Canadian Mining Journal June/July 2015

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June/July 2015

PRAIRIE POWER CAMECO SIGNS URANIUM DEAL WITH INDIA

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Departments 5 Editorial

This month Editor Russell Noble talks about “further studies” by government agencies when it comes to making crucial decisions involving moving ahead with key mining projects, namely Ontario’s “Ring of Fire” where investors seem to be driven away because of delays caused by various ‘studies.’

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6 First Nations

Grand Chief of the Mushkegowuk Tribal Council also looks at the proposed “Ring of Fire” project and suggests that many are wondering if this opportunity is real and if so, when will it kick off?

8 Law

A column by Chris Wolfenberg and James Sullivan from Norton Rose Fulbright’s Calgary office on foreign investment in strategic commodities and how they are affected by the new rules of the Investment Canada Act?

MINING IN THE PRAIRIES

10 CSR and Mining

A regular column by Michael Torrance, a lawyer in Norton Rose Fulbright’s Toronto office, on Corporate Social Responsibility.

44 In My Mine(d)

Alvaro Arias and Minerva Cernea of the international executive search firm of Pedersen & Partners take a look at what’s involved in selecting a CFO.

46 Unearthing Trends

This month’s regular column by EY talks about potash taxation and Saskatchewan’s investment attractiveness.

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June/July 2015

ABOUT THE COVER This month’s cover shows miners underground at Cameco’s Cigar Lake Mine in northern Saskatchewan.

PRAIRIE POWER CAMECO SIGNS URANIUM DEAL WITH INDIA

Coming in August

Canadian Mining Journal’s August issue will feature its popular Canada’s “Top 40” miners, plus a look at some other companies vying for a position on next year’s list.

www.canadianminingjournal.com

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12 Cameco signs uranium deal 18 Veteran miner keeps growing 22 Manitoba miner takes safer approach 26 Keeping an eye on tailings storage 28 The hidden costs of electricity

I ndia’s $350-million deal to buy uranium from Cameco will keep Saskatoon miner busy for at least five years.

laude Resources has been producing gold since 1991 and continues C to spend more on further development.

ega Precious Metals takes responsible action by replacing old metal fuel M drums with a new bladder storage system.

older Associates describe how UAVs (unmanned aerial vehicles) can be G used to successfully monitor tailings facilities.

detailed report by Littelfuse Startco of Saskatoon reveals some ‘shocking’ A statistics involving the hidden costs of electrical equipment.

EQUIPMENT MAINTENANCE & REPAIR

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A special feature takes a look at what mine owners and operators should know about keeping their fleets of heavy equipment operating at full potential to help ensure production and profits.

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 June/July 2015 • Canadian Mining Journal |

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Editorial

CANADIAN Mining Journal June/July 2015 Vol. 136 — No. 5 38 Lesmill Rd. Unit 2, Toronto, Ontario M3B 2T5 Tel. (416) 442-5600 Fax (416) 510-5138 www.canadianminingjournal.com Editor Russell B. Noble 416 510-6742 rnoble@canadianminingjournal.com Field Editor Marilyn Scales 613-270-0213 mscales@canadianminingjournal.com Art Director Stephen Ferrie Production Manager Jessica Jubb Circulation Manager Cindi Holder 416 442-5600, ext. 3544 cholder@bizinfogroup.ca 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: 1-800-268-7742 ext 6891 or 5104 Toll Free USA: 1-800-387-0273 ext 6891 or 5104 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: $47.95 per year; $76.95 for two years. USA: US$60.95 per year. Foreign: US$72.95 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: 1-800-268-2742 x3544; Fax: 416-510-5138; E-mail: cholder@bizinfogroup.ca 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.

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“Futher studies” are sad, shameful

By Russell Noble

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hate to say it but it keeps getting more difficult to remain excited about the prospects for Ontario’s proposed “Ring of Fire.”

Initially when Cliffs Resources pulled its $3.3-billion plug on the project by packing up and going back home to Ohio, I thought the Ontario government’s $1-billion plan to move forward with helping develop the chromite-rich deposit in northwestern Ontario would help save the project.

In fact, I almost started feeling that the government actually recognized that the “Ring of Fire” could be Ontario’s answer to Alberta’s oil sands and that the billion dollars it dangled out there would kick start what should be the largest mining project in the province’s history by attracting more investors.

But now, thanks to the recent federal budget where Ottawa only valued the project as merely a $23-million investment over five years, the Ontario government has found a loop hole for its support too because the billion bucks was: “contingent on matching federal funds.”

In other words, both governments appear to have pretty much given up on the “Ring of Fire” and that’s not only sad, but shameful.

During these times when investing in mining has taken a backseat to more voter-friendly issues like infrastructure, the environment, health care and education, it’s sad that projects with the scope the “Ring of Fire” offers has been treated with so little commitment.

Sure I agree that the issues like the infrastructure, the environment, health care and education, plus many more, are important and deserve financial support, but I also strongly think a project with the scale and opportunity the “Ring of Fire” offers should be given equal if not more attention.

I know that many taxpayers object to huge amounts of federal money being spent on projects outside of their own jurisdiction, but every once in a while

people have to get over the “why them?” mentality and accept things for the good of the country as a whole.

Canada gives millions, perhaps even billions of dollars every year from what seems like a bottomless reserve for things like foreign relief, but when it comes to a longerlasting commitment like the “Ring of Fire,” it becomes an issue for “further study.”

Those two words are becoming an alltoo-easy answer to many pressing questions that deserve immediate answers and I’m afraid that unless politicians start responding with positive and concrete replies when asked questions that need an immediate answer, then more companies like Cliffs Resources will take their money and go home.

The “Ring of Fire” is not a new plan because as most of us know, it’s been on the books since at least 2007 when Noront Resources’ Richard Nemis announced the discovery of the first significant mineral find in the area.

Since then, the 5000km2 property, located about 500km northeast of Thunder Bay, has been the focus of more than at least 35 junior companies and no fewer than 30,000 claims.

Unfortunately, only two major development proposals have come from those claims; one by Cliffs Resources which is now gone, and the other from Noront Resources for its Eagle’s Nest project and in particular, its Blackbird chromite deposit.

Like too many mining projects, however, various approvals and permits from the provincial government, local communities, plus the ever-present need for financing, have resulted in delays to Noront’s business plan.

Delays in getting mining projects into production are nothing new to the industry but there are some things that should be made more streamlined and I’m convinced that the whole issue of “further studies” doesn’t help matters.

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First Nations

Keeping a close watch on the “Ring of Fire”

By Grand Chief Lawrence Martin

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s discussions continue on the development of the “Ring of Fire” between governments, industry, and First Nations, many are wondering if this opportunity is real, when it will kickoff, or how they will be able to participate.

Meanwhile at the Mushkegowuk Council, we are sharpening our pencils and watching the scene unfold. We are assessing our role in this newly perceived economic boom in Canada, taking place in our backyard, right upstream from our communities and traditional lands. What environmental impacts will the development have on the rivers and the waters that run through the muskeg towards us?

Will we be able to secure jobs? Will there be opportunity for any kind of direct participation, economic opportunities, and off-shoot tertiary businesses?

Being respectful of the Matawa First Nations, and not wanting to be in their way of the plans they need to put in place for such a significant change of life and landscape around them, we decided to offer some solutions by way of corridor infrastructure perspectives – rail connecting the Ontario Northland Railway and to a seaport in James Bay, and a Hydro line from Quebec. The 1000 MW transmission line is being proposed as a joint venture between the Eeyou Power (Crees from Quebec), Mushkegowuk, the Matawa communities, and perhaps other investors.

This new line would also offer electrification to the Matawa for the communities 6 | Canadian Mining Journal • June/July 2015

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Lawrence S. Martin is the Grand Chief of the Mushkegowuk Tribal Council. He was elected in November 2014 and will serve to August 2015. He is currently leading and promoting a conceptual plan on the Ring Of Fire Mushkegowuk Energy Infrastructure Corridor. He previously served as Mayor of Cochrane for a period of 10 years and in Sioux Lookout from 1991 to 1994. Lawrence’s extensive knowledge in municipal and aboriginal affairs is a great asset in promoting benefits for the aboriginal population within Northern Ontario. His work focuses on promoting and lobbying for economic benefits and environmental protection for the land and the people he serves as Grand Chief.

that are still utilizing diesel generators.

Are we being the Outliers? In speaking with some people in the industry, there is a belief that a railroad through the swamplands between Moosonee and the “Ring of Fire” is not feasible. Is this true?

“ …many are

wondering if this opportunity is real, when it will kick-off, or how they will be able to participate.”

Some believe that other options for energy and energy providers would best be suited – solar, wind, diesel, and hydro from Ontario Hydro at some point in the future. Some people want to convince us that a seaport in James Bay will not work because the water levels are too low in the Bay to accommodate the appropriate sized ships.

When Mushkegowuk developed 5 Nations Energy, our own transmission line to the communities of Attawapiskat, Ft. Albany and Kashechewan, we were turned down 37 times from the federal and provincial governments, financiers,

and industry.

We were told “NO,” but we didn’t give up. Once we convinced everyone of the viability of such a project, we added a Fibre Optic line to service the communities with fast-speed internet. Today, we are enjoying Facebook like everyone else around the world.

What is our bottom line on the “Ring of Fire?”

Our greatest concern, from lessons learned in previous developments, is that we may be adversely affected if we are not at the board table to discuss impacts on our environment, way of life, economy, education, job security, our current infrastructure, and social well-being. We need to ensure that we have all the necessary safeguards in place. Our involvement is imperative. In what capacity we are involved maintains to be determined.

Years ago we opened the door to sharing the land for mutual prosperity. We brought the land to the table with some conditions, the others brought technology and resources.

Either parties will not benefit without the significant engagement of the other.

This is a new day and companies are now beginning to acknowledge this truth and hold it in high regard. They acknowledge the value of our traditional knowledge and the value our people bring to the country’s fabric. Not only do we want to be in the Board rooms and not in Court rooms, we are.

CMJ www.canadianminingjournal.com

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Law

Foreign Investment in strategic commodities affected by new rules

By Chris Wolfenberg and James O’Sullivan

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n April 24, 2014 the Canadian government published new regulations amending the Investment Canada Act, imposing new rules on investments by non-Canadians. The amendments fundamentally alter the calculations used to determine which foreign investments will be reviewed by Industry Canada, expand transparency obligations for foreign investors, and increase the length of “national security” reviews. In all cases, carefully considering the impact of the new rules will be critical for foreign investors, as well as domestic producers seeking foreign investment, but this is especially the case for those dealing in strategic commodities such as uranium and potash, which are critical to energy and food security.

