CIM Magazine March/April 2013 by CIM-ICM Publications

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CONTENTS|CONTENU CIM MAGAZINE | MARCH/APRIL 2013 | MARS/AVRIL 2013

TOOLS OF THE TRADE 10

The best in new technology Compiled by H. Mathisen

NEWS 14 20

Industry at a glance Labour pains At African Mining Indaba, South

African miners get creative in the face of an uncertain future by A. Reitman Feeling the squeeze Oil sands exporters search for pipeline alternatives to deliver their product to market by H. Mathisen

Miners shrug off CN project suspension

Iron ore companies to forge ahead without new rail capacity by P. Diekmeyer Information to bring investment Northern Vancouver Island communities use geoscience project to promote local resources by H. Mathisen

COLUMNS 28 30 32 34 36

MAC Economic Commentary Untapped potential: mining and natural gas by B. Marshall Eye on Business A primer on National Energy Board Act amendments by L. Olthafer and K. Slipp Standards Factors to consider when determining appropriate discount rate for project NPV by G. Gosson and G. Wood HR Outlook Challenging perceptions: technology and the mature worker by Z. Saab Operations Straight talk on longwall mining by A. Strickland

UPFRONT | Maintenance 38 40 42

It pays to appraise Early planning promises myriad benefits for BHP Billitonâ&#x20AC;&#x2122;s Jansen potash project by I. Ewing Spare necessities Parts stocking software saves Teck Resources millions by H. Mathisen Excellence at any cost Reliability for its own sake drives Luminantâ&#x20AC;&#x2122;s maintenance program by A. Lopez-Pacheco

4 | CIM Magazine | Vol. 8, No. 2

Big on lean Shop talk with continuous improvement leader Raymond Floyd by R. Bergen

TECHNOLOGY | Ventilation 58

Air supply on demand New ventilation technology provides airflow when and where it is needed by K. Lagowski

CIM COMMUNITY 73 74

Reinventing the mill Industry examines how to adapt to the future at CMP 2013 by D. Zeldin On the path to success Cameco scholarship winners speak on achievements and goals by C. Baldwin

FEATURE | ARTICLE VEDETTE 48

by A. Kennedy

Supply lines Energy? Everyone needs it. And Western Canada wants to feed that demand by E. Moore

Le jeu de pouvoir Vous avez dit énergie? Tout le monde en a besoin. Et l’Ouest canadien veut répondre à cette demande par E. Moore

A wise investment How the CIM leadership development program provides tools to grow Centre of the action CIM Montreal Branch is always looking ahead by C. Baldwin Au coeur de l’action La section locale de l’ICM à Montréal pense toujours à l’avenir par C. Baldwin

Exposing the cracks Sergei Shipilov reveals the perils of corrosion by A. Lopez-Pacheco

TECHNICAL ABSTRACTS 102 103

CIM Journal Canadian Metallurgical Quarterly

IN EVERY ISSUE 6 8 84 84 86

Editor’s letter President’s notes / Mot du président Innovation Showcase Professional directory Mining Lore by C. Baldwin

62 SPECIAL REPORT

On the tip of the iceberg Brazil is demanding on explorers, but potential rewards are huge by A. Dion-Ortega

64 65 67 69

Who does what in Brazil? Infographic by B. Dubois Probable changes to Brazilian mining and royalty legislation Legal revisions have been years in the making by C. Vilhena Tip-toeing around taxes Canadian suppliers must deliver unique products to access the Brazilian market by C. Baldwin From broke to booming Luna Gold improves its fortunes by reworking how it operates its Aurizona mine by V. Heffernan

March/April 2013 | 5

editor’s letter

Editor-in-chief Ryan Bergen, rbergen@cim.org Executive editor Angela Hamlyn, ahamlyn@cim.org Managing editor Andrea Nichiporuk, anichiporuk@cim.org

Energy potential

was a little surprised to hear from a veteran journalist that this year’s PDAC Convention was “dull.” Maybe there was nothing shocking – convention lore includes a tale of gun play in the Royal York Hotel – but from my impression the energy was palpable. A number of conversations I had underlined the urgency for junior companies to either distinguish themselves from their peers and secure funding or shutter their projects entirely. Fund manager Eric Sprott railed against what he argues is the underhanded approach of central banks to keep one step ahead of inflation and stifle precious metal prices. Regardless of the machinations of federal bankers, in the marketplace, gold miners are losing ground to investment products that 10 years ago were not even a factor. The market has changed and the imperative to innovate both with respect to operations and financing was clear. While providing rich fuel for future magazine articles, for us the event fell right in the middle of the publishing cycle, inevitably forcing us to throttle back on pressing production work. Still, it did serve as a fitting backdrop for the creation of this issue, which explores the challenging combination of juggling resources and constraints. This proved to be the central theme for both the focus on energy and for our report on Brazil. Natural gas and coal project developers are anxious to get their ample resources to markets that are hungry for their products. Meanwhile, uranium producers and developers are biding their time, waiting for a nuclear renaissance that – given projected future energy demand – seems only a matter of time. In the feature, “Supply lines” (p. 48), Eavan Moore traces the progress these energy commodities are making on their route to world markets. Inside our special report on Brazil, Antoine Dion-Ortega, with his story “On the tip of the iceberg” (p. 63), mines the words of Ernest Hemingway to help define the nature of Brazil’s mining industry, which has vast potential and plenty of idiosyncrasies. We discover what Canadian companies have learned of both the opportunities and limits of working in that country. Finally, while miners cannot control all of the forces acting upon them, they can have an impact on downtime and reliability. How did Suncor boost production by 70 per cent without an equal outflow of cash? By applying the principles of continuous improvement, explains recently retired Suncor exec Raymond Floyd in our Q&A, “Big on lean” (p. 44). Whatever the principles behind the improvement, the challenge is in the execution, which is what we focus on in our Upfront section on maintenance. Soon enough we will be back in Toronto for CIM 2013 to tackle all of these topics and more. We look forward to seeing you there and re-energizing the conversation. Ryan Bergen, Editor-in-chief editor@cim.org @Ryan_at_CIM_Mag

Section editors Features: Ryan Bergen, rbergen@cim.org News and Upfront: Peter Braul, pbraul@cim.org Columns, CIM Community, Histories and Technical Section:

Dinah Zeldin, dzeldin@cim.org Herb Mathisen, hmathisen@cim.org Copy editor / Communications coordinator

Zoë Koulouris, zkoulouris@cim.org Web editor Nathan Hall, nhall@cim.org Editorial intern Maria Olaguera, molaguera@cim.org Contributors Correy Baldwin, Peter Diekmeyer, Antoine Dion-Ortega, Bruno Dubois, Ian Ewing, Greg Gosson, Virginia Heffernan, Alana Kennedy, Krystyna Lagowski, Alexandra Lopez-Pacheco, Dave Mackintosh, Brendan Marshall, Eavan Moore, Lars Olthafer, Anna Reitman, Ziad Saab, Katie Slipp, Antony Strickland, Carlos Vilhena, Graham Wood Translations SDL Published 9 times a year by the Canadian Institute of Mining, Metallurgy and Petroleum 1250 – 3500 de Maisonneuve Blvd. West Westmount, QC, H3Z 3C1 Tel.: 514.939.2710; Fax: 514.939.2714 www.cim.org; Email: magazine@cim.org Subscriptions Included in CIM membership ($170.00); Non-members (Canada), $220.00/yr (PE, MB, SK, AB, NT, NU, YT add $11.00 GST, BC add $26.40 HST, ON, NB, NL add $28.60 HST, QC add $32.95 GST + PST, NS add $33.00 HST) Non-Members USA and International: US$240.00/year. Single copies, $25.00. Advertising Sales Dovetail Communications Inc. 30 East Beaver Creek Rd., Ste. 202 Richmond Hill, Ontario L4B 1J2 Tel.: 905.886.6640; Fax: 905.886.6615; www.dvtail.com National Account Executives 905.886.6641 Janet Jeffery, jjeffery@dvtail.com, ext. 329 Neal Young, nyoung@dvtail.com, ext. 325

This issue’s cover Designed by Peter Braul and Bruno Dubois Layout and design by Clò Communications Inc. www.clocommunications.com

errata Base metal alchemy In “Deeper understanding” (p. 61, February 2013), the article states that the Reed Lake discovery in Manitoba was a nickel deposit. In fact, VMS Ventures discovered copper. We regret the error. 6 | CIM Magazine | Vol. 8, No. 2

Copyright©2013. All rights reserved. ISSN 1718-4177. Publications Mail No. 09786. Postage paid at CPA Saint-Laurent, QC. Dépôt légal: Bibliothèque nationale du Québec. The Institute, as a body, is not responsible for statements made or opinions advanced either in articles or in any discussion appearing in its publications.

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president’s notes | mot du président

CIM focused on today’s challenges The mining industry has been rocked recently by massive asset write-downs and major declines in profit at some of its largest companies. So how does the mining industry improve its performance going forward and avoid these pitfalls? Last November, Deloitte published its fifth annual mining report, which tracks industry trends and identifies the pressing issues facing the global mining sector, as well as responses companies can adopt. I highlight the following: • Higher costs: zero in on cost drivers, automate and improve asset efficiency. • Capital projects: make disciplined investment decisions through project rationalization and improved capital efficiency. • M&A activity: engage in more comprehensive due diligence to assess potential partners and plan integration in advance. • Resource nationalism: work to strengthen relationships with national governments, diversify commodity mix and geographic areas of focus, and demonstrate the industry’s value to local governments and citizens.

• Responsible behaviour: set a higher standard for behaviour by embedding sustainability into the approach to capital projects, as well as into the negotiations with local stakeholders. Many would say that these are simply common sense, back-to-basics approaches for addressing the challenges before us. Strong focused action is required, however. CIM, through its position as the premier technical society for mining industry professionals, is ideally placed to support both our corporate and individual members as they navigate these turbulent times. Every one of the challenges cited above is being addressed by CIM, either through the societies and branches, technical meetings, courses or publications. A recent example is the establishment of the CIM-supported Global Mining Standards and Guidelines Group, bringing together some 80 companies and major equipment manufacturers to establish standards that cover diverse areas, including asset management and operations; onboard data and access; safety and risk management; and underground mining. All of us at CIM must ensure that the institute continues to focus on today’s challenges. Often shareholders and the financial press look to CEOs to provide some miraculous cure to industry challenges, however, experience has shown that mining professionals – who are the backbone of the industry – have a significant role to play. CIM is here to ensure they do.

Terence Bowles, CIM President

L’ICM se concentre sur les défis d’aujourd’hui L’industrie minière a récemment été ébranlée par une dépréciation massive de son actif et des baisses de profits substantielles de certaines de ses plus grandes sociétés. Comment, alors, l’industrie minière peut-elle améliorer son rendement pour l’avenir et éviter de tomber dans ces pièges? En novembre dernier, Deloitte a publié son cinquième rapport annuel sur le secteur minier, qui fait le suivi des tendances dans l’industrie minière mondiale et dégage les défis immédiats qu’elle devra relever ainsi que des mesures que les sociétés peuvent prendre. J’attire votre attention sur les points suivants : • Coûts accrus : Se concentrer sur les facteurs de coût; automatiser et améliorer le rendement de l’actif. • Projets d’investissement : Prendre des décisions disciplinées en matière d’investissements, par la rationalisation des projets et une productivité du capital accrue. • Fusions et acquisitions : Procéder à des vérifications préalables plus exhaustives lorsqu’on évalue des partenaires potentiels et planifier d’avance l’intégration. • Nationalisme des ressources : Travailler à renforcer les relations avec les gouvernements du pays; diversifier l’assortiment de marchandises et les régions géographiques choisies; et faire la démonstration de la valeur de l’industrie aux gouvernements locaux et aux citoyens. • Comportement responsable : Hausser la barre en matière de comportements en intégrant la durabilité dans la façon d’approcher les projets d’investissements ainsi que dans les négociations avec les acteurs locaux. 8 | CIM Magazine | Vol. 8, No. 2

Bon nombre dirait que ces approches relèvent du simple bon sens, qu’elles constituent un retour aux sources. Mais une action vigoureuse et ciblée est essentielle. L’ICM, en tant que société technique de première importance pour les professionnels de l’industrie minière, est dans une position idéale pour appuyer ses membres, entreprises comme particuliers, en ces temps houleux. L’ICM s’occupe de chacun des défis mentionnés ci-dessous, par l’intermédiaire de ses sociétés et de ses divisions, de réunions techniques, de cours ou de publications. Le nouveau groupe sur les normes et les directives mondiales pour l’exploitation minière, supporté par l’ICM, en est un exemple. Il regroupe quelque 80 de sociétés et de grands fabricants d’équipement chargés d’établir des normes couvrant divers domaines, dont la gestion de l’actif et l’exploitation; les données de bord et l’accès à celles-ci; la sécurité et la gestion des risques; et l’exploitation minière souterraine. À l’ICM, nous devons tous veiller à ce que l’Institut continue de se concentrer sur les défis actuels. Souvent, les actionnaires et les journalistes du domaine financier attendent des chefs de direction quelque remède miracle aux problèmes de l’industrie. Cependant, nous savons par expérience que les professionnels du secteur minier, qui sont l’épine dorsale de l’industrie, ont un rôle significatif à jouer. La mission de l’ICM est de veiller à ce qu’ils s’acquittent de cette fonction.

Terence Bowles, Président de l’ICM

OF TOOLS THE TRADE

the best in new technology

Dialight has upped the energy efficiency of its eight-watt SafeSite RTO LED Area Light to 100 lumens per watt, providing even more potent low-maintenance lighting for hazardous locations. The solid-state LED lights were designed to take a beating in harsh environments. The lights have a five-year warranty and have been tested to stay at 70 per cent luminance for 100,000 hours, which translates to maintenance and replacement cost savings over conventional lights. “We’ve seen a lot of applications for this fixture on conveyor belts, draglines and crane lighting, or anything that’s going to have tons of vibration and impact,” says T.J. Struhs, strategic marketing manager. “You’re going to install it and forget about it.” The light saves energy too; it was designed to replace incandescent or fluorescent fixtures that use 75 watts. “It’s an 89 per cent energy savings,” Struhs says. Since the fixture is capable of running on DC power, it can operate underground where backup battery power is used. The light is certified for environments where flammable gasses, liquids or vapours are occasionally present, but other Dialight models are certified to operate in those locations permanently. 10 | CIM Magazine | Vol. 8, No. 2

◢ Metal detection, machine protection Eriez has released a new series of metal detectors to protect vital and expensive equipment like crushers and grinders from potentially destructive pieces of tramp metal. Installed upstream from these critical machines, the Model 1230 Metal Detector is attached to conveyor belts carrying coal and other minerals to protect them against damage from unwanted metal like bucket teeth. The detector lets magnetic and conductive ores such as magnetite and pyrite pass, while also ignoring metal splices that are used to repair conveyor belts. Customizable to most conveyor belt sizes, the largest detectors available are for belts 254 centimetres wide, with an aperture height of up to 101.6 centimetres. Eriez has also designed the Model 1230 detector to operate in outdoor environments. When a piece of tramp metal is detected, a marking system assists an operator in locating it on the belt. “The operator can stop the belt, remove the tramp metal, then restart the belt, minimizing the number of metal detector trips,” says John Klinge, product manager, metal detection.

Courtesy of Stevens Strategic Communications

◢ Low-maintenance lighting

Philippi-Hagenbuch has patented a variable volume technology on its HiVol Water Tanks, letting operators distribute the water load inside tanks fitted to their haul trucks by compartmentalizing the water in certain areas, says Josh Swank, vicepresident of sales and marketing. This loadbalancing is useful for trucks running on roads with steep grades. The HiVol Water Tanks have flat tops and square corners, as opposed to traditional cylindrical tanks, and are designed to minimize churning and to suppress dangerous side-to-side surges. The tanks also have front and rear doors, and since each internal baffle has a door, workers can efficiently and safely access the tanks to shovel out fines, for instance. By closing baffle doors, front-to-back water surges are also suppressed. HiVol Water Tanks can carry as much as 220,000 litres of water and are used primarily for dust suppression at mine sites. Swank points out that the tanks can also be used for fire suppression purposes, as they come with water cannons. The company holds an inventory of tanks for Caterpillar 789 haul trucks but also customizes tanks to a company’s fleet. “All options on our water tanks are completely customer-specific, even down to the drain,” says Swank.

Courtesy of Ironclad Marketing

Courtesy of SSPR

◢ Calm water on rough roads

OF TOOLS THE TRADE

the best in new technology

◢ Careful with cables An innovative and intelligent cable design on Atlas Copco’s Scooptram EST1030 may have untangled one of the biggest snags associated with electric underground loaders. Historically, electric loaders, which offer immediate energy and maintenance cost savings, have failed to catch on due to problems with the high tension put on the machines’ power cables, says Erik Svedlund, product manager of electric vehicles. “The cable is dragged and it’s stretched around corners and it’s going to get damaged,” he explains. “That’s costly and causes downtime.” Atlas Copco has come up with a solution that mimics fishing lines: constant low tension is maintained on the cable, without letting it go slack or to be stretched too tightly. “We looked into it and developed a totally new cable reel control system that actually reacts to what the machine is doing,” Svedlund said. This reduces cable wear and thus maintenance. Compared to their diesel counterparts, electric machines can help customers cut their energy costs by 40 per cent. Electric motors also reduce maintenance requirements and companies get underground ventilation savings when operating the emission-free machines. The EST1030 was released globally on February 1. Courtesy of Immersive Technologies

Herrenknecht AG is bringing its 30 years of tunnelling expertise to the mining game. The German company has applied pipejacking techniques to develop a Boxhole Boring Machine (BBM) that protects workers from falling rock hazards. The transportable and flexible boring machine is capable of drilling 1.1-metre-, 1.5-metre-, or 1.8-metre-diametre vertical or 30-degree inclined slot lines and shafts up to 60 metres long. The machine was designed with a crawler unit that moves the BBM to required locations underground with ease. Once set up, the BBM’s cutterhead is thrust upwards from the jacking frame and, after each metre of drilling occurs, a thrust pipe is added and attached inside the frame to continue boring the shaft. Crushed rock funnels down through the thrust pipes with workers safely operating the machine via remote control. BBM is useful for block caving applications and also for drilling ventilation shafts. “The big benefit of the machine is that the parts are proven,” says Silke Rockenstein, corporate communications team leader. “The only thing new is the product itself, the application of the machine and, of course, the mining market.” BBM has proven capable of drilling roughly one metre per hour when factoring in installation and demobilization times, or two metres per hour when conducting drilling exclusively, says Rockenstein.

Courtesy of Atlas Copco

Courtesy of Herrenknecht AG

◢ An exciting boring machine

◢ Value in the details Immersive Technologies has released a new underground coal mining simulation – an adaptation of the company’s UG360 hard rock mining platform. The CM360 has five separate coal mining equipment simulations available, including continuous miner, shuttle car, roof bolter, longwall and miner bolter equipment training. Accuracy and realism are key. During the simulation, a continuous miner operator can, for instance, signal a shuttle car driver by cap lamp to relay that it is safe to approach. Immersive Technologies has also developed virtual coal. “We can simulate the difference between coal and rock,” said Richard Beesley, a product manager, adding that a continuous miner will respond with realistic vibration and sounds according to the material it is cutting. Operator movements are tracked in the training simulation and a warning will sound – or a machine will shut down – if a worker gets too close to a machine. “It’s all about 12 | CIM Magazine | Vol. 8, No. 2

taking the miner through simulation and seeing how that correlates in the real world,” says Beesley. Analytics on operator performance are taken, and trainers can suggest improvements to increase workers’ safety and productivity, making mines more profitable. The company provides software updates to its customers to keep them relevant with changes in the industry and improvements with the product. Compiled by Herb Mathisen

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news | industry at a glance

Teck announced that it will leave coal in the ground this year to match production with market conditions.

Teck to take conservative tack Following record copper production in 2012, and an increase in overall coalproducing capacity, Teck Resource’s outlook for 2013 is optimistic but cautious.

In a February conference call to discuss year-end financial results with investors, CEO Don Lindsay confirmed the company would leave some coal in the ground in 2013 due to current prices. “Coal production guidance is in the range of 24 to 25 million tonnes, and

this is lower than our current productive capacity of 27 million tonnes, as we continue to match our production to market conditions,” he said. Coal prices were down 37 per cent in the fourth quarter of 2012 from that same period in 2011. Teck also produced a record 373,000 tonnes of copper last year – with 103,000 tonnes in the last quarter – but will see a decrease in production due primarily to declining ore grades. While Lindsay said the company preferred to stay the course, he did not close the door on a possible acquisition, particularly in either the copper or iron ore areas. With a healthy $3 billion in Teck’s coffers, Lindsay hinted that a few assets had recently become available and a deal could be made if the price was right. “Copper obviously is a priority for us and, with declining production for the next couple of years, it’s something that might fill the gap there,” he said. – Herb Mathisen

Attention and apprehension at PDAC Despite the doom and gloom surrounding the mineral exploration sector, the Prospectors & Developers Association of Canada’s (PDAC) annual convention attracted more than 30,000 delegates from around the world to Toronto from March 3 to 6. The event, attended by international government representatives, mining executives, students, geologists and investors, included more than 20 technical sessions and a variety of programs ranging from aboriginal engagement and consultation presentations to corporate social responsibility discussions and investor workshops. “Although a lot of people were smiling, and I did talk to quite a few people who did deals over the week – and I think that is a focal point for the convention – for the juniors sector and the grassroots exploration side of things, these are tough times in terms of raising capital,” said Ross Gallinger, PDAC executive director. During the current slowdown, Gallinger said PDAC will focus on helping companies retain highly qualified

14 | CIM Magazine | Vol. 8, No. 2

news | industry at a glance professionals in the exploration field and will work on ways for companies to access capital and reduce costs in order to stay afloat. The association, for instance, will devote concerted lobbying efforts to get the government to renew and extend the mineral exploration tax credit. As for next year’s convention, to be held in Toronto from March 2 to 5, 2014, Gallinger said broad pieces of the agenda are already being lined up, but planning is still in the early phase. “We haven’t looked that far ahead,” he said. “Of course, we have to revisit where the industry is in six months’ time.” – H.M.

Stricter mine rehabilitation rules expected in Quebec Making good on the Parti Québécois’ election promises, Quebec’s natural resources minister Martine Ouellet announced the government’s intention

to increase the financial guarantees required from mining companies early on to remediate the full mine site upon closure. Currently, companies are required to provide guarantees for 70 per cent of the clean-up costs for accumulation areas like tailings and waste rock piles over a 15-year period. However, that will soon change to 100 per cent of all rehabilitation costs within the first three years of operation, with 50 per cent due within 90 days of a site closure plan submission, and 25 per cent due each of the next two years. “What it means for a mining operation is it’s going to tie up capital earlier on in the process,” said Charles Kazaz, an environmental law specialist with Blake, Cassels & Graydon LLP. The regulations are not part of Quebec’s pending draft mining act, as the new closure rules require cabinet and not national assembly approval. Kazaz added these changes bring Quebec in line with other Canadian jurisdictions. – H.M.

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BHP Billiton CEO Marius Kloppers retires The game of musical chairs continues. This time it was BHP Billiton boss Marius Kloppers who announced on February 20 that he would step down as CEO of the world’s biggest mining company, effective May 10. Andrew Mackenzie, chief executive of BHP’s non-ferrous division, was named his successor. Mackenzie, 56, said Kloppers had persuaded him to join BHP five years ago. Kloppers has been with BHP for nearly 20 years and became the company’s CEO in October 2007, just before the onset of the global recession in 2008. “He drove new investments into next generation opportunities, including U.S. onshore gas and liquids, and created one of the most valuable companies in the world,” said chairman Jac Nasser in a statement. “He leaves BHP Billiton a safer and stronger company.”

news | industry at a glance yet,” said Anastasia Mishanina, a Severstal spokesperson. “It will take some time.” Severstal has pledged roughly $1.33 million to compensate the miners’ bereaved families. – H.M. Courtesy of Maya Gorham - MNDM

Kloppers recently set out to simplify BHP’s portfolio, divesting of non-core projects and focusing on long-life and low-cost assets, which included selling its diamond business to Harry Winston Diamond Corporation. BHP posted a US$4.23-billion profit in the second half of 2012, down 57.8 per cent yearon-year, citing lower commodity prices as a factor. Mackenzie has stated his intention to continue BHP’s focus on capital discipline. – H.M.

