In Guatemala on Sunday, one person apparently was killed and 13 injured when a long-simmering land issue arose with the new property owners, a local subsidiary of HudBay Minerals Inc., Compania Guatemalteca de Niquel (CGN.) Among those injured were company employees when protesters attacked and damaged a hospital the company runs.

Late this afternoon, HudBay details what had been happening on Sunday.

Discussions had been taking place that day between authorities and illegal occupiers of CGN land known as area 217 in an effort to persuade the occupiers to comply with their commitments under an agreement to relocate. A majority of local families have complied with the resettlement agreement but a few continue to illegally occupy CGN property at this location, the company said.

“HudBay wants to emphasize that no evictions were carried out and none were threatened or intended. The discussions were consistent with HudBay’s strategy of peacefully resolving illegal occupations through dialogue.” it said.

When negotiations ended without resolution, government vehicles departing from area 217 were attacked near the town of El Estor by a separate group of organized protesters.

Protesters stole police weapons

Reports received by CGN, HudBay said, indicate that the protesters also ransacked the local police station and stole weapons, including automatic firearms. Later in the day, they attacked a CGN-sponsored community hospital in El Estor, resulting in extensive damage to the facility and to equipment recently donated by the Hope Alliance.

CGN confirmed that several of its employees were injured during the attack on the hospital. Throughout the attacks, CGN personnel showed great restraint and acted only in self defense, it said. There was no damage reported at the mine site or plant facilities owned by CGN.

Reuters this morning quoted a spokeswoman for CGN saying that the company’s security guards did not carry live ammunition and were forbidden from using their weapons.

It has also been reported that one of the protestors died as a result of gunshot wounds sustained during a confrontation among the protesters.

“We deeply regret the injuries and loss of life that occurred in the El Estor area during the attacks by an organized minority,” said Peter R. Jones, HudBay’s CEO. “Our No. 1 priority is to ensure the safety and security of all residents and employees in El Estor.”

Dozens of community programs

CGN said it is committed to working collaboratively with the local community through various outreach programs to support the development and enhancement of health, education and cultural centers and to increase environmental understanding in the region. It’s not just in El Estor that the HudBay unit is working: The company initiated 66 projects in 20 communities around the Fenix project in health, education, culture and environment.

“The majority of residents in the area support our outreach efforts, investments in the local community and development of the Fenix project,” Jones said. “We remain committed to working with local residents to reach a fair and equitable solution to land claims and resettlement.”

CGN said it still is committed to advancing the development of the Fenix project to reach full production when it is economically viable. Currently, CGN employs about 100 people in Guatemala.

CGN said it intends to cooperate fully with any investigation conducted by authorities in connection with Sunday’s incidents.

Reuters said this morning that the dispute is over a “long-running land dispute” that began well before HudBay acquired the property last year. It reported that the mine’s previous owner had faced extensive opposition to its plans to reopen the mine earlier this decade. In 2004, protestors burned down a hospital and community relations office when plans to reopen the mine were announced, the news service reported.

Acquired Fenix in late 2008

HudBay acquired Fenix when it combined with Skye Resources Inc., a deal that was announced last June and consumated in August. Skye’s principal asset was Fenix, with 41.4 million tonnes of reserves, which HudBay termed “world class.” At the time, HudBay said the “Fenix Project will strategically expand HudBay’s base metals portfolio to include nickel and add significantly to HudBay’s development pipeline.”

Peter Jones, who took over as CEO this March, elected by an entirely new board of directors following considerable upheaval in the company, in July presented Fenix as part of the company’s two-pronged growth strategy. The first part was capitalizing on the firm’s based in Manitoba, he said.

“The strategic plan will only be fully realized by growing beyond our Manitoba base,” Jones added. “This second avenue of growth will include the company’s Fenix nickel property in Guatemala and potential acquisition opportunities worldwide.”

At that time, he promised revised project plan for Fenix in early 2010.

Through its subsidiary, HudBay owns 98.2% of Fenix, a brownfield nickel laterite project. The company said it offers an opportunity to build its nickel output to about 50 million pounds per year. The company now produces copper, zinc, gold and silver from its Canadian operations.

Competitive operating costs

It says that Fenix is expected to have competitive operating costs, long reserve life, and provide both metal and geographic diversification. Environmental and construction permits have been received and detailed engineering is well-advanced.

Although the company has been limiting expenditures at the project because of the economy, it said it continues to explore lower-cost power supply solutions and transportation options and to develop infrastructure, such as upgrading the access road.

A decision on whether to move ahead with Fenix is expected by mid-2010, Jones told an investors’ conference Sept. 24.

The Guatamalan unit also is working with the local community and all levels of government to ensure the project provides benefits to the people of Guatemala, as well as HudBay’s shareholders, it said.

HudBay reaches out to the community in Guatemala by conducting information, liaison and awareness programs in the Fenix vicinity. It also is upgrading a 37-kilometer highway from El Estor to Río Dulce, which should be complete in 2009 at a cost of about $10 million. This will not only be a road for heavy truck traffic to the mine project, but a pathway for communication that benefits local agriculture, commerce and tourist ventures.

HudBay spent $687,000 during 2008 on environmental protection and compliance, including land reclamation, environmental baseline studies and sampling. HudBay’s Guatemalan subsidiary also operates a tree nursery that can deliver up to 40,000 trees annually for reforestation.

Building medical center

In 2008, the company completed the first phase of a medical center to provide health care to the community and through the Raxche΄ Foundation, the company initiated 66 projects in 20 communities around the Fenix project in health, education, culture and environment.