The Amendments Under the Investment Canada Act framework, a non-Canadian proposing to establish a new Canadian business, or to acquire an existing one, must file a notification of the investment with Industry Canada, or if the investment is of sufficient size or raises national security concerns, submit the transaction for review and approval by Industry Canada in advance of closing. Prior to the amendments, the basic trigger for such a review was based on the book value of the Canadian business’ assets; the amended regulations instead refer to the “enterprise value” of the target. Generally, investments by non state-owned enterprises are now subject to approval by Industry Canada when the enterprise value of the target exceeds $600 million.

The enterprise value of the target is calculated based on the market capitalization, acquisition value or consideration payable, depending on whether the target is publicly traded, privately held or an 8 | Canadian Mining Journal • June/July 2015

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asset acquisition, respectively, subject to certain adjustments.

The amendments also significantly increase the disclosure that foreign investors must provide to Industry Canada, including details regarding the foreign investment vehicle’s structure, ownership and governance. Moreover, and of particular importance to producers of strategically important commodities including potash and uranium, if imposed, a national security review could now exceed 200 days in length.

Implications for Canadian Mining Participants Canada is the second largest producer of uranium in the world providing almost 16% of global supply and is the world’s largest producer of potash, providing almost 30% of global supply. Potash and uranium represent key strategic resources which attract international investment for their importance to agriculture and energy security. As governments seek to secure adequate food supplies and stable sources of energy, transactions that reduce Canada’s control of its domestic reserves of strategic commodities like potash and uranium will very likely face increased public scrutiny and government oversight.

Employment of the “enterprise value” metric will result in more investments being subject to review where market capitalization exceeds the book value of assets, as is common in the mining industry. Additionally, the enterprise value calculations have the potential to create “first bidder” advantages in auctions for publicly traded entities. This is because the average share price used to calculate market capitalization is referenced to the point in time at which an investor’s first filing is made with Industry Canada and not when

Chris Wolfenberg is a partner and James O’Sullivan is an associate in Norton Rose Fulbright’s Calgary office.

the transaction closes. Thus, the first bidder may be able to obtain non-reviewable status while subsequent bidders are subject to a review if the target’s share price increases following announcement of the initial transaction.

With growing public awareness of the strategic importance of Canada’s potash and uranium reserves, transactions involving such commodities will likely also be subject to political risk as Canadian decision makers may seek to position themselves as the guardians of the food supply and energy infrastructure. This political risk may be further aggravated depending on sovereign relations with resident jurisdictions of potential purchasers of strategic commodities such as potash and uranium.

Industry Canada may impose a national security review where the foreign investment may be “injurious to Canada’s national security” regardless of the size of the investment. A lengthy review period of 200 days or more could lead to investor fatigue or cause the transaction to overlap with unexpected economic or industry changes. When faced with the realization that the government can prohibit the investment, or even require the unwinding of the transaction once closed, foreign investors may avoid such transactions or demand commercial accommodations to account for such risks.

As a result of the amendments, transactions in Canada involving strategic commodities will likely face longer timelines, increased risk and less certainty. Domestic mining entities that are seeking foreign investment, particularly those with interests in strategic commodities such as potash and uranium, should carefully consider these factors when planning and structuring such investments.

CMJ www.canadianminingjournal.com

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CSR and Mining

Human rights, due diligence, and CSR Michael Torrance is a lawyer in Norton Rose Fulbright’s Toronto office.

By Michael Torrance

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he adoption of a shared value approach to extractive development necessitates, most fundamentally, respect for the human rights of those affected by extractive development. Even for those extractives companies not pursuing shared value, human rights is a critical business consideration, as it is the leading topic that will attract scrutiny at home and abroad if not managed well.

There are now several legal claims in Canada alleging tort damages for human rights related harms arising outside of Canada. This reality makes careful consideration of human rights management critical for any competent business leader.

“Human rights” is an often heard but hard to define concept. Human rights are best (and most regularly) defined in relation to international legal instruments, including what is known as the International Bill of Rights (encompassing civil and political rights) and core conventions of the International Labour Organisation (ILO) (addressing topics such as child or forced labour and rights to freedom of association), which define core rights of individuals vis-à-vis states.

In recent years these obligations of states are being broadened, through international standard setting, to include responsibilities of corporate actors to respect human rights.

All of the international standards endorsed in the Corporate Social Responsibility (CSR) Strategy for the Extractive Sector promote protection of human rights in some form or another.

Most particularly, the CSR Strategy endorses the United Nations Guiding Principles on Business and Human Rights (the “Guiding Principles”). The Guiding 10 | Canadian Mining Journal • June/July 2015

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Principles address not only the state duty to protect human rights, but also the responsibility of corporations to “respect” human rights. Respect is demonstrated, in part, by undertaken “due diligence” with respect to human rights issues. This includes; (1) developing a human rights policy; (2) assessing actual and potential human rights impacts of company activities and relationships; (3) integrating commitments and assessments into internal control and oversight systems; (4) tracking and reporting human rights performance; (5) transparency and disclosure (protecting confidential and sensitive information). This due diligence process includes, but may well go beyond, compliance with local laws that touch upon human rights. However, risks of gross human rights violations should be treated as a legal compliance issue, wherever they occur.

The IFC Performance Standards on Environmental & Social Sustainability (IFC Performance Standards), also endorsed in the CSR Strategy, encompasses many requirements, particularly in relation to labour standards, indigenous rights, consultation, grievance mechanisms, resettlement, community health, safety and security, and other topics which have clear human rights implications.

Importantly, in 2012 the IFC Performance Standards specifically refers to the Guiding Principles, requiring specific human rights due diligence to be conducted in “limited high-risk circumstances”, in addition to the extensive due diligence already required for environmental and social risks more broadly defined.

The Voluntary Principles on Security and Human Rights (the “VP”), also endorsed by the CSR Strategy, focuses on

the human rights risks presented by security forces. Due diligence of security providers is a core requirement for compliance with the VP. A key aspect of the due diligence process is identifying human rights impacts.

This means, in the language of the Guiding Principles, understanding whether the corporation is or will be causing, contributing or may be linked to adverse human rights impacts. To identify such impacts, human rights impact assessment is a useful tool, which involves a process of identifying human rights impacts, assessing them and developing mitigation approaches. In pursuing mitigation, the “leverage” of corporations over human rights outcomes is relevant. The more leverage a company has, the more control it has to affect human rights impacts and therefore the more responsibility it has to do so. While many risks or impacts may be identified in an impact assessment, the Guiding Principles acknowledges that prioritization of impacts in light of limited resources is entirely legitimate. The impact assessment and due diligence process is ongoing and should adapt to changing circumstances, rather than be treated as a once and for all process.

There are few CSR topics as important as human rights, and none likely to gain as much attention, positive and negative, from stakeholders. By understanding and applying the principles and approaches to human rights risk management set out in the standards endorsed by the CSR Strategy, particularly the Guiding Principles, Canadian mining companies can get ahead of these risk and capture awaiting opportunities, building shared value along the way.

CMJ www.canadianminingjournal.com

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| Mining in the Prairies

PRAIRIE POWER A miner at Cameco’s McArthur River site safely operates a raisebore rig to drill a pilot hole from the 530-m level through the orezone into a tunnel on the 640-m level.

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www.canadianminingjournal.com

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E R

CAMECO’S $350M DEAL WITH INDIA FOR URANIUM WILL RESULT IN MORE WORK FOR CANADIAN MINERS

By Russell Noble

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June/July 2015 • Canadian Mining Journal |

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| Mining in the Prairies

Cigar Lake’s “exceptional ore body” makes the mine the second largest, high-grade ore body of its kind in the world, and according to the mine’s General Manager Les Yesnik, it’s the equally exceptional workers who have been responsible for the operation achieving sustainable production.

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ow that Corner Gas, the long-running and syndicated television show based in Saskatchewan, has moved off into re-run heaven, some may think the province has lost a bit of its international identity with the loss of this popular sitcom.

In fact, it’s been said that Corner Gas and its fictitious Dog River location (set in the actual Town of Rouleau, pop. 453, about 60km west of Regina), helped give the province notoriety beyond wheat fields, railway tracks and grain elevators.

It gave the rest of Canada, and the United States too, for that matter, a brief glimpse at what Saskatchewan looks like thanks to the occasional camera angles showing the flat landscape surrounding the Town of Rouleau.

But as most people know, Saskatchewan is far more than simply the setting for a television show; it’s also home to some of the more highly sought-after natural resources found anywhere in the world.

Aside from its wheat and other grains, Saskatchewan is where miners have also concentrated on developing vast deposits of oil and gas, potash, and making the headlines most recently, uranium.

And, thanks in part to India’s recent five-year agreement to buy about 7.1 million pounds of uranium concentrate from Cameco of Saskatoon to power some of its nuclear-powered generating plants, few other natural resources from the province have earned such international attention.

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The Government of Canada estimates that the export contract is worth about $350 million, based on uranium prices at the time of signing.

But understandably, as you can probably imagine, signing the $350-million contract was not a ‘by-chance’ event; it was the result of a comprehensive undertaking that Cameco President and CEO Tim Gitzel says was a lengthy process.

“Securing this contract with India took many meetings over a period of years. It did not happen overnight and both parties (Cameco and the Indian Government) worked very long and hard to come to a mutually beneficial agreement. “This contract opens the door to a dynamic and expanding uranium market and much of the long-term growth we see coming in our industry will happen in India, and this emerging market is key to our strategy.”

Being one of the world’s larger uranium producers with more than 370 million pounds of uranium reserves (Cameco’s share) at three sites in Saskatchewan alone, and supported by another 55 million pounds at four other mines in the United States and Kazakhstan, the company is well positioned to supply India with enough uranium to generate clean electricity in its nuclear power plants for years to come.

Under this initial contract, Cameco has agreed to supply India with uranium concentrate through 2020. It’s the first contract the company has signed with India, which now operates 21 nuclear reactors providing 6000MW of nuclear capacity and about three per cent of the country’s electrical needs. www.canadianminingjournal.com

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Another six reactors totaling 4300MW are currently under construction and scheduled to come online by 2017 and by 2032, the country expects to have 45,000MW of nuclear capacity.

To say that Cameco has tapped into a promising market is an understatement, but with its vast resources, it is confident that it will be ready should India continue buying its uranium after the current contract runs out in five years.

As mentioned earlier, the company has an abundance of resources around the world but it’s the operations in Saskatchewan at Key Lake, McArthur River, Rabbit Lake and Cigar Lake that make it world renown.

Tim Gitzel recently said: “Mining is a long lead-time industry, so mine startups don’t happen every day, and certainly not of the caliber of Cigar Lake, the second largest, high-grade ore body of its kind in the world.”

The Cigar Lake mine is owned by Cameco (50.025%), AREVA Resources Canada Inc. (37.1%), Idemitsu Canada Resources Ltd. (7.875%) and TEPCO Resources Inc. (5.0%)/ It’s operated by Cameco.

