Editorial: And these people are supposed to be serious

Well, the 47th trading week of 2007 brought more messages of consolidation, but ones that made us feel even more jaded than usual. And regulatory issues, forced into the light by anti-mining groups, make us feel more cynical still.

* Another super-giant is said to be in the making, after Onexim, the holding company largely owned by Russian businessman Mikhail Prokhorov, offered to sell a 25% interest in Norilsk Nickel to aluminum giant Rusal. Rusal’s chief executive Aleksandr Bulygin and Onexim’s chief executive Dmitry Razumov said the sale would pave the way for a combination of Rusal and Norilsk that would create a large diversified mining company.

Rusal, whose major shareholder is another oligarch, Oleg Deripaska, has to wait for the result of another offer to sell the block, which Onexim made to Prokhorov’s onetime business partner, Vladimir Potanin of Interros, the holding company that owns the control block of Norilsk. Potanin would have to close the deal early in 2008, or Rusal can take it up.

The creature that would result from a Rusal-Norilsk combination is impossible to predict — maybe an ungainly neo-Soviet conglomerate, living on the West’s seemingly boundless optimism about Russian business?

* FNX Mining got a jarring message from a major shareholder on Nov. 19. York Capital, a fund owning 19% of the company, followed up a meeting with FNX’s chairman, Terrance McGibbon, with a letter commending management’s conduct of the company’s business and its creation of value in FNX but lamenting “the public market’s unwillingness to recognize the intrinsic value in FNX’s shares.” York wants FNX to start looking for a buyer, and is backing that up with a plan to get maximum value for its own block of stock. In other words, we’re selling: and if you want in, start working the phones. Maybe Rusal would like some.

FNX, one of the biggest success stories of the early 2000s base metal cycle, is caught between the two measures of corporate success — do you build a business, as McGibbon has done, or do you move the stock price and make yourself into a takeover target? York, like many shareholders, thinks it has the answer.

But it is an answer with a finite life. There is money to be made in bull markets by managing companies to sell, but when the market turns against a sector, what’s left is the business itself and the earnings and value it can generate. And without that, there is no value to put a multiple on.

If York sells, FNX’s share price may take a hit. But the rest of the shareholders may be better off without York.

* Earlier this month, Ecojustice — previously the Sierra Legal Defence Fund — sued Environment Minister John Baird on behalf of anti-mining group Mining Watch Canada and pressure group Great Lakes United, alleging that Baird issued instructions to the mineral industry that a 2006 revision to reporting requirements under the National Pollutant Release Inventory — intended to capture the metal content of waste rock and mill tailings — could be ignored.

The revision to the policy was the outgrowth of a successful move on the part of the Environment Canada staff to harmonize Canadian pollution-inventory practices with the Americans’ absurd Toxics Release Inventory. Nobody with adequate knowledge of the natural world took the TRI seriously when it catalogued waste rock and mill tailings as pollutants, and a court decision in 2003 removed waste rock from the definition, too (T.N.M., July 19-25/04).

But in the la-la-la-I-can’t-hear-you world of anti-mining politics, that was irrelevant. Faced with the suit — and the spin from the greenistas — Baird knuckled under, and a departmental spokesthingy said he was instructing the civil service to have mining companies report tailings and waste rock as toxic emissions.

In one respect, that was the right thing: the government should follow the law. But the law, often enough an ass, is an even bigger ass than usual if it supposes rock and unrecovered metal to be a “pollutant.” If that’s the eye of the law, the law is blissfully unaware of any natural science, and — along with Mr. Bumble — the worst we wish the law is that its eye be opened by experience. Foolish indeed was the former minister, Rona Ambrose, when she took her advice from the Environment Canada bureaucracy — the biggest asses of all — and issued Orders in Council to change the reporting system. Now the government should change the system back, that Nature not disclaim in it.

Send your Letters-to-the-Editor and other op-ed submissions to the Editor at: tnm@northernminer.com, fax: (416) 510-5137, or 12 Concorde Pl., Suite 800, Toronto, ON M3C 4J2.