The Fenix operation, on care and maintenance since 1980, is a substantial brownfield nickel laterite mine and processing plant in eastern Guatemala that became part of HudBay as a result of its business combination with Skye Resources in August 2008. A technical report dated Sept. 15, 2007 titled “Technical Report on an Update to the Fenix Project, Izabal Guatemala” is available on SEDAR.

The Fenix deposits are near El Estor in Izabal, Guatemala. The mineral rights to most of the deposits are held under a 25-year renewable exploitation licence with the remainder held under an exploration licence.

Compañia Guatemalteca de Níquel S.A. (CGN), a Guatemalan company, holds both the licences. HMI Nickel Inc. (a wholly owned subsidiary of HudBay Minerals) owns about 98.2% of CGN’s shares, while the Guatemalan government owns the balance of 1.8%. (CGN has its own website, but it’s in Spanish.)

The project’s principal mineral reserves are on the Sierra de Santa Cruz in eastern Guatemala at elevations from 400 to 800 meters above sea level. The nickel laterite ores are formed by intensive tropical weathering of ultramafic rocks. A limonite layer is the top and most intensely weathered layer and the saprolite ore is the lower and less weathered layer with an irregular transitional boundary separating the two.

Reserves good for 30 years

At steady-state operation the mine is expected to provide 1,464,000 tonnes of saprolite and transition ore annually to the process plant. The open-pit mine’s average stripping ratio is expected to be 1.1 tonnes of waste for each tonne of ore mined.

The average grade of the saprolite will be 1.63% over the 30-year mine life, although higher grade is expected to be mined in the early years. The general mining sequence will begin with the removal and storage of soil that will be used for future rehabilitation of the mined areas. Following the removal of the soil the limonite layer will then be removed and placed in previously mined or other designated storage areas.

The transition zone and saprolite ore will then be removed and loaded into off-road haul trucks for transportation to the process plant. The soil will then be replaced over the mined areas and reforested.

The existing 25-million-pound-per-year process plant will be upgraded to about 50 million pounds and the process flowsheet will consist of a coal-fired dryer, two calcine/reduction kilns, a 90-MW electric arc furnace and a ladle refinery to produce a 35% ferro-nickel product.

Plant has been well maintained

The existing process plant was well maintained and many of the components will be reused. The dryer, one kiln and the refinery will be new. The existing furnace will be upgraded with new technology to achieve the required capacity.

Production over the 30-year project life is estimated to be 1.3 billion pounds of nickel. The average production for the first 20 years after start of full production is planed to be 48.5 million pounds per year of nickel contained in ferro-nickel.

Fenix, by the way, is the Spanish version of Phoenix, the mythical bird that burned then rose from the ashes. In the case of HudBay’s Guatamalan nickel project, only time will tell whether such is true.

There were two pieces of news on the wire today about energy projects whose combined value exceeded $80 billion, two of the largest such projects in history.

And of no surprise to anyone halfway savvy, neither of them had anything to do with “green” or renewable energy.

Developments such as these are part of the reason that electricity demand in the UAE is growing so rapidly.

These two stories came hard on the heels of the G20 ministers promising that they’ll do something great for the environment only if everyone else does the same.  At point was Japan’s PM-elect, Yukio Hatoyama, vowing to cut GHGs 25% if China and India would do the same, knowing full well that will never happen.

There was a report this morning that the United Arab Emirates was ready to award a $40 billion nuclear power contract to two consortia of French firms, the largest energy development project ever in the Middle East.

The UAE later in the day denied that the contract award was imminent.

A story that developed this afternoon out of Melbourne said that dozens of companies from around the world were lining up for $42 billion worth of work on the Gorgon liquefied natural gas project, Australia’s largest resource development.

Some $82 billion worth of conventional energy work after a week of articles about the failure of solar, wind and biofuel projects.

It’s almost as if the adults are doing what adults are supposed to do — finding ways to keep everyone they’re responsible for warm, fed and housed — while the kids are in the back yard playing with imaginary friends.

Nuclear in the Mideast?

The first story is a bit of a shocker, till you think it through. Why would the UAE be investing in nuclear power?

Reuters quoted a source in France as saying the UAE originally wanted two reactors, but that grew to four and then, perhaps, six.

continued below illustration

UAE consists of seven emirates, including the burgeoning financial powerhouses of Abu Dhabi and Dubai.

This growth has strained the power grid, and Abu Dhabi wants to use nuclear power to replace oil and gas — which it hopes to sell overseas to keep the revenues flowing.

UAE expects its electricity requires to rise from 15.5 gigawatts in 2008 to 40 GW in 2020 and it wants nuclear power to grow to supply  15% of that need by 2025.

It’s likely that UAE can get reactors, perhaps ones supplied by the French firm Areva, on line quite a bit faster than a utility in the United States and at a considerably lower cost, leading to lower electric costs.

Now nuclear power is GHG friendly, of course, but it’s not “renewable,” and it’s hated by most environmental activists. Spending some time with a recent Areva presentation, however, points out that current resources of uranium are 200 times as great as 2008 demand for the element.

It also points out something the kids playing in the back yard don’t seem to get — worldwide demand for electricity is expected to double by 2030.

Just to keep GHGs at the current level,  that means the equivalent of every single existing power plant would have to be replicated as wind, solar, geothermal — or nuclear — over the next two decades.

Right now, only 16% is nuclear and 19%  is hydro, with the rest producing GHGs.

In dollars and cents, Areva says, capex in the power sector is expected to reach $13.8 trillion by 2030. A couple of million for a solar demonstration project here and a wind turbine there isn’t going to make much different in the real world.

Even if you change the “m” to a “b,” you’re still talking about chicken feed.

What’s it mean for uranium?

Because leaders in the west have been unable to decide whether they want to romance nuclear power or the Chicken Little crowd, there has been total political uncertainty driving the market.