The mine is second in size to the McArthur River mine, which boasts more than 345 million lbs (100% basis) of reserves and is owned by Cameco (70%) and AREVA Resources (30%).

Understandably, Gitzel is proud of the Cigar Lake mine and when you look at what it has to offer, he should be proud. The orebody stretches for 2km on an east-west axis and it not only has the potential to produce 18 million pounds of uranium annually, (which the company plans to achieve by 2018) but there’s also enough uranium reserves to give the property a 15-year mine life (with significant additional mineral resources).

And furthermore, the “exceptional ore body” located at a depth of about 450m sandwiched between the Athabasca sandstone formation and the underlying Precambrian basement rocks, will keep a crew of almost 700 workers busy at Cigar Lake for the next decade and a half.

Outsiders may think the location of the mine, located about 660km north of Saskatoon, would make it difficult for Cameco to find skilled workers but as the mine’s General Manager Les Yesnik says: “The people in Northern Saskatchewan are as “exceptional” as the ore body at the Cigar Lake mine and the success of the project can largely be attributed to them.”

Drawing from a population of about 40,000 people in the entire region, Yesnik says that although Cigar Lake is among the richest high-grade uranium deposits in the world, with grades that are 100 times the world average, it’s also one of the more technically challenging mines in the world and because of that, the company relied heavily on the skills of its workers to overcome many challenges involved with putting the mine into production.

“We began developing the Cigar Lake underground mine in 2005, but development was delayed due to water inflows. To eventually overcome those water problems, we used a number of innovative methods and techniques to mine the deposit,” said Yesnik.

“Because the sandstone that overlays the deposit and basement rocks are water-bearing, with large volumes of water under significant pressure, we froze the ore zone and surrounding ground in the area to be mined using a hybrid freezing approach

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Underground views show miners working at three of Cameco’s operations in Saskatchewan: Rabbit Lake (above); Cigar Lake, (centre); and McArthur River (below). The three mines shown here, plus Key Lake, combine to make the company one of the larger uranium producers in the world.

June/July 2015 • Canadian Mining Journal |

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| Mining in the Prairies

Working ‘the face’ at Rabbit Lake is an example of Cameco’s commitment to keeping its customers supplied with a steady supply of high-grade uranium for many years to come.

with a combination of underground and surface freezing to prevent water from entering the mine and to help stabilize weak rock formations.”

Through 2014, Cameco continued to drill freezeholes from surface, expand the surface freezing infrastructure and put the new freezeholes into operation.

“To manage any potential risks, the area to be mined had to meet specific ground-freezing criteria before we began any mining,” said Yesnik.

The ground freezing expertise combined with the mining techniques used by Cameco, are what set the Cigar Lake mine apart from other uranium projects around the world.

“After many years of test mining, we selected jet boring, a non-entry mining method, which we have developed and adapted specifically for the Cigar Lake deposit,” said Yesnik.

Before starting to mine with the jet boring system, the ore and surrounding rock is frozen by circulating brine, chilled to -30C, that is piped underground through a series of large pipes. It takes about a year for the rock to freeze and when ready, mining machines are safe to bore through the frozen rock to create production tunnels under the orebody.

Technically, Yesnik explained that the jet-boring system enters the tunnels and drills a pilot hole up into the frozen orebody, then the jet-boring nozzle is inserted in the pilot hole and using a high-pressure water jet, it cuts a cylindrical cavity out of the frozen ore. Loose ore water is flushed down the pilot hole then pumped into an underground sump storage facility and allowed to settle.

Once settled, the ore is moved from the slurry storage to a 16 | Canadian Mining Journal • June/July 2015

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grinding and processing circuit, then it is pumped to the surface in a slurry form and eventually loaded into tanker trucks where it is transported to AREVA’s McClean Lake mill for further processing.

Once the mining is completed, each cavity in the orebody is backfilled with concrete and the jet-boring process begins again in the next part of the deposit, and on-and-on it goes.

“We have divided the orebody into production panels and will have one jet-boring machine operating in each panel, with at least three production panels being frozen at one time to achieve our full production rate of 18 million pounds of uranium per year by 2018,” said Yesnik.

To achieve its 2015 production target and continue ramping up the operation, Cameco currently has three jet-boring machines on site and later in the mine plan, the company may require a fourth to sustain annual production on 18 million pounds. The operation remains on track to achieve 2015 annual production of 6 million to 8 million packaged pounds (100% basis).

With the jet-boring systems working as planned, processing the ore is handled at the McLean Lake Mill, located about 70km northeast of Cigar Lake.

The mill is currently undergoing extensive upgrades to enable full production of 18 million pounds of uranium annually.

In May, the Cigar Lake mine announced another milestone when the operation achieved commercial production. That means the mine met all of the criteria for commercial production, including cycle time and process specifications. It’s largely a transition in the accounting treatment for costs incurred at the mine, but also demonstrates that the operation has achieved sustainable production.

CMJ www.canadianminingjournal.com

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| Mining in the Prairies

DIGGING

DEEPER Continuous work by Claude Resources has resulted in the company being a mainstay in both Saskatchewan and Manitoba mining circles since 1991.

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www.canadianminingjournal.com

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Veteran miner takes aggressive approach to growing business

By Trish Saywell*

R

C

laude Resources’ flagship Seabee gold mine is located about 400km northeast of Saskatoon and since it started commercial production in December 1991, the mine has produced more than 1 million ounces of gold.

Its Santoy mine, also located in northeastern Saskatchewan just 14km farther east of Seabee, has also been producing gold for the company since January 2011 and from the two mines, Claude Resources has been a continuously productive contributor to the local economy.

But in 2013, the company ran into headwinds as weaker grades and higher costs pushed its balance sheet into negative territory, analysts Joseph Fazzini and Kent Neale of Dundee Capital Markets recently reported.

The proportion of lower-grade ore mined at the Santoy mine’s 8 Zone slowed overall production and raised costs, while “volatile grades” from Seabee’s narrow-veined orebody “hampered production,” said Fazzini and Neale.

At the same time, said Fazzini and Neale, the company was spending significant sums to extend its shaft at Seabee from 550 metres to 1,000 metres, and investing $6-10 million on exploration at its Madsen project in Red Lake, Ontario.

“As these operational challenges occurred in tandem with a declining gold price,” Fazzini and Neale explain. “Claude Resources’ balance sheet came under pressure in 2013.”

Last year, however, things took a turn for the better. The company introduced Alimak long-hole mining at Seabee, which improved productivity with lower development costs, and commissioned its higher-grade Santoy Gap zone, which helped drive 2014 production up 44 per cent year-on-year to 62,984 ounces of gold. Annual mill head grade last year also increased 43 per cent year-on-year to 7.32 grams gold per tonne.

Claude also decided early in the year to sell a three per cent life-of-mine net smelter return royalty for Seabee to private equity firm Orion Mine Finance for US$12 million.

By the end of 2014, the company’s debt had fallen by US$10.6 million to $22.6 million, and its cash balance had moved from zero to US$11.2 million. The company says it hopes to achieve a net debt balance of zero before 2016.

“Overall expenditures are down six per cent and with Claude Resources’ lean and mean structure, the company can continue generating positive free cash flow and pay down debt,” the Dundee analysts outline in their research report, entitled Claude Making a Comeback.

In a recent interview, President and CEO Brian Skanderbeg described 2014 as a pivotal year for the company and that despite a challenging gold-price environment, management delivered the best operating performance in its history.

“Our grade profile has changed, our endowment in the camp has changed, and that’s impacting our free cash flow margins,” said Skanderbeg. “The two orebodies that now form 95 per cent of our production weren’t even discovered in 2010 and weren’t part of our resource base until the end of 2011 — they were discovered in the second quarter of 2011, and were reflected in the year-end resource statement.”

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| Mining in the Prairies

A scenic view of mining at night is proof that companies like Claude Resources never give up when it comes to production and growth opportunities.

Skanderbeg was referring to the 120,000 ounces of gold L62 deposit found 200 metres from its Seabee mine, and the 600,000 ounces the Santoy Gap deposit, 800 metres from the lower-grade Santoy 8 zone.

“We started investing in Seabee in 2009 and committed to an expanded exploration effort in 2009 and 2010, and were rewarded in 2011 with the discovery of L62 and Santoy Gap, within

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months of each other,” he said. “It’s those discoveries and our execution that has really put us in a much healthier position. We also took the opportunity to sell [the Madsen] asset and reduce debt to become a much simpler story leveraged to operational success.”

Moreover, as Claude Resources mined the Santoy Gap, grades came in much higher than management had initially expected. Santoy Gap entered production

in 2014 and was mined at 7.96 grams of gold per tonne for the year, he says, while reserves were 6.4 grams of gold per tonne.

“Veins are thicker at the Santoy Gap and grade is higher, so it has simply improved margins by having greater endowment,” he said. “The positive reconciliation of grade translated into positive reconciliation of ounces and higher margins ... and we may find at depth that parts of Santoy 8 may link up with Santoy Gap.” The improvements combined to send the company’s stock up 125 per cent last year; a performance better than many of its peers.

This year, Claude plans to produce between 60,000 and 65,000 ounces of gold, mostly from the Santoy Gap zone, as it ramps up to 500 tonnes per day, and from the L62 deposit at Seabee.

Operating costs are forecast to come in slightly below those of 2014, with unit cash costs ranging from C$785 to C$850 per oz., compared with last year’s average of C$836 per oz. It expects all-in sustain-

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DISCOVER

MERLO IN ACTION

ing costs this year of between C$1,175 and C$1,275 per oz., down from the 2014 average of C$1,310 per oz.

“All-in sustaining costs are at the low end of what most of our peer group is at,” said Skanderbeg, “and our fully loaded cost is C$1,300 per oz., inclusive of debt-servicing costs, which would put us in at the lower end of the cost curve of producers on a fully loaded basis and gives us healthy margins of 15% on a free cash-flow basis.”

The company also does all of its own drilling, with five rigs that it owns, and can drill underground at a cost of C$20 per metre, which Skanderbeg says is far below the industry average of $50 to $60 per metre.

“Most producers don’t choose to operate their own equipment, but we’ve found it to be the most costeffective way of drilling,” he said. “We can drill three times as many metres for the same dollars as most of our competitors. I don’t know why more people don’t do it.”

This year management expects to spend C$2 million on a 70,000-metre drill program. Between 4,000 and 5,000 metres will be exploration drilling from surface.

The remaining 65,000 metres will be underground drilling, of which 20,000 metres will be exploration-focused.

The Dundee analysts believe there’s plenty of exploration upside left on Claude Resources’ land package.

“Despite the already long history of production from the Seabee mine complex,” says Fazzini and Neale, “we believe that significant exploration potential remains in the camp.”