Coal mine blast kills 18 in Russia A methane explosion at Severstal’s Vorkutinskaya coal mine in Russia killed 18 miners on the morning of February 11. According to the company, three other workers were injured in the blast – with one requiring medical evacuation to Moscow. The Russian government’s department of emergencies announced that 241 workers were successfully evacuated from the mine, located north of the Arctic Circle near the town of Vorkuta. The mine reopened on February 15, but operations at the affected mine face in the south section were suspended with its tunnels sealed to allow the government to investigate the cause of the blast. “We cannot tell what may have caused the blast right now because the investigation of the explosion circumstances is not over

18 | CIM Magazine | Vol. 8, No. 2

Michael Gravelle, Ontario’s new minister of northern development and mines

Gravelle back as Ontario mining minister Michael Gravelle is once again Ontario’s minister of northern development and mines, after Premier Kathleen Wynne tapped him to replace the retiring Rick Bartolucci. Gravelle, a Thunder Bay member of the provincial parliament, who held the cabinet post from 2007 to 2011,

said the implementation of Ontario’s mine modernization act will be one of his main focuses early on. The act mandates early consultation between First Nations and mining companies, and Gravelle said it provides clear and progressive guidance on aboriginal consultation. One of the first calls Gravelle made after his appointment was to Joseph Carrabba, CEO of Cliffs Natural Resources, in which they discussed infrastructure initiatives related to Cliffs’ proposed Ring of Fire chromite project. Cliffs has called for cooperation from various levels of government to develop access to the area. “There is, I think, a role for us to play, but may I say there is a very important role for the federal government to play as well,” Gravelle said, adding he is encouraged that the Harper government has assigned Tony Clement to provide leadership on the – H.M. Ring of Fire file.

Bécancour plant project axed Citing weak market conditions for titanium, along with its need to curb costs, Rio Tinto Iron and Titanium (RTIT) announced in early February that it would halt a prefeasibility study looking at, among other things, building a multi-billion-dollar processing plant in Bécancour, Quebec. The proposed plant was part of RTIT’s TiO4 project, designed to grow the company’s global titanium mining and processing operations. While prefeasibility studies related to TiO4 were suspended for operations in Canada and Madagascar, a planned mine expansion in South Africa will proceed, as will exploration work in Mozambique. Bryan Tucker, spokesperson for Rio Tinto, said the decision will not affect the company’s TiO2050 project. This $800-million investment over five years in Quebec, announced in 2011, will expand the capacity of RTIT’s metallurgical plant at Sorel-Tracy and extend the ilmenite mine life at Havre-Saint-Pierre to 2050. “It is important to note that the decision has nothing to do with the recent organizational changes,” added Tucker. Former CEO Tom Albanese was replaced by Sam Walsh in January. – H.M.

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Labour pains South African miners get creative in the face of an uncertain future by Anna Reitman The mood was cautious at February’s annual African Mining Indaba. The event, trumpeted as one of the world’s largest mining investment conferences, was held in Cape Town, South Africa, a country marred by recent unrest in the mining sector. In the aftermath of the violence at Lonmin’s Marikana mine last August, South African equity market losses intensified, with Standard Chartered Bank reporting US$858.8 million in outflows in September and October due to low economic growth and the impacts from strikes. Hardest hit at the moment are platinum and gold producers, with Anglo American Platinum (Amplats) reporting an eight per cent drop in equivalent refined platinum

production year-on-year, mainly due to lost production relating to labour issues. Johnson Matthey, a platinum group metals (PGM) manufacturer and Amplats’ refining and marketing agent, reported in its interim statement for the period of October 1, 2012 to January 29, 2013, that sales in its precious metal products division fell seven per cent to US$192 million during that time. According to a company statement, lower production volumes, particularly from Amplats, more than offset the benefit of slightly higher average PGM prices. Platinum, of which South Africa is by far the world’s largest producer, has taken a wild ride since August 2012, jumping from around US$1,400 per ounce to over US$1,700 after the violence

at Lonmin, then tumbling to just over US$1,500 by December. Now, prices are being driven more by demand expectations, said Robin Bhar, head of metals research at Societe Generale. Platinum rose upwards again to midUS$1,700 in early February until sentiment on economic growth soured around the world. By early March, spot platinum was at mid-US$1,500. At the Indaba, keynote speaker David Humphreys, principal at DaiEcon Advisors, told delegates that resourcerich countries are increasingly asking how to leverage minerals to further their own national economic development, even as the investment community is becoming more risk averse and the mining industry more cost-conscious.

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20 | CIM Magazine | Vol. 8, No. 2

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Speaking to CIM Magazine, Humphreys pointed out that while labour issues in South Africa may be holding the world’s attention, rising labour costs, political uncertainty, power shortages and bureaucratic burdens existed long before Marikana erupted. “South Africa has been lagging behind the curve in terms of attracting investment interest during the years of peak prices for some years now,” he said. Miners and developers across the country are tackling these problems in a variety of ways. For instance, Gold Fields restructured by spinning out mature assets into a new company, Sibanye Gold. “Given the labour and political issues that have been making headlines, there is going to be a segment of Gold Fields investors who don’t want South Africa exposure,” said James Wellsted, head of corporate affairs at Sibanye. The company will also consider courting Asian investors. CEO Neal Froneman arrives from Gold One, a miner that saw 90 per cent of its shares taken up by a Chinese consortium. “Big state shareholders from China have a long-term view towards investment and could be beneficial in terms of mitigating political risk,” Wellsted explained. Outside of gold and platinum, other companies are finding themselves caught in the crossfire. DiamondCorp is developing the Lace mine in Free State. The project contains 14 million carats of diamonds in kimberlite and tailings, and DiamondCorp expects to produce from tailings in the second half of this year. “We are operating at shallow depths using mechanized mining so we have not had the labour problems that others have suffered, but certainly it had made putting our financing package together a protracted affair because investors had concerns,” said DiamondCorp CEO Paul Loudon. The company benefited from off-take agreements with jeweller Tiffany and support from state-backed Industrial Development Corporation that contributed US$24 million of its total US$34.8 million in financing, Loudon added. These kinds of initiatives seem to back up government statements in South Africa’s budget: the best way to increase tax revenues is to “grow the economy more rapidly.” But with a revenue shortfall of US$1.8 billion due to production interruptions from strikes and low commodity prices, observers are questioning how the country will continue to deliver on its national development plan, which aims to eliminate poverty and reduce inequality. In its South Africa - Deficit Surprise report, Standard Chartered Bank said fears about a radical shift in government economic policy look overdone, adding conservative spending plans are a hallmark of the budget: “While tax reviews were promised, the absence of any headline-grabbing measures on mining taxation, despite expectations to the contrary, is also notable.” CIM March/April 2013 | 21

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Feeling the squeeze Oil sands exporters search for pipeline alternatives

Courtesy of CAPP

by Herb Mathisen

Vancouver to: Japan - 4,300 miles Taiwan - 5,600 miles S. Korea - 4,600 miles China - 5,100 miles San Francisco - 800 miles Los Angeles - 1,100 miles

The pipeline network, including both existing and proposed lines, linking western Canadian oil with Canada and the U.S.

Oil sands producers are losing $27 million each day due to steep discounts on Albertan oil, according to a recent report from Deloitte. This discount is due largely to the steady and growing supply of American and Albertan crude oil that is being stranded in Canada’s biggest export market, the U.S. Midwest, particularly at a major pipeline hub in Cushing, Oklahoma. As a result, oil sands companies are looking at creative options to get their oil to new markets. And while the Keystone XL and Northern Gateway pipelines, designed to connect Canadian oil with the U.S. Gulf Coast and Asian markets, work through political bottleneck, new projects to move oil to thirsty markets within Canada are gaining steam. In 2011, eastern Canadian refineries imported just over 300,000 barrels per day (bpd) from Western Canada but roughly 600,000 bpd from foreign markets. This foreign oil is more expensive 22 | CIM Magazine | Vol. 8, No. 2

than western Canadian crude due largely to its ability to access world markets. As a result, flowing Albertan oil eastward would be a win for both producers and refiners. Travis Davies, spokesperson for the Canadian Association of Petroleum Producers, said Canadian pipeline options could provide some of the quickest solutions for Alberta’s pricing problems. For instance, the Enbridge Line 9 reversal project could begin as soon as mid2013, adding more than 200,000 bpd to refineries east of Sarnia, Ontario. And TransCanada’s plan to convert its natural gas Canadian Mainline to start moving oil to Montreal, and possibly by barge to Canada’s biggest refinery in Saint John, New Brunswick, is gaining momentum. This project is attractive, said Davies, because most of the infrastructure is already in the ground, and with natural gas production rising in the northeastern United States, demand for

western Canadian natural gas in that market is shrinking. Grady Semmens, a spokesperson for TransCanada, said their project is technically and economically feasible, adding it could transport between 500,000 to one million bpd to Canadian refineries. In comparison, without any unforeseen regulatory delays, the Northern Gateway pipeline would flow roughly 525,000 bpd by 2017 and Keystone XL as much as 830,000 by 2015. “We are having discussions with potential customers and we are pleased with the interest that has been expressed to date,” Semmens said. “We will have to turn that interest into long-term commercial contracts before we could spend the billions [that are] required to make this project a reality.” Semmens noted the earliest the pipeline could begin moving oil is 2017, and added the location of where the pipeline would end has not yet been determined.

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Meanwhile, both CN and Canadian Pacific (CP) have expanded their oil-shipping potential to meet industry demand. Since CN began looking at transporting heavy crude, light crude and bitumen from Western Canada in 2010, it has scaled up its shipments from 5,000 carloads in 2011, to 30,000 in 2012, with hopes to double that to 60,000 carloads – or more than 90,000 bpd – in 2013. A carload carries 550 barrels of heavy crude or 650 barrels of light crude. CP has already upped its overall capacity to 70,000 carloads for 2013, and Ed Greenberg, CP spokesperson, said the rail giant could double or triple that volume in the coming years. “Ultimately though, the market will be developed by the energy industry,” he said. Mark Hallman, a CN spokesperson, said rail would not replace pipelines but supplement them. CN’s network gives companies access to new markets not currently served by pipelines. “Once you are on the rail network, you are not tied to a specific market,” he said. “You can ship to the most profitable market of the day.” Southern Pacific Resource Corp., a Calgary-based junior, has done just that, signing a five-year deal with CN to ship diluted bitumen from its STP-McKay Thermal project, located 45 kilometres north of Fort McMurray, south to the Gulf of Mexico. Foregoing the traditional pipeline method gives the company access to more competitive markets, meaning it can get a better price for its product. Oil sands production is expected to continue growing, and Geoff Hill, Deloitte’s oil and gas sector leader, insists producers must convince average Canadians that improving transportation infrastructure is in the national interest, granted it is done in a safe and environmentally responsible way. The Deloitte report, Gaining ground in the sands 2013, estimates a potential for $2.1 trillion in economic benefits – including $783 billion in taxes paid – from the oil sands to Canada over the next 25 years. “It’s almost impossible to think of another source of income that would replace that for Canada,” said Hill. CIM

The discount explained The majority of crude oil and bitumen exports from Western Canada are sent to the U.S. Midwest through thousands of kilometres of pipeline. This supply has recently been supplemented by surging production in North Dakota’s Bakken region, which has also eaten up some of Western Canada’s pipeline capacity. The resulting oil glut at a major pipeline hub in Cushing, Oklahoma, means Alberta has to sell its oil at a cheaper price. According to the U.S. Energy Information Association, the West Texas Intermediate (WTI) benchmark sold out of Cushing had been trading on par with the European Brent benchmark as recently as two years ago, but dropped significantly since the Keystone Phase Two pipeline started sending more oil to Cushing in early 2011. This spread had expanded to more than $20 per barrel in February 2013. Western Canadian oil sells at a further discount to WTI due in part to its inability to access other markets. In December, a barrel of Western Canadian Select, a heavy conventional and bitumen blend, sold for $40 less than WTI. Other products, like Syncrude’s upgraded light sweet crude, did better, but still sold at a $2.52 per barrel discount to WTI in 2012. Siren Fisekci, vice-president of investor relations with Canadian Oil Sands, a 36.74 per-cent shareholder in the Syncrude joint venture project, expects this gap will widen to $5 per barrel in 2013. “Given the tight pipeline capacity and the growth in supply, we are seeing more volatility in our pricing,” she said. “It would be very difficult to see this spread reducing without major pipeline announcements,” added Deloitte’s Geoff Hill.

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March/April 2013 | 23

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Miners shrug off CN project suspension Iron ore companies to forge ahead without new rail capacity

Iron ore miners say it is business as usual following CN’s suspension of a feasibility study on a $5-billion project to expand rail and ore-handling capacity in the resource-rich Labrador Trough region. Last August, CN, the Caisse de dépôt et de placement du Québec, and six mining companies agreed to begin the study in order to assess projected costs and engineering parameters for building a proposed 550-kilometre multi-user rail network to haul iron ore from the Labrador Trough to the port town of Sept-Îles, Quebec. It also evaluated the feasibility of building a handling and storage facility with an annual capacity of 125 million tonnes in Sept-Îles. Currently, the Quebec North Shore and Labrador Railway, owned and operated by the Iron Ore Company of Canada, is the common carrier for two mines run by Cliffs Natural Resources, as well as the Labrador Iron Mines Holdings project. ArcelorMittal uses its own railroad that connects its Mont Wright operations to Port Cartier. Despite reported progress, in February, CN cited existing market realities

Courtesy of CN

by Peter Diekmeyer

Iron ore miners in the Labrador Trough will, for now, rely on existing transportation options after CN shelved plans to look at constructing a $5-billion, 550-km rail line through the region.

and “anticipated delays with mine development projects in and around the Labrador Trough,” as justification for its move. Conflicting construction schedules and the diverging needs of the projects made it hard for the rail carrier to

ACHIEVEMENTS BHP Billiton picks up gold safety award BHP Billiton Canada received the Safe Day Everyday Gold Award for attaining more than 391,000 person hours without a lost workday incident in 2011. The award was presented by the Association for Mineral Exploration British Columbia (AME BC) at Mineral Exploration Roundup in January. Winners of the Safe Day Everyday Awards were honoured at the event as well. AME BC, together with the Prospectors & Developers Association of Canada (PDAC), recognized 52 organizations in Canadian mineral exploration activities, which succeeded in achieving a full year without a lost workday. “We are very pleased to recognize companies, government geological surveys, and independent contractors that are successful in achieving a safe day, every day in their operations,” said Gavin C. Dirom, AME BC’s president and CEO. Award recipients included: Anglo American Exploration (Canada) Ltd., Boart Longyear, Cornerstone Resources Inc., New Millennium Iron Corp., Rio Tinto Exploration Canada Inc., Xstrata Copper and Yukon Zinc Corp.

24 | CIM Magazine | Vol. 8, No. 2

round up the iron ore volumes needed to support the new capacity. Adriana Resources and Century Iron Mines did not sign on to be part of the study, which also played a role in CN’s decision. The mining companies involved in the study were Cliffs Natural Resources, Champion Iron Mines, Labrador Iron Mines Holdings, New Millennium Iron Corp., Cap-Ex Ventures Ltd. and Alderon Iron Ore Corp. For Labrador Iron Mines Holdings, the impact will be small. “Our facility has been producing for some time, and we thus have access to existing transport solutions,” said Keren Yun, vicepresident of investor relations and communications. “While we agreed to participate, it was only at minimal cost, to see what alternatives could be made available. However, the projected completion date for the new line was only in 2017 or 2018, which reduced its potential value to us.” Ian Chadsey, a spokesperson for Alderon, said his company will move ahead using existing transportation

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infrastructure. Alderon is not slated to begin production at its Kami project near Labrador City until 2016, which gives it flexibility with planning. Chadsey said the company was not reliant on the proposed development, as the Quebec North Shore and Labrador Railway covers projected needs. “We are located close to an existing rail line, which currently has more than enough capacity, so we should be okay,” he pointed out. New Millennium Iron issued a statement noting that while the projected rail solution was a possible option to transport production from its Taconite project to the coast, its base case is to transport slurry concentrate through a ferroduct. “This suspension will have no impact,” said Dean Journeaux, the company’s president and CEO. The Taconite project is currently in the feasibility stage. The Labrador Trough, which straddles the Quebec-Newfoundland and Labrador border south of Ungava Bay for 1,600 kilometres, has hosted iron ore mining operations for almost 60 years. However, the region has been attracting increased attention, as growth in emerging economies drives up demand. While development opportunities abound, economic times are tough, making investors hesitant about fronting the considerable dollars needed to get new operations off the ground. Their reticence is exacerbated by the region’s relative isolation from existing infrastructure, particularly the port facilities required to send production off to major markets. The rail feasibility project is off the table for now, but it is unclear for how long. When the initiative was announced last August, the price of iron ore, which is driven by demand from Chinese markets, languished below US$90 per dry metric tonne. However, prices bounced back up to more than

$150 per tonne in February, driven by shrinking Chinese inventories that reportedly hit a three-year low. Shortly after CN suspended its study, Champion

Iron Mines announced it would refocus its efforts on building support for a rail line south from its Fire Lake North property to Sept-Îles. CIM

March/April 2013 | 25

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Information to bring investment Northern Vancouver Island communities use geoscience project to promote local resources

A new survey project from Geoscience BC, funded in part by northern Vancouver Island communities, is aimed at boosting investments in the region’s once-flourishing mining industry. Geoscience BC, a nonprofit organization devoted to encouraging exploration investment in the province, recently released high-resolution aeromagnetic survey results for 4,204 square kilometres of the northwestern portion of Vancouver Island. The airborne survey was the first of two datasets Geoscience BC will make public as part of the Northern Vancouver Island Exploration Geoscience project. Findings from an extensive geochemical survey are expected to be released in April, according to ’Lyn Anglin, the organization’s Last summer, Geoscience BC conducted an extensive moss-mat and stream sediments geochemical survey on northern CEO. “When we looked at the Vancouver Island and flew an aerial survey over 4,204 square kilometres of the northwestern portion of the island. The statistics, Vancouver Island was aeromagnetic results were released in February, while the geochemical results are expected sometime in April. underrepresented in terms of exploration expenditures when you comquarry mining operations and Hills- residents. “First Nations in the area parpare it to other parts of B.C.,” she said. ticularly are looking for some environborough Resources’ Quinsam coal In 2010, Anglin met Port Hardy mine. The Myra Falls copper-zinc mentally and culturally sustainable Mayor Bev Parnham and some of the mine, located southwest of Campbell economic options going into the town’s councillors over lunch at the River, has been operating since 1966 future,” he said. Association of Vancouver Island and and, not so long ago, BHP’s Island The aeromagnetic data was collected Copper mine was a major economic by Laval, Quebec’s Geo Data Solutions, Coastal Communities conference in last summer at an elevation of 80 Powell River. The town council became engine in the region. The open pit mine produced more than 1.3 million metres, and a line-spacing of 250 interested in collaborating with Geoscience BC to renew mining interest in tonnes of copper over 24 years, clos- metres. This new survey provides ing in 1995. “We know the benefits of higher-resolution data, compared with the region. Parnham sits on the Island mines to communities,” said Parnham. previously conducted surveys from Coastal Economic Trust (ICET) board, a “We’ve lived it. We have a legacy of 1962 and 1971 that used an 805-metre group that invests in economic opporthat and we wanted to get that mes- line-spacing. Prior to this work, Geotunities on the north island, and it science BC had reanalyzed 480 till sampitched in $400,000 for the project, sage out there.” ples taken in the 1990s to look for 53 Dallas Smith, chairman of the Nanwith Geoscience BC adding $530,000. “We really wanted to try to dispel wakolas Council Society, which directly different elements using an ultratrace any kind of perception that we’re not represents 10 of the 16 First Nations aqua-regia digestion ICP mass specopen for business here on Vancouver with land in the survey area, said with trometry package. This reanalysis projIsland,” said Parnham. The sparsely- the forestry and fishing industries ect, Anglin said, sparked some claimstaking activity in the area. Geochemists populated northern part of the island declining, a reinvigorated mining sector would provide opportunities for also took more than 700 new moss-mat is home to forestry and fishing sectors, 26 | CIM Magazine | Vol. 8, No. 2

Courtesy of Geoscience BC

by Herb Mathisen

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and stream sediments samples to analyze for 51 metals. Combined, the new data could make it easier for prospective explorers to pinpoint anomalies in an area known for its thick brush and unforgiving terrain. Del Ferguson, earth sciences instructor at Vancouver Island University and president of Aztec Geoscience, said the island boasts several interesting exploration targets, including massive sulphides and copper porphyry, coal, and gold and magnetite-rich skarn deposits. NorthIsle Copper and Gold is a junior exploration company with claims near the old Island Copper mine, including its Hushamu site with an Indicated Resource of 1.4 billion

pounds of copper, 2.8 million ounces of gold and 65.7 million pounds of molybdenum. CEO Jack McClintock said NorthIsle has already flown its own aeromagnetic survey but added the company that previously owned the properties conducted geochemical stream samples in the early 1970s that only looked for “copper, molybdenum, lead, zinc and silver” anomalies. He is interested to see what other elements the new geochemical survey will reveal. McClintock said Geoscience BC’s project has brought attention to the area and to his company. “At least here in B.C., there has always been the perception on Vancouver Island that it’s a tough place to explore,” he said. “But

the fact that even the municipalities are involved in this gives people the correct understanding that the north end of Vancouver Island is quite different from the south in that it’s a resource-based economy.” Geoscience BC will soon announce a new survey initiative in B.C.’s Interior, but if the Vancouver Island data is wellreceived, the organization could return to the island. While Parnham admitted it is tough to measure the immediate success of the project, Anglin knows the true barometer will be whether it converts interest into investment. “The real test of how influential it’s been is if we do see more money being spent on the island in the next couple of years,” she said. CIM

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March/April 2013 | 27

M A C E C O N O M I C C O M M E N TA R Y

Untapped potential: mining and natural gas BY BRENDAN MARSHALL

28 | CIM Magazine | Vol. 8, No. 2

Source: CGA, Kent Group, Statistics Canada 326-0009

n 2010, energy inputs (fuel ciate this price increase, and electricity) cost Canaconsider that one MAC dian miners $2.2 billion – member consumes an averthe third most expensive proage of 2.2 million litres of duction cost after materials and diesel each month at a sinwages. Frequent dependency gle operation. On a strict on diesel due to limited or nonprice comparison, given existent energy infrastructure in some 36,500 Btu per litre of remote locations contributed diesel, the energy cost savsignificantly to this cost. ings for this one operation This dependency on diesel switching to natural gas leaves miners with little flexiwould exceed $2.5 million bility to reduce greenhouse a month (more than $30 gas (GHG) emissions. Amid million annually) at 2012 these concerns, recent develaverage prices. Given that opments in natural gas have natural gas prices are subcaught the attention of minject to volatility – such as ers. Technological advances in the 2013 winter price gas extraction have boosted spikes in the northeastern supply through new finds and U.S. – questions over the have increased access to viability of switching need known deposits. Due to marfurther detailed analysis. ket developments in North Currently, miners face America, gas prices remain similar challenges in low on average. And the fuel Natural gas prices have remained stable, while diesel prices have increased. accessing natural gas as has a smaller GHG footprint they do with other dieselthan diesel. This positions natural gas well to assist miners in replacing alternatives. In remote areas, particularly in the reducing both their energy costs and carbon emissions. North, no direct transmission or distribution pipeline netWith anticipated emissions reduction regulations from the work exists, and building one would be a capital-intensive federal government, along with several provincial emissions investment. Maritime transportation of natural gas is also programs and, most recently, the advent of the Western Climate expensive as it requires ships, and unloading and storage Initiative, incentives to reduce carbon emissions are increasing. facilities. It is a compounded challenge since very little port Diesel releases roughly 0.9 tonnes of carbon dioxide (CO2) per infrastructure currently exists and all-weather road systems megawatt hour (MwH) of electricity generated, whereas in pro- are scarce. This leaves many mining operations isolated, with ducing the same amount of electricity, natural gas emits 0.6 sunk costs in diesel generation and storage facilities. tonnes on a single cycle unit and 0.4 tonnes on a combined Natural gas technologies, however, continue to improve, cycle generator. Depending on the market value of a trading incrementally enhancing the fuel’s usability for miners. Some permit, or the price per tonne of a carbon tax, the potential to natural gas generation technologies have been designed to decrease emissions and to increase compliance-related cost sav- retrofit existing diesel systems, making a fuel switch less ings is significant. capital-intensive. From an end-use perspective, progress has In the North American market, the price of natural gas closed been made towards the development of liquid natural gas at around $4 per million British thermal units (MMBtu) in 2012 engines for heavy vehicles. In June 2012, Westport Innovations – the same rate it opened at in 2000. The fuel had an average Inc., a global leader in natural gas engines, signed agreements 2012 price of US$2.75 per MMBtu based on Henry Hub, the with Caterpillar Inc. to co-develop natural gas technology for offpricing point for natural gas futures traded on the New York Mer- road equipment, including mining trucks (see Efficient injection, cantile Exchange. The price of diesel, on the other hand, more p. 51). Cat 793, 795 and 797 trucks, equipped to run on natural than doubled from $16 to $34 per MMBtu over the same period gas, are expected to roll off the assembly line in 2017. Efficiency and had an average 2012 price of $34.88 per MMBtu. To appre- gains in combined cycle technology have improved significantly

columns

Brendan Marshall is director of economic affairs at MAC. He works to advance the mining industry’s interests and understanding of key economic issues such as taxation, international trade and investment, transportation, energy and climate change, and innovation.

