# "The best place to be is in commodities"



## drillinto

Interview with Jim Rogers: "The best place to be is in commodities"

http://seekingalpha.com/article/31835?source=feed


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## drillinto

Consensus Commodity Price Forecasts:

http://tickersense.typepad.com/ticker_sense/2007/04/consensus_commo.html


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## drillinto

Catching the commodities wave 

Investors cite 1920s theory in saying that the rally in commodity stocks is only just beginning 

By MALCOLM SCOTT 

RUSSIAN economist Nikolai Kondratiev argued in the 1920s that commodities move in 50 to 60-year cycles. His analysis suggested prices would rise early this century. They did.

Now, investors Shane Oliver and Marc Faber are using his theory to back their bets that the five-and-a-half-year-old rally in commodity-related stocks is only just the beginning.

'The norm in financial markets is to look at very short-term cycles,' said Mr Oliver, who helps oversee US$83 billion at AMP Capital Investors in Sydney. 'I think that's wrong. Kondratiev allows you to view these things in a broader context.' BHP Billiton Ltd, the world's biggest mining company, and Rio Tinto Group, the third-largest, are among AMP's top 10 holdings.

Shares of companies that produce raw materials have leaped 173 per cent and energy stocks have jumped 118 per cent since October 2001, when commodity prices began rising. The two groups have had the biggest gains in Morgan Stanley Capital International's World Index since then. Shares of Melbourne-based BHP have almost quadrupled, while those of London-based Rio have almost tripled.

Mr Oliver and Mr Faber, a Hong Kong-based money manager, are among a new generation of 'super cycle' proponents that also includes strategists at Citigroup Inc, Deutsche Bank AG and Goldman, Sachs & Co. They say that supply shortages and growing economies in China and India will send prices higher for years to come.

Their intellectual ancestor, Kondratiev, founded the Institute of Conjuncture in Moscow in 1920. He argued in books and papers such as The Major Economic Cycles, published in 1925, that long waves in economies and prices are inherent in the capitalist system. Upswings are caused by increased capital investment, and downswings arise as those investments lose value. New markets and new technologies also push prices up during the expansionary phase.

He observed three upswings: 1789 to 1814, spanning the French revolution and Napoleonic wars; 1849 to 1873, an era of European industrialisation; and 1896 to 1920, when the US emerged as the world's largest economy. Each was followed by a commodities decline of between 23 and 35 years. The average decline lasted 29 years, the average upswing 24 years.

Using Kondratiev's analysis to project forward, a 29-year slump was due from 1920 to 1949 - a span that includes the Great Depression and World War II. A full 53-year up-and-down cycle followed, making another upswing due in 2002.

'I agree that commodity prices move in long cycles,' said Mr Faber, who manages US$300 million at Marc Faber Ltd. 'The up wave of the Kondratiev cycle is likely to last for at least another 15 to 20 years.'

Mr Faber devoted a 35-page chapter of his 2001 book Tomorrow's Gold to Kondratiev and other long-wave theorists, writing that once the cycle turned higher, 'it will change the entire rules of investing, because in a rising wave, commodity prices will rise, inflation will accelerate and interest rates will increase'.

The Reuters/Jefferies CRB index of 19 commodities has surged 139 per cent since October 2001; copper has jumped fivefold, while oil prices have more than tripled. The US Federal Reserve has raised its benchmark interest rate to 5.25 per cent, from a low of one per cent in 2003.

Mr Faber owns mining stocks, which he declined to name, as well as gold, rare metals and agricultural land. He's underweight in bonds, which he said don't perform well in a rising Kondratiev wave.

The best-performing commodity related stocks since the rally started include Phoenix-based Freeport-McMoRan Copper & Gold Inc, up 505 per cent; Valero Energy Corp of San Antonio, up 647 per cent; Seoul-based Korea Zinc Co, up 988 per cent; German steelmaker Salzgitter AG, up 1,247 per cent; and Indonesian coal exporter PT Bumi Resources, up 2,100 per cent. The MSCI World Index is up 67 per cent in the same period.

Angus Gluskie, who helps manage about US$380 million at White Funds Management in Sydney, hasn't heard of Kondratiev and isn't a believer in the long rally. He expects central banks around the world will raise interest rates in the face of higher inflation, slowing global growth and demand for raw materials.

'Things don't go on forever,' he said. 'The reason these things are called cycles is because they run out of steam. In the next six to 12 months, I see a much tougher environment for commodities and resources companies.'

That means that commodities may already have peaked. The CRB index has slipped 10 per cent from its May 2006 high. Mr Gluskie said he's 'neutral' on mining stocks, expecting strong earnings for the first three months of this year. Beyond that, he's 'anxious' not to be left owning too many shares exposed to the global economy, he said.

Proponents of a super cycle, including Alan Heap at Citigroup in Sydney, Melbourne-based Peter Richardson and London-based Michael Lewis of Deutsche Bank, and Goldman's Jeff Currie in London, say the pullback since May is just a blip in a longer rally. 

Australia's central bank shares their optimism. 'The rapid growth in world demand for metals and other resources appears to be showing little sign of abating,' the Reserve Bank of Australia wrote in its monthly bulletin published April 19. 

'There are good reasons to believe that strong demand, from emerging economies in particular, may continue for several decades.'

China's economy has grown tenfold since the late 1970s, when leader Deng Xiaoping began adopting market-based policies. It has grown an average 9 per cent annually for the past decade, fuelling demand for copper, iron ore and other commodity imports it needs to sustain its manufacturing-based expansion.

India's economy has grown an average 8.6 per cent annually in the past four years, the quickest pace since independence in 1947 and behind only China among the world's major economies. Goldman Sachs expects India's growth to average 8 per cent a year until 2020.

Kondratiev himself didn't profit from his analysis. He was convicted for championing private farm ownership in the 1930s and executed during Josef Stalin's great purge in 1938 at the age of 46. Joseph Schumpeter, an Austrian economist, pursued Kondratiev's ideas in the 1930s.

AMP's Mr Oliver, when making presentations to clients, includes a slide titled The Latest Long Wave Upturn, inspired by Kondratiev. Its saw-tooth graph traces the global economy since 1785, with wave points marked at 40 to 60-year intervals. A red dotted line continues north until 2020.

'A lot of people at my level see it as hocus-pocus stuff, only slightly better than charting,' he said. 'But it is something you can't ignore.' 

Source: Bloomberg, May 2007


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## Kimosabi

And then you have an article like this, straight from Bloomberg as well. Who knows what to think...



> *Metals Bubble Poised to Burst on Increasing Supplies (Update3)*
> 
> By Millie Munshi
> 
> May 7 (Bloomberg) -- Copper, nickel and lead, the best performing commodities in the past four months, may be the worst by year-end.
> On Wall Street, the chorus is getting louder that rising metal supplies are outpacing demand. From Goldman Sachs Group Inc. to JPMorgan Chase & Co. to Societe Generale, there are warnings of a mania that is showing all the signs of a climax.
> 
> ``This is a real bubble,'' says metals trader David Threlkeld, who first got the world's attention in 1996 when he showed that Sumitomo Corp.'s copper hoarding would lead to a market collapse. Once again, ``we have an enormous amount of unsold copper,'' says Threlkeld, president of Resolved Inc. in Scottsdale, Arizona.
> 
> The metals bears are convinced that consumption may drop partly because China, the biggest user, is attempting to reduce investment through interest-rate increases and lending curbs after the economy expanded 11.1 percent in the first quarter.
> 
> Demand is also weakening because of a slowing U.S. economy and a consumer-driven pursuit of alternatives to historically expensive copper and nickel, according to Stephen Roach, chief economist at Morgan Stanley, the second-largest securities firm by market value.
> 
> Copper will decline 30 percent to an average of $5,650 a metric ton in the fourth quarter from more than $8,000 today, according to the median of 12 analysts' forecasts compiled by Bloomberg. Nickel and lead will drop about 50 percent from record prices reached on May 4 to $24,450 a ton for nickel and $1,000 for lead, the data show.
> 
> The anticipated slump would depress exports from Australia, Canada and Chile, wipe out more than $22 billion on the London Metal Exchange and squeeze the profits at mining companies from BHP Billiton Ltd., the largest in the world, to OAO GMK Norilsk Nickel, the biggest metals producer in Russia.
> 
> *Bears Miss Rally*
> 
> To be sure, many of the bears were wrong so far this year. An investor who acted on the advice of JPMorgan, the third- largest U.S. bank, missed gains of 67 percent for nickel, 30 percent for copper and 41 percent for lead, the best-performing commodities in the 26-member UBS Bloomberg CMCI Index.
> 
> That compares with a 6.2 percent increase for the Standard & Poor's 500 Index and 2 percent for U.S. Treasuries, according to Merrill Lynch & Co. indexes.
> 
> ``We're sticking to our guns'' because ``prices are unsustainable,'' said London-based Jon Bergtheil, head of global metals strategy at the bank, on May 2. Nickel may average $35,328 a ton in 2007, down from $51,600, because stainless steelmakers might buy less in the second half, he said.
> Bergtheil in February said that nickel would decline 25 percent in 2007. The metal, used to make stainless steel, has since gained 40 percent.
> 
> *Finding Alternatives*
> 
> Nickel may plunge to $30,000 a ton by the end of 2008, because the current level is ``overdone,'' Goldman Sachs analysts led by James Gutman in London said in an April 2 report. ``There is a risk of longer-term demand destruction.''
> 
> Stainless-steel producers are canceling orders, he said. His colleague in London, Jeffrey Currie, head of global commodities research, was less bearish last week, saying he expects metals prices to be ``trading sideways'' this year.
> 
> The record copper price of $8,800 a ton reached last May was the peak, said ABN's London-based analyst Nick Moore. He recommended selling copper in December because global supplies were growing. He declined further comment in a May 3 e-mail, saying he couldn't discuss changes to price estimates before they were published. Copper for three-month delivery ended at $8,320 a ton in London on Friday.
> 
> *Rising Output*
> 
> World supplies of copper outpaced demand by about 50,000 tons in the first quarter, Stockholm-based copper producer Boliden AB said May 3. Global output rose 8 percent in the period, twice as much as demand, the company said.
> 
> Chile, the world's biggest supplier of the metal, said production jumped 13 percent in March as high prices encouraged miners to increase supply. Output rose to 502,106 tons from 442,410 tons a year earlier, the Santiago-based National Statistics Institute said April 26.
> 
> Nickel stockpiles tracked by the London Metal Exchange, the world's largest metals bourse, rose almost 60 percent since dropping on Feb. 6 to 2,982 tons, their lowest since July 1991 and barely enough to supply the world for a day.
> 
> Lead inventories are also rising, gaining by 42 percent since March 13 on the LME, to 43,825 tons. A surplus of 25,000 tons of lead may exist next year, from a deficit of 35,000 tons forecast this year, Natixis Commodity Markets Ltd. said in a quarterly report on May 1.
> 
> The metal's record price is likely to trigger more exports from China, said Natixis, one of 11 companies trading on the floor of the LME. Lead for three-month delivery ended at $2,115 a ton in London last week.
> 
> *Consumption Cut*
> 
> Some of the world's biggest users of metal are finding ways to reduce consumption. Pohang, South Korea-based Posco, the world's fourth-largest steelmaker, said April 25 it will increase output of nickel-free stainless-steel fivefold next year. Nickel helps make steel corrosion-resistant.
> 
> Morgan Stanley's Roach, who will soon become the bank's chairman in Asia, says commodities are poised to crash in the same way they did in May 2006, when a 5.4 percent weekly decline in the Reuters-Jefferies CRB Index was the biggest tumble since December 1980.
> 
> ``Watch out below for yet another reversal of commodity froth,'' Roach said April 26. ``It's deja vu spring of 2006.'' He correctly predicted the slump in commodities 12 months ago.
> 
> *China's Rates*
> 
> Roach anticipates a drop in commodities because China will increase interest rates to slow the economy and inflation, while a slowdown in U.S. housing will rein in consumer spending.
> 
> China ordered banks on April 29 to set aside more money as reserves for the seventh time in 11 months to try to prevent the world's fastest-growing major economy from overheating. Lenders must put aside 11 percent of deposits starting May 15, up from 10.5 percent.
> 
> The increase will draw 170 billion yuan ($22 billion) from the financial system. China raised borrowing costs three times since April last year, and will increase rates twice more this year, according to a Bloomberg survey
> of economists.
> 
> In the U.S., the world's biggest economy, growth slowed to a 1.3 percent annual pace in the first quarter from 2.5 percent in the fourth. An index of pending sales of existing homes fell 4.9 percent to the lowest level in four years in March, the National Association of Realtors said.
> 
> *`Boom in Demand'*
> 
> Bullish metals investors expect China will fail to curb growth, according to Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion.
> 
> ``The speculative element in commodities hasn't been affected by the slowdown in the U.S. economy,'' Dolphin said. ``The expansion we're seeing in China and India has kept the speculators in.''
> 
> Even the largest U.S. pension fund, the California Public Employees Retirement System known as Calpers, is chasing commodity returns after years of holding stocks and bonds. The fund in March invested $450 million in the Goldman Sachs Commodity Index.
> 
> ``Strength in commodity markets will be something we should see generally over the next 10 to 20 years,'' said Russell Read, the chief investment officer, in an April 24 interview. ``We see a relative shortage of commodities stemming from a boom in demand from emerging markets, particularly India and China.''
> 
> *`Crash' Possible*
> 
> Any further gains will be fleeting, according to Societe Generale's head of commodities research, Frederic Lasserre. He expects commodities will extend their rally and rise close to near-record levels in the third quarter of this year, before falling back.
> 
> The gains in metals are ``100 percent-driven by funds,'' said Resolved's Threlkeld. ``At some point the funds are going to want to take a profit. And when that happens there could be an almighty crash.''
> 
> http://www.bloomberg.com/apps/news?pid=20601109&sid=a.mU61VXh8TU&refer=exclusive


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## BREND

Inventory level is a crucial factor in my view. 

With the low inventory going lower, hence metal price going higher, that does not justify the definition of a bubble.


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## 2020hindsight

http://www.abc.net.au/news/newsitems/200705/s1927233.htm 
Friday, May 18, 2007. 6:34pm 


> Resources sector weighs down market
> The Australian sharemarket has been weighed down by heavy losses in the resources sector.
> *Plummeting base metal prices have shaved 2 per cent off the world's biggest miner BHP Billiton*.
> It closed down at $30.71 while its rival Rio Tinto slumped $1.39 to $90.91.
> 
> Qantas chairman Margaret Jackson has ended a week of speculation and announced she will step down at the company's annual general meeting later this year.  Ms Jackson was under pressure to resign from shareholders and unions for her ardent support of the failed $11 billion takeover bid. She says the last eight months have been particularly testing and it is a good time to move on.  Qantas board member and Publishing and Broadcasting Limited chairman James Packer is also retiring at the AGM.  Qantas is down 3 cents to $5.22.
> 
> Nine Network chief executive Eddie McGuire is also stepping down after 19 months in the top job.  Analysts say he was not able to lift the ratings or cut costs enough, but Mr McGuire will stay with the network as an on-air personality.  The chief executive role will not be replaced. PBL is down 6 cents to $20.94.
> 
> The retail sector is lower today. Grocery chain Woolworths has lost 2 per cent to $28.22, and furniture company Harvey Norman is 11 cents lower at $5.26.
> 
> Telstra has shed 9 cents to $4.86.
> 
> Three of the big four banks improved a little. The NAB was the exception, dropping 21 cents to $42.98.
> 
> *The All Ordinaries Index is down 50 points to 6,320*.
> The ASX 200 has fallen 53 points to 6,312.
> 
> At 5:00pm today, a barrel of West Texas crude oil was $US 64.80 a barrel and spotgold was $US656 an ounce.



Yet the Dow continues to climb to new heights


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## BREND

Over a longer term, I'm still bullish on base metals. 
I'll be buying more mining stocks when metal prices come down further. 

But currrently will still recommend my clients to short copper on rebound & 
also to sell copper call options, strike $8200, Jun07 contract.


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## drillinto

Must read: Major report on the global trends in the mining industry - 2007

http://www.pwc.com/extweb/pwcpublications.nsf/docid/AD4DEFB47A20ED0A852572F9007200C7/$File/07-02111_mine2007.pdf


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## BIG BWACULL

Ah thats better 
http://www.pwc.com/extweb/pwcpublications.nsf/docid/AD4DEFB47A20ED0A852572F9007200C7/$File/07-02111_mine2007.pdf


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## drillinto

BIG BWACULL said:


> Ah thats better
> http://www.pwc.com/extweb/pwcpublications.nsf/docid/AD4DEFB47A20ED0A852572F9007200C7/$File/07-02111_mine2007.pdf




Thanks m8


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## drillinto

A mid-year look at commodities

Author: RiskCenter Staff
Date: 2007-08-01

The Dow Jones-AIG Commodity Total Return Index is up six percent so far this year. Leading commodity analysts provided their market outlook for the rest of 2007 yesterday morning at the sixth annual Dow Jones Indexes – AIG Commodities Outlook, hosted by CME Group, a CME/Chicago Board of Trade Company. 


“Global demand for oil is expected to rise by 50% in the next 25 years. In China the demand is at record highs and will continue to rise. A strong stock market coupled with a weak Dollar suggests that demand here in the U.S. will grow steadily for the remainder of year. It is unclear whether conventional supplies can keep pace, and I predict oil prices will hit a new record high of $85/barrel before the end of 2007,” said Phil Flynn, vice president and senior market analyst at Alaron Trading Corporation in Chicago. 

“There are several key economic factors that are driving agricultural futures and prices upward. The demand for U.S. exports is very strong as our agricultural products are now very competitively priced, primarily due to the weakness of the Dollar. The U.S. government has mandated increased use of ag-based fuels such as ethanol and biodiesel, and changes in government spending and taxation will ultimately promote greater inflation. At the moment wheat is the high flyer due to weather problems here and in Europe, but prices overall should stay strong into 2008.” said Jack Scoville, Vice President of Price Futures Group in Chicago.

“The gold market is expected to be well supported through year-end, with a move into the $700-$732 range anticipated. While occasional quick liquidations are possible, they will likely be tied to the latest round of sub-prime fears rather than any bearish gold-centric news. Gold may experience an increased correlation with the stock market as a result. Longer-term, however, gold should find support from a return of fund and investment flows, moderate global economic growth, seasonal jewelry demand, a weak dollar, and technical issues,” said Tom Pawlicki, precious metals and energy analyst at MF Global in Chicago. 

“We have seen continued interest from investors in the commodities futures market. This interest has been driven largely by the growing understanding of the importance of diversifying one’s portfolio by blending together different asset classes. The Dow Jones-AIG Commodity Index has continued to serve as a useful benchmark for these investors with an estimated US$38 billion as of the end of the second quarter tracking the Dow Jones-AIG group of commodity indexes on a global basis,” said Daniel Raab, managing director at AIG Financial Products Corp. 

Source: RiskCenter.com


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## BREND

drillinto said:


> A mid-year look at commodities
> 
> Author: RiskCenter Staff
> Date: 2007-08-01
> 
> The Dow Jones-AIG Commodity Total Return Index is up six percent so far this year. Leading commodity analysts provided their market outlook for the rest of 2007 yesterday morning at the sixth annual Dow Jones Indexes – AIG Commodities Outlook, hosted by CME Group, a CME/Chicago Board of Trade Company.
> 
> 
> “Global demand for oil is expected to rise by 50% in the next 25 years. In China the demand is at record highs and will continue to rise. A strong stock market coupled with a weak Dollar suggests that demand here in the U.S. will grow steadily for the remainder of year. It is unclear whether conventional supplies can keep pace, and I predict oil prices will hit a new record high of $85/barrel before the end of 2007,” said Phil Flynn, vice president and senior market analyst at Alaron Trading Corporation in Chicago.
> 
> “There are several key economic factors that are driving agricultural futures and prices upward. The demand for U.S. exports is very strong as our agricultural products are now very competitively priced, primarily due to the weakness of the Dollar. The U.S. government has mandated increased use of ag-based fuels such as ethanol and biodiesel, and changes in government spending and taxation will ultimately promote greater inflation. At the moment wheat is the high flyer due to weather problems here and in Europe, but prices overall should stay strong into 2008.” said Jack Scoville, Vice President of Price Futures Group in Chicago.
> 
> “The gold market is expected to be well supported through year-end, with a move into the $700-$732 range anticipated. While occasional quick liquidations are possible, they will likely be tied to the latest round of sub-prime fears rather than any bearish gold-centric news. Gold may experience an increased correlation with the stock market as a result. Longer-term, however, gold should find support from a return of fund and investment flows, moderate global economic growth, seasonal jewelry demand, a weak dollar, and technical issues,” said Tom Pawlicki, precious metals and energy analyst at MF Global in Chicago.
> 
> “We have seen continued interest from investors in the commodities futures market. This interest has been driven largely by the growing understanding of the importance of diversifying one’s portfolio by blending together different asset classes. The Dow Jones-AIG Commodity Index has continued to serve as a useful benchmark for these investors with an estimated US$38 billion as of the end of the second quarter tracking the Dow Jones-AIG group of commodity indexes on a global basis,” said Daniel Raab, managing director at AIG Financial Products Corp.
> 
> Source: RiskCenter.com




Quite surprise that many commodity reports are not talking about lead. 

Lead has a high demand, heavy inventory drawdown from London Metal Exchange warehouse, and no substantial new amount of  lead supply. 

Lead price rally is going to be sustainable for a long time.


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## drillinto

Gold is the place to be

http://www.brw.com.au/viewer.aspx?E...nergy&portal=_ARTICLE&title=The+new+gold+rush


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## drillinto

Rankings of gold and silver companies listed in US stock markets

http://www.investor.reuters.com/bus...ry=GLDSLV&target=//busrankcomp&rankcategory=0


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## drillinto

Golden Opportunity

China Economic Review
August 2007

A movement into the gold market is seen as a means of diversifying China’s US dollar holdings 

As the US dollar weakens, China’s stock of dollars and dollar-denominated debt is falling in value. Unwilling to be caught holding the bag, bankers have been seeking ways to reduce their risk. In any other currency regime, this rebalancing would be simple: swap dollars on the open market. But Beijing’s restricted system forbids this. 

China’s export-dependent economy thrives on an artificially strong dollar and a relatively weak yuan. Lack of faith on the part of the world’s largest buyer of dollars could trigger a run against the US currency and hurt China’s export sector. 

Diversification demands
Local economists have seen the writing on the wall and are calling on the government to identify alternatives. One of them is gold. 

“More gold reserves will help the government prevent risks and handle emergencies in case of future possible turbulence in the international political and economic situation,” said Yan Tanling, a researcher at the Bank of China. 

Gold currently accounts for 1.3% of China’s foreign currency reserves, according to the Beijing Gold Economy Development Research Center. For some years now, experts have been petitioning the central bank to increase this from 3 to 5% of reserves. Such a move would bring China’s gold holdings more in line with global averages. 

To do this, China would have to lay its hands on an additional 2,500 tons of gold at today’s prices – an amount equal to nearly a quarter of America’s own mammoth reserves. 

“It’s impossible to do something like that over a short period of time,” said Paul Walker, head of the World Gold Council, an advocacy group. 

There may also be supply issues. Bill Murphy of LeMetropole CafÃ©, a gold-industry think tank, said the current gold market would be hard-pressed to meet the needs of a Chinese buying binge. 

“There is no way the Chinese could buy anywhere near that amount of gold without sending the gold price bonkers.” 
That is, unless China can leverage its own domestic gold resources to support its reserve rebalancing. Several prominent mining firms made share offerings this year as part of efforts to bring forward consolidation in the sector. 

Home sourced
Meanwhile, the country’s economic planners have also announced a significant expansion of China’s existing gold mines in the past year. Production is expected to top 260 tons in 2007, so China may well have the domestic supply in place to expand its gold reserves. 

There are signs that Beijing may be putting in the structures required to support this. In June, the China Securities Regulatory Commission gave the Shanghai Gold Exchange the green light to begin trading gold derivatives futures. 

Another factor is, paradoxically, the current low price of gold. A large buy by China would likely create a major price spike as investors anticipate a tighter market. This would see the value of their reserves appreciate. 

Rather than embark on a risky commodities drive, many prefer the more subtle technique of using the dollars to invest in US securities. Buying into American firms would reduce currency risk and boost returns while avoiding the appearance of abandoning the troubled dollar. Indeed, this is the principal objective of China’s recently established first state-owned foreign investment agency. 

However, the new agency is likely to operate in a conservative manner and, even if it did not, bold takeover efforts would face stiff opposition in the US. 

As it stands, gold may not be an immediate fix for China’s reserve imbalance but it is a viable option. Walker remains convinced that gold will be part of whatever exit strategy China chooses. 

“There’s no doubt in my mind at all that they will be in the [old] market. I would expect to see baby steps towards gold in the future.”


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## drillinto

U.S. Housing: Bullish Or Bearish For Commodities? 
BCA Research (Canada)
August 10, 2007 

 Our Commodities and Energy Strategy service maintains its positive outlook on the commodity complex, but advises that investors steer clear of housing-related assets such as lumber and copper. 

While commodities linked to housing such as lumber and copper remain under downward pressure as a result of the ongoing strain on the U.S. housing and mortgage markets, the overall climate for commodities is healthy. Weakness in the U.S. housing market could be viewed as bullish for commodities because it caps the cost of capital. Outside of the U.S., plentiful liquidity conditions and savings keep the global risk-free interest rate low, boosting investor willingness to buy into risky assets such as commodities, both on a speculative basis and over the long term. Low interest rates also encourage industry consolidation, which boosts pricing power. Furthermore, robust investment trends in emerging economies are commodity-intensive, and a huge tailwind for commodities. Finally, supply bottlenecks remain stubborn and exploration costs continue to mushroom


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## drillinto

HEARD ON THE STREET  

Bet for Uneven Seas: Try Oil
By ANN DAVIS / WSJ
August 20, 2007

Investors have been fleeing risky investments, but that doesn't mean oil futures will tank along with other ailing assets.

Analysts and traders cite a host of reasons why -- despite a rocky August so far -- crude-oil prices could stay relatively high even as the credit and stock markets swoon. Though market turmoil may accentuate a seasonal drop in crude prices this fall, other forces could pull oil back up in the short term or by year's end, they say.

For one, some play down the 8% drop in light, sweet crude on the New York Mercantile Exchange this month from its record close July 31 of $78.21. Oil closed at $71.98 a barrel Friday. Lehman Brothers Holdings Inc. energy analyst Adam Robinson attributed the downdraft to hedge funds and other investors' attempts to raise cash from well-performing investments as they managed problems in other parts of their portfolios.

"I don't think it is a coincidence that on July 31, we peaked," Mr. Robinson contends. That is the day many hedge funds recorded monthly returns. In recent weeks, including late last week, "people took losses on fixed-income and equities but liquidated oil investments" either to lock in profits or raise cash.


Many fossil fuels, including oil and gasoline, remain up by double-digit percentages this year. Some industrial materials, such as aluminum and nickel, have lost ground in recent months, but remain at historically high levels.

Of course, contagion could still spread to the oil and other commodity markets if the U.S. economy stumbles. A recession, especially if it spread globally, would severely cut industrial- and consumer-energy consumption. Last week, the Organization of Petroleum Exporting Countries said uncertainties in world economic growth were clouding the outlook for oil demand.

Still, crude-oil supplies may stay tight and prices may be less vulnerable than other markets.

If the Federal Reserve cuts interest rates in coming months, which many investors think likely even after other steps it took Friday, this could push down the U.S. dollar relative to other currencies as global investors move some money invested in U.S. debt abroad. Commodities are mostly dollar-denominated. The lower the value of the dollar, the more greenbacks it takes to buy a barrel of oil. Many economists predict further dollar weakening whether or not the Fed cuts rates.

OPEC, which pumps about 40% of the world's crude, is set to meet Sept. 11 in Vienna. Although the International Energy Agency, which tracks energy markets for industrialized nations, has warned of continued market tightness, predictions are streaming in that OPEC won't boost production.

OPEC has said U.S. oil inventories are ample. It may be reluctant to agree to a production increase if it mainly satisfies U.S. refiners' desire for cheap crude to cut their processing costs. Deutsche Bank AG analysts said they expect "OPEC will only start to struggle to defend the oil price if world growth falls below 3%. We are currently forecasting world growth of 4.6% next year."

Another catch: Even if OPEC does increase supply, it could take a couple months for tankers with the added barrels to reach the U.S., adds Lehman's Mr. Robinson.

Then there is the annual ritual known as hurricane season, which runs through November. A big storm could damage oil-production operations in the Gulf of Mexico or the Louisiana ports that receive foreign oil imports. Late last week, worries that Hurricane Dean would strengthen over the weekend and threaten the Gulf Coast prompted some drillers and energy companies to evacuate potentially threatened offshore platforms as a precaution. It takes days to close down platforms safely and additional time to restart the facilities.

As for finding new oil to relieve a tight market, Western energy companies may pull back on exploration amid the current credit crunch. If this weren't enough, structural changes in the oil-futures markets over the past few weeks lowered incentives to keep oil in storage.

Traders are abuzz about how the need for crude on the spot market has pushed up today's going rate relative to the price of oil to be delivered a few months from now, a state known as "backwardation." Energy economist Philip Verleger said in a recent report that holders of physical oil may be quicker to sell it off and to expect "a new equilibrium with lower stocks...and probably higher prices," at least as long as a recession doesn't loom.

The switch to backwardation, a condition the market hasn't seen in more than two years, also has "elevated" already strong institutional-investor interest in oil investments, providing some upward pressure to the price, says John Brynjolfsson, portfolio manager of the Pimco Commodity Real Return Strategy Fund, overseen by the Allianz AG unit, Pacific Investment Management Co. The reason? Investors holding oil futures make a little extra money each month when they sell an expiring contract and replace it with one for farther-out delivery that is a little cheaper.

Still, betting on oil's rise isn't for the faint of heart. Lehman points out that every year since 1999, oil prices have fallen at least 15% in the fourth quarter from August or September peaks, before a pickup tied to winter energy consumption kicks in.


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## drillinto

Harvest Moon
By David Gaffen 
WSJ / 23rd August 2007

Stocks aren’t doing much, bonds are quiet, energy markets are calm and even asset-backed commercial paper rates are reportedly starting to relax a bit. Which by default makes the most exciting market of the day…wheat. Yes, really.

Wheat futures traded on the CME were up sharply today after Statistics Canada reported a 19.6% year-over-year decline for the expected wheat harvest over the next month, thanks to a heat wave producing a drought. 

“People are searching for grain and we’re up into uncharted territory,” notes Darin Newsom, senior commodities analyst at DTN in Omaha. The December wheat contract rose 6.25 cents to $7.38 a bushel, after earlier touching $7.54 a bushel. 

Wheat: commodity of champions. Futures in this grain have spiked dramatically since the middle of May, partially because of reduced supply thanks to poor weather conditions in Europe and Australia, causing world production forecasts to be trimmed. In addition, this market has been afflicted with similar speculation as other normally staid commodities markets. “There’s been a huge flow of money into these markets,” Mr. Newsom said.

Wheat was trading around $5 a bushel in mid-May on the CME, but has spiked by nearly 50% since. Export demand has been steady, and supply concerns aren’t likely to fade . 

“If you look at it rationally, we’re well above normal trading levels,” says Benson Quinn Commodities analyst Ryan Kelbrants. “But funds are long; managed money is long a lot of these contracts, and as long as they keep on lowering the world numbers and exports stay positive, we could see support i these markets.”


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## drillinto

Several factors contribute to higher farm commodities prices
::::::::::::::

Two necessities, fuel and food, create spiral of rising prices 
By Victor Davis Hanson
San Jose Mercury News / US
June 2007  

While we worry about gas prices, the costs of milk, meat and fresh produce silently soar. So like the end of cheap energy, is the era of cheap food also finally over?

Since the farm depression of the early 1980s - remember the first Farm Aid concert in 1985 - farmers have gone broke in droves from cheap commodity prices. The public shrugged, happy enough to get inexpensive food. Globalization saw increased world acreage planted and farmed under Western methods of efficient production. And that brought into the United States even more plentiful imported food.

