A year of shocking moments

As 2005 grinds to a close, few in the mining industry could say they were surprised by the business’s strong fundamentals this year, but there were more than a few events that prompted a jaw-drop and a Keanu Reeves-ish “Whoa!”

Here, we present our list of the top 10 most-shocking mining moments of 2005:

10. Thom Calandra’s meltdown — In January, the U.S. Securities and Exchange Commission brought and settled civil fraud charges against Calandra, co-founder and editor-in-chief of the wildly popular web site www.cbs.marketwatch.com and editor-in-chief of The Calandra Report, a now-defunct, mining-oriented online newsletter that once boasted 4,500 subscribers.

The SEC alleged Calandra “profited by secretly selling stocks shortly after his investment newsletter’s positive recommendations of the stocks caused their prices to rise.”

In settling, Calandra neither admitted nor denied the allegations but did disgorge US$416,000 in trading profits and interest, and paid a US$125,000 civil penalty.

Humiliated, the 48-year-old Californian settled into writing research papers about biotechnology and pharmaceutical companies for San Francisco-based consultant LSG International.

9. The resurgence of uranium — While uranium can do too much damage to a person’s gonads to ever be called “sexy,” the politically incorrect metal was unexpectedly hot this year as an exploration target, as its price soared to US$36.25 per pound U3O8 at December’s end, up from US$20 per pound a year ago and US$9 per pound just three years ago.

The higher price stems from greater demand: many nuclear reactors are expanding capacity and new ones are coming on-stream, particularly in Asia and Europe, and will require enriched uranium fuel rods. China alone plans to quadruple nuclear power generation by 2020.

8. Refco’s swift collapse — In business for 36 years, and with 2,400 employees in 14 countries, Refco was a large, New York City-based brokerage house that specialized in the murky world of commodities, derivatives and futures markets. With metals, Refco provided execution services for exchange-traded derivatives in gold, silver, platinum and palladium, and was a leading ring-dealing member of the London Metal Exchange.

However, in October, less than two months after its US$583-million initial public offering, Refco stunned the market by announcing that its chairman and CEO, Phillip Bennett, had hidden US$430 million owed to Refco by a company he controlled. Within two weeks, the stock price had collapsed, shares were delisted, and the company had sought bankruptcy protection in a bid to delay its liquidation.

7. Copper market mayhem — An already tight copper market got a whole lot tighter in November with an admission by the Chinese government’s State Reserves Bureau (SRB) that one of its metals traders had taken large short positions in the red metal — rumoured to be between 100,000 and 200,000 tonnes in July and August — with the SRB obliged to deliver by December 21.

With copper prices having risen steeply since the summer on strong fundamentals, some guessed that the SRB’s paper losses on the shorts exceeded US$100 million by November.

Adding to the mystery was the trader’s disappearance and the SRB’s initial denial that he was even an employee.

On news of the “rogue” trading, the cash bid for copper surged another 3%, peaking on November 21 at a record US$4,381 per tonne, a penny shy of US$2 per pound.

6. Hurricane Hugo’s damage — Venezuelan President Hugo Chavez has emerged as the Fidel Castro of the 21st Century, but with a much stronger hand. Chavez is bankrolling the export of his particular brand of anti-Americanism and anti-capitalism using his own country’s oil money rather than unreliable handouts from Mother Russia. This September, foreign gold miners active in Venezuela got a taste of Chavez’s capriciousness when el presidente declared that Crystallex International’s Las Cristinas project “belongs to Venezuela, and we are going to create a national mining company there.” Shares in Crystallex and related gold miners tumbled, spurring the companies to jump into full damage-control mode.

5. Mongolia’s sudden uncertainty — Starting from the humblest of places after the collapse of the Soviet Union and fortified with a progressive mineral policy that emphasized foreign investment, Mongolia has emerged as one the world’s premier destinations for mineral exploration dollars, and boasts one of the past decade’s greatest discoveries: Ivanhoe Mines’ Oyu Tolgoi copper-gold deposit.

However, the warm and fuzzy feelings foreign explorers have had for the country turned decidedly chilly in November with the open musings by some members of government that the state should retake up to a 30% stake in large mineral projects.

As a result, shares in mining companies working in Mongolia were hammered before new, soothing words from the government eased foreigners’ concerns there’d be any imminent expropriations.

4. Brett Kebble’s murder — In crime-ravaged South Africa, where fatal car-jackings are commonplace, the murder in September of this gregarious, South African gold-mining executive on his drive home appeared to virtually all observers as a premeditated “hit.”

The motive for this as-yet-unsolved crime, however, was less clear, as Kebble had racked up as many enemies in the nation’s political scene as he had in its mining sector.

At the time of his death, Kebble had been at the centre of a multimillion-dollar share scandal: According to a regulatory filing by Randgold Resources with the U.S. Securities and Exchange Commission on June 30, the 31% stake in Randgold Resources that Kebble-controlled Randgold & Exploration claimed to own really amounted to no more than a 6.7% interest.

These “missing” shares, worth about US$225 million, appear to have been sold under Kebble’s direction — without board or shareholder approval — and the money from the sales has yet to be accounted for.

3. Gold tops US$500 per ounce — Santa visited the gold bugs early this year, as the spot gold price powered its way upwards in late November and early December to a new 24-year high of US$541 per oz. on December 12 in Hong Kong trading, before pulling back towards a new, bottom resistance level around US$500 per oz.

2. Inco’s merger with Falconbridge — Just a year ago, Noranda and its subsidiary Falconbridge were on the verge of falling into the hands of the Chinese government and Inco was a juicy takeover target for other foreign behemoths. Fast forward to today, and Canada is months away from having its own base metals powerhouse: Noranda and Falconbridge having already merged under the latter’s banner, and a friendly merger in the works between Falco and long-time rival Inco. It’s amazing, really.

1. Barrick’s Placer takeover — We argued in this space in July that “unspectacular management at the top and inconsistent performance on the ground” had left Placer Dome vulnerable to a hostile takeover. Well, we weren’t the only ones noticing: On Halloween, Barrick Gold launched the largest hostile takeover attempt in gold mining history, valued at US$9.2 billion. Two months later, Barrick’s sweetened offer has turned the deal into a friendly one, and its side agreement with Goldcorp is propelling the latter towards a 2-million-ounce producer status, eclipsing a fading Kinross Gold.