ACHIEVEMENTS Endress+Hauser turns 60 Endress+Hauser celebrates its 60th anniversary this year. The 10,000-strong Swiss company, whose operations focus on measurement and automation engineering, created 500 jobs worldwide in 2012 and plans to continue to expand. Meeting clients’ needs and requirements is the company’s most important objective. “Our strength is that we are entirely driven by the market,” said CEO Klaus Endress. “We learn from our customers and strive to create sustained and outstanding benefits and value for them.” Endress+Hauser’s network consists of 40 sales centres in 12 countries.

Company founder Georg H. Endress (centre, back row) with workers in Lörrach, Germany, 1955

Photo credit: Endress+Hauser

over the last decade, rendering greater generation output per volume of fuel input. Increasing interest in tapping into the potential of natural gas is likely to continue fuelling innovation, the developments from which will help miners overcome existing hurdles. Although uptake has been limited to date, opportunities where miners can harness these advantages are being explored and implemented where possible. To aid in this process, MAC is currently engaged in an exploratory dialogue with the Canadian Gas Association. Progress already made in the area of heavy mining vehicles demonstrates a trend that is likely to continue as market demand for natural gas solutions grows. While no home-run scenario exists now, miners are keeping their eyes on the ball. CIM

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EYE ON BUSINESS

A primer on NEB Act amendments BY LARS OLTHAFER AND KATIE SLIPP

any changes occurred to the environmental assessment and regulatory review processes for federally regulated energy development in 2012. The recently passed Jobs, Growth and Long-Term Prosperity Act addresses the federal government’s stated frustration over regulatory inefficiencies and codifies Ottawa’s commitment to streamlining reviews. The changes are intended to stimulate investment in Canadian natural resources by bringing more clarity to the review process. Among other things, the Jobs, Growth and Long-Term Prosperity Act amends the National Energy Board (NEB) Act to alter NEB’s powers over interprovincial and international energy development and to make the review process more predictable and timely, while ensuring continued environmental protection. Many of these amendments will impact NEB-regulated entities. The following four examples may be of interest to the mining industry.

Certificates of public convenience and necessity now federal cabinet’s domain The federal cabinet now has the power either to approve or deny certificates of public convenience and necessity, which authorize the construction and operation of pipelines. Prior to the amendments, the cabinet had the final authority to deny an application for a certificate that had been approved by NEB but no authority to approve an application that had been denied by NEB. NEB’s role in the certificate process is now limited to carrying out the environmental assessment and the regulatory review processes, and to recommending terms and conditions and a positive or negative disposition to the minister. Whereas NEB’s denial of a certificate was formerly the final word, the expansion of cabinet powers and the narrowing of NEB powers suggest that government policy may become the primary driver behind certificate decisions.

Timelines set to prevent delays A primary reason for the passage of the Jobs, Growth and Long-Term Prosperity Act and the resulting amendments to the NEB Act was to prevent unwarranted delays of energy projects. To this end, NEB must now finish its assessment of, and reporting on, a certificate or an exemption order application within 15 months of receiving a complete application. After that, the cabinet has three months to make its decision. This puts the onus on project proponents to ensure that applications are both thorough and complete prior to filing. While timelines provide some certainty about the timing of decision-making, it is important for proponents to know 30 | CIM Magazine | Vol. 8, No. 2

that there are off-ramps from the process, which can put the timelines on hold, including exclusionary periods approved by the NEB chairperson and ministerial extensions. In this regard, legislated timelines are not absolute.

Criteria for obtaining export licences being revised NEB Act amendments include changes to the licensing of oil and gas exports. In its interim guidance document, NEB confirmed that public hearings are no longer mandatory for such applications and that the only relevant consideration is whether the quantity of oil or gas to be exported will exceed the surplus remaining after due allowance is made for reasonably foreseeable requirements for use in Canada. NEB recently issued its first export licence decision under the new regime, approving LNG Canada Development Inc.’s application for the export of liquefied natural gas. In this decision, NEB recognized that the export licence would not directly or indirectly authorize physical activities, such as construction, or result in potentially adverse environmental and social impacts that might be associated with those activities. Therefore, environmental and social factors did not need to be considered. NEB is currently reviewing its procedure for assessing export licence applications, and further requirements are expected to be put in place.

Non-compliance fines Administrative monetary penalties (AMP) are fines NEB may impose for non-compliance with the regulatory regime. They are intended to encourage compliance without imposing excessive punishment for wrongful activity. Although details of the activities that trigger AMPs and specific amounts will be the subjects of future regulation, maximum AMPs will range from $25,000 for individuals to $100,000 for corporations. The AMP amount will depend on the violator’s history, on the economic benefit associated with the violation, and on efforts at mitigation and co-operation after a violation has occurred. While the long-term impacts of NEB Act amendments are yet to be seen, it is expected that the changes will both encourage and expedite natural resource development under NEB jurisdiction, while helping to align the regulatory process with broader government policies. CIM Lars Olthafer is a partner and Katie Slipp is a senior associate in the regulatory and environmental practice group at Blake, Cassels & Graydon LLP. Olthafer and Slipp regularly advise and represent energy clients on regulatory and environmental compliance and approval processes, public and aboriginal consultation, and land rights acquisition and compensation, in the context of both provincially and federally regulated projects.

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S TA N D A R D S

Factors to consider when determining appropriate discount rate for project NPV BY GREG GOSSON AND GRAHAM WOOD

o find examples of industry consensus or approaches to particular issues and techniques, mining staff of the securities commissions in Canada will use technical reports filed on the system for electronic document analysis and retrieval (SEDAR), which were prepared by highly credible sources, including international consulting firms, well-known experts, and major mining companies. However, one assumption in which there appears to be no obvious consensus on SEDAR is the appropriate discount rate applied when calculating a project’s net present value (NPV). Discount rates are dependent on many project factors and characteristics, including the marketability of the commodity to be mined, the location of the project, the stage of development, and the size and capability of the project’s owner. While reports filed on SEDAR can be useful guidelines, it is important to ensure that the reports a company relies upon as sources for determining its project’s discount rate come from mining companies of a similar scale, stage of development, and with comparable characteristics. A company’s key consideration when selecting discount rates for a project is the rate of return that is likely to attract a major investor. Often the actual discount rate used by the company does not address the risks of the individual project. To begin, different discount rates should be applied to different commodities. For example, mixed base metal/precious metal projects, such as copper-gold, would be expected to attract higher discount rates than precious metal projects like silver-gold. Because precious metal projects encounter fewer barriers to sell their product, they should have a basic discount rate of six to eight per cent; base metal projects should have a 10 per cent discount rate; and industrial minerals or speciality metals with no purchase agreements in place and no clear marketing strategy should have an additional two to three per cent added. The jurisdiction of the project should also be reflected in the discount rate. For example, Chile- or Nevada-based projects would not typically attract additional discounts to their

MOVING ON UP New role for Golder’s Rodriguez Emmanuel Rodriguez was named the global chief information officer for Golder Associates Ltd. With more than 20 years of experience as a CIO, Rodriguez will oversee Golder’s information systems, including the technical and architectural infrastructures needed for its strategic growth.

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cash flows as these regions are viewed as relatively stable jurisdictions for developing long-term mines. However, projects in some areas of Australia may now attract additional discounting due to the uncertainty around mining taxation. Projects in the Democratic Republic of Congo may also need to tack five to seven per cent onto the discount rate due to sovereign risk perceptions, as well as political and taxation uncertainty. Also, when precise information pertaining to access and the mining or processing methods to be used are lacking, or when environmental sensitivities and permitting requirements are uncertain, higher discount rates should be applied. For instance, a project in production would be considered lowrisk, so no additional discount would be added; a project at the Preliminary Economic Assessment stage could have an additional two to three per cent discount rate added to cover unknowns associated with the level of project definition and cost accuracy. However, when adding to the discount rate in the latter situation, a company should be careful to avoid handicapping the project by using overly conservative production costs and process parameters – these should already be accounted for by increases to the discount rate. The size and experience of the project owner is another factor to be taken into consideration. If the owner is a recognized major miner with credible experience in operations and mine development in the project’s jurisdiction, no additional discount would be added to the cash flows. However, a two-to-three per cent increase to the discount rate could be considered if the owner is a junior whose management team has limited development and operational experience, if it faces obstacles in developing major infrastructure requirements, or if it has had no previous exposure to mine development in the project’s jurisdiction. All of the points mentioned should be considered when determining an appropriate discount rate for NPV. And, as previously mentioned, caution should be exercised when considering comparable disclosure by credible sources on SEDAR. The discount rate used in a financial analysis of an operating gold project in Nevada, owned by a major, should not be considered appropriate as the discount rate for a junior’s base metal project at a PEA stage in Mali. CIM Greg Gosson is the technical director of geology and compliance for AMEC Americas Limited. He is a member of the CIM Standing Committee on Mineral Reserve and Mineral Resource Definitions, and a member of CSA Mining Technical Advisory and Monitoring Committee. Graham Wood is the technical director of Financial Services for AMEC Americas Limited. He directs the economic evaluation services of AMEC’s Mining & Metals division. He has conducted financial and economic analyses on dozens of advanced mining projects worldwide.

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Learn about the latest regulations on public reporting of resources/reserves through state-of-the-art statistical and geostatistical techniques; how to apply geostatistics to predict dilution and adapt reserve estimates to that predicted dilution; how geostatistics can help you categorize your resources in an objective manner; and how to understand principles of NI 43-101 and the SME Guide. INSTRUCTORS: Marcelo Godoy, Golder Associates, Chile; and Roussos Dimitrakopoulos, McGill University, Canada • DATE: September 9 - 13, 2013 • CITY: Montreal, Quebec, Canada

Quantitative Mineral Resource Assessments: An Integrated Approach to Planning for Exploration Risk Reduction Learn about exploration risk analysis for strategic planning. Understand how to demonstrate how operational mineral deposit models can reduce uncertainties; make estimates of the number of undiscovered deposits; and integrate the information and examine the economic possibilities. INSTRUCTOR: Don Singer, USA; and David Menzie, U.S. Geological Survey, USA • DATE: September 23 – 25, 2013 • CITY: Montreal, Quebec, Canada

HR OUTLOOK

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Challenging perceptions: technology and the mature worker BY ZIAD SAAB

ntroducing new technology in the workplace poses a learning challenge for all workers. Employers, however, are particularly concerned with how it affects mature mining workers who have become accustomed to a certain way of operating over the course of their careers. According to Mature Workers in Alberta and British Columbia: Understanding the Issues and Opportunities, “Employers may be reluctant to look at initiatives to attract or retain mature workers because of unfounded concerns about the willingness of mature workers to learn new skills and new technologies and practices.” However, research suggests that this may be a perpetuated myth. Staying Ahead of the Curve: The AARP Work and Career Study reveals that “on-the-job training” and the “opportunity to learn something new” are two aspects that mature workers look for in a job. This sentiment was echoed by participants in MiHR’s recent studies, Managing the Skills Shortage: Technology and the Canadian Miner; and X, Y, Boom: Managing Mining’s Multigenerational Workforce. Data reveal that a quarter of mature workers surveyed see working with new technology as a major source of job satisfaction, and that they would benefit the most from the improved efficiency and the reduction in manual labour stemming from these advances. The remote operation of machinery, for example, means that in some cases, miners are no longer required to be in the same physical location as the heavy equipment they operate. The adoption of new technologies like driverless haul trucks could make work less physically taxing as well as safer and more efficient for mature workers. New ways of working made possible by technological advances provide mature workers with a challenge that keeps them intrigued and engaged. Since job satisfaction is positively impacted by training workers on new technology, employers should invest in this as part of their worker retention strategy. Retention is key because one of the most daunting challenges facing the industry is the loss of knowledge and experience that occurs when older workers retire. MIHR’s 2010 National Employer Survey indicates that, on average, more than half of the mining workforce is aged 45 or older, with a third of the mining workforce eligible to

retire by 2015 and around half of the workforce by 2020. The retention of these workers is essential for the mining industry; the alternative is to let a wealth of knowledge and experience walk out the door in the next 10 years, instead of transferring it to new entrants to the workforce. The introduction of new technology and its role in the retention of mature workers could be instrumental in addressing skills shortages in the Canadian mining industry. In addition, both the retention of older workers and adoption of new technologies enable mentoring relationships that are needed for new, younger workers seeking to develop their skills and abilities. MiHR’s Virtual MineMentor program is a prime example of how technology can foster knowledge transfer between mature workers and the next generation of mining employees. The program connects participants through email, video conferencing, instant messaging and other virtual forms of communication. Virtual mentoring is time-efficient, requiring only one to two hours per week, while providing a number of benefits to both parties. There will be a need for ongoing research into the role technology plays in retaining mature workers, and, in turn, how it can affect the sharing of knowledge and experience with the new generation of workers. However, the time has come to challenge past perceptions that mature workers are reluctant to adapt to new and innovative technologies that ultimately make their jobs safer and less physically demanding. CIM

“Data reveal that

a quarter of mature workers

surveyed see working with new technology as a major source of job satisfaction.”

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To access these reports, please visit www.mihr.ca. To learn more about MiHR’s Virtual MineMentor program, contact Ziad Saab at zsaab@mihr.ca.

As communications coordinator, Ziad Saab is responsible for supporting MiHR’s various communication initiatives while also contributing to event planning and promotion. He holds a bachelor’s degree from the University of Ottawa, majoring in communications with a minor in political science. He also completed a master’s degree in communications from the University of Ottawa, specializing in media studies.

O P E R AT I O N S

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Straight talk on longwall mining BY ANTONY STRICKLAND

s an experienced longwall miner, who has worked on longwall coal mining projects around the world including in Canada and China, I feel the need to dispel misconceptions about the technique and to comment on the idea of Chinese miners being imported to work in B.C. For the Canadian mining community, finding skilled miners to operate the longwall is not the greatest concern; instead, it is the geology of the site and the logistics of sustaining longwall operations in the long term that are crucial to safe and successful mining. Longwall failures in Western Canada have occurred under foreign (British) management before, in geological conditions with which they were unfamiliar, at sites operated by imported longwall miners. Let’s not repeat this mistake. In mountainous areas of Western Canada, there will be few (if any) places where the geology will be suitable for longwall mining. Faults with a displacement greater than half the thickness of the seam are difficult for longwalls to negotiate. Roof and floor conditions are often weakened by mountain building tectonic forces. Even if a suitable site exists, any longwall mine will fail without attention to efficiency and best practices. Detailed logistics planning is key to success. While a panel is being mined, the next panel has to be developed. As soon as a panel is mined out, the longwall equipment – which includes

MOVING ON UP Atlas Copco and Sandvik Mining collect innovation awards Atlas Copco and Sandvik Mining received the first Northern Lights Awards at the ninth Annual Raw Materials Group (RMG) Exploration & Mining Investment conference in Sweden last November. Atlas Copco was presented with the Northern Lights Equipment Award for Innovation that recognizes the design or technique used to improve working conditions in a hostile operating environment, above 60 degrees north. Atlas Copco received the award for its Secoroc EDGE, the world’s first continuous-monitoring system for exploration drillers, developed in cooperation with SPC Technology AB from Sweden. Sandvik Mining won the North Lights Equipment Award for Sustainable Development for Vibrocone, its eco-efficient comminution system. “The RMG Exploration & Mining Investment conference is the key event for any industry player wishing to learn more about the Nordic resources sector,” said Chris Hinde, editorial director of IntierraRMG, who presented the awards. “The 2013 conference, our 10th anniversary, is already shaping up to be the most informative, innovative and exciting conference of the year.”

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the shearer, 300 metres of face conveyor, 200 support units, electrics and other ancillary equipment – must be disassembled and transported up to four kilometres to the new face and then re-assembled. The process requires careful planning and special equipment for loading and transporting large, heavy loads over long distances, and special care of roof control while the hydraulic face supports are being withdrawn. In the U.S., this process is done in about seven days. From my observations of the longwalls in China, which I visited as a technical advisor in 2004, I doubt that a longwall equipment transfer would be accomplished safely in seven days. At mines I visited in Heilongjiang Province, only single entries were used at each end of the face so that there was no way to keep “gob” gases away from the working face. In the U.S., having three entries is common practice. In China, the hydraulic supports oil reservoir allowed dirt to enter the system. I saw four or five hydraulic support legs out of service and awaiting replacement. Where I visited, there were no geologists on the engineering staff for 12 mines. Rock mechanics was not applied to mining and roof control – it was hardly understood. And finally, to address the issue of Chinese labour, let us consider the manpower requirements of both the longwall and the development phases: longwall equipment is simple to operate, requiring no special physical strength or dexterity. The equipment can only be operated as it is designed; therefore, little decision-making skill is needed. In the U.S., a typical longwall operating crew consists of 10 miners or less per shift, including the supervisor. Longwall operations require no more than 30 miners for three shifts. Canadian miners with underground experience could, in my opinion, master the process in one week. Excluding the various support and maintenance workers, typical longwall development work requires about 48 miners, including two mechanized development units, working three shifts per day. Most Canadian miners can handle this work and it would not be difficult to find men familiar with the equipment used. In addition, British Columbia legislation requires the mine manager to be conversant in the English language and to know the Provincial Mines legislation. Employees, too, should be able to read and understand the literature given to them. There is also a need for communication between the inspectorate, mine management and miners. How these safety-related questions might be resolved has not yet been addressed. CIM Antony Strickland received his mining education and training in the U.K. He came to Canada in 1967 where he worked as supervisor, mine manager, and project engineer in Rocky Mountain underground coal mines in Alberta and B.C. He joined Norwest Mining Consultants in Calgary in 1982 and has worked on longwall projects in the western U.S., Indonesia, Australia and Mexico. He is now retired.

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It pays to appraise Early planning promises myriad benefits for BHP Billiton’s Jansen project by Ian Ewing

Courtesy of BHP Billiton

Ballentine says companies fail to understand how asset reliability analyses can provide value early on in the process. “They’re sort of focused on executing and getting the plant up and running, and they kind of forget about some of the longterm operability of the plant and the influence maintenance can have on the actual production and the design,” he explains.

Detailed analysis Once process flow sheets had been created in prefeasibility, ARMS began making reliability block diagrams (RBDs) using a powerful reliability simulation tool. Preliminary process flow diagrams were used to model the relationships between the BHP Billiton's multi-billion-dollar Jansen potash project under construction in September 2012 major pieces of mechanical equipment in the process. In one section HP Billiton is not taking any chances with mainte- of the model, for example, material from a single wet sizing nance planning on what could become one of the screen feed distributor is split into two paths, heading to world’s premier potash mines. Tens of millions of dol- another feed distributor and a secondary feed distributor. lars are at stake in potential unforeseen parts, labour From those two points, the material is routed to one of four costs and lost productivity over the life of the site. To minimize wet sizing screens, each of which sends output material into its maintenance risk, increase cost planning certainty and test one of two secondary cage mills. Each component has a probprocesses and equipment before they become entrenched, ability of failure associated with it. Simulations of the process BHP Billiton has engaged consulting firm ARMS Reliability to were performed using this detailed model; rough performance perform early asset reliability analyses for its Jansen project, predictions could be made and capacity losses due to particular pieces of equipment quantified. situated 140 kilometres east of Saskatoon, Saskatchewan. As the project progressed into the feasibility phase, process The goal of asset reliability analysis is to predict and then minimize lifetime maintenance costs and downtime, but by flow diagrams were revised, equipment selections were made, starting the process at the prefeasibility stage rather than at the and equipment vendors were chosen. ARMS began identifying execution stage, the results can be implemented with more the individual failure modes of the main process equipment. ease and less impact on cost. The information provided will By the time the initial feasibility stage was complete, nearly assist the BHP Billiton team in its plant design decision-making 6,000 failure modes – specific ways equipment could fail – were identified in the process plant, and nearly 4,000 more process. “We were able to provide them with maintenance budget below ground. For each failure mode, a probability was predictions, and also some production predictions,” explains assigned, based on a combination of manufacturer data, indusJason Ballentine, engineering manager for North America at try experience of the teams at BHP Billiton, as well as ARMS’ ARMS. “It’s not so much what we’re doing that’s unique. It’s the library of data gathered over the last 10 years. fact that they’ve applied it at very early stages of the project.” The methods that ARMS Reliability and BHP Billiton are Planning and due diligence The analyses informed the team about how much inventory using for the Jansen mine are becoming increasingly common across the rest of the mining industry but have been slow to be they would need for spare parts, and will eventually let them adopted in potash, partly because Jansen will be the first know what their critical spares will be. They also included major scheduled maintenance and generic maintenance tasks, greenfield potash mine built in over 30 years.

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and considered storage and surge buffers, which allowed ARMS to predict the total availability of the plant and to verify that the plant would achieve its designed throughput capacity. “Because we’ve considered all the possible maintenance failures, we’ve considered the maintenance outages, and we understand that it is possible to get what we’re promising,” says Ballentine. The solid data behind such predictions affords BHP Billiton an envious level of certainty in cost planning – plus or minus 15 per cent for maintenance budgets and labour requirements at the feasibility stage. Ryan Posnikoff, BHP’s principal mechanical engineer for the project, says it helps the company know what it is getting into: “It’s part of the puzzle.”