Continued leaps in agricultural technology ensured more production per acre. The result was likewise predictable: the same old food surpluses and low prices. My late parents, who owned the farm I now live on in central California, used to sigh that the planet was reaching 6 billion mouths and so things someday "would have to turn around for farmers."

Now they apparently have. Food prices are climbing at rates approaching 10 percent per year. But why the sudden change?

There have been a number of relatively recent radical changes in the United States and the world that, taken together, provide the answer:

Modern high-tech farming is energy-intensive. So recent huge price increases in diesel fuel and petroleum-based fertilizers and chemicals have been passed on to the consumer.

The public furor over illegal immigration has, despite all the government inaction, still translated into some increased border security. And with more vigilance, fewer illegal aliens are crossing the border to work in labor-intensive crops like fresh fruits and vegetables.

The U.S. population still increases while suburbanization continues. The sprawl of housing tracts, edge cities and shopping centers insidiously gobbles up prime farmland at the rate of hundreds of thousands of acres per year.

In turn, periodic droughts and competition from growing suburbs in the West have made water for farming scarcer, more expensive - and sometimes unavailable.

On the world scene, 2 billion Indians and Chinese are enjoying the greatest material improvement in their nations' histories - and their improved diets mean more food consumed than ever before.

The result is that global food supplies are also tightening up, both at home and abroad. America has become a net food importer. We seem to have developed a new refined taste for foreign wines, cheeses and fresh winter fruits even as we are consuming more of our corn, wheat, soybeans and dairy products at home.

Now comes the biofuels movement. For a variety of reasons, ranging from an attempt to become less dependent on foreign oil to a desire for cleaner fuels, millions of acres of farmland are being redirected to corn-based ethanol.

If hundreds of planned new ethanol refineries are built, the United States could very shortly be producing about 30 billion gallons of corn-based fuel per year, using one of every four acres planted to corn for fuel. This dilemma of food or fuel is also appearing elsewhere in the world as Europeans and South Americans begin redirecting food acreages to corn-, soy-, or sugar- based biofuels.

Corn prices in America have spiked. And since corn is also a prime ingredient for animal feeds and sweeteners, prices likewise are rising for poultry, beef and everything from soft drinks to candy.

There is more corn acreage - about 90 million acres are predicted this year - than at any time in the nation's last half-century. But today's total farm acreage is either static or shrinking; land for biofuels is usually taken from wheat, soybeans or cotton, ensuring those supplies grow tight as well.

In the past, the genius of our farmers and the mind-boggling innovation of American agribusiness meant that farm production periodically doubled. Indeed, today we are producing far more food on far fewer acres than ever before.

But we are nearing the limits of further efficiency - especially when such past amazing leaps in production relied on once-cheap petrochemicals, fuels and fertilizers.

As in the case of oil, we've gone through these sudden farm price spikes before. My grandfather once told me that in some 70 years of boom-and-bust farming he only made money during World Wars I and II, and the late 1960s.

But this latest round of high food prices seems coupled to energy shortages, and so won't go away anytime soon. That raises questions critical to the very security of this nation, which may have to import as many agricultural commodities as it does energy - and find a way to pay for both.

The American consumer lifestyle took off thanks to low-cost fuel and food. Once families could drive and eat cheaply, they had plenty of disposable income for housing and consumer goods.

But if they can't do either anymore, how angry will they get as they buy less and pay more for the very staples of life?


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## explod

San Francisco Fund Manager Extols Virtues of Precious and Base Metals

 By Al Korelin      
Aug 29 2007 4:30PM

www.kereport.com



 Marshall G. Berol, co - Portfolio Manager of the Encompass Fund (www.encompassfund.com), has invested about 35% of the Fund’s assets in precious and base metal companies over the past fourteen months. So far it has been a win for investors.

Berol has been following resource companies for the past twenty-five years, and believes that in today’s environment these companies provide not only effective insurance, but great upside potential for the Fund’s investors.

I recently spent a couple of days with him in Saskatoon and Uranium City, Canada, looking at mining properties. The airplane and helicopter flights we took together gave me the opportunity to pick his brain.

We discussed how last week on The Korelin Economics Report the guests were split 50-50 between optimism and pessimism about commodity prices, and commodity equities.

Regarding base metals, Lawrence Raulston and others feels that an unprecedented buying opportunity exists today.  On the opposite side, Paul van Eden, Bob Moriarity and others expressed the opinion that copper, nickel and other commodities were something to avoid right now.

Berol is in the camp with our guests who are optimistic about prices. Berol and his co-Portfolio Manager, Malcolm H. Gissen, believe that the supply-demand picture favors the continued rise in the price of the base and industrial metals (copper, zinc, nickel, molybdenum and uranium) for some time to come.  While recognizing that there will be price volatility, the demand for these metals continues to grow with the growth of the economies of China, India, the rest of Asia, and South America. Particularly in China and India, the need for the continued building of the infrastructure requires various of these metals, such as copper for wiring, nickel and zinc for steel manufacturing, molybdenum for pipelines, and uranium for the fuel for the 440 nuclear plants currently operating, and the approximately 100 new nuclear plants now under construction or planned, around the world. The growing consumer class in these countries also want housing, refrigerators, automobiles, cell phones, etc.

The demand continues to grow, and it is increasingly difficult, time-consuming and expensive to bring new mines into production, or even increase the output of existing mines. This is due to increased environmental requirements, the need to accommodate the local people, and the fact that the “easy” material has been found. New discoveries and mines are in increasingly difficult geographic locations or less stable geopolitical areas.

I completely agree with Berol. I went on record some time back stating on the air that I was a long-term bull in both the base and precious metals sectors. Everything I learned as both an undergraduate and graduate student indicates that for a while it simply makes sense.

Berol also believes that it makes as much sense in the gold and silver areas, to which I agree. While some of the underlying factors involving gold are different, there is still a supply-demand imbalance that is not likely to correct for years. Gold isn’t so dependent on the infrastructure build-out as the base and industrial metals, but it does have the additional historic demand factors of “storehouse of value” in difficult times, and demand from an expanding middle class for jewelry and gift giving. Silver has increasing industrial uses, as well as consumer demand. Recall that only a few years ago, the silver bears were saying silver “was dead” because of it’s decreasing usage in photography. The fact is that silver has gone from $3.00 - $4.00 per ounce to over $11.00 (with a high around $15.00) in that time frame. 

The investment climate today is anything but stable and the gyrations in the conventional markets, as measured by the Dow, the Nasdaq Composite and the S&P are truly frightening. You cannot open a newspaper today without reading about serious liquidity concerns around the world. It’s enough to scare anybody.

I truly believe that fear is the incorrect emotion here. Rather than be fearful investors need to be optimistic. Why? Simply put, we have an unprecedented opportunity for profits from investing in precious and base metals and the related public companies. Listen to The Korelin Economics Report (www.kereport.com) and hear discussion with experts in this field and see if you don’t agree.



A.B. Korelin


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## drillinto

September 10, 2007

Australia’s Bauxite Boom Gathers Pace

By Our Man In Oz
www.minesite.com/aus.html
[Free Registration]

Bauxite, the mineral which eventually becomes aluminium, continues its remarkable revival as an exploration target in Australia. Hot on the heels of a search by United Minerals and its big Norwegian partner, Norsk Hydro, comes what is believed to be the first pure bauxite float on the Australian Securities Exchange. The aptly-named Bauxite Resources Ltd is looking to raise a miniscule A$5 million, hardly enough to scratch the surface of the targets it has lined up. Highest on the list is an area around the west coast settlement of Muchea which, for old readers, instantly brings back memories of an earlier, and unhappy time, in the Australian bauxite/alumina/aluminium industry – not to mention a couple of once great names who tried for more than a decade to mine the bauxite near Muchea.
Lang Hancock, a legend in the iron ore industry, and his partner, the late Peter Wright, once formed a joint venture with the sugar-producer, CSR (Colonial Sugar Refineries) known as Pacminex. The project, which chewed up A$2 million (A$60 million in today’s money) from the mid-1960s to the mid-70s, was designed to rival the mines and refineries build by Alcoa and Western Mining Corporation further to the south along a geological structure known as the Darling Scarp. Low prices, environmental protests, and internal bickering, eventually saw the Pacminex name disappear. But the bauxite remained.

Enter a small team of eager young explorationists led by lawyer, Luke Atkins. They have acquired three areas for their float of Bauxite Resources, two in the Darling Range (Muchea and South Darling) and one in the Mitchell Plateau, 3000 kilometres to the north, and not far from the tenements being explored by United and Norsk, and also close to a big swag of country held by Rio Tinto and Alcoa. It is at this point that a light bulb should be flickering in the brain of the average investor, tapping out a signal along the lines of “what’s happened, why has bauxite suddenly become so sexy”.

The answer, somewhat curiously, lies in the price of oil. As it rises, all other power sources rise in sympathy. And, as the cost of power rises so does everyone look for ways to cut their power bills, with one of the best ways, especially for aviation and road transport, to move even more heavily into lightweight metals. Rio Tinto’s merger with Canada’s Alcan (to become Rio Tinto Alcan) is the best illustration of the extremely bright long-term outlook for aluminum, and its precursor mineral, bauxite. If BHP Billiton should do what some observers believe, and launch a takeover bid for Alcoa, or Rio Tinto Alcan, then interest in bauxite will go through the roof. If there is to be a bauxite stampede, and these are very early days, then the best place to find the stuff is in Australia, or countries close to the equator where the tropical sun and heavy rain, has leached the soil to form layers of alumina rich cap-rock.

United’s plan, which Minesite reported several weeks ago, is to explore on its own tenements which encircle those of Rio Tinto and Alcoa on the Mitchell Plateau, and perhaps go as far as building a multi-billion dollar alumina refinery. At some stage United and Norsk might even suggest that since neither Rio Tinto nor Alcoa has done much to mine their bauxite then the “use it, or lose it” principal of Australian mining law ought to be applied. Bauxite Resources is being a little less aggressive, so far. It proposes to explore its tenements on its own at this stage, and look more towards a “direct shipping” proposal which would see bauxite, grading around 34%, exported direct to markets such as China and/or the Middle East.

Atkins told Minesite that exports could be comfortably handled through a number of ports, with the start-up target being a relatively lowly one million tonnes a year. Given that bauxite is currently fetching around US$45 a tonne, that represents a potential start-up annual cash flow of US$45 million – and all from a mining process which genuine hard-rock men call “gardening” because all that has to be done is blast the cap rock, scoop it up, separate out residual vegetation, perhaps upgrade modestly by removing any silica, and then off to market.

Said quickly and it sounds easy, and it remains to be seen whether Australian investors are yet ready to embrace bauxite as the next hot commodity in the five-year mining boom. Atkins thinks they are, obviously. He says Bauxite Resources will be the only “junior entry” with its foot in the world-class Darling Range area. “We’re planning to review historic data, including mountains of documents, and then look to establish a JORC resource,” he said. “Expanding world demand for bauxite means there is real potential to ship directly to China.”

He’s right. But launching a new bauxite mine in the Darling Range will be tough. Pacminex failed, perhaps for internal reasons. Alcoa continues to battle environmental protests over its mining in the Range which is also a prime water source for much of south-west Western Australia. There is also the potential for Alcoa, and the Worsley joint venture, which is run by BHP Billiton, to object to Bauxite Resources exploring in some areas, a point Atkins acknowledges, but is confident that negotiations will lead to his company gaining access.

Whether Atkins succeeds, or not, is probably irrelevant for investors, unless they want a slice of the action . The key consideration is that this is the latest example of bauxite forcing its way onto the investment stage, and it will probably not be the last. It might be time to brush up on a mineral which appears to have a found a fresh life.


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## drillinto

Oil Price Forecasts

http://bespokeinvest.typepad.com/bespoke/2007/09/oil-price-forec.html


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## drillinto

Like it or not, coal is vital to Asia's growth

http://www.spiked-online.com/index.php?/site/printable/3808/


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## drillinto

Global context for commodity fund-buying
Jessica Cross, CEO, VM Group
21 Sep 2007
Source: www.miningmx.com 

WHAT kind of world are we living in where the price of nickel can rise 12% in a day – as it did on the LME on Wednesday September 19? Not long ago that kind of rise might be regarded as quite decent over a year. 

So what happened? Nothing special really by way of news that day. A few stainless steel producers have been talking about how they might start buying more nickel again. But if all it takes to get speculative buyers excited is a few rumblings like that, we are living in very odd times.

Consequently investment money is still sloshing around in vast quantities in commodities, and for some very sound underlying reasons. It’s not just the old China factor – rapidly expanding urbanisation. The same is happening in India, Brazil and other big economies where the game today is catching up with already well-developed countries. 

Demand for lots of commodities, in some base metals, some agricultural products, and energy, is growing at an unprecedented pace in newly emerging economies.

The supply-side lag in commodities is profound. In base metals lack of investment in the mining industry has made itself felt across most base metals, tipping them into steep and prolonged backwardation. Research we have commissioned suggests that primary supply projections are currently considerably overstating the reality of how the miners are able to respond to these tight markets. 

This revolution in commodity demand and potentially serious shortfall in supply is grist to the mill of a wide range of investors – hedge funds, mutual funds, pension funds and private individuals. 

Commodities have weathered the recent credit crisis far better those most other investments. Largely because of uncertainty over whether or not slowly growing (and frequently interrupted) supply is going to be enough to cope with strongly growing (and rarely interrupted) demand.

In addition, the end of the Cold War era has resulted not in brotherly love and harmony, but a situation where geo-political uncertainty and a heightened sense of insecurity exists more everywhere. 

Russia is increasingly cause for concern; we have a Middle East ruled by autocrats desperately trying to stave off the rising tide of fundamentalist challenge; a Europe that is only nominally united; a USA brought low by its own wilful determination to use muscle over diplomacy; and a China that is quietly but steadily buying up the world’s resources wherever it can. 

The world’s global currency – the US dollar – is getting cheaper by the day as the US Federal Reserve fights a rearguard action against its own consumer credit bubble. Inflation is just around the corner – oil at $100/barrel was laughed at a couple of years ago. And lastly of course there is climate change.

Eventually some of this background noise will interact to slow the whole growth game down. Until then, investment money will continue to flow into commodities.


Jessica Cross is CEO of VM Group, a UK-based commodities markets research house founded in 1997. In a career that spans about 20 years, Cross has worked as an precious metals commodity analyst for Anglo American, Consolidated Gold Fields and RTZ. She has a doctorate in financial engineering.


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## drillinto

The latest forecast for Australia's commodity exports
:::::::::::::::::::::::::::::::::::::::::::::::::

24 September 2007 

Higher commodity exports despite poor season 

Australian commodity export earnings are forecast to increase by 4 per cent to $144.7 billion in 2007-08, according to the September issue of ABARE’s Australian Commodities.

‘Farm export earnings are forecast to rise by more than 3 per cent to $28.5 billion in 2007-08, despite poor seasonal conditions in many parts of Australia meaning earnings will fall short of earlier expectations’, said Phillip Glyde, Executive Director, ABARE, on releasing the report today. 

The increase in farm export earnings reflects a combination of mostly higher volumes shipped and good prices in global markets for grains and oilseeds, wool, beef and veal, lamb, wine and dairy products.

A forecast winter grains crop of 25.6 million tonnes in 2007-08, over 60 per cent greater than last year’s drought affected harvest, will contribute to a 3.6 per cent boost in export earnings from crops.

Mr Glyde was keen to point out, however, ‘that while much of the commodity focus has recently been on the lack of rain and its effect on both irrigated and non-irrigated agriculture, mineral resources will continue to be far and away the mainstay of Australia’s commodity export performance’.

The value of Australia’s minerals and energy exports is forecast to be around $112 billion in 2007-08, a rise of 4 per cent from $108 billion in 2006-07. The forecast increase mainly reflects the effects of higher export volumes for mineral and energy commodities.

‘We are now starting to see the benefits of recent high levels of investment in the Australian mining industry, with the volume of mineral resources production and exports increasing. For example, export volumes of iron ore and coal are forecast to increase by 13 per cent and 7 per cent respectively in 2007-08,’ Mr Glyde said.

Earnings from energy exports are forecast to increase by more than 5 per cent to $41 billion, supported by an increase in the value of thermal coal and crude oil exports.

The metals and other minerals industries are forecast to contribute nearly $71 billion – an increase of 4 per cent – to Australian exports in 2007-08. Mineral commodities for which export earnings are forecast to increase significantly in 2007-08 include iron ore, copper and gold.


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## brilliantmichael

There's no doubt that commodities, particularly raw materials, have, are, and will remain one of Australia's greatest sources of income for decades to come. However this does not make the commodities sector, even with its massive revenue generation for the Australian economy, immune from the question that remains the major arbiter of whether any investment is sound or not: "_Is the price good? Am I getting what I'm paying for? Am I getting back a desirable proportion of return for the amount of money I'm putting in?_" In other words, what kind of return on capital am I talking about here?

Now the extent to which one pays of course depends on what prospects one _believes_ a particular sector or issue will have into the future, and depending on what time frame one wishes to remain invested in the issue. Obviously the degree to which 'The Market' in general believes an issue will produce outstanding returns also affects investment performance - via the share price. Note the key word here was _believes_. The key point here is that belief needn't necessarily be a predictor of reality. And following on from that, the share price needn't either.

Just something to think about for the mom 'n pop investors out there who are considering it.

The question is one of either two:

Are commodities still reasonably priced for the amount of growth they can conservatively be expected to generate into the future?
OR, playing by the 'Greater Fool Theory', Are commodity stocks going to be driven up in price into the forseeable future? E.g. Are the Chinese and Russians really going to be paying up in the near future, even at these prices?

For valuers, the question is, "Am I getting in value what I'm paying for?" and his or her task is thus, to try to place a value on the issue. A challenging task perhaps but necessary nonetheless. Though not everybody is all that competent at valuing resources.

For punters, the question is, "Will the market continue to be interested enough in commodities such that people will continue to be willing to pay the prices they are paying now, and more, _after_ I pay up myself?" Well for these people I guess, they'll just have to be watching the news more often!


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## drillinto

Stick to OZ !

:::::::::::::::::::::::::::::::::::::


Anvil, First Quantum may lose Congo licenses
Reuters | Posted: Sun, 04 Nov 2007
[Source: www.miningmx.com] 

SIXTY-ONE mining contracts under review by a mining commission in Democratic Republic of Congo should be cancelled or renegotiated, according to a preliminary report from the panel seen by Reuters on Saturday.

The document, which a commission member said had not yet been finalised, showed that no contract reviewed by the panel was considered "viable" in its current form.

Thirty-seven contracts, including those with international firms Freeport McMoRan Copper & Gold, BHP Billiton and Nikanor, needed renegotiating while the remaining 24 should be terminated, the document recommended.

The commission was established to bring mining contracts in the vast former Belgian colony, most of which were negotiated during a 1998-2003 war and a subsequent three-year transition period, up to international standards.

"(The document) is the work of a subcommittee and is not the final version of the report. There still could be changes," the commission member told Reuters.

He said the final version of the report should be presented to Congo's Ministry of Mines on Tuesday.

Among those contracts recommended for cancellation are Toronto-listed Anvil Mining Ltd's rights to the Dikulushi copper and cobalt mine, where the Perth-based company[AVM @ ASX] has recently launched an underground mining operation.

"The commission notes that the state earns absolutely nothing in this contract and proposes the government end it," the report said among its recommendations.

The panel also called for a 2004 decree authorising the creation of KMT Plc, of which First Quantum Minerals is the major stakeholder, to be repealed.

Mining Code

The commission criticised several mining majors for irregularities in the negotiation of their contracts and recommended they be renegotiated but not cancelled.

Freeport McMoRan's Tenke Fungurume project, negotiated before the company's takeover of Phelps Dodge, was criticised for not respecting Congo's mining code.

"The government should end all these conventions and invite the parties to sign a new partnership conforming to the mining code with the right of pre-emption in favour of the current partner," the report said.

BHP Billiton and AngloGold Ashanti, which are both in joint ventures with state companies, and Nikanor, which has launched a $1.8bn copper project in Congo, were similarly criticised.

Following Congo's first democratic elections in more than four decades last year and a return to relative political stability following a five-year war, interest in the country's vast mining sector is booming.

The government first announced plans for a review of the legality and fairness of mining contracts early this year but the process was not launched until June and the commission's work has been delayed on several occasions.

Upon completion of the evaluation of the mining licenses, the commission is due to begin renegotiating the deals.


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## mishu

http://www.zealllc.com/2007/basetech4.htm

This article says zinc prices are perplexing but they must come up again. He tends to think all the metals are still in a bull period and will continue so for some time.

I agree.


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## drillinto

I repeat: stick to OZ !

:::::::::::::


DRC govt slams leaked licence report
Allan Seccombe, 06 Nov 2007
[www.miningmx.com] 

THE mining licence review process in the Democratic Republic of Congo (DRC) has been damaged by a leaked early draft of the Review Commission's report and the Ministry of Mines expects a large number of the companies operating there will continue to do so once "all irregularities have been corrected", said mines minister Martin Kabwelulu.

Newswires Reuters and Bloomberg have reported on a leaked preliminary draft of the Commission's report, saying 37 of the 61 contracts under review need renegotiating while the other 24 should be terminated.

"The speculation is not based on any official document, but on a leak of an early draft from within the Commission. The government deplores the leaking of this draft and the uncertainty that it has understandably created," Kabwelulu said in a statement.

Shares in companies operating in the DRC have fallen sharply since Friday as investors took fright on the leaked news.

"The review process has been damaged by this grossly misleading leak of information, but the DRC remains determined to manage the license review responsibly and to the benefit of all responsible companies," Kabwelulu said.

“It is expected that, after all irregularities have been corrected, the great majority of companies currently in the DRC will remain in the country for the long term. This has been and will remain the position of the government.”

Metorex, which has the Ruashi project in the DRC copperbelt, called the leaked report an "unauthorised breach of protocol", said CEO Charles Needham.

"The report of the Commission still requires discussion and amendment prior to presentation to the government and release by it," he said.

Other companies have said they would wait until the official report into their licences before commenting.

"The fact the report was leaked was bit of a surprise. The market hates uncertainty. It maximises the problem for the DRC," said Clive Newell, president of First Quantum.

The government launched the review process to ensure the contracts agreed during a six-year war, which ended in 2003, and a three-year transitional government period are above board.


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## bean

drillinto said:


> I repeat: stick to OZ !
> 
> :::::::::::::
> 
> one does have to be careful now as these countries can hold some companies to ransom
> Bolivia's Congress raises mining taxes on friday
> 
> http://www.reuters.com/article/marketsNews/idINN2316961620071124?


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## drillinto

January 14, 2008

Metal Price Forecasts – How Much Are They Worth? Part 2
By Our Man In Oz
www.minesite.com

This is the second of two comments on metal prices forecast by leading broking houses – the first was from London at the end of last week and this is from Our Man In Oz.. At the beginning of 2008 it seems timely to take a very close look from both ends of the world at these forecasts which run to 2015 and try to interpret the reasoning behind them as to so many investors they look wildly out of kilter with reality. This appears to be especially the case in Australia.
-------------------------------------------------------------------------

Europe. Now let me think, that used to be an important part of world, didn’t it? With apologies for the arrogance implicit in that question, it is valid to ask how the different hemispheres of the world see the future. And, nowhere is that more apparent than in the way the old world of Europe and the U.S., and the new world of Asia, see future demand for commodities – and future commodity prices. For Australia, stuck in the middle with its historic western-world connections, and an outlook which very much faces the eastern world, the choice of which side to back is rather simple because one half of the world (old) has gone negative, and the other half (new) remains positive.

Perhaps, the new BRIC world (Brazil, Russia, India and China) will slow down courtesy of the problems being caused by energy prices and what seems to be a systemic failure of the old-world banking system. But, that slowdown probably means growth in the east slips from its current break-neck 10 per cent to somewhere around 6-to-8 per cent. In the oil rich Middle East, and in energy-rich countries such as Australia with its coal, gas and uranium, there are few storm clouds on the horizon.

It is with that background in mind that last week’s long-term forecasts of metal prices from an anonymous London stockbroker looked, to an Australian, as unbelievably out of touch. Given that the courageous chaps peering eight years into the future have stuck their necks out a long way then any mistake can be forgiven. But, to see copper slipping back to around US$3,500 a tonne (US$1.75 per pound), nickel dropping to US$14,500 a tonne (US$7.25 a pound), and zinc falling to US$1,500 a tonne (US75 cents) is to have a exceptionally gloomy view of the world that could only have been compiled in the grey, wet, and miserable weather that is London in winter.

From Australia, admittedly without anyone having the balls to publish price forecasts eight years into the future, it seems that London might actually be on a different planet. Down this way we’re looking at Goldman Sachs forecasts of copper at US$3.63 a pound for the next few years, roughly double the London view. Nickel is forecast to hold US$12.50 and zinc US$1.15. Other tipsters in the new world agree. Citigroup has copper at US$3 for several years to come, and nickel settling between US$11 and $US13 a pound. UBS has copper at US$3.25 a pound, easing to US$3, and zinc at US$1.50 a pound, easing to US$1.15.

If there is an explanation as to how the eight-year forecaster in London tended to take such a gloomy view it is the old problem of someone reverting to the use of long-term trends. For an economist this is a perfectly normal thing to do because the only way they know how to look forward is by looking back and saying “that’s what happened over the past 50 years, therefore it will do the same over the next 50”. Wow! Is that a blinkered view of the world which fails completely to accommodate the demands of two billion Chinese and Indians who want (demand?) a better (metal rich) lifestyle.

And, if the demand side of the equation isn’t sufficiently persuasive there’s the supply side where it remains perfectly valid to ask (a) where is the next generation of mines, and (b) where is the infrastructure to get mined products to market given the chronic worldwide shortage of shipping and rail capacity – and that’s before we get to the question of political instability in some producing countries.

Europe remains a wonderful theme park for a holiday. It is not the place to look for growth, the future, or the place which accurately measures the pulse of the modern world.


----------



## drillinto

Must read => International Survey of Mining Companies 2007/2008

http://www.fraserinstitute.org/Commerce.Web/product_files/SurveyofMiningCompanies20072008.pdf


----------



## sam76

bubbles bursting everywhere

ANALYSTS warn that speculative bubbles may be forming in commodity markets as global investors increasingly seek safe havens from uncertain stock markets and a weak US dollar, pushing gold and oil prices to record highs, and buoying base metal prices. 

Commodity prices surged again yesterday with oil approaching $US105 a barrel, buoyed by declining US inventories and the OPEC oil cartel refusing to raise production. Military tensions between oil-rich Venezuela and neighbours Ecuador and Colombia provided further price support. 
Gold hit a record high at $US991.80/oz on Wednesday and late yesterday remained at over $US986/oz. 

Metals prices were also strong, with copper and aluminium prices approaching record highs as investors increasingly bet that Chinese demand will continue to grow strongly despite a slowdown in the US and Europe - what economists call the  "de-coupling'' of Asian growth economies from downturns in developed economies. 

Copper, aluminium and nickel prices are up about 30 per cent so far this year. 

But with investors wary of equity and property markets in the wake of the global credit crunch, there are concerns that liquidity boosted by US interest rate cuts could be creating speculative bubbles in commodities. 

Metal prices prices have been buoyed by power shortages in China that are expected to ease, and there are concerns that a fall in copper stocks on the London Metal Exchange may be partly contrived as some stocks are held off market. 

"We have been pretty optimistic about China and we expect the decoupling will prove to be the right way to call the current situation but (given the US rate cuts) you tend to worry a bit about the next bubble and there could be some speculative activity here,'' Westpac's global head of economics Bill Evans told The Australian. 

Two weeks ago, the founder of Platinum Asset Management Kerr Neilson told The Australian that mineral prices were ``simply far too high''. 

"Take iron ore, for example, which has been ramped to ridiculous price levels. The clowns are taking over and there will be an awakening one day,'' he said. 

National Australia Bank's minerals and energy economist Gerard Burg said investment money had become a significant part of commodity markets in recent years, and that speculative money is now quick to buy into any tightness in metal markets. 

But he said the demand fundamentals remain intact on the back of Chinese growth. And he believes last month's 65-71 per cent iron ore price settlement is encouraging optimism on China. 
Mining giants BHP Billiton and Rio Tinto both this week reiterated their faith in a strong outlook for Chinese metal and mineral demand. 

"We expect continuing double-digit GDP growth in China in 2008 and metals demand to continue to rise at a rate well above GDP growth,'' Rio chief executive Tom Albanese told a mining conference in Canada. 

Speaking in Melbourne on Wednesday, BHP chairman Don Argus was similarly upbeat. 

"China metal demand is growing and there is no evidence at this stage that this demand is abating,'' Mr Argus said.


----------



## mattyhill

Thanks for the info guys, makes for interesting reading!


----------



## MRC & Co

Sam, doesnt the first half of your post contradict the second half?  Vice-versa.

Definately specuation building in commodities as people look for a safe haven.  

Money is pouring out of real estate, stockmarkets, cash no doubt, where is it going?  Commodities for now, until this "bubble" bursts.  But then where?  

Interesting.


----------



## drillinto

Jim Rogers: 'Abolish the Fed'

INTEREST RATES, FED, BEN BERNANKE, JIM ROGERS, FEDERAL RESERVE, WEAK DOLLAR, INFLATION

By CNBC.com | USA | 12 Mar 2008 |  

Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday. 


Asked what he would do if he were in Bernanke's shoes, Rogers, who slammed the Fed for pouring liquidity in the system and accepting mortgage-backed securities as guarantees, said: "I would abolish the Federal Reserve and I would resign."

If this happened, "we don't have anybody printing money, we don't have inflation in the land, we don't have a collapsing U.S. dollar," he told "Squawk Box Europe."

The Federal Reserve announced on Wednesday a rescue package that it would put around $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.

Wall Street responded to the news with the biggest rally of the year, but Rogers reminisced of the 1970s, when the Fed printed money to avert a recession, boosting inflation and then forcing interest rates to more than 20 percent to keep a lid on price rises. 


"No country in the world has ever succeeded by debasing its currency," he said. "That's what this man is trying to do. He's trying to debase the currency as a way to revive America. It has never worked in the long term or the medium term." 

'Socialism for the Rich'

The Fed's move to accept risky collateral is not part of the central bank's business, he added.

"What is Bernanke going to do? Get in his helicopter and fly around the world and collect rents? That's absurd," Rogers said.


A recession may be a good way to clean up the economy, while trying to prevent one may cost more and actually worsen the recession, Rogers said. Also, investment banks should be allowed to fail.

"Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes -- if you bail out every investment bank that gets in trouble, that's not capitalism, that's socialism for the rich," he said.

The weakest financial institution is Fannie Mae, in Rogers' opinion, "but all of them have problems."


He said he had a short position on all investment banks and is buying agricultural commodities such as cotton, wheat, coffee and sugar and was also buying the Chinese yuan and the Japanese yen. 

"Buy agriculture. Agriculture is one of the few places where you're going to make a fortune in the next years," Rogers said.


----------



## ithatheekret

Is tin signalling the start of the next wave for commodities ?

Indonesia and Thailand etc. canneries starting to pump out the products again ...........


----------



## drillinto

M & A activity in the mining sector (2007)

*****************

March 18, 2008
www.minesite.com

Eat Or Be Eaten In The Mining Sector As M&A Activity Reaches New Records

‘Eat or be eaten’ is the new reality for companies in the global mining industry as mergers and acquisitions (M&A) levels reach unprecedented levels and a new era of super-consolidation begins. That is the key finding of ‘Mining Deals’, a report from PricewaterhouseCoopers reviewing deal-making in the sector. It shows a huge surge in mining company M&A.

Among the salient statistics that the report points to, a few stand out. The volume of mining deals rose 69 per cent from the 2006 level to 1,732 in 2007. Total transaction value was US$158.9bn, up by 18 per cent on the previous year, and the strong upward trend covered mining companies of all sizes. Over 90 per cent of all deals involved transactions of US$250 million or less and the number of such deals doubled in just two years from 2005 to 2007. At the other end of the scale, the number of US$1 billion-plus deals trebled, from eight in 2005 to 25 in 2007. What’s more, Chinese and Russian companies have made their mark with a number of key foreign acquisitions in North America and Australia. The total value of mining deals conducted by entities from these two countries rose six-fold, from just US$5.3 billion in 2005 to US$32.7 billion in 2007, accounting for a fifth of total mining deal value worldwide.

