Friday, November 18, 2022

Ontario Teachers’ statement on FTX

November 17, 2022 ·

In light of continuing developments in relation to FTX, we wanted to provide additional context and transparency around our investment.

In October 2021, Ontario Teachers’ invested US$75 million in FTX International and its US entity (FTX.US). In January 2022, we made a follow-on investment of US$20 million in FTX.US. These investments were made through our Teachers’ Venture Growth (TVG) platform, alongside a number of global investors, to gain small-scale exposure to an emerging area in the financial technology sector. Our investment represented less than 0.05% of our total net assets and equated to ownership of 0.4% and 0.5% of FTX International and FTX.US, respectively.

TVG was established in 2019 to invest in emerging technology companies raising late-stage venture and growth capital. Investments are structured to provide Ontario Teachers’ with returns commensurate with the risk undertaken and to provide proprietary insights that inform investing elsewhere across the Plan. Naturally, not all of the investments in this early-stage asset class perform to expectations, however, since inception, TVG has delivered solidly on intended objectives.

Ontario Teachers’ investment departments, including TVG, conduct robust due diligence on all private investments. Supported by experienced, external consultants with financial, commercial, and other relevant expertise, and often in consultation with investment partners, due diligence is designed to use company-provided materials and other research to assess the risk related to a specific investment. In FTX’s case, our underwriting process included working closely with third-party advisors and FTX to explore commercial, regulatory, tax, financial, technical and other matters. Recognizing that no due diligence process can uncover all risks especially in the context of an emerging technology business, the investment in FTX was sized moderately in relation to TVG and the overall portfolio of the Plan.

Recent reports suggest potential fraud conducted at FTX which is deeply concerning for all parties. We fully support the efforts of regulators and others to review the risks and causes of failure for this business.

Our strategy aims to diversify investments across asset classes, geography, time horizons and economic outcomes, to mitigate risk and enhance returns. This supports the Plan’s ability to perform well in a variety of investment environments and mitigates the adverse impact of any one investment loss on the fund overall. The investment size in FTX reflects our approach to diversification.

We will be writing down our investment in FTX to zero at our year end. The financial loss from this investment will have limited impact on the Plan, given its size relative to our total net assets and our strong financial position. However, we are disappointed with the outcome of this investment, take all losses seriously and will use this experience to further strengthen our approach.

Updated November 17, 2022

Ontario Teachers writes off FTX stake, citing potential fraud

Derek Decloet, Bloomberg News

Ontario Teachers’ Pension Plan said it will write down its stake in FTX to zero, taking a US$95 million loss barely a year after making its first investment in Sam Bankman-Fried’s now-bankrupt cryptocurrency exchange.

Teachers said the writedown will have only a “limited impact” because it’s less than 0.05 per cent of the $242.5 billion (US$182 billion) pension fund. “However, we are disappointed with the outcome of this investment, take all losses seriously and will use this experience to further strengthen our approach,” the fund said in a statement Thursday.

The Toronto-based pension manager put US$75 million into FTX’s international and U.S. divisions in October 2021 through its venture capital arm, and invested US$20 million more in FTX.US in January.

Ontario Teachers said it worked closely with advisers and FTX to understand commercial, regulatory, tax, financial and technical aspects of the business. The fund had a 0.4 per cent stake in FTX International and 0.5 per cent of FTX.US when Bankman-Fried’s empire collapsed last week and filed for Chapter 11.

“Recent reports suggest potential fraud conducted at FTX which is deeply concerning for all parties,” Teachers said. “We fully support the efforts of regulators and others to review the risks and causes of failure for this business.”

It’s the second time in three months that a major Canadian pension manager has been forced to write off a crypto investment it only recently made. In August, the Caisse de Depot et Placement du Quebec marked its $150 million stake in Celsius Network LLC to zero after the cryptocurrency lender failed.

Ontario Teachers’ Pension Plan becomes

second public pension to write off crypto

bet

By Ian Bickis The Canadian Press

Posted November 18, 2022

The Ontario Teachers' Pension Plan Board office, in Toronto, Tuesday, Sept. 28, 2021. The Ontario Teachers Pension Plan said on Thursday it had invested a total of US$95 million to the cryptocurrency exchange FTX. THE CANADIAN PRESS/Cole Burston

For the second time this year a major Canadian public pension is writing down to zero a bet on cryptocurrency as the risky market sours.

The Ontario Teachers’ Pension Plan said this week it will write off its US$95-million investment in FTX, the cryptocurrency exchange that collapsed last week, following a move by the Caisse de depot et placement du Quebec to write off its US$150-million investment in Celsius Network in August.

The investments, while providing potential exposure to an emerging asset class, point to the wider risks pension funds have taken on as part of a hunt for returns, said Malcolm Hamilton, a pension expert and senior fellow at the C.D. Howe Institute.

