Canadian Mining Journal August 2016

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August 2016

PRODUCTION MEANS PROFITS FOR

CANADA’S

TOP 40 PRODUCERS

Canada Post Canadian Publications Mail Sales Product Agreement No. 40069240

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CANADIAN Mining Journal www.canadianminingjournal.com

AUGUST 2016 VOL. 137, NO. 6

22

FEATURES CANADA’S TOP 40 MINERS 11 CMJ’s annual look at how Canada’s Top 40 mining companies are performing.

SUNCOR OVERCOMES CHALLENGES 22 A Top 40 performer overcomes tough economic times, plus recent fires that threatened its Alberta operations.

26

VICTORIA GOLD CONTINUES TO ADVANCE 26 Eagle Gold site in Yukon moves closer to becoming Territory’s

next mine.

FALCO RESOURCES RESTORES MINE 30 A Historic Quebec mine gets new life thanks to company’s renewed interest.

FORTUNE MINERALS WELL POSITIONED IN NWT 34 Growing need for ‘energy metals’ keeps company moving forward with shovel-ready project.

DRONES 37 A Special Report looks at this transformative technology and how it’s changing the way that miners, prospectors and developers are conducting business.

DEPARTMENTS 5 EDITORIAL 6 FIRST NATIONS 8 IN MY MINE(D) 49 LAW 52 CSR & MINING 54 UNEARTHING TRENDS

AUGUST 2016

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37 ABOUT THE COVER

This month’s cover provided by SMS Equipment and Komatsu.

Coming in September

MINExpo, one of the larger trade shows and conventions devoted to the mining industry, will be featured in this issue.

For those attending the show in Las Vegas (Sept. 26-28) you are invited to visit CMJ’s Booth 4377 in the Central Hall at the Las Vegas Convention Centre.

For More Information

Please visit www.canadianminingjournal.com for regular updates on what's happening with Canadian mining companies and their personnel both here and abroad. A digital version of the magazine is also available at www.digital.canadianminingjournal.com

CANADIAN MINING JOURNAL

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CANADIAN Mining Journal

EDITORIAL

Old news is still new to some

August 2016 Vol. 137 — No. 6 38 Lesmill Rd. Unit 2, Toronto, Ontario M3B 2T5 Tel. (416) 510-6789 Fax (416) 447-7658 www.canadianminingjournal.com

Editor Russell B. Noble 416-510-6742 rnoble@canadianminingjournal.com Field Editor Marilyn Scales 613-270-0213 mscales@canadianminingjournal.com Production Manager Jessica Jubb Circulation Manager Cindi Holder 416-510-6789, ext. 43544 cholder@glacierbizinfo.com Publisher & Sales Robert Seagraves 416-510-6891 rseagraves@canadianminingjournal.com Sales Western Canada, Western U.S.A. and Quebec Joelle Glasroth 416-510-5104 jglasroth@canadianminingjournal.com Toll Free Canada & U.S.A.: 1-888-502-3456 ext 2 or 43734 Group Publisher Anthony Vaccaro

Established 1882 Canadian Mining Journal provides articles and information of practical

use to those who work in the technical, administrative and supervisory aspects of exploration, mining and processing in the Canadian mineral exploration and mining industry. Canadian Mining Journal (ISSN 0008-4492) is published 10 times a year by BIG L.P. Mining.

BIG is located at 38 Lesmill Rd., Unit 2. Toronto, ON, M3B 2T5.

Phone (416) 510-6891.

Legal deposit: National Library, Ottawa. Printed in Canada. All rights reserved. The contents of this magazine are protected by copyright and may be used only for your personal non-commercial purposes. All other rights are reserved and commercial use is prohibited. To make use of any of this material you must first obtain the permission of the owner of the copyright. For further information please contact Russell Noble at 416-510-6742.

Subscriptions — Canada: $51.95 per year; $81.50 for two years.

USA: US$64.95 per year. Foreign: US$77.95 per year. Single copies: Canada $10; USA and foreign: US$10. Canadian subscribers must add HST and Provincial tax where necessary. HST registration # 809744071RT001.

From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-888-502-3456 ext 2; Fax: 416-447-7658; E-mail: cholder@glacierbizinfo.com Mail to: Cindi Holder, BIG Mining LP, 38 Lesmill Rd, Unit 2, Toronto. ON, M3B 2T5.

We acknowledge the financial support of the Government of Canada through the Canada Magazine Fund toward our editorial costs.

AUGUST 2016

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By Russell Noble

T

he last thing I write before the deadline of every issue is my Editorial. Not because I’m saving my words of observation to the very last minute for research purposes, or anything like that; it’s usually because I often find it challenging to single out any one topic worth talking about.

After all, there are plenty of mining-related things happening between each issue, and each deadline, that I think are worth commenting on, but when it comes time to write about them, something else seems to comes along that’s even more interesting and newsworthy.

Or, more often is the case, they’ve already been covered by other media with a frequency that makes a hot topic old news by the time we publish it in a monthly magazine.

Take the recent fires in Alberta and Saskatchewan, for instance. We all know about what hardships this disaster has had on the provinces, their people, the wildlife, and the mining companies that have projects in the affected areas.

Without question, the fires are the topic of the year insofar as mining (and the entire landscape of northern Alberta and Saskatchewan is concerned) and there’s nothing more I can say here that hasn’t already been said and televised around the world.

Then there’s also the on-going issues involving the pipelines, and most recently, the Canadian high court cancelling of the 1177-km Northern Gateway pipeline project that was proposed to run from Alberta across northern British Columbia to the Kitimat port.

It’s been one thing after another with the pipelines that have made them newsworthy from a mining industry perspective, but quite honestly, they’re also old news now that many people don’t care to hear about them anymore.

Sure, they’re still topics of much concern for the thousands of people relying on them to move forward, but I don’t think too many people outside of the immediately affected routes are interested.

Like all mining-related projects, there are two sides to the stories: one side that wants to get on with it, and the other that says: “Over my dead body.”

The latter seems to have won the pipelines’ battle for the moment, but you can bet that it’s not over.

Much like the reality that we’re not over with other newsworthy events that have had a deep impact on the mining industry lately.

Mine closures, and mergers and acquisitions that have resulted in temporary layoffs, or outright “shock and devastation” to entire communities, have been the norm for too many months now and it’s depressing to keep reading about these things.

For me, however, I’ve been around long enough to know that the mining industry is resilient, and moreover, its people tough enough to take a few punches, that there will always be news worthy of talking about, even if it is old in some respects.

And what’s wrong with old anyway?

The Canadian mining industry is old, its members are old, or getting there, and what’s best of all, what’s old is new again when it comes to some mines because, as you will read later in this issue, historic mines are getting renewed attention because of the wealth of resources they still contain.

And that’s old news to some, but new to others, and it’s thanks to the imagination, innovation and initiative of those mining companies out there working now to bring old CMJ mines back to life that mining in Canada will always be newsworthy.

CANADIAN MINING JOURNAL

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FIRST NATIONS

First Nations to benefit from sale of 15 million Hydro One shares

By Isadore Day, AFN Ontario Regional Chief

F

irst Nations are ready to secure our rightful place in Ontario – both socially and economically. The announcement of an Agreement-in-Principle to collectively purchase shares in Hydro One is a significant step towards the promise of future sustainable prosperity for our Peoples. It may take up two years for all of our First Nation communities to officially sign off on collectively owning up to 15 million shares.

In some respects, we have been waiting over 250 years for this opportunity.

First Nations were never given the opportunity to own shares in the Hudson Bay Company when it was first established to trade with our Peoples over 300 years ago. And, despite Treaties intended to equally share the wealth and resources, First Nations have only received the dividends of despair and dysfunction.

We have been marginalized in terms of land, water and human rights. We continue to suffer under an institutionally racist Indian Act. This is not what our ancestors envisioned when we sat down with the Crown to make binding agreements on trade, commerce, peace, and prosperity.

In 1764, our ancestors gathered in Niagara to re-affirm the Royal Proclamation of 1763. The Treaty of Niagara was witnessed by several thousand First Nation leaders from the east coast to the mid-west. The ceremony was held near a place of great power – Niagara Falls. Niagara – or Niagagarega – has been occupied by our Peoples for thousands of years. In fact, remains of villages dating back 4,000 years have been discovered along the banks of the Niagara River.

Hydro One – what used to be Ontario Hydro – was established over a century ago, in 1906, to build transmission lines from Niagara Falls. Over the decades, our lands were expropriated and flooded to build these lines and expand hydro operations. Now, we are finally coming full circle, thanks to a provincial government that is taking seriously its inherited commitment to uphold the Honour of the Crown. In her Statement of Reconciliation on May 30th, Premier Kathleen Wynne said, in part: “Our shared history begins around 400 years ago. When Europeans first arrived, the generous partnership of Indigenous Peoples helped them establish profitable enterprises and settlements. In 1763, the Royal Proclamation confirmed the original occupancy of Indigenous Peoples and paved the way for nation-to-nation treaties between the British Crown and Indigenous Peoples. Treaties were negotiated and signed with the intent of delivering mutual benefits.

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In Ontario, most of this happened hundreds of years ago. To some, seven generations ago can seem disconnected. Yet we know that our history is always shaping our present. And for some of us, treaties are part of the history that shapes our prosperity. Treaties granted us land to live on and water to drink. They are the foundation on which the short history of our country has carried forward – a history in which every generation has built a better life by building on the achievements of the past.

But it’s only one side of our story. For Indigenous people in Ontario, this same history created a very different reality. Despite the promise of early treaties and the respectful, nation-to-nation partnerships they established, Indigenous Peoples became the target of colonial policies designed to exploit, assimilate and eradicate them.”

In my response, I stated, in part: “The Political Accord being implemented in Ontario; the commitments of both the Federal and Provincial governments that follow the Truth and Reconciliation Commission’s Calls to Action; and the full adoption of the United Nations Declaration on the Rights of Indigenous Peoples. These are all powerful signals of a new relationship based upon equality, restitution, and recognizing our sovereignty as Nations.

Today, we will walk together on a path towards building happy, healthy First Nation communities. We will end the scourge of suicide. We will end the epidemic of missing and murder Indigenous women and girls. We will return Our Children to their Families.”

We will work together to build economies – in the Spirit and Intent of the Treaties. We will work together to combat climate change. We will work together to return Ontario to the beauty and bounty that first attracted the settlers to our lands. We will strengthen Indigenous Peoples’ connection to our Mother, Mother Earth.”

Today, through our modern Political Accord in partnership with Ontario, and Reconciliation with our Peoples, we can realize an economic opportunity stemming from that long ago binding covenant of friendship and sharing at Niagara. Having meaningful equity participation in Hydro One is a unique long-term wealth creation opportunity for First Nations. This demonstrates the real potential set out in the principles in the Political Accord when supported by a shared commitment for change.

More significantly, we now have the opportunity to secure our rightful place not only in the energy sector but in the economy as a whole. Our ancestors would be proud, and our children will CMJ finally see the prosperity promised so very long ago.

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IN MY MINE(D)

Innovative strategies for a New Era of Mining

By John Bianchini, Chief Executive Officer, Hatch

G

lobal and industry forces are changing the world of mining as we know it. Mining companies are faced with new challenges, including heavy debt loads, oversupply of many commodities, and more complex, lower-grade ore bodies. Overlaying the traditional mining cycle is a new level of complexity. Society and business are being reshaped by rapid advances in technology, and stakeholder engagement has increased. Shifting public attitudes are moving us toward a more sustainable, lower-carbon future.

The mining industry has reached an inflection point. The days when cost-cutting alone could solve every problem are behind us. As an industry, we need to explore new ideas, including disruptive technologies and innovative business models. We need to change the way we think about mining, to adapt to these unprecedented changes and emerge stronger.

Modern Mining

In the future, mining companies will need to consider ways to create financial, social, and environmental value from mining projects. That means developing more innovative strategies that increase the value of mining operations, while identifying ways to create positive social and environmental outcomes. Today, that means converting challenges into opportunities.

A new energy approach at Glencore’s Raglan mine illustrates this. Raglan has set a new precedent for harvesting wind energy on an industrial scale in Canada’s North, while creating benefits for local Inuit communities. Working together with Hatch and implementing our unique Microgrid controller technology made it possible to bring stable, renewable power to a site that had been heavily reliant on diesel. As an integrated team, Glencore, TUGLIQ Energy (owner of the wind turbine and storage system), and Hatch were able to overcome great challenges to make this remarkable project a reality.

Over the last decade, our engineers have developed and implemented more than 40 unique technologies that have given our clients a competitive advantage. Today, we are partnering with our clients to create, commercialize. and implement technologies that tackle combinations of new challenges for their businesses and society.

At a time when many miners lack capital, one strategy is to support our clients through operational readiness, asset management, commissioning and start-up. In other words, better operational support. At the same time, we see great potential in new digital breakthroughs and disruptive technologies that are bringing 8|

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new value propositions to the market. Whether it’s drones, 7D BIM (building information modeling), or digital asset management, technologies will play a large role in the mines of the future.