The price of uranium has been bouncing up and down, from mid-$50s last December down to $40 in March, back to the $50s in July and now on a downward  trend to the mid-$40s.

continued below illustration

However, major uranium producers are gearing up for greater demand. Areva, for example, is looking at doubling its production, from about 6,300 tonnes in 2008 to about 12,000 tonnes in 2012.

In a report titled “The Changing Geopolitics of the Nuclear Energy Market – China,” The Ux Consulting Co. said that “no country in the world comes close to matching China’s plans for nuclear power expansion.

“China’s latest official target of reaching 5% of total electricity from nuclear plants by 2020 means that around 78 gigawatts-electric (GWe) of new nuclear capacity should be built over the coming decade.

“In fact, given current trends, China is on track to potentially becoming the world’s largest user of nuclear power by the year 2030.”

China now has 11 reactors in operation,but another 16 are under construction and a further 250+ are planned.

Big Aussie gas complex

The Gorgon liquefied natural gas project, Australia’s largest resource development, is operated by Chevron Corp. (50%) with partners Royal Dutch Shell (25%) and ExxonMobil (25%.)

A final investment decision is expected by Sept. 15.

The $3 billion LNG plant alone will take 250,000 tonnes of steel, with most of that work going to Korean and Japanese companies, though some has been reserved for Australian firms.

It also will require 230,000 cubic meters of cement over three years.

In recent weeks, Chevron has been getting needed environmental permits from national and state agencies after six years of preparation of an environmental assessment.

The Greater Gorgon gas fields are between 130 and 200 kilometers off the north-west coast of Western Australia.

The fields contain resources of about 40 trillion cubic feet of gas, constituting Australia’s largest-known gas resource.

The subsea gas-gathering system would be located on the sea floor at the gas fields west of Barrow Island in 200-1300 meters water depth.

The key components of the subsea gathering system include development wells, subsea trees, cluster manifolds, pipeline termination structures, flowlines and control systems.

Extensive use will be made of corrosion-resistant alloys and chemical corrosion management techniques to counteract the corrosive nature of the produced fluids.

Normal operation of the wells and subsea facilities would be remotely controlled from the gas-processing facility on Barrow Island.

Requirements for offshore support, such as the provision of construction materials and maintenance, would be provided from a mainland support facility.

This would ensure that offshore construction and maintenance does not impact on Barrow Island, Chevron said.

Remotely operated vehicles, offshore work vessels and semi-submersible drilling rigs would be used for inspection and maintenance of the subsea system.

30-year life

It is anticipated that between 20 and 30 wells would be drilled in the Gorgon area gas fields over a 30-year period. The number of development wells and timing of construction will depend on future gas demand.

Wells would be drilled in campaigns to optimize the efficiency of rig operations and minimize mobilization/de-mobilization costs. Offshore support during the drilling campaign would be from an onshore support base located on the mainland.

Subsea trees (providing containment to and control of production wells) would be connected to cluster manifolds via well jumpers, all located on the ocean floor.

Subsea trees are installed by the drilling rig during well completion operations.

Fluids from up to eight wells would flow to each cluster manifold located nearby on the ocean floor.

These cluster manifolds gather fluids from the wells into a single flow path for connection via jumpers to the pipeline termination structures.

Pipeline termination structures provide a connection hub to the flowlines via flowline expansion spools and enable tie-in of future equipment. The structures also provide access points for flowline pigging.

Flowlines of various sizes would connect the pipeline termination structures together and ultimately form the conduit for produced fluids to the LNG plant on Barrow Island.

Some of the flowlines will be made of corrosion-resistant alloys, depending on their function.

Gas processing facility

At Barrow Island, proposed gas processing facilities include an LNG plant, condensate handling facilities, carbon dioxide injection facilities and associated utilities.

The LNG plant will comprise three trains capable of producing a total of 15 million tonnes per annum. About three shipments a week are expected to leave a dedicated LNG loading jetty.

The facility would separate gas and condensate (light oil) received from the Gorgon gas fields.

continued below illustration

After separation from the gas, the condensate will be stabilized prior to shipping to market.

The gas component of the stream will then be treated to remove carbon dioxide, hydrogen sulfide, trace amounts of mercury and water vapor. At this point the gas can be liquefied for export as LNG.

The environment

Chevron says the Gorgon project has the potential to be the first project in Australia to significantly reduce greenhouse gas emissions by the injection of carbon dioxide underground. The opportunity to reduce greenhouse emissions in this way is relatively new.

The preferred location for CO2 injection is on the central eastern coast of Barrow Island in the general location of the proposed gas processing plant.

This site was selected to maximize the migration distance from major geological faults and to limit disturbance to areas around the proposed gas processing plant.

Demand growing rapidly

With energy demand expected to continue it growth, much of that is expected close to Australia.

Current demand for LNG in the Asia-Pacific region is about 80 million tonnes per year, Chevron says, and is forecast to more than double by 2015.

The established LNG markets of Japan, South Korea and Taiwan are expected to continue to comprise the bulk of this demand.

However, emerging markets in North America, China and other Asian countries will also add significant opportunities, the company added.

Chevron is anticipating that natural gas will be the fastest-growing energy source in the 21st century because of its technical, economic and environmental advantages.

Talk to Areva and you might get an argument that such is the role of nuclear power.

And this doesn’t even bring coal into the mix, already the major source of electricity in the United States and a big and growing component of utility feed in both India and China, the most populous and fastest-growing economies.

So where does that leave the “green, renewable” resources?

Certainly not playing any major role in the world’s energy picture for the next couple of decades.

And where does that leave all the promises that G20 nations are making to each other?