“My perception is they have very dramatically increased the risk profile of the portfolio with the passage of time,” he said, noting that in the 1990s funds were much more focused on government bonds.

Hamilton said the erosion of returns in more stable assets like government bonds has pushed pensions to diversify investments into new areas, though he notes that given the size of the funds, it’s inevitable some bets will look risky without jeopardizing overall funds.

Ontario Teachers’ said in a statement that its investment in FTX represents less than 0.05 per cent of its total net assets, and was invested through its Teachers’ Venture Growth platform to “gain small-scale exposure to an emerging area in the financial technology sector.”

The pension plan said that while the financial loss from FTX will have limited impact because of its relatively small size, it’s disappointed in the result.

The investments are hardly the first by public pensions to dip their toe in the space though, with the venture arm of the Ontario Municipal Employees Retirement System investing in some crypto-related assets as far back as 2012.

And while public pensions have different expectations than private funds because they’re investing public money, there’s no reason they shouldn’t be able to dabble in the emerging space, said John Rekenthaler, vice-president of research for Morningstar.

“They have the right to invest in that, but they also have the right to lose their jobs.”

He said there needs to be serious questions around due diligence for the investments, and given the limits on what can be known in the emerging sector, if the returns fit the risk.

“That’s part of the judgment call that the pension fund manager has to make. Am I getting compensated enough?”

Ontario Teachers’ said in its statement that it conducts robust due diligence on all private investments.

The pension fund said that given the limitations on due diligence, especially in an emerging technology business, it sized its investment moderately in relation to both its venture fund and overall portfolio.

FTX, valued at US$32 billion in the fundraising round that Ontario Teachers’ participated in last January, filed for bankruptcy on Nov. 11.

John Ray III, who was appointed CEO at FTX as part of the filing, and has in the past been brought on to turn around companies in crisis including Enron, said the operational practices at the company were the worst he had seen.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he said.

Other big Canadian public pension funds still have yet to see the risks as worth it.

John Graham, chief executive of the Canada Pension Plan Investment Board, said at a July event that the fund was looking at crypto, since as trillion-dollar market they need to understand it, but that they were still on the sidelines.

“You don’t want to just be investing with FOMO. You want to really think about what the underlying intrinsic value is of some of these assets and build your portfolio accordingly,” Graham said at the time.

Bankman-Fried tells his side of the story of

FTX collapse in tweets

Alex Millson, Bloomberg News

Nov 17, 2022

Confronted by a crypto crisis he helped spark, former FTX.com Chief Executive Officer Sam Bankman-Fried is tweeting through it.

On Wednesday, he added a further 18 tweets to a meandering thread he started at the beginning of the week. The posts, published at sporadic intervals, have combined apologies for his failings with his perspective on what went wrong at the companies he founded and ran. They add to a previous series of cryptic posts that eventually spelled out the message “What HAPPENED,” followed by a hint that there were revelations to come.

With the wisdom of hindsight, he stated how he would do his best to save customers' cash, mused on how hard it is to regulate the crypto sphere and boasted how he had been “on the cover of every magazine” before FTX's meteoric crash. “We got overconfident and careless,” he said.

It is unclear whether the tweets by Bankman-Fried, who is facing questioning by everyone from the Department of Justice to regulators in the Bahamas, will help or hinder his legal defense.

If Bankman-Fried is concerned about how regulators will respond to FTX's spectacular implosion, he's not showing it. In an interview via Twitter direct message with Vox's Kelsey Piper, he was blunt: “F--- regulators” and “they make everything worse.” He agreed that the crypto industry needs more consumer protections, “but regulators can't do it.”

He concluded the most recent tweets in the thread with, “What matters is what you do--is *actually* doing good or bad, not just *talking* about doing good or *using ESG language*. Anyway -- none of that matters now. What matters is doing the best I can. And doing everything I can for FTX's customers.”

But he didn't make clear exactly how he intends to help customers of the collapsed Bahamas-based crypto exchange, given he's no longer CEO.

The backlash to the posts was swift, with FTX's new management quick to distance themselves from him. The company posted a statement attributed to former Enron liquidator and new FTX CEO John J. Ray that read: “Mr. Bankman-Fried has no ongoing role at @FTX_Official, FTX US, or Alameda Research Ltd. and does not speak on their behalf.”

Bankman-Fried could not be immediately reached for comment.

Torstar co-owners say focused on quick 'divorce' in public appearance

The Canadian Press

Speaking for the first time publicly since their business relationship soured, Torstar Corp. owners Paul Rivett and Jordan Bitove confirmed there was no reconciliation ahead as their approaches to business were too different.

The two, speaking at the launch of a TVO documentary about the Toronto Star newspaper Thursday evening, were however in agreement that they hope to resolve the split of their partnership as quickly as possible.

Rivett and Bitove are equal partners in Nordstar Capital Inc., an investment company that purchased Torstar in 2020 for $60 million, and controls all of its assets, including the Toronto Star newspaper.