However, some of the technologies being talked about today, when analyzed, have no direct connection to actual problem-solving or value creation. It’s critical that the mining industry has a clear line of sight to those technologies that create real, measurable value and better business results. What’s needed is a compass to find our way – one that uses analytical, fact-based assessments to determine how applying specific technologies, tools, and business processes will add real value.

At Hatch, we’ve found that the best linkages between technologies and value are identified by assessing four key mining intensities: labor, energy & water, processes, and capital. This method evaluates the efficiency of mining processes and resources – the people and workplaces, equipment and production, and energy and water – per unit of product.

Using a value lens to analyze business and technical decisions will provide different answers than a cost analysis alone. For example, an operation may cut staff, but if a fundamental change to technology hasn’t been made to compensate for this loss, the mine’s performance will decline. A value lens can also avoid decision-making that pushes economies of scale beyond the optimum level. So purchasing more super trucks may not be a good investment when considering the incremental costs of moving steel up and down ever-deeper mines and servicing these vehicles with ever-larger facilities.

We know that mining is a water-intensive industry and must be responsibly managed. To reduce water intensity, mineral processing flow sheets must minimize the amount of water that contacts the ore, keeping it as dry as possible, for as long as possible. This has benefits for tailings, water treatment and conservation, and reduces potential environmental contamination.

Smarter Mining Solutions

Globally, the mining industry is moving toward several key enabling technologies that will help build the mine of the future.

As technology integrators, we are working with our clients in several of the following key areas to help move the industry forward.

w Technology Road Maps: In a digital age, the mining industry needs clear technology road maps that provide custom solutions.

The goal is to create integrated, optimized, and appropriate technology solutions for each operation.

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2016-07-22 10:38 AM

w Electrification: Our clients’ vision is clean, safe,

automated mines operating solely on electricity, at half the energy intensity of today. The benefits include a healthier, safer work environment, particularly for underground mines, less diesel, and reduced operating costs. Electrification also lends itself to integrating renewable power into mine control systems.

Harvesting wind energy in Canada’s North.

w Mine-to-Mill: From the very first fracturing of

rock, operators can begin the process of increasing the value of the ore, rather than waiting until it reaches the mill. By using information about geology, minerals, and ore body characteristics, mining can be conducted in a way that makes removing impurities easier and delivers a more valuable end product, faster.

w Mining Automation: Automating a mine makes the entire process leaner and more cost-effective. The automation of mining processes and software is a major focus for the industry right now, but is sometimes misunderstood. When done right, the potential benefits can be anywhere from 10 to 40 percent improvement in productivity. w New Mine Financing: In the future, the industry will need to find cheaper ways to mine and reduce capital intensity. As financial markets take an increasingly dim view of the risks associated

with mega projects, alternative ways to attract investment will become necessary. This may mean reconfiguring aspects of mining projects to appeal to different classes and types of investors, from the high-tech investor to those willing to invest in a project’s infrastructure requirements.

Despite current market conditions, there are good reasons for the mining industry to be optimistic. Bold, new ideas are challenging the status quo. More and more mining companies are looking to smarter, more innovative solutions to overcome today’s challenges. Mining companies and their leaders are becoming more empowered to redefine the way they operate. As this transformation takes place, we’ll need to keep our focus on solutions that deliver real value to the industry, our stakeholders, and a rapidly-changing environment.

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Photos: Chris Fertnig, hanibaram, iStockphoto

A SPECIAL REPORT BY FIELD EDITOR MARILYN SCALES TAKES AN IN-DEPTH LOOK AT HOW CANADA’S TOP 40 MINING COMPANIES ARE PERFORMING

AUGUST 2016

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ANOTHER

ROUGH YEAR SEES

Photo: Grigory Fedyukovich, iStockphoto

LOWERED EARNINGS FOR TOP 40 12 |

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WWW.CANADIANMININGJOURNAL.COM

2016-07-21 9:47 AM

S

C

anadian miners have weathered another tough year as commodity prices stayed stubbornly in the doldrums throughout 2015.

Almost without exception mineral prices fell for the second straight year. Gold, copper, nickel, zinc, iron ore, coal, uranium, potash – all down. The World Bank’s Metals and Minerals Index was 66.9 for 2015 (using 2010 prices equal to 100), down from 84.8 in 2014 and 90.8 in 2013.

Despite the drop in fertilizer prices, Agrium once again heads CMJ’s list of Top 40 mining companies with gross revenues of $18.92 billion. That is a massive amount of revenue compared to Potash Corp. of Saskatchewan that finished fifth with revenues of $8.03 billion.

Filling the spaces between first and fifth are Barrick Gold, second with revenues of $11.55 billion; Suncor Energy’s oil sands business, third with $9.36 billion; and Teck Resources, fourth with $8.26 billion.

Rounding out the first 10 are Goldcorp ($5.60 billion), Kinross Gold ($3.90 billion), First Quantum Minerals ($3.45 billion), Cameco Corp. ($2.75 billion), and Agnico Eagle Mines ($2.54 billion).

As if to underline the sagging commodities markets, only three of these 10 companies recorded net earnings for 2015 – Agrium ($1.26 billion), Cameco ($344.0 million), and Agnico Eagle ($31.5 million). That’s not much considering the 10 companies had total gross revenues of $74.37 billion and each has assets counted in the tens of billions of dollars. Taking the Top 40 as a whole, only 12 companies managed to post positive earnings last year, compared to last year’s survey when 22 of the Top 40 posted profits.

Kudos to every company that made the Top 40, and a special shout out to Detour Gold, 23rd with revenues of $720.1 million.

This is the first time that company has made the list, a special achievement when gold prices fell by almost 9%, taking quite a toll on other miners of the yellow metal. Teranga Gold moved up to the 40th spot from 45 a year ago, and the biggest jump was made by Tahoe Resources, 30 places from the bottom of the Runners-up list to 25th spot last year. Other Runners-up that made their way into the Top 40 were Primero Mining (34th) and Lucara Diamond Corp. (38th).

We also kept track of the 15 companies that almost made the Top 40 list, our Runners-up. The cut-off point was $285 million in revenues. First Majestic Silver came so close with $280.6 million. The Runners-up table is where companies often make their first appearances, and this time there are seven newcomers – Paladin Energy ($255.2 million), Mandalay Resources ($248.8 million), Kirkland Lake Gold ($219.9 million), Banro Corp. ($200.4 million), North American Palladium ($193.6 million), Gran Colombia Gold ($172.5 million), and Silvercorp Metals ($164.4 million). Well done.

AUGUST 2016

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Readers may notice some familiar names have disappeared from our survey, usually due to takeovers. One notable omission is Syncrude. Suncor took over Canadian Oil Sands Ltd. thus consolidating its hold on Syncrude, but that meant no 2015 figures were available for Syncrude.

One way to look at the growth of the Canadian mining industry is to rank whether revenues rose or fell year over year. Lundin Mining boosted its revenues by 78.9%, by far the best showing among the Top 40. Growing revenue was a blessing for 17 of the Top 40.

Yamana Gold squeaked by with an increase of 0.2%. Then there were those companies that lost revenue in 2015 compared to 2014. New Gold lost the least, a mere 0.6%, and Thompson Creek Metals saw revenue fall 38.1%.

To track the growth of earnings, companies must have earnings, and between last year and 2014 only three of the Top 40 managed to increase their year-over-year earnings. Semafo and Lucara Diamond Corp. did very well with increases of 73.0% and 70.1%, respectively. Agrium recorded a 37.2% boost to net earnings. Among the six other companies that managed to report positive income in both years, the amount was down 15% to 85% in 2015.

And finally, a quick look at how the assets of our Top 40 companies changed last year. If you were one of the 19 primary gold producers on the list, you could have expected your assets to fall in value by 20% or 25%. There were exceptions. Tahoe Resources saw its gold-silver assets grow by 105.3%; commissioning the new Shahuindo mine in Peru certainly helped. Of the larger gold producers, Agnico Eagle had the smallest asset value drop, only 1.9%.

Gold producers weren’t the only ones who suffered asset shrinkage last year. Hudbay Minerals saw a drop of 7.6% despite ramping up the Lalor and Reed mines. Thompson Creek Metals took a whopping 38.1% hit. Sherritt International saw its assets slip 22.6%, an amount more typical of gold miners, not nickel miners.

That’s a lot of bad news for Canadian miners, but some analysts are beginning to talk about a revival of commodity prices, led perhaps by gold this year. But much depends upon economies spread around the globe – China, Brazil, India, the Russian federation. We must wait and see. In the meantime, encourage every Canadian miner you know to work smarter – safely, more productively, manage costs – and stay in business. The tide will eventually turn.

As a post script, let me leave you with these numbers from the world’s five biggest mineral producers: Glencore had revenues of $218.07 billion and lost $10.38 billion. BHP Billiton raked in $57.09 billion and had net earnings of $3.51 billion. Rio Tinto took in $49.61 billion and lost $1.11 billion. Anglo American had revenues of $33.42 billion but lost $7.47 billion. Lastly, Vale reported revenue of $33.31 billion and a net loss of $15.51 CMJ billion.

CANADIAN MINING JOURNAL

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Canada’s Top 40

by Gross Revenue (C$ millions)

2015 2014

Rank Previous Company Year end Type Revenue Net Assets Revenue Net 2015 Year Earnings Earnings Loss Loss

Assets

1 1 Agrium Dec 31 Potash, Fertilizer

2 2 Barrick Gold Corp.

Dec 31 Gold, Copper

3 3 Suncor Energy Dec 31 Oil Sands

4 5 Teck Resources Dec 31 Zinc, Lead, Copper

5 6 Potash Corp. of Saskatchewan Dec 31 Potash, Fertilizer

6 10 Goldcorp Dec 31 Gold, Copper

7 9 Kinross Gold Corp.

Dec 31 Gold

8 7 First Quantum Minerals Dec 31 Copper

9 12 Cameco Corp.

Dec 31 Uranium

10 13 Agnico Eagle Mines Dec 31 Gold

11 14 Yamana Gold Dec 31 Gold

12 18 Lundin Mining Corp.

Dec 31 Nickel, Copper, Zinc, Lead

13 8 Turquoise Hill Resources Dec 31 Copper

14 17 Iamgold Dec 31 Gold

15 21 Dominion Diamond Jan 31 Diamonds

16 29 Hudbay Minerals Dec 31 Copper, Zinc

17 16 Eldorado Gold Dec 31 Gold

18 23 New Gold Dec 31 Gold

19 22 Pan American Silver Dec 31 Silver

20 25 Silver Wheaton Dec 31 Silver, Gold

21 20 Centerra Gold Dec 31 Gold

22 26 Endeavour Mining Dec 31 Gold

23 Detour Gold Dec 31 Gold

24 30 B2Gold Dec 31 Gold

25 55 Tahoe Resources Dec 31 Gold, Silver

26 19 Thompson Creek Metals Co. Dec 31 Molybdenum, Copper, Gold

27 31 Franco-Nevada Corp.

Dec 31 Gold

28 24 Capstone Mining Corp.

Dec 31 Copper, Gold

29 40 China Gold Int’l Resources Dec 31 Gold

30 36 Silver Standard Resources Dec 31 Silver, Gold

31 27 Nevsun Resources Dec 31 Copper

32 53 Alamos Gold Dec 31 Gold

33 38 Semafo Dec 31 Gold

34 41 Primero Mining Dec 31 Gold, Silver

35 32 Sherritt International Dec 31 Nickel

36 35 Dundee Precious Metals Dec 31 Gold, Copper, Zinc, Silver

37 34 Golden Star Resources Dec 31 Gold

38 43 Lucara Diamond Corp.

