Editorial: Loonie at 30-year high

The resurgent Canadian dollar pushed its way to the top of the newsmaker list during the week ended June 2, the twenty-second trading week of 2007.

* The Canadian dollar closed the week up 1.8% to a near 30-year high of US94.3, or an 8.5% rise since the start of the quarter. As recently as 2002, the loonie traded at US62.

Economists point to the usual factors for the loonie’s strength: a weakening greenback; surging commodities prices; huge capital inflows to Canada from merger and acquisitions activity; and strong operational performances from Canada’s basic industries of oil and gas, forestry and mining.

While this rapid rise will likely lead to an equally sharp pullback, most forecasters are broadly bullish on the Canadian dollar. Such specialists as CIBC World Markets chief economist Jeff Rubin and National Bank Financial chief economist Clement Gignac are predicting that the loonie will trade at parity with the U.S. dollar within 6-18 months, especially if Canadian interest rates are hiked later this year to dampen economic growth rates at the same time that U.S. rates are lowered.

Canada’s miners have so far largely escaped any serious damage from the rising loonie, with gains in metal and mineral prices more than making up for the currency drag.

* It has been a long, hard road for Greystar Resources developing its multimillion-ounce Angostura gold project in northeastern Colombia, but the Vanvouver-based junior celebrated a positive scoping study this past week.

The study foresees a 16% pretax internal rate of return using modest gold prices and an 11-year mine life that would tap into open-pit, provisional reserves of 167 million tonnes grading 1.28 grams gold and 5.82 grams silver per tonne. The pit would annually produce an average of 395,000 oz. gold and 1.3 million oz. silver at a cash cost of US$276 per oz. gold. Initial capital costs are pegged at US$380.4 million and sustaining capital at US$140 million.

With its relatively undervalued stock price, Greystar is an obvious takeover target for a major willing to dip its toes in Colombia. AngloGold Ashanti is already there with an intensive, countrywide gold exploration program, while Barrick Gold has tended to shy away from the country’s political risk.

* Another junior enjoying a triumphant week was Toronto-based Carpathian Gold, which released a substantially larger resource at its Rovina property in western Romania, which hosts a pair of promising copper-gold porphyries, named Colnic and Rovina. Colnic now has an indicated resource of 68 million tonnes grading 0.64 gram gold per tonne and 0.12% copper, while Rovina’s inferred resource stands at 144 million tonnes grading 0.33 gram gold and 0.24% copper. The global resource amounts to 1.7 million oz. gold and 849 million lbs. copper. The company continues to drill both porphyries, which should add to, and upgrade, the resource base.

* In an echo of the debates that raged in British Columbia during the building of the trans-Canada railroad in the 1880s, a plan drafted by Canadian Dehua International Mines Group to bring in 400 Chinese miners to work at its proposed Gething underground coal mine in northeastern B.C. set off alarm bells throughout the West Coast’s labour community.

Having visited many Canadians happily making top dollar working in mines around the world, including China, we have no qualms with the concept of importing foreign labour to man remote mines. Rather, our reservations lie in the quality of Chinese coal mining techniques, which tend to leave a lot of people dead. This idea looks literally like an accident waiting to happen.

Instead, how about bringing in some capable miners from Chile or Brazil?

* In the personnel files, the world’s largest mining company, BHP Billiton, has promoted from within to fill the shoes of Chip Goodyear, who is retiring as CEO in October. The new man at the top will be Marius Kloppers, a 14-year veteran with BHP Billiton and its predecessor companies, and currently an executive director and the group president of non-ferrous materials.

Born in South Africa, Kloppers holds a degree in Chemical Engineering from the University of Pretoria, a PhD from MIT, and an MBA from Insead in France.