In September, Rivett filed an application to the Ontario Superior Court seeking a court order to wind up the media company, citing "irreparable" damage to his relationship with Bitove, while in October the two agreed to move their dispute to meditation-arbitration.

Bitove, who is publisher of the Toronto Star, emphasized at Thursday's event the importance of the paper as a civic institution and its adherence to its guiding social principles, while Rivett pushed on the need to diversify revenue streams through experiments like the company's foray into online gambling because the organization is losing about $1 million a week.

Bitove said the dispute was a "massive distraction" from efforts to turn operations around.

"What kills me inside is we had such great momentum ... the best thing is a quick divorce so we can allow our team to move forward," he said.

Rivett, speaking at a press scrum after the event, said the two were working as fast as they could to get it resolved, with a likely resolution in weeks rather than months.

“Divorces aren’t great, they’re a distraction for sure, and that’s why we’re trying to get it done as quickly as possible. It causes confusion, it causes anxiety."

He said it was crucial for the company to improve search engine optimization and the delivery of online content, noting that while the New York Times has a margin of around 10 per cent, there are digital content businesses with margins of 80 per cent.

He said that for a news organization like the Star to succeed, there also needs to be more collaboration between the sales and news sides of the business.

"If we want to have advertising on snow tires, we can't just be constantly writing that we shouldn't have cars."

Rivett was previously president at Fairfax Financial, while Bitove was part of the ownership consortium that built the SkyDome, now the Rogers Centre.

U.S. military in talks with Canadian miners for key minerals as rivalry with China grows

One of the projects on the Americans' radar is northern Ontario's Ring of Fire

Author of the article:Naimul Karim
Publishing date:Nov 16, 2022 •

Headquartered at the Pentagon in Arlington, Virginia, the U.S. Department of Defense is having discussions with miners about the important role northern Ontario’s Ring of Fire region will play in producing the critical minerals needed by Canada and the U.S.

PHOTO BY REUTERS/AL DRAGO

The United States military is talking to Canadian miners about potentially funding some critical minerals projects in Canada, the latest evidence of President Joe Biden’s administration’s commitment to cutting its reliance on China for the metals needed to build defence equipment and expand the electric vehicle (EV) market.

One of those projects is in the Ring of Fire region in northern Ontario, which Premier Doug Ford’s government believes has “multi-generational potential” to produce minerals such as nickel and copper that are currently in high demand as countries look to accelerate the shift away from fossil fuels.

“We’ve had initial discussions with the U.S. Department of Defense regarding the important role that northern Ontario’s Ring of Fire region will play in producing the critical minerals needed by Canada and the U.S.,” Luca Giacovazzi, chief executive of Wyloo Metals Pty. Ltd., the Australian company that owns the Eagle’s Nest project in the area, confirmed in a statement.

Ontario is currently working to build an all-season pathway to connect the Ring of Fire with manufacturers in the southern part of the province. The project, which is being advanced with the help of two Indigenous groups, however, has also faced opposition by other First Nations.

Wyloo Metals Pty. Ltd.’s Eagle’s Nest project in the Ring of Fire region in northern Ontario. The deposit contains nickel, copper, platinum and palladium.

PHOTO BY WYLOO METALS PTY. LTD.

Toronto-based Electra Battery Materials Corp. is another company that has had “preliminary discussions” with the U.S. Department of Defense. In September, the company inked its first “big commercial contract when it signed a deal to supply LG Energy Solution Ltd., a global lithium-ion battery maker, with 7,000 tonnes of cobalt from its Ontario refinery.

Lithium miner Avalon Advanced Materials Inc., based in Toronto, also had talks with the U.S. Department of Defense.

“The capital-intensive nature of our projects and moving them at the requisite speed is a sizeable challenge,” said Zeeshan Syed, the company’s vice-president of external affairs. “Our U.S. colleagues quite clearly understand they may have a role to play to help fortify North America as a dominant player.”

‘A broader strategy’

Aaron Shull, managing director at the Centre for International Governance Innovation, a think-tank, said the American government’s discussions with Canadian miners were “tactically part of a broader strategy” on how Western democracies confront “adversarial authoritarian state actors” such as China, which dominates the EV sector.

Shull was referring to the series of steps taken by the U.S. and Canada to ensure EV production occurs close to home, or at least in places where they wield influence.

In late October, Prime Minister Justin Trudeau’s government raised the bar that foreigners must clear to join Canada’s critical minerals industry, saying any attempt by a state-owned enterprise to purchase assets in the sector can now trigger a section of the Investment Canada Act (ICA) that determines whether deals that could be “injurious to national security” require lengthy reviews.

Days later, Ottawa ordered three Chinese companies to divest their investments in three Canadian junior lithium miners.

