Canadian Mining Journal June 2018

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Nutrien’s new heft

Mining in the Prairies PLUS

MINING’S BIG SHIFT: Notes from CIM 2018 SPECIAL REPORT

JUNE/JULY 2018 | www.canadianminingjournal.com | PM # 40069240

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CANADIANMINING

JUNE/JULY 2018 VOL. 139, NO. 05

JOURNAL

FEATURES

13 CIM 2018 Five ways the mining industry is changing.

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MINING IN THE PRAIRIES 16 Agri-giant Nutrien faces market challenges.

22 Saskatchewan suppliers’ association sees strong growth.

25 Alberta’s production of metallurgical coal set to rise.

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EQUIPMENT MAINTENANCE & REPAIR 28 The benefits of picking the right hydraulic fluid.

31 The hidden impact of idling engines.

35 How tire management can enhance efficiency.

25 DEPARTMENTS 4 EDITORIAL | Challenges multiply for miners

5 UNEARTHING TRENDS | EY’s Yogen Appalraju urges miners to get serious about cybersecurity.

6 LAW | David Bursey of Bennett Jones outlines some of the far-reaching effects of Bill C-69 on Canada’s project review regime.

8 CSR & MINING | Michael Torrance reports on the increasing focus on climate risk reporting and sustainable finance in the EU and Canada.

10 FIRST NATIONS | AFN Ontario Chief Isadore Day discusses recent progress on First Nations taking control of funding and services for their communities.

11 FAST NEWS | Updates from across the mining ecosystem.

31 ABOUT THE COVER

Nutrien’s Allan potash facility in Saskatchewan.

Credit: Nutrien

Coming in August Canadian Mining Journal’s annual Top 40 issue, our New Mining Technology supplement and a review of Canada’s top development projects.

For More Information

www.canadianminingjournal.com JUNE/JULY 2018

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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

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FROM THE EDITOR

CANADIANMINING June/July 2018 Vol. 139 – No. 5

Challenges multiply for miners Alisha Hiyate

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find the mining industry fascinating, but I have to say, I don’t envy mining CEOs. The pressures on miners right now are enormous. As laid out in the plenary session entitled “Thinking Differently: A Modern Approach to Mining” at this year’s CIM convention in Vancouver in May (see Page 13), the challenges are numerous and complex. Ranging from the familiar (political risk, financing) to the relatively new (recognizing the importance of diversity), the issues confronting the industry do indeed require a change in mindset.

At the same time, the sector is attempting to innovate and adopt new technology while still smarting from a deep and prolonged downturn.

The good news – for mining CEOs and industry editors alike – is that it looks like the pain of the commodities contraction that started in 2011-12 is finally coming to an end.

“I think we’ve seen the bottom,” said Hatch CEO John Bianchini at the plenary.

“We’re seeing investment coming back into the industry, a lot of our clients are dusting off old reports. In fact, many in the copper and lithium businesses are actually starting to invest heavily in early stage greenfield and brownfield developments, so we’re at that turning point I believe.”

The not so good news is that a new cycle in and of itself won’t be a panacea for the mining sector. Some of the more distressing comments by the plenary panellists were about a lack of foresight around and investment in exploration – the lifeblood of the industry.

Majors are neglecting exploration, hoping that juniors will do the heavy lifting for them. Nicole Adshead-Bell, a director with Cupel Advisory, noted that last year for the first time, over 50% of financings for smaller Canadian juniors came from international intermediates and majors.

“I believe that’s the wrong approach,” she said, explaining that majors, not juniors, are the ones with the capability and money to stick with exploration over the longer timeline necessary for discovery.

Adshead-Bell also referred to the “short-termism” plaguing both investors and the exploration strategies of miners.

“One thing I’ve noticed recently is because of that pressure to produce results quickly, instead of going through the multi-year processes of an appropriate exploration program, it’s designed to have the glory hole – the hole that drives your share price, the hole that allows management to give you a big budget to explore,” she said.

“That short-termism is a little bit disconcerting because exploration is a process, it’s not easy, and randomly poking holes in the ground is not likely to result in success.”

Meanwhile, Bianchini said that metals demand has increased fairly steadily by 3% a year since the end of the Second World War. But a 3% increase in 1985 is different from a 3% increase today, he noted. “The pressure of replacements is much higher today because the absolute amounts are much greater,” he said.

Again, I don’t envy mining CEOs. It will take a lot of “thinking differently” to re-invent the industry – while not losing sight of the basics that have always been central to mining. CMJ

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UNEARTHING TRENDS

It’s time to address the mining security gap

By Yogen Appalraju

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t seems hardly a week goes by without news of another high-profile cyberattack. The stories that attract the most attention usually involve major retailers or big banks that store personal data. But the risk to mining and metals companies is just as great.

In the recent EY Global Information Security Survey, 55% of energy and resource companies said they experienced a significant cybersecurity incident in the past 12 months. But only 34% of these companies’ boards reported having sufficient cybersecurity knowledge to ensure effective oversight of cyber risks. With cybercriminals showing more sophistication with each passing year, and mining companies quickly becoming more digital, there’s a serious unsustainable gap between boards’ operating and security needs.

Combine that with how dire the consequences of an attack can be – putting everything from employee health and safety, supply chains and brand reputation at risk – miners need a “step change” in thinking.

It starts with the right questions To be prepared, organizations must apply good risk management principles, and this starts with viewing cyber risk as a business issue – not one that should be relegated to the IT department. Start by asking the following questions: w Do I understand the cyber threat landscape? No step change is possible unless miners know the unique threats they face, and the vulnerabilities that make their organization susceptible. This is the foundation on which any plan is based and is thus a critical first step. w Do I have a baseline of cyber controls? This baseline should align with the organization’s top threats and be continually evaluated to ensure controls are effectively protecting highvalue assets and critical business data (enterprise IT and business applications; treasury, financial and commodity trading; commercially sensitive data; and operational technology). w Have I developed a cybersecurity framework? This allows businesses to consistently and accurately identify cyber control gaps and threats, and the actions required to achieve the target risk profile.

Foster a culture of cybersecurity As important as it is to understand the landscape and risk profiles, none of it will amount to much if an organization

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lacks buy-in at the executive and board level. To be fair, mining organizations face no shortage of competing priorities as they emerge from a prolonged period of sluggish performance.

There are as many places to invest as there are fires to extinguish.

But don’t fall into the trap of approaching cybersecurity as just another line item. By some estimates, 80% of business relationships will be managed without human interaction soon – and mining companies are no exception. Many are currently taking a hard look at the value of automation. Every stage of digitization creates new vulnerabilities to cyber risk. Viewed in this light, cybersecurity must be seen as a business imperative for miners. Without that level of commitment, neither the funding nor internal momentum required for substantial change will take place.

Championing cybersecurity is all about positioning. Make a point of using language that resonates in boardrooms. Business leaders care about business performance, and any perceived risk to the bottom line or that may interfere with mission critical operations will be taken seriously. Viewed in this way, cybersecurity is not an IT risk, but rather an operational risk that warrants serious attention.

Next, come with a plan that lays out clear value at every step.

Demonstrate how progress can be made by not only demonstrating the details of the remediation steps that are in motion, but by articulating the defence in depth approach being taken to protect critical assets and reduce the company’s cyber risk exposure.

Finally, look outside the company walls for allies. Internal budget asks will always be met with some degree of skepticism by leadership, easily dismissed as managers fight for departmental dollars. An assessment conducted by an independent and impartial third party, however, can help lend more weight to the cybersecurity argument and spell out the “why’s and how’s” in more stark and objective terms.

Every organization has the ability to reduce the threat posed by cyber attackers. By drawing up the right plan, carefully implementing it according to priorities and working to build security into the operational mindset, mining companies can stake out a leadership position, and ensure they reap the full rewards now that better times have returned.

CMJ YOGEN APPALRAJU is the EY Canada national cybersecurity leader. He is based in Toronto.

For more cybersecurity insights, visit ey.com/ca/cyber.

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LAW

Ambitious Impact Assessment Act to reshape project review regime

By David Bursey, Sharon Singh, Brandon Mewhort and Stephanie Ridge

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ith the proposed Impact Assessment Act (part of Bill C-69), the federal government seeks to increase public acceptance and certainty for the assessment of major projects. The stakes are high because project assessment is at the intersection of many federal policy objectives that shape our natural resource economy and global reputation.

Although Bill C-69 retains many features of the 2012 Canadian Environmental Assessment Act, the IAA is ambitious in scope and will reshape the project assessment regime.