Oh, well, the world is used to politicians making grand gestures. But few in any nation are willing to pay the price for these dreams, nor are most nations capable of doing so.

Thus we can expect to continue to read about major energy projects, using the traditional, reliable fuel sources, expanding to meet the needs of the real world.

Teck's Pend Oreille plant site in Washington.

Teck Resources Ltd. said July 3 it has agreed to sell to China Investment Corp. shares that represent about 17.2% of its equity.  It will use the net proceeds from the transaction of more than C$1.7 billion to reduce its debt.

CIC has agreed to purchase through a wholly-owned subsidiary 101.3 million Class B subordinate voting shares of Teck for C$17.21 per share.  Teck will apply the net proceeds of the transaction to reduce outstanding bank debt.

On closing, CIC will indirectly hold some 17.5% of Teck’s outstanding Class B subordinate voting shares, representing about 17.2% equity and 6.7% voting interests in Teck.  Upon completion of the transaction, Teck’s Class A shareholders as a group will hold a 61.8% voting interest in Teck, with Temagami Mining Co. Ltd. holding a 28.5% voting interest.

Teck President and CEO Don Lindsay said: “This transaction will have an immediate and very positive effect on Teck’s balance sheet and represents an attractive opportunity for Teck to establish a relationship with a major Chinese financial investor, with a deep understanding of China, the world’s largest consumer of our principal products.”

CIC has advised Teck that it is acquiring the Class B shares for investment purposes as a long- term passive financial investor and has agreed to hold the purchased shares for at least one year following closing.

Lots of caveats

Provided CIC does not sell any purchased shares, it will have the right to maintain its percentage ownership interest through open market purchases or through participation in additional issuances of Teck Class B shares or similar securities or securities convertible into such securities, subject to customary exceptions.

If Teck were to issue additional Class B shares within 12 months of closing at a price less than C$17.21 per share (or securities convertible into Class B shares with a conversion price less than C$17.21), CIC would be entitled to a partial make-whole payment, capped at 8.4% of the aggregate subscription price, payable at Teck’s option in cash or in Class B shares.

CIC also has agreed that after the one year hold period, it will not sell the purchased shares to a participant in the worldwide mining, metals or minerals industries or to a material customer of Teck.

In the event of a takeover bid for Teck, CIC will be permitted to tender its shares, provided that the bid has features associated with a “permitted bid” customary in Canadian shareholder rights plans or is supported by the Teck board.

A standstill provision provides that CIC will not take certain actions, including acquiring additional securities of Teck (other than pursuant to its anti-dilution rights) or soliciting proxies, proposing to effect any extraordinary transaction involving Teck or assisting any third party in doing so.

In doing so, the court sorted out some of the confusion arising from conflicting direction in the authority of each of the agencies as granted by various federal laws.  The vote was 6-3, with the majority opinion delivered by Anthony Kennedy.  The dissenting opinion was written by Ruth Bader Ginsburg.

The Southeast Alaska Conservation Council and other environmental groups had challenged the decision by the Army Corps of Engineers and the Environmental Protection Agency to allow Coeur Alaska Inc. to use this method of tailings disposal.

The permits were upheld by a federal district court in Alaska upon challenge by the SEACC (joined by the Sierra Club and Lynn Canal Conservation), but the 9th U.S. Circuit Court of Appeals overturned the permits.  Coeur and the State of Alaska took the challenge to the U.S. Supreme Court, where the matter was argued in January.

The environmental groups argued that §404 permit issued by the Corps of Engineers was not “in accordance with law,” because Coeur Alaska should have sought a CWA §402 permit from the EPA instead and that the slurry discharge would violate the “new source performance standard” the EPA had promulgated under CWA §306(b), forbidding froth-flotation gold mines to discharge “process wastewater,” which includes solid wastes.

Coeur ready to build a mine

The decision clears the way for completion of the only item remaining to be constructed, the tailings facility, and for production to commence at the mine, providing job growth and economic stimulus to southeast Alaska, the company said.

“We are very pleased with today’s decision by the Supreme Court,” said Dennis E. Wheeler, chairman, president and CEO of Coeur.  “It confirms that the thoroughly studied and permitted plan is lawful and the best environmental choice.”

Coeur said it is now targeting production for Kensington, which lies about 45 miles north-northwest of Juneau, in 2H10.  The mine’s potential for 125,000 ounces of annual gold production represents a 135% increase for Coeur over our current gold production levels.

It is also expected to provide an estimated 370 direct and indirect jobs, including many for Alaska Native Groups, and begin generating long-term economic benefits to Juneau and southeast Alaska, Wheeler added.

Environmentalists’ take

The SEACC website was quiet about the court’s decision today.  Back on Jan. 12, when the court heard arguments about Kensington, the organization called the case “a dangerous assault on America’s rivers, lakes and streams and the federal Clean Water Act and threatens to set a precedent of allowing our lakes and streams to be used as mine tailings dumps.”

SEACC has said it wanted Coeur to use a paste tailings option for Kensington, that it said would do a better job of protecting the environment.  But the company said that using Lower Slate Lake would result in the smallest environmental footprint, using less than half the energy required for the dry tailings alternative.

Wheeler said after today’s decision that “we expect that the environmental organizations who had challenged the mine plan in court will now stand behind their commitment to support the immediate economic impact and job creation that Kensington will provide.”

Trip Van Noppen, president of Earthjustice, which had participated in the litigation, was quoted by the Associated Press this morning as saying that “if a mining company can turn Lower Slate Lake in Alaska into a lifeless waste dump, other polluters with solids in their water can potentially do the same to any water body in America.”

The same article quoted Alaska Gov. Sarah Palin calling the decision “great news for Alaska,” adding that it’s “a green light for responsible resource development.”