The company’s Seabee property hosts proven and probable reserves of 1.32 million tonnes grading 7.03 grams of gold per tonne for 299,000 contained ounces of gold. Measured and indicated resources stand at 0.65 million tonnes grading 5.98 grams of gold per tonne for 125,200 contained ounces of gold, and inferred resources add 3.3 million tonnes grading 7.96 grams of gold per tonne for 847,300 ounces.

In addition to Seabee, 125km northeast of the town of La Ronge in Saskatchewan, and 150km northwest of Flin Flon, Man., Claude Resources owns the Amisk gold project in northeastern Saskatchewan. The company rekindled the project in 2010 by outlining its potential to host a large, bulk-tonnage gold-silver deposit.

Skanderbeg says the company is transformed.

“We’ve fundamentally changed the story from one where shareholders had balance sheet concerns and Claude was viewed as a relatively high-risk company, to one where we’ve delivered a healthy balance sheet and excellent operating execution,” he said.

“The next step is to look at growth opportunities.

Our focus is free cash flow, and the ability for the company to generate free cash flow gives us those opportunities.”

CMJ

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*Trish Saywell is a Senior Writer with The Northern Miner, a sister publication to Canadian Mining Journal.

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| Mining in the Prairies

R E D D LA

POR E R L A SPECI

T*

B NTROL O C

Photo: ?

ING

ETT G E K MA P L E RS H EASIER E D D BLA TLE E T I G L A A TOR OVALS S L E FU PPR A T I PERM

Two views clearly show ‘the old’ and ‘the new’ methods being used for fuel storage on an increasing number of mining and exploration sites.

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www.canadianminingjournal.com

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T

he Monument Bay Project, Mega Precious Metals’ most advanced Manitoba project, is located 570km northeast of Winnipeg and 340km east southeast of Thompson.

The nearest communities are Red Sucker Lake First Nation, 52km to the southwest, and God’s Lake Narrows First Nation,100km to the west. Hydro power lines currently run as far as Red Sucker Lake First Nation.

It’s a gold and tungsten property, 100 per-cent-owned by Mega Precious Metals Inc. and consists of 136 contiguous claims totaling 338km2 and, as already described, it’s located in a remote part of the province where access to the site has been primarily by air.

Because of its location, diesel, gas and jet-A fuel have been delivered and stored at the site in fuel drums; a common, but unfortunate choice since drums carry a high price tag in more ways than one.

First of all, they’re expensive to buy, inefficient to transport, and are often abandoned and left behind to become garbage and a potential threat to the environment.

Secondly, and in addition to being an eyesore, abandoned drums can also create a spill risk from the small amounts of fuel left inside, all of which adds up due to the number of drums.

Spillage can also occur from everyday fuel transfers and injuries are also possible to workers who have to move the heavy drums on a daily basis.

So, Mega Precious Metals asked the question: “Is there a better way to store fuel in remote locations?”

“Absolutely there is,” says Trudy Gilbertson, a petroleum storage program specialist with the Manitoba Conservation and Water Stewardship Department of Manitoba.

In fact, it’s Gilbertson’s job to work with companies like Mega Precious Metals to process applications and issue approvals for projects that require fuel storage in remote areas.

“The military, for example, has been using collapsible fuel storage bladders instead of fuel drums for decades to help prevent contamination to remote sites so the question is, why haven’t more companies followed the military’s lead?” asked Gilbertson.

To help answer this question, here’s a look at possible answers on how to switch to a safer and more environmentally friendly option.

L

G

A Regulator’s Perspective Once again, Gilbertson says, “We do everything from the cookie-cutter permit to a custom process that satisfies the requirements of a unique operating permit and having said that, 90 per cent of the time we issue the same permit.”

And that’s where Mega Precious Metals and its Monument Bay mining camp enters the picture. Their request to use collapsible fuel bladders fell into the 10 per cent “unique” category.

Typically, fuel storage permits are needed for obvious uses such as gas stations, airport fueling depots and refinery tanks, but in the case of the Monument Bay camp, fuel was going to be stored beside a lake in the Manitoba Twin Lakes area.

“The Monument Bay project introduced us to fuel bladders for the first time, but we had no provincial standard to use to create a variance for them,” says Gilbertson.

“So, we did our homework, talked to others that had used bladders before and Mega Precious Metals provided all sorts of documentation,”

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| Mining in the Prairies turer who uses encapsulated cross seams and 100% radio frequency welding specified in the national standard (although other manufacturers may do so in the future).

Arctic King tanks have excellent UV and hydrolysis resistance for a longer life expectancy and are deployable to -50° F (-46° C).

Easy to fold, transport and relocate, the Arctic King requires minimal site preparation and saves on transportation costs, thanks to its lighter weight.

An aerial view of Mega Precious Metals’ Monument Bay camp in northeastern Manitoba.

said Gilbertson. “It wasn’t so much about the product; it’s a good product that fits the environment and came highly recommended. Our biggest concern was about how to deal with spills and what safeguards were in place.”

Wanting to see a formal plan, Gilbertson asked for a full proposal which was followed by several back-and-forth revisions.

“Even though we were talking about a new way of operating in a remote location, as it turned out, the biggest sticking point was that the company didn’t have a spare bladder,” said Gilbertson.

With all other aspects satisfied, the decision was made to purchase an SEI Industries’ Arctic King tank from SEI Industries to provide additional capacity for fuel transfer in the case of a leak in one of the bladders in use. With the spare bladder purchased, the permit was approved.

“Ultimately, our role is not to put people out of business or be in the way of doing business, we just want to keep everyone compliant,” says Gilbertson.

She says that learning about collapsible bladders has given her a “different perspective now” and she wouldn’t think twice about approving them again. “My only regret is that I didn’t get to see them being filled with fuel.”

Since then, Gilbertson has gone on to participate as a regulator on a technical committee to create a new CSA national standard for fuel bladder tanks which was recently completed and released in July 2014.

Which bladders are approved?

So far, SEI Industries’ Arctic King tank is the only collapsible fuel bladder that meets the new CAN/CSA B837 2014 national standard for Canada.

Specifically designed for liquid fuel storage in remote sites and the Canadian environment, the Arctic King is constructed from a proprietary high-durability fabric unique to SEI. In addition to its innovative fabric, SEI is currently the only manufac24 | Canadian Mining Journal • June/July 2015

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Getting the Permit Right Depending on the authority having jurisdiction, collapsible fuel bladders and secondary containment systems require variances to construct and operate. Tetra Tech, a leading provider of consulting, engineering and project management services worldwide, has worked closely with SEI Industries, in the successful permitting of these systems.

Tetra Tech says it has permitted fuel bladder systems in less than two months, however, a more typical timeline would be 3-6 months, especially with new jurisdictions where fuel bladders have not historically been used.

After assisting Mega Precious Metals with its Monument Bay permit and helping many others with their applications, today, Tetra Tech staff are experts in the permitting of collapsible fuel bladders in Manitoba, Ontario and the Northwest Territories.

What’s their secret? By integrating environmental considerations early in the design process, the company says it’s easier to obtain approvals and avoid permitting hurdles which can cause delays.

“Initially, due to collapsible fuel bladders not previously being used in some jurisdictions, there were some uncertainties with the permitting process,” says Ryan Wizbicki, a project manager in Tetra Tech’s Winnipeg office. “To overcome this, we worked to ensure that sufficient information was provided so that regulators could adequately review the proposed systems and make informed decisions.”

“With bladder tanks already heavily used by Canada’s Armed Forces on federal land, federal technical guidelines were also helpful in evaluating their suitability,” he says.

A second challenge for regulators was the inability to use fuel system parts (piping and fittings connecting the collapsible bladders to dispensing equipment) that are typically used with conventional rigid tanks. For example, a typical overfill prevention valve or high level alarm cannot be installed in a bladder tank.

To address this, alternative solutions were employed in order to meet overfill protection requirements.

“In many cases, properly designed, installed and maintained collapsible fuel bladders are a far safer alternative from an environmental perspective,” notes Wizbicki. “The fuel bladders and equipment are easier to transport to the location, require a smaller footprint of ground disturbance and are easier to decommission following end of use.”

“They also provide a more stable storage system than using fuel drums and can reduce both fuel handling costs and work place injury,” he adds.

Making the Switch If you’re ready to use collapsible fuel bladders, www.canadianminingjournal.com

15-05-28 11:16 AM

the expert advice below will help ensure a positive outcome with your permit application: Allow enough time to process your application especially if needing a variance. For example, “don’t leave the application until the last minute knowing your access road will be closed in two weeks,” says Gilbertson.

Read the regulations that apply to bladder tanks in your area and familiarize yourself with the new national standard (CAN/ CSA B837 2014) by the Canadian Standards Association (CSA).

Hire a licensed petroleum technician (LPT) for the area your project is located in to prepare your application. Involve them early in process.

Prepare your operating procedures and contingencies planning. “Think through the process. How will you deal with things such as communications, access, staff on site, roads, fuel handling and inventory procedures?” says Gilbertson.

Review your application and submit through your LPT. Your LPT will also submit any test results, site drawings and/or completion documents needed.

Switching to collapsible fuel bladders makes sense both as a business case and a social responsibility effort that helps to ensure pristine remote locations stay that way.

CMJ

Trudy Gilbertson, a petroleum storage specialist with the Manitoba Conservation and Water Stewardship Department of Manitoba, processes applications and issues approvals for projects that require fuel storage in remote areas.

Information for this Special Report* provided by Nancy Argyle of Calgary. In addition to being a university lecturer, former print reporter, and strategic communications consultant, she also holds a commercial pilot’s licence.

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| Mining in the Prairies

FROM ABOVE T AERIAL PHOTOS PROVIDE NEW LOOK AT TAILINGS STORAGE FACILITIES

By Michael Bender*

ailings storage facilities (TSFs) and other waste dumps are often a high profile operating issue for a mine’s management team, who need to manage tailings and meet regulatory requirements for a facility with many “moving parts” and performance uncertainties.

A lot of a mine’s liability is associated with the tailings facility.

Good risk management means keeping a close eye on the tailings and optimizing or providing contingencies where appropriate.

In particular, the tailings facility can certainly affect mine production if the capacity does not match the scheduled containment expansion works.

Yet despite their importance, TSFs can be difficult to monitor with any precision. They tend to be geographically large, with surfaces that are not generally trafficable. The boots-onthe-ground approach also has its limitations because TSF beach surfaces can be highly variable, which is not always visible to someone standing on the edge.

Having detailed information about a tailings surface, or changes to a surface over time can help identify measures to optimize management of the tailings. Better information can also help to avoid relatively expensive emergency measures to fast-track a dyke raise or an unscheduled spigot move.

Ground-based LIDAR is seeing increased use for monitoring TSFs, but this technology requires a direct line-of-site from the ground, which may risk missing important surface features such as large cracks or gullies.

