The greatest mining flameouts of 2012

2011 was a year where many metals and minerals were hitting all-time record prices, most companies had more cash than they knew what to do with and in some parts of the world mine workers wouldn’t ge out of bed for less than six-figures.

2012 was always going to bring with it some sort of reckoning.

Here are some of the more notable flops, failures and flameouts of the year.

So close he could taste it: Robert Friedland

Oyu Tolgoi – the flagship of the world’s flagship mining projects – was already more than 80% complete when billionaire Friedland was shown the boardroom door leaving it to the big boys to finish the job.

Friedland loved to talk up his cherished copper-gold project in the middle of nowhere.

How it made Ivanhoe worth $30bn (market cap never came close), how it would turn the average Mongolian herder into a high-net-worth-individual and how people like him don’t need the likes of Rio Tinto to pull off a project this size.

A bitter disappointment it must’ve been for Friedland when after a decade’s work and eleventh-hour attempts to sell off assets to divert to Oyu Tolgoi, he still had to cede control to the bean counters.

He’s bounced back of course and with $2.5 billion Ivanplats (somehow doesn’t have the same ring to it)  Friedland has once again lumped together a few fine deposits. And a property in the most fraught mining sector in the world: South Africa’s platinum industry.

And he thought dealing with Mongolian politicians was a tricky business.

Proof money can’t buy you happiness, or empathy, or poetry skills:  Gina Rinehart

If Rinehart has been buying up television stations to buff her public image, consider it money down the drain.

Much of the unflattering attention in 2012 came from her dirty laundry being washed in public thanks to ongoing disclosures in court.

Cases involving a bitter fight family feud and various lawsuits over royalties (is there an iron deposit in Western Australia that Rinehart does not believe belongs to Hancock?) showed  Rinehart’s non-existing soft side.

The details emerging from the family rift pitting Rinehart and her youngest daughter against three  siblings are just sad, but Rinehart did herself no favours when she started publicly sharing her insights into the politics of mining in Australia.

She managed to piss off people on two continents with one sentence with her wish  that Aussies would become more competitive and be happy with $2-a-day like those hardworking Africans. These weren’t just off the cuff remarks, but part of a 10-minute prepared speech to the Sydney Mining Club.

She apparently has no love for the ordinary people of the country that made her richer than the queen of England.

In another article she had some choice advice for Australia’s working class: “If you’re jealous of those with more money… spend less time drinking, or smoking and socialising and more time working.”

Rinehart’s dream – like that of her father – is to split Australia in two. She’s even written a poem about it that’s on a plaque attached to an iron boulder in a public square in the culture capital that is Perth, WA.

She clearly has the common touch and in 2013 may still pursue the long mooted run for public office.

Gina for President of the Republic of Western Australia!

Sitting on a mole hill of gold: Frank Callaghan 

If it pans out, Cow Mountain will instantly catapult Barkerville Gold and veteran promotor Callaghan into the top tier of global gold mining.

If it pans out.

Back in June, when many of Vancouver’s mining juniors and their investors were worrying that they may not see out the year, everyone was looking for a good news story.

And Callaghan provided it. In spades. 10 million ounces right smack in the middle of BC at the most juicy grades.

Early skepticism and persuasive arguments about just how flawed the technical report was did not stop punters – hungry for anything that moved with any kind of tradeable volume on the V – from diving in.

Four months later the cease trade order remains firmly in place and the only news out of Barkerville is that work on a new NI 43-101 is ‘ongoing’.

No-one involved in the saga exactly covered themselves in glory – not the market regulators, the qualified persons, the media, the investors; the whole junior mining industry in Canada for that matter.

But it sure was fun while it lasted.

Fables of fabulous riches runner-up:

White Tiger Gold / Intergeo  –  Maxim Finsky / Mikhail Prokhorov

Gave North America a glimpse into the Russian way of doing  business and the true meaning of a bear raid.

CEOs lending to their own business at usury rates, mysterious oligarch backers, huge loan defaults to Western banks, stealth takeovers while all along keeping shareholders in the dark and spinning a yarn to Toronto market watchers.

You shall not Mountain Pass!: Molycorp (and the rest of the rare earth industry)

On the ground Molycorp’s  rare earth mine seems to be doing just fine, but just about everything else around the company is imploding.

Shall we count the ways Molycorp was mutilated in 2012?