Notable aspects w The IAA focuses on impact assessment versus environmental assessment and includes an expanded list of assessment factors: contribution to sustainability, cumulative effects, regional assessments, gender-based impact analysis, alternatives to the project, and alternative means to carry out the project. Assessing economic factors and positive effects is essential to sustainable development. But overemphasis on risk without a proper weighing of the positive effects will constrain innovation and growth. w The Canadian Environmental Assessment Agency will become the Impact Assessment Agency of Canada. It will have an expanded role as the authority responsible for impact assessments. Panels will continue to review larger projects. w Ultimate decisions will remain at the political level and will follow a defined public interest test. The Minister or cabinet must weigh the public interest, policy direction, and risk trade-offs, and then stand accountable. w The IAA emphasizes the reconciliation of the interests and traditional knowledge of Indigenous peoples and allows opportunity for input at all stages of decision-making. w The IAA retains the “project list” approach, rather than returning to a federal approval “trigger” to decide on reviewable projects. w The Minister may designate a project for review in the public interest, but not if the project has substantially started or has received federal approvals that allow it to proceed.

The Minister may initiate regional assessments. Assessing cumulative effects in a region rather than placing that burden on a single project developer is important, but it is unclear how the process will work and how overlaps with provincial interests will be reconciled. Regional assessments will take time and resources.

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w The Agency will use the planning phase to assess the public interest, determine the need for assessment, and set the scope of the assessment, which shifts more work to the front end of the process so the review is more efficient. Developers must factor this early stage process into any planning timeline. w The IAA allows for inter-jurisdictional co-operation and for a provincial process to substitute for the federal assessment, but decisions remain at the federal level. This may help avoid regulatory duplication but will require meticulous planning to withstand legal challenges. w The IAA increases the opportunity for public participation, with funding, which has the potential to overwhelm a review unless the Agency or Panel manage the process well. w The transition rules require further clarity for proponents planning or undergoing assessments in the current process. w The IAA emphasizes time limits, transparency, notices and detailed reasons for decisions for each phase.

Next Steps The Standing Committee on Environment and Sustainable Development completed its review at the end of May. The committee considered over 500 amendments and passed over 130 of them. The amended Bill C-69 will be posted publicly in June and then sent to the House of Commons for third reading.

Completed public consultations on the Regulations Designating Physical Activities (Project List) and the Information Requirements and Time Management Regulations will inform the drafting of the regulatory proposals over the summer. Consultation on the draft proposals is set for the fall, with a plan to finalize the regulations in early 2019.

These regulations are important tools that will define the practical application of the IAA. Implications for resource development The ambitious blueprint laid out by Bill C-69 will require substantial federal resources and time to achieve its goals of increasing public confidence in the process and creating more certainty for project developers. In a world where capital for resource development projects is mobile, Canada must have an efficient project review process to attract capital to develop our natural CMJ resources and civil infrastructure.

DAVID BURSEY is partner and co-head of Aboriginal Law at Bennett Jones. SHARON G.K. SINGH and BRANDON MEWHORT are associates; STEPHANIE RIDGE is a student-at-law.

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CSR & MINING

Growing focus on climate risk reporting and sustainable finance

By Michael Torrance

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limate risk reporting and sustainable finance has been centre stage for Canadian and European regulators in recent months. There is a trend towards increasing standardization driven by investor and market expectations, with regulators observing from the sidelines and/or stepping in to steer or cheer on these developments as they see fit.

EU expert group In January 2018, the EU High-Level Expert Group on Sustainable Finance released recommendations on a number of priorities for the EU to promote and enhance sustainable finance through EU policy. Major recommendations included clarifying investor and director duties regarding sustainability with focus on environmental, social and governance (ESG) issues, promoting enhanced disclosure on ESG, promoting a taxonomy of sustainable finance products and increasing standardization (green bonds, social bonds, ESG rating methodology etc.) and incentivizing investment in sustainable infrastructure. A key focus of the EU recommendations was on climate change and creating the financial conditions to facilitate the transition to a low carbon economy.

The report of the EU High-Level Expert Group will likely inform new policy initiatives that could drive the development of the sustainable finance industry in Europe for the next decade or more. Emergent approaches will likely have a more global effect as well by influencing how the relatively nascent sustainable finance market evolves and by informing best practices.

Canadian miners interested in pursuing sustainable finance options for accessing capital should keep an eye on these developments. They will point to areas of possible regulation in future and also offer opportunities for access to capital or investment that may be emerging.

Climate Related Financial Disclosure Recommendations The carbon risk aspect of the recommendations of the EU High-Level Expert Group ties into new expectations around climate related financial disclosure flowing from the Financial Stability Board (FSB), a global banking regulator.

In 2015, the FSB (at the direction of Chairman Mark Carney) initiated a Task Force on Climate-Related Financial Disclosure (TCFD). The TCFD was headed by Michael Bloomberg and released recommendations in the summer of 2017 regarding how companies should evaluate and formulate 8 | CANADIAN

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For the Canadian mining sector, sustainable finance creates new opportunities for access to capital – such as green or social bonds.

financially material disclosure of climate change risks affecting their business.

The TCFD recommended qualitative disclosure in the following areas relating to climate related risks: strategy; governance; risk management; metrics and targets. Such disclosures would presumably be made in financial disclosures or possibly through sustainability reporting.

The TCFD also recommended that (all) companies undertake a quantitative analysis of the financial impact of climate change risks (what are called transition risks and physical risks) on the business. This quantitative aspect of the reporting is tied to a stress testing-style methodology referred to as “scenario analysis,” linked to the 2° Celsius caps on global climate change sought by the Paris Agreement (“Scenario Analysis”). A transition risk would include the risk of new regulations that increase the costs of goods or services and lower demand. It can also include product or service substitution that results from market forces or the introduction of new regulations (i.e. reduced fuel consumption due to carbon taxes or shifts to electric vehicles). A physical risk would include extreme weather events, flooding or other physical changes tied to climate change. The theory of the TCFD is that these types of risk (transition and physical) may, if they materialize over a long-term horizon, have financially material implications for businesses engaged in certain activities, including in particular lending and insurance. Where material implications are identified in applicable scenarios, it could necessitate disclosure in financial statements.

The precise methodology for implementation of scenario analysis was not specified by the TCFD. A pilot project for TCFD implementation relating to the financial sector was organized by the United Nations Environment Program (UNEP) in 2017. The results of the pilot were released in an implementation guidance report published in May 2018. The www.canadianminingjournal.com

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implementation guidance sets out an approach to scenario analysis for financial institutions in accordance with the recommendations of the TCFD. The methodology proposes that the results of this analysis should be factored into financial risk analysis. If the analysis shows that there could be a financially material impact to the company in the event a particular scenario occurs, this information would potentially be disclosable in financial statements as material information.

It must be emphasized that the nature and scope of such disclosure remains to be seen and will be subject to company specific considerations including in relation to materiality. It does highlight the complexity of the disclosure contemplated by the TCFD. Climate disclosure in Canada and Ontario In April 2018, roundtables were held in Toronto by both the Ontario and Canadian governments, responding to these new developments. One meeting was organized by the Federal Ministers of Finance and Environment with Mark Carney in attendance. The second was organized by Ontario Premier Kathleen Wynne with Michael Bloomberg in attendance.

Invitees to both sessions included Canadian companies from various industries. No policy developments were announced,

but the meetings shone a spotlight on the interest of governments in these issues. They also coincided with an ongoing review of securities disclosure requirements in Ontario including in relation to climate related material risks. The outcome of that review is pending. The sessions pointed to the “interested observer” role of governments in relation to these emerging sustainability reporting and investment trends.

Conclusions While no new regulations are on the horizon in Canada, the growing interest of key stakeholders including government in the standardization of sustainable finance and reporting is telling. At the least, it illustrates the weight of new and emerging standards in these areas like the TCFD. For the Canadian mining sector, sustainable finance creates new opportunities for access to capital – such as green or social bonds. It also flags the importance of sustainability ratings and indices and the marketplace generally in driving evolving expectations. Reporting issuers in the Canadian mining sector should keep in mind these trends, which present both opportunities and possible expectations from investors. CMJ MICHAEL TORRANCE is chief sustainability officer for BMO Financial Group.

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2018-06-07 3:16 PM

FIRST NATIONS

Federal government needs to honour its obligations to First Nations

By Isadore Day

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n May 3 and 4, chiefs, leadership, and Indigenous organizations met with federal officials at a joint gathering in Toronto to discuss five key areas: a new fiscal relationship; reliable infrastructure; improved health outcomes; quality education; and, most importantly, bringing children and families back together.

This was a good beginning towards ultimately turning over control of funding and services to our own institutions, run by our own Peoples, in the years to come.