Dec 31 Diamonds

39 33 Taseko Mines Dec 31 Copper, Molybdenum

40 45 Teranga Gold Dec 31 Gold

21,881.1

14 |

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18,922.8 1,263.7 20,946.2 20,517.7 920.9

11,548.1 (3,981.5) 33,647.9 13,095.7 (3,784.6) 43,331.2 9,364.0 (856)

42,967.0 13,694.0 1,776.0 40,979.0

8,259.0 (2,484.0) 34,688.0 8,599.0 382.0

36,839.0

8,030.8 1,624.3 22,342.9 9,100.1 1,964.5 22,669.0 5,595.6 (5,316.8) 27,406.4 4,394.6 2,760.1 35,768.5 3,903.8 (1,265.4) 9,893.6 4,433.4 (1,424.7) 11,448.8 3,450.7 (712.4) 23,812.4 4,530.2 1,270.0 22,796.9 2,754.0 344.0 8,795.0 2,398.0 412.0 8,473.0 2,539.3 31.5

8,547.8 2,426.0 106.2

8,709.1

2,334.0 (2,704.8) 12,183.6 2,347.1 (1,769.0) 15,967.0 2,176.7 (260.4) 8,671.6 1,216.7 157.8 2,090.9 392.8

9,370.8

10,539.1 2,219.8 (306.8) 10,614.4

1,171.9 (963.7) 1,216.5 1,289.1 (254.5) 1,515.2 1,171.3 92.3

3,104.6 961.7

1,133.3 (423.9) 5,729.4 first

602.7

2,947.7

(83.5)

6,204.3

1,104.2 (2,104.1) 6,988.8 1,365.8 136.2 9,456.4 911.8

(257.6) 4,701.0 928.6

(610.2) 4,964.8

862.9

(296.2) 2,193.5 961.7

(696.8) 2,580.9

829.7 (207.2) 7,203.6 793.2 254.3 5,944.5 798.1

53.2

2,123.9 763.3

(52.6)

769.2

45.5

1,348.2 746.4

(419.8) 1,232.8

2,083.6

720.1

(209.2) 3,124.2 685.3

(191.2) 3,218.7

708.2 (185.6) 2,589.2 622.4 (852.3) 2,709.7 664.7

(92.0)

632.0

(172.5) 3,039.4 1,021.8 (158.9) 3,625.6

2,561.2 488.0

116.1

1,247.8

567.4 31.5 4,699.4 565.8 136.5 4,434.2 537.8

(332.5) 2,003.8 839.0

64.5

2,363.0

511.5

(8.7)

53.6

3,969.4

480.0

(159.0) 1,114.9 383.8

3,556.4 355.3

(161.7) 1,261.3

456.5 58.7 1,284.2 709.8 213.1 1,262.0 454.2

(650.9) 3,149.2 368.7

(216.9) 2,918.4

383.8 39.1 999.5 370.1 22.6 790.8 372.6

(136.7) 1,183.1 351.2

(287.0) 1,282.6

335.9

(2,076.6) 4,090.0 455.6

(290.0) 5,283.2

332.7

(60.1)

(75.3)

1,159.0 414.4

1,253.7

326.4 100.3 473.5 420.7 (106.7) 399.3 299.0

99.5

440.2

245.2

58.5

405.4

289.3

(62.4)

990.2

342.9

(53.9)

992.5

287.3 (72.4) 890.4 333.3 28.5 927.0 WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:26 AM

Revenue as % of Assets (C$ millions) Rank Company Type

2015 2015 Assets Revenue as Revenue % of Assets

14 Iamgold

Gold

1,171.9 1,216.5 96.3%

1 Agrium

37 Golden Star Resources

38 Lucara Diamond Corp.

22 Endeavour Mining

30 Silver Standard Resources

7 Kinross Gold Corp.

19 Pan American Silver

33 Semafo

15 Dominion Diamond

21 Centerra Gold

5 Potash Corp. of Saskatchewan

31 Nevsun Resources

2 Barrick Gold Corp.

40 Teranga Gold

34 Primero Mining

9 Cameco Corp.

10 Agnico Eagle Mines

39 Taseko Mines

36 Dundee Precious Metals

24 B2Gold

28 Capstone Mining Corp.

25 Tahoe Resources

12 Lundin Mining Corp.

4 Teck Resources

23 Detour Gold

3 Suncor Energy

26 Thompson Creek Metals Co.

6 Goldcorp

13 Turquoise Hill Resources

16 Hudbay Minerals

18 New Gold

11 Yamana Gold

17 Eldorado Gold

8 First Quantum Minerals

32 Alamos Gold

29 China Gold Int’l Resources

27 Franco-Nevada Corp.

20 Silver Wheaton

35 Sherritt International

Potash, Fertilizer

18,922.8 20,946.2

90.3%

Gold

326.4

473.5

68.9%

Diamonds

299.0

440.2

67.9%

Gold

769.2

1,348.2

57.1%

Silver, Gold

480.0

1,114.9

43.1%

Gold

3,903.8

9,893.6

39.5%

Silver

862.9

2,193.5

39.3%

Gold

383.8 999.5 38.4%

Diamonds

1,171.3

3,104.6

37.7%

Gold

798.1

2,123.9

37.6%

Potash, Fertilizer

8,030.8

22,342.9

35.9%

Copper

456.5

1,284.2

35.5%

Gold, Copper

11,548.1 33,647.9

34.3%

Gold

287.3

890.4

32.3%

Gold, Silver

372.6

1,183.1

31.5%

Uranium

2,754.0

8,795.0

31.3%

Gold

2,539.3

8,547.8

29.7%

Copper, Molybdenum

289.3

990.2

29.2%

Gold, Copper, Zinc, Silver

332.7

1,159.0

28.7%

Gold

708.2 2,589.2 27.4%

Glencore, Rio Tinto, etc.

Copper, Gold

537.8

2,003.8

26.8%

If you think your company

Gold, Silver

664.7

2,561.2

26.0%

should have been included

Nickel, Copper, Zinc, Lead

2,176.7

8,671.6

25.1%

and wasn’t, please contact

Zinc, Lead, Copper

8,259.0

34,688.0

23.8%

the author, Marilyn Scales

Gold

720.1

3,124.2

23.0%

by emailing to MScales@

Oil Sands

9,364.0

42,967.0

21.8%

CanadianMiningJournal.com.

Molybdenum, Copper, Gold

632.0

3,039.4

20.8%

Gold, Copper

5,595.6

27,406.4

20.4%

CMJ converts all reporting

Copper

2,090.9

10,539.1

19.8%

Copper, Zinc

1,133.3

5,729.4

19.8%

Gold

911.8

4,701.0

19.4%

Gold

2,334.0

12,183.6

19.2%

Gold

1,104.2

6,988.8

15.8%

Copper

3,450.7

23,812.4

14.5%

Gold

454.2

3,149.2

14.4%

Gold

511.5

3,556.4

14.4%

Gold

567.4

4,699.4

12.1%

Silver, Gold

829.7

7,203.6

11.5%

Nickel

335.9

4,090.0

8.2%

AUGUST 2016

11-20_CMJ Aug2016_Top 40_REV.indd 15

HOW WE CHOOSE THE

TOP 40 CMJ scours the internet for the public documents of as many as 100 Canadian mining companies. Miners are deemed “Canadian” if they meet two of the following three criteria: They trade on the Toronto Stock Exchange; they are domiciled in Canada; and they own, operate or have a significant interest in a producing or developing property in Canada. That’s why we don’t include Vale,

currencies to Canadian dollars using the Bank of Canada’s average yearly rate.

This year the US-to-Canadian rate was US$1:C$1.279, and there were no other currencies used in the public documents examined to create the Top 40 list.

CANADIAN MINING JOURNAL

| 15

2016-07-21 10:26 AM

Revenue Change Rank Company Type 2015 Revenue 2014 Revenue 2015/2014

12

29

16

25

6

30

32

38

15

9

24

34

23

10

21

20

33

27

11

18

Lundin Mining Corp.

Nickel, Copper, Zinc, Lead

2,176.7

1,216.7

+78.9%

China Gold Int’l Resources

Gold

511.5

355.3

+44.0%

Hudbay Minerals

Copper, Zinc

1,133.3

649.1

+42.7%

Tahoe Resources

Gold, Silver

664.7

488.0

+36.2%

Goldcorp

Gold, Copper

5,595.6

4,394.6

+27.3%

Silver Standard Resources

Silver, Gold

480.0

383.8

+25.1%

Alamos Gold

Gold

454.2

368.7

+23.2%

Lucara Diamond Corp.

Diamonds

299.0

245.2

+21.9%

Dominion Diamond

Diamonds

1,171.3

961.7

+21.8%

Cameco Corp.

Uranium

2,754.0

2,398.0

+14.8%

B2Gold

Gold

708.2 622.4 +13.8%

Primero Mining

Gold, Silver

372.6

351.2

+6.1%

Detour Gold

Gold

720.1

685.3

+5.1%

Agnico Eagle Mines

Gold

2,539.3

2,426.0

+4.7%

Centerra Gold

Gold

798.1

763.3

+4.6%

Silver Wheaton

Silver, Gold

829.7

793.2

+4.6%

Semafo

Gold

383.8 370.1 +3.7%

Franco-Nevada Corp.

Gold

567.4

565.8

+0.2%

Yamana Gold

Gold

2,334.0

2,347.1

–0.6%

New Gold

Gold

911.8

928.6

–1.8%

Top Earners (C$ millions)

16 |

2015 2014

Company Type Rank 2015

Net Net Earnings Earnings Earnings Change (Loss) (Loss) 2015/2014

33 Semafo

Gold

39.1 22.6 +73.0%

38

Lucara Diamond Corp.

Diamonds

99.5

58.5

+70.1%

1

9

5

10

31

27

15

Agrium

Potash, Fertilizer

1,263.7

920.9

+37.2%

Cameco Corp.

Uranium

344.0 412.0 –16.5%

Potash Corp. of Saskatchewan

Potash, Fertilizer

1,624.3

1,964.5

–17.3%

Agnico Eagle Mines

Gold

31.5

106.2

–70.3%

Nevsun Resources

Copper

58.7

213.1

–72.5%

Franco-Nevada Corp.

Gold

31.5

136.5

–76.9%

Dominion Diamond

Diamonds

92.3

602.7

–84.7%

CANADIAN MINING JOURNAL

11-20_CMJ Aug2016_Top 40_REV.indd 16

WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:28 AM

Revenue Change 2015/2014 (C$ millions)

Revenue Change Rank Company Type 2015 Revenue 2014 Revenue 2015/2014

22

4

13

1

14

19

5

2

7

3

40

39

17

36

37

8

35

31

28

26

Endeavour Mining

Gold

769.2

746.4

–3.1%

Teck Resources

Zinc, Lead, Copper

8,259.0

8,599.0

–4.0%

Turquoise Hill Resources

Copper

2,090.9

2,219.8

–5.8%

Agrium

Potash, Fertilizer

18,922.8

20,517.7

–7.8%

Iamgold

Gold

1,171.9 1,289.1 –9.1%

Pan American Silver

Silver

862.9

961.7

–10.3%

Potash Corp. of Saskatchewan

Potash, Fertilizer

8,030.8

9,100.1

–11.8%

Barrick Gold Corp.

Gold, Copper

11,548.1

13,095.7

–11.8%

Kinross Gold Corp.

Gold

3,903.8

4,433.4

–11.9%

Suncor Energy

Oil sands

9,364.0

13,694.0

–13.6%

Teranga Gold

Gold

287.3

333.3

–13.8%

Taseko Mines

Copper, Molybdenum

289.3

342.9

–15.6%

Eldorado Gold

Gold

1,104.2

1,365.8

–19.2%

Dundee Precious Metals

Gold, Copper, Zinc, Silver

332.7

414.4

–19.7%

Golden Star Resources

Gold

326.4

420.7

–22.4%

First Quantum Minerals

Copper

3,450.7

4,530.2

–23.8%

Sherritt International

Nickel

335.9

455.6

–26.3%

Nevsun Resources

Copper

456.5

709.8

–35.7%

Capstone Mining Corp.

Copper, Gold

537.8

839.0

–35.9%

Thompson Creek Metals Co.

Molybdenum, Copper, Gold

632.0

1,021.8

–38.1%

A quick look at how the assets of our Top 40 companies changed last year. If you were one of the 19 primary gold producers on the list, you could have expected your assets to fall in value by 20% or 25%.

AUGUST 2016

11-20_CMJ Aug2016_Top 40_REV.indd 17

CANADIAN MINING JOURNAL

| 17

2016-07-21 10:28 AM

The Runners-up (C$ millions)

2015 2014

Rank Previous Company Year end Type Revenue Net Assets Revenue Net 2015 Year Earnings Earnings Loss Loss

Assets

1

46

First Majestic Silver

Dec 31 Silver, Lead, Zinc, Gold

280.6

(138.6) 1,010.0 314.0

(78.5)

986.5

42

48

23.6

619.7

Lake Shore Gold Corp.

Dec 31 Gold

271.4

8.7

43

Paladin Energy

Jun 30

255.2

(383.8) 1,406.9 421.4

(498.3) 2,002.5

44

Mandalay Resources Corp.

Dec 31 Copper, Gold, Zinc, Lead

248.8

24.0

443.3

236.1

22.5

464.0

45

Copper Mountain Mining

Dec 31 Copper

242.0

(102.9) 647.5

265.7

(22.5)

692.7

46

Kirkland Lake Gold

Apr 30 Gold

219.9

19.8

173.3

(11.1)

409.4

47

44

Aura Minerals

Dec 31 Gold

212.1 (18.5) 183.3 339.4 (182.8) 229.6

48

49

Atlatsa Resources

Dec 31 Platinum

205.7 (369.0) 326.4 237.4 (49.5) 720.8

49

54

Argonaut Gold

Dec 31 Gold

202.8 (259.3) 739.6 212.7 (5.4) 1,483.0

50

Banro Corporation

Dec 31 Gold

200.4

(93.5)

1,114.9 160.4

20.8

1,135.1

51

Fortuna Silver Mines

Dec 31 Silver

197.9

(13.6)

485.6

20.0

488.0

47

51

Uranium

671.6

467.3

256.1

222.5

52

North American Palladium Dec 31 Palladium

193.6 (216.4) 535.3 220.1 (66.7) 550.8

53

Gran Colombia Gold

Dec 31 Gold

172.5

(16.8)

483.8

157.3

(4.7)

592.4

Sierra Metals

Dec 31 Copper, Zinc, Gold, Lead

171.5

(45.1)

471.3

220.8

14.6

542.9

Silvercorp Metals

Mar 31 Zinc, Lead, Silver

164.4

(139.0) 476.3

138.6

(611.9) 597.7

54

52

55

eXtraorDinary

PossiBilities

in Mining anD Minerals Processing

Minerals Processing

Mine Design

infrastructure

WinDer systeMs

contract oPerations

stuDies

www.draglobal.com

18 |

CANADIAN MINING JOURNAL

11-20_CMJ Aug2016_Top 40_REV.indd 18

WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:30 AM

Earnings as % of Revenue (C$ millions)

We also kept track of the 15 companies that almost made the Top 40 list, calling them our Runners-up.