This year looks set to see mining deals reach astronomical record levels as super-consolidation takes place in the market. Early in 2008, BHP Billiton announced a takeover offer for Rio Tinto, and with a potential deal value over the US$150 billion mark it would shatter all previous records if it went through. The previous highest single deal value was Rio Tinto’s 2007 US$43 billion purchase of Alcon. That the era of super-consolidation is upon us is further highlighted by rumours of a Vale bid for Xstrata in a deal that could be worth US$90 billion.

And there’s little evidence of a slowdown in deal activity as a result of the credit crunch. Indeed the number of mining deals announced in the fourth quarter of 2007 was more than double the level recorded in the corresponding quarter of 2006, while the latest heavyweight moves by the biggest players has got 2008 mining deal-making off to an unprecedented start.

Commenting, Tim Goldsmith, global mining leader, PricewaterhouseCoopers, said: “No company can stand aside in this ‘eat or be eaten’ environment. Everybody needs to be both on the front foot as well as looking over their shoulders. The very biggest companies are positioning themselves to achieve super-consolidated global scale. They face considerable competition from fast-growing companies emerging from India, Russia and China. The industry landscape is set to change dramatically”.

Underpinning this trend is the quest for world scale, resource acquisition, and resource diversification. High commodity prices and optimism about the industry’s long-term prospects for growth and profitability, in the context of new and sustained demand from Asia outstripping fluctuations in western demand, means that companies are embarking on ambitious long-term growth strategies. Looking ahead, economic slowdown in the US, continuing financial market uncertainty, and fears of actual recession will inevitably cast a cloud of uncertainty over the immediate future. However, while these factors tending to instability are likely to deliver a bumpier deal-making ride, the fundamentals for mergers and acquisitions activity in mining remain strong. Indeed, 2008 looks set to be a landmark - if not a record - deal year for the industry.

PricewaterhouseCoopers’ report goes on to focus on some of the deals already done in each of the key mining regions. In North America, says the consultant, deal-making by North American mining companies continued at a very high level in 2007, even without a repeat of the clutch of mega-mergers that characterised 2006. Canadian companies, in particular, proved attractive to foreign buyers drawn to the advantages of investing in a politically stable environment. Alongside this, there was considerable consolidation as mid-cap North American mining companies took the opportunity to scale up with a number of mutually strategic fits with counterpart companies.

In the Asia Pacific region, including Australia, deals for Asia Pacific mining assets surged in 2007. Deal numbers were up by 72 per cent from 368 in 2006 to 634 in 2007. Total deal value rose 216 per cent from US$11.2 billion to US$35.3billion. There was also a significant increase in the number of big deals. In 2007, there were seven US$1 billion-plus deals for Asia Pacific mining assets and a further eight US$0.5 billion-plus deals. In contrast, in 2006, there were just two deals above US$1 billion and no others above US$0.5 billion. Intense competition for Australian mining assets lay behind much of the deal growth, with foreign buyers attracted by the politically stable environment and the potential to fill their resource pipelines. 

There was also a big increase in deals for diversified assets in the Russian Federation, and that, combined with a step change in international expansion by Russian companies, put Russia firmly on the mining M&A world map in 2007. Total deal value for Russian Federation assets was up 16 per cent to US$19.1 billion in 2007 and Russian buying activity rose 66 per cent to account for US$26 billion of assets, up from US$15.7 billion in 2006. It was the size of the biggest deals rather than the extent of deal activity that pushed up the totals. Two deals topped the list of purchases of Russian mining assets: Rusal’s US$13.3 billion acquisition of a 25 per cent stake in Norilsk Nickel, and Mechel Steel’s winning US$2.3bn bid in the privatisation auction for stakes in Russian coal mining companies Yakutugol and Elgaugol. In addition, Russia’s Norilsk Nickel’s US$5.4 billion all cash purchase of Canadian nickel miner LionOre highlighted the importance of international expansion by Russian mining companies.

In Africa and South America there were also big increases in deal numbers for assets in both continents. The number of deals rose by 81 per cent from 52 in 2006 to 94 in 2007 in Africa, and by 51 per cent, from 115 to 174 in South America. Of the two regions, Africa accounted for the largest total deal value with US$13.5 billion worth of deals, up by 38 per cent from US$9.8 billion in 2006. South American total deal value rose slightly from US$8.6 billion in 2006 to US$8.7 billion in 2007.


----------



## Kauri

Gold prices have tumbled sharply on the back of the USD rebound, increasing the risk for a fresh wave of commodity selling mirroring the action that emerged on Monday when the CRB fell to a three week low. The Baltic Dry Index has now declined for six days and base metals are at risk of following the gold decline. Gold is now under $1000 at $978, well down from highs around $1025 yesterday. Gold/JPY is at a further risk of a sell-off after losses already seen yesterday. A gold/JPY sell-off will weigh on AUD/JPY and CAD/JPY as well.


----------



## rederob

Kauri said:


> Gold prices have tumbled sharply on the back of the USD rebound, increasing the risk for a fresh wave of commodity selling mirroring the action that emerged on Monday when the CRB fell to a three week low. The Baltic Dry Index has now declined for six days and base metals are at risk of following the gold decline. Gold is now under $1000 at $978, well down from highs around $1025 yesterday. Gold/JPY is at a further risk of a sell-off after losses already seen yesterday. A gold/JPY sell-off will weigh on AUD/JPY and CAD/JPY as well.



One week on and there is not much different from a few weeks before.
Actually, oil, gold and base metals are in a short-term rally.
If anything, it appears a lot of fund money is going "long" into commodities, including oil.
That doesn't mean their prices won't collapse at some point in the future.
But it does mean that the forward price curves are still climbing, so the next big rally in commodity prices will launch from a substantially higher base than analysts though possible a year ago; when they were forecasting the market to unravel.


----------



## ithatheekret

I think I can agree with Red here , we've had the pullback , although I don't believe the lull is quite over yet . I think tin is semaphoring stage II , I also heard a rumour that there's a contract out there in Asia for rations and field packs production .

The barney with RIO / BHP and the Chinese steelmakers doesn't look to be driven by the Collective , it looks more like wage inflation and production costs , eating into already tight margins . Haven't kept up with the stoush , been flat out on other obligations and a good bout of home handy wrecking ..........


----------



## drillinto

Commodity Bull Market Alive and Well

Strong fundamentals to drive prices higher.  

Sally Limantour / www.minyanville.com / Mar 26, 2008 


As most of you know, commodities went through an overdue correction last week. This shouldn’t have been a big deal. 

Here’s the problem. As a result of that correction, some folks are making assumptions that don’t make sense. In fact, some of these assumptions are downright dangerous. 

For example, the media and others are giving Federal Reserve Chairman Bernanke credit for “putting an end to commodity inflation” with his brilliant strategies. On March 21st, Bloomberg stated that “the biggest commodity collapse in at least five decades may signal Federal reserve Chairman Ben Bernanke has revived confidence in financial firms.” 

Or how about this: Ron Goodis, a trader with the Equidex Brokerage group, tells us “Bernanke took care of the commodity bubble.” 

This is faulty thinking. To imagine that Bernanke deserves credit as the commodity dragon slayer, even as he lowers interest rates and continues to stoke inflation, is mind-boggling. 

Sources of the Sell-off 

So what exactly caused the vicious sell-off in commodities? When all was said and done, by last Thursday’s close, gold had its biggest weekly loss since August 1990. Oil had plunged almost $10 over three days. The corn market was off by 9%. 

There were a number of things that contributed to the sell-off. First, the commodity markets had gotten ahead of themselves, and were in a classic “overbought” situation. 

Second, derivative trading losses and shrinking credit lines forced hedge funds to liquidate their winning trades -- many of those trades in commodities -- in order to free up capital. 

There was also fear the Commodity Futures Trading Commission, or CFTC, was on the verge of raising margin requirements for commodity positions. This happened at the end of the last big commodity bull market, when the Hunt brothers were forced to liquidate their silver positions. (I was on the trading floor at the time - it wasn’t pretty.) 

Furthermore, the dollar was oversold and ready for a bounce. All these factors combined to create a swift break, which has now taken many commodities back to more attractive buying levels. 

Facing the Facts 

To say the commodity bull market is over is just, well, a bunch of bull. Let’s take a look at the facts. 

Energy prices, precious metals, agriculture prices, and other commodities have been in a bull market trend since 2000. The UBS Bloomberg Constant Maturity Commodity Index has gained 20 percent every year since 2001. For 2008 the index is already up over 10%. 

The big picture has not changed. We still have central banks pumping money like mad into the global financial system. This is long-term inflationary. Helicopter Ben is not going away. Nor is his one-trick strategy to save the world - running a printing press. This is long-term bullish for gold and silver. 

In regard to agricultural commodities, the 2008 crops are not even in the ground. Demand issues are pressing and widespread. There are still record high rice prices in Asia. Egypt is in the midst of a serious “bread crisis” from lack of grain. An outbreak of “sharp eyespot disease,” or SED, now threatens 4.83 million hectares of wheat in major producing areas throughout China. Water is increasingly scarce.

In regard to energy, no major new finds have been tapped in recent memory, North American natural gas demand is set to out-pace supply over time, and the global supply-demand situation is still supportive of high oil prices. (That said, crude oil’s parabolic move from $85 has been enormous, and a trading range may be in order for crude.) 

Three Billion Strong 

In the macro picture, we still have the incredible growth stories of China, India, Brazil and Russia under way, not to mention many other fast-growing countries that get less attention in the headlines.

While there is talk of “recoupling” -- the tongue in cheek opposite of decoupling -- it's hard to argue with the fact that 5.6 billion people currently consume just one third of the world’s raw materials. That 5.6 billion grows more successful, and more hungry, every day. 

As my good friend Clyde Harrison said,“the industrial revolution involved 300 million people. The emerging nation revolution involves 3 billion.” 

When discussing the general supply-demand imbalance for commodities, I am referring to a very, very big trend. In fact, we now have two “megatrends” colliding. Thirty years of restrained and neglected natural resource supply are coming face-to-face with three billion people intent on discovering capitalism. Irresistible force meets immovable object? We haven’t seen anything yet. 

Reversing the Reversal 

Monday’s trading action in commodities saw a “reversal of the reversal,” with solid moves higher in many different areas. Today we are seeing follow through on the upside. Soybeans have tacked on $1.00 per bushel since the Thursday’s lows and are limit up today. Wheat is up over 10% and corn has rallied 8%. The metals are recovering as well with gold, silver and copper all gaining between 3-5%. 

The commodity bull market is alive and well. Last week’s correction let some much needed air out of the balloon, that’s all. 

It would be healthy at this point to see some consolidation, but we might not get it. Already it looks like commodities could be off to the races once again.


----------



## reece55

Interesting article from JP Morgan in the Australian today...

"The bank's Australian analysts told clients on Wednesday that investors should be underweight in mining stocks and that the sector's perceived safe-haven status, particularly for commodities and commodity equities, looked shaky.

The resources sector had powered the bourse during the record bull run, which lasted almost five years and provided outstanding returns for investors, chiefly because of insatiable demand for Australian minerals by the emerging market economies of China and India.

The entry of speculators in commodities markets and the falling $US recently led to new highs for many commodities, including gold.

However, JPMorgan now argues that the strength of the resources sector has "pushed valuations to the limit". 

Full article here.

Cheers


----------



## rederob

reece55 said:


> Interesting article from JP Morgan in the Australian today...
> 
> "The bank's Australian analysts told clients on Wednesday that investors should be underweight in mining stocks and that the sector's perceived safe-haven status, particularly for commodities and commodity equities, looked shaky.
> 
> The resources sector had powered the bourse during the record bull run, which lasted almost five years and provided outstanding returns for investors, chiefly because of insatiable demand for Australian minerals by the emerging market economies of China and India.
> 
> The entry of speculators in commodities markets and the falling $US recently led to new highs for many commodities, including gold.
> 
> However, JPMorgan now argues that the strength of the resources sector has "pushed valuations to the limit".
> 
> Full article here.
> 
> Cheers



It's a very interesting analysis!
Overweight into energy.... ie oil, gas, coal etc - commodities.
While it's true the stronger AUD will take some gloss off profits, the other reality is that commodity (esp. base metal) prices are relatively firm; several having already suffered the greater share of their setbacks (eg zinc and nickel).
The weakness of the analysis is that it ignores the fact that many mining equities were already trading to low pe multiples, so while these companies remain "profitable", their further downside risk is mitigated.
The only fly in the bull's eye is if global industrial production declines significantly more than it has.  This will only occur if the US recession resembles more of a depression, going forward.
I believe we will know by October if the commodity bull needs putting to pasture.  For the time being its rutting nicely.


----------



## communique

Interesting to read back through this thread.

Nethertheless, without seeking advice does anyone have soft commodities in their portfolio.  If so, it it through managed fund or buying shares in affiliated companies i.e. suppliers of potash.  How do you buy corn wheat? Any good books to read on the subject?


----------



## Temjin

communique said:


> Interesting to read back through this thread.
> 
> Nethertheless, without seeking advice does anyone have soft commodities in their portfolio.  If so, it it through managed fund or buying shares in affiliated companies i.e. suppliers of potash.  How do you buy corn wheat? Any good books to read on the subject?




I am looking to add them to my portfolio.

You can buy either the futures or through Exchanged Traded Funds (ETF) or Commodites (ETC, same thing). 

www.etfsecurities.com are one, but beware of credit risks. Read other threads for more info. 

www.seekingalpha.com have more information on ETFs.


----------



## drillinto

Must-read China Reading: World Bank Quarterly

http://siteresources.worldbank.org/INTCHINA/Resources/Quarterly_December_2008.pdf


----------



## drillinto

Rupert Murdoch on India & China:

http://www.abc.net.au/rn/boyerlectures/stories/2008/2397948.htm#transcript


----------



## drillinto

http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10172


----------



## drillinto

January 05, 2009

Commodities Outlook For 2009: The Developing World Is Still In Growth Mode, Just

By Rob Davies
www.minesite.com

If we learnt one thing from 2008 it was that making forecasts is a mug’s game. Even the most bearish bears did not predict the mayhem that infected the financial markets in 2008 and clobbered the base metals in the process. On the basis that what catches you out is the thing you didn’t expect there are grounds for optimism in that no one is predicting a bull market in any asset class in 2009. It seems insolvency lawyers and pawnbrokers are the only people looking forward to a good year.
Yet this prevailing and all-pervading atmosphere of gloom, largely pedalled by the press who are among the hardest hit, is not entirely in accord with all the data. It is true that the OECD is forecasting that the economies of its member nations will collectively shrink by 0.4 per cent in 2009. But this economic cycle has never really been about growth in the developed world. It is the developing world that was the major story and, although now under stress, it still is. French bank SociÃ©tÃ© GÃ©nÃ©rale, in its year-end commodities review lays out its view of the economic environment, and still expects these emerging economies to grow in 2009. 

Slightly less bearish than the OECD about the developed world, with its forecast of a 0.3 per cent contraction, Soc Gen nevertheless expects the world economy in total to grow by 2.4 per cent. That difference of 2.7 per cent is accounted for by China and other usual suspects like India, although the bank’s forecast of a 10 per cent growth rate for China may be a little optimistic if the reports of 75 million tonnes of iron sitting on Chinese docksides are correct. But a world economy growing at a couple of percent actually isn’t that bad. More importantly for the metals business that growth, with it bias towards developing markets, will be more metal intensive than any activity in the west. Bridge builders use a lot more metal that marketing executives. 

Another encouraging number from the SociÃ©tÃ© GÃ©nÃ©rale forecasts is low interest rates everywhere. The range for central bank rates runs from 0.28 per cent in Japan to the highest at 1.63 per cent in the Euro Zone. Ten year bond yields go from 1.48 per cent in Japan to 3.7 per cent in the UK. So finance will be cheap, if you can get it, and that ought to favour large scale, long-term infrastructure projects that will need a lot of raw materials. Finally, the bank expects oil prices to be somewhat curtailed at the relatively modest level of US$57 a barrel, a price, which in the context of last year’s run on oil will help constrain operating costs.   

But while there a few rays of optimism around there is no doubt the macro environment has turned down very quickly, and that’s what’s damaging the demand side of the metals business. Indeed, things may get worse before they get better. However, on the other side of the equation was the supply side’s failure to deliver the additional new metal on time that played a large part in sustaining the boom. While some metals, like nickel, have reversed the supply-demand balance very quickly, other metals, like copper, are still suffering from tightness on the supply side. Add in the speed at which miners have cut back on production and the threat of massive oversupply does not appear to be quite such a problem. Each metal is different of course, and a quick gallop through each one, guided by forecasts from SociÃ©tÃ© GÃ©nÃ©rale and Royal Bank of Scotland, sets the scene for what to expect in 2009. 

Kicking off with aluminium, the biggest base metal by volume, and the industry should be congratulated for taking rapid action in reducing capacity so quickly. According to the French bank 3.7 million tonnes of capacity has been taken off-line already, of which 2.5 million tonnes is in China. This country has made the largest addition to capacity in recent years, fuelled by cheap power costs. Whether that will continue is crucial to the price outlook for the metal. What is known, though, is that this massive increase in supply was needed to cope with a huge increase in demand. SociÃ©tÃ© GÃ©nÃ©rale quotes metals market specialists CRU as saying that Chinese demand for aluminium rose a staggering 38 per cent in 2007. Growth of nine per cent in 2008 and a forecast of three per cent in 2009 look pretty mundane by comparison. RBS expects demand to grow by seven per cent to 42.65 million tonnes this year. That perhaps explains its forecast average price for the year of US$2,325 a tonne, against that of US$1,625 from Soc Gen. 

The story in copper is very different in that there have been virtually no voluntary cuts in production. That’s because the industry has been so poor at actually delivering what it is supposed to, bedevilled as it is by labour disputes, lower grades and technical problems that mean it produces around a million tonnes less than nameplate capacity. As a consequence Soc Gen estimates the oversupply in metal in 2008 was 170,000 tonnes.  With its massive reliance on the construction sector it is little surprise that the French bank estimates demand will fall by 1.2 per cent in 2009 and that this will lead to the oversupply doubling to 350,000 tonnes. Some may regard those figures as optimistic, although not RBS, which forecasts a 250,000 tonne surplus. Its forecast average price for 2009 of US$5,500 looks high compared to Soc Gen’s estimate of US$3,600 a tonne, but both could be on the high side if production keeps growing. 

Nickel is a tricky metal to forecast, because its end use in stainless steel is so volatile. In fact the spread between the US$13,775 a tonne forecast by RBS and the US$11,300 predicted by Soc Gen is relatively narrow. A key factor for nickel is whether stainless steel mills will reverse the changes they made to the production of ferritic steels. Having made the changes to deal with this it is easy to see why mills would stick with the changes made and, consequently, use less nickel. Add in the collapse in demand in end markets, and the forecast 2.2 per cent contraction in demand for 2009 by Soc Gen could be a rosy estimate. Miners, though, have wasted little time in reacting to this brutal price environment and have taken out 160,000 tonnes of production with a bias to higher cost ferronickel miners. 

Zinc has been in a bear market longer than the other metals and has reached the stage where the current price is well below the marginal cost of production. Despite the pressure on producers the French bank is predicting a 3.3 per cent increase in demand in 2009 to generate an average price of US$1,150 a tonne. In contrast RBS predicts an average price of US$1,550 a tonne even though it has a similar demand growth forecast. 

Lead ought to be the metal that comes out best from this financial crisis. A dramatic fall in new car sales will increase the average age of the car fleet and that ought to boost demand for replacement batteries. Supply will be tightened too as cars are run for longer and scrapping is delayed. As that source already provides 68 per cent of western refined consumption even a small change in scrapping activity could impact supply dramatically.  Soc Gen expects demand to rise 2.9 per cent in 2009 while RBS is more bullish at 3.5 per cent. That probably explains its forecast of US$1,675 a tonne against that of US$1,075 a tonne from Soc Gen.  

There is little doubt that 2009 will be a challenging year for many industries. On the basis of these predictions mining may actually be among the better sectors on a relative scale. Whether the forecasts here given will be any more accurate than the ones made a year ago is for others to judge, and for time to tell.


----------



## chops_a_must

Another very strong rally in commodities tonight.


----------



## GumbyLearner

chops_a_must said:


> Another very strong rally in commodities tonight.




I heard tonight that the parent company of Ssangyong Motor Company in S Korea just got a cash injection today from its Shanghai based parent. Basically I think North Asian Economies are happy to keep tightening loosened nuts and bolts to keep their respective car industries running. Funny that US Treasuries and commodities are both rising at the same time.


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## kransky

crb index has broken the down trend...

http://stockcharts.com/h-sc/ui?s=$CRB


----------



## drillinto

Byron Wien Announces Ten Surprises for 2009  

Posted on : 2009-01-05 | Author : CT-PEQUOT-CAPITAL 

 WESTPORT, Conn. - (Business Wire) Byron R. Wien, Chief Investment Strategist of Pequot Capital Management, Inc., today issued his list of Ten Surprises for 2009. Mr. Wien has issued his economic, financial market and political surprises annually since 1986. The 2009 list follows: 

1. The Standard and Poor’s 500 rises to 1200. In anticipation of a second-half recovery in the U.S. economy, the market improves from a base of investor despondency and hedge fund and mutual fund withdrawals. The mantra changes from “fortunes have been lost” to “fortunes can still be made.” Higher quality corporate bonds, leveraged loans and mortgages lead the way. 

2. Gold rises to $1,200 per ounce. Heavy buying by Middle Eastern investors and a worldwide disenchantment with paper currencies drive the price of precious metals higher. In a time of uncertainty, investors want something they can count on as real. 

3. The price of oil returns to $80 per barrel. Production disappointments and rising Asian demand create an unfavorable supply/demand balance. Other commodities also rise, some doubling from their 2008 lows. Natural gas goes to $9 per mcf. 

4. Low Treasury interest rates coupled with huge borrowing by the Treasury send the dollar into a serious downward slide. Overseas investors become concerned that the currency printing presses will never stop. The yen goes to 75 and the euro to 1.65. 

5. The ten-year U.S. Treasury yield climbs to 4%. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change. 

6. China’s growth exceeds 7% and its stock market revives. World leaders credit China’s authoritarian government for its thoughtful stimulus policies and effective execution during a challenging period. The Chinese consumer begins to spend more and save less and this shift is behind the unexpected strength in the economy. 

7. Falling tax revenues from the financial sector cause New York State to threaten bankruptcy and other states and municipalities follow. The Federal government is forced to step in and provide substantial assistance. The New York Post screams “When will the bailouts stop?” 

8. Housing starts reach bottom ahead of schedule in the fall, and house prices stabilize after dropping 15% from year-end 2008 levels. The Obama stimulus program proves effective and a slow growth recovery begins before year-end. Third and fourth quarter real gross domestic product numbers are positive. 

9. The savings rate in the United States fails to improve beyond 3%, as most economists expect. The concept of thrift seems to have vanished from American culture. Peak job insecurity and negative growth drive increased savings early in the year, but spending resumes as the economic growth turns positive in the second half, making Christmas 2009 the best ever. 

10. Citing concerns about Iraq’s fragile democratically elected government and the danger of a Taliban-controlled Afghanistan, Barack Obama slows his plan for troop withdrawal in the former and meaningfully increases U.S. military presence in the latter. In a hawkish speech he states that the threat of terrorism forces the United States to maintain a strong military force in this strategic area. 

Mr. Wien believes these surprises, which the consensus would assign only a one-in-three chance of happening, have at least a 50% probability of occurring at some point during the year. In previous years, more than half of the elements of the list have proven correct. 

Pequot Capital Management(USA) is a private investment firm.


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## drillinto

Investors anticipate an upturn in commodity prices.

http://online.barrons.com/article/SB123119632381155397.html


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## drillinto

Questionable timing for commodity index rebalancing ?

http://www.ritholtz.com/blog/2009/01/here-comes-the-commodity-index-rebalancing/


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## drillinto

Gold to gain through 2012

http://www.bloomberg.com/apps/news?pid=20601116&sid=aUq6leFyb1uY&refer=africa


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## drillinto

2008: Gold Production

http://www.economist.com/markets/indicators/displaystory.cfm?story_id=12991418


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## drillinto

Where next for oil and gold ?

http://jkaonline.typepad.com/jkaonl...-gold-the-speculative-bubble-map-updated.html


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## drillinto

January a happier month for commods
Reuters
30 Jan 2009

[www.miningmx.com] -- Commodity markets steadied on Friday, heading for their strongest performance since mid-2008 despite month-on-month falls in several markets, in the first signs of possible consolidation after last year's hefty losses.

London copper futures, up 4.4 percent so far in January, are heading for their first monthly rise since June 2008, while the Reuters/Jefferies CRB index, down 4.1 percent this month, is on course for its smallest fall since June.

Oil has fallen almost 7 percent in January, its most positive showing since August, while gold has scored around a 3 percent gain after rising 8 percent in December.

"The second half of last year saw some very weak performances across commodities. Prices came down so far and fast that it doesn't take a strong reason for market participants to look for a period of consolidation," Barclays Capital analyst Yingxi Yu said.


Click Here to subscribe to our daily newsletter"The duration of this consolidation period will vary from commodity to commodity. Precious metals and agricultural products will outperform base metals and energy in the first half," she said.

But Yu said that if the global economy bottomed out in the second half, industrial raw materials will follow it higher.

Investors are preoccupied with macro-economic data, more specifically, the release of advance U.S. fourth-quarter gross domestic product data due later in the day.

Thursday's dismal figures -- record U.S. jobless rates, an all-time low for sales of new U.S. single-family homes and a fifth monthly decline in durable manufactured goods orders all weighed on markets.

Ballooning inventories continue to worry investors.

Shrinking demand for fuel has contributed to the biggest four-month build-up in U.S. crude stockpiles since 1990, while stocks at London Metal Exchange copper jumped 22,750 tonnes, the biggest single-day rise since August 2004, to 477,675 tonnes.

By 0710 GMT, U.S. crude rose 15 cents a barrel at $41.59, off an intraday low of $41.31.

"The risk is still clearly on the downside. The economic data is going to confirm that things are still slowing down," said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.

"Oil's big Achilles heel is the U.S. market, and that's going to continue to weigh on prices."

LME copper for delivery in three months dropped $19 or 0.6 percent to $3,221 a tonne.

Worries about shrinking demand from China, the world's largest consumer of industrial metals, also weighed on prices.

The world's third-largest economy is expected to grow between 7 and 8 percent this year, the World Bank's chief economist said on Wednesday, compared with the 9 percent pace for 2008 which was the slowest in seven years.

Gold edged down as speculators booked profits after prices rallied more than 2 percent the previous day, but buying interest from investors remained strong, with ETF holdings hitting another record.

Spot bullion traded lower at $904.60 an ounce, down $2.15 from New York's notional close on Thursday. Gold is within sight of a three-month high of $915.30 hit on Monday.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said it held arecord 843.59 tonnes of gold as of Jan. 29, up 10.71 tonnes fromJan. 27, reflecting flight-to-quality buying amid chaos in the financial sector.

"The next target is of course $1,000," said Yukuji Sonoda, analyst at Daiichi Commodities, referring to a level last seen in March, when gold struck a record $1,030.80 on fund buying driven by fears of rising energy costs and uncertainties in the dollar's outlook.


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## drillinto

"We are still in a commodities bull market" - Barclays Capital

http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=78218&sn=Detail


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## drillinto

February 10, 2009

The Struggle For Control Of The World’s Commodities May Be Only Just Beginning

By Alastair Ford
www.minesite.com

So where are we at? On the day that the BBC reported UK cabinet minister Ed Balls as having said that we are in “the worst global recession, I’m sure, for a hundred years”, and on the day that Minesite reported some hopeful signs from the two early February African conferences – Livingstone and Indaba – one thing’s for sure, we are in a whole new world, and no one’s really sure what’s going to happen next. Money just isn’t what it used to be; and neither’s demand. Politicians may squabble and throw money around, but Gordon Brown’s Freudian slips - he’s “saved the world”, even if we are in a “depression” – speak louder than any of his official statements. If we’re to take Ed Balls at his word, though, and this is the worst recession for 100 years, is it worth,then, taking a look at what the world looked like in 1909? The answer is: up to a point.
1909 was a world unburdened by knowledge of Ponzi schemes, derivatives trading, or asset-backed securities. In science, 1909 was before stainless steel had been developed, before Rutherford split the atom, and before radio had gained any ground. It was, however, a world in which the great global power had just fought a nasty little local war against an enemy over which it had rather optimistically proclaimed victory a little too early. But if there’s any mileage in comparing Lord Roberts’ early declaration of victory over the Boers to George Bush’s early declaration of victory in Iraq it’s probably only in that it serves to illustrate that each successive Great Power is destined to repeat the mistakes of its predecessor. And the year itself did witness some significant moments, too. Drilling commenced on the world’s biggest oil gusher, the Lakeview gusher, Louis Bleriot flew across the channel, and BP, or Anglo-Persian as it was then called, listed on the stock market. In mining there was major tragedy at the Cherry coal mine in Illinois, in which 259 miners, not all of them full-grown men, lost their lives. Then, as now, such disasters were sadly, still commonplace, although these days it’s China that suffers the heavy death toll each year. 

So 100 years ago, plenty was different, but plenty was still the same. So far, so trite. What’s far more illuminating are the reasons why the world order that then prevailed no longer prevails today. Here we get far closer to the bone. Back in the dying days of the Edwardian era the world was split into imperial zones of influence. This mainly involved the European powers, but the US was a late arrival and active participant in the party, having recently expanded its own empire through the acquisitions of the Philippines, Guam, Puerto Rico and Hawaii. “We are stretching out our hands for what nature meant should be ours. We are taking our proper rank among the nations of the world... along with these markets will go our beneficent institutions, and humanity will bless us”. So said Charles Denby, a former US Minister to China, on the conclusion of his report to a commission of enquiry into the USA’s acquisition of the Philippines in 1898. In Britain, Kipling and Kitchener would surely have applauded. So how would it be if the Chinese or the Indians or the Pakistanis came up with such a phrase now to justify some such similar aggression? The answer, surely, is that no-one would like it, but plenty of people would understand it, and would also understand at least in a vague sense, the provenance. 

Back in the early part of the 20th Century there just weren’t enough markets or commodities to go around to support the industrialization of all the Western countries. So these countries inevitably fought over them in a long, drawn-out process that historian Niall Fergusson has recently sought to buttonhole into the unwieldy phrase: “Wars of the world”. It’s a repeat of this series of 20th century conflicts that politicians fear when they argue against the evils of protectionism - it was the clashing of the protectionist economic blocks over markets and commodities that brought forth twentieth century conflict in its nastiest form. This fear is especially pronounced in Europe, a continent which bore a heavy brunt of these conflicts. Whether the Europeans are right to be so worried remains open to debate: perhaps it will be different this time round? All that we really know is that some things don’t change: if there’s not enough to go round, people will fight for their share, and, what’s more, it’s always advisable not to declare victory too early. 

So when president Obama talks protectionism, Europeans get jumpy. Back in the day, in the late 1940s, the fractured protectionist world was finally welded back together by total American victory over the Germans, the Italians and the Japanese. The new order had as its pillars the gold standard, the World Bank, and the UN. The Germans had helpfully bumped the French off the playing field in 1940, and the Americans had taken over the British markets as the price for US destroyers and other aid offered at around about the same time. Game on for more than half a century of growing prosperity. Even the collapse of the gold standard as the US sought to finance the Vietnam war didn’t unsettle things too much. Decades after Rutherford had spit the atom, we were now in the world of Einstein’s relativity. Value it seemed, was relative too. No need for the absolutes of the gold standard. But times sure change: it might well be that we are already half way back to an unofficial gold standard even now. 

Because that brave new world, a good world, one that lasted 60 years or more, and may yet survive, is nevertheless reeling from a severe and possibly fatal blow, one that was inflicted, paradoxically, by a group of people that benefitted more from the system in material terms than any other social group – its bankers. If it does start to disintegrate, one of the signs to look out for will be the increasing politicization of commodities and commodities-related issues. In the 1930s, in the shadow of war, the powers all jostled for position in commodities. Nowhere was this tendency clearer than in the Far East – where the Japanese wanted oil from the Dutch East Indies, now Indonesia, and also tin and coal. From Malaya, meanwhile, they wanted rubber, from China, raw materials in general and industrial capacity. And from the Philippines, that chain of islands that “nature meant” to be American, they wanted the nickel, iron ore, and other mineral resources, as well as the plantations, and the opportunity to defeat the Americans. They got them all. And they took them by force because no one would trade with them on terms that they thought were fair. If that’s not a warning from history for the world to heed, then we might as well all pack up and head for the hills.