In April, I was very pleased to sign a Joint Commitment to Policy and Funding Reform for First Nations Child and Family Services in Ontario – alongside the government of Ontario, and leadership from the Chiefs of Ontario. We must bring our children back to be cared by our Peoples in our communities. The federal government is committed to working with all partners to address the severe overrepresentation of First Nation children in care. This is a crisis that continues to steal children from their families. However, this is now a crisis with an end in sight.

Most importantly, our chiefs have re-iterated that the return of lands and resources is the most critical outstanding issue that must be addressed. There will be no social justice for First Nations, no positive future for our children, if we do not have a sufficient land base to build happy, healthy sustainable communities.

As the youth reminded us, we are the land. The land means everything to us. Our chiefs and grand chiefs have stated that far too many of our Peoples are physically, spiritually, and mentally damaged by colonial dependency trickled down on postage stamp size pieces of land.

In April, at our own special chiefs assembly, we emerged unified on important issues from all regions. This is critical if we want the Chiefs of Ontario to be an organization that responds and serves the leadership in our communities. We are all reminded of the urgency we have in regard to our fiscal relationship with both the federal and provincial governments.

Ontario has 25% of the First Nation national population, but only receives 9-11% of the national federal funding. At this rate, the housing crisis will worsen. We will never be able to address urgent needs from clean water to health. For example, Ontario requires $2 billion to address the housing crisis on-reserve.

The current national funding level of $200 million per year, translates, at best, into $50 million for the Ontario region.

Without significant funding increases as aligning with regional population profiles, this crisis will continue and likely worsen.

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Services that this funding inequity will be corrected as soon as possible. However, we still need more funding in order to eradicate inequities and poverty.

As outgoing Anishinabek Nation Grand Chief Pat Madahbee stated at the Joint Gathering, we will assert our own jurisdiction, develop our own laws, and develop our own sustainable economies. In less than five years, our Peoples must be ready to assume control of federal funding and assert ourselves as sovereign nations.

Prime Minister Justin Trudeau announced in February the government’s intention to table an Indigenous Rights Framework and Legislation, to be passed before the October 2019 federal election. The current engagement process consists of three hour regional meetings with various interest groups, along with email submissions. At the May 1-2 AFN Special Chiefs Assembly on legislation, chiefs from across Canada passed resolutions to remind the federal government that we – the First Nation communities and citizens – must be fully engaged in developing legislation that impacts upon us.

Specifically: “Government engagement processes with nonrights holders and organizations, such as the Assembly of First Nations (AFN), do not constitute consultation and accommodation and cannot be used to obtain free, prior and informed consent ...”

The resolution called on Canada to honour its constitutional obligations and commitments to the full implementation and affirmation of inherent rights, treaty rights and title.

However, by the end of this summer, the federal government will implement legislation to legalize the sale of cannabis.

Currently, there are no provisions in the legislation which address First Nation needs, from health and public safety, to youth education and economic development. Other pieces of federal legislation that will directly impact First Nation land rights include Environmental, Energy, and Navigable Waters.

Again, this legislation requires deep consultation including complete co-development by First Nations.

Remember, there is strength in unity. We cannot – we must not – fall under a “divide and conquer” mentality – whether with governments, or amongst ourselves. We must never back down when colonial governments tell us to how to live our lives.

We will exercise our own laws and our own jurisdictions.

We will continue to advance our Nations in order to secure a CMJ better future for our children.

ISADORE DAY Wiindawtegowinini, is Assembly of First Nations Ontario Regional Chief.

www.canadianminingjournal.com

2018-06-07 3:17 PM

FAST NEWS • DIAMONDS |

Updates from across the mining ecosytem

De Beers to sell synthetic diamonds

• REORGANIZATION |

FLSmidth to concentrate on mining, cement

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A collection of Lightbox jewelry. PHOTO CREDIT: Lightbox

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e Beers Group shocked the diamond industry on May 29 with the revelation that it will, indeed, start selling laboratory grown, synthetic diamonds.

This is an about-face for the company, which previously said it would never sell anything but natural diamonds.

The news comes along with the announcement that De Beers is creating a new fashion jewelry brand, Lightbox, to market the lab-grown gems. Synthetic diamonds will sell for US$200 for a 0.25carat stone or US$800 for a full carat. All Lighthouse stones will carry a permanent Lightbox logo, visible under magnification, inside the stone for clear identification. Initially pink, blue and white gems will be available to U.S. consumers through the Lightbox e-commerce site.

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“In addition to a deep understanding of what consumers want, Lightbox brings innovation and a commitment to transparency to the lab-grown diamond sector,” said Steve Coe, general manager, Lightbox Jewelry. “We’ve learned from our research that there is a lot of confusion about lab-grown diamonds – what they are, how they differ from diamonds, and how they are valued.

Lightbox will be clear with consumers about what lab-grown diamonds are and will offer straightforward pricing that is consistent with the true cost of production.”

In the words of De Beers CEO Bruce Cleaver, customers will be getting “affordable fashion jewelry that may not be forever, but is perfect for right now.”

s of July 1, FLSmidth is reorganizing to concentrate on two industries – mining and cement.

The changes will be supported by a regional setup to strengthen customer focus and life cycle solutions combined with a new central digital organization.

Building on its unique business model of projects, products and services, FLSmidth will reduce the number of its divisions from four to two. At the same time a reorganization will take place into an agile regional structure rather than by country. Sales and service will be decentralized in seven regions, while ownership for the full life cycle offering will be anchored in the two industries.

The changes will enforce a productivity driven organization with a strong, unified digital approach. At the same time, it will strengthen FLSmidth’s local presence, customer-orientation, and life-cycle offering in order to further capture growth.

The two industry centres – mining and cement – will be arranged into seven regions: North America, South American, Europe, Russia and North Africa, SubSaharan Africa and the Middle East, Asia, Subcontinental India, and Australia.

FAST NEWS CONTINUED ON PAGE 12

Stantec acquires Norwest

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lobal engineering and design firm Stantec has signed a letter of intent to acquire Norwest Corp. With the addition of Norwest, Stantec’s Energy and Resources business operating unit will add a strong mining practice to the company’s portfolio in Western Canada.

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Colo., Salt Lake City, and Charleston, W.Va. Norwest has been involved with Western Canadian energy and mining projects for over 35 years. The firm has a long standing involvement with resource assessment, and mine development in Alberta’s oil sands working closely with clients from early development stages through to operations and reclamation.

In the Vancouver market, Norwest’s presence has assisted in the re-development of the northeast British Columbia coal mining sector, and new metal mine development projects. In the United States, Norwest has established itself as the leading coal mining consultant.

The acquisition was expected to close in the second quarter.

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2018-06-07 3:19 PM

FAST NEWS • ROYALTIES |

Updates from across the mining ecosytem

Ontario to share mining, forestry revenue with First Nations

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alling the agreements the first of their kind, the Ontario government has come through with its long-awaited plan for sharing mining and forestry revenues with First Nations. Queen’s Park announced on May 3 that it had signed agreements with 32 First Nations so that they may directly benefit from natural resource revenues. (The announcement was made one month before a provincial election that the governing Liberal party was expected to lose.)

The province has agreed to give 40% of the annual mining tax and royalties from mines active at the time the agreements were signed to First Nations represented

by Grand Council Treaty #3, Wabun Tribal Council and Mushkegowuk Council. The government will share 45% of taxes and royalties from future mines and from forestry stumpage. The agreements will come into force in 2019.

New Gold’s Rainy River mine falls within the revenue sharing agreement covering Treaty #3 territory.

PHOTO CREDIT: New Gold

According to a bulletin published by law firm Fasken, First Nations must spend the funds received through the agreement on one of the following areas: economic development, community development, cultural development, education, and health. The revenue cannot be used for per capita payments to First Nation members or any other parties, and cannot be distributed to any

Indigenous group outside of Ontario or used to cover the cost of litigation.

Notably, the agreements do not include all First Nations communities in northern Ontario, including those in the Ring of Fire.

Fasken also notes that Ontario has taken a broader approach than B.C., where mining resource revenue is shared on a project by project basis.

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• Ice Roads & Runways • Large Diameter Drilling • Mine Reclamation – Care & Maintenance • Remote Infrastructure Planning • Site Services & Crushing

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2018-06-07 3:19 PM

CIM 2018 Five ways the industry is changing Plenary session pinpoints complex challenges facing miners

By Alisha Hiyate

T

he plenary session at this year’s CIM conference in Vancouver in May aimed to outline the many complex, intertwined challenges the mining industry is facing. While the session touched on multiple topics, from political risk to diversity, CMJ identified five big changes in the industry that miners will need to address, regardless of where commodity prices go.