Justice Kennedy’s opinion

In delivering the opinion of the court, Justice Kennedy said the case required consideration of two questions under the Clean Water Act.

“The first is whether the Act gives authority to the Army Corps of Engineers, or instead to the Environmental Protection Agency, to issue a permit for the discharge of mining waste, called slurry.  The Corps of Engineers has issued a permit to petitioner Coeur Alaska Inc., for a discharge of slurry into a lake in southeast Alaska.

“The second question is whether, when the Corps issued that permit, the agency acted in accordance with law.

“We conclude that the Corps was the appropriate agency to issue the permit and that the permit is lawful.”

After a detailed description of the issues involved and the conflict between the two agencies’ regulations, Justice Kennedy says that “rather than address the tension between §§306 and 404, the regulations instead implement the statutory framework without elaboration on this point.

“Each of the two principal regulations … seems to stand on its own without reference to the other.”  Nor do additional regulations offer a clean basis for reconciliation, he adds.

Considering practice and policy

To break a deadlock, he turns to “the practice and policy of the two agencies,” which is outlined in a memo called the Regas Memorandum, written in May2004 by Diane Regas, then the director of the EPA’s Office of Wetlands, Oceans and Watersheds.

What the Regas Memorandum says is that the “regulatory regime applicable to discharges under section 402, including effluent limitations guidelines and standards, such as those applicable to gold ore mining … do not apply to the placement of tailings into the proposed impoundment [of Lower Slate Lake].”

The memo does not purport to invalidate the EPA’s performance standard, Kennedy said, since when slurry is discharged into a closed body of water, the EPA’s performance standard retains an important role in regulating the discharge into surrounding waters.

Coeur is required by its permits to ensure than any water coming out of Lower Slate Lake meets CWA standards.

In discussing the Regas Memorandum, Justice Kennedy said the court found “it a sensible and rational construction that reconciles §§306, 402, and 404, and the regulations implementing them,” while the arguments put forth by the environment groups do not.

Justice Breyer’s concurring opinion

In a concurring opintion, Justice Stephen Breyer wrote that “to literally apply these performance standards so as to forbid the use of any of these substances as “fill,” even when, say, they constitute no more than trace elements in dirt, crushed rock, or sand that is clearly being used as “fill” to build a levee or to replace dirt removed from a lake bottom may prove unnecessarily strict, cf. §1362(6) (defining “pollutant” to include “rock”), to the point that such application would undermine the objective of §404, which foresees the use of “dredged or fill material” in certain circumstances and with approval of the relevant agencies.”

While he recognizes the potential problems in going to far away from the CWA standards, he says there are safeguards in place to prevent that from happening.

In this case, Breyer wrote, a middle ground was needed.  “Faced with a difficult choice between creating a huge pile of slurry on nearby wetlands or using part of the lake as a storage facility for mine tailings, …  the EPA arrived at a compromise,” treating the mine tailings as fill, while considering anything that spilled over into nearby waterways as requiring a §402 permit.

Three justices disagree

Justice Ginsberg, joined by John Paul Stevens and David Souter, disagreed with the majority.  “The litigation before the court thus presents a single question,” she wrote:  “Is a pollutant discharge prohibited under §306 ofthe [Clean Water] Act eligible for a §404 permit as a discharge of fill material?

“In agreement with the Court of Appeals, I would answer no.

“In sum,” she concluded, “it is neither necessary nor proper to read the statute as allowing mines to bypass EPA’s zero-discharge standard by classifying slurry as “fill material.”

“The use of waters of the United States as “settling ponds” for harmful mining waste, the Court of Appeals correctly held, is antithetical to the text, structure, and purpose of the Clean Water Act.”

“The statute’s text, structure, and pur-pose all mandate adherence to EPA pollution-control requirements.

Shortly afterward, Xstrata confirmed that “it recently sent a written proposal to the board of Anglo American seeking their consideration of a merger of equals of the two companies.

Anglo American operations in South America. Red is copper.

Web sources put the value of the merger at $68 billion based on market values, $35 billion for Anglo American and $33 billion for Xstrata.

Anglo American said that “it should be noted that this situation is at a very preliminary stage and that there is no certainty that any transaction will be forthcoming.  A further announcement will be made if and when appropriate.”

Anglo American posted detailed disclosure information on the web.

Xstrata said it believes “a merger of these two world-class companies with complementary assets is highly compelling.   The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth.

“Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone.  In addition, Xstrata believes the optimization and reprioritization of the combined company’s organic growth pipelines would significantly enhance shareholder returns.”

Anglo said likely to resist

Reuters quoted a “source close to the situation” as saying that Anglo American is likely to resist the approach by Xstrata.  The source said Anglo’s assets are higher quality and have longer lives than those of Xstratra.

With regard to achieving synergies, Anglo American said April 30 it already has taken “a series of proactive measures in response to the current economic environment.”

In its platinum operations, for example, the company said that “a number of cost and value management initiatives were implemented.”  By April 30, it had cut employment by 4,195 since December, on the way to eliminating 10,000 positions by the end of 2009.  It also said that “good progress was made in the period with the efficiency enhancing operational restructuring” at two of its properties.

Anglo American also cut metallurgical coal  production by shutting higher-cost mines in Australia and by “selective restructuring of mining activities at core operations.”

At De Beers, the company reduced diamond production at all its mines through a combination of production holidays and reducing shifts worked, allowing sales from existing inventories in order that sales demand was met.

Synergistic savings put at 2%

Reuters quoted analysts who predicted savings from synergies of $700 million per year, or 2% of combined operating costs, to $875 million a year, which included benefits from putting Anglo assets into Xstrata’s Swiss tax domicile.