Monitoring by aircraft can be expensive or unnecessarily dangerous, depending on the location.

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Satellites offer a variety of services from imagery to rough scale topography, and can provide a reasonable solution in many cases. They can, however, be limited in terms of accuracy and in areas with persistent cloud cover.

Another new tool in the miner’s toolbox, especially for keeping an eye on TSFs and other mine disturbed areas, are unmanned aerial vehicles (UAVs), sometimes referred to as unmanned aerial systems or drones.

These small “aircraft” are seeing increased use in mining.

UAVs provide ultra-high resolution imagery of the ground, and the images collected can be used to interpret accurate topography equivalent to survey points every few inches. They can also carry a variety of payloads that include thermal imaging and multi-spectral cameras.

Survey-grade UAVs, such as the fixed-wing senseFly eBee, are designed for accurate topographic surveys using photogrammetry techniques to interpret overlapping photographs. The eBee, in particular, is the equivalent size of a small bird of prey.

It has a wingspan of about 100cm and weighs under a kilogram, camera included. This style of instrument is fast becoming standard survey equipment for many applications.

Getting best use of UAVs for tailings management As a new tool in the toolbox of mining companies, UAVs can be quite versatile in their application. UAVs are being used to: � Measure the remaining containment capacity of the TSF; � Measure the change in containment capacity of the TSF over time, via multiple surveys, to help interpret volumetric www.canadianminingjournal.com

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changes and moisture content; � Measure the beach slope to plan for future spigotting arrangements; � Characterize the surface cracking and other features to improve future evaporation estimates; � Measure waste dump or material stockpile volumetrics; � Plan logistics for various activities using the high resolution imagery; � Characterize spills, slides, or slope failures; and, � Identify leaks or inventory wildlife via thermal imaging document pre-disturbance or post-reclamation conditions.

Many of these tasks have previously been difficult to accomplish with any precision because the tailings landscape is often untrafficable to traditional survey methods.

The overhead photogrammetry methods have been proven to be sufficiently accurate for these purposes (e.g. Vallet et. al.

2011), and with some key advantages in some cases. UAVs can: � Be more cost-effective for small areas, as compared to aircraft; � Provide ultra-high resolution, as needed; � Help to visualize micro-topography, as needed; and, � Be operated in areas with persistent cloud cover.

Other mining applications include the use of hovering vehicles (i.e. quadcopter) to map pit walls for a variety of assessment purposes. It’s difficult to imagine the extent of possible applications.

One of our clients actually uses our UAVs to test their RADAR bird-deterrent systems – something that can be done because a UAV has the equivalent RADAR signature of a bird.

Like any tool, UAVs have their limitations, and mining companies need to be aware of these. For example, weather conditions can “ground” a UAV, particularly strong or gusty winds.

Photographing surfaces that are entirely homogenous (such as

snow cover) can lead to limited results because the photogrammetry techniques rely on image texture or unique features to automatically detect tie points for comparing images. The colour variation and cracking patterns found on most tailings beaches are usually sufficient to generate the required tie points. Surveys near water can also be tricky, because waves will shift between photographs and confuse the software as it looks for tie points.

Expectations need to be managed for UAV surveys of the ground surface in forested areas, as the photogrammetry techniques will deliver the equivalent of topography for the canopy cover instead of “bare earth.”

Many UAVs also require the use of surveyed Ground Control Points (GCPs) to calibrate the topography products to real-world elevations, although some UAVs are now equipped with Real Time Kinematic (RTK) technology to reduce the need for GCPs. To avoid creating bias in the calculated surfaces these GCPs must be arranged properly, usually by forming large-scale triangles on the ground. If used properly, the GCPs can help to develop an accurate 3D surface equivalent to LiDAR for most mine-disturbed areas.

The responsible use of UAVs includes proper training and regulatory approvals from transportation authorities, who in some countries treat UAVs similar to other manned aircraft – with corresponding safety requirements.

To obtain the most effective use of UAVs for tailings facility planning, mining companies should be sure that they have access to personnel (either on staff or through external counsel) who are familiar with the application of these tools for mine-site geotechnical or tailings management purposes.

CMJ Michael Bender (PhD. PEng.) is the director of UAV Services with Golder Associates Ltd., in Calgary.

Aerial photos (here and on the adjacent page) showing tailings storage facilities give mine owners and operators a ‘safety check’ when it comes to monitoring remote locations.

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| Mining in the Prairies

g n i k c o h S s c i t s i t a St COSTS N E D D I THE H MENT O T N I G DIGGIN TRICAL EQUIP OF ELEC g

P.En Klassen,

By Tyler

I

n a recent survey of primarily Canadian mining and oil sands professionals, 70 per cent of respondents estimated that hidden costs typically add 10-30 per cent to the purchase price of their power distribution equipment.

Surprisingly, fewer than half even track total cost of ownership (TCO), and at least two-thirds fail to account for hidden costs such as repair, downtime, late delivery, reconfigurations and consulting costs.

Electrical infrastructure represents 15 per cent of capex for a typical mine or oil sands application. As operations strive to control costs, they are increasingly using centralized purchasing agents to select their vendors of electrical equipment. This works well for off-the-shelf products, but for custom products the vendor’s engineering team should have at least an equal share in the selection process.

Compared to stock products, custom electrical equipment is more complex and has a compressed design and manufacturing cycle, and that’s why vendor experience and capabilities are important considerations when selecting a supplier for portable power distribution centres, mine electrical substations and other modules for protection and control.

Consider these stories: a vendor promises an unrealistic delivery date to an operation in Northern Canada and subsequently misses the seasonal ice road and the equipment had to be delivered by air, at a cost of $35,000.

Or, a potash mine receives equipment with cable connectors located in the same spot where the loader would contact the equipment in order to push it into position. Maintenance workers are required to drill out and move the connectors thus adding an unexpected $8,000 to the cost of the equipment.

And even worse, a situation where an open-pit operator

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Complex facilities containing numerous pieces of equipment often result in owners spending more money on electricity than required.

learns the power distribution centre was precisely built to U.S. standards rather than the needed Canadian standards. The inspector would not approve it and it ended up in the scrap yard as a $250,000 storage closet.

Each of these stories are true stories of what happens when managers put too much emphasis on the initial equipment purchase price. They may have thought they would save money by selecting a low bidder but in the long run, the true cost was much higher.

The discipline of considering all the costs of a purchase, including its maintenance and service life, is called Total Cost of Ownership (TCO).

To better understand the role of TCO in organizations, our company conducted a survey in 2014 of engineers, purchasing agents, electricians, and managers in mining, oil sands, and oil & gas companies. Here’s some of what we leaned.

Organizations do not pay enough attention to TCO Two out of three respondents failed to include one or more hidden costs, such as repair, downtime, late delivery and outside consulting costs.

Regarding electrical equipment, does your company track the total cost of ownership (TCO)? Check all items that go into your cost calculation: Answer Options Response Percent Outside consulting costs 22.0% Commissioning time 42.0% Extra costs associated with late delivery 30.0% Reconfiguration (if needed) costs 20.0% Repair and/or downtime costs 32.0%

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Hidden costs are significant In the survey, 70 per cent of respondents estimated that hidden costs add 10-30 per cent to the purchase price of equipment.

Some respondents (14 per cent) put the figure as high as 30 to 40 per cent.

In your estimation, what percent of the total cost is based on items not included in your equipment purchase price?

Answer Options <10% 10-20% 20-30% 30-40% >40%

Response Percent 12.0% 42.0% 28.0% 14.0% 4.0%

Half don’t track TCO Only about half of the respondents said that their organizations track TCO, and of those who do, fewer than 5 per cent use TCO tracking software. This finding suggests that for many companies, TCO is an informal process that may not be robust enough to inform decision makers during the vendor selection process.

Does your operation use a formal TCO tracking program or software?

Answer Options Response Percent We don’t track TCO 48.0% We use TCO tracking software 4.0% We don’t use TCO tracking software, but we do track TCO using internal processes 48.0%

Downtime is a costly part of TCO Mining and oil sands operations are particularly sensitive to the cost of downtime. Because the value of their output varies with market prices, these indusIn rank order of importance: tries strive to operate as efficiently as possible.

1. Equipment purchase price However, production is 2. Downtime costs efficient only when it can 3. Late delivery costs continue without interrup4. Commissioning time tion. When survey respon5. repair costs dents were asked to rate 6. Reconfiguration costs factors in vendor selection, 7. Outside consulting costs they ranked downtime costs number two, after equipment purchase price. In these industries, the cost of downtime can be as high as tens of thousands of dollars per hour.

Gaps in gound fault protection can add cost One particular example of equipment failure is an electrical ground fault. Ground faults, if left undetected, pose a shock hazard to workers and can cause costly equipment damage and downtime. If a ground fault damages an electric motor resulting in a machine, fan, pump or other equipment failure, it can have serious impact on production. It’s even worse if a power distribution centre fails: all equipment powered by that centre is idled,

CMJ2015_JunJul.indd 29

and a spare may not be readily available. That’s why critical equipment is usually protected by a relay that will report a ground fault (while equipment keeps operating) and will trip if the ground fault reaches a high value.

The challenge comes with the increased use of variable-frequency drives (VFDs) used to control motors more efficiently and reduce energy consumption. VFDs come with built-in ground fault protection, so operators think that the equipment and workers are safe from ground faults. Actually, because mines and oilfields operate on resistance-grounded electrical systems, the ground fault current is limited to a few amps, not enough current to trip the ground fault protection that is typically provided on VFDs. Does your operation use ground-fault relays on VFD drive equipment?

Answer Options No Yes, built in drive Yes, ancillary relay

Response Percent 16.0% 76.0% 8.0%

Few managers are aware of this problem, and wrongly assume that workers and motors are protected, when in fact they are placing both at risk. According to the survey results, 76 per cent of respondents use ground fault protection built-in the drive, and 16 per cent of respondents don’t use any ground fault protection on drives.

An ancillary ground-fault relay costs more initially, but it could save thousands of dollars in downtime, replacement parts and liability costs. Engineers and purchasing agents need to consider the value of this protection when reviewing equipment bids.

Electrical safety is also part of TCO The cost of an electrical accident should be considered during vendor selection. Worker injury or death means medical costs, lawsuits, fines and downtime. Total costs per electrical incident can exceed $15 million.

Electrical shock is amazingly common. It is estimated that 30,000 workers are shocked each year, and electrocutions are the fourth leading cause of traumatic occupational fatalities in the United States. In mines, a harsh work environment and relatively high voltage make shock a particular safety concern. A good example is a dewatering pump. These have long power cables, operate at 600 volts, and work in wet environments. In many applications the pumps must be manually repositioned, which puts workers at special risk of shock.