1

Longer and more volatile resource cycles

The resource cycle follows a predictable pattern: a demand surge followed by rapid supply expansion, a stable period of good margins and increasing capital expenditures, and then finally a denouement where supply exceeds demand.

But John Bianchini, president and CEO of Hatch, noted that the cycles are becoming longer, and the price swings between the troughs and peaks are becoming wider.

“That means that the volatility is getting more extreme over

time,” Bianchini said. “That causes some real new dynamics that we have to contend with.”

The way to temper the swings in the resource cycle is for the industry to adopt longer-term thinking, Bianchini said.

For example investing in projects not when markets are riding high, but when they’re depressed.

“We have to start having the courage to counter-cyclically invest in development,” he said. “That means doing your studies early on in the down part of the cycle; getting ready, investing in technology.”

Evidence shows that if feasibility and early engineering studies are done in the stable market and denouement stages of the resource cycle, the projects are much more successful.

Of course, there are many barriers to this strategy.

“The mining community has this juxtaposition of a mining company having to manage its business for plus ten years but CONTINUED ON PAGE 14

From left: Plenary session moderator and B2Gold CFO Mike Cinnamond; John Bianchini, CEO of Hatch; Nicole Adshead-Bell, director of Cupel Advisory; Sean Roosen, CEO of Osisko Gold Royalties; Clive Johnson, CEO of B2Gold; Leon Teicher, chair of Continental Gold; and Johnna Muinonen, VP Operations, RNC Minerals.

CREDIT: JON BENJAMIN PHOTOGRAPHY; COURTESY OF CIM

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Leon Teicher, chairman of Continental Gold.

CREDIT: JON BENJAMIN PHOTOGRAPHY; COURTESY OF CIM

the investing community, if you’re lucky, having a quarterly time horizon,” said Nicole Adshead,-Bell, director of natural resource investment firm Cupel Advisory.

2

New sources of financing

“There’s probably no portion of our business that is changing faster right now than how capital works,” said Sean Roosen, CEO and chair of Osisko Gold Royalties.

With the underperformance of gold miners fresh in investors’ minds, fund managers and retail investors have largely abandoned the space.

“One of the biggest reasons why there’s no money out there now in the gold funds is because they’ve lost so much money,” said Clive Johnson, CEO of B2Gold. “And it isn’t because of the gold price.”

For investors to return, miners need to start delivering on their promises and provide a better reason to buy the stock than the possibility the gold price will go up, he added.

Roosen said there’s been a pronounced narrowing of financing sources, with a handful of institutional shareholders now holding over 60% of all the public companies in the space.

One new source of financing has been private equity. But the terms that come with this money can be extremely stringent.

Royalty and streaming firms have also grown to be an important source of financing.

Reflecting these trends, Roosen pointed to a recent $500-mil-

lion financing for Victoria Gold that bypassed the public markets, and instead involved a royalty streaming company (Osisko), private equity, and the financing arm of an equipment manufacturer.

On the exploration side, investors retreated even earlier, leaving junior companies reliant on joint ventures with majors or selling potential future royalties for funding.

Retail investors have turned to cryptocurrencies and marijuana and tech stocks for the “casino” experience junior miners used to provide. “I think the number one challenge is how do we re-format the exploration business to get the excitement back into it,” Roosen said.

That will require new discoveries and “a few wins” for shareholders. “Greed is an amazing thing – it will overcome a lot of sentiment,” he added.

3

Exploration is becoming more challenging

At the same time as funding for exploration has dried up, it’s becoming much more difficult to find new mineral deposits. Timelines from discovery to development have increased from 5-6 years to 10 years – another factor that’s expected to make resource cycles more intense.

“The easy stuff is gone,” Roosen said.

A trend toward mining companies being managed by executives with a financing rather than technical background is one of the factors underpinning an underinvestment in exploration among majors, said Adshead-Bell. “Exploration is a cost and they’re focused on the bottom line,” she said.

Short-term thinking has also infiltrated companies’ exploration strategies.

“Because of that pressure to produce results quickly, instead of going through the multi-year processes of an appropriate exploration program, it’s designed to have the glory hole – the hole that drives your share price, the hole that allows management to give you a big budget to explore,” Adshead-Bell said, adding that such a strategy is not likely to result in success.

Even worse, some majors have outsourced exploration completely to juniors – which don’t have the funds or stability to be solely responsible for making discoveries.

4

The talent gap is becoming more pressing

Because of the downturn and resulting layoffs in the late ‘90s and early 2000s, there’s a missing middle of technical people in the industry with 10-15 years of experience.

Mike Cinnamond, John Bianchini, Nicole Adshead-Bell and Sean Roosen.

CREDIT: JON BENJAMIN PHOTOGRAPHY; COURTESY OF CIM

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2018-06-07 3:20 PM

“The visible minority in the mining space right now is the greenfield exploration geologist that has 20 years’ experience.

That is far more interesting to me than a unicorn,” said Roosen.

Because exploration geologists are typically the first fired, and last hired, larger mining houses have lost the ability to execute, Roosen said. “They’ve really lost the theme. A lot of these senior mining companies – you could blow up the building and you wouldn’t kill an exploration geologist.”

In addition to the exploration skillset, the industry is looking at a looming overall labour shortage, noted Johnna Muinonen, vice-president operations at RNC Minerals. Over the next decade, it’s projected the sector will be short 50,000 workers.

A low percentage of women and First Nations in mining point to relatively untapped labour resources. Women comprise 17% of the workforce (up from 14% a decade ago), while Indigenous people comprise only 6%, despite the proximity of many First Nations communities to mines and agreements that commit miners to training and employment.

Although there are exciting technology and innovation developments taking place, the mining industry’s image is not exciting. Mining is key to “sexy technologies” like electric vehicles and renewable energy, “yet we don’t sell ourselves as being part of that technology economy,” Muinonen said.

5

CSR is being recognized as critical to success

Corporate social responsibility was once thought of as “soft” issue. But miners are realizing it’s anything but.

“More projects are killed by CSR related issues than tech-

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Johnna Muinonen, VP Operations, RNC Minerals.

CREDIT: JON BENJAMIN PHOTOGRAPHY; COURTESY OF CIM

nical or financial issues,” said Leon Teicher, chairman of Continental Gold, a junior that’s building the first modern gold mine in Colombia. “We believe that the sustainability aspect of business is equally as important if not more than geology or operations or financing.”

Teicher emphasized the importance of starting good CSR practices early, ingraining them in the company’s culture, and providing CSR training across the company.

“Exploration is where it all starts,” Teicher said, adding that problems created early on can be difficult to resolve later. CMJ

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MINING IN THE PRAIRIES

Nutrien faces market

challenges after mega-merger WORLD’S LARGEST POTASH PRODUCER EXPECTS ‘HUGE’ SYNERGIES

By D’Arcy Jenish

T

he village of Allan, Sask., with a population of around 700 and located 55 km southeast of Saskatoon, bills itself as “a thriving community with a long tradition of pride and prosperity.” The well-being of the village was due, in no small part, to the underground Allan potash mine which was, until very recently, owned and operated by Potash Corp. The mine provided jobs and generated tax revenue while the company gave generously to community-building projects like the local swimming pool and Allan and District Communiplex with its hockey and curling rinks.

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With its portfolio of six potash mines, Nutrien has the flexibility to shift production from its high-cost to its lower-cost mines, depending on the market conditions of the moment. www.canadianminingjournal.com

2018-06-07 3:21 PM

An underground borer at one of Nutrien’s potash mines. CREDIT: NUTRIEN

“The company has been a good corporate citizen,” says Mayor Les Alm. “They donated a lot of money over the years.”

In early May, Mayor Alm, his fellow councilors and a smattering local dignitaries held a sod-turning ceremony for the community’s new Emergency Services Centre and the local council was hoping for a generous corporation donation to supplement funds raised from local taxpayers. This time around, however, Potash Corp. won’t be writing a cheque.

Potash Corp. ceased to exist in January when it merged with Calgary-based Agrium to create a global agricultural giant called Nutrien Ltd. with a market value of US$36 billion, more than 20,000 employees and operations in 18 countries. Apart from all that, Nutrien is the world’s largest producer of potash, thanks to its six Saskatchewan mines, it is the largest agriculJUNE/JULY 2018

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tural retailer and it is the number two producer of nitrogen fertilizer.

“We’ve asked Nutrien for a donation for our Emergency Services Centre,” says Mayor Alm, “but we’re still waiting.”

Employees are waiting and wondering too about job cutbacks given that CEO Chuck Magro has indicated the company is looking for $500 in synergies (read savings) by the end of 2019.