It was estimated that Xstrata has offered to pay about a 30% premium for Anglo American.   It is assumed that Xstrata would have to sell its 24.9% stake in No. 3 platinum producer Lonmin plc since it’s unlikely that a deal would go through if it added that to Anglo Platinum Ltd., the world’s largest producer.

There is also speculation that if a full merger doesn’t go through, as happened with BHP Billiton and Rio Tinto, the two firms may establish joint ventures in copper and coal similar to what BHP and Rio announced June 5 for their Australian iron ore operations.

Both Anglo American and Xstrata have been building copper empires in South America; each owns a 44% interest in the big Collahuasi mine in Chile.

Potential competition

As is typical when major mining mergers are discussed, there could be competition.  One firm that is mentioned is Vale S.A., which attempted last year to acquire Xstrata.  It is the world’s largest iron ore producer, but is interested in diversification, as seen from its own efforts in copper and nickel and from its acquisitions, such as that of Inco Ltd. in 2006.

While Vale has some small copper operations in Brazil and Canada, acquisition of Anglo American would make it a world-class player in that arena as well, as it became in nickel through acquisitions.  It also would become a major player in coal, platinum and diamonds and would gain far greater geographic diversification.

Vale considers itself the world’s second-largest mining company, with market capitalization of about $90 billion.

Analysts say a wild card in the mix is Glencore International AG, a Swiss commodities trader which owns 35% of Xstrata.  There has been speculation in the past week that privately held Glencore has been exploring an initial public offering, taking itself to the market.  It is unknown whether this event might be tied to Xstrata’s interest in Anglo America.

HudBay’s Flin Flon copper smelter is part of an integrated complex. Photo courtesy of Brian Pieters Photography

The financial impact of the smelter closure on the company will be minimal, it added, as the processing costs from the sale of concentrates are expected to be similar.

Further, the smelter is part of an integrated complex, and reclamation costs, which have been fully accounted for on the company’s balance sheet, only occur when the entire Flin Flon metallurgical complex ultimately shuts down.

HudBay said it anticipates manpower reductions as a result of the closure to be about 225 in Flin Flon and 65 at the White Pine Copper Refinery.

“The Flin Flon copper smelter has been a great asset and one of the centerpieces of our operations for over 80 years,” said Peter R. Jones, HudBay’s CEO.

“Today’s business realities, combined with the age of the plant and regulatory changes, make continued operation of this plant impractical and uneconomic.  We are strongly positioned post-smelter closure with our metallurgical facilities, the 777 and Trout Lake mines and an impressive project pipeline, including Fenix and Lalor.”

“We will work closely with our employees, unions and affected local, provincial and state governments, as well as other stakeholders, to mitigate the impact of the closures,” added Tom A. Goodman, senior vice president, operations.

Zinc business still fully integrated

After the closures, HudBay will remain a fully integrated zinc producer with its state-of-the-art, environmentally friendly zinc processing facilities in Flin Flon and Brampton.”

Particulate and sulfur dioxide emissions to the atmosphere will be essentially eliminated from the Flin Flon operations once the smelter is closed and the integrated metals facilities will be among the most environmentally friendly in North America in this regard, HudBay said.

HudBay is building a filtration plant that will enable the company to ship its copper concentrate off-shore, if necessary.  HudBay said it expects to have sales arrangements for its copper concentrate in place by the time the smelter closes.

The copper smelter ships anodes by rail to White Pine, Michigan, where they are refined into market standard copper cathodes.  The smelter has an annual capacity of 90,000 tonnes of copper anode.

In 2008, HudBay produced 82,458 tonnes of copper, of which 7,777 tonnes was produced from recycled White Pine spent anode.  Approximately 32% of the concentrate treated at the copper smelter in 2008 was purchased concentrate.

Its concentrate feed last year included 233,975 tons produced by the company and another 58,962 tonnes purchased, mostly from British Columbia, for a total of 292,937 tonnes.

Smelter dates to 1930

The Flin Flon smelter has been operating since 1930.  Its problem isn’t cost, since last year processing costs for the facility were C38.1¢ per pound of copper produced.  White Pine, a facility operating since 1982, added US 7.4 ¢ to each pound of copper.

Flin Flon smelter reverb slag is poured at the slag dump. Photo courtesy of Brian Pieters Photography

White Pine received 84,494 tonnes of anodes and converted them into 68,756 tonnes of cathode.

Flin Flon uses reverberatory furnace

Flin Flon is one of the last copper smelters using a reverberatory furnace.  Feedstock is roasted in a process that removes about half of the sulfur, before the calcines are put into the furnace.  Matte from the reverb is taken to converters to create blister, which is then cast into anodes from shipment to White Pine.

The roaster, reverberatory and converter off-gasses are passed through electrostatic precipitators to remove dust, which is in part recycled.  The slag is deposited in a slag-storage area and is used primarily for tailings dam construction.

HudBay’s copper smelter is subject to emission reduction targets set out in a notice issued on April 29, 2006 by
the Canadian government pursuant to the Canadian Environmental Protection Act.

The notice required HudBay to prepare and commence implementation of a pollution prevention plan (P2 Plan) that considers annual air release limit targets for sulfur dioxide, particulate matter and mercury.  The P2 Plan was prepared and implementation was commenced as required by Oct. 29, 2006, the company said.

HudBay added that it is required to provide annual interim progress reports until the P2 Plan is fully implemented by Dec. 31, 2015.

About Flin Flon

The 777 mine at Flin Flon produced its first ore in 2004.  Considered the company’s flagship mine, it produced 1.424 million tonnes of ore in 2007.  Six kilometers northeast of Flin Flon is the Trout Lake mine, which started in 1982 and produced 827,000 tonnes of ore last year.