China dominates

Washington’s recently passed Inflation Reduction Act (IRA) offers a US$7,500 subsidy meant to encourage the production of EVs in North America, while Deputy Prime Minister Chrystia Freeland used a series of speeches this fall to stress the need for “friendshoring,” an idea that would see democratic allies build supply chains through each other’s economies and tackle the influence of authoritarian regimes in the energy sector.

China dominates the EV supply chain through its refining and processing industries even though most of the metals required by EVs, such as lithium, nickel and cobalt, are mined outside the country.

Patricia Mohr, an economist and former vice-president at Bank of Nova Scotia, said that the competition with China “is growing for these important metals.” She added that Canada had a “big advantage” when it comes to nickel, noting the geology of the U.S. isn’t “prospective” for the metal.

“Furthermore, most nickel deposits in Canada involve sulphide ore which will have a much lower carbon footprint than the lateritic projects in Indonesia, mostly developed with coal-fired power,” Mohr said.

The U.S. Department of Defense wasn’t immediately available for a comment. According to the CBC, an official from the department confirmed that Canadian projects would qualify for an investment from the U.S. military while speaking at a conference.

• Email: nkarim@postmedia.com | Twitter: naimonthefield

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China has links to dozens of Canadian miners tied to critical minerals
Bloomberg News | November 11, 2022 |

Highland Valley Copper mine operation owned by Teck Resources.

(Image courtesy of Teck Resources)

China has built up stakes in more than two dozen Canadian mining companies, including some of the industry’s biggest names. Canada’s latest crackdown on foreign investments in critical minerals is about to put a chill on such activity.

At least 27 public companies including Teck Resources Ltd., Ivanhoe Mines Ltd. and First Quantum Minerals Ltd. have shareholders with ties to China, according to data compiled by Bloomberg. Attracting such investors — or encouraging them to increase their holdings — will now be much harder given Canada’s latest efforts to protect its minerals wealth.

Company Top Shareholders With China Ties % Held

Nickel North Exploration Corp. Sinotech Hong Kong Corp. 49.7%
Ivanhoe Mines Ltd. Citic Metal Africa, Zijin Mining Group 39.5%
First Quantum Minerals Ltd. Jiangxi Copper Co. 18.3%
Fission Uranium Corp. CGN Mining Co. 14.2%
Teck Resources Ltd. China Investment Corp. 10.4%
Lithium Americas Corp. GFL Lithium Co. 11.1%
Source: Data compiled by Bloomberg, company disclosures

“Canada has said it doesn’t want to see injections of capital from state-influenced investors,” said Subrata Bhattacharjee, who specializes in foreign investment law at Borden Ladner Gervais LLP. “That’s going to leave some mining companies in a bind in terms of finding alternate sources of financing.”

Chinese firms have been involved in 89 announced acquisitions and investments in Canadian metals and mining companies in the past decade, according to data compiled by Bloomberg. The value of those transactions is $14 billion. Many deals involve companies tied to the 31 critical minerals identified by Canada.

Metals such as lithium, copper, nickel and cobalt are essential ingredients for electric-vehicle batteries, solar panels and wind turbines — and securing access is key in reducing risks of supply bottlenecks and shortages. Canada has been working with the US and other friendly nations to develop supply chains for these minerals and reduce dependence on China, which dominates the industry and has stakes in resource firms far and wide.

Teck, which produces copper and zinc at mines in North and South America, lists sovereign wealth fund China Investment Corp. as its top shareholder, the data show. Ivanhoe Mines, founded by billionaire mining magnate Robert Friedland, counts China’s Zijin Mining Group Co. and a unit of state-owned Citic Metal Group among its biggest holders.

Among smaller firms, the largest investor in Lithium Americas Corp. is a subsidiary of China’s Ganfeng Lithium Group Co., while Fission Uranium Corp.’s biggest shareholder is tied to state-owned China General Nuclear Power Corp., the data show. Vancouver-based Nickel North Exploration Corp. lists Sinotech Hong Kong Corp. as its top investor.

Gold producers also count the Chinese government and entities as shareholders, though they have insignificant investments.

Ivanhoe Mines, Teck and First Quantum declined to comment. Emails and calls to Fission Uranium and Nickel North weren’t returned. Lithium Americas didn’t provide comment.

Canada announced tougher rules around investments in the country’s critical minerals last month, making it harder for foreign state-owned enterprises to pursue takeovers or invest in the industry. Any transactions in the sector now face “rigorous” national security oversight if they have such foreign involvement.

“The policy direction applies to future transactions,” said Alex Wellstead, spokesperson for Canada’s Industry Minister Francois-Philippe Champagne. The ministry declined to comment on specific companies.

“The Canadian government is taking a harder line on investments, not just by state-owned companies but also companies with links to foreign governments,” said Sandy Walker, a Toronto-based foreign investment and competition lawyer at Dentons. “You could be a private investor and still be considered a state-owned enterprise or at least subject to the influence of a foreign government.”