Complementary assets The mega-merger was some two years in the making and driven by the potential for cost savings and the fact that the companies have complementary assets. Potash Corp. operated CONTINUED ON PAGE 18

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MINING IN THE PRAIRIES five mines in Saskatchewan and one, since Regardless of the size around 1,000 metres,” says Downey. “They just keep going and going. Most of the mines shut down, in New Brunswick. For its part, of their deposits, the have 40 to 50 years of proven reserves.”

Agrium owned a single potash mine, but was challenge for potash Regardless of the size of their deposits, a leading producer of nitrogen and phosproducers worldwide the challenge for potash producers worldphate fertilizers and operated over 1,000 wide has been that supply has outstripped farm retail centres that sold seed, liquid and has been that supply dry fertilizers as well as herbicides, insecti- has outstripped demand demand for the past decade. Prices peaked at almost US$900 per tonne in 2008 but have cides and fungicides. for the past decade. languished at just over US$200 per tonne for “It made a lot of sense to bring the two the past several years. companies together,” says Richard Downey, The market tightened in the first quarter of 2018 and Vice-President Investor and Corporate Relations. “The size Nutrien reported sales of 3.1 million tonnes, up 11% over the of the companies was similar. We both have a lot of nitrogen first three months of 2017. Offshore prices were up 15% and plants. We both have phosphate facilities. By putting the assets North American prices rose 8%. together, the synergies are huge when you’re buying equipment However, the prospects over the next couple of years are or optimizing warehouses and rail cars. We can have one purless than glowing. “Nobody questions that demand is going to chasing program, one safety program and so on.” grow,” says Downey. “It’s more a question of new mines under For now, few observers expect any major changes in the potconstruction and how quickly they ramp up to full production.” ash mines. Earlier this year, Nutrien laid off a total of just over 600 workers at its Allan and Vanscoy mines, largely due to a New potash supply shortage of rails cars that led to a build-up of inventory, but The $4.1-billion K+S Bethune mine, located near the Saskatchmost were back on the job within a week. ewan community of the same name, opened in May 2017 and Some of the mines have been producing for decades and began shipping its product in late October 2017. More worrithey stand to be producing for decades to come. “The reserves some still, Swiss-based EuroChem Group is nearing compleare incredible once you get down to depth, which is generally tion of two greenfield potash mines in Russia – its Usolsky and Volgakaliy projects. They will have a combined capacity of 8.3 million tonnes per year once they are fully operational.

In a report for investors earlier this year, BMO Capital Markets analyst Joel Jackson predicted that output in 2018 from the K+S Bethune mine and EuroChem’s two Russian mines could more than offset the anticipated 2.5-3% growth in demand for potash. Jackson’s models predicted prices ranging from US$230 to US$255 per tonne, but cautioned that: “We recognize the risk that prices could fall closer to US$200 per tonne or below as new supply threatens industry structure.”

Some analysts anticipate that supply will outstrip demand until the mid-2020s, which has led the board of Australian mining giant BHP Billion to delay a final decision on completing its Jansen mine, located 140 km east of Saskatoon. It has been billed as the world’s largest potash project, with a projected cost of $12 to $14 billion, and the company has already spent $2.6 billion sinking production and service shafts to a depth of about 1,000 metres.

With its portfolio of six potash mines, Nutrien has the flexibility to shift production from its high-cost to its lower-cost mines, depending on the market conditions of the moment.

“Nobody wants to close a mine,’ says Brooke Dobni, professor of corporate strategy at the University of Saskatchewan’s Edwards School of Business. “They’ve got highly trained, dedicated employees. And it’s very expensive to bring a mine back into production four or five years down the road. They’d rather increase production at their most cost efficient mines and have temporary layoffs at other mines to manage supply and demand.”

Indeed, Nutrien has reported that its cost per tonne in the 18 | CANADIAN

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www.canadianminingjournal.com

2018-06-07 3:21 PM

Nutrien’s Rocanville potash facility in Saskatchewan. CREDIT: NUTRIEN

first quarter of 2018 was 4% lower than a year earlier because it had ramped up production at its biggest producer – the Rocanville mine, which has an operational capacity of 5.7 million tonnes per year. And in his report to investors, Jackson suggested that Nutrien could run the Rocanville mine at or near full-out for the year while scaling back other operations to as little as 40% of capacity.

Managing the supply/demand equation is just one of the

challenges facing this newly created agri-giant. Finding savings of $500 million by the end of 2019 is another. “Mergers usually cost more in the first year than corporate executives expect,” says Dobni. “You’re laying people off or firing them and they all have to be paid out. There’s a lot of costs to understanding what you have and what you need. It’s going to take four or five years before they get to $500 million savings. And they may not save much at all in the first year.”

CMJ

BUILDING

MINES OF

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WORKPLACE SAFETY NORTH’S

PRESIDENT’S AWARD RECIPIENT

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MINING IN THE PRAIRIES

ALL WE’RE

SASKATCHEWAN ASSOCIATION GROWS ITS MEMBERSHIP WITH WIN-WIN APPROACH

in this together

By Eric Anderson

T

he Saskatchewan Industrial and Mining Suppliers Association’s (SIMSA) membership has grown by 132% to over 170 members since November 2016.

Formed in March 2013, SIMSA’s membership now represents well over $15 billion in annual revenues and over 15,000 employees. Membership fees are close to covering annual operating expenses, and with the additional revenues from events, the association is self-sufficient without government funding. All of this has happened with an engaged board, a brilliant half-time administrative assistant, and a full-time executive director.

At the core of this growth is a belief that “we are all in this together,” which enables the supply-chain (SIMSA) and resource producers to work closely together.

As a guiding set of principles, SIMSA works towards enabling SIMSA members to earn more money via:

• • • •

face-to-face networking events; business education events; representing members via lobbying efforts; and informing members of current events, rather than focusing on social events.

SIMSA also aims to build partnerships with industry, government, and other associations by being supportive of positive behaviour and politely/quietly pointing out the negative.

SIMSA requires regular members to be physically located in Saskatchewan with a permanent bricks and mortar location, have at least three employees, and be PST and WCB registered in the province. By doing so, SIMSA is unlike many other business associations that only require having an “interest” in the province.

As such, when SIMSA speaks with resource companies

A DEMOday panel, organized by the Saskatchewan Industrial and Mining Suppliers Association. CREDIT: SIMSA

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www.canadianminingjournal.com

2018-06-07 3:22 PM

about doing an event together, they typically reply “yes” for two reasons.

First, they know they are working with the Saskatchewan supply chain. In short, the resource companies want to work with local suppliers – we make it easier for them by identifying the local companies via our vetted list (membership in SIMSA); this is strengthened by SIMSA requiring a company to have its corporate head offices in Saskatchewan to be eligible for board seats.

Second, we are focused on procurement; the resource companies know we are their partners in building the sector – we are an advocate, not an adversary.

SIMSA has begun development of the Saskatchewan Suppliers Database with the support and cooperation of the government of Saskatchewan, Mosaic, TransCanada, and Nutrien (others are expected to join shortly). This database will allow them to quickly identify Saskatchewan suppliers of various goods and services.

Recognizing that “if they do well, we do well,” SIMSA was

supportive of the PotashCorp/Agrium merger when it was proposed.

At the time, we stated: “The PotashCorp and Agrium merger allows two Canadian champions to become one larger one; it allows them to achieve the scale and scope to be globally competitive into the future. This, in the long run, is good for the province, jobs, and investors.”

We went on to say that: “SIMSA would expect that our relationships with PotashCorp and Agrium, which have been great, would continue into the future and become stronger.

As such, we look forward to a renewed focus on prioritizing Saskatchewan vendors in the support of all our ongoing operational success.”

Roundtable events Following this, SIMSA hosted our first roundtable event with PotashCorp, which then led to similar events with others, including Cameco, BHP Billiton, Mosaic, and K+S. These events have been the major driver behind SIMSA’s rapid growth. At the session where the roundtable concept was developed, PotashCorp noted our support of the merger.

The roundtable event sees the resource companies send

CONTINUED ON PAGE 24

New Name, Same Commitment You’ve known us as AREVA for years. We are now Orano.

A new brand with the same focus on uranium exploration, mining and milling in northern Saskatchewan, and the same commitment to safety, environmental protection and our communities.

www.oranocanada.com

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MINING IN THE PRAIRIES executives, procurement staff, and community persons to meet one-on-one with SIMSA members. They are seated individually around the room, with SIMSA members able to choose who they sit with. After lunch there is a presentation, followed by a free-flowing two-hour networking session. SIMSA submits a series of questions in advance, which become part of the resource companies’ presentation, as well as the Q&A session.