Influencing design

future day-to-day operations, as data compiled now will propagate through the operating and maintenance plans. Equipment data sheets and procedures for routine inspection and maintenance will be available when work orders are created, and the software will be used to create schedules to plan the preventive maintenance program. As the real-world operational history increases over the life of the mine, more data will become available for each piece of machinery. Modifying the model with this observed data will further improve reliability predictions and maintenance planning. The model can also be easily modified to analyze what-if scenarios regarding process changes. The ability to justify design decisions, make accurate cost and productivity predictions, and easily modify maintenance procedures throughout the life of the plant will place BHP Billiton’s first-ever potash mine well against entrenched competitors. And it seems like a worthwhile investment. Ballentine notes that with the high cost of downtime, the eventual savings for BHP Billiton could well be 10 to 20 times the value of its contract with ARMS. For his part, Posnikoff is proud that his company is ahead of the game. “My hope, and my full expectation, is that we’re going to bring a step change in maintenance processes to Saskatchewan,” he says. “That’s part of our plan – to be a lowercost producer – but it’s also part of our plan to attract people.” CIM

The benefits of early reliability studies extend beyond cost planning and productivity verification. They also allow reliability and maintenance planning to influence the plant design. By showing very early on what the major sources of downtime in a process are expected to be, the model can point to helpful design modifications when they can still be easily implemented. One such modification on the Jansen project was with the baghouses, used for removing particulate from the air. During the initial process modelling, the baghouses unexpectedly stood out as one of the biggest causes of downtime. A baghouse shutdown, once the site reaches its full proposed capacity of eight million tonnes per year, could cost BHP Billiton as much as an estimated $100,000 per hour, depending on the facilities that are affected. “We didn’t want to have to stop the whole process just to go in and see if there was a bag blown because we have a pressure drop trip,” explains Posnikoff. “Or, alternatively, shut the unit down and keep running, risking creating a really dusty environment in the plant.” With the problem identified, the BHP Billiton team consulted a potential vendor, who was able to take the large baghouses and subdivide them into four Established in 1960, smaller compartmentalized units. It was Fournier Industries then possible to isolate any one of the is a leader in the four, and still run on the remaining three with adequate capacity. mining industry. “We changed our baghouse strategy everywhere we had one, and basically > Leach Tanks > Ore Bins took it right out of the picture in terms of maintenance,” says Posnikoff. > Process Tanks > Chutes

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The legacy of this reliability planning will be apparent in the Jansen project’s March/April 2013 | 39

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Spare necessities Parts stocking software saves Teck millions

Courtesy of Teck

by Herb Mathisen

purpose is closely tied to spares management. “We have a value for downtime,” says Kalwarowksy. “If our truck runs for so long, it produces ‘x’ amount of coal. Given that, we can sell that coal for ‘y’ dollars and then we get that profitability. Do we hold more parts and reduce how many hours we’re going to be down? Or are we going to hold fewer parts and increase the number of hours we’re down?” Teck used the program to stock parts for 18 separate critical components for its Komatsu 930E fleet. For example, at the end of 2011, Teck carried five GE GDY-106 wheel motor spares, worth $1.2 million each. Using the C-MORE software, Kalwarowsky concluded that holding Teck used spares optimization software developed by the University of Toronto’s C-MORE to stock parts for 18 separate critical components for its Komatsu 930E fleet at its three Elk Valley, B.C., coal operations. eight spares was the optimal stocking option for 2012. The average cost of eck Resources made the Komatsu 930E its primary holding five spares was $4,683.08 per hour, while holding haul truck in 2010 and, over the following two years at eight parts costs $3,196.93 per hour. Taking the difference its three Elk Valley, B.C., coal mines, the number of between the two options’ hourly costs and multiplying it by those trucks nearly doubled from 51 to 99. With the 6,000 hours – the amount each truck operates per year – the expanding fleet, the company needed to find a way to keep calculated savings comes out to more than $8.9 million. Teck’s calculations take into account the component’s just the right number of the critical spare parts in stock. Hitting that moving target proved difficult because the probable rate of failure, its repair and manufacturer lead company’s inventory management software at the time was not times, and the truck’s fleet number and age, while also factorable to add new trucks as they came into operation, says Rob ing in potential downtime costs, the part’s overall cost and Kalwarowsky, reliability analyst with Teck. He had to look else- the $250,000 it costs to rebuild it. Holding more than eight where, and because Teck is a member of the University of parts would further reduce the likelihood of equipment Toronto’s Centre for Maintenance Optimization and Reliability downtime but would wind up being less economical since Engineering (C-MORE) consortium, Kalwarowsky had access the probability of needing those added spares would not outto spares management software designed to solve this specific weigh their cost. problem. Using resources from C-MORE, it quickly became apparent that stocked parts were not keeping up with the bur- Identify what is critical Before using the software, Teck had managed its spares geoning fleet. “In all of the cases, we weren’t carrying enough,” inventory through a combination of two conventional partshe points out. Since June 2011, Kalwarowsky says Teck has saved more stocking philosophies: criticality and turns. But there was no than $30 million by getting critical spares stocks to optimal systematic way to evaluate when each ought to be applied. Criticality-based stocking increases the number of spares levels. held when a component is vitally important for continuous Smarter stocking finds costs to cut operation. Consider a mine using 10 transformers, each with a Spares management is an area companies often overlook 100-year lifespan: “If one transformer goes out, we lose power for potential cost savings, Kalwarowsky says. “If we step to the plant and we can’t produce,” says Kalwarowsky. “By critback and look at why we are here, it is to make money for icality, we would hold 10 transformers. Now is that correct? If the shareholders,” he explains, adding that fulfilling this the transformers are five to 10 years old, that might not be the

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right answer. If they’re 95 years old, then that’s probably the right answer.” Managing by turns, on the other hand, is based on how often spare part stocks are expected to turn over in a given time; if a component fails four times in one year and a company stocks two spares, the company would have two turns. Companies often have between two to five turns a year, Kalwarowsky says, but that range creates a lot of uncertainty over cost. If a company were to manage by turns alone, components like transformers, which rarely turn but have significant failure consequences, would not theoretically have any spares, thus increasing the risk of production disruptions. Before applying the software, companies must first identify parts they consider critical, says Neil Montgomery, senior research associate with C-MORE. These components are often considered highly reliable yet vital to operations, and investigating past rush orders can pinpoint such items. With these components identified, companies must then determine probable failure rates for them. These can be found using historical failure information gathered internally over the years, through reliability engineer assessments, data provided by original equipment manufacturers (OEMs), or even by dividing the number of overall components by their failures. “It’s often the case that if a part is so important that it deserves to have spares, then there is a very good chance that you are keeping track of how often they fail, even if you are doing it by accident in your computerized maintenance management system,” says Montgomery.

project in Labrador City, Newfoundland, where spares across the site are currently stocked based on a combination of OEM recommendations, hunches and past history, Gibbons says. “That’s not to say that some people may not have their own statistical method, but as far as a standard method across the business, we currently don’t have one here at IOC specifically.” In January, C-MORE demonstrated the software in Labrador City, using IOC’s current data to find out how effectively the company was stocking spares. “In some cases, they were being managed quite well, in other cases, not so well,” Gibbons says, adding the statistical analysis showed spare parts for the company’s haul truck fleet was lower than optimal. Next, Gibbons wants to use the software to optimize the stocking of spare parts for the concentrator plant’s 32 horizontal filter pans, which extract moisture from the product at the end of the concentration process. The $200,000 pans consist of several different parts. The company rebuilds three filter pans each year, and the cost and time associated with the rebuilds depend on the age of the components that make up the filter pans. Jardine says C-MORE can help many companies use information they already own to make better management decisions. “Companies are collecting more and more data these days, and they are looking for tools to smartly interrogate the databases and that really is what our group is all about.” CIM

Setting a standard The software has been evolving since 2003, with more options added and becoming easier to use with each version, says Andrew Jardine, C-MORE director. An updated version of the spares management software will facilitate spare analysis on multiple components for a project instead of just one at a time, he says. Jardine has been researching asset management since 1967. He founded C-MORE in 1994, with the realization that partnering with industry was required in order to get the organization’s research into the field. A consortium of companies from the mining, energy and defence sectors provides CMORE with funding, and every six months the centre meets with members to update them on its work and let them suggest future projects or focus areas. For instance, C-MORE developed condition-based maintenance software and later spares management software from its theoretical research at the request of consortium members. “They don’t explicitly want the mathematics or the statistics behind getting the answer, they just want something that’s easy to use, knowing that underneath the tool, there is rigour in the underlying mathematics going on,” says Jardine. Rio Tinto’s Iron Ore Company of Canada (IOC) recently became a consortium member and getting access to the software provided an incentive to do so, according to Jon Gibbons, asset management reliability advisor with IOC. The company wants to adopt the software at its Carol iron ore March/April 2013 | 41

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Excellence at any cost Reliability for its own sake drives Luminant’s maintenance program by Alexandra Lopez-Pacheco

Courtesy of Luminant

across all eight mine sites and it isn’t working, we’re going to know pretty quickly.” Luminant’s Mine Maintenance Support Services (MMS) brought together project management support workers – a group responsible for providing support for railroads, 15 draglines, 10 loading stations and 500 pieces of mining rolling stock. The MMS group is composed of 44 employees from electrical engineering, mechanical engineering, technical design, reliability, predictive services and planning, which support more than 600 mining employees and equipment across the eight mine sites. MMS now unifies each site’s functional departments with the support organization to maintain mining assets and improve reliability, says Keith Lawson, Luminant’s predictive maintenance specialist supervisor.

The right tools for the job To facilitate standardization, Luminant introduced computerized maintenance management system software used to track everything from equipment inspections to work orders. The MMS toolkit includes its condition based maintenance (CBM) program, which monitors all of its draglines and mobile mining equipment, tracking and evaluating large mining tire performance, amongst other things. The company also uses the data it collects for predictive maintenance (PdM), employing ultrasonic, ultrasound, infrared, vibration analysis, magnetic particle, liquid penetrant, weld inspection and visual inspections to predict and correct possible failures. “If we see vibration on a bearing increasing, Keith’s group picks it up, identifies whether something is loose or misaligned or if there’s a lubrication problem,” says Boudreau. “At that point, early enough in the failure, we can do something about it. If you wait, then you have to replace the bearing, or the machine, and that leads to delays and more serious problems.” Each component is initially rated based on its critical importance or safety risk, and then on its cost. “We implemented a reliability centred maintenance (RCM) program about 18 months ago,” says Boudreau. “We have completed RCM analysis on 60 per cent of our assets. Our schedule is to have 100 per cent of our assets complete in the next 12 months. The result of that analysis is an individual criticality prioritization number that ranks all assets in order of importance, a detailed maintenance strategy and proactive maintenance tasks.” Luminant has been fortunate, as many of its maintenance employees have been working with the company for decades.

More than 100 people were involved in this dragline outage. The reinstallation of a walking arm is seen above.

our years ago, Luminant, the largest generator of electricity in Texas with a mining division that produces 33 million tonnes of coal per year to fuel its plants, embarked on a complete shift in its maintenance approach. “As Jim Collins, author of ‘Good to Great’ put it, the enemy of great is good,” says George Boudreau, director of maintenance at Luminant. “Without trying to become too preachy, our goal was to go from where we were – good – to the best we could be, with the goal of being great.” Luminant focused on processes that maintained equipment at optimal capacity and standardized processes across all of the company’s eight mines. “Our goal was not to reduce maintenance costs but to better maintain our equipment and its capacity, reliability and safety,” says Boudreau. Yet, as a result of its new approach, Luminant has experienced an 18 per cent reduction in maintenance spending. Core to the improvement was changing the mindset of practically everyone in the organization – from seeing maintenance as the repair of broken machinery to viewing it as an ongoing process of preservation.

Bringing people together The company sought to put in place standardized, repeatable processes across the board. “If we have something that isn’t working and everyone is doing their own little tweak, we’ll never know it isn’t working,” says Boudreau. “If we standardize 42 | CIM Magazine | Vol. 8, No. 2

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They have valuable experience and knowledge, but these key people are nearing retirement age. “One of our main goals is to get these employees’ tribal knowledge documented so when the next group of supervisors come in, they don’t have to make the same mistakes the people who have been here for 30 years had to figure out on their own from day one,” says Boudreau. With this in mind, Luminant added 17 maintenance organization planner positions across eight locations. “These planners are responsible for putting together detailed job plans that include safety precautions, lockout-tagout procedures, tools needed, number of people to do the job, time to do the job, and detailed instructions to do the job.” Over four years, the company has built about 3,000 jobs. “That is a great start but we still have a long way to go,” notes Boudreau. Luminant also introduced the human performance improvement (HPI) initiative, designed to create a culture that encourages reporting and learns from mistakes. As a result, the number of near misses reported at Luminant in recent years has quadrupled. “This program distinguishes between willful violations of policy and latent organizational weaknesses within the company,” points out Boudreau. “HPI is all about changing and creating a company culture.”

Maintenance not just for maintainers The new maintenance approach relies on the collaboration of everyone using – or even working near – equipment. “It’s a real team approach,” says Lawson. “We have a very good relationship with operations, which isn’t always the case in all mines. Sometimes they work against each other. When MMS [staff] go to the site, we deal with the maintenance superintendents and managers, and we talk to everyone. We do this at least once a week with each site, and then we re-contact them at a later date and track what they’ve done, using the CMMS software. All the data is kept on file, so the software triggers follow-ups. We also have a good training department that trains the equipment operators so they understand everything about that component they’re using, what it can and can’t do, and how to inspect it, so if they see something, they can fill out a sheet and make sure the right people get to it.” The company also added monitoring technology to its draglines to reduce behaviour that can lead to equipment failure or damage. “You can overload a dragline and increase production in the short term, but you are putting stresses on the equipment that it wasn’t designed for and that’s eventually going to lead to failures,” says Boudreau. The new technology includes Sony cameras using Exacq software that tracks the way the equipment is being used. If an operator overloads the dragline over and over, an alert is set off in the web-based management software. This triggers a meeting with the operator – not to assign blame, but to attempt to identify what factored into the overloading. “We try to understand why someone made the decision and why they thought it was the right decision,” says Boudreau. “If it is a willful violation, there is recourse for that. But if a mistake was made, what we want to do is learn from that.”

The company also introduced a behaviour-based safety initiative for employees in the field. Employees observe co-workers in the field anonymously and identify behaviours that could lead to injuries. “We, as a company, do thousands of observations every single month, and we compile the statistics and disseminate the findings out to the field so we can learn from them,” says Boudreau. The new program makes heavy use of metrics to track progress and set goals. But maintenance superintendents, supervisors and technicians are given goals based on factors they can control instead of factors they cannot, like reducing maintenance costs. Nevertheless, since introducing its corporate maintenance standardization initiative four years ago, Luminant has seen an eight per cent improvement in asset availability and even greater maintenance spending reductions. In 2011, its PdM group won the Uptime Award for the Best Non-Destructive Testing Program and, last year, its MMS Department won the 2012 Best Condition Monitoring Program Uptime Award. “The last three years have been our best in production and safety,” says Boudreau. “You have to be disciplined, stay the course, believe in the process and wait for the results. If you are looking quarter to quarter and you’re not committed to the long term and doing the right thing, then you will hit bumps and make short-term decisions and you will fail. For us, this year, we were better than last and next year, we’ll be better than this one.” CIM GIVING BACK PotashCorp targets global food security Potash Corporation of Saskatchewan announced it will commit $35 million over the next seven years for the creation of the Global Institute for Food Security (GIFS) at the University of Saskatchewan. The provincial government will also provide another $15 million in the same period. GIFS’s objective will be to develop Saskatchewan-led solutions for secure and sustainable food and nutrition worldwide. This is PotashCorp’s largest donation to date, demonstrating its commitment to food security. “Food security remains our biggest challenge as populations increase and diets change, putting immense strain on food production,” said Bill Doyle, president and CEO, PotashCorp. “As the world’s largest producer of crop nutrients, supporting food production is a mandate for our company and we believe this institute can play an important role in improving global food security.” Saskatchewan Premier Brad Wall said: “The plan for growth positions Saskatchewan as a global leader in food security and innovation by 2020. Advancing Saskatchewan’s agricultural advantage allows us to significantly increase the global food supply – our moral obligation as a good global citizen – while building the next economy, an innovation economy, here at home.”

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Big on lean Shop talk with continuous improvement leader Raymond Floyd

Courtesy of Raymond Floyd

by Ryan Bergen

lenty of people will promise big returns if they are allowed the chance to step in and change how mining operations are run. But thanks to a record of improving performance across multiple sectors, Raymond Floyd has executives at the biggest mining companies asking him how they can “make their workplace right.” While working at General Motors early in his career, Floyd was instrumental in adopting the lean manufacturing principles made famous by Toyota. He later adapted them to the processing sector with Exxon before Suncor Energy lured him to Fort McMurray. From 2008 to 2012, Floyd helped trim waste and improve output at Suncor’s mining and processing operations by using those lean methods gleaned from the automotive industry. Some of those experiences are detailed in his 2010 book, Liquid Lean: Developing Lean Culture in the Process Industries. Floyd now serves on the board of directors of two companies and says more books are in the works.

became empty received whatever truck was next in line to be worked on. The problem with that was, although every craftsman had a big box of tools, they almost invariably didn’t have a tool or a part that was needed for that job, which they had to go get. As we organized to make the workplace right, we dedicated two bays for routine service, and those bays had every single thing needed: tools, equipment and parts, and trained craftsmen who knew all about routine service. So a truck that previously needed routine service and took 36 hours – and in some cases 72 hours – to get it, could pull into one of those special service places just like Jiffy Lube and go in and out in a couple hours and have the full service done. As we expanded, we also set up bays that were right for transmissions, or suspensions, or engines. We also managed parts so that we never took a truck out of line until we had a bay, the required parts, and craftsmen available for that kind of work.

CIM: Can you give a hands-on example of how lean processes make a difference? Floyd: At Suncor, there are more than 40 bays available for maintenance on trucks, shovels and dozers, and that sort of thing. In the original 2008 configuration, whatever bay

CIM: You also stress the need for a clean workplace. Why is this important? Floyd: The emphasis on cleanliness is to make the status of the equipment visually apparent. If you have 10 years’ worth of leaks that have never been cleaned up and repaired, a small leak today

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is invisible. But if the equipment is clean, a small leak is instantly visible and you can fix it before something bad happens. CIM: Since improving maintenance relies on people to both do their basic jobs and improve their work, how do you make sure staff are most effective? Floyd: You have to have strategic goals that become meaningful to every individual, so that they know what to do. Then you have to have the improvement tools and you must make sure the people know how to use those tools correctly. You have to have a system for delivering the tools, and since the tools are often team-based, you need to have a system for organizing the teams so that the tools are used right. That way, people can say, “I know I’m doing the right thing and I know I’m doing it in the right way.” But, boundaries are also important. For example, we allowed our mechanics to make great improvements in the way they worked on a truck, but they weren’t allowed to change the design of the truck without engaging an engineer who approved the changes, which the front line teams then executed throughout our fleet. CIM: How successful would you say companies across all industries have been at implementing lean principles? Floyd: At this moment, more than half of the entities that attempt lean implementation abandon it at some point. Sometimes they go on for years before they abandon it. That’s always the result of not developing the culture and the systems that surround the lean tools, so that people can use them effectively and the company retains control of its system of production. CIM: So how can the success rate be improved? Floyd: Senior leadership is the exclusive owner of systems and culture. Unfortunately, execution of the lean tool set is largely the domain of mid-management or even lower in big organizations. If senior leaders do not understand that lean practice must lead to and be enabled by a cultural transformation, they are content to leave lean in the middle to lower parts of the organization. This means that cultural transformation never occurs and lean implementation never matures to its full potential.

CIM: That is impressive. Can you give an example of the process that helped you get to that point? Floyd: You start with the routine maintenance that we talked about earlier. When it used to take three days for routine maintenance, the trucks often didn’t get it on time. Or trucks got to the point when they needed routine maintenance, and they sat and waited for their turn. When we got to doing it very quickly, the trucks always got the routine maintenance, and they always got it exactly on time. That enabled more truck-hours in the mine. And we moved to other things like suspensions. Just like we did with routine maintenance, we got to the point where a truck would come in to get its suspension fixed and go back out in the mine very quickly. But once the suspension is fixed, it turns out that you can activate the onboard weighing system. It works off of the suspension, but not if the suspension’s not working right. From there, you know how much to put in each truck to optimize the load without exceeding the truck’s limits, and all of a sudden it’s carrying more because it’s well-maintained – not only the suspension and lubrication but everything is well-maintained because of the things we’ve talked about. The trucks can carry heavier loads at higher speeds. It’s a more robust truck – what it always was intended to be. CIM: Do you think there is a strong appetite for lean in mining? Floyd: Oh, certainly. I’ve talked with folks at BHP in Canada and elsewhere. Before he left Rio Tinto, former CEO Tom Albanese and I would frequently exchange emails or phone calls. He’s very interested in it and had actually tried some of that work in several of his mines. It’s been slow in the chemical processing industries, it’s been slow in mining, but it is such a powerful technology that sooner or later it will get everywhere. CIM

CIM: The work at Suncor discussed in Liquid Lean covers less than the first two years you were there. What were some of the longer-term impacts of the improvements at Suncor’s operations? Floyd: Suncor has essentially the same kit of mining equipment it had in 2008 and it’s public knowledge that they are producing about 70 per cent more product these days. There are a lot of things that go into that, but most of it is what we’re talking about. March/April 2013 | 45

Supply lines Energy? Everyone needs it. And Western Canada wants to feed that demand. by Eavan Moore

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Although oil sands hog the headline of the Canadian energy story, western provinces also boast rich deposits of thermal

coal, uranium, & natural gas. With shifting regulation in Canada and immense potential overseas, producers and developers are beating a path to Asian markets to peddle their resources. And for good reason – China and India alone are expected to require nearly a third of the world’s energy production by 2035. Back in black The seaborne thermal coal market promises growth for current and future coal producers in North America. Cheap natural gas is accelerating Canada’s and the United States’ transition away from coal-fired electricity generation, yet, globally, the International Energy Agency foresees coal increasing its share of the energy mix by 1.2 billion tonnes by 2017, thanks in large part to Chinese and Indian electricity demand. In that same time period, Canada’s exports will roughly double. They stand now at a comparatively small six million tonnes per annum (mtpa), the bulk of which is supplied by Sherritt International’s March/April 2013 | 49

four mtpa Mountain operations. Hillsborough Resources’ 0.5 mtpa mine on Vancouver Island, as well as thermal coal produced by B.C.’s and Alberta’s metallurgical operations also contribute to exports. By 2017, Coalspur Mines Ltd. promises to add five mpta with its Vista project, a dedicated thermal coal mine near Hinton, Alberta. The mine is expected to produce 12 mtpa from 2019 through to the end of its 29-year life.

93 % of Canada’s thermal coal exports went to Asia in 2011

JAPAN SOUTH KOREA CHINA

35% 34% 24% Source: PwC

David Montpetit, Coalspur’s vice-president of external affairs and logistics, says new funding should allow production to begin in 2015 as scheduled. A US$300-million debt facility from EIG Global Energy Partners “will fund construction for 2013 and partially into 2014,” he predicts. “We are confident that we will have the remaining funding requirements in place by the end of the first quarter 2013.” At lowest estimates, the total construction cost would be $445 million. Projects further on the horizon could also boost Canadian thermal exports. Hillsborough Resources has applied to build a second mine, Echo Hill, near Tumbler Ridge, B.C., which would produce between 1.0 and 1.5 mtpa during a 10- to 14year mine life using a combination of contour and highwall auger mining, beginning in 2015. Around the same time, if it gets the go-ahead, the metallurgical-focused Donkin coal project proposed by Morien Resources Corp. in Nova Scotia, would also produce thermal coal over its 20-year life, initially feeding local generators but entering the export market if conditions are favourable. Struggling U.S. coal miners have set their sights on the same opportunity, but at higher volumes. U.S. producers exported about 25 million tonnes in 2011 and are seeking ways to export more, which includes increasing access to West Coast ports. Montpetit points out that this development has encouraged B.C. ports to expand their coal terminals, which may benefit Canadian producers as well.

Planning and patience Nearly half of U.S. thermal coal exports were Europebound in 2011. Countries that suspended their nuclear programs in response to the Fukushima meltdown have made only tentative motions to restart, relying on gas and coal to fill the gap. This weak demand for nuclear fuel has put a number of uranium projects on hold until markets improve. Uranium giant Cameco Corporation has revised its global growth plans

from 20 to 16 additional million pounds of uranium oxide by 2018. But a dearth of major projects coming on stream in the next few years suggests that when demand does pick up, supply could be tight. The forecasts used by Cameco show worldwide uranium demand growing three per cent annually. Projected Asian electricity demand, as usual, accounts for a large chunk of this; of the 64 new reactors under construction around the globe, 36 are found in China and India. Cameco’s growth figure also factors in restarts among Japan’s 48 idled reactors. In January, the country’s “We expect six to new nuclear authority released eight of [Japan’s draft guidelines for the restart of reactors and anticipates nuclear reactors] finalizing those in July. “We to be restarted expect six to eight of the units to be restarted this year and this year and then growth going forward,” then growth said Tim Gitzel, president and CEO of Cameco, in February. going forward” Nuclear plants in the U.S. will lose 24 million annual – Cameco CEO Tim Gitzel pounds of uranium oxide supply when America’s Megatons to Megawatts agreement – whereby uranium from Russian warheads is converted for use in American generating stations – expires this year. Without political motivation to extract uranium from stockpiled weapons, further nuclear warhead supplies will be limited, says Ian Hiscock, senior consultant at CRU Group. “Warheads are expensive to dismantle,” he explains. “You need some highly specialized skills to do it.” The stable, high-grade Athabasca Basin of Saskatchewan will help meet uranium demand, especially since the Canadian government has completed a bilateral export agreement with China and has started negotiations with India. Cameco plans to bump up production at its McArthur River mine from 18.7 to 22 million pounds in 2018, and its Cigar Lake mine, with a late-2013 start-up date, will produce 18 million pounds of uranium oxide annually. French nuclear conglomorate Areva, with shares in these two Cameco-operated mines, anticipates exporting uranium to China later this year. Exploration activity also continues in the Athabasca Basin, which produced 17 per cent of the world’s uranium in 2011, although any new projects would only begin producing towards the end of this decade. Areva’s numerous Uranium concentrate is loaded in steel drums for shipment from Cameco’s Rabbit Lake mill in Saskatchewan. Courtesy of Cameco Corp.