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## drillinto

Commodity Price Volatility and World Market Integration since 1700

http://papers.nber.org/papers/w14748


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## explod

Thanks for posting that drillinto.    The bigger picture gives the greater view.

cheers explod


............................................................................


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## kransky

so much for higher highs and higher lows.. looks to be heading down some more??


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## drillinto

February 25, 2009

Analysts Take A Reasonably Optimistic View On The Outlook For Gold This Year, Although There Are A Few Exceptions

By Charles Wyatt
Source: www.minesite.com/aus.html [Registration is free]

It’s always good fun to take a look at the forecasts precious metals analysts have previously put out for the prices of gold, silver, platinum and palladium. Fun, too, to take a look at how they think things will shape up in the current year. Gold evokes most interest from investors, so we'll stick to the yellow metal, and start with the winners. As far as 2008 went, the first prize in gold goes to Frederic Pannizzutti of MKS Finance SA, who was right on the button with his forecast of US$872 per ounce. This indeed was the average for 2008 after gold hit a high of US$1,011.25 per ounce on 17th March. And it’s interesting to record that just seven months earlier the Lex column on the Financial Times had published a piece – Stolid Gold - which had slammed the idea of investing in gold when it was only at US$660 per ounce. And it is even more interesting to record that the writer of said piece is now US Lex Editor. Funny way to get a promotion, but then Ed Balls, now a minister in Gordon Brown’s government, was previously an FT writer and it is said that he was the one who persuaded Brown to sell all our gold.
But back to the forecasts... Frederic was only inches ahead of Rhona O’Connell of GFMS at the finishing line. Sadly, though, Rhona is not making a forecast this year. Last year she made it under the name of her own consultancy, but this year the head honchoes of the London Bullion Market Association deemed it invalid for two analysts from the same organisation to participate in the forecasts. She therefore left it to Philip Klapwijk, also of GFMS and who, it has to be said, was just about neck-and-neck with her last year with his forecast of an average gold price of US$870 per ounce. Others who came close were Jeff Christian of CPM Group New York, Martin Mureenbeeld of Dundee Economics, Bob Tokai of Sumitomo Corporation, Matthew Turner of Virtual Metals and Bhargava Vaidya of BN Vaidya & Associates of Mumbai. 

Where there are winners there have to be losers, and the most ambitious was Rene Hochreiter of Allan Hochreiter Ltd in Jo’burg who forecast an average gold price for 2008 of US$1,050 per ounce. Ross Norman of Bulliondesk wasn’t far behind him with US$975 per ounce and at this point it’s probably worth recording that out of the 28 analysts who took part eight were ahead of the game and the rest, bar Frederic, behind. If anyone wants to read into this that the majority of analysts tend to be pessimists that is fine, but they should bear in mind that those working for certain US banks may have received some ‘guidance’ when these forecasts were made. Goldman Sachs, for instance, went short of gold at US$810 per ounce only a few months before it hit its high in March 2008. One cannot expect any analysts there to have been very optimistic when forecasting, but their figures cannot be traced, as no one from Goldman Sachs takes part in the LBMA competition. 

On then to the forecasts for this year and it is probably best to take a look first at the high points these wise men expect gold to reach. Ross Norman takes the honours here with a high of US$1,275 per ounce. He’s followed closely by Philip Klapwijk with US$1,260. There’s a dead heat for third between Jeffrey Christian and Trevor Turnbull of Scotia Capital in Toronto. Frederic Panizzutti, as last year’s winner, should be given a mention for his forecast of US$1,180 per ounce. As some of these names come up with astonishing regularity it should be of use to investors to understand the thinking behind these forecasts. Philip says the outlook for gold has been transformed due to the official policy response to the global crisis. He sees the reckless expansion of US Government spending, the ballooning of its budget deficit, and the huge expansion in the Federal Reserve’s balance sheet and in the money supply, all leading to a weaker dollar and an increasing demand for gold from investors. Jeffrey Christian has roughly the same argument, but points out that physical supplies of gold remain tight so the impact on price could be even more significant. 

At the other end of the scale comes poor old Rene Hochreiter who reckons that the high point for gold this year will be US$750 per ounce - so he is well wrong already, and may be wishing for a second chance. His reasoning is that deflation and a strong US dollar are likely to put pressure on the price. He goes on to say that the performance of gold in 2008 was a massive disappointment during the liquidity crisis and sentiment towards the metal is likely to remain poor. It looks slightly as if Rene lives in a parallel universe so we will embarrass him no more. Instead a look at the forecasts of John Reade of UBS should be rewarding as he has long been a leading figure in London from back when he was with Warburg. He forecasts that gold will average only US$700 per ounce this year, the first decline in the average price since 2001. His thinking is that gold will be hit by a stronger dollar, deflationary risks in developed markets, lower jewellery demand, and a decline in producer de-hedging. 

There you have it. Markets are made up of buyers and sellers, and here one has examples of both. Just for the record no one thinks gold will average US$1,000 or over this year, though Ross Norman comes close with US$988 per ounce. At the other end of the scale John Reade thinks it could go as low as US$600 per ounce, as does our friend Rene. Overall the forecasters expected gold to be the only precious metal to finish with a higher 2009 average, at f US$881 per ounce, and 75 per cent of them expect gold to hit record highs, again with an average of US$1,074 per ounce. It is therefore not surprising that the trading range for gold is expected to widen further, as investors take profits whenever there is a forward surge. Wonder what the Financial Times will have to say about these forecasts? Probably nothing at all as it still regards gold as a barbarous relic, and refuses to appreciate the role it plays as a currency hedge in any well managed portfolio.


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## CFDTrading

*Crude Gains On Supply Expectations, Gold and Silver Continue to Stall*

*Oil and Gold Fundamental Outlook*

Tuesday, 03 March 2009 22:11:15 GMT
Written by Stefan Tifigiu, CFDTrading Research

Despite deepening negative sentiment, Crude Oil prices gained today on expectations of supply reductions. Gold prices continued their downward trend today despite continually negative outlook for the global economy. While the economic outlook remains downbeat, several forces may be contributing to gold’s sell-off.

*Commodities - Energy*

*Oil Gains on Production Cut Expectations*

*Crude Oil (WTI)                     $41.20                 +1.050              +2.57%*
Despite deepening negative sentiment, Crude Oil prices gained today on expectations of supply reductions. Several OPEC members stepped up hawkish supply-cut rhetoric in the face of sharp price declines. It seems that demand and supply forces will be battling it out in deciding the price of crude for the coming sessions. The question is: which of the two will have more influence? On the one hand, demand destruction continues to exert strong downward pressure on crude prices. If recent bearish releases are any indication, the world economy will likely remain stagnant or continue to contract for some time. Barring any unexpected reversal in global economic trends, demand destruction will maintain a strong influence on prices. On the other hand, cuts from a number of suppliers can help prop up crude prices at their current levels. OPEC and major corporations such as Royal Dutch Shell plan on reducing production in response to falling prices. How much these reductions will lower supply is questionable given several of the OPEC members’ budgetary constraints. Some members have already expressed concerns over other nations failing to fully comply with reductions. That being said, if tommorow’s DOE figures indicate a steeper reduction in supplies, this will provide support for current prices. Otherwise, crude prices will likely fall again.







*Commodities - Metals*
*
Equities Reach Attractive Levels, Speculative Funds May Be Moving*

*Gold                                       $915.275                -$10.075            -1.13%*
Gold prices continued their downward trend today despite continually negative outlook for the global economy. While the economic outlook remains downbeat, several forces may be contributing to gold’s selloff. Some value-investors consider currentprices of equities to be exceptional bargains at current levels as many securities have fallen to decade lows. In response to this, some speculative funds may have begun to transfer from safe-havens toward equities, however equities markets are not particularly indicative of this. Most of the price action may be more readily attributed to traders deleveraging positionsby selling off on profits acquired through the safe-haven. Negative market sentiment continues to remain a major influence on the markets, however resistance was demonstrated as even extremely bearish comments by Fed Chairman Ben Bernanke could not spark up the metal’s demand. Given the outflows by speculative funds and competition from other safe-havens such as government bonds and the US Dollar, Gold prices may stall for the short-term. Favorable conditions for a mid-term to long-term rally however are in place but until short-term pressures subside, gold will likely trade flat.

*Silver                                     $12.800                   -$0.140             -1.08%*
Negative market sentiment continues to remain a major force in the markets, but so long as Gold experiences downward pressure, Silver will likely follow suit. Long-term the environment remains favorable for a future rally. Silver has historically lagged behind Gold’s gains and when demand begins to pick up again will likely grow at a very quick rate.


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## metric

war commodities are worth a look....copper is one obvious candidate.


.


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## quinn123

metric said:


> war commodities are worth a look....copper is one obvious candidate.
> 
> 
> .




Why?


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## metric

quinn123 said:


> Why?





brass. and copper has other aplications.


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## drillinto

April 14, 2009

Noble Group’s Richard Elman, Last Of The Hong Kong Taipans, Casts A Watchful Eye Down From His Eyrie Above The Harbour

By Our Man in Oz >> www.minesite.com

China has returned, which is an odd thing to say since it never actually went away. What it means is that the business of selling minerals and metals, food and fibre to the world’s most important “factory” is returning to normal, or at least to a condition significantly improved on the disaster which was the second half of 2008. Nowhere is it easier to sense a recovering “China trade” than in Hong Kong, and no-one is better placed to talk about it than the last of the great British “taipans”, Richard Elman, founder and still the hands-on boss of the supply-chain management specialist, Noble Group. From his eyrie overlooking one of the world’s great harbours, Elman sees and hears everything, which is why Minesite’s Man in Oz popped up for a session at the feet of the great man, leaving after a stimulating hour which confirmed his belief that recovery is underway.

A conversation with Elman can be a prickly affair. He is very much the boss, and this latest encounter was no exception. It started with a firm refusal to discuss Noble Group’s latest quarterly performance. “We don’t judge our business in 12-week chunks”, he said disdainfully. Fair enough, but there’s no denying that Noble Group had did well last year, in the face of daunting conditions. The calendar 2008 year produced stellar numbers. While other businesses were suffering, Noble lifted its annual turnover to a record US$36 billion, and net profit to a record US$577 million. Profit will probably be less in 2009, though all Elman will acknowledge is that he is confident of achieving his long-term target of a 20 per cent return on equity, a remarkably strong performance in difficult times, which illustrates the point that China, and other customers, are still buying the coal, oil, iron ore, manganese, soy and wheat that’s traded by Noble. 

With the topic of financial forecasts falling into the teeth-extracting category Minesite’s Man switched to something easier: is the worst of the crash behind us? “I am more optimistic than a few months ago”, Elman said. “The good news is that the panic is out of the way. Around Christmas there was panic in the market and no-one seemed to know what was going on. I’m not sure we really know today, but I sure feel less stressed about it.” 

China, Elman said was “quite committed” to doing whatever is necessary to stimulate its economy. “It is one of the few countries in the world that can actually get something substantial done,” he said. “Not everything is 100 per cent, but we have to assume that China will achieve an 80 to 90 per cent hit rate. For the time being things are okay. China will pour money at the issues and keep its industries going because there is a bigger problem than an economic downturn, and that is the social question which is pre-eminent in any discussions.” 

The biggest challenge in China today is the reversal of its export-focused economy, something that is being achieved with basic industries such as steel-making switching production runs from steels used to make exported products to heavy-duty construction steels for girders, and other “long” products. Whether that is being done legitimately remains to be seen, with US steelmakers complaining bitterly that China is dumping steel to shift its stockpiles and win market share unfairly. “For the last 10 to 20 years China has been export focused, which is all well and good, but you have to find someone to import,” Elman said. “That means there is a much greater reliance today on domestic consumption, and that’s something we’re watching very closely.” 

Elman is cautious about China’s future growth rates, almost as careful as he is in talking about Noble Group’s financial results. In late 2007, before the wheels fell off the world, Elman told Minesite that he doubted whether it would matter much if China’s double-digit growth contracted back to between six and eight per cent – a rate it appears to have achieved. “I’m still quite happy at the six to eight target, but I get worried if it falls below five per cent,” he said. “My senses tell me that five per cent is a threshold that we do not want to fall below.” 

On the outlook for his home-town of Hong Kong, Elman is equally optimistic, in a cautious sort of way. He acknowledges the decline in sales of luxury goods, and the pressure being felt in the financial and property markets. “The mood of Hong Kong is back to a reading of about 70 per cent,” he said. “At the depths of the crisis it was below 50 per cent.” Elman then reminisces about the changing fortunes of Hong Kong. “Years ago we used to feel very rich in Hong Kong, and everything was affordable, and we wondered why everyone didn’t come and live in Hong Kong”, he said. “And then for the last three-or-four years, when we travelled to London, everything seemed so expensive and we sort of became the paupers. The wealth was coming from somewhere else. Suddenly, we didn’t feel as important any more. We couldn’t push our way around in queues in shops. But now it’s coming back. Now, we feel quite important again.” 

Elman’s “feeling good in Hong Kong” mood is relative, and perhaps a reflection that the mood in London, and elsewhere is awful. But, for investors there is a message in the strength he is feeling in Hong Kong’s pulse, a strength derived directly from its proximity to the world’s great commodity sink, China. It leads naturally to a final question from Minesite: Where will the opportunities come from for investors as China spends big on its internal economic stimulus? 

“I think it’s more of the same,” he said. “China needs raw materials, and it needs lots of them. All of the world’s major toilet makers manufacture in China, which means there’s a market for the raw materials which go into making a toilet.” Is that his way of saying that commodities are a good investment category for the future? “Well, we think so. I don’t mean to be rude, but it’s a silly question for someone who’s spent that last 50 years in supply-chain management.” Minesite duly apologises for asking a silly question but digs the hole a little deeper by persevering and asking (tongue in cheek) whether Elman might have made a terrible mistake by being in commodities for the past 50 years? 

For the first time, as the conversation gets close to an end a laugh is extracted from the Taipan. “They are very fundamental things,” he said. “We believe that somewhere in the world we affect somebody every day because they eat, or build something, or use transport that we’re involved in, or use coal. It’s not this pen (Elman says, holding up his Mont Blanc). This is a luxury. You can also buy a cheaper pen, but it’s still got raw materials going into its manufacture.” 

Elman’s final words are on the financial crisis itself, and how Noble rode it out so successfully, and is plotting a profitable future. “We’re very simple people,” he said. “We apply the KISS principle, keep-it-simple-stupid”. We don’t understand most of the financial products created over the past decade. You know, a huge amount of the dislocation in the banking community was caused by a lack of correlation between the instruments. People were hedging a peanut with an apple on the theory that they both came out of the ground, and if the price of one goes up they should all go up. It just doesn’t work like that. It was a terrible mismatch that had to come to an end.” 

For investors in resource-related stocks there is hope, and a warning. The hope lies in the fact that demand in China for basic raw materials such as iron ore, copper, zinc and nickel, is rising after six dreadful months. It is demand from China which underpins much of the price recovery seen in those metals. The warning is that turning China around from an export-driven economy to one focused on internal consumption will not be as easy as it sounds. The US steel industry’s anti-dumping case against China is an early shot across China’s bows. More shots can be expected as China rebounds and attemps to steam away from the rest of the world. Hands up anyone who remembers the “de-coupling” theory which argued that China’s growth was separate from the rest of the world? De-coupling didn’t work last year, and it will not work next year – which is why Elman is optimistic, but watching very, very, carefully.


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## moneymajix

A 'Copper Standard' for the world's currency system

By Ambrose Evans-Pritchard
Last Updated: 2:41PM BST 16 Apr 2009



Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal. 

China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons. 

Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can. 

The G20 moves the world a step closer to a global currency
China's growth more Occident than design
A world currency moves nearer after Tim Geithner's slip"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years." 

"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said. 

The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass). 

While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank. 

John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep." 

Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944. 

The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees. 

If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49pc this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15pc to 20pc this year as construction wilts. 

Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February, and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports - almost half GDP - fell 17pc in March. 

While Beijing's fiscal stimulus package and credit expansion has helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50pc. 

One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said. 

This is slightly disingenuous. China has the world's largest reserves - $1.95 trillion, mostly in dollars - because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits. 

The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis. 

Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard". 


http://www.telegraph.co.uk/finance/...-Standard-for-the-worlds-currency-system.html


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## drillinto

April 20, 2009

Commodities Go Up As The Price Of Risk Falls
By Rob Davies | www.minesite.com

If everyone is so bearish why are prices going up? It is not just base metal prices that are on the rise. Equities and soft commodities are also moving up. Yet all the data from economists, governments and businessmen is uniformly downbeat. But therein lies the answer: if everyone expects the worst, then any news that is not absolutely atrocious is greeted as being less bad than the market was pricing in, and so there is a collective sigh of relief. Last week’s news that was better than expected was results from the US financial sector. True, there was a large element of one-off and special factors, but the overall results seemed to cheer traders up simply by not adding any more horrors to the long list that we already have.
That element of euphoria spilled over into equity markets generally, and continued on into commodities. Here again there are some special factors, the biggest one being the decision by China to buy up excess metal during the price slump to help domestic production. At the scale it is talking about - one million tonnes of aluminium, and half a million tonnes of copper and the same again of lead and zinc - it will probably have an impact outside China as well. One  broker, which, for reasons that are somewhat obscure, prefers to remain anonymous, even reckons that China is buying up metals as part of a concerted switch out of the US dollar and into physical assets. Whether that’s true or not, the recent buying from the Chinese has certainly affected prices. Copper rose 6.5 per cent to US$4,756 a tonne, zinc 11 per cent to US$1,500 and nickel nearly 14 per cent to US$12,230. Not bad for a recession. 

Essentially then, it seems the price of risk is coming down from the atmospheric levels to merely just expensive. Measuring the price of risk is not easy. But bond yields are one way, and there there has been some easing of prices so that yields have risen from their panic struck lows. Even so a yield of 2.9 per cent on a 10 year US Treasury suggests that most people are still pretty nervous. A better measure perhaps is the VIX, a measure of near term volatility in S&P 500 stock option prices. It peaked at 90 last autumn, and is now back at 34. While better than it was at this level the VIX still suggests the market is three times more nervous than it was two years ago. Gold too is telling us that markets are a little less nervous about risk than they were. But not much, a US$10 fall to US$870 an ounce over the week still indicates a lot of uncertainty. Trying to determine what happens next, though, is altogether different from arguing that risk is diminishing. 

The mining industry is still in a flap. Mines are being closed, or openings delayed, the most recent production deferral coming from Vale’s Onca Puma 58,000 tonne a year nickel mine in Para. And the big boys are raising money - both Rio Tinto and Anglo American issued convertibles last week to beef up their balance sheets. They clearly think that there are still tough times ahead and want to be better prepared. On a more positive note it does seem that the firm action taken by De Beers to tighten up the diamond market has had some effect. Angola says sales are picking up and Botswana is planning to resume mining next week. 

Positive news from banks, base metals and diamonds is encouraging. But given the scale of the bailouts being thrown by governments at banks and other businesses it is arguable that is the least we can expect. The big question that still remains is: what happens when the governments run out of money. How risky will that be?


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## drillinto

April 25, 2009

That Was The Week That Was ... In Australia
By Our Man in Oz  
www.minesite.com

Minews. Good morning Australia, it looks like you had a fairly flat week. 

Oz. Going nowhere is the best way to describe a market which, overall, slipped by 1.6 per cent, and a metals sector which ended 2.1 per cent lower thanks almost entirely to a single company. BHP Billiton’s four per cent decline weighed so heavily that it dragged everything down with it. But, even if you blame sliding indices on the big boy of mining it was a week lacking in direction, although not news flow. A handful of stocks performed well, including some you’ve probably never heard of, which is an interesting development in itself, while a handful went south quite rapidly.

Minews. Let’s start with the news events, including what seems to be as fresh twist in way your government is handling Chinese investment. 

Oz. Two developments in that area, starting with harsh criticism from the chairman of Gindalbie Metals (GBG), George Jones, over delays in the Australian Government’s foreign investment approvals process, followed by a remarkably strict set of rules governing approval for China Minmetals’ purchase of assets from OZ Minerals (OZL). The outburst from Jones was pure frustration because his Chinese partner, Ansteel, has been asked several times to re-submit its investment application, and has never been told why, which is rather curious. But, the terms of the OZ approval are potentially far more interesting because they might turn out to signify a great deal more, by setting the bar too high for Chinalco to climb over in its attempt to get into Rio Tinto’s bed. 

Minews. You think the Rio Tinto deal with China is dead in the water? 

Oz. It’s certainly looking that way when you consider the legally enforceable undertakings demanded by the Australian Government of China Minmetals in the OZ deal. The rules include the Chinese having to operate via Australian incorporated and headquartered companies, management to be predominantly Australian, the chief executive and chief financial officer to have Australia as their principal place of residence, the majority of meetings to be held here, all off-takes (sales) agreements to be priced by sales teams in Australia and be referenced against internationally observable benchmarks. They also stipulate that the Chinese produce an annual report that conforms with Australia’s Corporations Act, including reviews of employee, sales, environmental and community relationships, and that they make that report publicly available. 

Minews. Wow. Your government seems to be intent on forcing a Chinese company to perform to western standards? 

Oz. Precisely, that’s why the OZ/Minmetals decision could have far reaching implications - it seems to be laying down a template for others to follow, plus sending out a very loud warning that all Chinese investment in the mining sector will be watched very carefully. That’s why a BHP Billiton merger with Rio Tinto is looking to be a much easier route to follow. 

Minews. Enough of the news flow, time for prices. 

Oz. As was said earlier, not much movement in any sector. Gold, iron ore, and base metals stocks were evenly split, with a few specials standing out. Among the gold stocks to rise was Perseus (PRU) which continues to attract attention with its Ayanfuri project in Ghana, adding A8.5 cents to A91.5 cents, although it was briefly above the A$1.00 mark early in the week. Kingsgate (KCN) bounced back from its Thai riots setback, gaining A61 cents to A$5.82. Mundo (MUN) reported solid production numbers from its South American mines, rising A5 cents to A38 cents, and Avoca (AVO) crept A7 cents higher to A$1.53. Going down, we saw Medusa (MML) slip A4 cents to A$1.56, though the stock did trade up to A$1.67 on Tuesday. Adamus (ADU) fell by A3 cents to A38 cents, while St Barbara (SBM) put in the worst showing with a drop of A5.5 cents to A27.5 cents after reporting poor production numbers. 

Minews. Iron ore now, perhaps with an opening comment on the Fortescue Metals court case. 

Oz. Now that is getting interesting. Most of the evidence has been heard with final summations next week when we will know whether Fortescue and its chief executive, Andrew Forrest, did mislead the market in 2004 with a statement about “binding” sales contracts. In court this week there was plenty of fun and games with the defence blind-siding the prosecution by not calling three witnesses it had earlier indicated might give evidence. That, of course, is a perfectly legitimate move, but it deeply upset the government’s prosecutors who complained loudly that “we had assumed” the witnesses would be called because it had more documents to go through. Perhaps a lesson in life for everyone - never assume anything, especially in a legal action. On the market, Fortescue barely moved, losing A1 cent during the week to close at A$2.52. Most other iron ore stocks were modestly weaker. Territory (TTY) lost A1 cent to A19.5 cents, Atlas (AGO) fell A4 cents to A1.32, Northern Iron (NFE) slipped A7 cents lower to A$1.15, and Brockman (BRM) declined by A8 cents to A$1.14. 

Minews. Not much to write home about there. Anything more interesting in the base metals? 

Oz. No. Copper, nickel and zinc were mixed, with a modest downward trend evident. Among the copper stocks Equinox (EQN) moved most with a fall of A29 cents to A$2.09, but that comes after a big capital raising. Citadel (CGG) added A1.5 cents to A14.5 cents, and Anvil (AVM) lost A13 cents to A$1.37. Marengo (MGO) opened the strongly at A12 cents, then reported a fresh copper discovery in Papua New Guinea, and closed the week even at A10 cents. In the nickel sector, Mincor (MCR) slipped A7.5 cents lower to A94.5 cents, Mirabela (MBN) added A6 cents to A$1.84, Minara (MRE) lost A8.5 cents to A60 cents and Independence (IGO) gained A2 cent to A$94.5 cent. There was a more defined downward pattern among zinc stocks with Bass Metals (BSM) the only stock to rise, and then by just half a cent to A16.5 cents. Kagara (KZL) lost A19 cents to A81 cents. Terramin (TZN) fell A7 cents to A66 cents, and CBH (CBH) was A1.8 cents weaker at A8.7 cents. 

Minews. Uranium, coal and specials to finish please. 

Oz. There was more strength in the uranium market, which continued on an upward trend that has been evident for several weeks now. Mantra (MRU) added another A30 cents to A$2.60, Uranex (UNX) added A1 cent to A37 cents, and Forte (FTE) rose by A1.5 cents to A11 cents. Coal stocks were generally weaker. Riversdale (RIV) lost A24 cents to A$4.22 despite reporting a big increase in reserves. Coal of Africa (CZA) was A10 cents lighter at A$1.20 and Centennial (CEY) dropped A42 cents to A$1.71 after a poor production report. 

Minews. And specials? 

Oz. Saving the best for last because there was bit of action among some penny dreadfuls which never get a mention anywhere, plus some encouraging exploration news in odd places. Among the “dreadfuls” we saw the copper/gold explorer Augur Resources (AUK) top the trading report on Friday with a rise of A1.9 cents to A4 cents, a jump of 90 per cent on the day, in thin turnover and with no news, nor ASX speeding fine. Another “Neville Nobody” called MKY Resources (MKY) did cop a speeding ticket from the ASX on Friday after shooting up by 86 per cent to A1.3 cents. There was also a strong move by Platina Resources (PGM) which added 57 per cent to A33 cents. 

And Exploration news came from Magma Metals (MMB) which reported more encouraging platinum assays from its work in Canada. It added A5 cents to A45 cents, which is very good news for the lucky clients of the broking firm, Hartleys, who subscribed early in the week to a A$16 million capital raising priced at A32 cents, a difference which equates to making 41 per cent on your money in three days. There was also a “Robert Friedland” moment on the market when the local stock he controls, Ivanhoe Australia, reported rich molybdenum and rhenium assays from its Merlin prospect in Queensland, and that drove the stock up by 34 per cent to A$2.01. 

Minews. Thanks Oz. That activity at the small end of town, and from exploration news, is rather encouraging. 

Oz. It certainly is, perhaps the start of a climb out of the hole we’ve been stuck in for the past year.


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## drillinto

May 26, 2009

For Insights Into What Happens Next Watching The Chinese Is A Better Idea Than Paying Attention To Rating Agencies

By Rob Davies
www.minesite.com

Few institutions have come out of this financial crisis well. Apart from the banks, one group that has suffered more than most are the ratings agencies, led by S& P and Moody’s. The obvious conflict of interest they suffered from of saying nice things about the companies that paid them was overlooked during the feeding frenzy of the securitised debt markets boom. Those concerns seem to have been forgotten now as the press give wide coverage to the reservations expressed by S&P about the credit worthiness of the UK and the likelihood of similar opinions being expressed about US debt. It is doubtful if the UK or UK Treasuries sought or paid for these opinions. More likely S&P thought it was doing everyone a favour by publishing its opinions.
As a statement of the bleedin obvious these views are about as redundant and irrelevant as it possible to make. Both the UK and US economies will have budget deficits of 12 to 13 per cent and debt to GDP ratios approaching 100 per cent in few years’ time or maybe sooner. You don’t need to be an economic mastermind to realise these are not good numbers and do not merit high quality rating for the debt being issued by these two. The same goes for many other countries. Nevertheless, this exercise is all part of the system of modern finance where external validation is required to demonstrate that our politicians are honest. The population needs to be told what to think about such complex matters as sovereign debt. No matter that any reasonably well read person could come to the same conclusion as the agencies, and possibly act on it. 

It is in the interests of the authorities to keep these matters arcane. The alternative, something that every man in the street could comprehend, is far too democratic for the powers that be. Even so, not everyone believes that the emperor has new clothes. It is not surprising that the Chinese have been steady and consistent buyers of hard commodities this year. No one needs a second opinion to determine the value of a tonne of copper. Its price is US$4,500 a tonne, about US$200 more than it was worth last week. Is that because the price of copper has gone up or the value of the dollar has gone down? It is hard to tell but it is certainly easier to assess the utility of the tonne of copper, and what you can do with it next year, than the future worth of 4,500 promises from the US Government.  

Not all metals had a good week though. Aluminium was sold down US$50 to US$1,429 a tonne as inventories on the LME rose to over four million tonnes. That transparency is a vital part of confidence that buyers of commodities have. Knowing how much more of a metal there is in stock makes it much easier to put a value on it.  Moreover, news from Brazil that Vale is going to slash its capital expenditure by US$5 billion to US$9 billion makes it clear that less metal will be coming onto the market in the years to come. Buying something where you know there is some restriction on supply usually makes more sense than putting money into something where supply could be never ending.


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## drillinto

June 01, 2009

The Collapse Of General Motors Might Mark The Moment When Uncle Sam Changes Its Economic Gear From Reverse To Forward

By Rob Davies | www.minesite.com

No one rings a bell at the top or bottom or any market. These things are only visible with hindsight. While that is good for journalists, it is not a fat lot of use for market participants attempting to time entries and exits from the markets.
In an excellent article on the bond-focused PIMCO website, economist Paul McCulley declares that the Minsky Moment for this economic cycle was August 2007, give or take three months on either side. For those not in the know, the Minsky Moment is the occasion when market participants stop increasing debt and switch to repaying it. It’s also when the price of risk assets peaks and starts to turn down. Commodities are regarded as the quintessential risk asset. Although the time Paul McCulley presents as the Minsky Moment in this most recent of cycles isn’t a perfect fit for any particular metal, it does offer a pretty good approximation of recent pricing across the commodities asset class. Some metals, like nickel, peaked earlier. Others, like copper, peaked later. 

Over the following eighteen months pretty much everything went downhill, with the exception of bonds and gold, the assets you switch to when you want to minimise risk. Bonds, as defined by the 10 year US Treasury, peaked at the end of 2008 with a yield of two per cent. Since then bond prices have collapsed by 80 per cent so that last week the yield had risen to 3.75 per cent. Whatever the bears sitting on cash say, that looks as if the price of risk is falling. Growth assets such as commodities and equities have benefited from that. Mining equities of course give you two bites of the cherry when risk is being sought, so it is little surprise that the mining sector has been one of the best performers this year. 

The gains in metal prices may have moderated a little but the upward trend remains in place. A three per cent rise in copper took it to US$4,636 a tonne while a nine per cent increase in nickel saw it jump to US$13,335 a tonne. True, aluminium and zinc moved in the other direction but a 4.7 per cent drop in the former to US$1,362 and a 1.3 per cent decline in the latter to $1,423 a tonne demonstrates that each metal has its own dynamics.  Another key measure of the appetite for risk is freight rates. Last week these jumped 25 per cent. 

So do all these signs mean that December 2008 was an inverse Minsky Moment? That would be the point when the reverse Minsky journey of shrinkage changed direction again to growth. Mr. McCulley seems to think not, but he does think we are much further along the path than many believe. Since many markets, especially equities, anticipate events up to 18 months ahead it is quite rational for them to start pricing that change in a long time before it actually happened. 

That’s the thing with forward Minsky journeys. They start slowly and take a long time to build as they are essentially momentum driven. Reverse journeys happen more rapidly because they are just one big margin call. Perhaps the widely anticipated bankruptcy of General Motors on June 1st will be the definitive moment when Uncle Sam steps up to the plate and meets that margin. It would be ironic if the collapse of the iconic US car builder was marked by a change of economic gear from reverse to forward.


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## drillinto

June 07, 2009

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia, Rio Tinto’s double-dump on China must be good news for your small iron ore miners and explorers? 