SIMSA developed a set of Aboriginal Inclusion guidelines for its members, which further reflects a cooperative effort between our members, the resource companies, and the Aboriginal/Indigenous communities. These guidelines and SIMSA’s previous roundtable events, led to the “SIMSA Saskatoon Tribal Council (STC) PotashCorp Business Forum; Growing Together,” which saw the supply chain sit with the economic development arm of the seven Saskatoon Tribal Council First Nations and 18 people from PotashCorp to discuss business opportunities. The three groups spent the day learning of STC’s membership’s economic opportunities and desires, PotashCorp’s procurement plans and opportunities, and spent time in discussions. This event has become the first of a series.

SIMSA recently backed the resource sector in a letter to federal Minister of Environment Katherine McKenna. We noted that the sector requires policy stability for investment to occur, and that if the producing/pipeline companies are burdened by

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policies or do not receive stable/prompt regulatory approvals, the supply chain suffers.

SIMSA, the government of Saskatchewan, and the Saskatchewan Mining Association (SMA) host an annual Saskatchewan Mining Supply Chain Forum. The forum sees procurement presentations by SMA members, a tradeshow featuring the supply chain, and various keynote presentations.

The event has grown to see over 330 mining company and 1,000 mining supplier personnel attend, plus over 225 exhibitors.

As a final example, SIMSA worked with the International Minerals Innovation Institute (IMII) to host the first ever Innovation Award as well as DEMOday. These efforts saw SIMSA member companies have their products and companies critically reviewed by a panel of Saskatchewan resource sector buyers and decision makers. The DEMOday panelists were a who’s who of decision makers from BHP Billiton, Cameco, K+S, Mosaic and Nutrien.

In summary, SIMSA’s success is a result of a businessfocused group of Saskatchewan people, working together towards a common goal – our mutual business success. As such, SIMSA will continue down this road and all will benefit.

CMJ After all, we are all in this together.

Eric Anderson is the executive director of SIMSA.

www.canadianminingjournal.com

2018-06-07 3:22 PM

MINING IN THE PRAIRIES

COURTESY: COAL ASSOCIATION OF CANADA

CANADIAN COAL driving global growth

By Robin Campbell

O

ur coal industry has played a vital role in the Canadian economy for hundreds of years, and with our product in high demand, it isn’t showing signs of letting up any time soon. With 6.6 billion tonnes of recoverable coal reserves, we are well-positioned to continue to supply high-quality coal for the next hundred years at current production rates.

Global population is growing and expected to reach around 9.7 billion people by 2050. This means massive amounts of infrastructure and energy will be required to shelter, transport, feed and support this population. For the steel and electricity required, coal is not so much an option, but a necessity.

According to the BP Energy Outlook 2018, China, India and other emerging and industrializing economies in Asia

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will drive the increase in global energy demand, and coal will fuel much of this growth through 2040. Even as renewables increase their share of the energy mix, coal demand will remain high.

This is positive news for Canada’s coal industry, notably our metallurgical coal which is exported around the world.

Canada is the world’s third largest exporter of metallurgical coal, with 85% of our production in Alberta and British Columbia. We produced 61 million tonnes of coal in 2016, half of that being metallurgical coal that was exported to Japan, South Korea, China, the United States, Chile, Brazil and India. Exports from Canada were valued at over $4.5 billion dollars. Preliminary numbers from Natural Resources Canada show that total value of Canada’s coal production increased 55.6% to reach $6.3 billion in 2017 as a result of higher prices for the second year in a row.

While some projections show that Canadian coal production will decrease moving forward, this is based on the reduced production of thermal coal associated with the government of Canada’s phase-out of coal-fired power generation.

What is happening in Alberta?

While B.C. is the power-house producer of metallurgical coal in Canada thanks to Teck’s operations in the Elk Valley and Conuma Coal Resources recently re-opening operations in northeast B.C. around Tumbler Ridge, Alberta’s production will increase in the coming years.

It is no secret that Alberta’s foothills and Eastern Slopes hold major deposits of high-quality coking coal, and several projects are moving towards production.

In the Crowsnest Pass area, Riversdale Resources is working through a joint federal and provincial permitting process CONTINUED ON PAGE 26

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MINING IN THE PRAIRIES for their Grassy Mountain project that they hope to conclude mid-2019. They are well-positioned to kick off construction once permitted, and will produce 4.5 mtpa at full production.

Adjacent to Riversdale’s Grassy Mountain project, Atrum Coal has started a major drilling at Elan South which has 7 million tonnes of indicated, 29 million tonnes of inferred and 200 million tonnes of exploration target resources of hard coking coal in a well-established mining area. Atrum also plans to further test the coal quality in 2018.

Closer to west-central Alberta, Ram River Coal Corp. completed a prefeasibility study of its Aries project. The study identified an in-place resource estimate of 413 million tonnes (312 million tonnes measured, 101 million tonnes indicated) of metallurgical coal and the company is taking steps to advance the project toward permitting. Ram anticipates it will enter the environmental assessment process later this year.

Thermal In Yellowhead County, development of Coalspur’s Vista Mine commenced in June 2017. With over 100 employees currently on the ground construction of preparation plants, roads, site prep, belt lines and the rail load out to CN’s mainline is well underway with eyes on a first coal shipment in the first quarter of 2019.

Production will reach 7 mtpa (with room for potential expansion) of clean coal production destined for Asian thermal customers by way of Ridley Terminals in Prince Rupert. Joining Westmoreland’s Coal Valley Mine, Vista Mine will be Alberta’s second thermal export mine.

Production According to the Alberta Energy 2017 Coal and Mineral Development report, Alberta’s bituminous production dipped slightly in 2017 compared to 2016.

However, royalties increased due to higher metallurgical coal prices. Sub-bituminous production slightly increased

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to 2.23 million tonnes compared 21.4 million tonnes in 2016.

Who Are We? The Coal Association of Canada works on behalf of our membership, which includes a broad spectrum of the Canadian coal industry. Members include companies at every level of the supply chain from mining exploration, development and production, rail, port and terminal transportation, equipment suppliers and trading companies. It’s important that our membership includes such a range of companies and organizations at all levels in order to ensure that our voice and advocacy work toward maintaining and promoting the entire industry. The benefits of the coal industry for Canadians go beyond the dollars and cents; it also provides long-term, reliable employment and helps build strong communities throughout Canada.

The Coal Association of Canada is working closely with governments and regulators on a number of areas including the federal government’s draft Coal Mining Effluent Regulations, which are expected to be released later this year for public comment before being finalized in 2019. The federal government is also working on a Canadian Minerals and Metals Plan aimed to position Canada as a mining leader for the long-term.

Our association also holds a national annual conference every fall. This year, Canada’s Coal Industry: Driving Global Growth, will take place Sept. 12-14 at the Westin Bayshore in Vancouver.

Attendees will hear from a variety of industry experts, including our keynote address from Ernie Thrasher, CEO of Xcoal Energy & Resources. The conference will include presentations from IHS Markit, S&P Global Ratings, coal producers and juniors, equipment suppliers, transportation partners, and many more.

For more details and registration, please visit www.coal2018.ca.

We are excited for the future of our industry and look to build on both the accomplishments and challenges we CMJ face.

Robin Campbell is the president of the Coal Association of Canada.

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www.canadianminingjournal.com

2018-06-08 10:02 AM

Photo: SVproduction , iStockphotos.com

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THE COSTS OF PICKING THE WRONG HYDRAULIC FLUID THE HIDDEN IMPACT OF IDLING ENGINES HOW TIRE MANAGEMENT CAN ENHANCE THE BOTTOM LINE

MINING JOURNAL

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BENEFITS OF PICKING THE RIGHT HYDRAULIC FLUID ADD UP Machines using hydraulic fluid formulated with Dynavis technology use less fuel.

CREDIT: EVONIK INDUSTRIES AG

by Aarti Soerensen

M

ost mine operators understand the cost-saving potential of effective equipment lubrication.

And like any investment, tires should be managed carefully to maintain their performance and generate optimal returns, which can take the form of enhanced equipment performance, downtime prevention and reduced operating costs.

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But, looking more closely, it’s clear they don’t understand just how much of an impact it can have on the total cost of ownership, and ultimately, the mine’s bottom line after fuel savings, increased equipment productivity, reduced downtime, lower maintenance costs due to reduced wear and tear on equipment, and improved oil drain and maintenance

intervals are all accounted for.

According to an extensive industry survey by Edelman Intelligence, 60% of mining companies believe that cost savings of greater than 5% are possible through proper lubricant selection and management, however, only a quarter think that those savings could exceed 10%. Nearly half don’t believe that www.canadianminingjournal.com

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choosing a higher-quality lubricant will help reduce maintenance costs. At the same time, nearly all the mining companies surveyed reported unplanned machine shutdowns in the last three years, and more than half acknowledged that these shutdowns have been due to their incorrect selection or management of lubricants.