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Natural gas chills out Canada used to pipe most of its gas to the United States, but net exports have steadily declined from a peak of 3.3 trillion cubic feet (TCF) in 2007 to only 2.2 TCF out of a total 5.3 TCF produced in 2011. Growing domestic markets, such as Alberta with its expanding oil sands operations and population, and Ontario, which is phasing out coal-fired power plants, have drawn on existing conventional gas reserves, explains Bill Gwozd, senior vice-president, gas services at Ziff Energy. That shift, says Gwozd, prompted companies in the U.S. to refine their hydraulic fracturing and horizontal drilling techniques to open up previously inaccessible shale gas reserves. The export of those techniques to Canada have unlocked large Alberta and northeast B.C. shale and tight gas formations that proponents are eager to link to the coast, convert to liquefied natural gas (LNG), and ship to Asian customers accustomed to paying a premium the North American markets simply cannot match. In Asia, oil indexation values a cubic foot of gas at its oil barrel heating equivalent of $15, instead of the Henry Hub, Louisiana index recently trading between $3 and $4. Add $6 to $9 per barrel for transport and liquefaction costs and some negotiating space remains, says Gwozd. “At the end of the day, the alternative that the Asian buyers have to using LNG is burning oil-linked liquid fuels,” says Asish Mohanty, senior analyst, global LNG, Americas at Wood Mackenzie. “So they can never completely leave their comfort zone of oil indexation, other than perhaps for small portions of their overall portfolio.” At least six LNG terminals and three pipelines have been proposed on the B.C. coast. Global gas company BG Group is in the feasibility stage with its LNG terminal near Prince Rupert, supplied with up to 4.2 billion cubic feet (BCF) per day through a pipeline venture between BG Group and pipeline company Spectra Energy. David Byford, manager of external communications at BG Group, says the shale resources of northeast B.C. and the short travel time to Asia drew the group’s attention to the region. He cautions, however, that like other LNG players, BG has made no final investment decision.

construction, there will be a crunch, and it could very well go the Aussie way,” says Mohanty. “Because of that, many potential contractors are heard to be a bit cautious about promising on the cost figures.” Project proponents likewise hesitate to quote numbers. Floated expenditures on BC LNG Ltd.’s barge-based operation in the Douglas Channel start with an initial $400-million price tag and have since risen by an undisclosed amount. BC LNG holds an export licence for 1.8 million tonnes LNG (roughly 88 BCF natural gas) per year. At the other end of the scale, Progress Energy estimates its investment in a 7.2-million-

Efficient injection Not all liquefied natural gas is destined for export. LNG can replace diesel in engines fitted with conversion kits or, as is increasingly the case, engines purpose-built by companies like Westport Innovations Inc., which teamed up with Caterpillar Inc. in 2012 to develop LNG technology for mining equipment. Its high-pressure direct injection system uses a small amount of diesel to ignite natural gas, reducing overall emissions and, if gas prices stay low, fuel costs. Caterpillar hopes to launch LNGpowered haul trucks and locomotives within five years. A separate project under development would allow owners to convert their existing trucks to natural gas. 1) Westport W estport HPDI Inj Injector ector Tip As Assembly sembly

iinjector njector bo dy body g as ne edle gas needle p ilot n eedle pilot needle

Courtesy of Westport Innovations

exploration properties include Shea Creek at about 88.1 million pounds Measured and Indicated Resources. Rio Tinto continues to drill and perform environmental baseline research at the Roughrider deposit it acquired after completing the deal to purchase Hathor Exploration in 2012.

diesel diesel pilot pilot (pilot) (pilot) natural natural gas gas (primary (primary fuel) fuel)

body iinjector njector b ody gas needle g as ne edle pilot p ilot needle needle

People power Global energy demand is critical for these projects to make sense economically, but so is the employment outlook. An intensely competitive labour market worsened multi-billiondollar cost overruns at new LNG developments in Australia. “If a few of these [B.C.] projects simultaneously end up under

d iesel pilot pilot (pilot) (pilot) diesel na tural g as ((primary primary fuel) fuel) natural gas

For ignition, a small amount of diesel fuel is injected into the engine cylinder (1), followed by the main natural gas fuel injection (2). The diesel acts as a pilot, igniting the natural gas. March/April 2013 | 51

Stikine Energy’s two-tonne-per-hour frac sand pilot plant in Abbotsford, B.C. The company wants to market locally sourced quartz sand to the growing hydraulic fracturing industry in northeastern B.C.

Outside the comfort zone For now, the West is Canada’s energy king. Eastern provinces have responded with caution to the risks involved with hydraulic fracturing. Nova Scotia and Quebec put moratoriums on the practice. Several provinces have moratoriums on uranium mining as well. In Quebec, uncertainty looms over future uranium developments. Strateco Resources CEO Guy Hébert sees potential there, pointing out that his Matoush uranium property is practically a twin to Saskatchewan’s Rabbit Lake. He says it could be economic even at today’s low spot prices and will be even better in five years’ time. However, Quebec’s environment minister has declined to approve underground exploration at Matoush until the Eeyou Istchee territory Crees, who are opposed to uranium mining, consent. In Nunavut, similar forces are pulling in different directions. The location is challenging, but the government is supportive. Areva continues to work its way through the environmental assessment process for its proposed open pit and underground Kiggavik project. Watching and learning from Areva’s experience is junior mining company Kivalliq Energy; CEO Jim Paterson believes that the future market for uranium, and grades comparable to many Saskatchewan projects, could inspire a new uranium mining district in Nunavut.

Energy drink While the financial, political and social forces cloud the timing of these projects, the upward trajectory of global electricity demand makes a powerful case for their development. Selling power to Asia, as Ziff Energy’s Gwozd puts it, is like selling water to a thirsty person in a desert. CIM 52 | CIM Magazine | Vol. 8, No. 2

Crystallizing the natural gas boom What could be a better prospect than gold? For Stikine Energy Corp. the answer is “sand.” Scott Broughton, president and CEO of the junior exploration company, says he has no regrets about abandoning gold and base metal exploration to pursue silica deposits in northeastern British Columbia. His business case is simple: shale gas companies pump frac sand into their hydraulic fracture sites, where sand grains prop open the tiny cracks that let gas escape. Today, that sand is imported to northeastern B.C. from mines in Wisconsin, Saskatchewan, even Texas, at prices upwards of $200 or even $300 per tonne. Much of that cost is related to shipping and handling. Local mines ought to beat the competition handily; indeed, 2011 preliminary economic assessments on Stikine’s Nonda and Angus frac sand projects suggested they could deliver suitable product at costs in the $60-per-tonne range. But Broughton’s courtship of gas producers and their contractors has taught him a few things about the priorities of companies like Shell, Chevron, and Halliburton. “There are long-standing [supply] relationships within the industry, which work all over North America,” he says. “It’s become clear to us that those relationships and that certainty about supply is something that the gas producers really enjoy. And right now they’re willing to pay for it.” In the long term, he believes companies looking at multi-billion dollar natural gas investments in the province will seek strategic, quality supply from local sources with better costs. LNG exports projected for the end of the decade would require four or five years of aggressive production drilling – meaning a lot of frac sand will be required in the not-so-distant future. “In 2009, when we first started this, the operations in the Horn River formation in B.C. were pumping in something like half a million tonnes” he says. “In the Montney, they were pumping close to a million tonnes in 2010. And that’s all prior to full-on production drilling.” Until LNG plans solidify, gas producers are spending as little as possible on drilling and doing deals. Without investment through 2012 and in difficult junior markets, Stikine has limited its expenditure, but once LNG takes off, Broughton says it will feed all kinds of businesses. “I think it will surprise a lot of people how fast it will happen, and we think the outlook has already turned in the oil patch for these large shale-gas plays,” he says.

Courtesy of Stikine Energy

tonne (351 BCF) terminal near Prince Rupert between $9 billion and $11 billion.

Courtoisie de Canadian Pacific

Le jeu du pouvoir

Dans les ports de la côte de la Colombie-Britannique, incluant Roberts Banks (ci-dessus), on exporte actuellement le charbon thermique à partir des États-Unis et du Canada.

Vous avez dit énergie? Tout le monde en a besoin. Et l’Ouest canadien veut répondre à cette demande. par Eavan Moore

Même si les sables bitumineux monopolisent l’histoire énergétique canadienne, les provinces de l’Ouest renferment également de riches réserves de charbon thermique, d’uranium et de gaz naturel. Les producteurs et les promoteurs de projet se tournent vers les marchés asiatiques pour vendre leurs ressources en raison des changements de réglementation qui surviennent au Canada et de l’immense potentiel à l’étranger. Ils font ainsi pour une bonne raison : on s’attend à 54 | CIM Magazine | Vol. 8, No. 2

ce que la demande combinée de la Chine et l’Inde représente près du tiers de la production énergétique du monde entier d’ici 2035.

Le retour au noir Le marché du charbon thermique livré par transport maritime annonce une croissance pour les producteurs de

Courtoisie de Cameco Corp.

L’uranium est raffiné à l’usine Blind River de Cameco en Ontario.

charbon actuels et futurs en Amérique du Nord. Le gaz naturel à faible coût accélère la transition au Canada et aux ÉtatsUnis pour se débarrasser de l’électricité produite par du charbon. Pourtant, l’Agence internationale de l’énergie prévoit que la part du charbon dans le panier d’énergies mondial augmente à 1,2 milliard de tonnes d’ici 2017. Cette augmentation serait due en grande partie à la demande d’électricité de la Chine et de l’Inde. On estime que les exportations canadiennes devraient sensiblement doubler durant la même période. Actuellement, les exportations ne représentent qu’un maigre 6 millions de tonnes par année (MTPA), dont la majeure partie est composée des 4 MTPA provenant des mines en montagne de Sherritt International. On peut également compter la production de 0,5 MTPA de la mine de Hillsborough Resources, sur l’île de Vancouver, ainsi que la production de charbon thermique provenant de l’exploitation métallurgique de l’Alberta et de la Colombie-Britannique. D’ici 2017, Coalspur Mines Ltée promet d’ajouter 5 MTPA avec son projet Vista, une mine de charbon thermique près d’Hinton, en Alberta. Cette dernière devrait produire 12 MTPA à partir de 2019 jusqu’à la fin de son cycle de vie de 29 ans. David Montpetit, vice-président, Affaires externes et logistique, de Coalspur mentionne qu’un nouveau financement devrait permettre de commencer la production comme il est prévu en 2015. Selon lui, une facilité d’emprunt de 300 millions de dollars US d’EIG Global Energy Partners « devrait financer la construction de 2013 et celle de 2014 en partie. Nous sommes certains que nous aurons le reste du financement requis en place d’ici la fin du premier trimestre de 2013 ». Les estimations les plus basses indiquent que le coût

de construction total serait de 445 millions de dollars. D’autres projets à l’horizon pourraient également augmenter les exportations thermiques canadiennes. Hillsborough Resources a présenté une demande pour construire une deuxième mine, Echo Hill, près de Tumbler Ridge, en Colombie-Britannique. La production pourrait atteindre entre 1 et 1,5 MTPA sur une durée de vie de 10 à 14 ans en utilisant une combinaison de méthodes d’exploitation minière : l’exploitation suivant les courbes de niveau et l’exploitation à la tarière, au commencement de 2015. Au cours de la même période, si l’autorisation est donnée, le projet de mine de charbon métallurgique proposé par Morien Resources Corp. en Nouvelle-Écosse devrait également produire du charbon thermique tout au long de sa durée de vie de 20 ans. La production initiale servirait à alimenter les usines locales, mais elle percerait le marché de l’exportation si les conditions sont favorables. Les minières étasuniennes en difficulté visent sur la même occasion, mais à de plus gros volumes. Les producteurs étasuniens ont exporté environ 25 millions de tonnes en 2011, et ils cherchent des manières d’exporter davantage, ce qui inclut un accès accru aux ports de la côte Ouest. M. Montpetit indique que ce développement a encouragé les ports de la Colombie-Britannique à agrandir leurs terminaux de charbon, ce qui peut profiter également aux producteurs canadiens.

Planification et patience Près de la moitié des exportations de charbon thermique étasuniennes étaient envoyées en Europe en 2011. Les pays qui ont suspendu leurs programmes nucléaires à la suite de la catastrophe de Fukushima ont fait seulement quelques tentatives pour redémarrer, en se basant sur le gaz et le charbon pour combler l’écart. Cette faible demande de carburant nucléaire a placé de nombreux projets d’uranium en attente jusqu’à ce que les marchés s’améliorent. Cameco Corporation, un géant de l’uranium, a révisé à la baisse ses plans de croissance mondiale pour les faire abaisser de 20 à 16 millions de livres additionnelles d’oxyde d’uranium d’ici 2018. En outre, l’absence de projets importants en cours dans les prochaines années suggère que la demande n’a pas repris, les stocks pourraient être restreints. La prévision utilisée par Cameco indique une croissance annuelle de la demande mondiale d’uranium de 3 %. La demande d’électricité projetée en Asie, comme à l’habitude, représente une grande part de cette croissance. Sur les 64 nouveaux réacteurs en March/April 2013 | 55

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Courtoisie de Kivalliq Energy

construction dans le monde, 36 se trouvent en Chine et en Inde. Cette croissance prévue par Cameco tient également compte du redémarrage des 48 réacteurs en veille du Japon. En janvier, l’autorité nucléaire du pays a publié une ébauche de directives pour le redémarrage des réacteurs et elle prévoit qu’une version définitive sera prête en juillet. « Nous prévoyons le redémarrage de six à huit unités cette année et la croissance continuera par la suite », a mentionné en février Tim Gitzel, président et premier dirigeant de Cameco. Les centrales nucléaires aux ÉtatsUnis devraient perdre un approvisionnement de 24 millions de livres d’oxyde d’uranium annuellement lorsque l’accord « Megatons to Megawatts » en place aux États-Unis, qui prévoit la conversion de l’uranium des charges militaires La propriété d’uranium Angilak de Kivalliq Energy au Nunavut russes pour alimenter les centrales aux États-Unis, prendra fin cette année. Sans motivation politique d’extraire l’uranium des réserves 2007, elles sont passées d’un pic de 3,3 billions de pieds d’armes, les stocks de charges nucléaires seront restreints, cubes (BPC) à seulement 2,2 BPC sur une production indique Ian Hiscock, consultant principal du CRU Group. totale de 5,3 BCP en 2011. Des marchés intérieurs en « Les charges militaires coûtent cher à démonter, explique croissance, comme l’Alberta, dont la population et l’exploiM. Hiscock. Cela requiert des compétences hautement tation des sables bitumineux augmentent; et l’Ontario, qui spécialisées pour y arriver. » élimine progressivement ses centrales au charbon, ont fait Le bassin stable et de grande qualité d’Athabasca, en diminuer les réserves de gaz classiques, explique Bill Saskatchewan, aidera à combler la demande d’uranium, par- Gwozd, vice-président directeur, Services du gaz, chez Ziff ticulièrement depuis que le gouvernement canadien a conclu Energy. une entente bilatérale en matière d’importation avec la Ce changement, mentionne M. Gwozd, a poussé les ÉtatsChine, et depuis qu’il a entrepris des négociations avec Unis à chercher à améliorer leurs techniques de fractionnel’Inde. Cameco planifie augmenter sa production à la mine ment hydraulique et de forage horizontal afin d’ouvrir des McArthur River pour la faire passer de 18,7 à 22 millions de réserves de gaz de schiste auparavant inaccessibles. L’exporlivres en 2018. De son côté, la mine de Cigar Lake, ayant tation de ces techniques au Canada a permis de débloquer de démarré à la fin de 2013, produira 18 millions de livres grandes formations imperméables de gaz et de gaz de schiste d’oxyde d’uranium annuellement. Le groupe français spécia- en Alberta et en Colombie-Britannique, dont les promoteurs lisé dans l’énergie nucléaire, Areva, qui détient des parts dans ont hâte de relier la côte pour convertir le tout en gaz naturel ces deux mines exploitées par Cameco, anticipe d’exporter liquéfié (GNL), et de l’expédier sur le marché asiatique à un prix que le marché nord-américain n’est tout simplement pas de l’uranium en Chine plus tard cette année. L’exploration poursuit son cours dans le bassin d’Atha- en mesure d’égaler. En Asie, l’indice du prix du pétrole tient compte de la basca, qui a produit 17 % de la production mondiale d’uranium en 2011, même si tout nouveau projet ne valeur du prix d’un pied cube de gaz à un prix d’équivalent commencerait pas à produire avant la fin de notre décennie. baril de pétrole de 15 $, plutôt que de tenir compte de celui Parmi les nombreuses propriétés d’exploration d’Areva, on de l’indice de prix de Louisiana Henry Hub, qui s’échange retrouve Shea Creek, avec des ressources mesurées et indi- entre 3 et 4 $. Ajoutez à cela entre 6 et 9 $ pour les coûts de quées de 88,1 millions de livres. Rio Tinto continue de forer transport et de liquéfaction par baril et cela laisse encore et de réaliser des recherches pour obtenir des données de place aux négociations, selon M. Gwozd. « À la fin de la journée, la seule alternative qui reste aux base sur l’environnement à son dépôt de Roughrider, acquis après avoir conclu l’accord d’achat d’Hathor Exploration en acheteurs asiatiques, qui utilisent le GNL, est de se tourner vers les carburants liquides dérivés du pétrole, mentionne 2012. Asish Mohanty, analyste principal, GNL mondial, Amériques, chez Wood Mackenzie. Cela fait en sorte qu’ils ne sortent pas Le gaz naturel s’essouffle complètement de leur zone de confort en matière d’indexaLe Canada avait l’habitude de vendre son gaz aux États- tion du prix du pétrole, mis à part, peut être, d’une petite Unis, mais les exportations diminuent, depuis le pic de partie de tout leur portefeuille. »

Au moins six projets de terminaux de GNL ont été proposés sur la côte de la Colombie-Britannique. Une société gazière mondiale, le BG Group, est à l’étape de l’étude de faisabilité de son projet de terminal de GNL près de Prince Rupert, il serait alimenté par un maximum de 4,2 milliards de pieds cubes par jour par un pipeline exploité par une collaboration entre le BG Group et Spectra Energy, une société spécialisée dans les pipelines. David Byford, gestionnaire des communications externes chez BG Group, mentionne que les ressources de gaz de schiste du Nord-est de la Colombie-Britannique et les courts délais de transport vers l’Asie ont attiré l’attention du groupe sur la région. Par contre, il met en garde que BG, comme tous les autres joueurs dans le secteur du GNL, n’a pas encore décidé d’investir.

Le pouvoir aux peuples La demande d’énergie mondiale est importante pour que ces projets se justifient du point de vue économique, mais il faut également tenir compte de l’emploi dans l’évaluation. Un marché du travail concurrentiel intense a empiré les dépassements de coûts de milliards de dollars dans le cadre de nouveaux projets de développement du GNL en Australie. « Si jamais quelques-uns de ces projets voient le jour simultanément en Colombie-Britannique, la demande de maind’œuvre sera tellement forte qu’il peut arriver la même chose qu’en Australie, dit M. Mohanty. Cela fait en sorte que de nombreux sous-traitants potentiels sont prudents quand il est question de faire des promesses selon les chiffres sur les coûts reçus. » Les promoteurs des projets hésitent également à présenter des chiffres. Les dépenses préliminaires associées aux immobilisations flottantes de l’exploitation sur barges de BC LNG Ltée dans le chenal marin de Douglas sont évaluées à 400 millions de dollars, prix qui a augmenté depuis à un montant qui n’a pas encore été divulgué. BC LNG détient un permis d’exportation pour 1,8 million de tonnes de GNL (environ 88 MPC de gaz naturel) par année. À l’autre extrémité, Progress Energy estime que son investissement dans un projet de terminal de 7,2 millions de

tonnes (351 MPC), près de Prince Rupert, se situera entre 9 et 11 milliards de dollars.

Sortir de sa zone de confort Jusqu’à maintenant, l’Ouest canadien est le maître de l’énergie. Les provinces de l’Est ont répondu avec prudence en ce qui a trait aux risques de la fracturation hydraulique. En Nouvelle-Écosse et au Québec, la pratique est sous l’effet d’un moratoire. Plusieurs provinces ont également mis en vigueur des moratoires sur l’uranium. L’incertitude plane sur les prochains développements d’uranium au Québec. Guy Hébert, le premier dirigeant de Strateco Resources, voit là un potentiel, il souligne que la propriété d’uranium de Matoush est pratiquement la jumelle de Rabbit Lake en Saskatchewan. Il mentionne que le projet peut s’avérer profitable même avec les faibles prix en vigueur aujourd’hui, et il sera encore plus profitable d’ici cinq ans. Par contre, le ministre de l’Environnement a refusé d’approuver l’exploration souterraine à Matoush jusqu’à ce que les Cris du territoire Eeyou Istchee, opposés à la mine d’uranium, y consentent. Au Nunavut, des forces similaires tirent dans toutes les directions. L’emplacement représente un défi, mais le gouvernement le soutien. Areva continue son processus d’évaluation environnementale pour sa mine à ciel ouvert proposée et le projet souterrain de Kiggavik. Le premier dirigeant de la petite société minière Kivalliq Energy, Jim Paterson, observe et apprend de l’expérience d’Avera. Il croit que l’avenir du marché de l’uranium et les qualités comparables aux projets de la Saskatchewan pourraient inspirer un nouveau district minier d’uranium au Nunavut.

Boisson énergisante Bien que les forces sociales, politiques et financières planent au-dessus de ces projets, la demande mondiale d’électricité en hausse justifie en grande partie le développement de ces projets. Comme le mentionne M. Gowdz, de Ziff Energy, vendre de l’électricité en Asie c’est comme vendre de l’eau dans le désert à une personne assoiffée. ICM

Être membre de l’Institut canadien des mines, de la métallurgie et du pétrole, c’est atteindre de nouveaux sommets, à titre individuel ou en tant qu’entreprise. C’est aussi appartenir à une communauté dynamique qui façonne le secteur minier d’aujourd’hui et de demain, tant au pays qu’à l’international. Joignez-vous aux 14 000 membres de l’ICM dès aujourd’hui.

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March/April 2013 | 57

Ventilation Air supply on demand TECHNOLOGY >>

By Krystyna Lagowski

Courtesy of Goldcorp

Many existing mine ventilation systems are often based on a “set and forget” mentality – a mine will set its systems for maximum airflow and keep them that way throughout the day. It is assumed that if air needs to be provided somewhere, it needs to be there all the time. But why provide air to areas that are not being actively used? Why not introduce a system that makes it possible to shut off airflow and move it somewhere else in a timely fashion?

The development team at Goldcorp’s Éléonore project install ventilation conducts along the exploration ramp. Airflow at the mine relies on an automated ventilation system furnished by SimSmart.

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Saving energy and even boosting productivity are the goals of automated ventilation. “Ventilation on demand (VOD) is the ability to have the right amount of air where you need it, when you need it,” says Cheryl Allen, principal engineer, ventilation, mines technical support at Vale. “You use automated systems to deliver VOD – we speak of the two simultaneously.” “With the older systems, we’d have to get a crew, we’d have to maybe build a bulkhead, maybe move heavy boards to change airflow in and out of regulators,” explains Allen. “The older systems can’t react quickly enough.” VOD, with fan and louver controls responding to data relayed from underground, directs the required volume of air to the places in the mine where it is needed. Automated ventilation’s inherently quicker reaction times and greater flexibility make a compelling business case to decrease energy costs where production is not possible, while increasing production where possible, says Andrew Dasys, president of the data analysis consultancy, Objectivity. During a 31-day case study done in concert with the Centre for Excellence in Mining Innovation (CEMI) to model the VOD business case, Dasys says, changing air only once per shift and redistributing unused air from two operating levels provided a potential production increase of a quarter to half a million dollars, by allowing an additional scoop tram to operate. Sudbury-based CEMI has ongoing partnerships with operations to advance the understanding of VOD in Canada. The next phase of CEMI’s VOD project is to determine how mines can increase production potential using VOD.

Courtesy of Simsmart

technology >> VENTILATION SimSmart’s 3D ventilation modelling tool can be used to track real-time conditions as well as run simulations.

SimSmart software is also employed at Goldcorp’s Éléonore development in Quebec.