Oz. It certainly is. Prices of iron ore stocks rose sharply on the Australian market on Friday after Rio Tinto’s deal with BHP Billiton, and those rises reinforced a trend which started a week earlier when Rio Tinto settled this year’s long-term iron ore sales contracts with Japan, rather than China. Next week, Beijing might even cop a third slap across its sensitive chops when OZ Minerals is forced to divulge the details of a rival bid to the deal its management has negotiated with China Minmetals.

Minews. Is the mood in Australia turning anti-China? 

Oz. No. It’s turning against a bargain-basement shopper who pushed too hard for the extra 20 per cent discount, and suddenly finds that what he wanted has been bought by someone offering better terms. China pushed too hard on price at the bottom of the market correction, and has now failed to realise that the trend has changed. The great weakness of Chinese companies - that they all report to the Chinese Government - has also been exposed. 

Minews. Are you serious about a counter bid for OZ? 

Oz. Absolutely. In fact a rival bid has been proposed but the board of OZ has deemed it to not be superior, and will not be putting it to shareholders before next Thursday’s vote on the China Minmetals deals. But the fact remains that the Canadian investment bank, RBC, and the Australian resource financier, RFC, have structured a deal which keeps OZ intact, rather than face dismemberment under the Chinese deal. 

Minews. Sounds like more fun and games for you next week. Time for prices, starting with iron ore. 

Oz. The big winner was Fortescue Metals (FMG) which has effectively been elevated from its self-proclaimed status as the “third force” in Australian iron ore to the status of second force, now that Rio is in business with BHP Billiton. On the market, FMG shot up by A56 cents to A$3.18, but did get as high as A$3.41, its highest level since October. The theory behind the rise is that China will forgive Fortescue’s past indiscretions and place future orders with anyone who rivals the new BHP/Rio iron ore joint venture. Other solid iron ore moves included Atlas (AGO), which added A16 cents to close at A$1.70 after peaking on Friday at A$1.78. Meanwhile BC Iron (BCI) announced that it had negotiated an ore transport agreement with FMG, a very positive move, which helped the stock rise by A25 cents to A87 cents. At one stage BC was trading at A95 cents. Also on the up, Brockman (BRM) added A15 cents to A$1.18. Giralia (GIR) gained a more modest A3 cents to A69 cents, and Aquila (AQA), which has iron ore as well as coal interests, put on A25 cents to A$5.04. 

Minews. Solid rises indeed. 

Oz. They were, and it was the iron ore sector which played the dominant role in the startling rise on the metals and mining sector of the ASX, up y an eye-catching 8.2 per cent over the week, double the performance of the all-ordinaries which gained four per cent. BHP Billiton, up 10 per cent, and Rio Tinto, up 12.3 per cent, did most of the heavy lifting, but their leadership flowed across the entire resources division. 

Minews. Let’s shift to gold, and then move through uranium and base metals. 

Oz. The gold tone was positive, thanks to a slightly better metal price, though the rising Aussie dollar weighed on some stocks. Robust Resources (ROL), a stock you never hear about, was the star, rising by A25 cents to A80 cents after the one-time king of coal, Ken Talbot, snapped up a 15 per cent stake in this Indonesian gold and copper explorer. The investment cost Talbot A$2.5 million, which is chickenfeed for his A$1 billion portfolio, but it is a useful pointer to where a very experienced resource investor sees future profits. 

Other gold stocks on the way up included Kingsgate (KCN) which is slowly winning recognition for the improving production outlook at its Chatree mine in Thailand, and for its nearby Chokdee discovery. It closed the week at A$6.59, up A54 cents, after peaking on Wednesday at A$6.93. Perseus (PRU) was on the rise again after a couple of down weeks. It added A8 cents to A97 cents. Dominion (DOM) announced plans to expand its Challenger mine and rose by A12 cents to A$5.02. Allied Gold (ALD) rose by A7 cents to A52 cents. Silver Lake (SLR) gained A9 cents to A79 cents and Resolute (RSG) rose by A3 cents to A73 cents. 

It wasn’t all up traffic thanks to our dollar clearing the US80 cent mark early in the week, and trading as high as US82.6 cents before slipping back on Friday. Avoca (AVO) ran out of steam after strong gains, slipping A5 cents lower to A$1.75. Troy (TRY) fell A4 cents to A$1.54, and Centamin was A8 cents lighter at A$1.62. 

Minews. Uranium now, please. 

Oz. Another strong showing, despite the short-term price of uranium staying below US$50 a pound. Extract (EXT) hit a fresh 12-month high during the week at A$6.24, as its war of words with Kalahari Minerals dragged on. Extract ended the week at A$5.90, for a gain over the week of A40 cents. Forte (FTE) added A4 cents to A16 cents after releasing a positive update to market, and Uranex (UNX) was up A2 cents at A45 cents. 

However, the star of the uranium sector was Uranio (UNO) which announced a merger with the privately-led Manhattan Resources, a company which is led by one-time Summit Resources boss, Alan Eggers. The market loved the deal because Eggers made fortunes for followers after selling Summit to Paladin Resources (PDN) in the last phase of the uranium boom. On the market, Uranio more than doubled from A19.5 cents to A49 cents, after peaking on Friday at A53 cents. 

Minews. Base metals to finish please. 

Oz. Star of the copper sector was another new corporate name with an old head at the top. Sandfire Resources (SFR) which has an interesting copper and gold play in Western Australia rose a very sharp A22 cents to A68 cents, and earned a speeding fine for its chairman, Miles Kennedy. Best known for his exploits in the diamond world, Kennedy has made a return to the market with his long-time corporate associate, Karl Simich. Recent drilling at the Degrussa prospect has returned assays as high as 2.4% copper and 10.9 grams a tonne of gold over a 75 metre intersection. 

Other copper moves included CuDeco (CDU) which has been very quiet for a few months but which came back last week with a rise of A13 cents to A$3.22 even after announcing a big capital raising. Equinox (EQN) was up A16 cents to A$3.24 and Marengo (MGO) rose by A1 cent to A12 cents. 

Nickel and zinc stocks also showed further signs of improvement. Best of the nickels was Independence (IGO) which added A55 cents to A$4.44. Mincor (MCR) gained A22 cents to A$1.56 and Minara (MRE) rose by A25 cents to A89 cents. Terramin (TZN) led the way in a steadily improving zinc sector, gaining A12 cents to A88 cents. Perilya (PEM) was steady at A44 cents and CBH (CBH) gained half-a-cent to A14.5 cents. 

Minews. Thanks Oz.


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## drillinto

June 08, 2009

Perennially Bullish Or Perpetually Bearish? - Metals Inventories Remain Incredibly Low

By Rob Davies
www.minesite.com/aus.html

Sometimes it seems that market observers will stick to their opinion, bullish or bearish, whatever the data. A journalist commented to this writer last week that he felt there was a lot more downside in metal prices, even from these levels. That generated some surprise, for two reasons. Firstly, this writer assumed that consensus opinion was that metals were trading close their cyclical lows. Secondly, as was pointed out, inventories of metal are incredibly low for such a severe recession. “Yeah, but...” was the reaction.
What is totally amazing about this downturn is that despite its intensity, metal inventories are incredibly low.  To put some numbers around that it seems that the German economy is now forecast to shrink by 6.2 per cent this year, an unprecedented contraction. Bearing in mind that it is one country that still does a lot of metal bashing, the impact of that contraction on commodities should be dramatic. 

Yet over the last week inventories of copper on the LME declined from 317,000 tonnes to 300,000 tonnes. Even though demand has fallen, that stockpile is only equivalent to a few weeks consumption. It is true that LME stocks are only part of the total inventory and the Chinese are probably sitting on large tonnages as well. Nevertheless, compared to the huge tonnages that used to sit around in warehouses for years in earlier, much milder, recessions, these figures are simply staggering. 

It was this decline in inventory that pushed metals up last week and took three month copper back over US$5,000 a tonne, before easing back at the end of the week.  In terms of cash prices copper gained US$230 to close at US$4,868 a tonne, while aluminium added US$80 to US$1,440 a tonne. Zinc added a similar amount to US$1,504 while lead had a stronger run putting on US$130 taking it to US$1,565 a tonne. Nickel joined in, with a US$500 increase to US$13,800 a tonne. 

Although copper inventories have the highest profile, other metals saw some modest falls in their stocks, including aluminium, the bÃªte noir that has caused Rio Tinto so much grief.  So the story is one that applies across the asset class, not just to one or two individual metals. Moreover, it means that is not related to short terms moves in external factors like exchange rates. What is happening here is fundamentally different to previous recessions and has dramatic implications for the future. Basic arithmetic tells us that a recovery will come at some point simply because economies will not shrink forever. Once they stabilise, albeit at a lower levels of activity, the data will stop being negative. It then only takes a small increase in business to register positive figures, especially as they will be working from a smaller base. When that happens, as it will, the metal markets are likely to respond in a dramatic fashion and prices are likely to move very sharply indeed. 

It is doubtful, though, whether that will be enough to convince the bears that things are on the mend. They won’t be convinced until copper is trading at US$8,000 a tonne. Then they’ll turn bullish.


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## drillinto

June 15, 2009

Is Recovery On The Way? - LME Stocks Are At Amazingly Low Levels

By Rob Davies
www.minesite.com

The definition of economic recovery is one quarter of growth. Bizarrely, it takes two quarters of contraction to constitute a recession. With widespread expectations that this quarter will show a higher level of economic activity than the first quarter of the year, a number of observers have hailed this period as marking the end of the recession. There is certainly a great deal of evidence in the prices of various assets to support this view. Bond yields in the UK and the US have risen sharply since the start of the year, to approach four per cent. Bearing in mind they started the year at 2.2 per cent and three per cent respectively, that is a pretty dramatic decline in bond prices. Equity markets we know have experienced steep rallies of 30 per cent or more. Within that rise some of the individual moves have been remarkable, such as the 85 per cent increase in the share price of Man Group, a listed hedge fund.
It is not surprising that commodity prices have been carried upwards on this wave of optimism.  Oil prices are over US$70 a barrel, an eight month high, and base metals have continued to make progress.  Copper was up eight per cent last week to US$5,265 a tonne, and zinc was up a similar percentage to US$1,633 a tonne. But these were the laggards of the group. Aluminium and lead both reported double digit rises of 14 per cent to US$1,641 and US$1,786 respectively, while nickel rose 12 per cent to US$15,430 a tonne.  The great beauty of traded markets is that they reflect the total knowledge the whole world has at that particular moment in time. 

At the price agreed exactly half the world thinks the price is too high and the other half thinks it is too low. As fresh data comes in that price may rise or fall depending on its nature. That is why you need terminal markets. What happened last week was that prices reacted to further falls in LME inventories. Copper stocks at the LME are now less at than 300,000 tonnes, and while there were no falls in the other metals, these are all still at amazingly low levels. The rationalisation of the mining industry over the last cycle has left it tightly controlled and very focussed on managing supplies to match demand. Consequently prices now react very quickly. 

Not all commodities use terminal market pricing. Some use contract prices instead, typically re-priced once a year. That makes them much lumpier, and when prices are revised they can be sharp moves. Last week, for example, BHP Billiton accepted a 58 per cent cut in coking coal prices. That is pretty painful but is probably not a lot different from what other pro-growth asset prices have done over 2008. The new price is therefore a reasonable approximation of the change in market conditions as of a few months ago.  

But, as we have seen, traded markets have been in a positive trend for several months, and there is enough data to think that the worst of the recession has passed. After all, if Ferrari only sold 18 cars worldwide in March how much worse can it get? 

This does, though, beg very large question. If this is as bad as it is going to get and metal inventories are still at historically low levels, even for normal times, what will happen to stocks, and hence prices, when conditions improve?  At least commodities that are priced on terminal markets can reflect the change in circumstances quickly. The same cannot be said of those using annual contract prices.  A few more quarters of growth and things could get very exciting indeed.


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## drillinto

June 22, 2009

Commodities Markets Pause For Breath, As Black Holes Elsewhere Suck In Cash
By Rob Davies | www.minesite.com |

All the multi-faceted impacts of unwinding the debt left over from the biggest credit bubble the world has ever seen still seem to make analysis of the future all but impossible. The rally in risk assets, like equities and commodities, stuttered to a halt last week. Part of the reason for the slowdown in equities were more demands for cash, and these were led by Rio Tinto with its request for US$15 billion to clear its balance sheet of the debt from the Alcan acquisition of two years ago. The Financial Times estimates that so far this year the UK stock market has been asked to stump up US$50 billion to bail out indebted companies and we haven’t even reached the halfway point yet.
Such a large black hole in the equity market, sucking in vast amounts of cash, is bound to have an impact on other asset classes. The attraction of buying new shares in Rio at £14 when they were trading at £30 a few weeks ago is easily enough to persuade the market to take profits from other assets, such as commodities, and redeploy them on favourable terms. One asset class that has already felt the heat is fixed income. 

While most bonds are higher than they were last year, many are down on the year to date so taking profits from gilts and treasuries is not quite so easy.  The reason for the weakness in that asset class in 2009 is the giant sucking sound from governments as they prepare to carry on spending as if nothing has happened. Pimco, the US bond fund manager, estimates that the US Government needs to sell a net US$2 trillion worth of Treasuries in 2009 to fund its spending habit. That is four times the level of last year. Well... it has got two car companies to feed that it has just adopted. 

The journey the US economy is taking from a capitalist structure to a socialist one might be expected to depress the dollar. But no, last week the dollar rose slightly against its rivals. Bad as the US economy is, the alternatives don’t look a lot better either. The good thing about the US way of doing things is that it is pretty rapid. While the American bank crisis is not over, there has been quick action to deal with the problem and set a course to rectify the situation - albeit, a fairly brutal one for shareholders and employees. 

The same cannot be said of the European banks. Their approach has been more dilatory with the ECB expecting another US$283 billion of losses to be revealed by the end of the year.  It is this growing sense of realisation that the global economy is not out of the woods yet that seems to have prompted this setback in the market.  

Commodities could not escape the weakness, and all ended the week lower, and not just because of a slight strength in the dollar.  Lead was the worst performer falling eight per cent to US$1,638 a tonne, but zinc, its blood brother, fell almost as much with a seven per cent drop to US$1,515 a tonne. In percentage terms, that was about same as copper, which went to US$4,900 a tonne. Aluminium, the cause of so much grief for Rio Tinto, only fell three per cent to US$1,589 a tonne. The big difference though, is that anyone holding commodities won’t be asked to put their hands in their pockets to buy more.


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## drillinto

June 27, 2009

That Was The Week That Was ... In Australia
By Our Man in Oz  |  www.minesite.com  |

Minews. Good morning Australia. It looks like you had another flat week. 

Oz. It does, but only if you use the start and finish points as your guide. If you do that you see a fall in the overall metals and mining sector of less than one per cent, and a rise in the all ordinaries index of one tenth of one per cent. Anyone standing back and looking at those numbers might be inclined to yawn. But, if you look at the individual days you get a bit of excitement, and see the trading opportunities that were created on three days that produced an upward trend and two days when things headed south.

Minews. Did any sector stand out, either way? 

Oz. Not really. It was a very mixed week with rises and falls scattered throughout the various commodities. Gold trended down, in line with the price of the metal in the opening days of the week. But we can expect better next week after London’s stronger close on Friday. Iron ore stocks were also down, with the odd move up. Same with uranium and coal. It was a slightly better picture among the base metals, with nickel stocks starting to attract interest, perhaps because nickel is always first in, and first out, of the metal-price cycle. Zinc was flat. 

Minews. Any rub-off effect in your market from Xstrata proposing marriage with Anglo American? 

Oz. Not really. The view down here seems to be that Xstrata probably needs the deal more than Anglo American. Neither company has a strong following in this neck of the woods, but from here it looks as though there’s a touch of the same excess debt and poor asset problems which caused OZ Minerals and Rio Tinto so much grief. Xstrata, despite owning the old MIM Holdings with its copper and coal assets, as well as Canada’s Falconbridge with its nickel mines, is carrying a whopping US$27 billion in debt and needs a deal to stay alive. 

Minews. It makes you wonder when the accountants running mining companies will learn that debt and mining never mix. But enough of the chit chat. Time for prices, starting with gold this week please? 

Oz. The emerging Argentinean-focussed Andean Resources (AND) is a good place to start in the gold space because it had a yo-yo of a week, starting at A$1.86, falling to A$1.69 on Wednesday, then announcing a C$90 capital raising in Canada on Thursday and soaring to A$1.98 during Friday trade, before ending the week at A$1.89. That gave Andean an official gain over the week of A3 cents, but only after having traded in a A29 cent band. Meanwhile, Kingsgate, a one-time Andean suitor, performed a similar trick, but ended substantially higher. It opened at A$6.38, fell to A$5.95 on Tuesday, and then soared to a 12 month high of A$7.11 during Friday trade before closing the week at A$7.01. That gave it a gain of A63 cents, but after trading across a band measuring A$1.16. 

Minews. Plenty there to keep your day traders awake. 

Oz. There certainly was, and the pattern was repeated across the sectors - one reason why looking at the start and finish of a week can be a little misleading if you’re looking for the real story. Continuing with gold, Centamin (CNT) was one of the genuine stars of the week, adding A22 cents to A$1.79, although it did get as high as A$1.85 on Friday, a 12 month high, and as low as A$1.60 on Wednesday. Resolute (RSG) started the week at A70 cents before fading to a low of A57 cents on Thursday and then recovering to A62.5 cents on Friday for a fall over the week of A7.5 cents. Perseus (PRU) fell A10.5 cents to A74.5 cents with no sign of a mid-week rebound. Allied (ALD) did better, and while it ended down A2.5 cents at A43 cents for the week it could have been much worse, as the stock oscillated between A37 cents and A47 cents. 

News flow from the gold sector helped a few stocks along. Corvette Resources (COV), a stock we don’t hear much about, added A2 cents to A13 cents after reporting assays as high as 9.8 grams a tonne over eight metres from its Plumridge project in Western Australia. On Thursday the stock rose as high as A17 cents. And Stirling Resources (SRE), the comeback vehicle for Michael Kiernan, unveiled a rescue plan for the failed Monarch Gold (MON). There was little trading in Stirling which has undergone a one-for-10 capital consolidation, but it still managed to fall by A5 cents to A23 cents during the week. Monarch remains suspended. The gold sector also welcomes back Norseman Gold after a period in the wilderness and on the London market, which we sometimes think is much the same thing. It re-listed on Thursday at a hefty A62 cents, and faded to a Friday close of A52 cents. 

Minews. Iron ore now, please. 

Oz. Down across the board, apart from the latest example of what a dash of Chinese interest can do for a stock. Wah Nam, a Hong Kong-listed company, snapped up an 11.3 per cent stake in Brockman (BRM) though not by a placement, which has been the preferred route so far. Wah Nam’s move was an on-market raid, with a courtesy note to Brockman after the event. So, on the market, Brockman added A6 cents to A$1.26, but did get as high as A$1.31 on Tuesday. After Brockman it was all downhill, but not by much. Atlas (AGO) slipped A1 cent lower to A$1.78, but moved between a band of A$1.55 to A$1.80, in another example of the vigorous movements noted across all sectors. Northern Iron (NFE), eased off by A7 cents to A$1.36. Fortescue Metals (FMG) dropped A9 cents to A$3.77. BC Iron (BCI) lost A2 cents to A$1.20, and Talisman Resources (TLM) the comeback vehicle of Kerry Harmanis, fell A3 cents to A30 cents after a disappointing expert’s report on its flagship Wonmunna project. 

Minews. Uranium and base metals to finish, please. 

Oz. Some uranium stocks were in demand, but the overall picture was one of stocks trending down. Mantra (MRU) was the pick of the pack, rising A50 cents to A$3.84. Paladin (PDN) added A46 cents to A$4.86. Uranex (UNX) hit a 12 month high of A58 cents on Friday after a fresh capital raising, and closed the week at A56.5 cents for a very strong gain of A15.5 cents. On the flipside, Extract (EXT) finally ran out of steam, losing A56 cents to A$6.64. Toro (TOE) fell A2 cents to A19.5 cents, despite OZ Minerals expressing ongoing confidence in the stock in which it holds a controlling interest. Meanwhile, Alliance (AGS) reported further progress at its Four Mile project, but fell A2 cents to A70 cents. 

Nickel stocks led the way among the base metals, with the price of the metal clearing the US$7.00 a pound mark, which translates into a very attractive A$8.75/lb for Australian producers. Several companies responded. Mincor (MCR), which we took a look at mid-week, added A12 cents to A$1.59. Independence (IGO) rose A34 cents to A$4.52, also aided by increased optimism about the Tropicana gold project. Minara (MRE), which could pop free in the wake of the Xstrata/Glencore move on Anglo American, rose A6 cents to A84 cents, and Poseidon (POS), which has been named as a possible bidder for BHP Billiton’s mothballed Ravensthorpe laterite project, added A1 cent to A28 cents. 

Copper stocks trended down with Copper Strike (CSE) and Marengo (MGO) going against the trend. Copper strike benefited from growing interest in its Einasleigh project in Queensland. It added A7.5 cents to A17.5 cents. Marengo rose A2 cents to A12 cents. On the way down we saw Indophil (IRN) fall A9 cents to A48 cents, despite a positive report on its part-owned Tampakan project in the Philippines. Anvil (AVM) slipped A3 cents lower to A$1.85 and Citadel (CGG) was A2.5 cents lighter at A19 cents. Most zinc stocks fell. Perilya (PEM) lost A3 cents to A38 cents, CBH (CBH) fell A2.5 cents to A11 cents, while Terramin (TZN) went against the trend, adding A1 cent to A70.5 cents. 

Minews. Thanks Oz.


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## drillinto

June 29, 2009

What The Fox And The Hedgehog Tell Us About Commodities: It’s All About Inventories

By Rob Davies  |  www.minesite.com  |

Trying to analyse current conditions in various financial markets isn’t easy, and commodities markets are no exception. The online and offline financial press is full of comments from gurus and experts with all manner of prognostications about the likely evolution of events. Some, like Albert Edwards of SociÃ©tÃ© GÃ©nÃ©rale, think that the Chinese economy will be much slower in the second half than many expect. That of course begs the question of what people actually do expect, and how many experts it takes to make an expectation.
Clearly, investors who have pushed the Chinese stock market up nine per cent this year take a more optimistic view of events than Mr Edwards.  But few organisations can claim more experts than the Organisation of Economic Co-operation and Development (OECD), and the OECD now takes the view that the global outlook is improving for the first time in two years. It believes OECD economies are near the bottom, but also concedes the recovery will be slow.  A projected implosion of activity this year of 4.1 per cent will be followed by growth of just 0.7 per cent in 2010. Not very exciting at all, although it is important to remember that OECD data don’t include China. 

Even so bond markets reacted poorly to these figures and US Treasury yields climbed back to 3.5 per cent. A similar response was also in evidence in equity markets, which have lost the upward momentum they have enjoyed since early March and have started to edge lower. Commodities, apart from gold, are risk assets, and moved in the opposite direction, edging higher over the week. The best mover was nickel, which put in a four per cent gain to US$15,350 a tonne, followed by lead with a rise of 3.8 per cent to US$1,700 a tonne. Copper rose two per cent to US$5,023 a tonne, and aluminium lagged the pack with its two per cent increase to US$1,621 a tonne. 

In the face of all this data, much of it conflicting, it is easy to feel like the apocryphal fox of who knows many things, and is unsure of what action to take.  Life for the hedgehog is much simpler. He knows one big thing - the fox wants to eat him for breakfast - so he lives his life accordingly. So it is with commodities. There is a vast amount of information out there that invites analysis. In reality, though, no one really knows what will happen, it just suits brokers and money managers to pretend that they do.  

A hedgehog looking at the commodity industry would very quickly ascertain that the one big thing to be concerned about is the level of inventories.  If a four per cent contraction in the world economy only leaves zinc stocks at half the level they were five years ago it suggests there is very little fat in the system. The same applies to copper, where LME inventories are 10,000 tonnes less than last week at 271,600 tonnes.  Apart from aluminium, all the metals have amazingly low inventories given that we are in a period of such a large economic contraction. 

And, as Mick Davis circles around Anglo American it is hard to avoid the analogy with the animal world. Over the last few decades Anglo under various leaders seems to have had little clear directions and to have embarked on various adventures, all of which have had the effect of eroding shareholder value. On the other hand Mr Davis, first at Glencor, then Billiton, then Xstrata, has had the single minded vision of a hedgehog who knows one big thing: that is, to focus on consolidating a large and disparate business to tighten supply, keep excess capacity low, and ensure inventories stay tight.


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## drillinto

July 05, 2009

That Was The Week That Was ... In Australia
By Our Man in Oz >> www.minesite.com

Minews. Good morning Australia. Another flat week, it seems. 

Oz. It looks that way, but really it was a repeat of last week. Three down days and two up, resulting in a 2.6 per cent fall in the metals index on the ASX and a 1.8 per cent fall in the all ordinaries. As with last week, that picture of a market drifting lower only told part of the story. As you dig into the different sectors of the market you find bright spots to lighten the gloom. The gold sector produced a couple of very solid winners in Avoca (AVO) and Norseman (NGX). Iron ore had two stand-out winners in Sphere Investments (SPH) and Emergent Resources (EMG), and even the lacklustre base metals sector produced a winner, one which we drawn attention to several times in the past as a seriously under-valued stock, Hillgrove Resources (HGO).

It must be two years ago that Minesite first noted the gap between Hillgrove’s share price and the value of its minority stake in a coal-seam methane explorer, Eastern Star Gas. Well, that gap was partially plugged on Friday when Hillgrove sold its 19.9 per cent stake in Eastern Star to the big Australian petroleum company Santos, for A$176 million. At the time of the transaction, Hillgrove was trading at A17 cents, which valued the entire company at A$70 million. Naturally, when the sale was reported the stock shot higher, briefly touching A27 cents, before easing to close at A24 cents which, still values the company at just A$99 million. Does that make Hillgrove a screaming buy? Well, the equation certainly looks compelling, because you get a company stuffed to the gills with cash, a copper project at Kanmantoo waiting to go ahead, and very interesting gold assets in Indonesia. 

Minews. Interesting indeed. Time for a few prices, please? 

Oz. Before we get there, there are a few other news events worth reporting as they might not have made their way over to the other side of the world yet. The nickel sector, which is always first in, and first out, of any change in the metal market, was the subject of two interesting developments. First came news that the local iron ore and coal billionaire Clive Palmer has bought BHP Billiton’s Yabulu nickel refinery in Queensland - an interesting twist in the long-running saga of that plant which was once controlled by the disgraced Alan Bond. More importantly, BHP Billiton is facing the forced closure of its Leinster nickel mines after another almost fatal underground rock fall. The Western Australian Government has served BHP Billiton with a demand for a full engineering study and “please explain”. If Leinster is closed it would take at least another 15,000 tonnes of nickel off the world market. 

Minews. Which can only be good for other nickel stocks. 

Oz. Precisely, and we saw a few modest upward moves among the small nickel producers, but nothing outstanding. Panoramic (PAN) added A8 cents to A$2.31 and Western Areas (WSA) was up A28 cents to A$5.70. On the flipside, Mincor (MCR) eased back by A10 cents to A$1.49 after a few strong weeks, and Independence (IGO) was down A28 cents to A$4.24 despite good production numbers and an expectation that the Tropicana gold project, in which it has a minority stake alongside AngloGold, will soon get a formal go ahead. 

Minews. Let’s stick with gold and then move across the spectrum. 

Oz. As mentioned earlier, Avoca and Norseman were the best of the gold stocks. Avoca reported record gold output of 52,118 ounces for the June quarter, news which lifted the company’s share price by A24 cents to A$1.79. At one stage on Friday Avoca rose to a high of A$1.84. Norseman, which only recently re-listed on the ASX after a period on London’s Aim market, continues to excite the locals. It add A25 cents to A77 cents, driven by the release of an updated resource statement that lifted proven and probable gold reserves by 25 per cent to 400,000 ounces, all contained in 1.4 million tonnes of ore grading 8.9 grams a tonne. The significance of the higher resource number is that previous owners have never been able to drill far enough ahead to prove the mine’s life even though everyone working there knew there was plenty of gold yet to come from the Norseman fields. Norseman seems to have managed it though, and the market has shown due appreciation. 

Other upward gold moves were hard to find, though, given the weaker trend in the gold price and the Aussie dollar holding at around the US80 cent exchange rate. Sector leader Newcrest (NCM) managed a truly modest rise of A27 cents to A$30.30, and Kentor Gold (KGL), which we don’t hear a lot about but which continues to make progress with its Savoyardy project in the Kyrgyz Republic, added A0.2 of a cent to A4 cents. After that it was all downhill, or flat. Centamin (CNT) eased back A5 cents to A$1.74 despite pouring its first gold at the Sukari project in Egypt, and Resolute (RSG) lost A4 cents to A62.5 cents despite pouring its first gold at the Syama mine in Mali. 

Minews. Sounds like another example of it being better to travel than to arrive. 

Oz. It does. A quick finish with gold because there were really isn’t too much to report. Troy (TRY) shed A6 cents to A$1.26, Kingsgate (KCN) lost A21 cents to A$6.80, Lihir (LGL) was A6 cents lighter at A$2.90, Perseus (PRU) slipped A1.5 cents to A73 cents, Adamus (ADU) fell A4.5 cents to A35.5 cents, and Allied (ALD) shed A3 cents to A40 cents. 

Minews. Time for iron ore please. 

Oz. Sphere and Emergent led the way up in a generally down week. Chinese interest, real in the case of Emergent, and possible in the case of Sphere, was the key factor. Emergent, which rarely gets a mention anywhere, added A10 cents to A60 cents, after announcing a joint venture with China Metallurgical Investment on the Beyondie magnetite project in Western Australia. At one stage on Friday the stock hit A65 cents. Sphere, which rose A16.5 cents to A90 cents was powered along by rumours of a deal covering its Guelb el Aouj project in Mauritania. 

The only other iron ore stock moving up was Cape Lambert (CFE) which added A2.5 cents to A34.5 cents, but that was mainly the result of it moving closer to control of the Lady Annie copper project which is being sold off by the receivers of the failed CopperCo. After those upward moves it was re-run of the gold story, with companies trading either flat or down. Atlas (AGO) fell A20 cents to A$1.58, Fortescue (FMG) was down A25 cents to A$3.52, and Golden West (GWR) lost A4.5 cents to A42 cents. Also weaker, BC Iron (BCI) slipped A7 cents lower to A$1.05 despite making a formal development decision on its flagship Nullagine project. That weakness was perhaps another example of travelling being better than arriving. Gindalbie lost A4 cents to A76 cents after announcing the retirement of its long-serving chairman George Jones, for health reasons. 

Minews. Uranium now and then finish the base metals you started earlier. 

Oz. More of the same “going-nowhere” story with uranium. The only difference with the gold and iron ore sectors is that nothing rose. Extract (EXT) after its stellar run of the past six months, fell A62 cents to A$6.02. Mantra (MRU) was down a less painful A15 cents to A$3.65. Uranex (UNX) shed A6 cents to A50.5 cents, and Forte (FTE) fell A 2.5 cents to A13.5 cents. 

Copper stocks generally did nothing, apart from Hillgrove which we mentioned earlier, and that was really a gas powered upward move. Equinox (EQN) dropped A20 cents to A$2.69. Anvil (AVM) was off by A19 cents to A$1.66, while Citadel (CGG) and Marengo (MGO) were steady at A19 cents and A12 cents respectively. 

The zinc sector produced two winners. CBH (CBH) rose A2.5 cents to A13.5 cents after reporting strong production numbers from its Endeavour mine, and Sabre Resources (SBR) reported an expanded target area at its Pavian Trend project near the Angolan border in northern Namibia. Sabre doubled in price from A5 cents to A10 cents, but in paper thin trading that saw 40,000 shares exchange on Thursday and 47,000 on Friday. The rest of the zinc market was down. 

Minews. Any coal news or specials to finish? 

Oz. Up and down in the coal sector. Coal of Africa (CZA) added A8 cents to A$1.65 and Riversdale (RIV) lost A40 cents to A$5.01 after a critical report on its prospects from Macquarie Bank. The only special worth noting was Spitfire (SPI), the manganese explorer we reported on during the week. It added A1.5 cents to close the week at A11.5 cents, but did get as high as A14.5 cents during the week.


