The current Canadian angst about selling out the country's corporate gems reminds me of the old saying, "Closing the barn door after the horses have already escaped." Where were these business nationalists when the extraordinary metal treasures of the Sudbury Basin - the richest mining district in North America and among the top ten most significant globally - were being sold?
The latest furor about the foreign bidding war over LionOre
Mining - one of the last major Canadian nickel producers - by
Anglo-Swiss Xstrata Nickel and the Russian miner Norilsk is
foolish. It also diverts attention from the real issue of
whether LionOre's new smelting technology should be allowed to
fall under Norilsk's control, at a time of increasing east-west
political tensions.
Before I continue, this quick "timbit" of information must be
highlighted as most of the mining and mainstream media still
claim that Norilsk is the world's largest producer of nickel.
They are wrong. In 2006, CVRD Inco produced 251,000 tonnes of
shinny strategic stuff closely followed by Norilsk with 244,00
tonnes. For the first time in decades the hometown Nickel King
is back on top.
 Back to the nationalism problem. None of Lion Ore's
mineral deposits are found in Canada. The company operates
mines in Western Australia, South Africa and Botswana. I
suspect the Toronto Stock Exchange listing and head office
location in Toronto was primarily set up to access capital
markets. Globally, Toronto is the premier centre to raise
capital for mining companies.
There is no doubt current political tensions between the West
and Russia are probably at its highest levels since the Berlin
Wall came tumbling down in 1989. Russia is increasing military
expenditures in order to reassert that country's former global
influence. Many political comentators are saying that we are
entering a new cold war and strategic resources will be one of
the key sources of conflict.
LionOre Mining's proprietary "Activox" process is more
environmentally friendly and cost effective than
traditional  smelting technology. It may be one of the
most significant advances in metal smelting in decades. We must
question whether such a technological lead - in addition to
LionOre's increasing nickel production which is essential for
military and civilian manufacturing - should be taken over by a
Russian company that has such close ties to the Kremlin
leadership. There is widespread speculation the Russian
government is seeking to renationalize the company.
Alcan and Alcoa
The other big mining story is the hostile takeover of Alcan by
Pittsburg-based Alcoa. Again, the economic cry of the
nationalists can be heard from coast to coast to coast. Alcan
originally belonged to Alcoa, having been created in 1902 and
carved off as a separate company in 1928. In 1951, Alcan was
divested under a U.S court order to remove the appearance of
collusion.
The combined company would be the fifth largest miner in the
world with dual headquarters in Montreal and New York. Quebec
will become the center of aluminum innovation and potentially
receive about $4.4 billion(US) in investment - the largest
private sector spending in Quebec history.
Alcan is the major mining company in Quebec, and is to the
Saguenay-Lac-Saint-Jean region as the former Inco and
Falconbridge were to Sudbury.
However, one of the main reasons Alcan is in Quebec is due to
cheap, taxpayer-subsidized electricity, a major cost in the
production of aluminum. If the power rates were to be increased
to fair market value, the company would probably close down
their Canadian operations. The raw material for aluminum -
bauxite - is shipped to Quebec from Australia, Brazil, Ghana
and Guinea where Alcan owns these strategic mineral deposits. A
few years ago, Alcan took over the French aluminum company
Pechiney with much concern and protest in France's business
media.
A combined Alcoa/Alcan would be a North American-controlled
mining powerhouse - a rarity these days. Alcan is too small to
survive on its own. Is this just another case of latent
anti-Americanism that Canadians are so proud of? Would we be
less concerned if a Russian or Chinese mining company were to
step up to the plate?
If a Canadian or other western mining company ever attempted to
takecover Norilsk or the Sino nickel giant Jinchuan Group Ltd.,
the Russian and Chinese governments would forbid it. In all
honesty, the Brazilian government would never allow CVRD to be
bought by a foreign company but foreign miners can operate
freely in Brazil and there is a long corporate history of
Canadian companies investing and profiting in that country. One
of the most famous is Brookfield Asset Management, formerly
known as Brascan Limited which originally began in Brazil, at
the turn of the last century, as Brazilian Traction, Light and
Power Company.
With a new cold war brewing, Russian and Chinese corporations
should not be allowed to purchase controlling interest in
strategic natural resouces in the west and LionOre must fall
under Anglo-Swiss Xstrata Nickel's control - or some other
western company.
The proposed merger of Alcoa and Alcan would build a North
American mining powerhouse that would benefit this country
enormously and ensure continued prosperity in Quebec.
Something to think about when you are crushing those alumium
beer and pop cans during the holiday long weekend or heading to
Tim Hortons for a coffee and timbits.
Stan Sudol is a Toronto-based communications consultant and policy analyst who writes extensively on mining issues. [email protected]
