The Globe and Mail - 16.10.2019

WEDNESDAY,OCTOBER16,2019| THE GLOBE AND MAILO REPORT ON BUSINESS| B5

BRUSSELSThe European In-

vestment Bank has postponed

taking a decision on whether

to stop financing fossil fuel

projects to November, an offi-

cial said on Tuesday, as the

multilateral lender works out

whether to keep financing gas

projects for a period.

The bank’s president, Werner

Hoyer, is pushing for the bank

to take the lead in financing

sustainable projects, and pro-

posed in July to stop its fossil

fuel lending by the end of

2020.

But Germany, Europe’s big-

gest economy and the EIB’s

biggest shareholder, wants the

bank to continue financing

projects linked to natural gas,

which produces less green-

house gas emissions than coal

or oil and which Germany and

some other states want to use

as a fuel to transition away

from coal.

“On the basis of what we

discussed this morning, I am

increasingly confident that we

will achieve final approval in

November,” Andrew McDowell,

an EIB vice-president, said in

an interview during the meet-

ing.

The EIB’s board, made up

mostly of European Union

finance ministers, has been

discussing ways to make the

bank greener by ending financ-

ing for fossil fuel-powered

energy projects, but some

countries heavily dependent on

coal or gas have opposed the

total ban of fossil fuel lending.

Germany, Italy, Poland and

Latvia want the bank to keep

funding certain gas projects to

help the transition from coal or

nuclear power, or for energy

security reasons.

Mr. McDowell said the delay

would “allow some more na-

tional reflection” after some

countries asked for clarification

on the proposal from EIB to

completely stop funding fossil

fuel-linked projects from the

end of next year.REUTERS

EUROPEANINVESTMENT

BANKDELAYSDECISION

ONFOSSILFUELLENDING

Shares in Alamos fell by 12.4 per
cent to $6.57 apiece on the To-
ronto Stock Exchange on Tues-
day, its biggest single-day drop
since September, 2017.
The setback for Alamos comes
amid a wider climate of uncer-
tainty around Turkey on the in-
ternational stage.
Last week, the country
launched an air-strike campaign
against Kurd forces in neigh-
bouring Syria, justifying the mil-
itary incursion as necessary to
curb a border security threat. On
Monday, the United States im-
posed sanctions on Turkey and
called for it to retreat from Syria.
“The government’s got a lot of
things going on. They’ve pushed
into Syria and they’re trying to
push back the Kurds,” said Kerry
Smith, mining analyst with Hay-
wood Securities Inc., in an inter-
view.
“I think they’re nervous there
are these [mine] demonstrations
and these protests. They don’t
want it to get out of hand.”
“The last thing they want is
social unrest in the country,” he
added.

Mr. Smith is optimistic that

Alamos will eventually be suc-

cessful in obtaining the needed

concession to be able to restart

the construction of Kirazli, not-

ing that Alamos originally had

some trouble obtaining neces-

sary forestry permits but was ul-

timately successful.

Alamos had planned to pro-

duce an average of 100,000

ounces of gold a year at Kirazli,

over a six-year period. The

mine’s all-in sustaining cost

(AISC) is projected at US$363 an

ounce, significantly lower than

Alamos’s 2019 forecast of US$940

an ounce across its existing port-

folio.

While Alamos already oper-

ates mines in Canada and Mex-

ico, Kirazli would be its first in

Turkey. The company acquired

the project in 2010 for US$90-

million. Alamos started con-

struction of the mine this spring

and its capital cost has been

pegged at US$152-million.

In an interview with The

Globe and Mail in August, John

McCluskey, Alamos’s chief exec-

utive officer, defended the com-

pany’s planned use of cyanide in

the processing of gold at Kirazli

as extremely safe. He also said it

is Turkey’s forestry service, and

not the company, that is respon-

sible for clearing the site of trees,

and that the forestry service has

been busy replanting the area.

Alamos did not respond to a

request for comment on Tues-

day.

While Turkey has historically

been pro-foreign investment

from the international mining

community, some companies

have struggled to gain traction.

Anatolia Minerals Development

Ltd. (now part of Alacer Gold

Corp.) initially struggled to ob-

tain necessary forestry permits

to build a mine in Turkey, but

eventually was successful after it

brought in a local partner. Eldo-

rado Gold Corp., which operates

the biggest gold mine in Turkey,

has mostly operated trouble-free

in the country without a local

partner.

Sentry’s Mr. Case said if Ala-

mos doesn’t make progress over

the next few months, it might

want to consider bringing in a lo-

cal partner.

ALAMOS GOLD (AGI)

CLOSE: $6.59, DOWN 91¢

AlamosGold’sKirazliproject,seeninAugust,wouldbethecompany’sfirstmineinTurkeyiftheprojectmovesahead.Thecompany
purchasedtheprojectin2010forUS$90-million.YASINAKGUL/AFP/GETTYIMAGES

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averageof100,000

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yearatKirazli,over

asix-yearperiod.

Sales activity and prices are espe-
cially strong around Toronto, the
CREA data indicate.
In the Oakville-Milton area,
the composite benchmark home
price rose 4 per cent to
$1,026,300 last month, the real
estate association said. In the
Hamilton-Burlington area, home
prices rose 7 per cent to
$620,700. In the Niagara region,
home prices increased 8 per cent
to $423,300.
“We have a situation where
those areas are becoming unaf-
fordable,” said Benjamin Tal,
deputy chief economist at CIBC.
Even in Vancouver, Mr. Tal said:
“The fact that prices went down
[compared to 2018], doesn’t
mean that it became afford-
able.”
Home prices in the southwest-
ern Toronto suburbs have reac-
hed a record high. The price of a
detached house in the Hamilton-
Burlington region reached
$656,300 last month. In Niagara,
the price was nearly $450,000.
“If you have your heart set on

buying a home, but you can’t af-

ford or qualify for a mortgage fi-

nancing in an area that you

would most like to, you look at

your second best. For that rea-

son, people are driving further

afield to places where they can

qualify for financing,” CREA’s

chief economist Gregory Klump

said.

