar continues to falter against its American counterpart, miners will continue to make healthy profits.

Teck, giving lessons on what not to do

Fording, Jericho, Galore Creek, Nautilus. What do all these things have in common? They were all recent business ventures of Teck Cominco and they have all proven to be terrible decisions that are helping bring the company down.

The Fording deal is the most publicized, Teck payed $13.5 billion dollars to acquire Fording Canadian Coal Trust literally days before the credit crunch starting destroying the markets. They refused to revise the deal even when the markets and commodities were obviously heading towards lows, it's like a stubborn child sticking to his decision even when it was obvious that it's not a good one. Buying Fording might of seemed like a great idea last year when Teck was cash rich, coal was at all time highs and the future looked promising but going through with this in September was just foolish. Now Teck is stuck with a monstrous debt, a coal company that is worth a fraction of what it was when it paid a premium for it and Teck is now forced to sell off solid assets just to make ends meet. Their dividend payments were suspended and the share price of one of the pillars of Canadian mining has hit 20 year lows, imagine if Teck had not done this deal, they would be one of the best looking mining companies out there right now, cash rich and looking at growing their influence instead of selling it off.

Teck was also involved with Tehera Diamonds, giving them $30 million so they could continue mining operations at their Jericho mine. This was after Tehera had recorded losses on lower than expected grades of kimberlite. Not too long after, Tahera put the mine on care and maintenance and their stock is at around a penny now. $30 million flushed down the toilet.

Teck also acquired 50% interest with NovaGold for the Galore Creek project in British Colombia. The projects development costs were expected to be $2.2 billion dollars which quickly ballooned to over $5 billion before the project was scrapped and put on hold. NovaGold is a whole different story in itself, maybe I'll cover them tomorrow because they rival Teck with bad decisions lately.

Last but not least is Nautilus Minerals, Teck, among others, poured millions into a company planning on mining the sea floor. Giving hard cash for unproven technology, without even an idea as to when, what and how anything will be mined.

This is just a short list of some of Teck's financial decisions that they have done lately and has let up to a steep and major decline in their stock price and financial fact sheet. Until a major turnaround happens in the industry and in the company, they will suffer and will lose millions of dollars worth of assets, the only question now is what will remain of Teck once all the bleeding is over.

I guess we'll just have to wait and see.

Poor Teck...things couldn't of gone worse for them. The timing of the Fording deal was terrible, the choice to buy Fording was terrible and now they're spinning their wheels trying to get out of debt. Investors are abandoning them faster than we can refresh our portfolio web pages.

The COO resigned this morning, Kinross and others will pick away at it and Teck will become a shadow of what it used to be. One of the mining powerhouses of Canada will never be the same after this market crash.

Gold continues to climb

820+

woohoooo!!!

The decline of Junior mining

Junior mining, the companies we love to gamble our hard earned money on and speculate which ones will find the next big mine. Realistically, 90% of the time finding a mine isn't what we're gambling on, we're playing the ups and downs, the pumps and dumps and putting our trust with the management of the company.

Junior mining companies aren't trustworthy, plain and simple. They are greedy, corrupt and shifty organizations that flip from one area to another and fleece the investor time and time again. The ones who actually do find mines or good properties are forced to become legit (or more so) and usually bring in a new board of directors or a new president to revamp its image. It can no longer contract all it's work to its buddies at ridiculously inflated prices or option ground from old friends they used to work with in the "rough times". When times are good, juniors will act like they are spending the investors money wisely, but they are passing it to their friends and families and doing everything they can to line their own pockets. They will do legitimate work, there is no doubt about that, but they will exaggerate in press releases and do everything they can to keep a story alive. Every ethical boundary is flirted with if not blatantly crossed, junior mining is an industry where snakes thrive, the good honest people are lost in the sea of deceitful money grubbers.

Yes, I'm a little bitter, but I also understand that they provide a great service to the mining industry, they get to do the dirty work for the majors and sometimes, they actually find a great deposit and become a mid-tier or major themselves. This economic crash, for all the bad that it has brought to the mining industry, is at least doing some good. It is going to trim the bloated junior mining industry into a slimmer, more competitive industry. The bad properties will be abandoned and the good management teams will survive. Good, honest people will lose their jobs, which is unfortunate, but at least we can hope to see a departure of the bad guys because frankly, mining doesn't need them, they brought us Bre-X, they brought us countless scams, they give a black eye to the mining industry every day. You know who they are, I know who they are, I shake hands with some of them regularly. We don't need them.

I urge everyone who invests in the TSX-V to read the book "Fleecing the Lamb" by David Cruise. It will make you a much better investor, I guarantee it.

ino

I'll be displaying ads from ino from now on, it's a cool site with lots of good features, inotv is pretty cool and the vids there are pretty informative, the trend analysis thing is also a good feature. Check them out if you want.

Markets need to do their job

Uncertainty can be the killer of markets and mining, the impact it has on an industry can be absolutely devastating. It can (and does) destroy companies, close mines, cancel exploration projects and turn an incredible asset into a crippling liability.