Both of those mine ship their ore to the Flin Flon concentrator, which took in 2.3 million tons ore ore in 2007 and produced both zinc and copper concentrates.

While the copper cons are taken by conveyor to the smelter, zinc goes to the complex’ zinc plant, which utilized leading-edge technology, including the world’s first two-stage pressure leaching system and state-of-the-art electrolysis.  In 2007, it produced 110,500 tonnes of zinc.

The 777 mine has 4.4 million tonnes of proven reserves, grading 3.1% copper and 4.0% zinc.  It also included 2.4 gpt gold and 25.7 gpt silver.  Probable reserves at 777 total 11.2 million tons grading 2.1% copper and 5.0% zinc, with similar amounts of precious metals as the proven reserves.

Trout Lake has 1.5 million tonnes of proven reserves grading 2.0% copper and 4.1% zinc, with somewhat less precious metals than 777.  Probable reserves are 0.8 million tonnes, grading 2.1% copper and 4.7% zinc.

Hollister mine site.

The overall contained gold-equivalent ounces at its Hollister in Nevada’s Carlin Trend have increased by 27% from 2.3 million in June 2008 to 2.9 million, Great Basin Gold Ltd. said this morning.

At a cut-off grade of 0.25 opt, the combined measured and indicated mineral resources contain 1.45 million gold-equivalent ounces grading 1.167 opt for gold and 8.59 opt for silver.  A further 1.43 million gold-equivalent ounces are contained in inferred mineral resources of 1.03 million tons at a grade of 1.340 opt for gold and 2.72 opt for silver, the company said.  Gold-equivalent ounces in the estimated inferred resources increased 111% from June 2008.

The resource estimate has benefited significantly from over nine months of trial mining, which generated data from channel sampling and delineation drilling for stope development, the company said.

As a result of the integration of empirical data from geological observations and ore control sampling into the vein model, more stringent parameters have been applied to measured and indicated classifications.  In addition, 161 additional boreholes (totaling 51,430 feet) completed in the period from April 2008 to March 31, 2009 were integrated into the model.

Most drilling from underground

“The drilling program, mostly conducted from underground, has provided infill data to delineate stopes for trial mining and significantly improved our understanding of the lateral and vertical geological continuity of the vein system,” Great Basin Gold reported.

The resource estimate reflects depletion of material mined in 2008 and 2009 (up to March 31 2009), totaling 103,746 gold-equivalent ounces at an average grade of 1.55 opt.

The outcome of changes made in determining resources is a more conservative approach to resource classification that more closely reflects what is observed empirically underground, the company said.

Consequently, the tonnage in the measured category has decreased but grade has increased.  Tonnage in the indicated category has increased due to reclassification and tonnage in the inferred category has increased due to re-classification and additional drilling testing the extent of mineralization.

More evaluation planned

As the mine development progresses, the evaluation and upgrade of the mineral resources from the inferred and indicated to a measured category will provide data to assess the potential for reducing cut-off grade, the company said.

It added that the current testing of various mining technologies may reduce stoping costs and expand the opportunity to exploit certain narrow veins that otherwise would not be considered in the mine plan.  Employing a lower cut-off grade would allow lower-grade material in the indicated category to be included in the resource.

The depth extent of the vein system is yet to be fully established, Great Basin Gold said, so to be conservative, inferred resources have been constrained to a depth of 1,200 feet below surface.  Certain areas of previous indicated resource have been re-categorized into inferred because of lesser density of sampling data.

Inferred resource grades have increased from 0.510 to 1.34 opt for gold and from 1.43 to 2.72 opt for silver due to the localized extrapolation of well defined areas of higher-grade pay shoots in the measured and indicated categories.

Gwenivere, Clementine veins

The ongoing program will continue to focus primarily on extensions of the Gwenivere and Clementine vein system to the west/northwest and at depth, the company said.  Further investigation of Blanket zone mineralization hosted in Tertiary volcanics above the Gwenivere/Clementine vein system is planned.

Miners heading underground at Hollister.

Detailed reassessment and modeling of all Blanket zone intersections is currently under way, as there is potential for a significant resource in this area as indicated by previous surface drilling, the company said.

Great Basin Gold currently has three drill rigs in operation underground, undertaking stope delineation, resource infill and exploration drilling.  Surface exploration is currently focused on collating and reviewing all geophysical, geological and drilling data for the property, with the intent of better delineating basement structures that control mineralization.

Additional drilling at Hollister is being considered for the Hatter Graben area during 3Q and 4Q.

Dippenaar’s comments

“Our ongoing exploration drilling programs and results from trial mining continue to confirm the prospectivity of the Hollister property, evidenced in the substantial increase in the reported resources,” said Ferdi Dippenaar, president and CEO.

“The tighter geological controls constraining the estimate are also improving trial stope tonnage and grade estimates and, as a consequence, our mine planning is benefiting from more accurate information.

“As the underground development continues, there will be further opportunities to drill-test the depth extensions of a number of high-grade zones that are emerging from the evaluation.  The continued exploration drilling from underground is bearing success with tracking the lateral extensions of the Hollister veins both eastward towards Hatter Graben, but also stepping northwestward into the major Butte Fault bounding structure,” Dippenaar said.

“Furthermore, the review of Blanket style mineralization in the overlying volcanics may provide an interesting upside to the current resource profile, as it could be mined from the current infrastructure.”

Staff at the University of British Columbia’s Hydrometallurgy Research Laboratory have successfully demonstrated that manganese metal can be manufactured from Boleo manganese carbonate using conventional hydrometallurgical processing steps, the company reported.