Fortunately, there is a new UL standard for industrial groundfault circuit interrupters (GFCIs) that trip at 20mA instead of the 6mA trip setting of residential GFCIs. This makes their use practical in mines and oil sands operations, where a high trip setting Does your operation use GFCI electric-shock protection devices on pumps?

Answer Options Yes No

Response Percent 40.0% 60.0% June/July 2015 • Canadian Mining Journal |

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| Mining in the Prairies electricity. It can release as much energy as detonating a charge of Does your operation use arc-flash mitigation?

TNT and produce extremely high temperatures. Medical costs per perAnswer Options Response Percent son can exceed $4 million for severe Yes, arc-flash relays 48.0% electrical burns.

Yes, other arc-flash 74.0% Arc flash risk is a concern in mitigation techniques mines, not just in general but No 10.0% because accumulated dusts bearing coal, metals or salts that can increase the risks of arc flash by providing an unintended path around insulators. Electrical equipment needs to be sealed and any vents filtered to prevent dust accumulation.

Not all equipment vendors take this step.

Fortunately, high-resistance grounding prevents an arc flash from forming if the fault involves a ground fault, and ground faults constitute 95 per cent of arc flash incidents. However it cannot stop an arc flash caused by phase-to-phase faults, which can be caused by a dropped tool, a misplaced test prod or a slipping component. Because many phase-to-phase faults occur when electricians or maintenance personnel are working in an electrical cabinet, they are particularly dangerous.

Arc flash relays are available that detect The Northern Miner’s new light from an emerging arc in 1ms and publication dedicated to quickly interrupt the circuit. They are easily retrofitted into existing electrical enclosures. recruiting in mining Nevertheless, the survey shows that more than half of respondents don’t use arc flash relays, and 10 per cent don’t have any arc flash protection. A large majority (74 per cent) does use some kind of arc flash mitigation, but only arc flash relays stop phase-tophase arc faults. The application of arc flash relays is a small investment compared to the costs of an electrical accident.

is needed to prevent nuisance tripping.

The majority of survey respondents (61 per cent) said they don’t use GFCI protection on pumps. This suggests that either respondents do not know about the new standards, or they do not include shock protection in their TCO analysis.

Electrical arc flash is another hazard that should be considered. An arc flash is an explosion caused by a sudden release of

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Moving beyond TCO: the best value model To conclude, industry professionals could do a better job of accounting for hidden costs when they purchase electrical equipment. To obtain the best return on investment, companies should move beyond simple TCO and embrace a more sophisticated approach by rating prospective bids/ vendors across 11 categories, such as reputation for on-time delivery, engineering capability, and relevant industry experience. CMJ Tyler Klassen, P. Eng. is Sales Engineering Manager, Custom Products, Littelfuse Startco, a Saskatoon-based company supporting the electrical distribution needs of mining and oil & gas operations. www.canadianminingjournal.com

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E Q U I P M E N T M A I N T E N A N C E & R E PA I R

P U D G A E H N A I N O R S A A E S Y E S U GFOR A B

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7/9/10 4:38:01 PM 15-05-28 11:16 AM

CONTENTS

Supplement of

Mining Journal E Q U I P M E N T M A I N T E N A N C E & R E PA I R CANADIAN JUNE/JULY 2015 PUBLISHED BY

Canadian Mining Journal 38 Lesmill Rd., Unit 2, Toronto, Ontario M3B 2T5 Tel. (416) 442-5600 Fax (416) 510-5138 www.canadianminingjournal.com

34

34...

36...

39...

40...

EDITOR

Russell Noble 416-510-6742 rnoble@CanadianMiningJournal.com

MINING MACHINES

ART DIRECTOR

B.C.’s Copper Mountain Mine increases production by maintaining its $100-million fleet of new equipment through a conscientious program of routine service and maintenance.

REMANUFACTURING

Remanufacturing large air compressors is a growing trend across the industry with most major manufacturers offering some form of remanufacturing program for equipment owners.

Stephen Ferrie

PRODUCTION MANAGER Jessica Jubb

CIRCULATION MANAGER Cindi Holder 416-442-5600, ext. 3544 cholder@bizinfogroup.ca

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PUBLISHER

Robert Seagraves 416 510-6891 rseagraves@CanadianMiningJournal.com

SALES

Western Canada, Western U.S.A. & Quebec

ENGINE DEPOSITS

Joelle Glasroth 416-510-5104 jglasroth@canadianminingjournal.com

Common engine issues, including misfires and excessive exhaust smoke to name just two, may be caused by a common enemy called ‘engine deposits.’

SEALS AND RINGS

Keeping contaminates out of expensive equipment is vital to the longer life and performance of today’s machines and maintaining seals and rings is a good way to avoid costly breakdowns.

Printed in Canada All rights reserved

40

39 ABOUT THE COVER

This month’s cover shows one of the many inner workings of a piece of mining equipment that must be maintained to help ensure production and avoid downtime.

E Q U I P M E N T M A I N T E N A N C E & R E PA I R

UAP D AHE IENASG ON R A S SY U GE B RA FO

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Feature

Equipment Maintenance and Repair

Heavy mining equipment at the Copper Mountain Mine in B.C. continues to perform well throughout the year thanks to routine and proper maintenance.

FROM MINE

TO MARKET WELL-MAINTAINED MACHINES HELP MINER DELIVER ORE ON TIME

T

he Copper Mountain Mine in British Columbia dates back to the 1920s. When it went back into full production almost four years ago in the summer of 2011, it became Canada’s newest major copper producer and represented a fresh start for the surrounding communities.

Situated on a 7380-ha site near Princeton, the mine has a resource of approximately five billion pounds of copper, plus significant exploration potential.

The 2015 production forecast is 80 million pounds of copper plus gold and silver credits, based on a mill throughput rate of 37,5000 tpd.

To help achieve these goals, Copper Mountain purchased more than $110 million worth of new mining equipment consisting of fifteen 240- and seven 260-ton haul trucks, three hydraulic shovels, the world’s largest mechanical loader, as well as a number of other support machines including drills, dozers and cranes.

As a past producer, the mine came with several bonuses, mainly existing facilities including an administration building, a fresh water pumping facility from the Similkameen River, an existing tailings management facility, and a power line connected to the B.C. Hydro grid.

However, the task at hand was to build a new mine on an old deposit; an undertaking that required an investment of $438 million, which included a new concentrator building with modern milling and processing equipment, a new five-bay truck shop, new primary crusher, and the new mobile mining fleet.

“The mine is a big deal for the province, as we haven’t had a mine opening since the 1990s,” says Tom Blake, Mine Maintenance 34

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Superintendent. “We commenced pre-production mining early, built roads, dams, shops and plants, and literally built the business from the ground up.”

From drilling to production in just four-and-a-half years, an ambitious and aggressive target timeline was successfully achieved. The first filtered concentrate was produced in the summer of 2011 and since then, the company has maintained regular monthly shipments of concentrate to the smelters in Japan.

Recognizing the importance in choosing the right equipment certainly helped prepare for production at the mine, but keeping it running is also vitally important to meeting production schedules.

To help ensure productivity with minimal downtime, Copper Mountain sent out for proposals from some of the lubrication suppliers in the industry to help prepare and run their equipment operations.

Keeping an eye on all activities at the mine, including equipment and production, is a full-time job but thanks to a conscientious effort by everyone at Copper Mountain, the mine continues to produce copper for a world-wide market.

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Equipment Maintenance and Repair » Feature

A fleet of various heavy machines work almost continuously in the mine, excavating and hauling material to the surface for export.

The company presented unique challenges to potential lubricant suppliers: “No matter the presentation, the one thing that mattered most was that suppliers actually did what they said they would do – that’s what’s really important,” says Blake.

Petro-Canada Lubricants was chosen by Copper Mountain to become an integral part of the preparation process. They were involved in designing the lube systems and lube islands, implementing procedures, and selecting the products that would provide the best results.

For Copper Mountain, the real challenge was to get the right oils and greases for their different types of equipment. Many of its machines inside the mill consist of different manufacturers’ parts and aligning them with OEM warranty guidelines was critical across all of the machinery on site. This added a layer of complexity to planning and managing the different lubricant requirements.

Service technicians at the mine play a vital part in keeping a wide variety to tools and heavy machines performing as designed without failures or breakdowns.

“If we had to use different original lubricants that OEMs demand, it would have been a constant headache. All we had to do was give the Petro-Canada Lubricants support team our list of needs and wants and they took care of getting all of the equipment approvals we needed,” says Blake.

Petro-Canada Lubricants Account Manager John Austerberry and Neil Buchanan of the Technical Services team were involved every step of the way. They continuously worked with Copper Mountain to assess needs and provide updated training, tools, education and guidance on a regular basis.

As already mentioned, Copper Mountain has many pieces of equipment in operation, with approximately 60 people involved in changing the lubricants for the machines. Every piece of equipment, what it is, what it does, what type of oil it uses, oil capacity, and proper change out methods, are all part of the maintenance team’s responsibility.

One particular product that has performed well at Copper Mountain is Petro Canada’s line of VULTREX OGL (Open Gear Lubricants). The greases are adhesive lubricants designed for open gear applications, including shovel, dragline, excavator and drill operations. They’re also suited for protection in handling mining’s toughest conditions from severe winter cold to extreme summer heat and from very wet to dry environments.

“Opening a mine is a huge undertaking, which is why new mines don’t open every day. So when they do, it’s important to choose the right people to work with. We believe we have a great business relationship with Petro-Canada Lubricants,” says Blake.

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Feature

Equipment Maintenance and Repair

NEW LIFE

REMANUFACTURING EXTENDS LIFE OF AGING AIR COMPRESSORS

Careful attention is given to remanufacturing vital components used in todayâ&#x20AC;&#x2122;s extremely expensive machines.

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Equipment Maintenance and Repair » Feature

A

s Tier 4 Final machines roll off the production line and onto equipment dealer lots, the cost of replacing aging machines continues to rise.

And, while modern emission regulations have created a market for engines that burn cleaner and help reduce pollutants that can harm the environment, the technologies required to achieve these benefits have also added costs and complexity to today’s dieselpowered equipment.

Equipment manufacturers are required by law to meet emission standards by introducing Tier 4 Final machines, but many contractors still simply want reliable machines at an affordable cost. Thankfully, the emergence of remanufacturing programs is helping to bridge the gap by giving contractors the option to extend the useful life of aging equipment at a lower investment and with strong returns.

Remanufacturing larger air compressors — 375 cfm or larger — is a growing trend across the industry with most major equipment manufacturers offering some form of a remanufacturing program.

While each program differs, the general remanufacturing process for most includes a complete restoration of the air compressor from a refurbished sheet metal frame to new wiring harness, filters, fluids and other parts needed to bring the unit back to likenew condition.