The cut-off point was $285 million in revenues.

2015

Rank 2015 Company Type Revenue Net Earnings

Earnings as a % of (Loss) Revenue

38

5

13

31

9

33

15

1

21

22

27

10

Lucara Diamond Corp.

Diamonds

299.0

99.5

33.3%

Potash Corp. of Saskatchewan

Potash, Fertilizer

8,030.8

1,624.3

20.2%

Turquoise Hill Resources

Copper

2,090.9

392.8

18.8%

Nevsun Resources

Copper

456.5

58.7

12.9%

Cameco Corp.

Uranium

2,754.0

344.0

12.5%

Semafo

Gold

383.8 39.1 10.2%

Dominion Diamond

Diamonds

1,171.3

92.3

7.9%

Agrium

Potash, Fertilizer

18,922.8

1,263.7

6.7%

Centerra Gold

Gold

798.1

53.2

6.7%

Endeavour Mining

Gold

769.2

45.5

5.9%

Franco-Nevada Corp.

Gold

567.4

31.5

5.6%

Agnico Eagle Mines

Gold

2,539.3

31.5

1.2%

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AUGUST 2016

11-20_CMJ Aug2016_Top 40_REV.indd 19

CANADIAN MINING JOURNAL

| 19

2016-07-21 10:30 AM

Top Asset Gainers (C$ millions)

Rank Company Type Assets Assets Asset change 2015/2014

Tahoe Resources

Gold, Silver

2,561.2

Gold

999.5 790.8 +26.4%

1,247.8

+105.3%

20 Silver Wheaton

Silver, Gold

7,203.6 5,944.5 +21.2%

37

Gold

473.5

Golden Star Resources

399.3

+18.6%

22 Endeavour Mining

Gold

1,348.2 1,232.8 +9.4%

38

Lucara Diamond Corp.

Diamonds

440.2

405.4

+8.6%

32

Alamos Gold

Gold

3,149.2

2,918.4

+7.9%

Gold

4,699.4 4,434.2 +6.0%

27 Franco-Nevada Corp.

Diamonds

3,104.6 2,947.7 +5.3%

3

15 Dominion Diamond Suncor Energy

Oil Sands

42,967.0

40,979.0

+4.9%

8

First Quantum Minerals

Copper

23,812.4

22,796.9

+4.5%

9

Cameco Corp.

Uranium

8,795.0 8,473.0 +3.8%

21 Centerra Gold

Gold

2,123.9 2,083.6 +1.9%

31 Nevsun Resources

Copper

1,284.2 1,262.0 +1.8%

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CANADIAN MINING JOURNAL

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2016-07-21 10:31 AM

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COMPANY PROFILE

22 |

CANADIAN MINING JOURNAL

22-25_CMJ Aug2016_Suncor.indd 22

WWW.CANADIANMININGJOURNAL.COM

2016-07-21 9:57 AM

SUNCOR ENERGY

n the afternoon of May 10, a group of sombre-looking oil industry executives joined Alberta Premier Rachel Notley for a televised press conference and update on the wildfires that had been raging for days across northern Alberta and through the heart of the province’s oilsands region.

Steve Williams, President and CEO of Suncor Energy, the largest oilsands producer, stood to the right the premier and was the first executive to speak.

And, he was blunt and to the point when he said: “This has been a crisis like no other. From day one, industry employees, emergency responders and the government have worked together around the clock to help fight the fire and move people out of the region and we will continue to work together.”

The wildfire began southwest of Fort McMurray on May 1 and swept through several neighbourhoods in the city, destroying 2,400 homes and forcing the evacuation of 88,000 residents. Insurance claims could hit $9 billion, making it by far the costliest natural disaster in Canadian history.

Oilsands producers across the region had to shut down their operations, causing shortages of gasoline at the pumps in western Canada and driving prices up, but none of the bitumen mines or processing facilities were damaged by the inferno.

The fires continued to spread until mid-June when rains finally helped firefighters bring them under control, but by then, Suncor had begun Like most companies working in the Fort McMurray area of Northern Alberta, Suncor Energy was forced to suspend its operations because of the wildfires that devastated parts of the province and threatened oilsands’ production like that shown in the top photo.

AUGUST 2016

22-25_CMJ Aug2016_Suncor.indd 23

CANADIAN MINING JOURNAL

Photo: Wesley Tolhurst, iStockphoto

SUNCOR ENERGY REMAINS A TOP PERFORMER THANKS TO ACQUISITIONS AND DETERMINATION

By Eastern Correspondent D’Arcy Jenish

| 23

2016-07-21 9:57 AM

COMPANY PROFILE

moving employees back into the region and restoring operations.

In a statement released June 6, the company announced that its base plant U1 upgrading complex had returned to pre-fire production rates and its U2 upgrading complex, as well as its Firebag and MacKay River in-situ facilities, would be back to normal production by the third week of June.

Barclays’ oil industry analyst Paul Cheng has pegged Suncor’s pre-tax losses due to the fires at close to $1 billion, and several Suncor employees, quoted anonymously in a Reuters report, said company executives also estimated the losses at about $1 billion.

The catastrophic wildfires were just one more blow to an industry that had been hammered in 2015 by a near 50 per cent drop in the price of crude oil.

Oil prices are cyclical, of course, and producers can always expect a rebound.

When it comes to public opinion, however, the industry is tilting against some formidable headwinds. Environmentalists, First Nations and pipeline opponents have all demonized oilsands producers and the industry can no longer count on getting a fair shake from the new Liberal government in Ottawa.

Yet, for all that, Suncor remains a Top 40 mining company (ranked 3rd again this year) and at the same time, its diversified assets ensure that it is wellpositioned to remain viable and profitable over the long term.

24 |

CANADIAN MINING JOURNAL

22-25_CMJ Aug2016_Suncor.indd 24

“We intend to be the last oil company standing,” Williams said in response to a reporter’s question at the annual general meeting on April 28.

Suncor increased its oilsands production by 11 per cent to 433,600 barrels per day in 2015, and in response to the sharp drop in crude prices, the company reduced its cash operating costs by 18 per cent to $27.85 per barrel, the lowest since 2007.

Williams told shareholders that Suncor expects to raise daily output to 800,000 barrels per day by 2019 through acquisitions and the completion of projects currently under construction.

Suncor’s Millenium and North Steepbank mines are two of the older and larger in the region. The company holds a 50.8 per cent stake in the $13-billion Fort Hills mine, now nearing completion 90km north of Fort McMurray. Production is slated to being in the fourth quarter of 2017 and it will be capable of producing 180,000 barrels per day when it is operating at full capacity.

Fort Hills is one of two major new projects in which Suncor has a significant stake. The other is the offshore Hebron heavy oil field, located 350km southeast of St. John’s, Nfld.

It is believed to contain 700 million barrels of recoverable crude, and production is slated to begin in 2017.

Suncor is one of five partners in the project and holds a 21 per cent interest.

Environmentalists, as well as the vari-

ous fly-in, fly-out celebrity opponents, detest the vast open-pit mines that have become a visual symbol of all that is wrong with oilsands extraction and processing. However, 80 per cent of the bitumen is too deep to be mined and must be extracted in-situ through steam-assisted gravity drainage (SAGD) in which parallel horizontal wells are drilled into the deposits, one for steam injection, the other for recovering the oil.

Suncor owns two in-situ operations, MacKay River, which began producing in 2002, and Firebag, which was brought into production in four phases between 2004 and December, 2012.

In the first quarter of 2016, the company achieved record production of 453,000 barrels per day from these two facilities and trimmed its per barrel operating costs to $24.25, a 15 per cent reduction over the same period in 2015.

In late April, the company reported a 2016 first quarter operating loss of $500 million, and this was on top of a $1.38billion loss in 2015. Nevertheless, Suncor has been on a buying spree this year. The company started 2016 with cash reserves of $3.1 billion and another $6.8 billion available in lines of credit. In addition, the company raised $2.5 billion through the sale of 71.5 million shares at $35 a share.

Suncor has used its cash and cash equivalents to pay down debt and to finance the acquisition of Canadian Oil Sands Ltd., which raised the company’s interest in the WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:02 AM

Syncrude oilsands development from 12 per cent to 49 per cent. The company then paid $937 million to acquire Houston-based Murphy Oil Corp’s five per cent interest in Syncrude and thereby increased its stake to 54 per cent.

Suncor is seen as primarily an oilsands producer, but it is, in fact, a diversified and integrated company with interests in exploration, development, refining and retailing through its ownership of PetroCanada and Petro-Can’s nation-wide network of 1,500 service stations.

The company is also focused on being part of a greener and cleaner Canada.

Suncor operates Canada’s largest ethanol plant near Sarnia, Ont., and uses 40 million bushels of corn annually – 20 per cent of the province’s corn crop, to produce ethanol. It is blended with gasoline to produce a cleaner-burning fuel.

As well, Suncor is a partner is six windpower facilities, which are capable of generating enough electricity to power 100,000 Canadian homes.

And, despite all the impassioned criticism of oilsands production and processing, Suncor has reduced its carbon footprint by some 35 per cent over the past decade.

“The plants that are being put in now are comparable with other sources of crude in the world,” says Williams. “We’re very proud of that.”

CMJ

A series of photos clearly show the types of activities that have helped keep Suncor Energy near the top of Canadian Mining Journal’s “Top 40” list of mining companies.

AUGUST 2016

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By Russell Noble

I

t’s hard for me to believe that it’s been almost six years since I toured Victoria Gold’s Eagle Gold Project, located on the company’s Dublin Gulch property, 375km north of Whitehorse, Yukon.

Back then, the project was little more than a camp and a few scratchings on a neighbouring mountain. It was like many other sites I visited in 2010; it was full of potential, full of hope, but also full of mountain-sized challenges to overcome.

Eagle Gold was, however, a ‘different’ site in that it featured what many predicted had the greatest potential to become Yukon’s next mine; namely, lots of gold and year-round road access to get at it.

And, today, those predictions are becoming a reality because Eagle Gold is about to take off.

In fact, thanks to perseverance by its owners, and an undying support from investors, many of those earlier challenges have been met and overcome; the most notable being that the Eagle Gold Project is now fully

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permitted and, as just mentioned, is on the verge of becoming the Territory’s next mine.

With permits and people in hand, Victoria Gold is almost ready to go, and it’s mainly because of the latter (people) that President and CEO John McConnell credits much of the success of the project so far.

As every miner knows, people can make or break a project. McConnell says that he’s found the key to keeping people happy is by making sure they have incentive, that they’re well paid, and perhaps, most of all, that they’re well rested and well fed.

And, he says, it’s for those reasons that Victoria Gold made it a priority to build a first-class living facility, with private rooms, fully equipped kitchen and internet access, that rivalled anything the crews would find almost anywhere else in the Territory.

This year, thanks to a strong balance sheet and treasury, Victoria Gold was able to take advantage of an exceptional opportunity for the expansion of the facility

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AUGUST 2

NEW MINES

Waste rock storage

Waste rock storage

In-valley heap leach Open pit

Gold recouvery plant

Camp

An aerial photo of Victoria Gold’s Eagle Gold project shows the base camp and scratchings on the adjacent mountain where the company is working to build Yukon Territory’s next mine. The (inset) rendering details the various components of the mine.

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DDC _ CanadianMiningJournal _3.375x10_Colour _160711 PROOF

NEW MINES

Look North.

It’s where you’ll find Dominion Diamond, Canada’s largest independent diamond producer and third largest in the world by value.

A fish-eye look shows the clean and modern eating facilities at the camp while its professional kitchen staff discuss the meals of the day.

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and purchased a used all-season camp complete with 110 dorm rooms, industrial kitchen, and recreational areas.

The newly acquired camp, located a stone’s throw from the Eagle Gold Project site, will allow Victoria to immediately mobilize more than 200 construction personnel directly to the site when construction of the mine begins, not to mention the nearly $6 million in upfront capital camp savings for the Feasibility Study Update that is currently underway.

The proposed mine (shown on the previous pages), is a fully permitted, low cost, conventional open-pit, three-stage crush, in-valley heap leach operation with a gold recovery plant that will produce approximately 200,000 ounces of gold per year.

With the Eagle Gold Project hosting a National Instrument 43-101 compliant Reserve of 2.3 million ounces of gold (92 million tonnes averaging 0.78 grams per tonne) it’s no wonder McConnell and his team are the talk of Yukon and international mining circles.