A sample of manganese carbonate produced during the 2006 demonstration pilot plant at SGS Lakefield was used as feedstock for the tests which were done under the supervision of Thomas Gluck, Baja’s manager for process technology, and David Dreisinger, Baja’s vice president for metallurgy.

The Baja property, scheduled to come on line in 2012, is expected to produce copper, cobalt and zinc metal, as well as manganese, zinc sulphate products and perhaps minor metals such as indium, gallium and germanium.

The key features of the Boleo manganese metal process are:

• Boleo manganese carbonate is leached to greater than 99% efficiency in the manganese leach solution (electrolyte from the manganese plating cell).
• Minor impurities present in solution are removed using sulfide precipitation and clarification.
• The purified solution is electrolyzed in a conventional manganese electrowinning cell. A smooth grey deposit of manganese metal was plated over a six-hour period at a current efficiency of 65%.  This represents typical commercial performance, the company said.
• The manganese metal is plated without the addition of selenium — a condition that ensures a higher quality product.

“Being able to produce manganese metal without adding selenium will differentiate Boleo manganese metal from the majority of the product available in the market,” Gluck said.  “This is something our Korean partners are particularly interested in.”

Korean investors

Last July Baja sold 30% of Boleo to a Korean consortium for $294 million in cash plus project funding.  The Korean firms include Kores, LS-Nikko Copper Inc., Hyundai Hysco Co. Ltd., , SK Networks Co. Ltd. and Iljin Copper Foil Co. Ltd.

“Today’s result provides added confidence in our ability to produce manganese metal at Boleo once the copper, cobalt and zinc circuits are up and running and could add significantly to the economics of the project,” said John Greenslade, Baja’s president and CEO.

Boleo is the world’s sixth-largest manganese deposit. Current Boleo mining and processing plans would allow for the production of up to 100,000 tonnes (220 million pounds) of manganese metal per year.

Manganese metal is used in alloying applications in the steel, aluminum and non ferrous alloy industries.  Annual production of manganese metal is estimated to be over 800,000 tonnes worldwide.  The spot price for electrolytic manganese metal containing selenium (manufactured in China) is currently $1.00 per pound and the Boleo product would sell at a premium to this price.

More studies needed

Further work on plating of Boleo manganese is ongoing at UBC and with other development partners toward the goal of producing a fully integrated flow sheet for converting Boleo manganese carbonate to manganese metal in the most efficient way possible, Baja said.

This ongoing work is being conducted as part of a “manganese action plan” that is overseen by the Minera y Metalurgica del Boleo (MMB) Manganese Action Committee and includes the evaluation of alternate uses for Boleo manganese carbonate. MMB is the Mexican subsidiary of Baja and a Korean Consortium

and 100% owner of the Boleo project. The Manganese Action Committee is made up of nominated representatives from Baja and the Korean Consortium. A next key milestone in the action plan is the completion of a pre-feasibility study for manganese metal production.

A 2007 definitive feasibility study projected an average annual production for the first four years of 56,000 tonnes of copper cathode, 1,500 tonnes of cobalt cathode and 20,000 tonnes of zinc sulphate, Baja said.

The project has proven and probable reserves that support a mine life of more than 25 years.  Anticipated cash costs in the first five years are $0.27 per pound of copper, net of by-product credits for cobalt and zinc and with no credit for manganese.

“In response to the recent improvements in the molybdenum market, the company is making operational adjustments at its mines that will result in molybdenum production and sales in 2009 being approximately 10% higher than previously announced estimates,” said Kevin Loughrey, chairman and CEO.

“These operational adjustments include the shortening of the planned shutdown period this summer to two weeks from one month for the milling operations at the Thompson Creek and Endako mines.

“We will continue for the time being with the other main production adjustment we announced in February 2009, namely the reduction in the Thompson Creek mill operation to 70% of capacity (a 10 days on, four days off schedule). However, we will be monitoring market conditions and we intend to remain flexible and ready to adjust our production again in the future.”

Molybdenum production at the Thompson Creek mine is expected to be 16 million to 18 million pounds (compared to previous guidance of 15 million to 17 million pounds) and the company’s 75% share of production at the Endako mine is now estimated at 6 million to 8 million pounds (compared to previous guidance of 5 million to 7 million pounds).

The company’s 2009 cash production costs are currently estimated in the range of $5.75 to $7.00 per pound of molybdenum produced, down from a previously estimated range of $6.25 to $7.25 per pound, with costs at the Thompson Creek mine expected to be $5.50 to $6.50 per pound (compared to previous guidance of $6.00 to $7.00 per pound) and costs at the Endako mine expected to be $6.50 to $7.50 per pound (compared to previous guidance of $7.00 to $8.00 per pound).  This assumes a US$/C$ exchange rate of 1.15 (compared to previous guidance of 1.20).

The revised 2009 Thompson Creek mine cash production costs include about $30 million of stripping costs related to future planned production phases, amounting to $1.65 to $1.90 per pound produced (compared to previous guidance of $1.75 to $2.00 per pound produced).  The 2009 Endako mine operating plan has minimal stripping costs.  All costs estimates are in U.S. dollars.

As the economy and the steel industry tanked late last year, the price of moly fell precipitously in October from about $34 a pound to about $12 in the course of a couple of week.  It then continued a slower drop to as little as $8 a pound in April.  In the weeks since, it has begun to follow the steel industry out of the slump to just over $10, but with indications that it will rise more over the course of the year.

Typical demand has 35% of moly output going into alloy steel, 24% into stainless steel, 9% into tool and high-speed steel, 6% into cast iron and a further 5% into superalloys.

Loughrey made a presentation that included the change to investors attending RBC Capital Markets’ 2009 Global Mining and Materials Conference in Toronto.