Gold’s Record Rise The Year’s Highlight

While many are thankful to leave an economically brutal 2009 behind, the year had its positive moments, too. Here’s our list of the year’s biggest mining stories:

• Layoffs — The global recession induced a bust in base metal prices in late 2008, which translated into large production cuts and layoffs at mines in the first quarter of 2009.

The nickel scene was emblematic: spot nickel prices dropped by two-thirds in less than a year and bottomed out below US$5 per lb. in March and April 2009, and Canada’s nickel mines responded by slashing output and staffing across the Sudbury basin and beyond.

But those base metals production cuts, combined with surprisingly robust Chinese demand, set the stage for a rebound in base metals prices in the fourth quarter — though that wasn’t enough to stop the closure of the Kidd metallurgical complex outside Timmins.

• Teck asset selloff — Teck’s overextension in mid-2008 on US$9.8 billion in borrowings caused 2009 to be filled with layoffs and asset sales by the crippled major, especially in gold. Teck is now a shadow of its former self in terms of its asset base, and has substantially increased Chinese ownership.

On the trading side, after quickly losing around 90% of their value, Teck’s shares hit their nadir of $3.35 on Nov. 20, 2008, before rising all year long and closing out 2009 around $40.

• Exploration successes — Many of the year’s standout exploration stories were really continuations of work on discoveries made in previous years: International Tower Hill’s rapid growth of its Livengood gold deposit in Alaska; Peregrine Diamond’s discovery of more diamond-bearing kimberlite pipes at its Chidliak project on Baffin Island; the drilling of substantial gold intercepts by now-merged West Timmins Mining and Lake Shore Gold in Timmins, Ont.; Underworld’s White Gold discovery in the Yukon; the hearty band of Ring of Fire juniors in northern Ontario; and Ventana Gold’s high-grade gold find at La Bodega in Colombia.

• Collapse in the diamond market — Just how bad was it? As prices for rough diamonds fell by maybe 50%, the world’s biggest diamond miner, De Beers, suspended mining in December 2008 for half a year at the world’s biggest and most-profitable diamond mine, Jwaneng in Botswana. De Beers also received some US$800 million in bailout money from its parent, Anglo American.

• Growing Chinese investment — Canadian juniors doing major deals with Chinese companies included Consolidated Thompson Iron Mines, Western Prospector Group, Cardero Resource and Canadian Royalties.

But in Australia, in its attempt to pump US$19.5 billion into Rio Tinto, Chinalco was stymied by Aussie regulators and irate Rio Tinto shareholders who preferred a rights offering as a way of trimming the giant’s US$37-billion debt.

• B.C. power line go-ahead — This political decision by the federal and B.C. governments in September will open up B.C.’s remote northwest. More than a dozen mining projects, many being advanced by Vancouver-based juniors, now stand a very real chance of being developed into large mines in the decades ahead.

• Thaw in Mongolia and Ecuador — The past few years saw the governments of Mongolia and Ecuador being overwhelmed by the successes of foreign mining companies on their soil, and unsure how to proceed with mine development that was fair to all concerned.

Much of that uncertainty was put aside in 2009, as the Mongolian government in October came to an agreement with Ivanhoe Mines to develop the massive Oyu Tolgoi copper-gold project, and the Ecuadorian government lifted a temporary ban on exploration and mining.

• Boom in rare metals and lithium — This odd subsector proved to be a profitable one for penny stock enthusiasts willing to bone up on obscure topics such as future battery demand in electric cars and high-tech gadgets.

• Record gold prices — From its low for the year of US$810 per oz. in early January, gold first rose above US$900 per oz. in February as investors saw the inflationary implications of the huge “porkulus” bill adopted in the U.S. to stimulate economic activity.

The big leg up above US$1,000 happened in early September, as the scale of the humongous new U.S. budget deficit sank in.

On the back of substantial new central bank buying of gold, prices ultimately hit an all-time nominal high of US$1,214.80 per oz. in early December 2009 before pulling back by around US$100 to close out the year.