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## drillinto

July 06, 2009

Global Spending Power Shifts East, And Metals Prices Follow
By Rob Davies  >>  www.minesite.com

The twentieth century belonged to the US. Now that 2009 is more than halfway through it is interesting to reflect on the progress so far and whether this century will again be dominated by America. No one of course should extrapolate the events of the last six months out for the next 90 odd years. Even so, some signs may give a clue to the future.
So far this year the US stock market has made no net progress. It suffered a sharp fall in the first quarter and then an even steeper recovery in the second quarter to leave it back where it started. Rising US unemployment means that 30 million Americans now have virtually no spending power. In all likelihood US unemployment will continue to rise as the country’s industry adapts to a new economic environment of lower economic growth, lower margins and smaller profits. The political ramifications of this genteel poverty can only be guessed at.  An estimated US$15 trillion of wealth destruction is going to hurt to someone. 

Contrast that tale of woe to developments elsewhere in the world. In the first half of the year the Chinese stock market has risen nine per cent. The Indian market rose 49 per cent just in the second quarter. Without doubt part of this reflects an increased appetite for risk. But could it also signify a much deeper change in the economic geography of the world?  We already know that China uses more metal than the USA and, overall, emerging markets are more important to commodities than the developed world.  The reason for that is quite simply that the balance of consumer spending is moving east.  The first quarter of 2009 was the first period since 1952 that US households reduced their overall indebtedness. Americans aren’t spending, they are saving. It is the emerging economies that are spending.   Hopefully, they will only spend what they earn and not what they can borrow. 

This generational change in behaviour may explain why commodities seem to tracking emerging market shares rather than that of the developed markets.  Over the first half of the year base metal prices have made steady progress upwards, rather than just treading water like Wall Street or London. Copper has been the best performer rising from US$3,300 a tonne to S$5,000 over the six months. Nickel had a bad start, falling from US$13,000 to US$10,000 a tonne before climbing steadily back to US$16,000. Zinc has had a similar trajectory, starting at US$1,200, dipping to US$1,100 a tonne and then finishing at US$1,550. Lead mirrored these movements very closely but ended a little stronger at US$1,700 a tonne.  Aluminium is the only metal that has made little real progress, starting and ending at US$1,600, although it did spend a lot of time trading closer to US$1,400 a tonne. 

It may well be that the progress of the base metals over the first half of the year is a better guide to economic future than stock markets. In which case it really does demonstrate that spending power is migrating from one end of the world to the other.


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## drillinto

July 12, 2009

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com

Minews. Good morning Australia. A big news week for you, even though not much happened on the market... 

Oz. A very big news week thanks to the Chinese dragon showing its true colours, or should that be its true claws. The arrest of a Rio Tinto iron ore sales team in Shanghai sent a shudder through the entire Australian resources sector because it reminded everyone that China remains a totalitarian state with the communist party in charge of everything. It will be a long time, if ever, for the truth to surface in this messy affair, but there’s no doubt that a lot of Australian companies which have done deals with China are now re-thinking the relationship, re-thinking any plans to send senior executives to China, and taking much greater care about what they say in the privacy of their offices and hotel rooms.

Minews. You’re hinting that a bit of bugging might lie at the heart of the arrests. 

Oz. Absolutely. In fact, a few weeks before the Rio Tinto boys were hauled away there was a wire service report floating around about how most of the preparation for iron ore sales now takes place in Singapore after the discovery of electronic listening devices in the Rio Tinto offices in Shanghai. What we don’t yet know is whether the buggers (if that’s the right word) actually got something on tape, or whether the Chinese have been embarrassed about being found out. Whichever way you analyse it, the whole episode has a touch of the Cold War about it, and serves as a reminder that China can still behave like a Stalinist state. 

Minews. More importantly, was there an effect on your stock market? 

Oz. It seems so, though it can never be proved. Most iron ore stocks fell, perhaps a result of the steady stream of news reports about iron ore salesmen being locked up, though the downward price trend was also evident among gold and base metal stocks. Perhaps the best measure of the incident was the sharp fall in the value of the Australian dollar which dropped by around US2 cents to US78.15 cents, but did spend part of the week below US78 cents. A war of words, let alone a trade war, with China will not do Australia any good. 

Minews. Enough of the chit-chat. Time for price, please. 

Oz. As hinted, the trend over the week was down, but as with the past few weeks it was not a consistent pattern. All of the falls occurred early in the week, with the last two trading sessions, on Thursday and Friday, in recovery mode. The end result was that the metals and mining index ended down 2.4 per cent, while the all ordinaries fell by 1.8 per cent. The target of the Chinese arrests, Rio Tinto, slipped 2.5 per cent lower, very much in tune with the overall mining market, while its new partner in iron ore, BHP Billiton, was down 2.3 per cent. 

Continuing with iron ore, because that’s the newsy sector, only one rise could be found. Atlas Iron (AGO) added A3 cents to A$1.62, thanks entirely to a strong Friday. Earlier in the week the stock had been trading as low as A$1.51. The list of the stocks falling is long and boring, with most moves over the week of little consequence, so we’ll keep it short. Fortescue Metals (FMG) lost A12 cents to A$3.40, BC Iron (BCI) fell A6 cents to A99 cents, and Brockman (BRM) slipped by A2 cents to A$1.20. Iron Ore Holdings (IOH) was one of the heavier losers with a drop of A10 cents to A69 cents, while Gindalbie (GBG) lost A3.5 cents to A72.5 cents, despite receiving a positive response from institutional investors invited to a corporate roadshow in Sydney and Melbourne during the week. 

Minews. Gold now, which should have benefited from that fall in your dollar. 

Oz. There might have been some hope of that, but the damage of the gold price falling away to around US$912 an ounce outweighed the benefit of the currency move. A trawl through the gold stocks found a few upward moves, but they weren’t moving by much. Carrick Gold (CRK), a company which does nothing to market itself, reported encouraging assays from its Brilliant prospect near Kalgoorlie, including 18 metres at 4.68 grams a tonne, which was enough to see the stock add A4 cents to A64 cents. At one stage Carrick was trading at A68 cents. The only other gold companies to rise were Adamus (ADU), Allied (ALD) and Tanami Gold (TAM). Adamus added A2.5 cents to A38 cents. Allied filed a strong report from drilling at its delightfully-named Pigibo prospect on Simberi Island in Papua New Guinea. This included a 47 metre hit assaying 2.84 grams a tonne. Good as that was, it only helped Allied up by half a cent to A40.5, although the shares did touch A45.5 cents during Friday trade. Tanami, a stock we used to hear a lot about, was also driven up modestly after it hit a rich lode at its Coyote project in the Northern Territory. Results there showed a best assay of 3.4 metres grading 27.3 grams a tonne. On the market, Tanami added one tenth of a cent to A3.3 cents. 

Now comes the long list of the fallen. At the top was St Barbara (SBM), which announced the closure of some of its older mines to save costs, resulting in a share price fall of A3.5 cents to A19 cents. But also worse off were Kingsgate (KCN), down A40 cents to A$6.40, and Bendigo (BDG), down A1.5 cents to A25.5 cents. Avoca (AVO), meanwhile, was hit very hard by heavy sellers who took A25 cents out of the stock which closed the week at A$1.54. And the list doesn’t end there. Resolute (RSG) fell A8.5 cents to A54 cents, Centamin (CNT) fell A12 cents to A$1.62 and Silver Lake (SLR) fell A13 cents to A58 cents. 

Minews. That’s enough of the bad news from the gold sector. How did uranium and base metals stocks perform? 

Oz. One uranium and two coppers up, but nothing positive from nickel or zinc. The uranium stock to attract support was the day-traders favourite, Extract Resources (EXT), which rose a modest A16 cents to A$6.18, but after that we saw Mantra (MRU) slip A10 cents lower to A$3.55, Uranex (UNX) lose A7.5 cents to A43 cents, and Paladin (PDN) fall A33 cents to A$4.40. 

The copper stocks on the way up were Hillgrove (HGO) and Sandfire (SFR) which we took a look at on Friday. Hillgrove managed a tiny rise of half a cent to A24.5 cents thanks to the big cash injection received from the sale of its stake in a coal-seam gas company. Even with that small rise Hillgrove is still trading well below cash backing. Sandfire remained a traders’ favourite, adding A29 cents over the week to close at A$1.50, but did get up to A$1.56 at one stage on Thursday. Citadel (CGG) finished steady at A19 cents. But everyone else fell. Equinox (EQN) lost A25 cents to A$2.44, Marengo (MGO) was off A1 cent to A11 cents, and Anvil (AVM) slipped A11 cents lower to A$1.55. 

Nickel and zinc, as mentioned, were flat all over. Independence (IGO) was the best of the nickel stocks, easing back by A2 cents to A$4.22. Western Areas (WSA) shed an equally modest A1.5 cents to A76 cents, and Mincor (MCR) fell A7 cents to A$1.42. Best of the zinc stocks was Terramin (TZN) which held its ground at A63 cents, while Kagara (KZL) fell A4.5 cents to A68.5 cents despite finalising a Chinese rescue package. CBH (CBH) lost A1.5 cents to A11 cents and Perilya (PEM) lost A3 cents to A33.5 cents. 

Minews. A quick look at coal and any specials to finish. 

Oz. Coal was a mixed bag, which actually makes it a winner in a down week. Macarthur (MCC) rose by A50 cents to A$6.75, and Riversdale (RIV) was up A67 cents to A$5.68. But Coal of Africa (CZA) fell by A20 cents to A$1.45, and Felix (FLX) fell A4 cents to A$13.90 respectively. No specials to speak of. 

Minews. Thanks Oz. Trust you’re packed for the long haul to London next week and a spot of cricket.


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## drillinto

July 13, 2009

Chinese Buying May Now Slow As Inventories Build, But The Summer Won’t Be Quiet For Everyone

By Rob Davies
www.minesite.com

The initial shock of the credit crunch of 2008 is now passing into recent history. Rather than being replaced by optimism about the future, though, the prevailing mood is now one of glum acceptance that we are all a lot poorer than before. Worse, there seems little prospect of that changing, and that makes people grumpy. In politics it is evidenced by increasingly direct attacks on rivals, and in business by previously unheard of actions. Price negotiations between the Chinese and Rio Tinto have gone on for a record period of time and in desperation it seems the Chinese have resorted to arresting employees of the miner. Whether that will improve the price they ultimately get remains to be seen.
So far this year commodities have held up well, in large part because of the activities of China in building up stockpiles of key raw materials. However, a report by UBS suggests that the Chinese now have more than enough for current conditions and it postulates that purchases in the second half will be significantly less.  Whether it was that information, or the general air of renewed bearishness, over the week the appetite for risk assets was much diminished. 

Equities drifted lower and so did base metals, although the falls were marginal.  Copper dropped US$7.00 to US$4,820 a tonne on the three month price, lead dropped US$8.00 to US$1,620, and zinc dropped US$13 to US$1,507. Against the trend aluminium rose US$5.00 to US$1,570, and nickel was up US$78 to $15,050. No doubt a contributing factor to the lethargy was the start of the summer holidays and a corresponding reduction in trading volumes. 

Not all miners will be having a quiet summer though. The announcement of a new chairman for Anglo American will help concentrate minds at that company and its predator Xstrata. The new man, Sir John Parker, has a track record of delivering good prices for companies being taken over, an indication, perhaps, that the board of Anglo realise that they have had a major role in impoverishing shareholders and that creating wealth is a task better given to Mick Davies, who has an excellent track record.  

Doubtless some could argue that his buccaneering ride through the mining industry over the last decade was only possible because he was easily able to finance his acquisitions through the ready availability of credit. But where he differed from other mining entrepreneurs was in leading the charge of consolidation in the industry and bringing much needed rationalisation to the sector. 

Chasing profit rather than volume growth made a huge difference to the economics of mining, and raised the return on capital employed to respectable levels. If he wins control of Anglo American it will mark the end of the road for executives that have mis-allocated capital for decades, especially in the diamond industry.  That will be a seminal moment, but once Anglo American has gone the industry will need to address the issue of under-investment in exploration and development that went alongside the last decade of consolidation. 

To get back to a more normal inventory level of mines waiting to be developed the industry will have to spend a fortune to find the new deposits that will be needed to service consumers in the decades ahead.  Will that mean that Xstrata will turn its attention to exploration companies after it has gobbled up Anglo? And, more importantly, will there be money available to fund those programmes?  That will largely depend on how poor investors feel once the deal is completed.


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## drillinto

August 03, 2009

The Concerns Of The World’s Economists Focus On China, As It Drives The Global Economic Recovery

By Rob Davies
www.minesite.com

The old aphorism was that when the US sneezes the rest of the world catches a cold. Right now though, the US has pneumonia while the remainder of the globe is only suffering from flu. The reason the rest of the world has not been dragged down quite as much as the US is the rising importance of emerging markets and especially of China. Indeed, now that China accounts for 10 per cent of the global economy the “emerging” label is a bit demeaning. It is the stunning growth of China this year, rather than the continuing contraction of the US economy that is the reason commodities have done so well and confounded expectations.
A graph of the LME index over the last twelve months, shows a fall from the 4,200 mark last August to a low of 1,614 in December 2008, before the subsequent rise to the current level of 2,700. Interestingly that graph is a closer match to the Shanghai stock market index than it is to the S&P 500. Both the LME index and Shanghai have virtually doubled this year, while US stocks have only risen about 20 per cent. 

So that’s fine then. The current buoyant metal prices - US$5,496 a tonne for copper, or US$16,845 for nickel, say - mean that the dark days we witnessed at the turn of the year are now behind us and we can all relax as the Chinese locomotive takes the task of hauling the global economy along over from the US.  No longer do we have to worry about US respiratory diseases infecting its trading partners. 

That argument is valid to some extent, but John Authors of the Financial Times, made some telling points in a video clip last week.   He explained that at the same time as the Shanghai index was doubling in the first half of 2009 Chinese bank lending grew by 50 per cent, a sharp contrast to the tight-fisted approach taken by Anglo-Saxon banks.  

The concern is that this money has not been well used, as evidenced by the 30 per cent fall in Chinese exports over that period.  Instead, some of it seems to have gone into stockpiling and inventory accumulation, with reports on Bloomberg that there is 1.3 million tonnes of surplus copper in store.  That is lot when we recall that there is only 278,000 tonnes in LME warehouses. 

These concerns expressed themselves in a seven per cent fall in the Shanghai stock market in one day last week.  To some that has eerie similarities with an eight per cent fall seen on the same index one day in February 2007, a day that many regard as the precursor to the widespread equity declines that affected all equity markets over the next two years and anticipated the sharpest recession in  a lifetime. 

It may well be that China is now more important to the world economy, and commodities, than the US. But all that means is that concerns over sovereign healthcare simply move from one hemisphere to another.  Whether China is suffering from a summer cold or something more serious will be a key factor for metal markets over the remainder of the year.


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## Boyou

Many thanks for keeping up the posts on this very useful thread.

Cheers Ya'll


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## drillinto

August 06, 2009

Life, And Stockbrokers, Return To Kalgoorlie
By Our Man In Oz
www.minesite.com

Pinch me, to prove that I am still alive, and that the crowd I see is not an illusion! With only slight exaggeration, that is the overriding expression on the faces of the record roll-call of 1,700 delegates gathered in the outback Australian mining town of Kalgoorlie for the annual Diggers & Dealers forum. Some believe that the recovery on metal and share markets over the past three months has been too good to be true. Others believe that the boom is back. But the vast majority who spoke to Minesite’s Man in Oz as he wandered from the auditorium, into the adjoining marquee, and then out into the cold winter sunlight on the steps of the Goldfields Arts Centre, were uncertain about the future, albeit in a cautiously positive way.

A year of living dangerously, which started with the dramatic collapse of much of the world’s banking system, and led to an equally dramatic collapse in commodity prices, has sapped the confidence of everyone involved with mining. It is good that the nickel price is back over US$8.00 a pound, that copper is heading for US$3.00 a pound, gold continues to test the US$1,000 an ounce barrier, and even zinc, that most horrible of metals, is back over US80 cents a pound. But, the damage of the crash is fresh in everyone’s mind, even if the Diggers forum can appear to be mysteriously disconnected from reality - not just because it is located on the edge of a desert in the world’s most isolated country, or because the three-day event is a “boys own” outing, but also because if you had gone to sleep at last year’s event, and woken up this week, it might seem as if nothing had happened. 

Believe it, or not, exactly a year ago, nickel was trading at US$8.00 per pound. Copper was around US$3.20 per pound. Gold was US$918 per ounce. Zinc was US80 cents per pound, and the Aussie dollar was at US84 cents – exactly where it is today. The symmetry in metal prices and the exchange rate is fascinating, and while most shares have some way to go before they reclaim last year’s price levels, many are close to where they were in the first week of August 12 months ago, and some are actually ahead. Three companies which gave presentations on day one of Diggers are case studies for a thesis titled: “Crash, what crash?” Mincor, one of Australia’s more successful nickel miners, is trading 43 per cent higher than it was on the opening day of Diggers last year. Silver Lake is more than double, and Sino Gold is up from A$5.02 to A$5.68. 

Looked at in a more statistical way, the metals and mining index of the ASX is currently just 14 per cent down on where it was at 12 months ago. Or, to play with the statistics, it is 78 per cent higher than the low point reached in late November last year. Or, if you will forgive stretching the point even further, it’s worth remembering that between last year’s Diggers and the November low point, the metals index plunged by 52 per cent. These examples illustrate the point that a hell of a lot happened between August 2008 and today, even if it might also seem that nothing really happened. And that’s why the crowds gathered in Kalgoorlie can be forgiven for gawking at one another, not unlike survivors from a train wreck. They are walking and talking, but all are wondering what comes next. 

To test his hypothesis that we have more questions to ask than answers, Minesite’s Man in Oz conducted two tests of the Diggers crowd. The first test was a simplistic observation of body language and crowd activity. The second was an up-market version of the Vox Pop type of poll favoured by tabloid newspapers, with the people quizzed in this instance all being chief executives of listed mining companies. 

Observation provided a glimpse of where we are in the market cycle, best described as a sort of back-to-the-future experience, with everyone wishing for things to happen, but not quite sure where to start. Without conducting a precise head count, it was still fairly obvious that this year’s event was dominated by bankers, stockbrokers, accountants, lawyers and public relations practitioners, all looking for work. Smelling a story, but not really able to find one, was a record media attendance with 56 journalists, photographers and hangers-on registered, the 42 that came last year. 

Dinkum diggers were swamped by wannabe dealers. Then came the mobile phone test on the forecourt of the Arts Centre, where at any one time 150 delegates can be seen chatting, smoking, drinking coffee, or speaking on their phone. Well, not quite true. Last year, as the clouds of the crash gathered, perhaps a third of the forecourt mob were on the phone, with worried looks on their faces. This year, at afternoon tea time, Minesite’s Man counted three. Why? The only answer is that there was no-one to talk to back at head office, because there wasn’t much happening. 

The second test, the CEO walkabout, was as equally enlightening as it was imprecise, though for investors on the other side of the world it is surely useful to hear from the horses themselves as to how they see the future. One man who has peered into the abyss of failure, and climbed out, is Michael Kiernan. “It’s really been a case of looking around to see who’s here”, said the one time head of Consolidated Minerals. “We’re all cautious. We know the worst is behind us, but we’re not sure what’s ahead. No-one is being bullish, but we are optimistic.” 

Gavin Thomas, chief executive of the goldminer, Kingsgate Consolidated, echoed Kiernan’s sentiment. “This year it’s not about discovery”, he said. “It’s about consolidation. There are far too many bankers about, all looking for deals. There’s not much spruiking by the miners because not many have anything to spruik about. Basically, there’s not a lot new to say, but the event remains a great place to re-establish contacts.” 

Peter Harold, chief executive of the nickel miner, Panoramic Resources, said the past few months had been all about watching the nickel price return to fair value. “The question is really whether fair value today is the same as yesterday, and I suspect not”, he said. “Average grades in the world’s nickel mines continue to fall, and while US$3.50 per pound might have been fair value a few years ago, today it is probably closer to US$7.50 per pound.” 

Mark Ashley, chief executive of the goldminer, Apex Resources, managed to avoid Minesite’s Man until they shared a plane back to Perth late on Monday. He flagged the potential for growth via acquisition, and is considering a number of strategic moves. A similar view was espoused by Silver Lake chief executive Les Davis, who was looking very dapper in a pinstripe suit, as befits a man who has orchestrated a very successful development story. If the suit spoke of success, Les’s view of the world is still cautious, though. “I’m not convinced that we’re through the worst of this market”, he said. “It’s good, but the banks are still in trouble. Gold is a good place to be in these times.” 

John Jones, founder of Troy Resources, was equally optimistic about gold, and delighted that his faith in Troy’s Sandstone operations has been confirmed by a fresh discovery which will add years to that mine. Also occupying Jones was the work of a private company he is helping to build, Altan Rio, which has a promising discovery in Mongolia. Like most other leading Australian mining executives, Jones is optimistic, but not excited. “We’re on the way back, but there’s still a long way to go”, he said. 

That view was repeated by most of the 14 chief executives who, perhaps unwittingly, participated in Minesite’s Vox Pop, among them Tim Goyder from Chalice Gold, Ian Mulholland from Rox, George Jones from Gindalbie, John Lewins from Platinum Australia, Stephen Everett from Australian Solomon Gold, and Kevin Willis from Flinders Mines. All can see the light ahead, even if they remain uncertain about how fast they are travelling towards it.


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## drillinto

Babak: "China's bubble 2.0 threatens global recovery"

http://www.tradersnarrative.com/chinas-bubble-20-threatens-global-recovery-2820.html


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## drillinto

August 07, 2009

Chinese Steel Production Is Underpinning Global Iron Ore And Coking Coal Production, But How Long Can It Last?

By Alastair Ford
www.minesite.com

It can be a dirty business, iron ore. Sure, finding an attractive mineral deposit and keeping hold of it once it starts to look rich enough to tempt avaricious bureaucrats or rival local operators is never easy. But it’s surprising how many of the current tussles at the beginning of the metals supply chain involve iron ore. The great West African iron ore deposits have lately been witness to allegation and counter allegation as two small London-traded mining companies battle for control of the old Tonkilili projects, and judging by the accusations that have been thrown around, the libel laws in Sierra Leone are clearly open to very liberal interpretation.

Across the border in Guinea Rio Tinto has just been dumped off the Simandou iron ore project, which has now been passed over to one of the most influential individuals on the continent in the metals arena, the Israeli Beny Steinmetz. Elsewhere, the battle for the Berezovskoye iron ore deposit in the Chita region of Russia between the Chinese conglomerate Xiyang continues. And further up the line, in Australia Rio Tinto executives are still smarting following the arrest of several of their price negotiators in China on allegations of industrial espionage. 

Iron ore is clearly still a much sought after commodity, even after the global financial crisis, and some of the world’s less salubrious characters are clearly not too worried about how they get their exposure. The driver, as ever, is China. To underline this point, one only has to look at the recent financial results from the mining major Anglo American. These results were widely viewed as terrible, as diamonds, platinum and gold all underperformed. The one saving grace was Kumba, the company’s iron ore division, which delivered US$738 million of earnings to the parent, the largest single contribution, on the basis of a new focus on selling directly to China. 

Chinese steel production is still on the rise, and hit record levels in the first half of 2009. That the rest of the world’s production is flat or in decline means that the Chinese, along with the Japanese, the Koreans, and other key buyers of iron ore once again have the upper hand in the annual price negotiations with the major producers BHP Billiton, Rio Tinto, and Vale, and that they are also enjoying a buyers’ market for the other key ingredient to steelmaking, metallurgical coal. But with spot iron ore at a 10 month high at around US$110 to US$112 per tonne, the Chinese may now have to settle for a less severe price cut than they'd been hoping for.   

BHP Billiton recently referred to the overall prevailing economic conditions as “a modest demand environment”, but on the other hand also reported coal and iron ore as among the strongest propositions it has right now. The difference is that while operations involving metals or alloys such as aluminium and manganese are in decline or operating below capacity, the Chinese demand for steel is at least allowing for iron ore and metallurgical coal output to stay steady or increase, even if pricing for those products is weaker. This means that margins are being squeezed on the coal side, and some mines are shutting down, but overall the mood in the industry remains optimistic. Meanwhile with spot iron ore prices trending upwards, many smaller Australian producers have been able recently to sell even at a premium to spot. 

The trend now probably will be away from annual price negotiations for iron ore, and away from spot settlement for coal shipment, as the Chinese increasingly lock down supply in project specific deals, or off-take agreements. In spite of the recent spat between Chinese officialdom and Rio Tinto, lots of these deals are being done with Australia. Chinese companies are moving in a big way to lock in supply from projects in the Australian iron ore producing areas of the Yilgarn and Pilbara, as a defensive move against any possible combination of BHP Billiton’s and Rio’s operations down there. Meanwhile Chinese imports of coking coal have also jumped significantly, for the slightly paradoxical reason that lower coal prices have rendered many of China’s own mines uneconomic. US coal giant Peabody, and Switzerland’s Xstrata have both ratcheted up coal shipments to China recently, although Xstrata’s boss Mick Davis has warned that prices may soon return to levels at which China’s own mines can be reopened. However, a further complication is that China has been on a long campaign to close down unsafe coal mines, which has further restricted the local supply.  

What happens next largely depends on the success of president Obama’s stimulus package. US spending is expected to drive up the cost of steel and associated raw materials, and indeed Nucor, the second largest US steelmaker raised prices recently for the first time in many a long month. If the stimulus can drive a global recovery then coal and iron ore prices will be on the march again. But there’s only so long the Chinese can prop up these markets on their own. Anecdotally, the Chinese expect some domestic weakness of their own by 2011. By that time, with any luck, recovery elsewhere will be taking up the slack.


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## drillinto

UPSIDE POTENTIAL FOR METALS AND MINING STOCKS 
Credit Suisse forecasts growth period for long-term commodity demand
Credit Suisse analysts say they continue to like the long-term story for metal demand, suggesting demand will remain at strong levels in the next 10-15 years. 

Author: Dorothy Kosich / www.mineweb.com
Posted:  Monday , 10 Aug 2009 

RENO, Nevada [USA]   

In recently published research, Credit Suisse metals and mining analysts say they are "selectively bullish" on certain commodities-such as copper, zinc, carbon steel, platinum and nickel-and remain "long-term bullish" on commodity demand driven by demographics and global infrastructure spend.

Credit Suisse's analysis suggests we are currently in a growth period for long-term commodity demand driven by the ongoing industrialization of China and emerging markets; global demographic shifts that will drive commodity-intensive demand for infrastructure; and by a wealth-transfer effect which requires infrastructure that is the "single greatest driver of long-term commodity demand."

Research analysts Michael Sillaker, Elly Ong, Alessandro Abate, and Hannah Kirby wrote, "We believe global industrialization will continue and, as such, ongoing demand for commodities should remain strong. Against this backdrop, we believe there is substantial long-term upside potential for steel, metals and mining stocks."

In their analysis, the analysts determined China's apparent metals consumptions appears "way ahead of real demand growth rates." They believe "China is arbitraging the West on commodity prices. It is acting as an effective ‘vacuum cleaner' for commodity demand in an ex-China recession, which would not have been material ten years ago."

"China appears in effect to be frontloading its own industrial recovery and stimulus by buying commodities as a cheap asset class. This compares with the Western world, which tends to buy most when demand is at its peak and prices are high. This is a well thought-out strategy from China but we should caution that apparent demand growth rates are well above where we see real demand growth right now and, as such, demand from China is unsustainably high in our view."

Credit Suisse's analysis suggests the country is currently consuming the amount of copper it should be consuming in 2011/2012. "There is a risk of a pull back, especially if prices start to rise, and any rapid pullback is unlikely to be matched by ex [external] China demand growth."

Meanwhile, the analysts forecast "a substantial tightening in the ex China supply-demand balance for all commodities (although some more than others)."

"We continue to like the long-term story for metal demand," the analysts said. "Like the 1950s and ‘60s post-war restructuring phase (when metal demand grew in the 6-8% range), we are now in what we believe is a long-term industrialization phase. ...Therefore, after the cyclical recovery, we forecast, metals demand should structurally remain at relatively strong trend levels in the next 10-15 years."

Credit Suisse advises the strongest commodities for its long-term view of the global metals and mining sector are:

•1)       Copper-potentially 21mt of demand by 2012 will not likely be met by new mine capacity. Even under a significant long-term slowdown in China, "we would get to 25mt of copper demand by 2016-which means new mines are necessary. When new mines are necessary the pricing dynamics should move from cost plus pricing to long-term pricing that satisfies the IRR of newbuild."

•2)       Zinc-"Although zinc is not favoured by many investors, we believe they often forget how late-cycle this metal is (within the 20-30-year cycle). ...Mine depletions from 2012E could be significant, although Chinese production capability is potentially large in our view. ...We believe China's mined output is in general small scale and ‘inefficient' and hence high cost, which is unlikely to be cost effective in a demand boom. We expect a sharp price increase in zinc in 2011/12, which will be required if CEOs are to be encouraged into building new projects."



•3)       Iron ore-"we are positive structurally on volume, as low-cost high-quality ore continues to take market share from high-cost production, notably in China and India, as the steel market continues to grow at 4-5% in the long term. Nonetheless, given spare capacity (largely higher cost), new volumes from the seaborne majors will, we believe, come at the expense of price in the long term."



•4)       Coal-thermal coal looks set for the long term. Metallurgical coal is structurally tight in supply, but geared to external Chinese demand; "so it may take time to return to 2008 levels."



•5)       Platinum-"limited new capacity, ongoing supply problems, and increasing global care and jewellery market, with cleaner cars suggesting a long-term switch to diesel. Fuel cell demand remains a positive long-term possibility."


"If investors, like us, favour the above commodities, then Rio, Anglo or Xstrata are probably the equities to own," the analysts advised.

‘BHP possibly has the best commodity mix and the strongest growth profile of the stocks in our universe. The problem we have with the stock is that the market appears fully aware of this and the stock therefore appears to have priced this in," they said. "We do think, however, that BHP is a relatively strong defensive play in the cyclical universe for more cautious investors wanting cyclical exposure."


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## drillinto

August 17, 2009

The Price Is Right: Commodities Strength Continues, As The Fundamental Outlook Remains Favourable

By Rob Davies
www.minesite.com

Base metal prices reached new highs for the year last week, but somehow pundits and commentators deemed this milestone less worthy of comment and attention than it was when equity prices hit a their own year highs recently. Yet the underlying drivers for both are the same. There’s a growing perception that the recession is over and it’s all good news from here on.
Well, that’s what the bulls say at any rate. The bears take the view that the recently reported growth in the French and German economies of 0.3 per cent in the second quarter is so anaemic as to hardly count. Besides, they add, a significant factor in that number was that the base from which that recovery is coming was already weak. As the year progresses that arithmetic input of a low starting point will start to make whatever is happening now look a lot better. 

Even so, few miners can be unhappy at seeing copper trading at US$6,413 a tonne, aluminium at US$2,034, nickel at US$21,065 and zinc at US$1,897. Almost all the major metals are now at twice the price they were fetching during the first quarter. And depending on which markets you look at equity indices are 30 per cent to 50 per cent up from their lows. 

The ongoing discrepancy between perceptions and reality was beautifully illustrated last week when BHP Billiton reported its results. Although the company’s shares are now trading at over £15.00 they were below £10.00 in December 2008. Yet in the face of that share price strength the company reported a 62 per cent fall in earnings per share.  

Commodity pricing is much more about the fundamentals of supply and demand than the pricing of equities is, because commodities are not widely viewed as an asset class for investors, though the widening use of commodity ETFs is changing that a little. Even so the close correlation in prices shows how connected they are in practice. 

And, at the moment, the fundamentals for commodities look pretty good. Inventories, at least published ones, are still low in relation to demand. China’s consumption is still firm and there are indications that even if construction and car building in the west is not rising it is at least not getting any worse. There is no further downside from a plant that is closed. 

Some of the activity is supported by the environmentally ludicrous scheme of incentivising people to scrap perfectly good old cars to buy new cars. Those schemes though, are cash constrained and when they end, as inevitably they will, one wonders what governments will do for their next trick. By how much will the unsold inventory of cars have really been reduced? 