Canada’s stance triggered action last week, when Chinese firms were ordered by government to divest from three small battery metals explorers, including Calgary-based Lithium Chile Inc.

“The entire Canadian lithium sector has now lost the support of really the major player in the space,” Lithium Chile Chief Executive Officer Steven Cochrane said in an interview. “The impact is going to be felt by everybody.”

(By Jacob Lorinc, with assistance from Brian Platt, James Attwood and Doug Alexander)

Lundin Mining to fill in giant mystery Chile sinkhole
Reuters | November 17, 2022

Sinkhole at the Alcaparrosa mine. (Image by Sernageomin, Twitter).

Canada’s Lundin Mining is planning to fill in a giant mystery sinkhole near its copper mine in Chile, an ambitious plan that will also see it attempt to pump out water that has seeped into the mine, a senior company executive told Reuters on Thursday.

The huge 36-meter-diameter sinkhole that opened up in late July in the Tierra Amarilla commune, around 665 kilometers (413 miles) north of capital Santiago, drew widespread global attention and saw charges by authorities against Lundin.

Studies to determine the causes of the sinkhole are already in “decisive stages” and a “technical body is already receiving all the information to be able to draw conclusions,” Luis Sanchez, president of a local unit of Lundin, told Reuters.

The executive said that regardless of the outcome the firm planned to fill the hole using material such as sand and rocks with the same characteristics as a river bed, as well as fully sealing the affected part of the mine.

Sanchez declined to predict the amount of material that would be needed or the total cost, though he said the firm had already spent some $10 million resolving the issue.

The executive said that from 300-330 liters per second of water that had been leaking into the mine initially, the level has dropped to 10-30 liters per second due to sealing work.

“We are observing a positive development in the recovery of the levels in the aquifer and this means that we can look positively at this solution and we can say that we are not facing irreparable damage, as some authorities have indicated,” Sanchez said.

The program will also try to pump 1.3 million cubic meters of water that remains in the lower levels of the reservoir to other industrial users in the area in exchange for them stopping extracting those resources from the aquifer, Sanchez said.

(By Fabian Cambero; Editing by Elaine Hardcastle)

World’s largest CO2 removal deal ever depends on tech that isn’t ready yet
Bloomberg News

Credit: Drax Group Plc

British energy company Drax Group Plc is planning to sell offset credits tied to power plants in the US that it has yet to build, relying on technology that hasn’t yet been proven to work at scale and by burning fuel that’s still controversial.

“There’s some risk in there,” says Jason Shipstone, chief innovation officer at Drax. “But, like any project, before you press the button to build the project, you want to know that the things that make the business case work are in place.”

Drax wants to build power plants that burn wood chips, capture emissions produced from the process and bury them deep underground. Its plans got a boost after the US passed its largest climate bill that provides $85 in tax credits for every ton of carbon dioxide buried for climate purposes. Drax says the first such plant in the US will be built by 2030.

The cost of capture and burial for Drax’s technology is likely to be more than the sum the US government is providing, says Julio Friedmann, chief scientist at consultancy Carbon Direct. Drax says it won’t provide the capture cost estimate citing commercial sensitivity, but confirmed it will top-up the US government subsidy by selling offset credits. Drax declined to say how much money it might fetch from the sale.

In September, Drax signed a memorandum of understanding with Respira International, a new player in the voluntary carbon market. The deal gives Respira the option to buy 2 million tons of credits, which could become the largest ever volume of carbon dioxide removals traded, according to Drax. The voluntary carbon market has not yet developed a standard for offsets tied to burning wood and burying emissions.

Carbon-capture technology on power plants works by separating out carbon dioxide from a mixture of gases coming emitted. Carbon dioxide is then compressed into a liquid and sunk deep underground. The process is quite energy intensive and thus often expensive. The only way companies can make it work is if they receive government subsidies or pass the cost of capture onto customers.

In the UK, Drax has been using wood chips as a source of fuel for large power plants for more than a decade after converting coal units to burning biomass instead. It has been trialing carbon-capture technology at small scale since 2019. However, the trials are of technology from a UK startup called C-Capture that’s far from working at commercial scale, says Shipstone.

Nonetheless, Drax has big ambitions. It says the last of its coal units will run until the end of March and it’s investing billions of pounds to bury the carbon from burning wood under the North Sea. Shipstone says Drax plans to capture 8 million tons of carbon every year in the UK and an additional 4 million tons a year in the US. Drax has a larger pilot study with the Japanese giant Mitsubishi Heavy Industries that’s been running since 2021, he says.

“It is a big complex project — that’s what a project risk is,” says Friedmann, who previously worked at the US Department of Energy overseeing carbon-capture projects. “But there’s no concern I have as to whether or not this technology will function.”

There are many large hurdles still to clear before Drax can claim to be a “carbon negative” company. The carbon-capture technology may be sound, but trapping emissions from burning biomass hasn’t been shown to work at scale. Some have also raised concerns about the carbon math. Wood is considered to be carbon neutral because the tree grew by capturing carbon dioxide. However, converting trees into fuel can have a carbon cost, either when processing and transporting, and soils in forests can release stored carbon if disturbed.