When people think of uncertainty and risks in mining people inevitably think of the obvious social, political and environmental factors. A mining company wishing to operate next to or in a park or nature reserve will never have its deposit evaluated to its full potential, the risk of the government, environmental groups or aboriginals interfering and either restricting or denying mining or exploration rights scares and turns away investment dollars. The same goes for a project in a country like Venezuela, recent examples are Crystallex and Gold Reserve who are the victims of a over controlling government that can't be trusted. Ivanhoe and Aurelian had the same problems, sitting on a great deposit but the stock could not respond because the government provided too much uncertainty. New laws, new regulations...change. It just doesn't sit well with investors.

The recent credit issues surrounding the world and crash in commodity prices, mostly due to people expecting less demand for metals has broken down mining and beaten it to a pulp. The demand for metals has helped in shrinking the industry but the uncertainty of markets and mining operations has obliterated it. Mining is already exceptionally vulnerable to risks and uncertainty for the reasons I mentioned above, recent bailouts, stimulus packages and whatever else "help" federal governments have been trying to implement has done nothing to improve the situation.

The confusing nature of all the recent legislation passed has just caused people who were already unsure as to what was going on to get out and abandon the markets in droves. We need to take a step back, evaluate what we have done and respond accordingly, knee jerk reactions to "save" the free market system have ignored the fact that the free market is supposed to correct itself. The only true job of the market system that we are so desperately trying to save by force is to identify a value and price for something. Its job is to wade through the political factors a company faces, calculate its costs, revenue, assets, potential and to come up with a price. One, which is controlled by investors. By throwing a new quick fix every two days we're hurting the shell shocked investor from participating in the free market system and we're increasing to the levels of uncertainty.

Mining already has to deal with too much uncertainty and risks, if we have to implement changes and packages to help instituations from collapsing we have to be able to present them clearly and transparently to the investor. Until then, continue to expect wild volatility in commodities and stocks.

Ecuador mining law to be presented

The piece of legislation thousands of investors, Ecuadorians and mining industry personnel have been waiting for to be released is about to come out. Since Kinross picked up 17 million ounces (or more) for 1.2 billion dollars, outrage ensued and Patrick Anderson is now on the board of directors of Noront (what were they thinking?). Now since the mining investment sector collapsed I've heard a few people say this wasn't a bad deal...thinking short term I can agree but long term, which is what people who had invested in ARU were thinking...this was far, far from a good deal. The only solace the ARU shareholders have is that at least they didn't get robbed like Crystallex and Gold Reserve.

Everyone expects the mining mandate to be pro-mining, even though the president has some extreme factions inside his government he was quoted as saying:

"If there are deep changes to the law, I will veto it and put it up for a popular referendum," Correa said during his weekly media address on Saturday. "The government's political decision is to develop the mining sector."

At least there's some positive news coming out of the mining sector. We'll see what the details of the bill say when it's released but after reading a few drafts, I think it's safe to say this won't have anything major in it that will make people's head spin.

Liberty forced to close

Liberty mines (LBE) announced on Friday that they will be putting their Timmins area nickel mines on care and maintenance. This is a tough place for them to be, another one of those new producers who got a couple mines started right in the thick of record nickel prices. Still dealing with development and start up debt, they needed financing to keep them going, once they realized that wasn't going to happen they were forced to do what many others have done lately and that's go on care and maintenance.

I don't expect this one to be doing anything spectacular for a while, even when nickel prices recover they will be dealing with their debt for a long time, they're not a very attractive company at the moment.

Best of luck to all the workers who got laid off. There's still a shortage of skilled men in the industry.

Copper outlook

Consider this, the world uses up one Escondida per year. That's the world's largest copper deposit, swallowed up by humans every single year. Do we find an Escondida every year? Not even close.

We all know commodity prices don't reflect their true supply and demand but they reflect what speculators think. With the markets contracting, copper is sitting well under $2 and a lot of copper mines are feeling the tight pinch and at risk of closing if these prices remain where they are. This, as we all know it is a cycle, copper will rebound and I think sooner rather than later, we simply use up too much copper and are not finding enough of it. The demand will shrink in the next little while but like the other metals, it will recover, maybe $4/lb was too much but $1.68/lb is definitely too low. Copper is a safer bet than most other base metals, we just don't chew through as much nickel, lead and zinc as we do copper, China and India are the especially strong buyers of the stuff and I don't care what "reduced growth" they keep talking about they are still predicting 8-9% growth for China over the next few years. It's not 12% but it's still a hell of a lot. Unless we find a few Escondidas we're going to be setting ourselves up for some more copper theives running around construction sites robbing people in a few years.

I was talking to the exploration manager of one of the world's largest copper miners the other week and this was the point he kept repeating, the suppression of copper prices simply cannot last very long. Juniors are still scary material to touch but a major or mid-tier producer might become pretty attractive right now.

Of course, do your own due diligence, it's still a rough place out in the mining investment sector but there's money to be made.