So much so, in fact, that Victoria’s shareholders are well positioned to participate in the success of the Eagle Gold Project as it advances to becoming Yukon’s next operating gold mine and the largest in the Territory’s history.

McConnell says that what is really encouraging is that ‘new’ people are coming forward to invest in Victoria Gold and the Eagle Gold Project.

For one, Billionaire Thomas Kaplan and his mining-focused private equity fund, the New York-based Electrum Group, recently WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:14 AM

11.8m (94m down-hole) and 2.1g/t gold over 38.1m (133m down-hole), and closer to surface, hole DG16-646C returned 2.0g/t gold over 20.2m (27m down-hole) and hole DG16-656C returned 1.6g/t gold over 73.8m (36m down-hole).

The Olive-Shamrock zone has been tested over a strike length of 1.5km and 300m in width.

Between the Eagle Gold site and the potential of the Olive-Shamrock zone, it’s

no wonder that John McConnell thinks a 10-year lifespan for the project is ‘conservative.’

Victoria Gold has also explored other targets along the Potato Hills Trend, a 13km mineralized zone located within the 26km x 13km property.

And that’s not only good news for Victoria Gold and its investors, but for the hundreds of people who will find work at the mine.

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invested $18 million for a 13.6% stake in the company. Sun Valley Gold, an early believer in the Victoria Gold story, again showed their support by joining Kaplan and the Electrum Group to the tune of a $6 million investment to increase their stake in the Company to 18.0%.

That’s the kind of support every junior miner dreams of, and understandably, McConnell is encouraged, and thankful for the support, but recognizes that money is simply a means to his goal; the goal of bringing the Eagle Gold mine into production.

Victoria Gold’s projected lifespan for the Eagle Gold mine is 10 years, but according to McConnell, that’s somewhat conservative considering the additional known mineral targets on the Company’s 100% owned Dublin Gulch property.

The Company completed a $3.5 million, 8,000 meter, 89 drill-hole program this year at the Olive-Shamrock zone, located about 2km from the proposed Eagle Gold mine.

To support the drill program, Victoria partnered with SGS Minerals of Vancouver to provide a mobile on-site prep lab for more timely assay results.

So far, McConnell says that drilling and surface trench results indicate the existence of near-surface, high-grade gold mineralization with the potential to feed into Eagle Gold operations. Recent highlight intercepts include 2.7g/t gold over AUGUST 2016

26-29_CMJ Aug2016_Victoria Gold.indd 29

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NEW MINES

RENEWED

interest

By Russell Noble

T

here are few places in Canada deeper in tradition, and minerals, than the historic Abitibi Gold Belt that extends from Wawa, Ontario to Val-d’Or, Quebec.

It’s a 650-km-long stretch of mineral-rich ground that spans two borders and meanders through some of the more picturesque countryside found anywhere in Canada. In fact, tourism is also now a major contributor to the local economy thanks in part to the drawing power of gold found in the Abitibi greenstone belt.

For example, one of Canada’s larger roadside attractions is a 12-foot replica of a 1908 gold sovereign built to commemorate Canada’s first five-ounce coin made from gold from the local Kerr Addison Mine; once

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Canada’s largest gold producing mine.

But the Kerr Addison Mine wasn’t the only mine in the area because, since the gold belt was officially established as a gold-mining district in 1901, about 100 other mines have broken ground in the region and produced more than 170 million ounces of gold.

Names like Hollinger, MacIntyre and Big Dome mines are just a few of the others, and even towns like Val-d’Or and Kirkland Lake got their subsequent nicknames (“Valley of Gold” and “The Mile of Gold”) from the rush for gold in the surrounding countryside.

Beyond those two towns are many others that also base their existence on gold; namely Rouyn-Noranda, and Noranda Mines, a powerhouse on the Quebec

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t

Falco’s confirmation drill holes were collared from the surface and successfully confirmed previously drilled areas between 650m and 2035m below the surface. The historic Noranda holes were also collared at depths ranging from 600m to 2300m below the surface across a strength length of up to 1000m.

– VINCENT METCALFE, FALCO’S CHIEF FINANCIAL OFFICER

mining scene from 1922 until it merged with Falconbridge in 2005, and was later acquired by Xstrata, which was acquired by Glencore.

Like most mines, however, it closed for financial reasons in 1976 and not because it ran out of gold because the site once contained the highest gold grade volcanogenic massive sulfide (VMS) deposit of its size in the world. It’s Horne Mine produced 11.6 million ounces of gold and 2.5 billion pounds of copper.

Today, thanks to Falco Resources Ltd., of Montreal, one of the larger claim holders in Quebec with a 100 per cent interest in the 74,000 hectares of land in the historic Rouyn-Noranda mining camp, the Horne Mine is coming back to life.

With more than 5,360,000 (Indicated Resource)

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gold equivalent ounces, including 3,418,232 ounces of gold hosted in 58.3 million tonnes averaging 2.86 g/t AuEq (1.82 g/t Au; 15.60 g/t Ag; 0.20% Cu; 1.00 Zn) still in the ground, it’s no wonder that Falco Resources Ltd. has expressed new interest in the old mine.

The Horne 5 resource estimate is based on 4,384 underground drill holes (305,788m) drilled by Noranda between 1924 and 1976 and 18 new confirmation drill holes (17,300m) drilled by Falco Resources Ltd. in 2015.

The resource estimate also includes silver assays from earlier metallurgical testing by Noranda, comprising 2,112 drill holes representing 75,540m grouped in 54 lots.

Vincent Metcalfe, Falco’s Chief Financial Officer

Opposite: Workers in this historic photo depart an original Rouyn-Noranda mine at the end of their shift.

Bottom right: Aerial photo shows the Horne 5 Mine today.

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NEW MINES

Core shacks, maintenance facilities and drilling equipment are found throughout the site as miners continue to bring life back to the historic Horne 5 Mine.

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says, “Falco’s confirmation drill holes were collared from the surface and successfully confirmed previously drilled areas between 650m and 2035m below the surface. The historic Noranda holes were also collared at depths ranging from 600m to 2300m below the surface across a strength length of up to 1000m.”

Technically, Luc Lessard, Falco’s President and Chief Executive Officer, explained that the majority of drilling was conducted as radiating “fan drilling” on 15m spacing from 40 underground working levels developed throughout the deposit. He said the 15m spacing is significantly closer than standard drill spacing used in resource estimation work today to further help ensure a higher level of confidence in the data.

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Falco sampled at 1m levels and produced more than 87,000 assays.

Armed with new and historic data, Falco recently released a preliminary economic assessment (PEA) on its Horne 5 deposit, which proposes a bulk-tonnage underground mine that would cost more than $900 million to build.

The PEA also suggests a 15,000-tonne-per-day surface mine that would produce about 236,000 ounces of gold annually from a semi-autogenous and ball-milling crushing facility that would divide flotation and thickening into three circuits to also recover copper, zinc and pyrite concentrates.

Other figures in the PEA propose a 12-year mine life with a target of producing 64 million tonnes of volcanic-massive sulphide (VMS) material with an average diluted grade of 2.6 grams gold equivalent per tonne for 4.8 million contained ounces of gold.

Furthermore, the payable life-of-mine gold recovery is expected to average 87 per cent, while by-product metallurgical recoveries would average 74 per cent for copper, 67 per cent for zinc, and 75 per cent for silver.

As for the actual mine, the underground deposit is located (as already mentioned) at a depth of approximately 600m to 2300m below the surface and will primarily be accessed initially through an existing and rehabilitated shaft which extends to a depth of 1200m.

Once again, CEO Lessard says, “The shaft will provide for the hoisting of mineralized material and waste, service personnel and materials, and the supply of ventilation to the underground workings. We

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2016-07-21 10:18 AM

also foresee rehabilitating several of the old Horne shafts for ventilation purposes and using old underground excavations to tailings disposal.”

Additional design features will include gravity transport of mineralized material and waste through raises, shaft hoisting, minimal mineralization material and waste re-handling, higher productivity bulk mining methods, and unconsolidated waste rock backfill where possible.

Where possible, Lessard says the mine will be designed to use as much state-ofthe-art technology including automated and remote-control equipment, including 21-tonne loaders to transport muck to the ore-pass system.

An underground crushing facility will be fed by two ore-pass systems and the crushed material will be transported via a 600-m conveyor to the shaft loading point where it will be hoisted to the surface using 43.5tonne skips on a continuous basis.

Because of the mine’s location in the popular Rouyn-Noranda mining district of Northern Quebec, Falco Resources will have little to no trouble drawing from the community’s 41,500 residents to fill its staffing requirements because, as mentioned at the outset, there are few places in Canada deeper in tradition than where Falco is setting up shop and that includes a deep tradiCMJ tion of experienced miners too.

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AUGUST 2016

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SHOVEL READY & READY FOR THE SHOW Staff Report

A

s technological innovations improves our quality of life, it also impacts the demand for the raw materials required to make new products, and the ubiquity of portable electronic devices is no exception.

In fact, it has resulted in a greater demand for ‘technology’ and ‘energy’ metals such as those used, for example, in lithium-ion rechargeable batteries for one.

The next phase of battery commercialization is underway with the electrification of the automobile and stationary storage of renewable energy, and one Canadian company, Fortune Minerals Limited of London, Ont., expects to benefit from this transformation with development of its shovel-ready NICO Cobalt-Gold-Bismuth-Copper development in the Northwest Territories.

NICO, which is comprised of a planned mine and mill in the NWT, and a refinery in Saskatchewan, is positioned to become a Canadian producer of battery-grade 34 |

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cobalt chemicals with 1.1 million ounces of gold and 12 per cent of global bismuth reserves as co-products.

The evolution to portability has necessitated improvements in battery performance and causing a shift from disposable alkaline cells to rechargeable batteries – initially based on nickel-cadmium (Ni-Cd) chemistry, then nickel-metal hydride, and ultimately to lithium-ion batteries that are expected to remain the standard for the foreseeable future.

Almost all of these battery technologies contain significant cobalt (up to 60 per cent by weight), which is primarily contained in the cathodes. The use of cobalt in batteries has driven growth of cobalt consumption at a compound annual rate of nearly 6 per cent for the past two decades and battery demand alone now accounts for about 50 per cent of the 110,000 metric tonne market in 2015, up from only 1 per cent of a much smaller market in the mid 1990s.

The next phase of battery commercialization is underway with technology heavyweights like Google, Apple, Tesla, and the traditional auto manufacturers, joining battery producers such as Panasonic, Samsung, and LG Chem in the transition to vehicle electrification and autonomous driving.

Cobalt-based lithium-ion batteries are leading this evolution and consequently the demand for cobalt in battery chemicals increased 12 per cent in 2015 and is expected to pressure the market with double digit growth in the coming years.

Mainstream interest in electric vehicles has been validated by Tesla Motors which made automotive history in March 2016 with one of the more successful consumer product launches in history.

Preorders for its new Model 3 hit 325,000 in the first week, generating US$325 million in deposits for a car that will only be available in late 2017. If these orders are converted into annual sales, WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:20 AM

NEW MINES

FORTUNE MINERALS’ NICO DEVELOPMENT IN NWT IS POSITIONED TO BECOME A VERTICALLY INTEGRATED SUPPLIER OF COBALT CHEMICALS FOR LITHIUM-ION BATTERIES. Aerial view of Fortune Minerals’ workings at its NICO development in NWT.

production of the Model 3 would be comparable to the top selling vehicles in North America.

Tesla, in partnership with Panasonic, are investing US$5 billion in their first Gigafactory in Nevada to make lithium-ion batteries with Nickel-Cobalt-Aluminum cathode chemistry and reduce the battery costs through economies of scale.

It is estimated that the original configu-

ration of the Gigafactory will require between 5,000 and 10,000 tonnes of cobalt per year. Notably, due to the successful Model 3 launch and demand for stationary storage applications, Tesla’s CEO Elon Musk announced that the company could triple the total planned battery output of the Gigafactory to ~150 GWh or, more than three times the current total lithium-ion battery production worldwide.

This plant is only one of 12 new megafactories announced by major battery manufacturers.

Governments around the world are also legislating the transition away from the internal combustion engine in response to pollution concerns only exacerbated by falsified emissions tests by several large automotive companies due to increasingly stringent emission standards.

Volkswagen’s ‘Dieselgate’ alone has resulted in a $15 billion US civil settlement and its strategic plan is to launch 30 new electric vehicles in the coming decade in order to be compliant with regulations.

Environmental initiatives to accelerate the shift to electrification and reduce carbon-based greenhouse gas emissions are increasingly frequent. Germany, for example, recently mandated that all new cars registered in the country will have to be emissions-free by the year 2030, and Norway is moving to an outright ban on the sale of gasoline and diesel-powered cars by 2025.

Ironically, even French petroleum giant Total has acquired battery maker SAFT for 1 billion Euros.

As the proliferation of automotive electrification continues, there is also growing

demand for stationary storage cells used to store power from rapidly expanding renewable energy generation such as from wind and solar, and also for off-peak charging from the electrical grid.