And when big-name companies have tried to scale carbon-capture technology for new applications, they have often struggled. One of the world’s largest carbon capture and storage projects, run by Chevron Corp. in Western Australia and built in 2016, failed to capture enough emissions to meet local targets.

Moreover, identifying and building sites in the US, where regulation and licenses vary state by state, isn’t an easy task. Various US government departments are working hard to ensure that there are enough injection wells that meet regulations available for the many carbon-capture plants being proposed.

Drax also doesn’t have the expertise to inject CO2 underground, says Shipstone. That’s why Drax will partner with other companies that have experience doing it in the US, though Shipstone won’t name the partners yet.

One of the company’s largest challenges may still be at its core. Campaigners have criticized the biomass industry’s sustainability claims, with a recent BBC documentary raising concerns over the company’s forestry operations in Canada. Drax replied with a detailed rebuttal to the program’s claims and argued it misled viewers.

Still, Drax sees biomass playing a critical role in displacing fossil fuel. “The voluntary carbon market is developing, and we are thrilled to be involved in it,” says Shipstone. “And we’re confident that the technology we are developing will deliver.”

(By Akshat Rathi and Todd Gillespie)

BHP says strike at Escondida copper mine “unjustifiable”

Cecilia Jamasmie | November 16, 2022 |

Escondida is the world’s largest copper mine. (Image courtesy of BHP | Facebook.)

Mining giant BHP (ASX: BHP) said on Wednesday the strike announced by unionized workers at its Escondida copper mine in Chile for November 21 and 23, was based on false accusations.

A union at the mine, the world’s largest copper operation, said workers were concerned for their safety as BHP had allegedly failed to comply with legal regulations and the current collective agreement.

In a statement, the Melbourne, Australia based miner denied the claims, saying it has always operated the mine following the “highest standards of occupational safety and risk prevention.”

BHP said the “forceful action” announced by Sindicato 1 was aimed at pressuring the company to pay a contribution to the union and a bonus to its partners. This, the company said, has no legal basis.

“An action of this kind creates safety risks for workers, compromises our facilities and affects the operational continuity of the mine, which is detrimental to the economic and social development of the region and the country,” BHP said in the statement.

Chile is the world’s top copper producer, and sales of the metal make up for about 60% its export earnings.

In 2017, Escondida workers staged a 44-day strike, the longest in Chilean mining history. The labour action caused the company $740 million in losses and meant a contraction of about 1.3% of Chile’s GDP.

BHP added that it was open to dialogue and hopeful that the union would end the stoppage at the operation, responsible for about 5% of the world’s total copper output.

While majority-owned and operated by BHP, Rio Tinto and Japanese companies such as Mitsubishi Corp also hold stakes in the mine.

Escondida mine workers announce strike amid labor demands
Reuters | November 15, 2022 |

Escondida workers on strike in 2017. (Screenshot from CNN Chile Video)

Workers of Chile’s Escondida mine, the world’s largest copper mine, decided to go on strike on Nov. 21 and 23 due to labor demands, their union said on Tuesday.

Members of the union, Sindicato 1, had threatened to strike in early September as they expressed concerns over security in the mine, which led to inspections by government authorities.

Union members will stop operations in all their shifts during the strike but will provide minimum services, Sindicato 1, which represents more than 2,000 workers, said in a statement.

Infractions by Minera Escondida, which manages the mine and is controlled by BHP Group, have continued, with the company failing to adopt preventive measures despite security incidents, like fires, the union said in the statement.

The union said it notified the company of the strike.

Minera Escondida has denied the union’s accusations.

The mining company and the union have faced off before, including in 2017, when workers went on strike for more than 40 days.

(By Fabian Cambero; Editing by Anthony Esposito and Leslie Adler)

Loblaw bolsters evil reputation by reporting huge profits as grocery prices skyrocket

MR.EVIL GALAN WESTON

blogTO

Executives at Loblaw Companies Ltd. are likely celebrating today as the Canadian retail giant reports an enormous, stock price-boosting, 30 per cent increase in profits over last year at this time.

Those who aren't shareholders of the Loblaw's and Shoppers Drug Mart parent company (read: the vast majority of Canadian consumers) are more like, "wtf? seriously?"

It's been less than a month since the conglomerate's heir and CEO, Galen Weston Jr., sparked widespread ire with a tone-deaf email announcing a temporary price freeze on all No Name brand products.

Critics found it a bit ironic (if not enraging) that one of Canada's wealthiest people was acting like a martyr for lowering the prices of his already-inflated food products, and that his promotional email claimed the move was meant to "help make a meaningful difference to your grocery budget at a time when you may need it most."