Existing infrastructure optimized

Communication is critical One of the keys to optimizing airflow is an effective minewide communications system, says George Hughes, research and development program director at CEMI. “That system has to control at least three components – the variable frequency drive fan system, auxiliary fan operation and some way of opening and closing regulators,” he says. The system Hughes describes is in place at Xstrata’s Nickel Rim mine. The network there enables individuals to access the Internet while underground. It also has a mobile and stationary array of air quality sensors, and radio frequency identification system (RFID), to track where people and vehicles are throughout the mine. To exploit these tools, the mine uses a proprietary threedimensional (3D)-modelling and simulation software from SimSmart technology to optimize airflow in the mine. “You can create a 3D model, connect it in real-time to sensors and fans, and control your network from that model,” says Sarah Perno, director of sales at SimSmart. The software, known as SmartEXEC, gives mine operators the power to control ventilation using a range of options which can include physical measurement or mass-flow balance that calibrates the best airflow for a specific area based on depth, temperature, air quality and demand. Using mass-flow balance control, the actual VOD flow can be compared to an ideal model value and then adjusted to provide maximum energy savings. While in the development stage, a mine can design, test and validate the implemented ventilation system to ensure it meets all health, safety and operational requirements. The VOD system at Nickel Rim also has instruments mounted on the mobile fleet, which measure air quality and air quantity, in addition to instruments at fixed locations in the mine. The

Pat Dubreuil, vice-president of operations, sales and marketing at Bestech, says improved technology is the biggest enabler for automating underground mining ventilation. “Better technology has liberated automation because now we have the ability to transfer and transport data to and from different points, at full speed and in large quantities, and we can do so in a very reliable manner,” he says. Bestech has developed NRG1-ECO, a mine-wide energy management tool that can be applied to ventilation and other processes in an operation to reduce a mine’s energy consumption. This product is compatible with the ventilation systems already being used by a mine and it is equipped with a userfriendly web-based human machine interface (HMI) that bridges gaps in the mine’s existing range of process controls by allowing real-time viewing and control of the system. It is currently in place at Vale’s Coleman mine. NRG1-ECO works with real-time locating systems, tagging systems based on various technologies, such as RFID or Wi-Fi, to detect tagged entities or equipment and enable or disable process control based on need.

March/April 2013 | 59

Courtesy of Bestech

technology >> VENTILATION

The open architecture of Bestech’s NRG1-ECO technology allows it to integrate with new or existing mine infrastructure and control ventilation equipment such as fans and louvers.

“Many mines have some process logic controllers (PLCs) controlling fans, or they have placed their pumps on PLCs,” explains Dubreuil, “or have compressors underground, and they may have automated some of this. The mine may also have implemented tagging and tracking technology, where they provide a tag to a miner, which identifies his location in the mine. You also have tags on the vehicles, to identify the location and help us identify the demand for air.” The locating system can detect movement, and detectors are placed at different intersections in various blocks and zones throughout the mine. When individuals enter or leave a block, the NRG1-ECO system knows who it is, what their air demand is, and it provides air accordingly, through the software. “The software sends the command to the PLC, which tells the starter to run, for example, at 20 per cent of capacity and to keep it running until a certain vehicle leaves that zone,” says Dubreuil. “There are different types of starters underground that can run equipment at different speeds, so you can operate at 20, 30 or 40 per cent capacity.” The software does the calculations in real-time, but Dubreuil says each mine has different needs. “You may want a certain zone of your mine to be running on manual, another to be on automatic, and another to be reactive to the environment,” he says. “Our system gives you the capability of managing all these different zones according to the needs of the mine.” Dubreuil cautions that underground communications can go down, so it is vital to have automated systems that are 60 | CIM Magazine | Vol. 8, No. 2

failsafe, with features that make them semi- or fully autonomous until communications are resumed. “We have designed our system to have the ability to run a level or a zone on its own, should it lose communication with the NRG1-ECO server on the surface,” he says. “If communication systems go down, our hardware/software combination will go into fail-safe mode.” Dubreuil explains that the fail-safe mode can be pre-programmed by mine ventilation experts to decide what and how the system should react in the event of communication failure. It could turn on all ventilation at full capacity in order to be safe, for example, and re-evaluate the environment once communications are established.

The winds of change Dubreuil foresees changes coming to regulations related to ventilation in Canada. He cites class action lawsuits in South Africa where miners were exposed to high particulate levels and are now suffering from silicosis. “The ministry here in Canada is saying they want to audit air quality and monitor what’s going on in underground mines,” he says. “There hasn’t yet been legislation imposed to monitor air quality, only regulatory rules that dictate certain gas levels.” According to Vale’s Allen, automated ventilation needs to pick up momentum since current systems are the biggest waste of energy and therefore have the biggest potential to become more efficient. “We have challenges underground,” she says. “We’re getting deeper, our mines are more spread out and our costs are continuing to increase. It’s more expensive to mine today. We have to do something and this is a good place to start.” CIM

SPECIAL REPORT Already one of the world’s mining superpowers, Brazil has massive undeveloped potential. Modern explorers are still working over hundreds of former artisanal mine sites, and the country’s economy continues to pick up steam. But Canadians looking into doing business there should be wary of regulatory snarls and a business culture with its own particular rules.

INSIDE: EXPLORERS – HOPING TO COME UP BIG INFOGRAPHIC – A SNAPSHOT OF THE ACTION OPINION – MINING LEGISLATION IS CHANGING UNDERFOOT SUPPLIERS’ PERSPECTIVES – CANADIAN BUSINESSES INNOVATE TO AVOID TAXES PROJECT PROFILE – THE RAGS TO RICHES STORY OF LUNA GOLD’S AURIZONA MINE

Workers operate a drill at the Aurizona gold mine Courtesy of Luna Gold

On the tip of the iceberg Brazil is demanding on explorers, but potential rewards are huge By Antoine Dion-Ortega

Courtesy of Marcelo Schwarz

SPECIAL REPORT

INV Metals’ Marcelo Schwarz (far right) says, while other South American countries may attract higher exploration spending, Brazil has outsized geological potential.

“The dignity of movement of an iceberg is due to only one-eighth of it being above water.” - Ernest Hemingway

xploration companies that operate in Brazil can probably identify with Hemingway’s admiration of the large and slow-moving. With only one third of its 8.5-million-square-kilometre landmass geologically mapped, Brazil is literally an emerging country, with vast parts of its territory shadowed by the Amazon rainforest. On one hand, nobody doubts the country’s huge geological potential could double or even triple its current production. But on the other, Brazil moves at its own pace, mired in bureaucracy, with red tape often hindering exploration and development projects. For the exploration companies that sit on the tip of the iceberg, the country certainly offers a great lesson in patience. “I can understand why Peru, Ecuador and Argentina have more companies and higher budgets in exploration than [what] Brazil has,” says Marcelo Schwarz, country manager for Brazil at INV Metals. “But when I talk with friends who work in these countries, we always agree that Brazil has more geological potential.” Schwarz’s feelings are common in exploration companies. Everyone agrees that Brazil is lagging behind. In fact, 62 | CIM Magazine | Vol. 8, No. 2

according to a recent report on mining by Global Business Reports, Brazil attracts 11 times less exploration capital per square kilometre than Peru, and 18 times less than Chile. In 2010, the country received only three per cent of global exploration expenditure. The main debate around exploration in Brazil is centred on who – between the state and the private sector – is responsible for detailed mapping of the country’s resources. The Serviço Geológico do Brazil, or CPRM, Brazil’s national geological service, considers this task incumbent on the private sector. Mining companies believe it should be the CPRM’s mandate. Even though CPRM has commissioned a series of surveys to evaluate the hydrology and geology of the country, the debate is far from being over. Schwarz, who is Brazilian, is well aware of this predicament. “I know lots of people who work at CPRM, and what I can say is that they have great people, but they don’t have good budgets,” he says. “So it is pretty hard for people who work there to do a proper job, and that is why Brazil has this lack of geological mapping throughout its territory.”

The less you rely on maps, the more you rely on people Still, blind discoveries are quite rare in Brazil, according to Brown, who is unfamiliar with INV’s Itaporã. “Generally speaking, Brazil has not arrived at the stage where companies make blind gold discoveries based on high-tech exploration,” he explains. In his experience, projects are best discovered using previous signs of mineralization. Where exploration companies cannot rely on geological maps, they rely on people – starting with the garimpeiros, or artisanal miners. This was obvious in Amarillo’s case. Both of its flagship properties were previous mining areas from as far back as colonial times. The Mara Rosa project, where the Posse gold deposit was found, was partly mined by the Portuguese before being rediscovered by BHP in 1982. Amarillo acquired it in 2003. Its other property, the Lavras do Sul project, is located in the mining region of Rio Grande do Sul, in what Brown calls “the biggest garimpo [artisanal mining] area south of the tropic of Capricorn.” In Brazil, history might be your best ally. “Every single gold deposit I can think of in Brazil has been found where there was an old garimpo,” adds Brown. “When you think of all the juniors out there, they all were garimpos at one stage. The trick has been to find which ones to spend your money on. There are probably 5,000 garimpos in Brazil.” Cancana Resources followed a similar trend with its Valdirao manganese project, in the state of Rondonia. “We originally identified diamond showings that were presented to us by locals who have been doing artisanal working,” says Andrew Male, CEO and director of Cancana. “They said they knew where the kimberlite was, and we took the risk of proceeding with an exploration program and in turn

Courtesy of Marcelo Schwarz

began developing the kimberlite.” It was while working on the kimberlite diamond project that one of Cancana’s geologists came across some manganese, to which Cancana has now transitioned. “On the kimberlite project, the initial knowledge came from garimpeiros, but on the manganese project, it came from farmers, who identified the resource on their property,” Male says. CPRM was of no help to Cancana, according to Male. “The area where we are is still not mapped at all,” he says. “It is even difficult to find a road map for some areas.” He has noticed that many landowners in Brazil know exactly what they have on their property but often do not have the means to actually launch exploration projects. “There’s not a lot of exploration capital in Brazil for internal development,” Male explains. As locals are often unable to gather enough capital, rumours about resources usually spread around until they reach the ears of a public exploration company able to raise money on the capital and financial market. “As an example, I just received an email from a guy who found us on the Internet, saying ‘I’ve got gold and diamond properties, are you interested?’” says Male, who will review the information and possibly send a geologist to check out the claims. Networking – getting to know the people who will lead you to the right spots – is of great importance for explorers. This worked to the advantage of Eagle Star Minerals, which owns three properties in Brazil. The company began by looking for iron ore but later switched to phosphate after it was approached by a group of Brazilian geologists who had been working on the mineral for decades. “They had a theory on how to find phosphate in Brazil,” says Patrick Brandreth, the company’s senior manager. “We took a bit of a risk, but it seems like it has paid off.” No high-tech maps were needed for Eagle Star, either. “[Our success] is basically the team that we built around our company, with our Bomfim project,” Brandreth says. “We brought a gentleman by the name of Doctor Campos on board, who has been working in the field for over 15 years. We used our contacts down in Brazil to source the best people. That is how we managed to acquire the local knowledge, and that is what our whole exploration team is now: solely Brazilian.” And local content is key to any team, as it is not easy for an outsider to come down to Brazil and simply begin working. “You really need to build up your network, know the right people, and walk in the same circles as the Brazilians,” suggests Brandreth. CIM March/April 2013 | 63

SPECIAL REPORT

Peru invested twice as Vale conducting exploration much in geological surdrilling in Brazil veys as Brazil in 2009, with a territory seven times smaller. “Peru has a much better geological database,” points out Rick Brown, vice-president of business development at Amarillo Gold. His company works exclusively in Brazil, attempting to define gold resources. “In Australia or in Canada, the provincial geological surveys are getting down to 1:25,000 [scale]. There is nothing like that at all in Brazil today.” This does not mean that CPRM’s services are of absolutely no use. In fact, they helped in the discovery of INV’s Itaporã gold project, in Pará state. “INV got some of the geophysical airborne surveys from CPRM, and then got the claims,” says Schwarz.

OPINION

Probable changes to Brazilian mining and royalty legislation BY CARLOS VILHENA

he Brazilian government has been signalling for years Strategic minerals now that it will propose significant changes to BrazilThe Brazilian government currently identifies potash and ian mining and royalty legislations. Recent state- other fertilizer minerals as strategic. Brazil is a huge producer of ments from the government indicate the proposal is in its agricultural goods, but it is heavily dependent on potash final stages of preparation and should be submitted to imports. Special rules for fertilizer minerals will likely seek to Congress soon. incentivize investment in those minerals’ This regulatory framework has exploration and production. Good been eagerly awaited by the mining opportunities should present them“Unless the decision sector, but its text has not yet been selves in these areas in the near future disclosed and openly discussed. the creation of special rules for to reduce the number and Nonetheless, from what government strategic minerals is something that officials have said publicly, I believe should not be of great concern for minof grants of mineral there will be four major areas of ers. But the devil is in the details, and we change: (i) the system for staking new currently do not know exactly what the rights is reversed, ground for exploration; (ii) establishgovernment will propose on this front. ment of fixed mine lives; (iii) creation the Brazilian mining of special rules for strategic minerals; Royalties sector will deteriorate.” and (iv) a likely increase in royalties. Due to a policy of incentivizing exports implemented in the late 1990s, the producing states have Staking of new exploration ground The government appears to want to move from a first- very little room to tax mineral enterprises and are dissatiscome, first-served system to a public bidding process to fied with current legislation. What they mostly get are roygrant exploration and mining titles. This move could have alties and those are low when compared to other countries. a significant impact on exploration activity, especially for Nonetheless, the overall tax burden on mining (e.g. local, greenfield areas. Moving from the current system, where state, federal taxes) is very high. Very little has been private companies have the initiative to stake ground for divulged on how the government intends to deal with royexploration, to a model where the government is responsi- alties, but I expect there will be an increase to please the ble for organizing bidding rounds may significantly reduce producing states. This increase will likely be offset by the investment and mineral exploration opportunities, at least reduction of other taxes, however, so investors should not in the short and medium terms. In addition, the govern- expect an increase in overall taxation of mineral enterprises. ment’s department of mineral production will have to be A major concern is the transition from the old law to the totally restructured to cope with this duty. The current agency does not have the financial and human resource new one. What will happen to existing claims and explostructures to carry out this mission. Such a change is likely ration licence? Will they be able to carry on? Will producing mines retain mining rights until the depletion of their to take quite some time. deposits, or will set periods of time be imposed? These and Fixed mine lives many other important questions are creating uncertainty Under the current system, mining concessions are good and there has not been any clear indication from the govfor as long as the mine keeps running, but that is likely to ernment as to what the answers will be. To add to this concern, there has been a significant reducchange. Concessions will probably come with an expiry tion in the granting of mineral rights for both exploration and date in the future. As long as the length of time is approprimining. This reduction has occurred gradually for more than ate for each project, and rules for renewal are clear and a year, and a drop in the number of exploration licences objective, there should not be much opposition to this idea. granted, may, in the long run, hinder the knowledge of Brazil’s The issue right now is that the government has not been mineral endowment. A reduction in the number of mining clear on what the proposed length of time will be, nor the criteria for renewal. I expect, however, that the proposal concessions may not only affect Brazilian mineral production will be balanced and well accepted. but also significantly increase so-called political risk.

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The effects have already begun to be felt. Projects that are ready to start operations have been unreasonably delayed by the government’s stance. This delay creates unnecessary uncertainty in the industry, making both the sector and the country less attractive to domestic and foreign investors. Unless the decision to reduce the number of grants of mineral rights is reversed, the Brazilian mining sector will deteriorate. The reduction in the number of grants of mineral rights may also be an indication of the level of discretion the government intends to exercise within the context of the new regulatory framework. One should keep in mind that Brazil’s legislation establishes very clear-cut rules for exercising discretion. Discretionary acts must be justified and must be limited by the principles of reasonableness and proportionality. Therefore, the government’s reduction in the number of grants of mineral rights must be subject to consideration as to its reasonableness and proportionality in view of its impacts on the parties concerned and on the mining sector as a whole. Hopefully, we will soon have the details of the government’s proposal. Brazil is a mature democracy and a strong economy. I am confident that the country will be able to reform its mining legislation in a sensible and balanced manner. CIM Carlos Vilhena is a partner of Pinheiro Neto Advogados in Brasilia, and head of the firm’s mining practice.

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ACHIEVEMENT Bestech on best employer list again Bestech has been named one of Canada’s 50 best small and medium employers for 2013. It is the second straight year the company has received this honour, which is given to top employers with 50 to 399 employees. How employers have “captured the hearts and minds of their employees” is a determining factor for which organizations are named the “best” employers. Employees provide feedback based on both their workplace and work experience; the information is used to measure their level of engagement. The study examines various engagement drivers: managing performance, career opportunities, recognition, organizational reputation, pay and senior leadership. “We are so proud to be recognized again on the list of 50 Best Small & Medium Employers in Canada,” said Denis Pitre, co-CEO of Bestech. “One of our priorities at Bestech is high employee engagement. The result of this survey is evidence that our employees are aligned with the company’s objectives. We realize that our employees are the foundation of Bestech ’s success and therefore, it is important to implement practices that will encourage them to be committed to our team.”

Tip-toeing around taxes Canadian suppliers must deliver unique products to access the Brazilian market

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With vast mineral reserves, an educated workforce, improved infrastructure and a recent increase in privatization, international interest in Brazil’s mining industry is high. More mineral-rich areas are opening up, attracting investors and suppliers from around the world. Currently, there are 45 Canadian mining equipment suppliers and 20 service suppliers working in the country. “Brazil is a big market with a lot of opportunities,” says Geraldo Pinto, international business development manager at Marcotte Mining Marcotte Mining Machinery Services Inc. is able Machinery Services. “The economy to export its equipment to Brazil free of duty in Brazil is very stable. For eight because it has no competitors in the country. years now, with the last president, Lula da Silva, and more recently President Dilma Rousseff, the country has been doing very in Brazil: “Brazil has a large local industry that supplies over well.” Although Pinto says Marcotte is more focused on 90 per cent of its internal demand for mining equipment Mexico, Brazil’s underground mines could mean big busi- and services. It’s a very competitive market, and the Brazilness for his company that manufactures and supplies ian government tries to protect this local industry by underground utility vehicles. imposing high taxation on imported equipment, especially Over the last decade, Brazil has gone from a struggling equipment that is also manufactured locally.” In fact, Brazil to a thriving economy, and is now considered a market of now has as many mining suppliers as Canada, and the strategic importance for investors. Its economy is ranked number of Brazilian suppliers – up 25 per cent in the last seventh globally, with a GDP of US$2.4 trillion. Mining and two years – is growing fast. mineral processing account for an increasing portion of its The Brazilian government protects the local industry economy; they brought in US$39 billion in 2010. well, says Pinto. “Taxation ends up being around 50 to 70 per cent of the product price [cost, insurance, freight]. Taxes make it tough With this level of taxation, many products from overseas But challenges remain for foreign suppliers, not the least cannot be competitive against similar products manufacof which is high tax rates. “Honestly, Brazil is not the path tured in Brazil.” of least resistance,” says Jean-Phillip Bouchard, mining Some countries, including the U.S., Germany, France, account manager at ISAAC Instruments. “It can be a chal- Italy and China, have established local manufacturing facillenging market, but it is a considerable mining market, and ities within Brazil as a way around the taxation problem. one that definitely requires attention.” ISAAC Instruments Canadian companies have yet to make much headway in produces vehicle telemetry solutions for both open-pit and this regard, aside from a few exceptions like Metso. “Canaunderground mining vehicles. dian suppliers of equipment also tend to be small- toThe company, says Bouchard, is not drawn to the Brazil- medium-sized companies and not able to invest huge ian market in particular, but its burgeoning potential amounts to have a facility there,” says Brandenberger. But there is good news. Importers can claim a tax makes it a strategic target. “Our objective is to be in the top reduction – down to zero per cent duty – if the product 500 mining companies as far as what we offer, and a large they are importing cannot be sourced from the local number of our prospective customers are in Brazil,” he industry. “Before they import,” explains Pinto, “they have notes. “North and South America are the main focus for us to file a claim with the government, and say: ‘I plan to right now.” The enthusiasm of Canadian business ventures is offset import this machine, but it’s not manufactured in Brazil, by the Brazilian government’s protection of local industry, and there’s no conflict with Brazilian companies, so we explains Franz Brandenberger, Canada’s trade commissioner would like to have a tax reduction.’” Marcotte is thus able

Courtesy of Marcotte Mining Machinery Inc.

By Correy Baldwin

to sell its vehicles in Brazil without paying any duty. “We have no local competition,” says Pinto. “Our main competitors are here, in Canada.” Taxes may be high, says Pinto, “but on the other hand, Brazil is very welcoming to new technologies and new products that don’t compete against Brazilian products.” This means that international companies must provide a product that is innovative, specialized or superior in quality. Most sales of Canadian mining equipment are for specific niche markets. Brandenberger cites exploratory drill rigs as an example of a Canadian product in demand: “Canadian drill rigs are much more expensive than the local ones, but they are state-of-the-art equipment and very reliable.”

SPECIAL REPORT

Local connections crucial “Brazil is a very conservative economy,” says Bouchard. “You have to either implicate local business or demonstrate that your solution is very unique and cannot be found locally. This way, you can fit into grey areas of their taxation so you don’t end up suffering from it.” Bouchard also mentions the possibility of working alongside Brazilian companies – striving to complement, rather than compete with, each other. Local expertise will keep Canadian companies on their toes. “No doubt the quality of what the Brazilians produce is as good as what we can produce in Canada,” points out Bouchard. “They have very knowledgeable, educated people. It’s still a developing country in some ways, but technologically it’s very advanced.” Finding a local dealer and connecting with local contractors is important for Canadians looking to access the market, says Pinto. “It’s important for Brazilians that they work locally [to source] service and parts.” Local connections also help break down cultural barriers. “They’re more comfortable when you make a presentation in Brazil as a Brazilian,” says Pinto, who is Brazilian himself. “And they know that when they have any issues, our dealer is right there, they can call them right away. Otherwise they can call me, and speak Portuguese. We don’t have any misunderstandings about what they need.” The success of suppliers from Canada may often rely on this level of cultural awareness. Pinto can speak five languages – English, Portuguese, Spanish, Italian and French – and is working on Russian and Japanese. ISAAC Instruments’ Bouchard has recently learned Portuguese as well. Still, the best way to kick-start business is to get business players together. Trade shows and trade missions are an important part of this networking, creating opportunities for companies to connect with Brazilian clients. This is especially true of missions held in Brazil. “We’re looking for face time with the end-user,” says Roger Perron, business development manager, Machines Roger International. “We need to get out to Brazil and visit the mines, and understand what their needs are and how our product can fit in with their requirements.” Machines Roger manufactures and exports the specialized V-30 68 | CIM Magazine | Vol. 8, No. 2

drilling head, designed for drilling large-diameter boreholes underground. After finding a customer in Brazil, Machines Roger is now looking to expand its presence in this market. With this in mind, last June, Machines Roger hosted a Brazilian mission in Val d’Or, Quebec, through 48e Nord International, an organization which promotes foreign trade in the Abitibi-Témisquamingue region of the province. “It was a good experience,” says Perron. “There were some large companies there, and they gave us a good perspective. It’s a special place to do business, and they were helpful in suggesting means of participating in their market differently. Generally we’re seeking visibility for our product, but it’s also important to understand the dynamics of every country that we need to do business in.” 48e Nord also works with the Canadian Association of Mining Equipment and Services for Export (CAMESE) that organizes and participates in export trade missions under the Canadian banner, often once a month, including the organization of Canadian pavilions. “CAMESE is in charge of recruiting companies all over Canada, and paying for their participation,” says Brandenberger, who works closely with the organization. “In Brazil, we, as the Canadian government, promote trade shows and organize parallel events to them, such as site visits. We organize matchmakings and meetings, and generally bring opportunities to the companies joining us for a trade show. We try to increase and to enhance the Canadian participation.” Brazil’s large trade show – the biannual Exposibram – will be held this coming September. The last time it was held, in 2011, Canada had 25 exhibitors. This year, however, the Canadian presence will be much smaller. Scheduling changes at Exposibram made it impossible for CAMESE to organize a pavilion, says Roy Jakola, the organization’s director of business development. Several Canadian companies will be attending independently, but Jakola admits interest is down: “The Brazilian market is of lesser importance to our members. The only true client seems to be Vale, which tends to draw suppliers to Brazil.” For his part, Brandenberger remains optimistic that Canada’s role in Brazil will only increase, and likely in new areas. “I expect to see growth in the near future in exploration,” he says. “Brazil is a priority market for exploration, with a lot of opportunities, especially for junior companies.” He also sees potential growth in the environmental sector and in engineering services. “The majority of mines in Brazil are open-pit,” Brandenburger points out. “There are over 2,000 open-pit mines and only around 200 underground, which means there is a lack of technology and expertise in underground mining.” Canada, on the other hand, has plenty of experience underground, which will be increasingly in demand as more underground mines open in Brazil. Brandenberger advocates for a commercial bilateral agreement between the two countries, pointing to the current agreement between Canada and Chile as an example. Such an agreement, he says, would help give Canadians the boost they need. CIM

From broke to booming At a time when gold project disappointments frequent the headlines, it is refreshing to encounter an operation that has bucked the trend. Flirting with bankruptcy as recently as 2011, the Aurizona gold mine, owned by Luna Gold, in northeastern Brazil, produced over 74,000 ounces of gold in 2012 and is now generating a net income of about $3.5 million per quarter while in full expansion mode. BY VIRGINIA HEFFERNAN

SPECIAL REPORT

Courtesy of Luna Gold

The build for the Aurizona mine went very poorly, but the company revamped its financial and operational management and turned the project into a success.

e spent our last few dollars on fuel in June 2011,” says Duane Lo, CFO of Luna Gold. “But within three months we went from barely surviving and not being able to meet our payroll, to meeting our feasibility production target of 5,000 ounces of gold per month.” The open pit mine is a shear-hosted orogenic gold deposit consisting of saprolitic, lateritic and low-sulphide fresh rock ores. This year, it is expected to produce at least 95,000 ounces at cash costs of about $710 per ounce – a big step up from 42,000 ounces at cash costs of more than $1,000 each two years ago. Once Luna completes its Phase 1 expansion currently underway, annual gold production is expected to reach 125,000 ounces, with new economies of scale keeping costs in check for this year and beyond. Aurizona has come a long way since its days as a joint venture between Eldorado Gold and Brascan. The part-

“W

ners decided to sell their 660,000-ounce gold resource to Luna in 2007 due to the low gold price and limited accessibility of Aurizona at the time. Luna quickly increased the resource by about 50 per cent, but, just as the company was gathering a construction team, the 2008 financial crisis hit. Unable to finance development on its own, Luna brought in a trio of angel investors who led an equity financing that injected $25 million into the company for the project. Vancouver-based Sandstorm Gold also contributed $20 million in cash and shares in exchange for the right to buy 17 per cent of the life of mine gold production for US$400 per ounce. But the influx of cash was not enough. “The build went poorly and there were a number of problems with management and the skills needed to build a proper mine,” says Lo. At the time, the company had not hired an EPCM consultant, and instead relied on a patchwork

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PROJECT SPECS

Courtesy of Luna Gold

of management, execution and equipment and services suppliers to build the mine. “In early 2010, we discovered that the build was not on spec or on budget, and the company was on the road to bankruptcy again,” he adds.