Each air compressor receives a rebuilt engine of the same tier classification as originally equipped, as well as a factory reconditioned airend. The unit undergoes a thorough inspection by certified service technicians, and usable parts from the original air compressor are thoroughly cleaned and checked again before reassembly. New fluids are added, filters are replaced, and the exterior sheet metal and frame receives a total makeover, including paint removal and recoating.

Most manufacturers offer a same-as-new warranty on the package, engine and airend.

The warranty provides peace of mind that the customer is getting a like-new unit and reduces the risk that the machine will experience downtime that results in high costs down the road.

With the same warranty, performance and aesthetics, the real difference between a new and a remanufactured air compressor is the

Highly skilled technicians carefully move and handle remanufactured parts and total air compressors for use in the mining industry.

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Equipment Maintenance and Repair

A remanufactured and reassembled unit is lowered onto a trailer and is ready for return to its owner.

price. A remanufactured unit can typically be purchased at an estimated 20 to 30 percent cost savings compared to purchasing a new Tier 4F model of any manufacturer brand. Considering the sale price of Tier 4 equipment, that could add up to significant cost savings on the purchase price, potentially to the tune of $20,000 â&#x20AC;&#x201C; $50,000.

Once the comparable reliability and performance of a remanufactured air compressor have been proven on a jobsite,

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fleet managers are sending in additional units to be remanufactured. And, other contractors are joining the movement.

The result for manufacturers like Doosan Portable Power is a strong increase in demand for remanufactured units in North America compared to 2014 figures.

Doosan Portable Power is just one manufacturer experiencing an influx of requests for remanufactured air compressors. Due to increasing market demands,

Doosan has doubled its output of remanufactured air compressors annually since the company launched the initiative in 2012. The increase in total volume has spurred the company to make vast operational adjustments to add capacity in order to meet demand.

Availability of remanufactured inventory is another factor driving demand. As manufacturers are challenged with transitioning various product lines to Tier 4F technology, many have existing stock of remanufactured units available for resale.

In most instances, customers can also choose to retain ownership of their original air compressor that is then remanufactured and returned to the customerâ&#x20AC;&#x2122;s fleet.

While manufacturers must continue to meet emission standards with Tier 4 Final machines, the remanufacturing program gives contractors the power to choose: Give an aging air compressor a new lease on life at a lower tier level and lower cost; or make an investment in Tier 4F models with advanced features, better fuel economy, less maintenance and more uptime. www.canadianminingjournal.com

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Equipment Maintenance and Repair » Feature

DEATH by DIRT ENGINE DEPOSITS ARE A COMMON ENEMY

C

ommon engine issues, including engine misfires, injector sticking, injector tip deposits, rough idling, excess exhaust smoking, power loss, and hardstarting conditions, may all derive from a common enemy — engine deposits.

Removing and preventing these deposits is key to improving engine health and machine uptime. If your engine isn’t performing the way it should, or if you are looking for a preventive measure against engine problems, there’s now a solution A product called Fuel-Protect Keep Clean solution from Hitachi for diesel injectors, is formulated to fight the engine deposits that cause these issues.

This product, which is intended to be blended with regular diesel

fuel, can be utilized as a deep-cleaning treatment if deposits are present or as proactive maintenance to prevent deposits from forming.

This product is not intended to replace the powerful duo of Diesel Fuel System Clean-Up and the Injector Flush Tool. Rather, it is a new weapon in the arsenal against engine deposits that works in conjunction with the other products. Clean-Up and the Injector Flush Tool are fast acting, removing deposits after an hour of connection to the machine. Keep Clean usually requires 40 to 80 hours to take effect, and, as its name suggests, it takes over where Clean-Up leaves off, ensuring the engine stays clean of deposits. :

Information for this article provided by Hitachi.

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SEALED & SAFE 40

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A LOOK AT KEEPING CONTAMINATES OUT OF EXPENSIVE MACHINERY www.canadianminingjournal.com

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Equipment Maintenance and Repair » Feature

W

orking in dirty and polluted surroundings is not only punishing on humans, but it’s also damaging on machines that operate in those same contaminated environments.

In fact, while continuous efforts are made (particularly in mining) to provide protective gear and breathing equipment to protect workers from harmful contaminants, machinery used under similar circumstances are rarely given a second thought. But in reality, they need protection too if they are to remain in good working order.

One company that takes ‘contamination’ very seriously, both for workers and machinery alike, is the SKF Group and its teams of designers, engineers and technicians.

In a dirty work environment, especially for many pieces of machinery used in the mining and cement industries, (such as a conveyor pulley) the bearings are

likely to fail before other components because of contaminants.

When this happens, it usually means that production must be stopped in order to replace them. In addition to lost time and revenue by any stop, there’s also the costs associated with rebuilding the pulley, or, in extreme circumstances, a seized bearing or blocked pulley can seriously damage or even destroy the conveyor belt and cause structural damage.

This is very costly, both in terms of repairs and lost production, so the answer is to protect the machines,(and the vital components within) from the rigors of these harsh environments.

Here are a few things to consider in order to help avoid costly breakdowns and failures.

Taconite Seals Use taconite seals because they are already the standard in protecting bearings from ingress in the mining industry. They were developed in the 1960s, and take their

name from taconite; a fine-grained, abrasive iron ore that was proving too much for existing housing seals.

Taconite dust is almost as fine as smoke particles: this makes it highly abrasive, very invasive, and harmful to windings and bearings. A heavy-duty seal is needed that is capable of preventing ingress of this dust, as well as preventing grease and oil from escaping. They are most commonly seen in conveyor pulleys, but also find use in many other applications, including grinding mill pinion housings, bucket elevators, hoists, winches, jack shafts and pulverizers.

And now, SKF’s designers have taken the design further, with a complete reengineering of the Taconite seal so that it offers increased protection to bearings in split block housings.

The new version was developed for use in iron ore mines, as part of an on-going effort to help protect bearings from the rigors of tough working environments; in terms of both abrasive iron ore dust and high-pressure water wash-downs.

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Equipment Maintenance and Repair

Benefits of this new technology include compact axial size, easier installation, more efficient use of grease purge and, superior sealing. The new design is also able to accommodate misalignments of up to 0.5 degrees.

Labyrinth rings At the heart of the new design are two labyrinth rings, one stationary and one rotating. Once mated, they create a multistage labyrinth with a very small clearance, which is hard to penetrate.

The rotating ring carries a low-friction V-ring, which seals against the stationary ring to help ensure effective grease purge and provide additional resistance to the ingress of contaminants. At the same time, it is sealed to the shaft by an O-ring in its bore. The V-ring and O-ring seal are both made from acrylonitrile-butadiene rubber (NBR).

Water ingress is controlled by the design of the rotating ring, which faces the bearing housing. The high centrifugal force generated when it rotates at speed helps to ‘fling’ water away rather than letting it penetrate the bearing housing.

Assembly and alignment are simplified, thanks to a circumferential groove

on the outer surface of the stationary ring.

As the rotating ring is slid over the shaft towards the housing, it engages with the stationary ring until its inner-side face aligns with the groove. Three grub or set screws on the rotating ring are then tightened against the shaft to secure it square to the shaft and drive it. The housing’s alignment is then adjusted if the inner face of the rotating ring is not aligned with the groove in the stationary ring.

Using these particular seals, in combination with upgraded sealed SKF Explorer spherical roller bearings, can also lead to a significant reduction in grease consumption.

Pulleys that use traditional open bearings and taconite seals will each require 1.8 kg of grease per month, equating to a total of 108kg per month and 1.27 tons per year for all 60 pulleys.

In comparison, the SKF alternative will consume just 0.625 kg of grease per month for each pulley. That is 37.5kg per month, or a total of 450 kg for the year, a reduction of 65 per cent. As well as reducing grease costs by two-thirds, the reduction will also mean less grease being discharged into the environment.

The seal can be grease purged in three ways: manually; using the SKF System 24; or via an SKF Automated Lubrication System (ALS).

Seal Specs The new seal is available for most SKF metric and inch-split block housings, from 50mm (1-15/16 inch) shaft diameter and larger. It fits SKF metric housings SE, SNL, SNL 30, 31 and 32 series and SKF inch housings SAF, SAF B, SAW, SAFD and SDAF.

A cut-away view of a screw-on Taconite seal.

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Cases in Point SKF’s traditional approach to heavy-duty sealing of bearing housings is its ‘ThreeBarrier Solution’; comprising a standard primary housing seal, a grease filling the housing cavity, and a sealed SKF spherical roller bearing . Now, it says, it will offer the ‘SKF Three-Barrier Solution’ for extremely contaminated conditions, through a combination of an upgraded Sealed SKF Explorer roller bearing, new SKF Taconite Seal, and a grease barrier.

A complete view of a Taconite seal in place with shaft.

The company has already demonstrated the power of the new system, in applications across a range of industries including mining, marine and metals.

In one loading facility, a conveyor pulley using non-SKF bearings, mounted in split plummer block housings, was experiencing a Mean Time Between Failures (MTBF) of just 12 months. This was caused by iron ore contamination of the bearings within the housings, the grease showing contamination levels of up to 14,000ppm (Parts per Million).

By replacing the existing seals with Taconite Seals, contamination levels fell dramatically. After six months, grease sampling showed a level no higher than 60ppm. The bearing MTBF is now greater than the pulley lagging life, which is typically four years.

In a similar example, the ultimate Three-Barrier Solution extended MTBF from 18 months to beyond five years.

The system also proved invaluable in a gold mine, where the non-drive end spherical roller bearing on an ultra-fine grinding mill was failing every 15 months due to water ingress through the mill drum gland pack.

An ultimate three-barrier system replaced the failing bearing and, as a precaution, the drive-side bearing. Nearly three years later, the bearings are still in service and performing well. Similar improvements have been seen on a range of equipment, mainly conveyors, that must withstand such tough conditions.

Contamination is a major cause of bearing failure in extreme environments like these. By constantly raising the standard of protection – with its new design of Taconite seal – SKF has helped to prolong machine lifetime while simultaneously cutting the need for maintenance and repair.

Information for this article provided by the SKF Group.

www.canadianminingjournal.com

15-05-28 11:16 AM

PROVEN PERFORMANCE. NATIONWIDE AVAILABILITY. If you would like to know more about Amercoat or any other PPG Protective and Marine Coatings, please visit www.ppgpmc.com

Dulux ® Paints now carries PPG Protective and Marine Coatings (PMC) products including Amercoat ® branded products across Canada.

With more than 250 locations, Dulux Paints is the largest company-owned stores network in Canada. PMC products are now available at store and dealer locations nationwide.

