Sunday, August 31, 2014

Mining the Tarkine Part 2

August 30/2014

The bad news just keeps coming. The iron ore price has sunk below $90 per tonne, and hopes of the Smithtonites and now Tullanese for local jobs with good wages just down the road have been dashed with the end of operations for Venture Mining at Riley Creek. I can't say I told you so on that one, I had just sadly shaken my head over cynical or brain dead opportunists exploiting community divisions because it too, like any little marginal base metal operation was doomed to fail on this side of the commodity cycle. At least it was on the surface and MAYBE some Chinese angel might have come in or still might to take a controlling stake in the tin prospect. Whichever, it goes to show the business case trumps everything else even if Richard Colbeck ignores it in his calculations. And well he might. He and his party stirred up enmity, garnered support, and arrived safely at their electoral destination. That it was an ugly hoax for all sorts of investors hardly matters. Their misplaced resentments will run long, broad and deep until next time, the bread having been snatched once again from their mouths by the environmentalists.

This may be far-fetched but if some Zen master say had spent years giving classes in the community, flummoxing, beating and humiliating people and enlightenment had eventually flared in a few minds: We aren't just honest working people desirous of bread; WE ARE THE BREAD! Then they could go back to cutting firewood or whatever they usually do, and would thereby know the answer to another famous koan:

A wood-chopper studies long and hard with his teacher. After years of anguish he attains satori. What does he do? 

Hint: these things always have an internal clue. The answer is not a holiday in Bali, or a new second -hand car like I might do.

Unity Mining is to close the Henty gold operation after a $52 mil loss. This company has never been a favourite of mine. When they were Bendigo Mining a relative who lived there filled me in on their activities. That nothing was happening but they were burning lots of cash with an office full of administrators. But like a fool I had ignored that and the due diligence of Harmony Mining, who had walked away from it in their efforts to diversify out of South Africa and then I had taken part in a capital raising from investors– they managed to get $90 million together, were building and due to start up their mill. But when they had the money they shut it down, stiffing their investors and walked away to greener fields which was a pertinent comment on the business they had been promoting; first to Beaconsfield where bad ground is legendary and the orebody is a lot like Mt. Lyell – which is to say there is a lot left but it is getting too dangerous and expensive to access. That was a disaster too and they took up the Henty mine from gold mining giant Barrick, (who was shutting it down) on a punt that the mine wasn't depleted after all, which is to say the unlikely event that Barrick's geologists were wrong. That worked out for them despite it having been an especially dumb and desperate thing to do. I was long gone – a name change after you have been screwed over is one more good negative indicator. Which is a nicer term for a kick in the a****.

I mention my involvement as a speculator or employee in these things to highlight that this is an ugly and risky and short-term industry, definitely not a place for elected know-nothings to be throwing money around -YOUR money, in forms of government assistance, or getting involved in subterfuges to attract capital from investors who are definitely going to do their dough; ninety- nine times out of a hundred is enough to say 'definitely.' And they run interference for these companies at all times. Recently Brian Green put on one of those weak Tony Abbott mouth-only smiles as he explained there had been a 'sulphur spill' from the tailings ponds at Savage River. That expression was used on the news several times; there had obviously been an agreement to use that particular term – sulphur; its that yellow powder, isn't it? Wouldn't hurt a fly that grandma used to mix with black strap molasses as a cold remedy. All's well. Actually it was acid drainage; sulphurous acid if you want to be technical; from weathering sulphides in all those millions of tonnes of waste and tailings. It will be leaching into the river until it is all washed into the sea in a global warming catastrophe or scraped there in the next ice age.

Its a nice mill at Savage River. And I have seen the pit and talked to people who actually know things and listened to the news. The ground is broken and there will never be an underground operation. The pit was designed with a grade that optimized recovery, but when you converge at the bottom there is nowhere left to go without stripping such a huge ratio of overburden you have no choice but to walk away. A landslip is a major disaster because the trucks have to drive out round and round. Another pit has been opened and its claimed they will be viable for another 10 or 20 years. But the clincher is probably the price of natural gas used in the pelletizing operation at Port Latta.

Australia is unique in the developed world in that we have no domestic gas reserves, our companies have been contracting it all for the export market as fast as it is being drilled. Prices on the Asian market are double what we want to pay and Australian manufacturing is shutting down at a horrific speed; if you want long term supply you have to match international prices. So I give them another three years. And yes, I have worked there too occasionally on shutdowns, nary a speck of sulphur in the house.

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