So where is the disconnect? Choosing the correct hydraulic fluid depends on a combination of the equipment’s design characteristics, operational parameters and environment. Factors like temperature, humidity, dirt and location (altitude/underground) all pose different challenges for lubrication. OEMs generally define the minimum requirements for lubricants or greases. However, not all products that meet these standards deliver the same level of performance.

With its registered and patented Dynavis technology, the Oil Additives business line of Evonik Industries has been working towards setting a higher industry standard to significantly improve not only the fuel efficiency of mobile mining equipment but also the productivity of the machine. High-quality multigrade hydraulic fluids work by broadening the temperature operating window and delivering more constant viscosity, even under extreme shear stress.

operate in a larger temperature window so that the oil remains thin enough at start-up to circulate quickly enough to protect critical components, and thick enough at temperatures of 90°C to provide the necessary protection to help prevent abrasive wear, is described as viscosity index (VI). While long chain polymers guarantee effective thickening of the hydraulic fluid, short chain polymers provide shear stability, which helps to avoid breaking of the lubrication film.

Dynavis formulated hydraulic oil guarantees an optimal performance in a wider temperature operating range, expressed by the high VI of >180 and a viscosity grade of ISO46.

THE KEY DIFFERENTIATOR OF HIGH-QUALITY HYDRAULIC FLUIDS TO LOWER-QUALITY OILS IS IMPROVED SHEAR STABILITY, IMPROVED PERFORMANCE, AND IMPROVED VISCOSITY CONTROL UNDER EXTREME CONDITIONS.

ey to be spent on maintenance and Increasing productivity while saving fuel In a comprehensive performance demonstration conducted under extreme heat in a coal mine in Ranchi, India, the application of Dynavis formulated fluid showed promising results with respect to increased overall machine productivity. While trips with the reference fluid measured an average of 10.8 tonnes/litre, Dynavis formulated fluid could move 12.2 tonnes/ litre, an increase in efficiency of 12.4%. In addition, the excavator using the Dynavis formulated hydraulic fluid was more agile and burned less fuel, allowing faster loading of the trucks and shorter trip cycles.

The excavator using the Dynavis formulated hydraulic fluid showed a ratio of 6.7 litre/trip, while the excavator using the reference oil demonstrated an average ratio of 7.4 litre/trip of fuel consumption, an improvement of 10.6%.

Considering that the fuel used for on-site haulage in a mine site operation can exceed 50% of the total energy costs, there is potential for significant financial savings, especially at remote mining sites.

Reducing CO2 emissions becoming a critical cost factor Burning less fuel also translates into fewer carbon dioxide (CO2) emissions – which is an immediate concern, with carbon taxing being implemented nationwide in Canada by early 2020. Following Alberta’s model, the Canadian governReliable performance in a wide range ment has proposed a floor price for its of temperatures nationwide carbon tax system By using monograde oils or at $10/tonne and increasing to low-performing multigrade oils An ISO 46 fluid formulated with DYNAVIS® Viscosity broadens the temperature operating window. $50/tonne by 2022. there is an increased risk of Conventional fluid Given that a 5,000-tonne corrosion and sludge buildup, upper limit open-pit mine consumes around increased wear and cavita5,000 litres of diesel fuel per day, tion (air pockets) that lead to ISO 46 and that one litre of burnt diesel faster degradation of the oil, emits around 2.7 kg CO2, one filter-blocking and valve-stickDYNAVIS® formulated open-pit mine can produce 13.5 ing, and increased oil use, fluid lower limit tonnes of CO2 per day, which which results in equipment adds up to about 4,950 tonnes of damage, premature failure and Temperature start up max. operating temperature CO2 per year. replacement of components, According to field test results loss of operating precision, excessive noise, increased maintenance With an improved VI and increased Evonik Industries conducted with a and expensive downtime. shear stability, a high-quality multigrade single excavator over a drain interval of The key differentiator of high-quality hydraulic fluid enables equipment to work 4,000 hours, the machine using a fluid hydraulic fluids to lower-quality oils is harder (improved productivity), improves formulated with Dynavis technology improved shear stability and improved machine maneuverability, while extending uses 3,300 fewer gallons (13,000 fewer performance, especially at lower tem- machine life and oil drain intervals, allow- litres) of fuel compared to the reference peratures, and the ability of the oil to ing for less time and money to be spent on fluid. This translates to 33.3 tonnes of provide improved viscosity control maintenance and improving safety on site reduced CO2 emissions per drain interCONTINUED ON PAGE 30 under extreme conditions. This ability to through reduced man-machine contact.

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val for a single excavator, based on the U.S. EPA’s standard for CO2 production of 10.08 kg/gallon diesel.

Consider what Jim O’Rourke, CEO of Copper Mountain Mining, stated in a recent CIM Magazine article: Copper Mountain’s mine, with 22 trucks and the need for 30 million litres of diesel per year, generates carbon-tax expenses of $2.3 million annually (1.5% of its total budget). These costs are projected to rise to $3.8 million by 2020. Although lubricants obviously won’t solve the carbon conundrum alone, they can play a role in mitigating rising operational costs. The total economic impact is even larger when the additional operating cost savings resulting from the increased productivity are included in the savings calculation.

Cost savings potential exacerbated in extreme climates Operating a mine in a profitable and safe manner while minimizing waste and CO2

emissions are clear objectives for mine operators. The challenge of accomplishing these objectives can be exacerbated in extreme climates, like in Canada’s Far North, where costs rise due to lack of infrastructure, limited or difficult access to the site, the need to fly-in equipment and personnel over large distances, and harsh weather conditions that increase the demand for power (usually diesel-generated). Operating costs for a mining project in northern Canada are in fact estimated to be up to 2.5 times higher for base metals than in other mining regions with access to infrastructure. Considering that energy costs can account for 30% of operating expenses in remote regions (in comparison to 10-20% for a mining site in a less remote area), economizing energy and diesel consumption can be a real game changer. Not to mention, machine standstills and equipment failures can incur significantly higher costs for remote mining operations making machine maintenance a key equipment ownership cost.

Considering that one gold mine in California, which is not located in an

extreme climate, was able to generate estimated annual savings of US$1.1 million by switching to a high-performing multigrade fluid in only two 250t Terex excavators, choosing a high-performing hydraulic fluid can play an even more significant role in managing operating costs at remote mine sites. In fact, Shell Lubricants estimates an overall savings potential in the North American mining industry of US$29.1 million by switching to high-performance multigrade fluids.

Good lubrication management can contribute to mining companies positioning themselves to meet stakeholder demands for more environmentally conscious operating procedures and practices. Switching to a high-performing hydraulic fluid, can help unlock productivity gains and help mining companies reduce overall operating costs.

CMJ The author is senior project manager with the Competence Centre for Mining and Mineral Resources, Canadian German Chamber of Industry and Commerce. For more information on Dynavis, see www.DYNAVIS.com.

Canadian Mining Journal’s Buyers’ Guide is published every November and is also available online via our website at www.canadianminingjournal.com/esource.

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www.canadianminingjournal.com

2018-06-07 8:51 PM

By some estimates, a machine’s average idle time is about 40%.

CREDIT: PETRO-CANADA LUBRICANTS

THE HIDDEN IMPACT OF IDLING ENGINES

by Brian Humphrey

H

eavy duty equipment in the mining industry operates in some of the world’s most extreme environments, often with the additional challenges posed by cold weather conditions. Added to this, fleets are expected to run reliably, efficiently and safely on sites that are live 24 hours a day, seven days a week, and where any unplanned down time can result in a significant impact to a business’s bottom line.

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Marginal gains in reliability and fuel economy are therefore crucial for fleet managers who need to consider all the factors that affect equipment performance, including the impact that prolonged engine idling can have.

A focus on engine idling Mining machinery can spend considerable time onsite with an idling engine, with manufacturer Komatsu, suggesting that a CONTINUED ON PAGE 32

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IT’S TOUGH TO EXTEND DRAIN INTERVALS TO 750 HOURS BUT NOT FOR DURON™

TM

Owned or used under license.

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Duron High Performance, Super High Performance and Ultra High Performance heavy duty engine oils.

CREDIT: PETRO-CANADA LUBRICANTS

machine’s average idle time is 40%. However, given the nature of the industry, it’s safe to assume that this figure may be even higher.

An hour of idle time is equivalent to about 40 km of driving, and often has a hidden and overlooked impact on equipment engines. Idling can alter the combustion process by increasing the likelihood that oil temperatures will drop below 100° Celsius. This can result in the accumulation of water and increase the formation of acids in the engine oil, as well as increase the risk of fuel dilution. Prolonged idling can therefore accelerate engine wear and the need for oil changes, even if the vehicle’s hour meter or maintenance schedule states differently.

