Editorial: Conflicts and confusion

While the crash in junior mining stocks started to level off during the week ended Aug. 30, the 35th trading week of 2008, there remained quite a few open-ended, confusing situations for miners and their investors.

• Doors continued to close for Western miners in Africa, particularly in the Central African Republic and the Democratic Republic of the Congo.

In the CAR, the normally very astute Axmin was blindsided by the government’s decision to restrict Axmin’s permits to gold from the prior broad suite of minerals. It’s devastating for the trailblazing junior, which has just found promising iron ore assets in the dirt-poor country, and has spent some US$60 million there over the past decade. It also throws into question the wisdom of going ahead with building its Passendro gold mine if the government is now seizing assets willy nilly.

In the DRC, the anxiety level has ramped up to a high pitch for Freeport-McMoRan Copper & Gold and partner Lundin Mining at their huge Tenke-Fungurume advanced copper project, after a DRC government official mused to Bloomberg that the government now wants to hike its Tenke interest to 45% from 17.5%, and boost a signing bonus to US$250 million from US$100 million.

A good gauge of the DRC government’s willingness to work with Western miners is the status of materials moving across the DRC-Zambian border. First Quantum Minerals has been in limbo in this border zone since November 2007. That’s when the DRC government disallowed the efficient and profitable shipments of ore from the company’s small but high-grade Lonshi copper mine in the DRC to its nearby Bwana Mkubwa SX-EW plant in Ndola, Zambia, where production is down more than 80% so far this year owing to the border closure.

A sign that things could get worse is Banro’s willingness to kick off a $35-million financing effort at a time when its shares have been bombed out to well below the $4 mark, down from $12 less than a year ago.

• In Venezuela’s well endowed but politically dodgy goldfields, Vancouver-based but Russian-backed Rusoro Mining suggested a low-ball takeover offer for Gold Reserve. The deal was immediately brushed off, but with Gold Reserve now on the outs with the anti-gringo Hugo Chavez regime and Rusoro seemingly better connected, you almost wonder if Gold Reserve should make a bigger effort to do a deal and exit with something in hand, as Hecla Mining did in the El Callao district.

Inmet Mining sweetened its offer for Petaquilla Copper by 10%, turning the bid from hostile to friendly, and also evaporating Petaquilla’s efforts to void Teck Cominco’s earn-in on the Petaquilla copper project in Panama. With its success at the Troilus gold mine in remote Quebec, Inmet has already proved itself to be highly skilled at keeping costs down in a difficult, low-grade, open-pit bulk-mining environment — skills that will be critical to success in Panama.

Minco Silver appears to have had a near-death experience while looking at the books of its erstwhile takeover target Sterling Mining, and has decided to call off its six-week-old friendly offer. With Minco now out of the picture, Sterling may go bankrupt, halting work at the reactivated Sunshine silver mine in Idaho, where 72 miners died in a fire in 1972.

• Prime Minister Stephen Harper announced new money to step up the geological mapping of resources in Canada’s Arctic, as part of his “use it or lose it” approach to maintaining Arctic sovereignty.

Some $100 million will be budgeted over the next five years for more on-shore geological mapping of the North. This is in addition to the $109 million that was already being spent by both the Conservatives and the previous Liberal government for mapping of the Arctic Ocean floor, and the estimated $500 million that will have been spent by the private sector.

As the Canadian Press describes it, the Geological Survey of Canada is in a hurry to better map the Arctic and its potential resource riches by 2013, having signed a United Nations treaty meant to determine international boundaries in the Far North between Canada, the U. S., Russia and Denmark. The Conservative government had already pumped an additional $40 million into the original $69-million mapping project, which had been underfunded by the previous Liberal government.

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