It was Weston's assertion in that email that the fast-rising cost of groceries at Loblaw's was due to supplier costs and "maddeningly, out of our control." (Interestingly, a still-live version of that email blast has been retroactively amended to omit this line.)

Federal regulators have since begged to differ with the whole "out of our control" thing, launching an investigation into the high profits being reported by grocery store executives who keep arguing that consumer food prices are skyrocketing due to inflation.

Inflation has undoubtedly impacted grocery prices, but not as much as to justify the rate of price creep at Canada's largest supermarket chains (the same chains that intentionally fixed the price of bread for 15 years before getting caught in 2017.)

Not only do prices for specific items vary widely from store to store, even those under the same banner, the cost of these products have risen faster than actual inflation rates — some 9.7 per cent vs. 7.7 per cent as of this summer, per Statistics Canada.

"With inflation on the rise, Canadian consumers have seen their purchasing power decline. This is especially true when buying groceries. In fact, grocery prices in Canada are increasing at the fastest rate seen in 40 years," wrote the Competition Bureau of Canada when announcing a probe into grocery store profits last month.

"Many factors are thought to have impacted the price of food including extreme weather, higher input costs, Russia's invasion of Ukraine, and supply chain disruptions. Are competition factors also at work? To find out, the Bureau will study this issue from now until June 2023."

Are grocery magnates actually gouging consumers when food bank usage is at an all-time high? The bureau has yet to decide, but some analysts have argued that, yes, some items are being falsely marked up under the guise of inflation.

Whatever the case, Loblaw — which owns Loblaws, Shoppers Drug Mart, Real Canadian Superstore, No Frills, Joe Fresh, Zehrs and more — has really been raking it in.

In a financial release issued Wednesday, Loblaw Companies Ltd. reported that adjusted gross profits for retail had risen by 30.8 per cent in the third quarter of 2022, compared to Q3 2021.

"Loblaw's efforts to moderate cost increases and provide superior value to customers through its PC Optimum Program and promotions resulted in strong sales and stable gross margins in Food Retail," reads a release accompanying the earnings report.

"Sales were led by strong performance in Discount banners such as No Frills and Real Canadian Superstore, and a continued shift to private label brands including President's Choice and no name. In Drug Retail, revenues benefited from elevated sales of higher margin categories like beauty, cough and cold."

All in all, the corporation boosted its adjusted net earnings for common shareholders to $663 million, up $123 million year-over-year, representing an increase of 22.8 per cent.

Said Loblaw in a statement on Wednesday: "Today we provided clear evidence that we are not taking advantage of inflation to drive profit. While food costs and prices have increased, our mark up on food has remained flat over the past year."

The corporation can say what it wants about inflation and price gouging, but their evidence is anything but clear.

Loblaw, Metro pressuring food

suppliers as profit soars

Alicja Siekierska

Wed, November 16, 2022

Loblaw, Canada's largest grocery retailer, saw total sales surge 8.3 per cent annually to $17.4 billion in the quarter ending Oct. 8. (REUTERS/Chris Wattie)

Loblaw (L.TO) and Metro (MRU.TO) each reported growth in sales and profit on Wednesday and say they are pushing back against suppliers' continued price increases as food inflation remains high in Canada.

Loblaw, Canada's largest grocery retailer, saw total sales surge 8.3 per cent annually to $17.4 billion in the quarter ending Oct. 8, while its profit jumped 29 per cent to $556 million. Same-store food sales, a key metric in the retail industry that excludes sales at newly opened stores, increased 6.9 per cent in the quarter, while drug retail sales jumped 7.7 per cent.

Total sales at Metro in the quarter ending Sept. 24 grew 8.3 per cent annually to $4.4 billion, "mainly due to higher inflation in this quarter", the company says. Net earnings in the quarter increased 9.4 per cent to $219 million, when adjusted for the impact of an impairment charge related to withdrawing from the Air Miles loyalty program and the amortization of Jean Coutu intangible assets.

The rise in profit and revenue comes as food prices continue to run hot in Canada, raising the pressure and scrutiny on Canadian grocery retailers. Grocery store prices jumped 10.1 per cent year-over-year in October, Statistics Canada reported on Wednesday, a slight slowdown from the 41-year highs reported the month before.

'The company is not taking advantage of inflation'

Both Loblaw and Metro say they have faced increased costs from food distributors, but add that they are pushing back against price hikes.

"We have seen unprecedented cost increases from our suppliers this year and we continue to receive new cost increases," Loblaw chief financial officer Richard Dufresne said on a conference call with analysts following the release of earnings on Wednesday.

"Part of our job is to evaluate these and push back where they do not make sense. We have done that vigorously over the last two years and will continue to do so going forward. Our objective is to make sure that our (prices) on the shelf do not rise faster than supplier costs."