As the market for lithium-ion batteries grows, so does the demand for cobalt. A recent estimate published in Metal Bulletin noted that battery demand for cobalt could be as high as 140,000 metric tonnes by 2020 with more conservative estimates by Stromcrow pegging the number at 120,000 tonnes by 2025 – both of which are greater than the entire 110,000 tonne market for cobalt in 2015.

Notably, 65 per cent of cobalt production is currently mined in the politically unstable Democratic Republic of the Congo (DRC or Congo).

Additionally, 52 per cent of refinery production is in China, which also dominates cobalt chemical production. DRC elections are due to be held this November and President Kabila is seeking to cling to power beyond his constitutionally limited second term causing increased tension and violence in the country.

Furthermore, Amnesty International recently highlighted safety and human rights abuses associated with artisanal mining which accounts for about 20 per cent of Congo cobalt mine production.

Cobalt is also primarily produced as a by-product of copper and nickel mining, and as the price of these metals has declined, a number of producers have closed due to low primary metal prices, resulting in even tighter cobalt supplies and greater geographic concentration of production in the Congo.

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These risks were recently addressed in the Assessment of Critical Minerals report to the U.S. Congress which identified cobalt as a critical mineral on a list that “have a supply chain that is vulnerable to disruption, and that serve an essential function in the manufacture of a product, the absence of which would cause significant economic or security consequences”.

The concentration of cobalt supply will be exacerbated if Freeport-McMoRan completes its planned sale of the controlling interest in the Tenke-Fungurume mine in the Congo to China Molybdenum, and potentially also the Kokkola refinery in Finland.

New sources of cobalt are needed to support the continued electrification of the global economy and provide geographic diversity to the raw material supply chain.

Fortune Minerals’ NICO gold-cobalt-bismuth-copper project is well positioned to become a reliable North American source of battery-grade cobalt chemicals with supply-chain custody transparency from ore right through to the production of value-added chemicals.

Fortune has invested more than C$115 million toward the development of NICO, which has advanced from an in-house discovery in 1996, through several resource cycles, to the point where the Company is now focused on securing off-take agreements and project financing for construction.

NICO has already been assessed in a positive feasibility study in 2014, and it has been test mined and pilot plant processed.

Environmental assessment approvals have also been secured for the mine in the Northwest Territories and refinery in Saskatchewan.

The NICO deposit has mineral reserves of 33 million tonnes that will support mining for a minimum 21-year mine life at a planned mill feed rate of 4650 tonnes of ore per day, producing 180 tonnes of concentrate per day for shipment to its proposed refinery.

The life of mine average annual production is projected to be 1615 tonnes of cobalt contained in battery-grade cobalt sulphate, 41 300 ounces of gold in doré bars, and 1750 tonnes of bismuth in metal and oxide chemicals, plus minor by-product copper. The refinery is also designed to be able to toll process concentrates from other mines and Fortune’s longer-term vision of the facility is to diversify production into the metals recycling business.

Fortune was early to recognize the opportunity in cobalt chemicals for lithium-ion batteries and produced its first battery-grade sample of cobalt sulphate in 2012. Earlier this year, the Company also delivered an ultra-pure sample for testing by a potential off-take customer.

Fortune is also in discussions for project financing and upon receipt of funds, could be in commercial production about two years after first breaking ground. NICO’s co-products should also not be forgotten as they include ~12 per cent of the global bismuth reserves and a 1.1 million ounces of gold that is highly liquid and can help finance the development.

Electric vehicles and energy storage for renewable power are among the most significant market transformative events this century and Fortune Minerals is pressing forward with NICO to CMJ be part of the raw materials solution for this evolution.

WWW.CANADIANMININGJOURNAL.COM

2016-07-21 10:20 AM

A SPECIAL REPORT FEATURING P38 EYES IN THE HIGH SKIES

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P42 CHANGING THE FACE OF MINING FROM ABOVE

2016-07-21 10:33 AM

EYES IN THE H

By Northern Correspondent Bill Braden

Photos by Bill Braden

how do you measure up three million tonnes of crushed rock and gravel?

Just a few years ago, it would have been with at least two surveyors and their cumbersome gear trudging for days around the stockpiles. But in 2016, it’s with an Unmanned Aerial Vehicle – a UAV – multi rotored helicopter or perhaps a foam wing, coupled with a miniature high-resolution camera, a laptop and an operator with the combined skills of an unerring pilot and a genius computer programmer. And, you get it done in a couple of hours.

That’s what Diavik Diamond Mines has employed as it advances its four-year, $350 million (US) project to build a rockfill dike around its A21 diamond-bearing kimberlite pipe. Gord Stephenson is Diavik’s engineering superintendent on the A21 dike, and estimates it will indeed take three million tonnes of crushed aggregate to build the 2.2 kilometre-long dam to depths of up to 20 meters in Lac de Gras.

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E HIGH SKIES A transformative technology catches on up in the far north

“That’s a pretty gargantuan task to survey on foot,” he says, and it’s why Diavik invested in three drones and the required training for Stephenson’s team to operate the system. The survey team now makes a regular bi-weekly flight over the site, then from the extremely high quality images taken by the on-board camera, plots areas and volumes of the aggregate as it is delivered and consumed. He figures that compared to physical surveying, it’s saving the project two workers and $250,000 a year.

UAV technology is hardly news to anyone in the civil engineering world. It’s been in play for a decade or so, but recent innovations in all kinds of technology – from software programming to miniaturizing the drones (called platforms) to enhanced digital imaging – are driving down the cost (from hundreds of thousands, to tens of thousands of dollars) and making it relatively easy to learn.

The mining world is one of UAV’s frontiers. It is steadily transforming the speed, accuracy, safety and scope of how exploration and mine development and operation is evolving.

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Rob Coolen

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DRONES “Mines are a great application as they’re typically remote and have a controlled airspace. So the safety risks are addressed,” says the Yellowknife-born Stephenson. “We can fly into the sublevel retreat of the mine, where we can’t get people to photograph or see, and produce 3-D imagery of the bottom of the open pits.”

“Moving forward, in terms of exploration, I think eventually they’ll be able to get beyond the (current) line of sight operating restrictions safely. Then the field will open up significantly,” he forecasts.

Rules and Regs

Governments around the world are grappling with writing rules for how drones can be used, as the technology is now simple and cheap enough to put it in the hands of the average consumer.

Inevitably, that also means curious or just plain stupid users are spying on neighbours, crashing into property, and endangering commecial air traffic and even birds.

This might not be much of a problem for an exploration program out on the tundra or over a remote forest, but the rules set

by Transport Canada apply everywhere in the country, says Colin Charlton, project engineer at Ollerhead and Associates, surveyors and engineers, of Yellowknife.

“Every part of Canada is, to some degree, a controlled air space… even remote country in the Arctic. And to legally fly, you have to be certified, and may even have to apply for specific permission each time you fly your UAV,” he says.

Charlton’s on side with the need for regulations, but he’s frustrated that it’s getting more complex.

“Transport Canada is continuously tightening up its regulations to deter a growing number of unregistered – and inexperienced – drone operators from buzzing around areas they shouldn’t be,” he says. Companies like Ollerhead invest hundreds of hours annually

just to maintain compliance for their Special Flight Operating Certificate (SFOC), something he says clients should be demanding as they would shoulder liability if something goes wrong.

Since buying its first UAV platform in 2013, Ollerhead has steadily grown its client sales from 10 flights a year to 50. A good portion of those are exploration juniors and big miners (Ollerhead first introduced UAVs to Diavik) who are getting far more from the images than area and volume measurements, he says.

“A picture’s worth a thousand words. And not only do we have the picture, we have the 3-D data train. They’re looking for the pictures as an inventory they can use years down the road,” says Charlton, noting that one detailed orthophotograph reveals a host of data – from contour and area to vegetation to drainage to contamination – easily saving the client from sending in multiple teams to do specific surveys.

Isn’t this going to cost surveyors like Ollerhead a lot of business?

“Not at all, I think it’s actually added to our business. Being a small Northern company, we have to be diverse and UAV’s are in the toolkit.”

Charlton is bullish on the prospects for UAVs to play a pivotal role in exploration, especially as more powerful and affordable drone platforms can handle heavier sensors like LIDAR and electromagnetic instruments.

“The biggest issue with drones is their capacity to lift,” says Gary Vivian, President of Aurora Geosciences, a veteran Yellowknife-based mining consulting company. “Sensors for airborne surveys are not light and need some fine tuning to make them smaller.” He’s already purchased a UAV, and is looking at adding an airborne magnetic sensor, an investment worth $100,000.

It’s a bit different in the Arctic

One enterprising UAV start-up that’s getting a lot of attention

We can fly into the sublevel retreat of the mine, where we can’t get people to photograph or see, and produce 3-D imagery of the bottom of the open pits.

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is Arctic UAV, launched earlier this year at the Nunavut Mining Symposium by multi-faceted Inuk entrepreneur Kirt Ejesiak.

It sparked when the Iqaluit-born Ejesiak thought offering drone aerials would enhance his Property Guys real estate franchise. Then one Kirt Ejesiak day a neighbor asked him to use his quad copter to check out damage on her roof, and the light switched on that it could have potential beyond selling homes.

“We don’t really see ourselves as a drone company – we see ourselves as an imaging company – doing much more [than just aerial photography] as things advance,” says Ejesiak, whose vision is to operate from Greenland to Alaska. It’s very early days for Arctic UAV, and Ejesiak has yet to sign up a mining or exploration client.

“Our pitch is to say, instead of flying people up from the south, why don’t you hire some locally-trained operators?” Arctic UAV also offers to train pilots for companies that want to build their own system. “It’s a bit different here in the Arctic – not like flying over a football field.”

Arctic UAV has Transport Canada certification to operate across the huge territory, including over communities and mine sites. It has invested in training eight certified pilots (two are based at its Ottawa office), and five different drone platforms in its fleet. The largest is the Dutch HEF30, a gasoline-powered helicopter drone capable of long-distance surveys with bigger payloads for high-end sensors.

Current Transport Canada regulations require the operator to be in constant visual range of the drone – limiting its range to less than a kilometer – but Ejesiak, like Diavik’s Stephenson, is hopeful that will change, especially considering the Arctic’s vast distances over land and sea.

Are UAV’s a transformative thing?

“It’s certainly promising,” he says, cautioning that the Arctic is a stern testing ground and any new technology needs thorough troubleshooting and modification to make it fit. “It might look good on paper, but we know the pitfalls… I think we’re almost there.”

An article in the High North News, a web newspaper published by the Nord University in Norway, picks up Ejesiak’s hope that one day, regulations will allow UAVs a longer leash and broader scope to flex their potential.

“If countries are willing to have honest and open discussions, as well as fund companies who are looking into improving UAV technology specifically geared to northern climates, there is huge potential for what can be accomplished,” says the paper, citing Arctic search and rescue, security and wildlife monitoring as likely advantages.

“It is not hard to see why so many people are enthused by the idea of using these devices in the Arctic, but there are important conversations and research that needs to be done before this potential can truly be unlocked.”

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CHANGING THE FACE OF MINING

FROM A Drones and ground-support sensors make using this fastspreading technology extremely efficient when it comes to massive sites like open-pit mines.

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M ABOVE Staff Report

T

he market for UAVs (unmanned aerial vehicles) in the mining industry is now firmly established as many operators and exploration services of all sizes have already acquired equipment, or had work done, through service providers in recent years.

And, because safety and cost savings are major considerations for all miners, drones, and the technological opportunities they bring, are a perfect fit on all accounts.

At least that’s according to hardware distributor UKKO of Palmerston, Ont., a Division of Ag Business & Crop., that says early adopters of the drone technology will benefit since it’s here to stay and will grow at an accelerated pace for at least another decade.

And here’s a look at why.

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DRONES Access to the technology is now widespread, but not all equipment is created equally, or for the same application.

Because of this, drones come in all forms; from fixed wings or rotary, from under 2kg to well above that in order to produce various types of data.

Topographic, multi-spectral, or thermal are just some of the sensors that are utilized in the mining market to help make the devices such valuable tools.

For example, the senseFly series of UAVs are designed for mapping, survey-

ing and inspection work. For mapping work, the eBee fixed wing, is designed to gather high resolution, down-looking pictures of any operation and quickly generate 3D models of high-density point clouds, and the Albris multi-rotor drone is designed to gather ultra-high resolution imagery, in colour or thermal, of infrastructure in hard to reach areas.

Applications cover most site operations and UAVs can be shared between departments. The benefits of collecting data immediately when you need it makes it

even more valuable to the operator.

Whether looking for volumetrics on a quarterly/monthly schedule, geotechnical surveys, hydrology and hydrogeology investigation, the use of the UAV platform will only grow with time and quickly be utilized on a regular basis.

Simplicity and safety of operation is at the heart of all drones and for those reasons, training time is relatively short, but still necessary and strongly suggested by Transport Canada.