Technical experts are available to understand your needs and assist with specifications, and comprehensive sales support across Canada. Our wide distribution network and highly experienced staff allows us to deliver consistent, reliable service.

www.ppgpmc.com | 1-888-9PPGPMC | PMCMarketing@ppg.com © 2015 PPG Industries Inc. All Rights Reserved. Dulux is a registered trademark of AkzoNobe! and is licensed to PPG Architectural Coatings Canada Inc. for use in Canada only. The PPG Logo and Amercoat are registered trademarks of PPG Industries Ohio. Inc. Bringing innovation to the surface is a trademark of PPG Industries Ohio. Inc. Sigma Coatings is a registered trademark of PPG Coatings Nederland B.V.

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In My Mine(d)

What’s involved in selecting a CFO

Alvaro Arias is a Partner and Head of the Industrial Practice Group at the International Executive Search firm of Pedersen & Partners, and Minerva Cernea is Canadian Manager of the Industrial Practice Group at Pedersen & Partners.

By Alvaro Arias and Minerva Cernea

W

hile it is important to choose the right candidate for all positions, it is doubly important to make the right choice for the Chief Financial Officer who works with sensitive, complex and confidential information.

A good CFO helps make sound decisions, anticipate contingencies, assess risks and ensure liquidity. Equally, choosing the wrong CFO carries significant business and reputational risks.

When the selection of a CFO is considered, doubts about the most appropriate profile are common. In order to come up with a coherent and well-defined profile, it is essential to include clear and relevant information, such as: company strategy, size, organizational complexity, typology of customers, financial strategy, growth strategy, international presence, corporate structure, business sector, capital structure, funding and working capital sources/needs, and practices of internal control and external audit.

Reasons Why a Candidate is Rejected There are many reasons why a company may decide not to proceed with a candidate who seems to have the right profile.

The most common are: � Lack of exposure to negotiating and monitoring debt contracts. � Does not understand the typology of customers. This is critical for businesses with working capital pressure. � From a very different sector. It is not easy to understand the key specifics of the business if the candidate’s experience is in a very different sector.

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� Too young, with too little experience. The job of a CFO requires experience and well-developed skills. � Insufficient international profile or proficiency in English. This aspect is increasingly important because of the globalization of businesses and internationalization of companies. For a CFO, it is even more important since much of the funding is found in English-speaking environments where fluency and accent are important. � Does not fit the company culture. � Lack of negotiation skills. � Is not hands-on (the role of the CFO has changed in recent years; a CFO is now more of a business partner willing to understand the variables of the business).

Good Understanding of the Company’s Context and Strategy The strategy and the context of the company are critical when choosing the right candidate, with the most important aspects being: � Size of the company, its organizational structure and corporate structure. � International presence . � Growth strategy: organic, acquisitions, geographies, new products and the market in which it competes. � Production and commercial processes. � Financial strategy, capital management, ways of funding and taxation. � Management of the income statement: projections, cost analysis and margins. � Balance sheet management: investments, assets and goodwill. � Risks Associated with a Bad Choice of CFO � The risks of selecting the wrong

CFO are higher than for any other position of the Steering Committee. These risks include: Loss of confidentiality; The CFO works with sensitive and confidential company information.

Replacement; Manages complex legal, numerical and processes issues, making the CFO difficult to replace.

High impact on results: risk of fiscal negligence, excessive indebtedness, poor capital structure, poor treasury management, poorly negotiated agreements, etc.

High impact on reputation; The CFO represents the company before banks, auditors, public entities and suppliers.

Keys to Choosing the Right CFO In order to choose the right CFO, both professional and personal aspects must be considered.

The professional aspects must be defined in a profile that is aligned with the challenges, situation and strategy of the company. Personal aspects must ensure that the chosen candidate’s personality fulfils certain core values, such as: honesty, hard work, integrity, loyalty, patience, critical sense, respect, self-control, self-confidence, teamwork, and self-motivation.

Considering the globalization phenomenon, today a CFO should have a high cultural intelligence quotient (CQ).

Related to the skills needed in order to be successful in unfamiliar cultural settings, the CQ can be measured and enhanced. A CFO with a high CQ can be more efficient in cross-border negotiations, understanding new markets, or working with multicultural teams.

CMJ www.canadianminingjournal.com

15-05-28 11:16 AM

PROFESSIONAL DIRECTORY MONTT GROUP SpA

Chilean Mining Attorneys Montt Group SpA offers a full array of legal and technical services, particularly creation of mining companies, filing for mining claims, easements, administrative permits, due diligence and legal surveillance Own Offices in Antofagasta and Copiapo and other cities Since 1974 serving clients in Chile and Latin American countries

ADVERTISERS INDEX

www.monttgroup.com +562 2544 6800 monttcia@monttcia.cl AEL Mining Services

2

www.aelminingservices.com

Brandt 11

www.brandt.ca

DMC Mining Services

20

www.dmcmining.com

Hard-Line Solutions

48

www.hard-line.com

Hercules Sealing Products 38

www.herculesca.ca

IESO

9 www.saveonenergy.ca/business

JoyGlobal 4 www.joyglobal.com KPMG 45

www.kpmg.ca

Manulift

21

www.manulift.ca/canada-dealers

Montt Group SpA

45

www.monttcia.cl

Motion Canada Petro Canada

7

www.motioncanada.com

31 www.lubricants.petro-canada.ca/mining

PPG Protective & Marine Coatings

43

www.ppgpmc.com

PR Engineering

41

www.prengineering.com

Rosta Inc.

25

www.rostainc.com

17

www.src.sk.ca/mining

SRK Consulting

45

www.srk.com

Stantec

47 www.stantec.com/mining

Saskatchewan Research Council

INVITATION FOR PROPOSALS

TO PURCHASE THE BUSINESS AND/OR ASSETS OF SEAFIELD RESOURCES LTD AND MINERA SEAFIELD SAS Pursuant to an order of the Ontario Superior Court of Justice, Commercial List, made May 20, 2015, KPMG Inc. in its capacity as Court-appointed receiver (the “Receiver”) of Seafield Resources Ltd (“Seafield” or the “Company”), is soliciting written proposals for the acquisition of the Company’s assets, by way of sale or an investment into the Company or its wholly-owned Colombian subsidiary, Minera Seafield SAS (“Minera”).

Minera, is 100% owner of 15 mining concessions covering an area of 6,042.8 hectares located in the Quinchía District in Colombia (“Miraflores” or the “Project”). Miraflores is an undeveloped open-pit and underground project with a resource base of 1.8Moz gold and 3.6Moz silver.

Seafield is also owner of 14 patented parcels of mining land and one license of occupation in the Kenora Mining Division of Northwestern Ontario (the “Elora Property”).

CMJ2015_JunJul.indd 45

Interested parties must be qualified by the Receiver in order to participate in the process and are required to submit initial bids by no later than 5:00 p.m. (EST) on Wednesday July 15, 2015.

To obtain further details about bid qualification, or the process in general, please contact Mr. Zakir Patel at +1 (416) 777-8944 or zvpatel@kpmg.ca or Mr. Aaron Collier at +1 (416) 777-8854 or acollier2@kpmg.ca and/ or visit the Receiver’s website (http://www.kpmg.com/ca/en/services/ advisory/transactionrestructuring/creditorlinksites/ seafield-resources-ltd/pages/default.aspx).

KPMG INC., COURT-APPOINTED RECEIVER OF SEAFIELD RESOURCES LTD.

June/July 2015 • Canadian Mining Journal |

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Unearthing Trends

Potash taxation and Saskatchewan’s investment attractiveness

Tom Stack works with EY’s Canadian Mining & Metals team.

He is based in Saskatoon.

By Tom Stack

I

n March, as part of its provincial budget, Saskatchewan introduced changes to the rates at which potash producers can deduct capital expenditures for purposes of computing profit for the potash production tax regime (PPT). The changes were not well received by all of the potash producers. Some companies issued public statements noting an adverse effect on earnings, while others argued that changing the rules in midstream impacts their ability to deliver fair returns to shareholders, and undermines Saskatchewan’s relative competiveness.

At the same time, the province announced that these initial changes will be followed by a complete review of the overall potash taxation regime, which will involve discussions with all stakeholders.

While the initial changes pose some challenges – as well as other benefits, depending on the producer – the challenge will be for Saskatchewan to embrace its creativity through consultations with stakeholders, to come up with an overall potash taxation regime that focuses on solidifying the province’s position as a top jurisdiction in the world for mining investment.

In 2014, Saskatchewan moved up five spots in the Fraser Institute’s Annual Survey of Mining Companies, to rank as the second most attractive jurisdiction in the world for mining investment (Manitoba, incidentally, moved into the top 10 in 2014, after ranking 13th in 2013). Saskatchewan also ranks highly in the survey when it comes to the attractive-

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ness of its mining policies – in fact, the region rose in the rankings from 12th in 2013 to 6th in 2014. But when it comes to taxation, Saskatchewan falls out of the top ten. For the province to maintain, and indeed strengthen, its position in 2015 and beyond, those involved in the review of the potash taxation regime must carefully consider the implications of proposed measures.

Looking more closely at the initial changes, as expressed by some producers, the measures may negatively affect producers’ cash flows, as they will generally pay more PPT in earlier years, and less in later years. However, the changes also give producers a 120% super allowance on all capital expenditures incurred in 2015 and subsequent years (this super allowance formerly only applied to capital expenditures in excess of the 2002 threshold amount, which was an amount equal to 90% of the producer’s capital expenditures in 2002). This change will not affect new producers who did not have a 2002 threshold amount, since they were already entitled to the super allowance on all of their capital expenditures. But for producers who were in business and incurred capital expenditures in 2002, these changes should produce a positive result because of the extra deduction for super allowance depreciation.

This budget change didn’t just apply to expenditures incurred in 2015 and subsequent years. Un-deducted capital expenditures from prior years which would

have been available for a 100% rate of depreciation suddenly are only deductible at a rate of 60% per year. Similarly, any un-deducted capital expenditures from prior years which would have been deductible at 35% are now only deductible at a rate of 20% per year.

By way of background, Saskatchewan levies a Crown royalty of 2% to 3% (depending on the grade) of the sale price of potash, and a resource surcharge of 3% of gross revenue from the sale of potash. In addition, under the PPT rules, the province charges a base tax (based on tonnes of potash sold), and a profit tax (based on profits). Profits are computed by deducting from gross revenue a variety of deductions including depreciation in respect of capital expenditures. It is this depreciation that is the focus of the budget changes.

No doubt, potash production has helped bump Saskatchewan’s attractiveness from a mining sector investment perspective. For the province to continue to maintain its position as a top jurisdiction in the world for mining investment, the review of the potash taxation regime must stay focused on sustaining that attractiveness – while at the same time providing a fair return to the province.

This means producers need to be confident that the rules will not change in midstream, after they have made major capital expenditures on expansions. In the meantime, producers will benefit from the super allowance applying to all of their capital expenditures.

CMJ www.canadianminingjournal.com

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