Loblaw reported a gross margin of 30.8 per cent in the quarter, up 10 basis points from the same quarter last year. Gross margin is the amount of profit made on goods measured as a percentage. The company said the increase was driven by sales in higher margin items like cosmetics and over-the-counter drugs. Dufresne said Loblaw's gross margin for food has stayed "essentially flat" as inflation has soared.

"This gives us the confidence to categorically say that retail prices are not growing faster than costs and the company is not taking advantage of inflation to drive profit," he said.

Metro reported a gross margin of 20.4 per cent in the quarter, and while it also did not disclose specific figures, it said food margins were down slightly while the pharmacy margins were up.

Metro's chief executive Eric La Flèche says that while inflation is expected to moderate, the outlook for prices remains uncertain as the company continues to receive requests from its suppliers for price increase in February.

"We're negotiating hard with our suppliers to mitigate that. We want them to justify that and we're pushing back because there is resistance for sure from customers," La Flèche said.

"If the vendors want to keep their volumes, the cost increases will have to moderate."

The Competition Bureau of Canada launched an investigation in October to study grocery store competition in Canada in the wake of soaring prices. The federal agriculture committee is also digging into grocery store profits, with testimony expected from the heads of the country's biggest grocery store chains, including Loblaw, Metro and Empire (EMP-A.TO).

With food prices soaring, both retailers said customers are increasingly turning to discount stores, such as Loblaw's No Frills and Metro's Food Basics.

"We're seeing a lot more Mercedes and Range Rovers in the parking lots in those (discount) stores than would have been the case before," chairman and president Galen Weston told analysts.

"Who knows how many of those customers will ultimately stay in the discount format, but that discount growth has been has been prevalent across our industry... the discount formats are successfully converting higher income customers."

La Flèche said the shift from conventional stores to discount brands is driving the company's sale growth, and that customers are increasingly turning to private label brands that feature lower prices.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

'Mercedes and Range Rovers:' Loblaw's discount chains attract higher-income shoppers

Brett Bundale, The Canadian Press
Nov 16, 2022

More wealthy shoppers are prowling the aisles at discount grocery stores in search of deals amid soaring food inflation, Loblaw Companies Ltd. said Wednesday.

"We're seeing a lot more Mercedes and Range Rovers in the parking lots in those (discount) stores than would have been the case before," chairman and president Galen G. Weston told analysts during a conference call to discuss the grocer's latest results.Sign up to get breaking news email alerts sent directly to your inbox

"The discount formats are successfully converting higher-income customers."

His comments came as Loblaw reported its third-quarter profits rose about 30 per cent compared with a year ago.

The grocery and drugstore retailer said its net earnings available to common shareholders totalled $556 million for the quarter ended Oct. 8, up from $431 million in the same quarter last year, while revenue climbed to $17.39 billion in the quarter, up from $16.05 billion in its third quarter of 2021.

Food retail same-store sales rose 6.9 per cent, led by the grocer's discount banners, including No Frills and Real Canadian Superstore.

"Performance in our discount banners continued to strengthen as market share and traffic improved year over year," Loblaw chief financial officer Richard Dufresne told analysts.

"We continue to see a larger share of wallet spend in our discount banners."

The grocer also noted a continued shift to private-label brands like President's Choice and No Name.

Loblaw has recorded "an enormous amount of new trial" of customers buying its No Name brand, Weston said.

"I don't know what it was like in the 1980s but certainly in my time in the business I haven't seen this kind of growth in an opening-price-point brand ever," he said. "It's pretty significant."

One of the key drivers of No Name sales is the brand's broad assortment, including in the produce aisle where inflation has been acute, Weston said.

Meanwhile, the President's Choice brand is also growing, though not at the same rate as No Name, he said.

In September, the price of food purchased in stores rose 11.4 per cent compared with a year earlier, the fastest pace since 1981, Statistics Canada said.

The agency said Wednesday the price of food from stores in October was up 11.0 per cent compared with a year earlier, a somewhat slower clip than the previous month, but still the eleventh consecutive month where groceries increased at a faster rate year over year than the overall consumer price index.

Loblaw said Canadian retail food inflation remained among the lowest of G7 countries but that "global inflationary forces continued to increase the cost of food in the quarter" and that it continues to field new cost increases from suppliers.

"We are largely dependent on what suppliers ask us to pay for their products," Dufresne said. "Suppliers determine the cost and we determine the retail prices."

Dufresne added: "Our objective is to make sure that our price on the shelf does not rise faster than supplier costs."

Loblaw tracks its margins closely, he said, and every quarter since inflation took off last summer the company's food gross margins have been essentially flat.

"This gives us the confidence to say categorically that retail prices are not growing faster than costs and the company is not taking advantage of inflation to drive profit," Dufresne said.

On an adjusted basis, Loblaw says it earned $2.01 per diluted share, up from an adjusted profit of $1.59 per diluted share a year ago.

Analysts on average had expected a profit of $1.96 per share and $16.85 billion in revenue, according to estimates compiled by financial markets data firm Refinitiv.

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