All flights should always be orchestrated

Here’s a more detailed description of each system:

Albris The Intelligent Mapping and Inspection Drone With the senseFly Albris, operators can switch between capturing high-resolution still, thermal and video imagery during the same flight, without landing to change cameras. Thanks to the drone’s unobstructed field of view and its head’s 180º vertical range of motion, clear, stabilized imagery can be captured. The senseFly Albris features five ultrasonic and visual sensors installed around the unit for live situational feedback to the pilot operating in tight spaces. These

provide the situational awareness required to operate the Albris close to structures and surfaces, even in confined and less-than-desirable environments, in order to achieve sub-millimeter image resolutions (without the movement issues caused by zooming in from afar).

All moving parts are protected with lightweight shrouding and high-powered LED lights and a flash to collect data in environments.

The Albris offers full flight mode flexibility; including, Autonomous, GPSguided mapping mission, or a livestreaming Interactive ScreenFly flight. It can also start in mapping mode and ‘go live’ on demand without the use of the GPS system in deprived environments such as tunnels, under structures, and canyons.

eBee The Professional Mapping Drone According to UKKO, the eBee is presently the only fixed wing UAV compliant with Transport Canada. Flown at lower altitudes, the eBee can acquire images with a ground-sampling distance (GSD) of down to 1.5cm per pixel. It also flies, captures images and lands itself. However, flight plan can be altered anytime. Thanks to its ultra-light construction, the eBee weighs just 800g and features a safetyconscious rear-facing propeller and autopilot to help manage a wide range of intelligent failsafe behaviours.

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from a safe location and away from potential hazards. Drones eliminate the need for mine personnel to go down an open-pit slopes in treacherous conditions or, sending an environmental specialist in the vicinity of tailings to collect thermal imagery.

In all cases, the UAV becomes the remote eyes of any employee, and in the process gathers tenfold the amount of data that can be analyzed in the comfort of an office away from all the commotion.

Another very important feature to all systems is that they integrate the collec-

tion workflow to provide a combined data collection system. In the case of the eBee (fixed wing) mentioned earlier, it can collect in high-and-wide macro environments whereas the Albris (quad copter) is better suited for looking into details in micro environments.

A Pix4D Mapper Pro can be used to integrate all imagery to generate a final combined project dataset.

Just as GPS altered surveying methodology, the use of UAVs is rapidly changing the face of the mining industry by encouraging operation efficiencies, time savings and providing a return via reliable and precise data. The simplicity and ease of use of UAVs has given, and continues to give, early innovators many benefits, and a competitive edge, in a rapidly changing CMJ market.

eBee RTK The Survey-Grade Mapping Drone Built on the same platform as the normal eBee, operators can produce absolute dense point cloud, orthomosaic, and digital surface model accuracy of down to 3cm without the need for GCPs – meaning less time in the field and high precision in even the most inaccessible areas. The drone’s supplied eMotion ground control software connects to the base station and broadcasts correction data to the rover (the eBee RTK) – no additional logger or third-party software required. The eBee RTK is compatible with most leading brands of base station and virtual reference station (VRS) networks, working alongside most existing portfolio of instruments. This technology can be used in large area mapping such as open-pit mines or corridor mapping. It can also cover very long distances

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PERSONAL SAFETY

THE THREAT HIDING IN BROAD

daylight

Protecting workers against the sun’s UV rays helps avert skin disease and absenteeism

By Matt Airhart

A

s one of the larger mining nations on the planet, Canada ranks in the top five worldwide for extraction of 14 major metals and minerals; including potash, uranium, niobium, aluminum, cobalt, tungsten, platinum, nickel, salt, sulphur, titanium, diamonds, cadmium and gold.

“If a rock is too big, you just get a bigger hammer to hit it with,” says Boucher.”

You can’t take the same approach with space mining. You have to learn how to do things with very little weight and very little power.”

And, as such, the country is also a leader in EHS (Environmental Health and Safety), and fortunately, it hasn’t had

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a major mining accident since 1992.

Yet, despite this relatively good track record, Canadian mine workers still face threats to health and safety from other, more subtle factors on the job; with one part of the body under constant attack – the skin.

In fact, according to the European Agency for Safety & Health at Work (EU-OSHA), mine workers have the highest incidence of skin disease among all professions.

Cases of allergic dermatitis, contact dermatitis and skin cancer affect almost one-third (31.5 per cent) of full-time miners, EU-OSHA says – more than

manufacturing and construction workers put together. And the U.S. Bureau of Labour Statistics (BLS) notes that skin problems are 78 per cent more common among mine workers than respiratory illnesses.

So, how can mine owners and operators, and the miners themselves, do a better job at safeguarding against skin issues?

To start with, let’s have a look at the potential risks and talk about ways to protect everybody from this threat.

The Biggest Irritants

Mine workers regularly come into contact

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industrial solvents, cleaning products and Portland cement – all of which can cause contact dermatitis and other uncomfortable skin conditions. They also can experience allergic reactions from exposure to poison ivy and oak, epoxy resins, nickel, chromates and acrylics commonly found around mine sites.

It’s estimated that about seventy-five per cent of workers with occupational dermatitis ultimately develop chronic skin diseases that are uncomfortable and costly to treat, BLS says. A single case of occupational dermatitis can cost an employer, on average, US $3,500 in workers’ compensation claims, according to the Journal of the American Medical Association.

One threat to the skin, however, quite literally outshines all others for the many mine and quarry labourers who work outdoors – the sun and its ultraviolet (UV) rays.

While underground miners don’t face as high of a risk, open-cut mine and quarry workers (and especially those

Occupational

skin irritations

and disease

aren’t just

unpleasant; they can lead to poor morale and absenteeism, which slashes productivity and adds to costs. Companies can also lose income if skin disease leads to prolonged absences from work.

involved in exploration and drilling) spend most of their time outdoors, where UV radiation can constitute a significant health hazard.

Outdoor workers are exposed to six to eight times as much UV radiation than indoor workers, according to Alberta Prevents Cancer’s BeSunsible program, making them up to 3.5 times more likely to be diagnosed with skin cancers. A mel-

anoma patient misses an average of 28 days of work, according to the Canadian Skin Care Foundation, and those affected with less-aggressive forms of skin cancer miss an average of 14 days.

Exposure to the UV rays can lead to painful sunburns, premature aging and skin cancer. While UVA rays activate melatonin in the skin and help it darken in response to sunlight, UVB rays are more damaging. A sunburn is the sign of overexposure to UVB light, and the risk of developing skin cancer – the most commonly-occurring cancer worldwide – accumulates over a person’s lifetime with every burn. While light-complected people are more likely to develop skin cancers, no one is completely safe.

Recognizing the Risk

By recognizing potential risks – even those that are easily prevented – safety professionals can safeguard employees against incidents that cause the most harm. The prevalence of UV-caused skin irritation among miners and quarry

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PERSONAL SAFETY workers serves as an important lesson in the management of all safety risks.

A mine or quarry likely carries some risk of UV overexposure, particularly in the summer months. Employers should conduct an assessment to gather information about work areas and potential UV exposures, taking note of existing shade at the site as well as surfaces that reflect sunlight such as water, sand, rock, concrete and corrugated steel, which magnify the threat.

The employer or a nominated employee representative can perform a walk-through to assess UV risk, identify employees who may be at higher risk of exposure, and the tasks and systems that create that risk. The risk assessment can then inform a plan to control exposure to UV light that includes the use of shade, procedural measures and personal protective equipment (PPE).

Sophisticated software tools are available to help companies mitigate these risks. For instance, a good Risk Analysis solution can greatly simplify the task of

performing a Job Safety Analysis (JSA), while compliance and training management tools make it easy for an EHS professional to spot gaps in compliance and ensure consistent training across his or her organization. Today, a comprehensive EHS management platform can provide all of these tools in a single solution.

Take inventory of the protective clothing available, and issue or encourage use of additional sun protection. The clothing required may be as simple as a broadbrimmed hat and a long-sleeved shirt with a tight weave; protections must also include a broad-spectrum, SPF 30+ sunscreen, SPF 15+ lip balm, and UV-blocking sunglasses.

Remember that sunscreen needs to be water- and sweat-resistant – depending on the work to be performed; and clothing should limit UV exposure, but not present a secondary hazard. Loose clothing, for example, can be dangerous to wear around operating machinery.

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Protection as Prevention

In Canada, employers must provide the information, instruction and supervision necessary to protect workers’ health and safety. Since many mines and quarries are operated on a seasonal basis, operators are encouraged to arrange safety meetings and refresher courses for temporary workers at the beginning of each season.

Educate employees on the dangers of UV radiation and your company’s strategy to control exposure. Make use of natural and artificial shade (such as temporary canopies or shelters) whenever possible, schedule alternative tasks during peak-sun hours, and increase the length and frequency of breaks to reduce UV exposure.

Supervisors should take reasonable precautions to inform workers about potential or actual hazards, ensure that workers are trained for the work they do, and confirm they use PPE and other protections according to manufacturer specifications.

Employers should provide appropriate products for use, and are advised to post a copy of the Occupational Health and Safety Act (OHSA) on-site.

Mine workers do carry some responsibility for their own protection. They would rarely begin the day without steeltoed shoes, helmets and additional PPE, and once educated about the risks of UV light, they should take the same attitude toward skin protection, repair and restoration products including sunblocks and healing creams.

Occupational skin irritations and diseases aren’t just unpleasant; they can lead to poor morale and absenteeism, which slashes productivity and adds to costs. Companies can also lose income if skin disease leads to prolonged absences from work. Employers must minimize the risk of skin irritation, sunburn and skin cancer to avert missed workdays and claims that can result.

Nobody wants to suffer a painful sunburn (or worse) on the job, but employees may not realize that a greater threat lies underneath that redness and sting. Inform employees about the long-term risks associated with UV exposure, and you’ll help them avoid more serious problems in the CMJ future.

MATT AIRHART is president of VelocityEHS Canada, a cloud EHS software company.

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LAW

As companies mine the potential of UAVs, the law drones on

By Tony Morris and Agathon Fric

B

efore it came to describe pilotless aircraft in the mid20th century, the word drone referred to the male honeybee, a lazy, idle contributor to the hive whose sole job is to mate with the queen. He does not help the female workers gather the nectar and pollen needed for honey production.

By contrast, drone technology is neither idle nor lazy: modern drones and the peripherals they carry are increasingly intelligent and versatile, causing them to proliferate at a greater rate than ever before. One need only turn to YouTube to see how ubiquitous drones (also known as Unmanned Air Vehicles or UAVs) have become. Vloggers now routinely supplement their footage with stunning aerial photography at angles that were previously reserved for the six o’clock news chopper and Hollywood filmmakers with multimillion-dollar budgets.

These two imperatives – greater sophistication and lower cost – have joined to make drones an attractive investment for the private sector.

The mining industry is fuelling the buzz. Last year, a writer in this journal lauded the “much less stringent regulatory environment” and “significant cost savings” to be had by leveraging drone technology to perform exploration, mapping, and inspection activities that previously required a helicopter. Drones can monitor staff, identify threats to safety, and prompt an intervention before damages occur.

However, there are several legal issues that mine owners and operators should consider before looking to the skies.

Transport Canada’s regulation of UAVs focuses on ensuring the safe operation of these hovering robots. According to the Canadian Aviation Regulations, hobbyists may fly drones weighing 35 kg or less, subject to certain requirements. However, commercial users must follow stricter rules. In particular, section 602.41 prohibits users from flying UAVs in Canada without first obtaining a Special Flight Operations Certificate (SFOC), which imposes conditions to ensure safety. Corporations operating a drone without a SFOC or in breach of its conditions may be fined up to $25,000. Transport Canada also publishes non compulsory general safety practices. In the event of a claim for negligence following an accident, these recommendations are likely to inform a court’s interpretation of the standard of care owed by an operator to its employees and others on the ground.

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tions in early 2017. Meanwhile, the United States Federal Aviation Administration issued a comprehensive set of rules this past June that are expected to expand the use of UAVs across many applications and industries. US regulations in this area are still catching up to Canada’s.

While safety is a significant concern deserving of attention, the Office of the Privacy Commissioner of Canada (OPC) criticized the legislative regime for drones in a 2013 report because it does not address new privacy concerns raised by persistent, surreptitious surveillance. For instance, whether a drone’s technologies could violate individual privacy does not factor into Transport Canada’s decision to issue a SFOC. But make no mistake: to the extent that drones collect, use, or disclose personal information – which includes video surveillance – they are governed by the federal Personal Information Protection and Electronic Documents Act. As the OPC makes clear, “organizations using drones will be expected to go further to genuinely address the privacy implications of their use, and ensure that drones are used in accordance with privacy laws and guidelines.”

Privacy may be less of a concern where drones are used for remote mining operations, away from inhabited areas. Canada’s existing privacy laws govern the protection of personal information, whereas mining activities may be more likely to engage spatial and physical privacy. Until and unless new rules are introduced to regulate drones in these contexts, the OPC has identified factors that it will consider relevant to assessing whether certain drone data-collecting activities are reasonable, including the vantage point, location, and context in which the information is collected, used, or disclosed. The type of technology used and the purpose for which data is collected will help to determine the degree of the intrusion. Individual consent to the collection, use, or disclosure may be implied, but that could be difficult to justify if the drones are not likely to be detected on the ground.