In equities history offers few comparisons for the near 50 per cent surge in valuations that we’ve witnessed over the last six months. What comparisons there are date back to the 1930s, and the analogy there is not very comforting. Investors in commodities are more used to such roller coaster rides in pricing and, although there are reasons to believe that commodities are overbought on a momentum basis, the strong fundamentals should provide better support than for equities. 

Moreover, the extremely low interest rate environment supports the futures markets and nickel is the only metal with a backwardation out to 15 months. All the other base metals are in contango with gently rising quotations on a three month and fifteen month basis. That suggests this is an orderly market, not a bubble. Whatever investor’s views and opinions of the short term future, the sum total of human knowledge is actually represented in those prices on the LME.


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## drillinto

A glance at 100 copper stocks:

http://www.mineweb.com/mineweb/view/mineweb/en/page54?oid=87755&sn=Detail


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## drillinto

August 22, 2009

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com

Minews. Good morning Australia. The August malaise certainly took a firm grip of your market last week. 

Oz. It did, and it wasn’t made any easier by half the country staying up late into the night to watch cricket, a decision most Australians now regret. Overall, the market, as measured by the all ordinaries index, fell by 3.6 per cent last week, taking it back to where it was in the opening week of August. The metals and mining sector declined faster with a fall of 4.7 per cent, while the gold index did “least worst” with a fall of 3.1 per cent. But golds can be expected to rebound strongly next week after the late rally in the London gold price which moved back over US$950 an ounce after we had closed here in Australia.

Minews. It’s interesting that your stock market fell in spite of what seems to have been a flow of positive resources news last week. 

Oz. We are living in confusing times. Last week was a cracker for the Australian resources sector. It ended with the national business newspaper, the Financial Review, splattering across its Saturday morning edition a two-word front page headline: “Resources Boom”. What brought that flush of enthusiasm on, from a media outlet which usually derides resources - in much the same way your Financial Times has never quite come to grips with gold - was the double-barrel effect of a monster gas sales deal with China, and a US$6 billion free kick awarded by China to the iron ore miner, Fortescue Metals Group (FMG). 

Minews. What interests investors is whether it’s all media hype or whether we really are on the verge of a return of the boom. 

Oz. If pressed for an early verdict the answer is positive - yes, the boom is back. But given a bit more time to consider the matter, the verdict might be a little more cautious – perhaps, at least, the first seeds have been sown for a return to the boom. 

Minews. Which boils down to a debate about timing more than anything else. 

Oz. Precisely. Last week’s deals in the worlds of liquefied natural gas and iron ore were quite remarkable, and cemented the already impressive trade relationship that Australia enjoys with China, even at a time when the two countries are at a diplomatic loggerhead over human rights and spying allegations against a Rio Tinto iron ore salesman. The gas deal, in which ExxonMobil sold most of its annual share of production from the Gorgon liquid natural gas (LNG) project for US$50 billion, is likely to be the start of a flood of LNG deals as Australia starts to monetise its vast reserves of natural and coal-seam gas. The FMG deal, in which China promised the company a loan of US$6 billion on advantageous terms, came after the Chinese won a bonus reduction on the price paid for Fortescue’s annual iron ore shipments. That extra money is likely to be good news for FMG, as well as for the flotilla of local small iron ore companies desperate to gain access to the country’s rail and port services, and all because China, in sympathy with various levels of Australian government, wants to see as much ore as possible hitting the ports. 

Minews. Which leads us to prices, and a natural start with iron ore this week. 

Oz. Good choice. But even with the positive news that hit the headlines this week, most share price movements were down. There were only a handful of winners. FMG itself ended the week steady at A$4.45, while several of the sector leaders fell quite sharply. Atlas Iron (AGO) lost A16 cents to A$1.78, BC Iron (BCI) fell A8.5 cents to A96.5 cents, and Iron Ore Holdings (IOH) slipped A7 cents to A71 cents. Going against that trend were a couple of stars. These were led by Polaris Metals (POL), which has agreed to an all scrip takeover offer from the mining services company, Mineral Resources (MIN). The two companies already have a strong working relationship. The bid lifted Polaris by A9.5 cents to A39.5 cents, while Mineral Resources rose by A43 cents to A$5.14. 

Meanwhile, Flinders Mines (FMS) was another strong performer in the iron ore space. Across the week the company added A0.7 of a cent, but on Thursday traded up to A10.5 cents, which was double the price the shares were at at the middle of last week, and enough of a rise to cop a speeding ticket from the ASX, perhaps the first for Flinders since it switched from diamonds to iron ore. 

Minews. Gold next please, and we’ll bear in mind that the price hike on Friday came too late for you. 

Oz. Most gold stocks trended down, with the odd exception. Shares in Pioneer Resources (PIO) - which has just changed its name from Pioneer Nickel - doubled on Thursday after the company reported excellent drill hits at its Lignum Dam project in Western Australia. Best assay was 11 metres at 5.63 grams of gold a tonne from a depth of 40 metres. The company’s shares ended the week at A5.7 cents, up A2.1 cents or 58 per cent. Troy (TRY), meanwhile, continued its strong upward run, adding another A7 cents to close the week out at A$1.90, a shade off a 12 month high of A$1.95 reached earlier on Friday. And Alkane (ALK) made a welcome return to the winner’s circle with a gain of A4 cents to A33 cents, which was also a slight fall back from a 12 month high of A38.5 cents reached earlier on Friday. Alkane’s strength was perhaps a result of reports that China is cracking down on its rare earths industry. Two other rare earth plays, Lynas (LYC) and Arafura (ARU) were also among the winners. Lynas added A12.5 cents to A58.5 cents, and Arafura rose by A13.5 cents to A63 cents. 

Elsewhere among the pure gold stocks Sino (SGX) added A9 cents to A$5.83 and Gryphon (GRY) rose A1.5 cents to A33.5 cents. After that it was largely downhill. Kingsrose (KRM) paid the price of a positive mention on Minesite, sliding by A4 cents to A48.5 cents, but is still double where it was four months ago. Avoca (AVO) fell A9 cents to A$1.62 after its bid for Dioro (DIO) failed to get past the 50 per cent mark. Dioro also lost ground, falling by A8 cents to A73 cents. Adamus (ADU) lost A2.5 cents to A34 cents, and Kingsgate (KCN) fell A33 cents to A$6.45. 

Minews. Base metals and uranium to finish please. 

Oz. Copper attracted most interest last week, with two stand-out stocks. Citadel (CGG) gathered traction after it announced an off-take agreement and capital injection, news which propelled the company’s shares to a 12-month high of A34 cents in early trade on Friday. Later in the day the shares eased, to close at A32.5 cents for a gain of A6 cents over the course of the week. The other big winner was Rex Resources (RXM), which reported excellent drill hits at its Hillside project on South Australia’s Yorke Peninsula. Rex rocketed up by 73 per cent to A$1.40. The eye-catching assay was only 1% copper, but it was over a 200 metre intersection. 

Minews. It might be time for an update report on Citadel, and perhaps a look in detail at what Rex is up to. In the meantime, let’s finish the call of the card. 

Oz. Shares in most other copper companies fell. Anvil (AVM) dropped by A43 cents to A$2.70, Equinox (EQN) lost A21 cents to A$2.84, and Sandfire (SFR) continued its retreat, losing A21 cents to A$1.65. All the nickel and zinc stocks lost ground. Mincor (MCR) fell A26 cents to A$2.63, after it reported its first loss. Western Areas (WSA) did much the same - reported a loss, and fell by A70 cents to A$5.48. Independence (IGO) lost A33 cents to A$4.65, and Panoramic (PAN) dropped by A41 cents to A$2.44. Bass Metals (BSM) lost least of the zinc stocks, slipping half a cent lower to A20 cents. 

Uranium stocks were flat, with one rise. Toro (TOE) added half a cent to A18.5 cents. Extract (EXT) ended its meteoric run, easing back by A18 cents to A$8.30, while Mantra (MRU) was steady at A$3.70. 

Minews. Thanks Oz.


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## drillinto

August 24, 2009

Whisper It Softly, The Worst May Be Over

By Rob Davies
www.minesite.com

Even though metal prices fell back last week, the underlying news flow for the industry continues to improve. Because even though emerging markets are the key growth market for metals, the reality is that over 50 per cent of demand still comes from countries in the OECD. So the news that France, Germany and Japan all reported positive growth in the second quarter of 2009 is encouraging confirmation that the corner has been turned.

And now that equity markets have bounced 30 per cent and some metals prices have doubled, many economists have now pronounced recovery is on the way.  Such statements, of course, only go to show that in many ways economists are the ultimate apparatchiks of the Department of The Bleedin’ Obvious. Prices started to tell us that five months ago. 

While the economic news drove equity markets to new heights for the year, the last week wasn’t quite so positive for metals. Copper dropped 4.6 per cent to US$6,121 a tonne, nickel slumped 8.9 per cent to US$19,200 a tonne, and aluminium split the difference with a 6.3 per cent fall to $1,905 a tonne. Lead and zinc were more subdued, falling 3.5 per cent and five per cent respectively to US$1,820 and US$1,803 a tonne.  

On the news front the big development was better than expected housing starts in the US. For a more serious analysis of commodities the Outlook for Metals and Minerals written by Vivek TulpulÃ© and which accompanied the recent interim results from Rio Tinto is an excellent summary of the current situation.  He too concurs with the consensus that the worst is over, although he warns that the fragility of many countries and the banking system means that we cannot ignore the possibility of some secondary shocks.  

He attributes the current strength in hard commodities to six factors: Chinese demand, the end of destocking, production cuts, the ending of recession, low interest rates, and speculation about a lack of finance for new projects. 

Each factor deserves more analysis than can be given here but several features are worth noting. Mr TulpulÃ© makes the point that 73 per cent of the global stimulus to infrastructure spending is coming from China. That has given a major boost to metals, as illustrated by the fact that copper imports into China in the first half of 2009 were 30 per cent higher than total copper imports in all of 2009. 

In contrast aluminium demand fell by 20 per cent in the first half, due to changes in the Chinese pricing structure. Iron ore, as is well known, has been a strong market, driven not just by infrastructure spending but also by the ongoing Chinese railway construction programme, big developments in rural housing and reconstruction in the wake of the Sichuan earthquake. 

One long awaited event finally came to pass this year as China became a large importer of thermal coal for the first time. High domestic production costs and low international freight rates finally tipped the balance to deliver a situation that had long been predicted. 

Overall Mr TulpulÃ© concludes that the world has weathered this severe crisis very well, mostly due to prompt government action. Although he expects the fundamentals behind the recent price rally to remain in place into 2010, he is cautious about how strong an impact this will have on some, at least, of the metals. 

Nonetheless, Mr TulpulÃ© also points out, as a more long-term bullish view, that the real driver for world growth is coming from emerging markets. The fact that per capita metal consumption in those regions is well below that of the developed world will drive significant incremental demand growth over time he says.


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## drillinto

August 29, 2009

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com

Minews. Good Morning Australia. Your market seems to have had a strong week. 

Oz. It was promising, in parts. Each sector produced an eye-catching winner, either from a corporate deal, a strong profit, or an exploration result, but the overall trend among mining stocks failed to match the very buoyant tone evident in the wider Australian market. The metals index on the ASX ended the week up 2.8 per cent, while the all ordinaries added 4.4 per cent, an indication of how well banks and industrials performed. The hottest game for speculators was in lithium, the metal earmarked for great things in electric car batteries. A new player, Reward Minerals (RWD), said it was joining the Australian lithium game last week, and was immediately handed a 50 per cent higher share price.

Minews. Presumably there is some substance behind such a sharp upward move? 

Oz. Perhaps, but draw your own conclusions because all that actually happened to warrant the rise was that Reward announced the lodging of an application for an exploration tenement over a lake in the Western Australian wheatbelt. The company claims it has noted “relatively high soluble lithium values” during earlier exploration for potash. Given that this lake, Lake Dumbleyung, holds a unique place in Australian history, the chances of there ever being a lithium mine in the area is pretty remote. Older readers might remember that the late Donald Campbell set a world water speed record there in 1964, and it remains a playground for local farmers. Nevertheless, fearless punters piled into Reward within hours of the Wednesday filing of the “soluble lithium” report, driving the stock up from A31.5 cents to A38 cents on Thursday, and then up another A9.5 cents to a close on Friday of A47.5 cents. 

Minews. Interesting. Even if it leads nowhere it’s a measure of speculative interest in your market. 

Oz. It is, and there’s no doubt that lithium is the flavour of the month. The other two local players in that space also had a good week. Galaxy Resources (GXY) raised A$26 million in fresh capital in a combined capital raising and debt-funding deal with a Chinese company, Creat Group. The funds will be used on its Mt Catlin project. The major winner in that partnership so far are the Chinese, though, given that they agreed to pay A88 cents a share for a 19.9 per cent stake in Galaxy on Tuesday when the stock was trading around A$1.40. It closed on Friday at A$1.42, up A9 cents for the week. Meanwhile, Reed Resources (RDR), the other player in the lithium game, successfully raised a fresh A$10.9 million on the strength of an option to acquire an old WMC Resources lithium prospect. It closed down A2 cents on Friday at A37 cents. 

Minews. Nothing like a speculative boom to generate interest in the market! Let’s shift across to the sectors and those eye-catching movers you mentioned earlier. 

Oz. Iron ore produced the star of the week, also courtesy of another Chinese-linked deal. Aquila Resources (AQA), which has been steadily building a portfolio of coal, iron ore and manganese interests, signed a funding and future commodity-supply deal with China’s biggest steel mill, Baosteel. As well as injecting A$285 million into Aquila through a placement priced at A$6.50 a share, Baosteel also said it would help source low-cost finance for Aquila’s mine development plans. On the market, Aquila rose A55 cents to A$7.15. Elsewhere in the iron ore space trading was mixed. Gindalbie (GBG) added A4 cents to A85 cents after a broker report compared it favourably with Fortescue Metals (FMG). Fortescue, meanwhile, slipped A8 cents to A$4.44. Meanwhile, Giralia (GIR) rose A1.5 cents to close the week at A71.5 cents after strong exploration results from the Mt Webber project. At one stage early in the week shares in Giralia were trading as high as A79.5 cents, before they eventually gave up ground. Other risers included Brockman (BRM), up by A6 cents to A$1.41, and BC Iron (BCI), up by A3.5 cents to A$1.00. Centrex (CXM), which announced a sales deal covering its Wilgerup project in South Australia, was steady at A47 cents, while Golden West (GWR), which is showing early signs of revitalisation, slipped A1 cent lower to A36 cents. 

Minews. We might take a closer look at Golden West if what you say about revitalisation is correct. For now, let’s move through the rest of the sectors, with gold next, please? 

Oz. Sino Gold (SGX) was the clear winner among the Australian gold stocks, thanks to the A$2.2 billion merger proposal which came in from Canada’s Eldorado. The share swap deal, which seems assured of success, values Sino at A$7.24 per share. That price helped move Sino’s shares up A$1.13 over the week, to close at A$6.65. Investors in Kingsgate (KCN) were also better off after the company reported an improvement in profits. Kingsgate’s shares rose A48 cents to A$7.07. Alkane (ALK) was also in the winner’s circle, though whether the buyers were coming in for its gold or for its rare earths project is a bit of a guess. Still, the shares were up by A4.5 cents to A39 cents by the end of the week. Also on the move was Troy (TRY), which continued its strong recovery investors continue to warm to the company’s three mine strategy. Troy ended the week at A$2.00, a gain of A15 cents, but did trade as high as A$2.07 on Wednesday, a 12 month high. Elsewhere, Drake Resources (DRK) made a surprise return, putting in a rise of A5 cents to A24 cents after it announced the start of drilling at its Falun project in Sweden. Other movers included Silver Lake (SLR), which added A5 cents to A75 cents, and St Barbara (SBM), which gained A2 cents to A22.5 cents. Apex (AXM) continued its downward spiral, losing A3.1 cents to A9.4 cents. Finally, Bendigo Mining (BDG) ended the week steady at A23 cents despite posting a modest annual profit of A$8.25 million. 

Minews. Base metals and uranium next please? 

Oz. Zinc produced most of the base metal winners for the week, which was a surprise in itself. Though most of the moves were modest, it could be a pointer to a trend, given that the zinc price continues to creep higher, and that at US$0.83 a pound most zinc mines should be in the black. In that context, Terramin (TZN) added A3 cents to A74 cents, Perilya (PEM) rose by A1.5 cents to A38.5 cents, and TNG (TNG) rose A0.8 of a cent to A7 cents. CBH (CBH), however, slipped half a cent lower to A10.5 cents. 

Copper produced a handful of winners, but an equal number of losers. Jabiru (JML) reported an upgraded resource at its Teutonic Bore mine, news which lifted the stock by A4 cents to A36 cents. Citadel (CGG) continued to build support, and put in a rise of A1.5 cents to A32.5 cents. Hillgrove (HGO) was also stronger, up A1.5 cents to A24.5 cents. Going down, OZ Minerals (OZL) was hit with heavy selling after it reported a big loss. On the plus side, this should clear out the last of the dead wood following its big corporate re-shuffle. OZ dropped A6 cents to A$1.05. Also weaker was Sandfire (SFR), which fell A10 cents to A$1.52. Anvil (AVM) was steady at A$2.70. 

Nickel stocks were all down, and that ended a very solid period of recovery. Mincor (MCR) fell A37 cents to A$2.33. Independence (IGO) slipped A7 cents lower to A$4.45, and Panoramic (PAN) lost A9 cents to A$2.40. 

Among the uranium stocks Extract (EXT) was the star, again. It rocketed up by another A$1.08 to A$9.50, but did hit a fresh high of A$9.90 earlier in the week. At this latest price, Extract is capitalised at A$2.1 billion, within sight of the A$2.8 billion value of its Namibian rival, Paladin Energy (PDN) which managed a rise of A14 cents to A$4.57 last week. Bannerman (BMN), another Aussie in Namibia, rose by A7 cents to A$1.15 last week. But after that most uranium stocks slipped lower. Mantra (MRU) lost A15 cents to A$3.55, while Uranex (UNX) fell A2.5 cents to A35 cents. 

Minews. Thanks Oz.


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## michael_selway

drillinto said:


> Among the uranium stocks Extract (EXT) was the star, again. It rocketed up by another A$1.08 to A$9.50, but did hit a fresh high of A$9.90 earlier in the week. At this latest price, Extract is capitalised at A$2.1 billion, within sight of the A$2.8 billion value of its Namibian rival, Paladin Energy (PDN) which managed a rise of A14 cents to A$4.57 last week. Bannerman (BMN), another Aussie in Namibia, rose by A7 cents to A$1.15 last week. But after that most uranium stocks slipped lower. Mantra (MRU) lost A15 cents to A$3.55, while Uranex (UNX) fell A2.5 cents to A35 cents.
> 
> Minews. Thanks Oz.




Wow EXT keeps climbing. Wand this stock a penny a few years ago?









> Resource Capital Research
> September Quarter 2009
> 
> EXT's scoping study indicates Rossing South mine (14.8mlbpa) could dwarf neighbour Rossing (2008: 9.1mlbpa; RIO 69%). Shares are reasonably valued on project NPV, but upside is likely from further exploration success and corporate intrigue involving RIO.
> 
> Overview:
> EXT’s exploration for uranium in Namibia has exceeded expectations as the world class potential of the major RÃ¶ssing South discovery (located immediately South of the RIO’s RÃ¶ssing uranium mine) becomes more evident. Exploration is advancing rapidly towards 300mlb U3O8 and beyond. The recently released scoping study targets a 14.8mlbpa operation (production 2013?) which if operating today would be the world’s second biggest uranium mine (with 60% higher output than Rossing itself!). Rossing South Project – Resource Status: EXT has identified extensive strongly mineralised high grade alaskite which is undoubtedly a major southern extension of the RÃ¶ssing Mine (RIO 69%) orebody (previously concealed beneath Namib desert cover). EXT has identified two initial mineralised zones (Zones 1 and 2) covering a combined 6km strike length out of a total target zone of 15km.
> 
> Zone 1 (2.4km): 3 Rigs (1 RC and 2 core) are currently engaged in resource definition drilling on 50 x 50 m spacings (~80,000m to date) – an upgraded Indicated & inferred JORC resource for Zone 1 of 147mt @ 449ppm for 145mlb contained U3O8 was announced in July ’09. Further drilling is proceeding which is expected to further increase the resource size and upgrade the JORC classification. Zone 2 (2.0km): EXT has completed ~58,000m of an on going intensive resource definition drilling program, using 3 RC rigs drilling on 100m x 100m centres. The maiden Zone 2 JORC inferred resource of 122mlb @ 543ppm was confirmed in Jul ’09 - well in excess of target 106mlb and impressive grades– better than Zone 1. Zone Extensions: All zones drilled to date are open at depth and along strike. EXT’s initial drilling ~2.8km S of Zone 2 intersected uraniferous alaskite with handheld spectrometer results indicating better results than Zone 1 discovery holes. Very encouraging for resource extensions beyond Zone 2 This anomaly is being drilled, as well as broader reconnaissance drilling on 1.6km spaced lines.
> 
> Further major resource upside beyond 300mlb seems assured based on this work. Rossing South Scoping Study Cost Estimates: GRD Minproc has completed preliminary
> cost estimates based on a 15mtpa operation, conventional acid leach with 92% recovery, head grades 487ppm, for 14.8mlb/year U3O8 production. Capex estimate is US$704m, opex US$23.60/lb which confirms Rossing South to be very low on the global cost curve. A more detailed PFS is underway with a heap leaching alternative also being considered.
> 
> Ida Dome Project: The Ida Dome resource is ~20km south of the RÃ¶ssing S. A JORC resource of 25.1mlbs U3O8. was defined before Zone 1. This is now low priority, additional resource potential is high.
> 
> Corporate: Rothschild has been engaged by EXT as a corporate advisor, with project financing in mind. Boardroom stoushes now resolved with significant shareholders RIO and Polo Resources appointing Directors, and major shareholder Kalahari to appoint new MD after Peter McIntyre retires Sep ’09.
> 
> Investment Comment: EXT shares have continued their spectacular run, and have pushed through the A$7.50 – A$8.00 target we set in our last Review. Now that we have scoping study cost data, our preliminary modeling (based on 10% discount rate, US$60/lb long term U price and fairly severe 30% discount applied to scoping study NPV) indicates assessed value around A$7.20 (~US$4/lb for current RS resource). This suggests the RS project as scoped is fully valued at current share price. That notwithstanding, we expect further share upside (~20-30%) with on-going corporate intrigue (RIO stake) a factor (Forsys takeover took place at ~US$7.50/lb for an inferior grade resource), and the very high probability of further major exploration upside.
> 
> http://www.rcresearch.com.au






> RBC Capital Markets comments on the Capital Raising
> 
> 
> RBC Comment :
> 
> Extract Tops Up the Till; Increasing Target to $12
> 
> • On August 25, 2009, Extract Resources announced it is raising $91 million by
> way of a two-part equity issue comprising a non-renounceable pro-rata offer to
> certain eligible shareholders and a private placement to accredited institutional investors.
> • The proceeds from the two issues will be used to accelerate exploration activities at the RÃ¶ssing South project and to complete the Definitive Feasibility Study.
> • We expect this issue to improve trading liquidity on the TSX.
> • The three major shareholders of Extract (Kalahari Minerals, Rio Tinto and Polo Resources) have agreed to take their pro rata share of the Entitlement offer.
> • After this equity issue is closed, we believe Extract will have sufficient funds to carry out its exploration activities as well as its definitive feasibility study.
> • We are increasing our target for Extract to $12.00 per share, up from $11.50, previously.






Thx

MS


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## drillinto

September 01, 2009

Is A Correction In Metals And Equities Prices Imminent?

By Rob Davies
www.minesite.com


Base metal prices made more progress last week, save for aluminium. Equities moved higher as well, as should be expected of a pro-growth asset. Oddly though, money also moved into bonds, taking two year gilts down to a yield of 0.8 per cent and 10 year US Treasuries to 3.52 per cent. But in spite of that, given that the latest data still shows the US and UK economies both contracted in the second quarter, there seems little reason to worry about even more weakness in metals or equities.
Of course it could be that the stellar gains made by equities in the last six months and metals over the course of the year are giving some investors vertigo. The desire to lock in gains on those assets and protect the downside by buying bonds is understandable after the last couple of years. 

Metals of course are simply commodities and, unlike equities, are not pricing in expectations of the future. That was one reason why lead suddenly jumped up last week from US$1,820 to US$2,020 a tonne.  The sudden closure of a lead smelter in the Chinese province of Hunan on environmental grounds reminded traders that inventories are still incredibly low at 120,000 tonnes. 

Lead will always be vulnerable to supply disruptions because of the health risks it poses to humans. In theory that ought to encourage manufacturers to maintain larger stocks so that interruptions won’t affect production. In reality, even in an age of super-low interest rates, no one wants to sit on any more working capital than is needed as a bare minimum. 

A similar argument applies to copper. As politically unstable central Africa becomes a larger source of primary supply, the uncertainty of the steadiness of that supply increases.  That should make fabricators keener to keep a little bit more metal on hand just in case. 

Against that, the continuing rise in the price, now standing at US$6,260 a tonne, up US$140 on the week, is a strong incentive to hold as little as possible. The Chinese, of course, are taking a different view, having built up a stockpile of over one million tonnes - over three times the size of LME inventories. 

Nickel and zinc also made gains last week rising US$185 and US$14 respectively, to US$19,385 and US$1,817 a tonne. Aluminium was the only metal to slide back, dropping US$70 to US$1,832 a tonne. 

As traders return to their desks over the next week all will be mindful of the reputation the next two months have for sharp, stomach-turning downward lurches. After the gains made so far this year it is an easy call to lock in profits. Doing that, though, leaves investors open to the risk of being left behind if economies are really starting to emerge from what has been the worst crash in a century. Record low interest rates means that the cost of holding risk assets has never been lower. 

But while the cost of money is not a hurdle, getting access to it is. That makes financing new mines even more difficult and creates a significant barrier to entry to the industry.  Low inventories, high barriers to entry and a continuing process of consolidation among the miners ought to mean that capital deployed in mining should continue to generate exceptional returns for those brave enough to take the risk, even if there is a correction on the way.


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## Edwood

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10594704

an "extraordinary" jump in Fonterra's online milk auction prices.  possibly related to the "extraordinary" shortage in commercial property space suitable to store milk products.  surely Fonterra wouldn't be filling that space in an effort to reduce supply?


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## drillinto

September 05, 2009

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com

Minews. Good morning Australia. Your market must have been a big winner as the gold price re-tested the US$1,000 an ounce mark last week. 

Oz. Gold was certainly on top as the week drew to a close, but overall the tone was slightly weaker, which made for a somewhat confused picture. On the one hand, the metals index on the ASX fell by around two per cent, thanks to weakness in BHP Billiton and Rio Tinto. On the other, most sectors produced winners, with gold leading the way, and copper a surprise star in the wake of Marengo Mining's (MGO) deal with investment funds controlled by George Soros. Iron ore was mixed, with continuing concern over Rio Tinto’s sour relationship with China. Nickel and uranium also lost ground, but zinc produced a couple of interesting rises.

Minews. All that set against a background of an Australian economy in growth while the rest of the world shrinks. 

Oz. That is awfully hard to explain, though, as has been said previously, it has never felt like a true recession down here. China has continued to soak up resources, and while prices might be down tonnage is up. We also had the advantage of going into the global financial crisis with a government budget in the black, which made it much easier to toss stimulus cash at potential problem areas. The upshot is that the Australian economy grew by 0.6 per cent in the year to June 30, the unemployment rate remains subdued at less than six per cent, fresh capital is flowing into the resources sector, a boom is underway in the development of natural gas fields, and the Aussie dollar cracked the US85 cent mark on Friday night, which will hurt mineral exporters. 

Minews. Time for prices please, starting with gold. 

Oz. As you would expect, it was pretty much up across the sector with one stand-out loser. Investors seem to be running out of patience with Avoca’s (AVO) attempts to land Dioro (DIO) as a takeover target, as we pointed out during the week. On the market, Avoca slipped A6 cents lower to A$1.79, while Dioro added A4 cents to A83 cents. Having got that bit of bad news out of the way the rest looks better, as a large number of gold stocks hit 12 month share price highs during the week. Andean Resources (AND) traded up to new high of A$2.44 on Friday before closing at A$2.43 for a gain over the week of A23 cents. Catalpa (CAH) rose to its new high of A15 cents before also slipping a fraction to end the week as A14 cents, a gain of A1 cent for the week. Emmerson Resources (ERM), one of the Tennant Creek specialists, closed at its new high of A26.5 cents, up A4.5 cents for the week. A3.5 cents of that gain came on Friday. Morning Star (MCO), which is about to pour first gold at its Morning Star gold mine added A7 cents to A27 cents, but did hit a 12 month high of A28 cents during Friday trade. Meanwhile Goldsearch (GSE) rose even more sharply, from A2.1 cents to A5.2 cents, as it announced the purchase of a 3.9 per cent stake in Morning Star. 

Minews. Big moves by small companies. 

Oz. Correct - that was one of the features last week, the re-discovery of the large crop of almost forgotten small gold stocks. West Wits (WWI) was another to set a new high at A14 cents during hectic Friday trade before it fell away to close at A11 cents, a rise over the week of A2.5 cents. Interest in the stock was so high that the ASX hit it with a query on both price and volume after it closed at A8 cents on Thursday, rocketed up to A14 cents on Friday when 3.7 million shares traded, and then slipped back to its close at A11 cents. 

Finishing the call of the gold card Norseman Gold added A9 cents to a new high of A78 cents after reporting a maiden profit of A$20.4 million. Troy (TRY) set a fresh record price of A$2.18 on Thursday, before easing to close the week at A$2.15 for a gain of A15 cents over the week. Silver Lake (SLR) hit a high of A97.5 cents on Friday, but eased to close at A92.5 cents for a very impressive gain over the week of A17.5 cents. Kingsgate (KCN) added A50 cents to A$7.57. Chalice (CHN) rose by A4.5 cents to A34.5 cents, and Perseus (PRU) gained A6 cents to A92 cents. 

Minews. Copper next, to see what that Marengo deal did to the sector. 

Oz. The reaction was very interesting. Copper companies that are still in their exploration and project development phase, like Marengo Mining, outperformed copper companies in production. Marengo itself starred, with a rise of A6.5 cents to A16.5 cents, in very heavy turnover. That Friday closing price was slightly less than the high for the week of A18.5 cents, reached on Thursday. Citadel (CGG) was another winner in the emerging producer category, adding A4 cents to A36.5 cents, down a fraction on the 12 month high of A37 cents reached earlier on Friday. Sandfire (SFR) returned to the winner’s circle with a gain of A25 cents to A$1.77, helped along by fresh assay results from its Doolgunna project. Rex (RXM) joined in the copper rush with a rise of A41 cents to A$2.01, and CuDeco (CDU) added A56 cents to A$5.49. 

Other copper stocks, the companies actually producing metal, were more subdued. Equinox (EQN) rose a truly modest A2 cents to A$2.99 despite a very positive presentation from its chief executive, Craig Williams, at an African-focussed investment conference in Perth. Anvil (AVM) presented at the same event, and managed a rise of A4 cents to A$2.74. 

Minews. The other base metals now please, before swinging across to iron ore and uranium. 

Oz. Nickel stocks, as mentioned, were weaker with the price of nickel easing over the week, though most falls were modest. Independence (IGO) eased back by A8 cents to A$4.37. Panoramic (PAN) lost A14 cents to A$2.26, and Mincor (MCR) slipped A1 cent lower to A$2.32. Zinc stocks were more interesting, perhaps because the zinc price firmed another US6 cents a pound over the week. Biggest winner was Mt Burgess (MTB), a stock which tends to fly beneath most radars. It rose by A1 cent to A2.8 cents, but did touch a 12 month high of A3 cents during Friday trade. TNG (TNG) was another zinc stock to set a fresh record price, closing at A8.5 cents for a gain on the week of A1.5 cents. Perilya (PEM) added A3 cents to A41.5 cents, but CBH (CBH) slipped A1 cent lower to A9.3 cents. 