SPECIAL REPORT

180 degrees So how did Luna turn such a broken endeavour into a gold mining success story when soaring capital and operating costs are crippling so many other projects? Vice-president of operations Peter Mah attributes the turnaround to improved operational management, a motivated workforce, and a striving towards best practices in mill recovery, operating time, throughput and grade control. In mid-2010, the company brought in an experienced Canadian EPCM company and recruited John Blake as president and CEO. John then hired Mah and general manager Jim Healy in early 2011 to overhaul the mine site management. Most importantly, contract mining was replaced by an owner-operated set-up. That allowed a reduction in cash costs to $651 per ounce by the fourth quarter of 2012. A fully owned and operated fleet consisting of 12 Caterpillar 740B articulated dump trucks and three Cat 374 excavators replaced a mash-up of heavy equipment operated by three separate contractors. “It was a complex combination of doing it all at once or, as we liked to call it, ‘fixing the car as it was moving down the highway at a hundred kilometres per hour,’” says Mah, who gives credit to the wizardry of Healy and their new deputy general manager, Alberto Reyes. “We became owner-operated and took our workers from the local workforce, trained them, had them fully certified, and shattered the contractors’ production records, while reducing safety incidents by more than half.” Over 720 of the 900-plus workers live within 40 kilometres of the mine in the state of Maranhão, with the remainder coming from other parts of Brazil. When Luna brought in Caterpillar’s representative in northeastern Brazil to train its staff, he was initially skeptical that the lag in education was too large to be made up. But despite first impressions, some of Luna’s employees were among the top graduates of Cat’s mobile training program. Luna complements the Cat training with on-site education. The company also supports its workers with programs in literacy, furthering their basic education and promoting local culture and dance. “The average education level is grade four and the state is the second poorest in all of Brazil, so there was big hill to climb,” says Mah. “But the schooling level is not a measure of the intelligence and capability of the people in the area.”

The Caterpillar 740B articulated dump trucks each haul twice the capacity of the company's original vehicles.

MINERAL RESERVES Measured: 10,782 kt Grade: 1.13 g/t Oz of gold: 391,000 Indicated: 67,231 kt Grade: 1.28 g/t Oz of gold: 2,775,000

PLANT Target throughput: 4,300 t/d Leaching: Carbon-in-leach Plant operating cost: US$12.14/t Mine operating cost: US$3.38/t

jumped 79 per cent to 720,000 ounces. Surface exploration has identified another 15 targets near to Aurizona. “Towards the end of the first quarter, we’ll be updating our resources and reserves and with that, considering our previous conversion rate from Measured and Indicated Resources into reserves, we could be looking at a 20-year mine life on Piaba alone,” says Mah, adding that Luna has applied for a mining licence on Tatajuba and is working on resource estimates for other nearby targets on the 15,500hectare land package. “There’s a really good brownfield opportunity here that we’ll leverage into Phase 2,” he points out. By doubling the capacity of the gravity and carbon-inleach (CIL) processing plant to 10,000 tonnes per day at a cost of $50 million, Phase 1 will increase Aurizona’s annual gold production to 125,000 ounces. The expansion is funded by a combination of internal cash flow and Sandstorm’s contribution – up to a maximum of $10 million. As part of the expansion, Luna will add downstream plant throughput capacity by replacing the existing thickeners and by installing additional CIL tanks, elution and acid columns, an intense leach reactor, and a crusher and wet screen in front of the SAG mill. Because of the deposit’s

Putting bad luck out of the picture Concurrent success with exploration on the project’s two main deposits, Piaba and Tatajuba, gave Luna the confidence to launch Phase 1 of its expansion and to examine the feasibility of a Phase 2 expansion of up to 250,000 ounces per year. A 44,000-metre drill program in 2011 boosted Measured and Indicated gold Resources by 250 per cent to 3.2 million ounces of gold, while Inferred Resources

Photos opposite page: 1. An operator adjusts equipment at Aurizona; 2. Some of the employees at Aurizona were top graduates of Caterpillar's mobile training program; 3. A Caterpillar 374 excavator loads one of Luna Gold’s 12 740B articulated dump trucks; 4. Jim Healy, general manager of the Aurizona mine, reviews the pit; 5. The Luna Greenfields property encompases 220,000 hectares and over 100 historical gold workings. Courtesy of Luna Gold

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Courtesy of Luna Gold

conventional metallurgy and moderate overburden (the strip ratio is about 5:1), Mah is not anticipating any major technical difficulties as throughput expands. Water management at the site, on the other hand, can be a challenge. “There is the very dry season (July to December) and the very wet season (January to May), with almost nothing in between,” explains Mah. The mine plan, a hold-over from older days, was approved by regulators and therefore never replaced. “That [seasonal] factor was not built into the mine plan in terms of water management and tailings storage.” Recent conditions have been drier than usual, and the company has occasionally had to curtail production to conserve water. To mitigate the problem and provide added water storage, Luna increased the height of the tailings dam to 27 metres and is designing successive raises and facilities as production increases. As for the future beyond Phase 2, six deep holes were drilled at Piaba in 2012, extending mineralization as deep as 600 metres. This has Luna wondering what lies beneath and whether an underground mine could lurk below the pit. The exploration potential on Luna’s concessions surrounding Aurizona is promising. The 220,000-hectare Luna Greenfields property contains more than 100 historical gold workings and the geology compares well with the gold belts of West Africa and the rest of the Guyana Shield. Positive results from initial drilling on the Touro target (including 26 metres grading 1.26 grams of gold per tonne) have encouraged Luna to commit a modest $3 million to continue exploring the area in the first half of 2013. The budget could increase if eight million warrants, at a strike price of $3.50, are exercised later this year. “We believe there are another two, three or perhaps more Piaba-style deposits in the Luna Greenfields, but due to our cash constraints this year, we can’t drill it out at the rate that we would like to,” says Mark Halpin, vice-president of corporate development. “If the warrants come in, we’ll bank about $28 million and some of that could be proportioned to Luna Greenfields.” CIM

Sandstorm Gold signed a streaming agreement for 17 per cent of Aurizona's production at $400 per ounce.

The $27-million trade off The streaming agreement between Luna Gold and Sandstorm Gold is one of those transactions that looks like a good idea at the time but becomes increasingly onerous as mine reserves and production grow. It could serve as a cautionary tale in these anxious times, when securing more traditional sources of financing – even for good projects – is challenging. When the streaming deal was signed in March 2009, to allow Luna to pay for construction, Aurizona had 909,000 ounces of Measured and Indicated Resources. That figure now stands at 3.2 million ounces, its share of which Sandstorm has the right to buy for $400 per ounce. And the resource base is growing. As a result of its obligation to Sandstorm, Luna receives a weighted average price of only $1,479 per ounce of gold if the spot price of gold is $1,700 per ounce. At a rate of production of 125,000 ounces per year, that is a $27.6-million annual hit to cash generation that current Luna management could do without. But Brazil’s Maranhão state has inadvertently come to Luna’s rescue with a tax break aimed at increasing income and employment for the state and its residents, which somewhat offsets the loss from the gold stream. As of 2012, Aurizona is eligible for a reduction in corporate taxes – from 34 per cent to 15 per cent – for the first 10 years of production. That amounts to an extra $70 per ounce – or roughly $7 million – that goes into Luna’s earnings each year. If Luna goes underground at Aurizona, Sandstorm will be able to buy 17 per cent of that production for US$500 per ounce. But if Luna finds any new resources in the promising greenfield concessions around the mine, the junior will be able to keep those ounces to itself. Assuming Aurizona continues to provide a healthy flow of profits, it is a safe bet Luna will not be signing away any more rights to future production.

CIM community Events

Reinventing the mill Industry examines how to adapt to the future at CMP 2013 By Dinah Zeldin Courtesy of Osisko

Alternative comminution technologies, protocol can help establish how lower improved process control, and applied grade or difficult ores can be processed geometallurgy were central to discussions at most efficiently,” he says. the 45th Annual Canadian Mineral ProcesStudent attendees – 32 of which were sors Conference. The event, held from Jansponsored by CMP – also contributed to uary 22 to 24 at the Westin Hotel in Ottawa, the discussion. In his CMP Essay Compefeatured 34 presentations and attracted over tition, winning presenter Syed Saad Ali of 650 attendees. McGill University demonstrated how the With more variable and lower grade ores surface energy of particles is related to feeding processing facilities, today’s plants their response to flotation. must not only grind minerals finer than ever The conference was also an opportu– to particles 74 microns and less – but nity to showcase some of the hardmust also optimize plants to process a range working people in the processing world. of grades and mineral compositions. This Denis Cimon, vice-president of technical was the catalyst for dialogue at the conferservices at Osisko, was recognized as Minence’s round table discussion, “Regrinding Denis Cimon at the Canadian Malartic mine eral Processor of the Year. Cimon was below 100 microns. What we know. What manager of the Canadian Malartic operawe don’t know. What we need to know,” moderated by Donald tion before becoming a key member of Osisko’s head office in Leroux, principal consultant for Triple Point Technology. Montreal. He was honoured for surmounting both technical Liberating valuable minerals from finely disseminated ore and social challenges to make each project he has touched a bodies requires rocks to be pulverized into ultrafine sizes, success. according to Leroux. This means grinding technology must “As manager at Malartic, I had to prove the project was adapt. “Generally speaking, ball mills are efficient for down to technically and socially feasible,” he explains. “It was difficult about 74 microns but rapidly lose efficiency when grinding to from a processing standpoint because we were dealing with a finer sizes,” he explains. “There are alternative technologies type of rock that is very resistant to breakage, so the wear rate like the tower mill, the ISA mill and the stirred mill, available on equipment was very high. On top of that, it is a huge on the market, that make better use of energy, but there are still open-pit mine very close to a community, so getting social challenges.” Among the challenges is maintaining separability licence to go ahead was a challenge.” of valuable minerals, as particle sizes are reduced. This year’s event also featured five short courses that The panel discussion, which drew over 200 attendees, fea- attracted 150 participants. “We went from three to five courses tured six participants: Mike Larson, senior metallurgist at because we wanted to offer more variety,” says Leroux, a pastXstrata Technology; David Rahal, product manager of fine chair of CMP. Topics included grinding, chemistry, process grinding at FLSmidth; Louis Steyn, product manager of grind- control and metal accounting. CIM ing, Outotec; Michel Brissette, account executive at SGS-Lakefield; Jan Nesset, consultant at Nessetech; and Peter AWARD WINNERS Radziszewski, expert on grinding at Metso. According to LerMINERAL PROCESSOR OF THE YEAR: Denis Cimon oux, the audience was engaged, focusing questions on how to RAY MACDONALD VOLUNTEER: Richard Robillard select and operate appropriate equipment, as well as on how BILL MOORE SPECIAL ACHIEVEMENT: Brent Hilscher to make ball mills grind finer. LIFETIME ACHIEVEMENT: Ernie Marcotte Philip Thwaites of Xstrata Process Support addressed the BEST TECHNICAL PRESENTATION OF 2012: Robert J. Visintainer importance of automated process control in his plenary presentation, “Manual Control, Process Automation – Or OperaSCHOLARSHIP WINNERS tional Performance Excellence? What Is The Difference?” He ANDRÉ LAPLANTE MEMORIAL made the case that automating systems is essential for boosting SCHOLARSHIP: Cooper Meadows (University of Saskatchewan) plant efficiency and for reducing operating costs. BYRON KNELSON MEMORIAL SCHOLARSHIP: Adrian Bill (McGill University) The technical program also included a session on geometallurgy for the first time ever. Erin Legault, the 2013 conferVisit “CIM – Canadian Institute of Mining, ence chair, explained that the inclusion was well-warranted. Metallurgy and Petroleum” on Facebook for action shots of the hockey game “The field is of increasing concern to processors because the March/April 2013 | 73

CIM community Scholarship Winners

On the path to success Cameco scholarship winners speak on achievements and goals by Correy Baldwin

Every year, Cameco awards an array of scholarships to the brightest and the most dedicated mining engineering and geology students in Canada. The uranium giant developed its scholarship program to create opportunities “for bright young people” and to encourage them to pursue a career in engineering, with a focus on the disciplines of mining, mineral processing and nuclear energy. The 2013 Mining and Mineral Process Engineering Scholarship was awarded to three second-year students who received $5,000 and consideration for a summer employment term with the company. CIM Magazine spoke to this year’s recipients about their career goals and about what makes them so passionate about mining.

Everett Piper – University of British Columbia Everett Piper is ambitious. Enrolled in just his second year at university, he has already worked at a gold mine and has started a family business. “I have always seen a future for myself in the industry,” says Piper, who grew up in the northern B.C. community of Dawson Creek. A couple of years ago, he teamed up with his older brother to found Sterling Operations, an environmental consulting company his brother now runs on his own. “Much of my time was spent collaborating with landowners and oil companies, developing plans that suited both parties,” Piper explains, adding that his ability to collaborate with these industries came naturally, as he drew from experiences gained in his hometown. “Growing up in Dawson Creek gave me the opportunity to understand how the different operations – agriculture and the energy industry – can co-exist.” Prior to Sterling, Piper worked at Ruby Gold, a small openpit mine in northern B.C. “The allure of handling gold can get anyone interested in the industry,” he says. During his stint at Ruby Gold, an enthusiastic mining engineer piqued his interest in the profession. The operation’s small size also allowed him to work in a number of areas and, since then, he has been hooked. Piper is now looking forward to summer employment, where he hopes to gain “real practical knowledge” of mining engineering. “I’d like to continue to play a role in the development and advancement of industry,” he says. “And I’d like to do it responsibly and sustainably.” 74 | CIM Magazine | Vol. 8, No. 2

Jennifer Taylor – Queen’s University For Jennifer Taylor, the road to mining started early. “As a child, I was eager to learn how things worked, how they were made and where they came from,” she says. The many family road trips of her childhood were formative experiences, sparking an interest in geological formations all over North America – places the family gave affectionate names, she says, “like Fossil Beach, the Brickworks and the Old Quarry.” Later in life, Taylor discovered the importance of corporate social responsibility. While interning with the Prospectors and Developers Association of Canada’s Mining Matters Aboriginal Outreach program last summer, she worked with community members across northern Ontario, arranging mine site tours for participants and undertaking other social engagement initiatives. “It gave me an understanding of not only the technical side of the mining industry, but also of the importance of building strong relationships between the mining company and surrounding communities,” she explains. According to Taylor, mining engineers play a vital role in this relationship: “The needs of local communities are extremely important to mining engineers. The technical aspect is just one aspect of the profession. Engineering constitutes a wide range of skills and disciplines, and public relations is an integral part of that. This is a large part of what drew me to mining engineering. It is such a broad profession.”

Caitlyn McKinley – Queen’s University Caitlyn McKinley likes to be put to the test. “I work best when faced with a challenge,” she says, “so I’m looking forward to the problem-solving and the technical challenges I will face in helping design and operate mines.” “I want to have a career path that remains challenging, rewarding and interesting,” McKinley explains. Mining engineering has answered that call, offering her “the challenge

CIM community

to constantly improve mining methods and techniques, to optimize profit and safety, along with the unique challenges that each ore body presents.” McKinley has been impressed with the mine visits made as part of her program at Queen’s – to Xstrata’s Kidd mine in Timmins and the Lafarge quarry in Bath. She is specializing in mineral processing and has a growing interest in mining

methods and techniques. Still, McKinley confesses, “I’m interested in almost every aspect of mining.” Her approach to career advancement is to keep all options open. “Having a focused interest can be beneficial, but you can also miss opportunities. Having broad interests will allow me to gain more skills and experiences,” she says, adding with confidence, “and in the end, find the perfect career.” CIM

A wise investment How the CIM leadership development program provides tools to grow by Alana Kennedy

Strong leadership has a direct impact on a company’s bottom line: with it an operation has the clarity of vision and the direction to meets its goals. In the last 10 years, leadership development has become an increasingly important component of business schools’ curricula, with Bloomberg Businessweek ranking the “Top Schools for Leadership in 2012.” For the mining industry, a similar attention to leadership development is critical for strengthening the sector over the long term. That is why I, along with a group of industry leaders, signed up for the first cohort of Leading in Mining, the CIM leadership development program, last February. The program, which was developed by Rosie Steeves, president of Vancouver-

based Executive Works; and Chuck Edwards, past-president of CIM, dissolved the myth that “leaders are born, not made.” I realized that the best leaders work at it and see the development of leadership skills as a lifelong process. The 12-month program showed me that we can all develop our leadership skills, but it is not done in a one-day course; it takes time and is an ongoing process. And the starting point is self-awareness. This awareness came from an activity called a “360 evaluation,” which enabled me to align my internal view of myself as a leader with the views of my colleagues and peers. The process consisted of collecting anonymous, open feedback from supervisors, colleagues, staff and peers, and comparing it to my perceptions. This was challenging but invaluable in helping me identify my strengths and the areas I want to develop. In order to prepare for the course, participants had to complete a “Leadership Development Profile” – a questionnaire designed to identify each participant’s leadership style, strengths and weaknesses. We were asked to share our test results openly, and as we all came from different companies, we were able to be honest and supportive without the barriers that can sometimes occur during in-house training. My leadership development profile revealed that I am an “achiever” type, one who is focused on end-goals and prides herself

on delivery. My challenge was to slow down and look for opportunities to help others achieve their goals through positive influence. Our group built a lot of trust through these activities, which was important as we continued to learn more about how we deal with conflict, how our colleagues and peers view us and about our ability to accurately interpret the world around us. We were encouraged to discover the characteristics of leadership that we value personally and to share those in a group setting. Ultimately, the program gave me the tools to develop as a leader in a way that is aligned with my values. I am now better equipped to support my organization, colleagues and peers, and to encourage everyone to consider the impact that leadership could have in our industry. CIM Alana Kennedy is director of marketing and communications at the Mining Industry Human Resources Council, responsible for promoting MiHR solutions and products through stakeholder communications. Alana was formerly head of marketing for a group of accountants in the UK. She is a Chartered Marketer (UK) with more than 14 years of experience.

The next cohort of the CIM Leadership Development Program starts May 8 in Toronto. Register by April 26 at www.cim.org

March/April 2013 | 75

CIM community Branch Profile

Centre of the action

Au cœur de l’action

CIM Montreal Branch is always looking ahead

La section locale de l’ICM à Montréal pense toujours à l’avenir par Correy Baldwin

Who’s who? | Qui sont-ils?

Courtesy of the CIM Montreal Branch

by Correy Baldwin

2013–15 CIM MONTREAL BRANCH EXECUTIVE MEMBRES DE LA DIRECTION DE LA SECTION LOCALE DE L’ICM À MONTRÉAL 2013-2015 CHAIR | PRÉSIDENT Hani Mitri VICE-CHAIR | VICE-PRÉSIDENT Dany Belanger PAST-CHAIR | PRÉSIDENT SORTANT Martin Poirier TREASURER | TRÉSORIER Ian Turner SECRETARY | SECRÉTAIRE Lise Chartrand FINANCE COMMITTEE | COMITÉ DES FINANCES Ian Turner, Mac Watson, Frank Kruzich STUDENT AFFAIRS COMMITTEE | COMITÉ DES AFFAIRES ÉTUDIANTES Ferri Hassani, Richard Simon, René Dufour PUBLIC RELATIONS COMMITTEE | COMITÉ DES RELATIONS PUBLIQUES Daniel Gagnon, Martin Poirier, Dany Belanger

From left: Ian Turner, Dany Belanger, Hani Mitri, Lise Chartrand. Missing: Martin Poirier

As an important hub for the Canadian mining industry, Montreal is home not only to mining head offices but also to leading academic institutions and large financial firms. The CIM Montreal Branch recognizes this and takes advantage of that fact by engaging with financial, political and educational organizations to address the present and future needs of a diverse and dynamic mining membership. “Some people are looking to connect not just to the operations aspect of the mining business but to the financial aspect as well,” says past-chair Martin Poirier. “We want to cover different aspects of the business.” Traditionally, the branch has been more involved on the operational side. “The presentations we have hosted focused on providing a project overview of new mining and exploration projects happening in Canada,” explains Hani Mitri, branch chair. According to Mitri, most presentations set up by the branch address the technical and economic aspects of the operations and are geared to inform students and industry about opportunities in Canada. But, branch executives are looking to expand the horizons. The challenge – and a goal of the coming year – is to continue providing members with these important opportunities, while also diversifying to meet new needs, interests and changing directions in the industry. “We are focusing on sustainable development,” says Mitri. “Our January speaker, Stephen Kibsey, vice-president of equities and hedge fund risk management at Caisse de 76 | CIM Magazine | Vol. 8, No. 2

Important centre du secteur minier canadien, Montréal héberge non seulement des sièges sociaux de sociétés minières, mais aussi des institutions universitaires de premier ordre et de grandes institutions financières. La section locale de l’ICM à Montréal en est consciente et en profite en s’associant à des organisations financières, politiques et éducatives pour répondre aux besoins présents et futurs de ses effectifs dynamiques et diversifiés. « Certaines personnes s’intéressent non seulement au volet opérationnel de l’exploitation minière, mais aussi au volet financier », au dire de son président sortant, Martin Poirier. « Nous voulons englober différents aspects du secteur. » La section de Montréal a toujours été plus engagée dans le volet opérationnel. « Les conférenciers que nous avons accueillis s’employaient principalement à donner un aperçu des nouveaux projets d’exploitation et d’extraction minières en cours au Canada », explique Hani Mitri, président de la section. Selon M. Mitri, la majorité des conférenciers invités par la section traitent des aspects technique et économique des activités et visent à informer les étudiants et les gens de l’industrie sur les débouchés qui existent au Canada. Mais les dirigeants de la section aimeraient ouvrir des horizons nouveaux. Le défi, et l’objectif pour l’année qui vient, est de continuer à fournir aux membres ces occasions importantes tout en diversifiant les activités afin de s’adapter aux nouveaux besoins et aux nouveaux centres d’intérêt de l’industrie, de même qu’aux nouvelles avenues qu’elle emprunte. « Nous mettons l’accent sur le développement durable, » dit M. Mitri. « Notre conférencier de janvier, Stephen Kibsey, vice-président conseil, Gestion des risques, Marchés boursiers à la Caisse