As drone technology reaches new heights, the law will continue to evolve. Regardless of its trajectory, one thing appears to be certain: unlike the male honeybee, the fruits of drone technology’s CMJ labour will be sweet.

TONY MORRIS is a Senior Partner, Lawyer, Trade-mark Agent, at Norton Rose Fulbright and Agathon Fric, is an Articling Student at Norton Rose Fulbright.

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ADVERTORIAL

ADVANCED Strengthening customer support by aligning with key business partners that contribute to the jobsite of the future Intelligent equipment. Trucks that drive themselves and virtual operator training. Telematics delivering real-time machine information. It’s all a part of a modern technological revolution that’s increasing efficiency, production and profit for mining and construction companies throughout Canada.

SMS Equipment brings all of this together, and more, with its new “Advanced Technologies” identity that’s designed to incorporate technology into businesses today, while planning for where technology will go in the future.

Dump trucks using Komatsu’s Autonomous Haulage System are equipped with vehicle controllers, highprecision GPS, an obstacle-detection system (ODS) and a wireless network. The trucks are automatically guided to the loading spot after computing the position of the GPS-fitted excavator or loader bucket. A supervisory computer also sends information about the specific course to the dumping spot.

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“Advanced Technologies encompasses all of our industries’ technologies and allows us to be forward thinkers of what comes next,” said SMS Equipment President Mike Granger. “The jobsite of the future will be vastly different than the past or today. We are prepared to help our customers take the next step forward.”

Advanced Technologies include Komatsu’s FrontRunner Autonomous Haulage System (AHS).

Dump trucks using AHS are equipped with vehicle controllers, high-precision GPS, an obstacle-detection system (ODS) and a wireless network jointly developed by Komatsu and Modular Mining Systems.

The trucks are automatically guided to the loading spot after computing the position of the GPS-fitted excavator or loader. A supervisory computer, which is often located in a mine’s “command center,” also sends information about the specific course to the dumping spot.

Suncor Energy recently began an extended evaluation of Komatsu AHS haul trucks at its North Steepbank Mine in Alberta “This exercise will allow us the opportunity to assess how the equipment interacts, as well as evaluate the technology during all seasons and potential terrain conditions,” said Suncor’s spokesperson Erin Rees.

“Safety is our top priority, and it is one of the metrics

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we will be measuring in comparison to the traditional truck-and-shovel operations. We are also looking at frequency of equipment stoppages, asset reliability and environmental impact.”

TRAINING SIMULATOR

Komatsu developed autonomous trucks many years ago, and mines in Chile and Australia have used them extensively to move vast quantities of material costeffectively. The technology is relatively new to Canada, so SMS Equipment is taking a leading role to ensure that mines are prepared to implement AHS. SMS Equipment and Modular Mining Systems jointly constructed the SMS FrontRunner Virtual Training Room designed to simulate the command center behind the operation of a mine that utilizes autonomous haul trucks. A mine using Komatsu’s AHS still needs a command center with a human controller or controllers at the helm. The SMS FrontRunner Virtual Training Room at SMS’ 63 North branch in Fort McMurray, Alberta, accurately simulates the environments in which the controllers work.

The servers that house SMS’ system are located at its Acheson offices in Edmonton, Alberta, offsite from the Virtual Training Room. That is by design.

“We built the system with flexibility in mind, because we’re confident in the growth of AHS in Canada,” WWW.CANADIANMININGJOURNAL.COM

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said Kim Young, SMS Infrastructure Department Supervisor. “As that happens, additional SMS Equipment locations can branch off the main server in a variety of ways and replicate our current training room. It’s a fairly economical way to expand support.”

INTELLIGENT MACHINE CONTROL

One of today’s most cost-effective technologies is Komatsu’s intelligent Machine Control dozers and excavators. SMS Equipment carries the full lineup of intelligent Machine Control products, including the PC490LCi-11, which increases productivity and efficiency in mass excavation, trenching and fine grading applications. Factory-integrated machinecontrol guidance lets operators focus on moving materials without worrying about digging too deep or damaging the target surface.

Like other intelligent Machine Control excavator models (the PC210LCi-10 and the PC360LCi-11), the PC490LCi-11 has a unique sensor package, including stroke-sensing hydraulic cylinders, an Inertial Measurement Unit sensor and a Global Navigation Satellite System antenna. They utilize 3D-design data loaded into the machine’s 30.7-centimeter (12.1-inch) monitor to accurately display machine position relative to target grade. When the bucket reaches the target surface, automation kicks in to limit overexcavation.

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Alberta’s SunHills Mining recently began using the PC490LCi for ditching and dewatering at its Highvale Mine. “The PC490LCi eliminated our need for stakes and laser levels,” said Operations Manager Jonathan Soper. “It was also great for our operators, because they didn’t have to get out and check their grade, which saved time and reduced risk of injury.”

The PC490LCi-11 is currently the largest of three intelligent machine control excavators with operating weight ranging from 47,931 to 48,919 kg (105,670 to 107,850 lb) and 359 net horsepower. The PC490LCi-11 features increased hydraulic flow in Power mode that boosts productivity up to 13 percent. It also has up to seven percent more arm-crowd force and bucketdigging force when the one-touch Power Max function is engaged.

“The PC490LCi-11 fits well in the mining sector as a good tool for reclamation and drainage work,” said Chris Safinuk; Manager of intelligent Machine Control for SMS West Regions. “Komatsu introduced intelligent Machine Control with its D61i dozer about three years ago, and has since introduced this technology into a diverse range of dozer and excavator models, including a new, second-generation D61i.”.

These innovative products and services position our customers on the cutting edge of the jobsite of the future.” n

Komatsu’s new PC490LCi-11 intelligent Machine Control excavator semiautomatically limits overexcavation and traces a target surface, increasing productivity and efficiency in mass excavation, trenching and fine grading. This excavator features factory-integrated machine-control guidance that lets operators focus on moving materials without worrying about digging too deep or damaging the target surface.

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CSR MINING IN MY& MINE(D)

Policy developments could affect CSR obligations of Canadian miners

By Michael Torrance

T

hree notable developments happened in the last quarter which could affect Canadian corporate social responsibility (CSR) policy generally and the mining sector specifically.

Free Prior and Informed Consent Fully Supported by Government of Canada In May, the Government of Canada officially removed its “objector status” to the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). In a speech by Canada’s Minister of Aboriginal Affairs, Carolyn Bennett, to the United Nations Permanent Forum on Indigenous Issues, the Canadian government’s “full support” for UNDRIP was declared, with “no qualification.”

Minister Bennett committed to adopt and implement the declaration in Canada in accordance with the Canadian constitution. Previous governments had only endorsed UNDRIP as an “aspirational document.” As such, this recent statement was a significant policy shift.

The most significant aspect of UNDRIP is the concept of Free, Prior and Informed Consent (FPIC). UNDRIP contemplates that FPIC is triggered where a project is proposed on lands traditionally owned, occupied or used by Indigenous peoples and where that project is likely to affect the Indigenous group.

Most notably, FPIC requires that the Indigenous group consent to the project. While there are debates about what exactly “consent” means (including whether or not it amounts to a veto) many experts believe that the FPIC requirement surpasses the standards set by the spectrum of consultation currently required of the Crown. Whether this is the view of the Canadian government remains to be seen. What is certain is that this development will precipitate much debate and likely affect the nature of Aboriginal consultation in Canada.

Office of Human Rights Created By Global Affairs Canada Also in May, Foreign Affairs Minister Stephane Dion announced the creation of a new “Office of Human Rights, Freedoms and Inclusion.” The exact nature of this office was not announced.

However, the office replaces the “Office of Religious Freedom” that had been established by the Conservative government. It was announced that the new office would have three divisions, “Human Rights and Indigenous Affairs,” “Inclusion and 52 |

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Religious Freedom” and “Democracy.”

The budget for the office will be $15 million – tripling what had been allocated for the Office of Religious Freedom. The announcement made clear that human rights would be a key focus of the new body, and that Canadian ambassadors, high commissioners and, consuls general, would have human rights among their core objectives and priorities.

It is not clear if corporate human rights expectations will be part of this new focus – such as implementation of the UN Guiding Principles on Business and Human Rights (UNGP).

There is also no indication yet that this body will replace any existing entities, like the Office of the CSR Counsellor for the Extractive Sector (CSR Counsellor). However, as I have noted in previous columns, the mandate and scope of the CSR Counsellor may well be the subject of future policy reviews. It will be worth monitoring whether the new Office of Human Rights, Freedoms and Inclusion may be part of any new human rights governance of Canadian companies operating abroad.

Inclusion of Human Rights in OECD Common Approaches Another important development for companies that may seek financing support from export credit agencies, is the release of the new OECD “Common Approaches,” which sets standards for environmental and social governance for all OECD export credit agencies. The Common Approaches are enacted through legislation binding upon export credit agencies like Export Development Canada. The new Common Approaches standard specifically requires screening of all applications for financing or support covered by the Common Approaches for “severe” human rights risks.

Where screening identifies a high likelihood of severe human rights risks, further assessments should be conducted, which may include specific human rights due diligence. This new development builds on an increased focus on human rights found in other international standards like the IFC Performance Standards, which have directly referenced the UNGP since 2012 – and which are, in fact, incorporated by reference into the Common Approaches. This reinforces how human rights governance issues are increasingly relevant for the due diligence efforts of potential financiers – building the business case for CSR even further. CMJ MICHAEL TORRANCE is a lawyer with Norton Rose Fulbright, Toronto.

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2016-07-21 10:53 AM

UNEARTHING TRENDS

Preserving the ecosystem means preserving capital, naturally

By Susan McGeachie

N

atural capital is one of the most valuable assets for mining companies. It provides the metals and minerals we seek, water during the extraction process and infrastructure to protect against flooding and droughts. But it’s hard to quantify with a dollar amount because its value isn’t easily captured by traditional accounting systems. This, however, has improved significantly, led by the United Nations-backed Economics of Ecosystems and Biodiversity initiative.

Ever since, financially quantifying the value of preserving nature versus development is a routine assessment in many municipal and national development decisions. This could put some mining companies at risk of losing access to land or water that will increasingly be revalued using more robust, reliable and globally accepted economic assessment methodologies.

Here are some considerations for mining managers to avoid surprises: Legislative and regulatory changes

The US, UK, EU and Rwanda Governments are at varying stages of holding companies responsible for measuring the value of their natural capital use, and incorporating these ideas into their strategic planning. This type of analysis will increasingly factor into legislative decisions as well as regulatory and permitting requirements, impacting both new and existing corporate development plans. Mining professionals who engage with government and other key stakeholders can help inform new regulatory requirements to ensure they’re ultimately achievable.

Water crisis

Water is a prime example of an ecosystem service that’s key for the mining sector. EY’s top 10 business risks facing the mining and metals industry included access to water for the first time in 2014, and remained a relevant issue in the 2015/2016 ranking.

Lack of access to clean water is exacerbated by the increasing risk of both flooding and drought due to deforestation, soil erosion and wetland degradation.

Flooding and drought risks will only intensify concerns around water scarcity which, in turn, impacts biodiversity. The 2015 World Economic Forum Global Risk Survey identified biodiversity loss as a significant concern, one that is closely linked to economic development and water security.

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Bloomberg’s Water Risk Valuation Tool illustrates how water risk can be incorporated into valuation models for gold and copper mining companies. The tool also offers the capability of modeling potential asset stranding based on conditions of future physical water scarcity, and estimates the effects of this water risk factor on earnings and share price.

Access to financial capital

In EY’s 2011 analysis of profit warnings issued by UK companies, the firm found that environmental externalities can equate to up to 50% of company earnings in a standard equity portfolio.

Appropriately pricing these externalities has become a significant concern for investors. This is particularly an issue for industries that are dependent on natural capital, such as mining.

In 2012, over 40 financial institutions launched the Natural Capital Declaration, which is a commitment to the integration of the value of natural capital into financial products and services.

Many large asset managers and owners are starting to re-evaluate stocks to incorporate potential increases in costs related to the use of natural resources. Issuers vulnerable to increasing natural capital costs may start to slowly experience an underweighting of their stocks in investment portfolios.

It is also becoming common for investors to engage with corporate leaders on their management of climate change and the corresponding resource scarcity, and related impacts on corporate profitability. For example, pension funds around the world, including Canada, publish their key areas of concern regarding environmental risks and other long term issues.

What does this all mean? Appropriately valuing the impact and dependency on natural capital is critical for mining companies to safeguard their natural assets and make better operational decisions over the life of a mine. Investing in natural water filtration systems, for example, can provide the same benefits as built infrastructure, and often at a lower cost. The negative financial and reputational consequences of poorly managed natural assets are very real. Proper valuations and overall transparency are must-haves to minimize those risks, and be viable in the long term.

CMJ SUSAN MCGEACHIE, EY Market Leader, Climate Change and Sustainability Services.

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