Investors are also fleeing to

the suburbs, and that interest is

contributing to housing boom

outside Toronto.

“They are now moving funds

into the St. Catharines and Niag-

ara market,” said Brian Hogben,

a mortgage broker who serves

the Hamilton area. “The upswing

potential is still quite large.”

The federal Liberals have pro-

posed expanding a first-time

home buyer plan to make it eas-

ier for people to buy in the ex-

pensive cities of Victoria, Van-

couver and Toronto. Currently,

Ottawa provides an interest-free

loan of up to 10 per cent of the

down payment, with a cap on

the price.

The Conservatives and the

New Democratic Party are pro-

posing to extend the possible

amortization period for an in-

sured mortgage to 30 years from

25.

The Conservatives have also

proposed to change the test that

requires borrowers to prove they

could handle home loan pay-

ments at a higher rate. It is un-

clear how they would change the

test, which reduced the size of

mortgages buyers could get.

Some critics have warned that

measures to improve affordabil-

ity such as lengthening the am-

ortization period could push

home prices higher and exacer-

bate the crisis.

“Lowering monthly mortgage

payments by stretching repay-

ment over a longer time period

looks great on the surface, yet a

surge in new buyers could cause

prices to escalate, erasing the en-

hanced purchasing power,” Phil

Soper, president of realtor Royal

LePage, said in a recent press re-

lease.

In addition to Toronto and

Vancouver, sales transactions

were up in Calgary, Edmonton,

Winnipeg, Ottawa and Montreal.

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heartsetonbuying

ahome,butyou

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qualifyfora

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GREGORYKLUMP

CHIEFECONOMIST,

CANADIANREAL

ESTATEASSOCIATION

“We’d have better regulations at
the outset, so we don’t end up
with a situation where Sears pays
out massive dividends to its
American owners while under-
funding the pension plan.”
According to a recent Aon PLC
survey, 52 per cent of Canadian
defined benefit plans were in sol-
vency shortfall as of the end of
September.
The Conservatives also pro-
posed taking steps to help under-
funded pension plans return to
solvency by allowing the transfer
of an underfunded pension plan
to another, more successful pen-

sion plan.

“That is legitimately a great

idea,” said Torys’ Mr. Frazer, not-

ing that some pensions, such as

the Colleges of Applied Arts and

Technology (CAAT) plan, have

initiatives aimed at managing

the money of smaller pension

plans. “This would give the pen-

sion plans the time to become

fully funded over time.”

The final Conservative prom-

ise on private pensions would be

to increase transparency by re-

quiring federally regulated com-

panies to report on the solvency

of their pension plans. This could

make the information easier to

access. Mr. Frazer, however,

noted that employees and

unions can already request this

information.

Also related to pension regu-

lation, the NDP and Green Party

platforms both include promises

to make pensioners the top pri-

ority for repayment in bankrupt-

cy situations. But this concept

could make it more difficult for a

distressed company to get fi-

nancing and ultimately push it

into a restructuring scenario

sooner, said both Mr. Frazer and

Mr. Macdonald.

“If you allow pensioners to

move further up the priority line,

above people who might offer

bridge financing, then people

won’t offer the bridge financing,”

Mr. Macdonald said. He noted

that in many cases, the goal of a

bankruptcy or insolvency pro-

ceeding is to restructure debts

but ultimately keep the company

running.

“If you knew in advance that

the bankruptcy was going to lead

to the dissolution of a company,

then I would be all for the pre-

eminence of pension plans over

other creditors. The danger is

that you don’t always know in

advance how a bankruptcy will

proceed.”

The Liberals did not include

promises related to private pen-

sions in their platform.

Pensions:Tories·ro·oseA··roA[htohe—·underfunded·—Ansreturntoso—íen[ð

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Accordingtoarecent

AonPLCsurvey,

52percentof

Canadiandefined

benefitplanswere

insolvencyshortfall

asoftheend

ofSeptember.

LONDONBank of England Gover-

nor Mark Carney said on Tues-

day that currency dealers should

face the same tough market-

abuse rules thatgovern share

and bond trading, adding to

scrutiny of London’s US$5-

trillion-a-day foreign-exchange

market.

Mr. Carney also struck a san-

guine tone on hedge funds and

other investors taking bets on

the value of the pound as the

Oct. 31 Brexit deadline nears,

arguing that the stability of the

financial system was the BoE’s

main concern.

The global spot foreign ex-

change market, dominated by

London, is unregulated, unlike

the tighter restrictions placed on

those who trade shares and

bonds.

“They do not apply to the spot

FX [market], and in our judg-

ment they should,” Mr. Carney

told a panel of lawmakers.

The European Union’s Eu-

ropean Securities and Markets

Authority has just opened a

public consultation on whether

spot foreign exchange trading

should come under EU market-

abuse rules.

ESMA flagged difficulties in

regulating such a huge market

and suggested that a new global

code of conduct aimed at crack-

ing down on abuses should be

given more time to bed down.

Mr. Carney said the BoE’s

main focus was on the core of

the financial system – making

sure that major banks were

ready for Brexit and that fi-

nancial markets function well.

REUTERS

MARKET-ABUSERULES

NEEDTOCOVERCURRENCY

MARKETS,CARNEYSAYS