Natural Resources

New York Times’ article which appeared today called ” With Wind Energy, Opportunity for Corruption“, serves as a reminder that business activities based on permits, subsidies, public officials, lands deals and construction, are fertile grounds for kickbacks and money laundering.  For example, in this New York Times’ article, Stephen Castle writes:  “It’s a very new area of development with the promise of a lot of money that can be made, both for the developers of wind farms and landowners,” said John Milgrim, a spokesman for the New York attorney general’s office, who noted that the industry had been largely unregulated. “Anytime there’s financial dealings, new industry and large sums of money, there is potential for corruption.

And more on the topic of money laundering, the respected UK’s Guardian reported yesterday in an article titled “Drug money saved banks in global crisis, claims UN advisor“, quoting the head of the United Nations’ Office on Drugs and Crime, Antonio Maria Costa: ” …he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result“.

To paraphrase John Milgrim, anytime there’s real estate and permits, there is potential for corruption.  And corruption may have saved a banking system.  Go figure.

Sudbury Star just announced  bad news for Timmins about Xstrata Copper Canada closing the zinc and cooper metallurgical plants, which existed for well over 40 years in that region.  670 workers will be out of jobs by May 1st, 2010.

Only the non hydro-intensive concentrator and mine site will remain open, maybe until 2017.  Both those operations do not operate on a hydro intensive diet like the zinc and cooper smelters.  It is more than likely that Timmins has indeed lost out to its smeltering operations to Quebec, where energy prices are strategically lower than that its neighbours.  This bad news story should be a good news story for the natural resource industry located in New Brunswick where they will learn in a hurry about the benefits of having Hydro-Quebec as your guardian.  According to the North Bay Nugget, the smeltering operations of the ore mined out of the Timmins mine will be shipped to Rouyn Noranda’s Horne operations and CCR, in the Montreal area.

Also, Timmins residents who have voted repeatedly for contrarian but well respected politicians (Charlie Angus federal – NDP and Gilles Bisson Ontario-NDP) are now wondering whether their NDP politicians can do anything in a province led by Liberals and a Canada led by Conservatives.

One cannot underscore the power of discounting the hydro-electric bill when planning for capital investment in any resource based province.  But while Ontario is redesigning its new Mining Act in hopes of offering investment certainty to mining companies, it is dealing with the obvious reality that it will only get “extraction” investments, like Africa because it has no Hydro-Quebec type infrastructure to increase refinery operation investments.

The announcement just a few weeks’ ago by Kria Resources is disclosing its discussions with Xstrata about a toll treating deal and a net smelter sharing interest.  Kria has its mining operations in New Brunswick and Xstrata is inviting more ore to process in its New Brunswick smeltering operations.  No doubt the hydro electric future looks bright for natural resource companies operating in New Brunswick.

The biggest gamble ever taken by Warren Buffett is railroads owned by Burlington Northern Santa Fe Corp.  Buffett is taking a huge risk that goods will move across the country in the long term.  According to Jack Ablin, chief investment officer at Harris Private Bank, the deal is said to be a bet on the future of energy.  Coal.  Burlington moves coal across the country.