Idling can use considerable fuel – it is estimated that a large diesel engine can consume up to 4 litres of fuel for each hour it is left idling. So how can lubricants offer protection for engines that idle while also providing fuel economy for maintenance managers?

Lubricant’s vital role Lubricants reduce pumping and spinning losses as well as minimizing metal-to-metal contact between moving components.

This protects the engine’s vital components and enhances its performance, which can lead to improved fuel economy.

For those within the heavy duty off-highway industries such as mining, API CK-4 oils are of particular relevance. These offer improved resistance to oxidation and aeration, along with increased shear stability. Off-highway engines can entrain more air than usual in their oil, so improved aeration control is important. This is crucial at the bearings as they require an oil film to protect them.

Mining equipment also operates in some of the coldest conditions so it’s essential to select an oil that benefits from a lower viscosity at lower temperatures. API CK-4 SAE 10W-30 and 5W-40 oils offer this and can move more easily throughout the engine and flow faster, preventing engine wear during start-up.

This is also an essential benefit for engines that idle regularly, as it can reduce the work rate of the engine.

Modern low viscosity oils enable easier cold starts, which supports the ability for the engine to be turned off and reduce idling.

To help neutralize any acid that builds up during prolonged idling, the oil selected should also be able to maintain its Base Number.

Oils that effectively combine these properties offer enhanced www.canadianminingjournal.com

2018-06-07 3:33 PM

protection and can help improve reliability to reduce unplanned downtime for mining equipment. However, before selecting a lubricant, it’s crucial that the product is based on the original equipment manufacturer’s (OEM) recommendations, as outlined in the owner’s manual.

Unveiling the impact through monitoring A used oil analysis program can highlight if oil should be changed earlier than normal and bring to attention maintenance issues before they become serious and expensive to repair. This is extremely beneficial for uncovering the hidden impact that idling can have on heavy duty mining machinery.

Oil analysis can also support the extension of oil drain intervals. This should always be supported by recommendations from the OEM manual and advice from technical experts; particularly when it comes to considering if and how to extend drain intervals.

It’s important to reference the OEM manual, as going against recommendations could invalidate any warranty coverage if damage or engine failure occurs, which could be expensive to repair.

Oil analysis is typically a three step process: taking a representative sample from the equipment in question, sending the sample to a qualified used oil analysis lab, and interpreting/acting upon the recommendations of the results. This is most effective when performed at regular intervals, as it allows for a performance database to be generated, and for trends to be established and identified. For the mining industry, where unplanned downtime results in a direct impact on the business’s bottom line, this scheduling allows for maintenance plans to be adjusted in advance and managed in-line with any planned downtime.

The impact of engine idling can be significant for off-highway engines, especially those in the mining industry where equipment is under pressure to operate 24 hours a day, seven days a week in extreme conditions. By selecting a tough heavy duty lubricant that can perform under these conditions and provide enhanced engine protection, fleet managers can benefit from improved reliability while reducing unplanned downtime.

CMJ

With DURON protecting your engine you could achieve drain intervals* of up to 750 hours in even the most demanding of operations. That’s the kind of drain intervals we call tough.

And it’s all proven in the real world with field testing on tough jobs like yours. We’ve talked tough.

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FIND OUT MORE. THE SOONER. THE BETTER. DURONTHETOUGHERTHEBETTER.COM *Extending drain intervals should always be undertaken in conjunction with an oil analysis program.

Brian Humphrey is OEM Technical Liaison with Petro-Canada Lubricants. For more information, visit lubricants.petro-canada.com and DURONthetougherthebetter.com.

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HOW TIRE MANAGEMENT CAN ENHANCE EFFICIENCY AND LOWER COSTS

Goodyear’s enhanced EMTrack system puts knowledge to work for miners

T

ires can be essential to the successful operation of mining equipment and can represent a significant investment for mining operations.

And like any investment, tires should be managed carefully to maintain their performance and generate optimal returns, which can take the form of enhanced equipment performance, downtime prevention and reduced operating costs.

To help mining companies achieve these goals, The Good-

year Tire & Rubber Company has launched a significantly enhanced version of its EMTrack OTR tire performance monitoring system.

“The updated Goodyear EMTrack system enables faster, even more accurate collection of critical tire data like tread depth and inflation levels,” says Eric Matson, global field engineering manager, Goodyear. “It also offers convenient, cloud-based data storage and more robust reporting capabil-

Tire maintenance is vital to downtime prevention and for an efficient operation. COURTESY: GOODYEAR TIRE & RUBBER CO.

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The Goodyear EMTrack App in action.

CREDIT: GOODYEAR TIRE & RUBBER CO.

(Operators) can view

ities thanks to the newly introduced Goodyear performance data for EMTrack App.” their tires across their Through EMTrack, trained Goodyear tire whole operation and even technicians perform fleet surveys, using a Bluezero in on specific tires, tooth-equipped Goodyear EMTrack scanning calculating cost-per-hour, tool, to record tire inflation, tread depths and cost-per-ton and other other critical measurements.

Tire performance data then automatically key metrics. uploads to a cloud-based platform for pass– ERIC MATSON, gives end users the information word-protected storage and easy access. Mining GLOBAL FIELD ENGINEERING MANAGER, they need to make better decicompanies can then download captured tire data GOODYEAR sions about their valuable tire into easy-to-read, customizable reports that show assets.” tire performance.

“Through the Goodyear’s EMTrack, mining Work with an expert company representatives can view collected tire Whether a mining operation is information and reports simultaneously and in real developing a new tire performance management program or time, regardless of their geographic location, for complete visibilis simply implementing measures to improve an existing proity,” says Matson. “They can view performance data for their tires gram, working with a capable tire dealer can have important across their whole operation and even zero in on specific tires, benefits, Matson notes. calculating cost-per-hour, cost-per-ton and other key metrics.”

“Select a dealer who has the experience and expertise to evalAmong other benefits, this can help identify maintenance uate equipment and specific tire needs,” he suggests. “And look opportunities to help ensure optimal tire performance. “And for one who can analyze the unique environment in which your the information collected through Goodyear EMTrack can machine operates, ranging from underfoot conditions to haul help in forecasting future tire requirements.” roads that lead into and out of mine sites.

This, in turn, can help mining operations manage their tire “In addition, a dealer with access to tire performance monibudgets more effectively, according to Matson. toring systems such as EMTrack can benefit from more robust “In the mining industry, knowledge is power,” he says. “Our data to support and enhance its assessments,” Matson adds. enhanced EMTrack OTR tire performance monitoring system 36 | CANADIAN

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Goodyear’s EMTrack App system offers fast and accurate collection of critical tire data. CREDIT: GOODYEAR TIRE & RUBBER CO.

“For example, tread surface conditions, recorded in a performance monitoring system and available to the dealer, can confirm that the right tire has been selected for a specific application, and can even indicate how performance enhancements can be achieved.”

Tire performance data also can help in planning. “By tracking tire performance over time, a mining operation can improve its ability to predict when tires will need to be replaced, which is more important than ever in today’s budget-conscious environment,” he adds.

Matson notes that mining operations can extend the service life of their tires through retreading, in cases where retreads are available for a size and type of tire and are appropriate, based on tire condition. (Goodyear provides mining tire retreading at its facility in North Bay, Ont., and many Goodyear dealers also retread mining tires at their own, independently operated locations.)

The ability to retread a mining tire hinges on the condition of its casing. “Following recommended tire maintenance JUNE/JULY 2018

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practices – such as regularly checking and, if needed, adjusting inflation pressure levels – can help preserve casing health and integrity.”

Both over- and under-inflation should be avoided. Over-inflation can result in irregular and/or premature tire wear and even a harsher ride for equipment operators. Under-inflation can contribute to irregular wear and increased potential for foreign object damage.

“Under-inflation also can impact a machine’s fuel efficiency since under-inflated tires can force engines to work harder,” says Matson.

While capturing tire data like inflation and tread depth levels, technicians also can look for the presence of other issues, such as cuts and nicks in the tread area, that have the potential to develop into other problems.

They also can check for mismatched tires in size, design and brand. “Mismatched tires can be particularly detrimental to tire life as they may wear unevenly and at different rates,” says Matson.

Findings of this kind also can be entered into Goodyear’s EMTrack system for record-keeping and future reference.

“By understanding the importance of tire management, using a tire management system like Goodyear EMTrack, working with a qualified dealer, and acting upon the data that has been accumulated, a mining operation can help enhance its operational efficiency and reduce its costs,” he says.

CMJ This article was provided by The Goodyear Tire & Rubber Company.

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