CIM community

dépôt et placement du Québec, covered sustainability risks in mining in his presentation, “Winds of change: how the investor is trying to account for sustainability risks in the resource sector.” Sustainability has become a central preoccupation for everyone connected with the industry, says Mitri. “We are working on building an awareness of the importance of developing sustainable mining projects and accounting for risks,” he explains. “Today, investors must look into the social and environmental impacts of projects and translate this information into a quantitative risk assessment.” The branch is also active in promoting and in organizing local and international events. This year, branch executives are heavily involved in both the leadership and organization of the World Mining Congress (WMC), to be held in Montreal this August. Ferri Hassani, a member of the branch executive, is chairing the event, and the branch is sponsoring student activities. “We are pleased to support students in Montreal by giving them a global networking opportunity,” says Mitri. Students are a major focus of the CIM Montreal Branch. The branch has close connections to McGill University and École Polytechnique, both of which offer mining engineering co-op programs that are promoted by the branch. Further, it provided a $5,000 sponsorship to the schools’ teams participating in the Canadian Mining Games, held in Montreal this year. Students make up around 200 of the branch’s 500 members. The branch also puts on an annual auction hosted by Mac Watson, branch executive member, and his wife Rena. The auction raises funds for undergraduate student scholarships at McGill and École Polytechnique. “This is a very popular event,” says Mitri. “It is a 40-year-old tradition of the CIM Montreal Branch and generates well over $2,000 each year.” Last year, the Montreal branch approved the transfer of $100,000 into a securities fund to be managed by the Canadian Mining and Metallurgical Foundation (CMMF). The funds will be used to generate two scholarships, each worth $1,750, for students in mining engineering and geology programs in Quebec. René Dufour, a Montreal branch executive member, is a founding member of CMMF, which was incorporated in 1972. “The branch’s national initiatives – from our involvement with WMC to our sponsorship of the Mining Games – are motivated in part by our mandate to strengthen ties with other CIM branches,” says Ian Turner, branch treasurer. “There is a lot happening in Montreal and it is important for our branch to serve as a bastion for the eastern side. We are well-situated to foster sharing of knowledge and of other resources with the Maritimes, which will help build a stronger national industry.” CIM

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de dépôt et placement du Québec, a parlé des risques de la durabilité dans l’exploitation minière dans sa présentation “Winds of change: how the investor is trying to account for sustainability risks in the resource sector”. » La durabilité est devenue une préoccupation primordiale pour tous ceux qui ont un lien avec le secteur, au dire de M. Mitri. « Nous travaillons à sensibiliser les gens à l’importance de développer des projets miniers durables et de tenir compte des risques, explique-t-il. Aujourd’hui, les investisseurs doivent étudier les conséquences sociales et environnementales des projets et produire, à partir de cette information, une évaluation quantitative des risques. » La section participe aussi activement à la promotion et à l’organisation d’événements locaux et internationaux. Cette année, les dirigeants de la section sont très impliqués dans la direction et l’organisation du Congrès minier mondial, qui aura lieu à Montréal en août. Ferri Hassani, un membre de la direction de la section, présidera l’événement; et la section commanditera des activités à l’intention des étudiants. « Nous sommes heureux d’appuyer les étudiants de Montréal en leur donnant cette occasion de faire du réseautage mondial », affirme M. Mitri. Les étudiants sont une des priorités de la section de Montréal de l’ICM. Elle entretient des liens étroits avec l’université McGill et l’École polytechnique, qui offrent toutes deux des programmes de stages en génie minier dont la section fait la promotion. Qui plus est, la section commandite à raison de 5 000 $ les équipes des établissements d’enseignement qui participent aux Jeux miniers canadiens, qui se tiendront cette année à Montréal. Environ 200 des 500 membres de la section sont des étudiants. En outre, la section tient annuellement une vente aux enchères, présentée par Mac Watson, membre de la direction de la section, et son épouse, Rena. La vente sert à collecter des fonds qui permettent de créer des bourses d’études de premier cycle à l’université McGill et à l’École polytechnique. « Il s’agit d’un événement très couru, » affirme M. Mitri. « C’est une tradition vieille de 40 ans de la section locale de l’ICM à Montréal où on recueille plus de 2 000 $ chaque année. » L’an dernier, la section de Montréal a approuvé le transfert de 100 000 $ dans un fonds d’investissement qui sera géré par la Fondation canadienne des mines et de la métallurgie (FCMM). L’argent servira à créer deux bourses d’études, d’une valeur de 1 750 $ chacune, pour des étudiants en génie minier et en géologie du Québec. René Dufour, un membre de la direction de la division de Montréal, est un des fondateurs de la FCMM, qui a été constituée en 1972. « Les initiatives nationales de la section, de notre engagement dans le Congrès mondial minier à notre commandite des Jeux miniers, sont motivées en partie par notre mandat, qui consiste à renforcer les liens qui nous unissent aux autres constituants de l’ICM », explique Ian Turner, trésorier de la section. « Il se passe beaucoup de choses à Montréal et il est important que notre section serve de bastion pour la région de l’est. Nous sommes bien placés pour favoriser le partage des connaissances et d’autres ressources avec les Maritimes, ce qui contribuera à l’établissement d’une industrie nationale plus vigoureuse. » ICM

CIM community Distinguished Lecturer

Exposing the cracks Sergei Shipilov reveals the perils of corrosion by Alexandra Lopez-Pacheco

Sergei Shipilov, research professor of materials science and engineering at the University of North Texas, specializes in corrosion science and engineering, including stress corrosion cracking (SCC), corrosion fatigue and hydrogen embrittlement. He has penned over 100 scientific papers and book chapters in his areas of expertise and edited the two-volume “Environment-Induced Cracking of Materials” (Elsevier, 2007) and “Minimizing Infrastructure Corrosion” (NACE, 2009). In his presentation, “Materials Degradation and Corrosion in a Sustainable Society,” Shipilov raises the alarm on the costly impact corrosion has on industry and on society – not just in dollars but also in lives. CIM: Why is corrosion such a critical issue today? Shipilov: Corrosion is coming to the forefront because there was never before such a large volume of ageing infrastructure that required maintenance. The direct cost of corrosion in Canada is around $41 billion, with indirect costs essentially doubling that amount. It is also a major contributor to environmental pollution due to leakage of hazardous materials from pipelines, vessels and nuclear reactors. For instance, corrosion was a factor in the world’s worst chemical disaster in Bhopal, India, in 1984, which took the lives of 3,800 people and some 15,000 from related illnesses. Because of North America’s ageing infrastructure, corrosion has become a major public safety concern. Some examples include the Minneapolis bridge collapse in 2007, which killed 13 people, and the Montreal bridge collapse in 2006, which killed five people, including a pregnant woman. It is important to understand that corrosion itself is not the problem. It is a natural phenomenon like snow or rain. But it can create problems. The problems manifest as a loss of structural integrity. If corrosion does not affect structural integrity, all is well. But if it does, bridges fall. The problem is how corrosion impacts complex engineering structures and high-risk technologies. CIM: One of your areas of research is SCC. Can you explain what this is? Shipilov: If you look at the statistics on failures in engineering structures in a wide variety of industries, 40 to 65 per cent of all failures are due to this type of fracture. To explain SCC, let’s use the example of a concrete bridge in Toronto. In that environment, a lot of salt is used during the winter season. Salt is a

very corrosive environmental factor. Through cracks in the concrete, salt can reach the bridge’s reinforcing bars, leading to corrosion and rust. Rust increases the bars’ volume, so it starts to push the concrete in different directions, potentially resulting in a piece of concrete falling off the bridge. One of the biggest issues today is that the materials we use age and, over time, their properties change. Material transforms and becomes brittle over the years so it can no longer withstand the same pressure and/or deformation. We need to recognize how materials have degraded over the years. CIM: When it comes to new structures, is there anything that can be done to reduce future corrosion? Shipilov: Engineers should be familiar with the critical combinations of environmental factors and materials in order to avoid them in next-generation systems. This is critical because environmental factors in corrosion and SCC are often specific to the material. In some combinations, the environment accelerates corrosion, while in others the combination is all right. For each material, there is a specific environment that will or will not accelerate deterioration. If you recognize this, you can prevent corrosion. For example, hot aqueous chlorides readily cause SCC in stainless steels but do not have the same effect on carbon steels, aluminum or other non-ferrous alloys. The biggest problem is that we do not educate engineers in this field. SCC is the number one type of corrosion; in fact, it is responsible for more catastrophic structural failures than all other forms combined. However, the number of people studying it is very small and the number of people who understand it is even smaller. SCC is a very complicated field because it is situated at the intersection of materials science, chemistry, mechanics and engineering. There are not many specialists in this field because there is no university program that combines these disciplines. The first step is creating publicity to draw attention to this issue. CIM

TO BOOK A DISTINGUISHED LECTURER visit www.cim.org, call (514) 939-2710 or email dist_lecturer@cim.org.

POUR DEMANDER UN CONFÉRENCIER, visitez www.cim.org, téléphonez au (514) 939-2710, ou envoyez un courriel à dist_lecturer@cim.org. March/April 2013 | 79

TECHNICAL ABSTRACTS

CIM

journal

Advances in continuous monitoring of water-cooled tapblocks for pyrometallurgical furnaces P. Gebski, A. Sadri, W.L. Ying, Hatch, Sheridan Science and Technology Park, Mississauga, Ontario, Canada; and D. George-Kennedy, C. Nexhip, D. Krippner and R. Kaur, Kennecott Utah Copper Smelter (KUCS), Magna, Utah, USA

ABSTRACT Water-cooled tapblocks are essential components of modern smelting furnaces. Uninterrupted operation of a tapblock is critical for the optimal operation of a furnace. This critical function, together with exposure to extreme conditions, drives the need for an efficient and reliable means for tapblock monitoring. The main objective of tapblock monitoring is to help optimize the life of the tapblocks by better scheduling inner refractory relining and protecting operators by preventing sudden deterioration of the tapblock. A taphole acoustic monitoring (TAM) system was developed to meet the above requirements. This paper describes the principles of the TAM system and selected case studies. RÉSUMÉ Les blocs de coulée refroidis à l’eau sont une composante essentielle des fours de fusion modernes. L’opération ininterrompue d’un bloc de coulée est critique à l’opération optimale d’un four. Cette fonction critique, de même que l’exposition à des conditions extrêmes, crée un besoin pour un moyen efficace et fiable de suivi du bloc de coulée. Le principal but du suivi du bloc de coulée est d’aider à optimiser la vie des blocs de coulée par une meilleure programmation du garnissage des réfractaires internes et une meilleure protection des opérateurs en empêchant une détérioration soudaine du bloc de coulée. Un système de suivi acoustique du trou de coulée a été développé pour rencontrer les objectifs cités plus haut. Le présent article décrit les principes du système de suivi acoustique des trous de coulée et présente quelques études de cas.

Electric load-haul-dump machines: real alternative for diesels? J. Paraszczak, M. Laflamme and K. Fytas, Department of Mining, Metallurgical and Materials Engineering, Université Laval, Quebec City, Quebec, Canada

ABSTRACT Diesel-powered loaders are a pillar of modern underground metal mining. As these mines are getting deeper and hotter and the emission regulations stricter, ventilation costs are soaring, affecting production cost. Also, the cost of diesel fuel is expected to rise. These may make the use of diesel engines more problematic. Electric load-haul-dump machines (LHDs) are an interesting alternative. This paper compares features and performance of diesel and electric, cable-powered LHDs. It overviews equipment offerings, and compares, analyzes and discusses technical parameters, operational problems and cost issues. The paper gives some conclusions about electric LHD applicability and performance, indicates possible applications, and suggests further research work. RÉSUMÉ Les chargeuses au diésel sont un pilier de l’exploitation souterraine moderne. Alors que ces mines deviennent plus profondes et plus chaudes et que la réglementation concernant les émissions devient de plus en plus stricte, les coûts de ventilation grimpent en flèche, affectant les coûts de production. De plus, le coût du diésel devrait grimper, ce qui rendrait l’utilisation de moteurs diésel encore plus problématique. Les chargeuses-navettes (LHD) électriques constituent une alternative intéressante. Le présent article compare les caractéristiques et le rendement des LHD diésel et électriques alimentées par câble. Il offre une vue d’ensemble des équipements disponibles, compare, analyse et discute des paramètres techniques, des problèmes d’opération et des questions de coûts. L’article présente quelques conclusions concernant l’applicabilité et le rendement des LHD; il indique des applications possibles et suggère de futurs travaux de recherche.

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TECHNICAL ABSTRACTS

CIM

Processing history at Vale Canada’s (Inco’s) nickel-copper smelter at Copper Cliff, Ontario: post-1950 B.R. Conard, Oakville, Ontario, Canada

journal

ABSTRACT It is critical that historical processes and concomitant exposures to specific nickel substances be understood because some diseases linked to inhalation of certain nickel-containing substances have a long latency between first exposure and disease onset, and because nickel substances vary significantly in their toxicological properties. A discussion of the smelting history and related processes at Vale Canada’s (Inco’s) Copper Cliff, Ontario, smelter is integral to the understanding of these processes. The post-1950 processing history, equipment, propensity for aerosol formation, operational procedures, and ventilation controls used by Vale Canada in roasting, smelting, converting, and copper-nickel separation is discussed. RÉSUMÉ Il est essentiel de comprendre les procédés historiques et les expositions associées à des substances nickélifères spécifiques. En effet, quelques maladies liées à l’inhalation de certaines substances nickélifères ont une longue période de latence entre la première exposition et le début de la maladie; de plus, les substances contenant du nickel possèdent des propriétés toxicologiques grandement variables. Une discussion de l’historique de la fusion et de ses divers procédés à la fonderie de Vale Canada (Inco) à Copper Cliff, Ontario, est donc une partie intégrante de la compréhension de ces procédés. L’article traite de l’historique des procédés, des équipements, de la propension à former des aérosols, des procédures opérationnelles et des contrôles de ventilation utilisés par Vale Canada dans le grillage, la fusion, le convertissage et la séparation cuivre-nickel depuis 1950.

Autogenous grinding mills for diamond liberation J.E. Danoczi, Saskatoon, Saskatchewan, Canada; and S. Harvey, Shore Gold Inc., Saskatoon, Saskatchewan, Canada

ABSTRACT A diamond processing plant is being designed for the Star–Orion South diamond project in central Saskatchewan. Key to the plant is diamond liberation, which occurs in the comminution section and is the process of breaking up kimberlite rock as gently as possible to minimize diamond damage, particularly in larger, high-value diamonds. Kimberlite from the crater area of a volcanic pipe is generally softer than kimberlite from the diatreme zone. Softer kimberlite, comprising the majority of Star-Orion South deposits, can be readily broken up using abrasion and attrition by autogenous grinding mills, the preferred comminution method for minimizing diamond damage. RÉSUMÉ Une usine de traitement des diamants est en voie de conception pour le projet de mine de diamants Star–Orion South, au centre de la Saskatchewan. Le point névralgique de l’usine est la libération des diamants, ce qui se produit dans la section de la comminution; il s’agit de briser la roche kimberlitique aussi doucement que possible afin de minimiser les dommages aux diamants, surtout aux gros diamants de grande valeur. La kimberlite provenant du secteur du cratère d’une cheminée volcanique est généralement plus tendre que la kimberlite provenant de la zone de diatrème. La kimberlite plus tendre, laquelle comprend la plus grande partie des gisements Star–Orion South, peut être brisée assez facilement par abrasion et attrition dans des broyeurs autogènes, soit la méthode de comminution de choix pour minimiser les dommages aux diamants.

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TECHNICAL ABSTRACTS

CIM

journal

Review of rare earth mineral processing technology J. Zhang, Saskatchewan Research Council, Saskatoon, Saskatchewan, Canada; and C. Edwards, AMEC Americas Ltd., Saskatoon, Saskatchewan, Canada

ABSTRACT The versatility and specificity of rare earth elements (REEs) have led to their use in an ever-increasing variety of applications in new technologies; consequently, demand for REEs has increased significantly. However, separating REEs safely and effectively is a complex and expensive process. This paper presents a review of REE mineral processing technologies, providing an update on current capabilities in REE mineral processing and REE extraction from the major commercially valuable REE-bearing minerals such as bastnaesite, monazite, and xenotime, as well as the ion-absorption type of REE deposits. RÉSUMÉ La polyvalence et la spécificité des éléments des terres rares (ÉTR) ont conduit à leur utilisation dans de plus en plus d’applications variées dans de nouvelles technologies; par conséquent, la demande pour les ÉTR a crû de manière significative. Toutefois, la séparation sécuritaire ou efficace des ÉTR constitue un processus complexe et coûteux. Le présent article passe en revue les technologies de traitement des minéraux des ÉTR, fournissant une mise à jour des capacités actuelles en traitement et en extraction des ÉTR des principaux minéraux à valeur commerciale porteurs d’ÉTR tels que la bastnaésite, la monazite et l’xénotime, ainsi que les gisements d’ÉTR de type adsorption des ions.

A simple solution to assess pore-water pressure in barricades made of waste rock L. Li, Department of Civil, Geological and Mining Engineering, Polytechnique Montreal, Montreal, Quebec, Canada

ABSTRACT Stope backfilling is a common operation in many underground mines, which requires a barricade at the base of the stope near the drift entrance to retain the backfill in place. In this paper, the distribution of pore-water pressure in barricades made of waste rock is analyzed. An analytical solution is introduced and applied to estimate the pore-water pressure along the base and full height of the barricade. Results show that the analytical solution generally accurately predicts the distribution of porewater pressure obtained from the numerical calculations, especially in the upstream part of the barricade, where it is most critical. RÉSUMÉ Le remblayage des chantiers d’abattage est une pratique courante dans de nombreuses mines souterraines, ce qui demande une barricade à la base du chantier, près de l’entrée de la galerie, afin de retenir le matériau de remblai en place. Dans le présent article, nous analysons la distribution des pressions interstitielles dans les barricades faites de roche stérile. Une solution analytique est présentée et mise en application afin d’estimer la pression interstitielle le long de la base et sur toute la hauteur de la barricade. Les résultats démontrent que la solution analytique prédit généralement de manière précise la distribution de la pression interstitielle obtenue des calculs numériques, surtout dans la partie amont de la barricade, là où elle est la plus critique.

Excerpts taken from abstracts in CIM Journal, Vol. 4, No. 1. To subscribe, to submit a paper or to be a peer reviewer—www.cim.org

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TECHNICAL ABSTRACTS

canadian metallurgical quarterly

Effect of mechanical activation on carbothermal reduction of chromite with graphite F. Apaydin, Bartin University, Metallurgy & Materials Engineering, Bartin, Turkey; A. Atasoy, Sakarya University, Tech. Edu. Fac., Extractive Metallurgy, Sakarya, Turkey; and K. Yildiz, Sakarya University, Metallurgy & Materials Engineering, Sakarya, Turkey

ABSTRACT The carbothermal reduction of mechanically activated chromite with graphite under an argon atmosphere was investigated at temperatures between 1100 and 1400°C and the effects of the mechanical activation on chromite structure were analyzed by X-ray diffraction, scanning electron microscopy and specific surface area measurement. An increase in specific surface area resulted in more contact points. The activation procedure led to amorphization and structural disordering in chromite, and accelerated the degree of reduction and metallization in the mixture of chromite and graphite. RÉSUMÉ On a effectué une investigation de la réduction carbothermique avec du graphite, de la chromite activée mécaniquement, en atmosphère d’argon, à des températures entre 1100 et 1400°C, et l’on a analysé les effets de l’activation mécanique sur la structure de la chromite par diffraction des rayons x, par microscopie électronique à balayage et par mesure de la surface spécifique. Une augmentation de la surface spécifique résultait en des points de contact plus nombreux. La procédure d’activation menait à une structure plus amorphe et en désordre de la chromite et accélérait le degré de réduction et de métallisation dans le mélange de chromite et de graphite.

Variation of dimensional properties of particulate materials during grinding and their non fractal nature E. Stamboliadis, E. Petrakis and O. Pantelaki, Technical University of Crete, Chania, Greece

ABSTRACT Dimensional properties of a particulate material are considered to be the mass, the surface area, the length and the number of its particles. The paper examines the variation of the distribution of these properties versus size as a function of the energy consumption during grinding. The data obtained show that the distributions of these properties have one maximum and one minimum size limit. Additionally the presentation of the cumulative distribution of each of these properties, versus size between these two limits can be approximated by an exponential curve, which if plotted in a log-log diagram gives an almost linear relationship. However, only about 50% of the data can be described by this linear relationship. The question that rises is whether these properties can be considered to be fractal. RÉSUMÉ On considère que la masse, la superficie, la longueur et le nombre de particules constituent les propriétés dimensionnelles d’un matériau particulaire. L’article examine la variation dans la distribution de la valeur de ces propriétés en fonction de la consommation d’énergie lors du broyage. Les données obtenues montrent que la distribution de ces propriétés a une valeur limite maximale et une valeur minimale. De plus, la présentation de la distribution cumulative de la valeur de chacune de ces propriétés entre ces deux limites peut être approximée par une courbe exponentielle qui, lorsque tracée sur un diagramme logarithmique, donne une relation presque linéaire. Cependant, on peut seulement décrire environ 50% des données par cette relation linéaire. La question est de savoir si l’on peut considérer ces propriétés comme étant fractales.

Excerpts taken from abstracts in CMQ, Vol. 50, No. 2. Subscribe—www.cmq-online.ca

March/April 2013 | 83

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From coal-crowned to ghost town: the life and death of Alberta’s Coal Branch

estled among the eastern slopes of the Canadian Rockies near presentday Jasper, Alberta’s Coal Branch region must have been the most scenic place in the country to mine for coal. This little-remembered but vitally important region, now an alpine wonderland, was once as lush with coal-mining activity as it is today with mountain panoramas. John Gregg, a prospector from the United States, was guided to the area by his wife, Mary Cardinal, and staked the first claim in 1909. Cardinal was the daughter of a local Stoney chief, and the Stoneys knew of the coal deposits in the Nikanassin Miners enjoy a Sunday ball game outside Mountain Park, Alberta, 1930. Photo by Charles Lee. Range, which would become known as the Alberta Coal Branch after several rich claims drew Canada’s spread across the Rockies – from Grande Cache in the north to railways to the region. Kananaskis in the south. The following spring, Gregg and Cardinal showed the site In 1911, Nordegg discovered another coalfield just 100 to a team of Scottish mining engineers, sent by Christopher kilometres southeast of the Coal Branch. CNoR began laying Leyland, a British industrialist. The Scots were both impressed down track from the east, just as GTPR was coming in from with Gregg’s coal claim and mesmerized by the area’s natural the north. In the end, the two areas tapped separate coalfields beauty. They named the claim Mountain Park. By early 1911, and both became prosperous. The Alberta Coal Branch was by Leyland had set up the Mountain Park Coal Company and had far the most extensive. Nordegg’s Brazeau Collieries did well, purchased Gregg’s share. Soon many prospectors began comb- but sadly Martin Nordegg did not: he was declared an enemy ing the alpine valleys and picturesque slopes of the region. alien when the First World War broke out in 1914 and was Gregg himself staked another claim that year, at Luscar. forced to sell all of his shares in his company. The coalfields in the southern Rockies near the Crowsnest The Alberta Coal Branch thrived, especially in its early Pass, were first reached when the Canadian Pacific Railway years. From 1922 to 1926, the area produced 3.9 million (CPR) passed through in 1884. But other rail companies like tonnes of coal, accounting for 22 per cent of Alberta’s coal prothe Grand Trunk Pacific Railway (GTPR) and the Canadian duction. By 1926, the region’s population was over 2,700, and Northern Railway (CNoR) were just as eager to reach other both Cadomin and Luscar had grown larger than the original lucrative areas. Both of these companies went north, entering community of Mountain Park. Cadomin even boasted the only the Rockies at Jasper and crossing through at the Yellowhead symphony orchestra between Edmonton and Vancouver. By the end of the First World War, however, trains were Pass. The rail companies were trying to reach the Pacific coast but they also wanted to get to the coal. The trains ran using diesel rather than coal, and the domestic market had on coal, meaning the resource was vital to the expanding rail- switched to oil and gas. One by one, the mines of the Alberta Coal Branch closed, leaving a valley full of ghost towns. CIM way system. After Gregg opened up the Alberta Coal Branch, GTPR began building a line south into the area. It established a railway hub at Coalspur, where the trail branched. GTPR’s construction of the east branch got off the ground, while the Mountain Park Coal Company began building the west branch – an expensive undertaking that GTPR eventually took over. But there was other competition. In 1909, CNoR joined forces with German-born entrepreneur Martin Nordegg, whose company, Brazeau Collieries, had eight coal claims 86 | CIM Magazine | Vol. 8, No. 2

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