• Rare earth prices have fallen, are falling and will fall again. Mountain Pass produces light REEs. These will be given away for free soon judging by recent price trends.
• They paid $1.3bn for a rare earth processor only to write off most of it a few months later.
• The CEO resigned just six months after touting the deal as a paradigm shift for the rare earth industry.
• They’ve been forced to go back to the market to close funding gaps a few times in 2012, they may have to do so again.
• The SEC is investigating if and how the company’s public disclosures correspond with the facts.
• Adding insult to injury Molycorp then fails to publicly disclose for months that the SEC is looking into what they publicly disclose.
• There is a pump-and-dump lawsuit against the company. Pump would be April’s $35/share. Dump is presumably November’s $5.75.
• The lobby to make US rare earth miners a special and protected industry has not even been able to persuade their supposedly most important customer – the US military.

There’s a popular video game about the US waging war over rare earths and it shows how Molycorp gives a new twist to the old stock market adage – buy on rumour, sell on fiction.

Molycorp’s peculiarities aside the whole REE business is a mess:

Just look at China.

They have a global monopoly. Their competitors can’t get their act together (talking about you Lynas). They shut down hundreds of mines, they stockpile, they manipulate exports and prices, they consolidate, they throw the full weight of the state behind the industry, but they still end up having to subsidize the remaining players who are already idling mines.

This is when you know fundamentals are bad.

Baja humbug: Too family-friendly company wins, then loses Mexican project

20% shareholder Mount Kellett wasn’t happy about what they saw at Baja Mining under John Greenslade.

What they saw was a company riddled with self-dealing and nepotism, a cosy board living on Greenslade’s  largesse when it came to share options time and supposedly arms-length associated companies under the Greenslade family tree scratching each others backs.

Greenslade’s followers – judging by the number of angry emails that flooded MINING.com’s inbox proclaiming his innocence on all charges and impeccable knowledge on all things mining, they were legion – managed to defeat Mount Kellett in the proxy battle by a hair’s breadth

But in the end that did not really matter.

While Greenslade’s extended family and Mount Kellett were slinging mud in public, the company’s Mexican copper project was burning through cash, getting cost calculations horribly wrong and generally making a hash of building a mine.

The Greenslade camp was eventually booted out and it was up to a Korean consortium to find the $1.1bn to build Boleo.

They’ve managed to secure funds to keep things going, but an oft-delayed re-written NI 43-101 now expected in January might convince everyone to stop throwing good money after bad.

Shareholders who’ve seen their investment lose 90% of its value at this point probably don’t care much either way.

Project management lessons learned the hard way runner up: Nautilus Minerals

Undersea mining is difficult, but not impossible – just ask De Beers who’s been hoovering up diamonds off the Namibian coast for decades.

What really did Nautilus in was not the technology, not even the economics of undersea mining.

It was good old fashioned company finances.

First there was the PNG government denying it ever had plans to pony up for something that might end up at the bottom of the Bismarck Sea, then the German shipbuilders wouldn’t go on building the ships and finally North American backers got tired of being the private placements of last resort.

Now all work is halted.

Except early exploration in the middle of the Pacific. Far, far away from any government or battered shareholders.

X-stremely disappointing: Glasenberg bowls Davis a googly*

The deal of the decade was a tale of the creation of a resource giant touching the lives of everyone on the planet, of the emergence of a new kind of integrated, diversified commodity producer, trader and marketer, of a new paradigm in global mining.

And of wanting too much money.

When Glenstrata seemed shaky, Xstrata chief and former cricket umpire Mick Davis offered to reduce the $44 million he was to receive to continue working at Xstrata, the company he built up over the last ten years, for a merger to go through.

When that wasn’t enough Glencore chief  and former champion sports walker Ivan Glasenberg upped the offer and slipped in a little provision that he, and not Davis –  the natural choice to head up a 80% pure mining company – would run the combined group.

The deal went ahead but even the generous Qatari’s decided that Davis and his closest Xstrata colleagues did not deserve the $200m+ to show up at the office.

Davis will be out of Zug within six months. No bonus and no job. That’s gotta hurt.

*Cricket reference

Jobless in 2013 runner up: Cynthia Carroll  

Anglo American was never going to be an easy company to run for a non-South African woman. A bullying board and big shareholders would’ve made sure of that.

Under her tenure Minas Rio became more trouble than it’s worth, South African platinum turned into a disaster zone and the Oppenheimers got too much for De Beers.

But the other major events she could control – the Codelco spat – probably turned out as well as could be expected for Anglo given Chile’s hard line.

In the end the relative underperformance of Anglo vs the other majors was just too glaring and Carroll realized that when you break the glass ceiling you will get cut.

Carroll is staying on until a replacement is found. Big Mick are you there?