Iron ore stocks were mixed, perhaps because of the ongoing confusion over contract talks between Rio Tinto and Chinese steel mills. Fortescue (FMG) lost A33 cents to A$4.11. Iron Road (IRD), on the other hand, added A12 cents to A56, and did trade up to a 12 month high of A65 cents after an encouraging geological report on its Warramboo project in South Australia. Legend (LEG) was another winner from exploration news, rising by A0.3 of a cent to A2.2 cents after signing a deal on a promising iron deposit in the African country of Cameroon. Atlas (AGO) slipped A7 cents lower to A$1.64, but Giralia (GIR) and Golden West (GWR) each managed half cent rises to A72 cents and A36.5 cents respectively. 

Minews. Uranium to finish, please. 

Oz. Most uranium stocks lost ground as the spot market price of the metal slipped another dollar lower to US$46 a pound. Extract (EXT), which added A30 cents to A$9.80 and Bondi (BOM), which rose by A2.5 cents to A11 cents were the only winners. Extract’s strength was down to a well-received presentation at the Africa conference in Perth, while the little-known Bondi reported encouraging drilling results from its Murphy prospect in the Northern Territory. Uranex (UNX) slipped A1.5 cents lower to A33.5 cents. Mantra (MRU) lost A7 cents to A$3.48 and Toro (TOE) lost half a cent to A18.5 cents. 

Minews. Thanks Oz.


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## drillinto

Gold boom for Australia 

NIGEL AUSTIN
http://www.news.com.au/adelaidenow/story/0,22606,26037151-5016955,00.html 
September 07, 2009 10:00am

A NEW gold boom is underway in Australia with increased production and a rising price expected to take the sector's export earnings to a record $18 billion this financial year.

A new report predicts rising production should see Australia become the world's second-largest gold producer as the price of the precious metal soars towards $US1000 an ounce. 

A survey of gold producers by industry consultants Surbiton Associates showed that Australia was gearing up to increase production in 2009-10. 

Surbiton said Australian gold production increased by two tonnes or four per cent more than the previous quarter to 57 tonnes during the June quarter. 

"We seem to be seeing the start of a recovery in Australian gold production,'' Surbiton director Dr Sandra Close said. 

Dr Close said the modern gold industry continued to make a substantial contribution to Australia's exports, despite the market's ups and downs. 

Dr Close said the gold rushes and gold boom of the 1850s were probably the best known in Australia's history and they had a major impact on the country, both in social and economic terms. 

But the modern gold boom, which started in the early 1980s, had been by far the largest in output. 
``Almost half of the gold ever produced in Australia has been mined since 1982,'' Dr Close said.

``That amounts to about 5800 tonnes, or 190 million ounces.'' 

ABARE forecast the record value of exports of $18 billion in its June Australian Commodities report, compared to just $5.5 billion in 2004-05. 

Australian and South African gold output is similar, making them the world's equal third-largest gold producing countries behind China and the U.S. 

However, Dr Close said it was likely that Australia would move up to become the second-largest gold producing country in the coming year. 

A further increase in production was likely to occur this quarter with the first contribution from Newmont's redeveloped Boddington mine in Western Australia, she said.


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## drillinto

September 07, 2009

Gold Closes In On US$1,000, As Government Printing Presses Roll 

By Rob Davies
www.minesite.com


The sharp rally in risk assets like commodities and equities seems to have surprised commentators much more than it surprised market participants. A couple of commentators at least have admitted publicly that their recommendations to short the market have gone horribly wrong. But still they pontificate that these prices can’t be maintained and that a big correction is coming.
They might be right.  But, as one financial adviser asked this writer, how many rich journalists do you know? 

The risk inherent in buying into shares and metals is there for everyone to see. In some cases prices have doubled over the course of this year - surely that must mean prices could just as easily be cut in half again as they were last year? That is true. However, there is also risk in nominal assets, like cash and bonds. It’s just that the risk here is less obvious and more insidious. 

The smart money knows this – even in spite of the recent equity and metals rallies, there is still a huge amount of money out there sitting in nominal assets that is looking to move into risk assets, primarily for protection against the inflation that most sage commentators expect to occur in a few years time. 

Politicians and central bankers have done a great job in pretending to have solved the financial crisis by printing unimaginable amounts of money. That has given the illusion that the value of assets has been maintained. But the suspicion still lingers that actually all that’s happened is that a devalued asset has simply been repriced by a devalued currency. 

This preserves people’s sense of perspective. In the biggest example, formerly great banks are seen to be recovering and normality is restored. In fact what has really happened is larceny on grand scale. These banks and other financial institutions had failed in a catastrophic fashion. That is part and parcel of the process of capitalism. Good companies succeed and bad ones fail, with the owners rewarded or punished as appropriate - “creative destruction”, as Schumpeter called it. 

However, in the modern world, where exam failure has been replaced by a below average pass, the reality of such an implosion was too much to contemplate for the politicians, regulators, and bureaucrats who were supposed to prevent this from happening.  So they pretended all was not bad and simply bailed out failed institutions with bucket loads of cash. 

This has not gone unnoticed by the real investors. They have been moving funds into real assets almost from the moment these policies were put in place at the end of the first quarter. Shares have risen sharply and base metals even more so. 

Even though equities took a little breather last week base metals, led by lead, generally moved higher.  A 10 per cent jump in lead took it to US$2,223, while a rise of 3.5 per cent in zinc saw it move up to US$1,881 a tonne.  Copper was more subdued and only rose a few dollars to US$6,279, while nickel retreated six per cent to US$18,775. 

All those movements though, were outweighed by the news that gold had risen to within a few dollars of US$1,000 an ounce.  In a world where no one is exactly sure what constitutes an asset and what a liability, there is no doubt that gold can be relied on. Especially if financial assets can no longer be trusted.


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## drillinto

Export earnings hit $160B record 

Colin Jacoby, Mining News, Thursday, 10 September 2009

HIGHER export prices for iron ore and gold helped lift Australia’s export earnings from mineral resources to a record high in 2008-09, according to the latest figures from the Australian Bureau of Agricultural and Resource Economics.

In its June quarter 2009 edition of Australian mineral statistics, ABARE reported export earnings from mineral resources increased 37% year-on-year to a record $A159.7 billion. 

ABARE deputy executive director Dr Terry Sheales said the record earnings reflected a 16% depreciation of the Australian dollar and higher contract prices for bulk commodities in the first nine months of the financial year. 

The index of export prices of Australian mineral resources increased by 35% in 2008-09. 

Iron ore was one of the big movers with 2008-09 export earnings up $13.7 billion, or 67%, to $34.2 billion, while gold gained $5.2 billion, or 48%, to $16.1 billion.

There were significant increases in export earnings for metallurgical coal, up 129% to $36.7 billion, and thermal coal, up 114% to $17.9 billion. 

However, nickel led the commodities, recording significant declines with a $3 billion or 53% drop in 2008-09 export earnings to $2.7 billion.

Zinc also fared badly, falling $1.5 billion, or 45%, to $1.9 billion, while copper dipped $964 million, or 14%, to $5.8 billion and lead fell $424 million, or 21%, to $1.6 billion.

Australian production of energy and mineral commodities declined in 2008-09, with the index of mine production falling by 1%. 

“In particular, production of nickel, iron and steel, zinc, gold and black coal declined in 2008-09,” Sheales added.

ABARE’s revised forecasts for minerals production, exports and prices for 2008-09 and 2009-10 will be released later this month.


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## drillinto

September 10, 2009

Barrick’s Decision To Close Off Billions Of Dollars Worth Of Hedging Is A Clear Sign Of China’s Influence On The Gold Market

By Charles Wyatt  
www.minesite.com

So what is the connection between Barrick Gold, that long time proponent of gold hedging, and the Chinese government? Simple really, provided one thinks in straight lines. Since overtaking South Africa in the production stakes, China is now the world’s second largest producer of gold. It’s also the second biggest gold consumer after India. What’s more, it has the world’s biggest foreign exchange reserves at US$2 trillion. Yes, that is US$2,000,000,000,000. Yet in spite of that huge cash pile, Chinese gold reserves are way behind the US, Germany, France and Italy. Such a situation is not sustainable in a world where the financial system has proved so fallible. So it came as no real surprise when, only a few months ago, the Chinese Government revealed that it was adding significantly to its gold reserves.
Other countries, particularly those with reason to dislike the US and the power it holds through the dollar’s role as a reserve currency, will follow suit. This is where Barrick comes in. It knows that there is only one direction gold can go if countries in the Middle and Far East are buying gold. That’s why it’s just announced that it is raising US$3 billion through the issue of 81.2 million common shares at a price of US$36.95 per share. Barrick intends to use US$1.9 billion of the net proceeds to eliminate all of its fixed priced gold contracts within the next 12 months. A further US$1.0 billion will go towards eliminating a portion of its floating spot price gold contracts. 

On the negative side, the company will book a US$5.6 billion charge against earnings in the third quarter, as it readjusts the way it treats its gold contracts in its accounts. The danger arises when gold is hedged at such a low price compared to the prevailing spot price that any request to close positions results in serious financial strain. Older readers will remember the difficulties a number of majors had to face up to the last time gold sustained a rise above US$1,000. 

Poor old Barrick has three million ounces of gold sold forward at various prices and 6.5 million ounces of gold subject to floating contracts. If all the forward sales are bought back and half the floating contracts eliminated it would involve the purchase of about 200 tonnes of gold - no less than 10 per cent of all the gold that will be produced in the world over the next year. The price of gold is bound to rise, too, as it did on the last two occasions when Barrick bought back its hedges. 

Interestingly the announcement of this gold deal coincided with the staging of the prestigious  Ambrosetti Workshop at Lake Como, where Cheng Siwei, a former vice-chairman of the Standing Committee of the National People’s Congress, in an outspoken criticism of Ben Bernanke’s quantitative easing policy, said he believed the dollar will “fall hard” if the US continues printing money to buy back government bonds. Cheng went on to say that China is diversifying its US$700 billion of US foreign-exchange reserves into gold. “Gold is definitely an alternative, but when we buy, the price goes up”, he said. “We have to do it carefully, so as not to stimulate the market.” 

The Chinese have long been shrewd buyers and sellers of raw materials. Remember how they built stockpiles of iron ore, nickel and copper when prices dropped through the floor at the end of last year? The conclusion has to be that little information will be forthcoming from China as it builds its position in gold, but that there is probably going to be a floor to the price somewhere above US$900 per ounce.  And all this has come to pass just when the UN Conference on Trade and Development (UNCTAD) has announced that the system of currencies and capital rules which bind the world economy is failing, and was in fact responsible for the recent financial crisis. 

UNCTAD has suggested that the answer is to replace the dollar as the word’s reserve currency. It is the first  time  such an august multinational institution has made this suggestion, though China, Russia  and India have pointed in that direction on several occasions. The replacement of the dollar would not be simple, as it would require an artificial currency and a system of managed exchange rates. Maybe gold will be involved, maybe not, but the reluctance by the G20 group of nations to relinquish the policies of hyper-stimulus is bullish for gold and bearish for fiat currencies. 

Like it or not - and economists such  as Martin Wolf of the Financial Times will hate it - gold  will now play an ever more important role in any discussions between world leaders about the future of  currencies,  just as China will play an ever more important role at the top table. We live in interesting times as the geopolitical balance of power inevitably moves from West to East.


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## drillinto

September 12, 2009

That Was The Week That Was ... In Australia

By Our Man in Oz
http://www.minesite.com/aus.html


Minews. Good morning Australia. Gold must have been the talk of your market last week! 

Oz. You would think so, with the price sticking above US$1,000 an ounce. But when you look at the overall market, gold stocks actually underperformed slightly, which is rather surprising. The gold index on the ASX rose 4.7 per cent, but that was noticeably less than the broader metals and mining index, which rose by 5.2 per cent, as strong gains among copper and iron ore stocks boosted the entire minerals sector. What might have slowed gold was the continued rise in the Australian dollar, or the fall in the US dollar if you prefer. Whichever way you slice it, the Aussie currency added another US1 cent over the week to close at US86.34 cents, a fairly dramatic rise from the US63 cents that it was trading at as recently as March.

Minews. The strength of your currency seems to be reflecting the general march by investors back into hard commodities and away from soft currencies. 

Oz. Bingo! The best example was the way the herd has followed billionaire speculator George Soros into copper stocks. Marengo (MGO), in which Soros took a big placement less than two weeks ago at A9.5 cents, stormed ahead last week to hit a new 12 month high on Thursday of A24 cents, before settling back to close at A21.5 cents. At that peak price, our George was looking at a return of 152 per cent for 10 days work. 

Other copper stocks chimed in, but none could match the Marengo stampede. Sandfire (SFR), one of the new kids on the block, returned as a speculative favourite, adding A41 cents to A$2.18. Rex (RXM), another recent copper star, also rose by A41 cents to close at A$2.42, down on an all-time high of A$2.60 reached during Friday trade. OZ Minerals (OZL) put on A9 cents to A$1.12, confirming its return to favour with investors, even if it is still only one-mine wonder until management does something with the spare cash burning a hole in its bank account. Equinox (EQN) traded up to A$3.32 before easing to close at A$3.27, for a gain of A28 cents. Anvil (AVM) added A49 cents to A$3.23 as the market digested its recent news regarding development of the Kinsevere mine in Congo, and Syndicated (SMD), showed signs of revival, adding A2 cent to A20 cents. 

Minews. Interesting as the copper market might be, many of our readers are keen to follow the gold sector, so let’s go there next. 

Oz. As you would expect it was up, virtually across entire gold spectrum. But what was noteworthy was that some gold stocks did not react positively to the strength of the gold price. It might seem somewhat perverse, but it is worth starting with the negative news first, if only because there is so much positive news to follow, and because readers might spot a few under-valued situations in a sector which ought to be on fire. 

Centamin (CNT) was one of the more interesting examples, losing A9 cents over the course of the week to close at A$1.90. Allied (ALD) was another “non-reactive”, rising mid-week to A54 cents before settling to close steady at A50 cents. Integra (IGR) and Catalpa (CAH) were two other stocks to open and close at the same price, A29 cents in the case of Integra and A14 cents in the case of Catalpa. Next week, as investors continue to digest a gold price which, fingers crossed, seems to have settled in for a long stay above US$1,000 ounce, we might see the laggards play catch up. 

Minews. Point noted. Now for the good news, please. 

Oz. This could get rather boring but here we go, with many of the prices at fresh 12 month highs, as we move beyond the one year anniversary of the all-encompassing post-Lehman Brothers wipe out. Troy (TRY) continued to revel in its status as a re-emerging star of the gold sector, adding A27 cents to close at a fresh high of A$2.42. Kingsgate (KCN) joined in, with intraday trades on Friday at a new high of A$8.30, before easing back to close A$8.00 for a rise over the week of A43 cents. Alkane, another of our old favourites, got as high as A49 cents on Tuesday before easing to a close of A45 cents for a rise of A7 cents, perhaps due as much to growing interest in its rare earths assets as its re-emerging goldmining interests. Meanwhile, Perseus (PRU) rose A15 cents to A$1.07, but did get as high as A$1.18 on Tuesday. Azumah (AZM) added A3.5 cents to A15.5 cents. Carrick (CRK) said it was moving to a mine study now that it has lifted its resource base to four million ounces, and its shares put on A18 cents to A78 cents. Medusa (MML) was a star, with a rise of A60 cents to A$3.34. Eleckra (EKM) delivered perhaps the best percentage rise by adding A2.3 cents to A6.5 cents, and Silver Lake (SLR) put on A3 cents to A95.5 cents, but did “break the buck” on Monday when it sold at up to A$1.02. 

Now for the best of the gold sector, with Westgold (WGR) reporting a bonanza drill hit at its Rover One project near Tennant Creek in the Northern Territory. That returned a best assay of 185 grams a tonne across a seven metre drill intersection, almost six ounces to the tonne, plus useful grades of copper, silver, bismuth and cobalt. On the market, Westgold rose by A15 on Friday to close at A52 cents, but did get as high as A56 cents. And that wonderful science of “near-ology” kicked in after Westgold reported, with two stocks exploring nearby delivering an even better stock market performance than the company that delivered the hit. Adelaide Resources (ADN) more than doubled from A13 cents to A29 cents, with Friday trades as high as A37 cents, and Emmerson Resources (EMR) added A9 cents to A35 cents. 

Minews. Time to shuffle across to iron ore. 

Oz. Like copper, all up, though precisely why is a bit unclear. Perhaps it was because of the continued flow of good news out of China, or because of the investment march into hard commodities. Atlas (AGO) returned to favour after announcing its merger with Warwick Resources (WRK), rising by A18 cents to A$1.84. Warwick added A15 cents to A57.5 cents. Gindalbie (GBG) rose as high as A$1.05 before closing at A$1 for a gain over the week of A17.5 cents. Giralia (GIR) was strongly supported, rising A18 cents to A90 cents, and Brockman (BRM) did even better with a gain of A23 cents to A$1.71. 

Minews. Uranium, the other base metals, and any specials to finish, please. 

Oz. There was continued strong demand for uranium stocks with the regular favourites Mantra (MRU), Extract, and Toro (TOE) leading the way. Mantra added A37 cents to A$3.85. Extract soared through the A$10.00 mark, closing at A$10.39 for a gain of A59 cents. Toro (TOE) rose by A5 cents to A23.5 cents. Paladin (PDN) failed to frighten the horses with a big capital raising, adding A12 cents to A$4.57, and promising to go on the acquisition trail, which could be a reason for the smaller U-stocks rising strongly, given that the uranium price has hardly looked poised for an upward run lately. 

Nickel stocks were modestly stronger, but most of the interest last week was in other sectors. Mincor (MCR) added A16 cents to A$2.48. Independence (IGO) was A38 cents stronger at A$4.75, but that may have been to interest in its gold assets. Minara (MRE) rose by A2 cents to A90.5 cents, and Panoramic (PAN) was up A28 cents at A$2.54. Zinc stocks continued to strengthen. Terramin added A4.5 cents to A74.5 cents. Perilya (PEM) rose A8 cents to A49.5 cents, and Kagara (KZL) rose by A1.5 cents to A95.5 cents. 

Minews. Specials? 

Oz. Some investors took a fresh dose of lithium during the week, though given the potential for worldwide over-supply the lithium boom now seems to be a bit stretched. Galaxy (GXY) soared on Tuesday to a fresh high of A$2.40, before easing to end the week at A$2.19 for a gain of A81 cents, while Reed Resources (RDR) joined the rush with a rise of A19 cents to A58 cents. Platinum stocks showed signs of benefitting from the gold revival. Nkwe (NKP) added A2 cents to A29 cents. Platinum Australia (PLA) rose A6.5 cents to A93.5 cents, and Aquarius (AQP) gained A47 cents to A$5.66. 

Minews. Thanks Oz.


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## drillinto

What the Heck Is Going on with China?
By Doug Hornig, Sr. Editor, Casey’s Gold & Resource Report, Sep 11, 2009

That’s a question that Westerners have been asking for, oh, several millennia now. Or at least since Marco Polo aimed his ponies down the old Silk Road in 1271.

Now as then, China keeps its own counsel. We know what they want us to know, plus what we can surmise from rumor and reading between the lines. But lately, we’ve been able to add presumption to news and come up with something that looks very significant. 

Specifically, there’s been a flood of tantalizing stories out of the East that, taken together, strongly suggest a growing preoccupation with a form of money that was ancient even in Signor Polo’s time. And it ain’t silk. It’s gold.

We already learned, back in April, that China has been salting away bullion for the previous six years, out of sight of international gold watchers. To the tune of 14.6 million ounces. Now the evidence suggests that that was merely the prologue.

Let’s take these tidbits one at a time:

Sovereign wealth fund dumping $$ for gold? This one is still at the rumor stage, but highly-respected website Mineweb.com is supporting it (http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=88400&sn=Detail). What we know for sure is that the country founded its primary sovereign wealth fund, China Investment Corporation (CIC), two years ago, with the stated aim of rapidly deploying some of its $1.5 trillion forex surpluses – $200 billion initially, with another $100 billion recently added to the kitty – into investment in non-Chinese enterprises. This it has been doing in spades, acquiring businesses around the globe. Extractive industries are among them, including Teck Corp., the diversified Canadian mining giant.

Might it also be buying up gold? We don’t know that for sure, but it seems likely. And, in addition, rumors sneaking off the mainland indicate that within the CIC, a lot of effort is being poured into prospective investment deals in the oil and precious metals sectors. The more it produces, the more it can keep.

The Chinese have made no secret of their disdain for current American economic policy and what they see as the inevitable destruction of the dollar. That they would be moving to diversify out of the greenback shocks precisely no one, and gold is one logical landing place for all those bucks. We suspect that’s exactly what is happening, behind the scenes as well as center stage.

Gold and silver pushed to the people. As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it’s actively pushing folks to buy some personal metal, with China's Central Television, the main state-owned television company, running news programs cum infomercials, letting the public know just how easy it is to purchase gold and silver as an investment.   

It truly is as simple as can be, because every bank sells gold and silver bullion bars in four different sizes to individuals. (Try to find the same the next time you make the trek down to Wells Fargo.) Mining companies are reportedly encouraging employees to convert some of their wages to gold on payday. Gold is traded in some form 24 hours a day. And paper proxies for the metal are also soaring in popularity.

There are persistent rumors that the export of silver has already been banned. Gold could be next.

Thus China, which only yesterday was the lowest per-capita consumer of gold in the world, is bidding to become the biggest. Some analysts believe it will pass India – the top dog since forever – as early as 2010. Clearly, the government believes the country is strengthened if everyone who can holds some hard currency. 

All this suggests a mania in the making, and only in the formative stage. Imagine if hundreds of millions of new consumers climb on that particular bandwagon…

China repatriates its bullion. Meanwhile, in early September numerous sources (see, e.g.: http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03) reported an announcement that Hong Kong is pulling all its physical gold holdings from depositories in London and transferring them to a newly built, high-security depository at the city's airport.
That means the government is backing the promotion of Hong Kong to a more formidable status as a Swiss-style, regional trading hub for bullion, at the same time as it reduces London's role as a key settlement and storage center. 

Press reports cited government officials as saying that marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility. Outreach will also be made to commodity exchanges, banks, precious metals refiners and ETF providers.

There can be little doubt this signals that the Chinese government fully recognizes the importance of gold in a time of crisis, and that the most prudent plan involves keeping its stores close at hand.

China threatens to “just walk away.” In one of the year’s most intriguing developments, commodity and derivative markets were thrown into a tizzy on Monday, August 31, by the worldwide circulation of a story published two days earlier in Caijing magazine (and reported by Reuters here: http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03).

According to the Caijing article, a spokesperson for China’s state-owned Assets Supervision and Administration Commission – the regulator and nominal shareholder for state-owned enterprises (SOEs) – told six foreign banks that SOEs reserve the right to default on contracts.
Say what? 

Maybe the commission has been paying attention to the “just walk away” forfeiture movement that blossomed among American homeowners whose overall debt on their properties far exceeded the assessed value. 
Small wonder there was panic in trading houses that hold a lot of Chinese paper. They hope any problems will be worked out short of a default. In fact, “It's [only] a handful of companies who are being encouraged by regulators to ‘re-negotiate’,” says one banking source. “It's outrageous, but it's China, so everyone is treading very carefully.” Very carefully.

Nevertheless, in addition to tangible losses, those potentially affected fear the establishment of a dangerous precedent, one that could lead to utter chaos in the enormous, tangled world of derivatives.

And there is one other, albeit highly speculative, possibility. Some major entities – we don’t know who, due to the opaque nature of international gold trading – have huge, perhaps quite concentrated short positions in the metal, both on the COMEX and OTC market. Is one of them China, acting through American intermediary banks?

A short position in precious metals means that the initiator of that position is obligated to deliver physical gold or silver if the buyer (who holds the long end) wants it. Suppose China is one of the big shorts. Suppose it’s been playing the market in order to buy at what it sees as bargain prices. Now suppose a gold rally induces it to just walk away from all those obligations to deliver. Who’s going to force it to make good? Guess what, no one has a gun large enough.

Granted, it’s an outlandish scenario. But impossible? No. Beijing has shown nothing but indifference to what others think of it. And if the dollar does crap out as the world’s reserve currency, there’s nothing to say that China won’t see its self-interest as lying in a completely new direction. 

Conclusion. Gold, and the companies that produce it, have enjoyed a brisk runup of late, as the metal mounts yet another assault on the beckoning, symbolic $1,000 level. How much of this can be traced to what China has done, is doing, or may yet do? 
We don’t know, but we suspect it’s not entirely coincidental. All rumor and speculation aside, as China clearly turns more and more bullish on gold, so will everyone else.


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## drillinto

September 14, 2009

The Insidious Weakness Of The US Dollar Drives Gold And Base Metals Higher

By Rob Davies
www.minesite.com/aus.html

A 1.8 per cent fall in the dollar last week was enough to take gold over the US$1,000 hurdle and revive talk of inflationary fears. The gold price also had separate support from news that Barrick was closing out its hedge positions. This double positive partly explains why the precious metal did better than base metals. Apart from nickel and lead, which fell 4.8 per cent to US$17,400 and 1.9 per cent to US$2,180 respectively, it wasn’t so much that base metals fell last week but that they failed to rise as much as the precious metals.

How much of that is due to anticipation of inflation is hard to tell. Although there is a great deal of comment about “the recovery” in Western countries, the statistics that demonstrate that economies are growing again really only illustrate that, compared to last year, the situation in the afflicted economies has simply stopped getting worse. 

The boom that ended so dramatically with the collapse of Lehman Brothers a year ago was funded by credit. The scale of that funding - US$40.00 of debt for each US$1.00 of equity in the case of Lehman - is not about to come back in a hurry, if ever. The economic conditions of the mid noughties are unlikely to be repeated. Instead, what we have are various “measures” from governments, like Quantitative Easing and cash incentives to scrap perfectly drivable cars, in a scheme that is environmentally ludicrous. 

Throwing money at the major economies has done wonders for stock markets and old bangers, but has it created a recovery? One wonders what will happen when these schemes come to an end. Will the mature economies return to sloth or will they be re-energised by voters driving around in newer cars. 

The concern of many is that this injection of cash will be like a giving a three year old a bar of chocolate. A sugar rush will create a short period of unproductive frantic activity which will be followed by morose grumpiness and a demand for more. That first bar of chocolate is effectively devalued, as another is needed to maintain the economy. 

It seems to many that the cash being thrown about by politicians and bureaucrats in our name is being progressively devalued. The only solution for those savvy enough to appreciate what is being done is to buy real assets, like gold, that cannot be materialised from thin air. Alongside gold sit the other precious metals - silver and the platinum metals. 

But in a way, these others are hybrid metals, where part of their demand arises from their financial roles and part from their industrial applications. Base metals, meanwhile, are at the other end of the spectrum from gold, in that they have no financial role at all. Demand for the base metals comes almost exclusively from industrial applications. 

Even so, they are priced in dollars, and as the dollar depreciates more dollars are required to buy each tonne of metal. And while base metals didn’t move as much as gold last week, a 0.3 per cent rise in copper took it to US$6,300 a tonne, a 0.2 per cent increase left aluminium at US$1,829 a tonne, and a 0.7 per cent rise left zinc at US$1,894 s tonne.  

Those moves might not be dramatic but, on a cumulative basis, they gradually accrete to become significant changes and demonstrate the insidious decline in the dollar, whatever sort of recovery may or may mot be happening.


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## drillinto

September 19, 2009

That Was The Week That Was ... In Australia

By Our Man in Oz
http://www.minesite.com/aus.html


Minews. Good morning Australia. You seem to have had a quieter week, even if the gold price did stick at over US$1,000 an ounce. 

Oz. Gold was certainly the hot topic down this way, but so was a continued and damaging rise in the value of the Aussie dollar, which cancelled out much of the value in the gold price rise. The net result was that while the overall market, as measured by the all ordinaries, rose by 2.1 per cent, the gold index managed a modest rise of just 0.6 per cent, due almost entirely to the Australian dollar rising from US85.6 cents to US87 cents.

Interestingly, the big game on the Australian market today is not mining or oil shares, it is banks and the currency carry trade. Relatively high interest rates down this way, coupled with a largely untroubled banking sector plus heavy-duty government guarantees on deposits, has seen a flood of low-cost cash entering the country. Banks have been the big beneficiaries, and the bank index rose by almost five per cent last week, taking the rise to 30 per cent over the past three months. 

Minews. Let’s stick to mining, starting with gold. 

Oz. Despite the overall flat performance, there were a few strong stocks. Perseus (PRU) reacted positively to a report of high grade drilling hits at its Tengrela project in Ivory Coast, rising A23 cents over the week to A$1.30. The stock hit a 12 month high of A$1.37 on Thursday. The best intersection reported was 217 grams over a one metre section, which was contained within 15 metres at 15.1grammes per tonne. 

Most of the other gold stocks to rise moved on discovery and development news. Atlantic Gold (ATV), which has kept an ultra-low profile for the past year, came out with a positive development study on its Cochrane Hill project in the Canadian province of Nova Scotia. Investors stampeded into the stock on Friday, with 76 million shares out of an issued capital of 320 million changing hands in a matter of hours, all as the price oscillated between A5.6 cents and A10 cents. Atlantic finally closed the week at A8.3 cents, up A2.3 cents. 

Heavy turnover was also seen in another stock we rarely hear anything about, Beacon Minerals (BCN). It reported encouraging near-surface gold mineralisation at its Barlee project in central Western Australia. An even bigger surprise than that was that on Thursday 196 million shares, or 55 per cent of the 357 million shares on issue, were exchanged at prices ranging from A2.9 cents to A3.2 cents. Beacon, which was once closely related to the Kyrgyz uranium and gold explorer Nimrodel, ended the week at A3.1 cents, up A0.6 of a cent. 

Minews. Heavy volumes indeed. We might take a closer look at Beacon soon. 

Oz. That can be done. Meanwhile, let’s finish with the better performing gold stocks before trawling through the sectors. A1 Minerals (AAM) announced a resource upgrade at its Delta project, copped a speeding fine from the ASX, and ended the week at A22.5 cents, for a gain of A10 cents over the past two weeks. Cortona (CRC) announced a fresh discovery at its Exeter Farm project, and added A3.5 cents to A18.5 cents, but did get as high as A24 cents on Wednesday. Troy (TRY) continued to attract fresh followers, rising by A18 cents to A$2.40, but did reach a new 12 month high of A$2.66 during Friday trade. 

Elsewhere in the gold space, Alkane (ALK) added A2.5 cents on positive sentiment as it gets closer to a development commitment at its Tomingley project. Meanwhile, Resolute (RSG) started the climb back after its latest capital raising, putting on A3.5 cents to close at A64.5 cents. Also on the up, Medusa (MML) steamed further ahead with a rise of A26 cents to A$3.60. Finally, Allied (ALD) put on A3 cents after announcing a friendly takeover of Australian Solomons Gold, a company which owns the Gold Ridge project in the Solomon Islands - a project with what might be called an interesting history. Other gold stock price moves were modest, either way. 

Minews.  Uranium next please, because that seems to have been your next most interesting sector. 

Oz. It was, with prices marching ever higher despite little evidence that the price of uranium is doing the same. Mantra (MRU) was the star of the week, following an announcement on 11th September of the discovery of thick, high-grade, uranium intersections at the Nyota prospect in Tanzania. On the market, Mantra added an eye-catching A$1.20 to close the week at A$5.05, a few cents shy of a 12 week high of A$5.18 reached earlier during Friday trade. 

Paladin (PDN) and Extract (EXT), the two sector leaders, performed less strongly, but in heavy volume. Paladin added A12 cents to A$4.69. Extract rose by A21 cents to A$10.60. Another uranium company attracting attention was Cauldron (CXU), which announced an ambitious target of finding up to 35 million pounds of uranium at its Yanrey prospect in Western Australia. That was enough to lift the stock by A2.5 cents to A38.5 cents. Also arousing interest was Pegasus (PUN), a new player, which doubled from A5 cents to A10 cents in thin volume and with no fresh news. In its favour, it does at least have an interesting management team. 

Minews. Iron seems to have been a bit dull last week, so let’s move along to the base metals, finishing with iron and any specials, please. 

Oz. Copper remained a focus for many investors, with Sandfire (SFR) continuing to set the market alight as it drills ahead at its Doolgunna project. It traded heavily all week, ending up A54 cents at A$2.72. CuDeco (CDU) was another favourite, thanks to what is believed to be Australia’s biggest drilling programme, a 15 rig effort at its Rocklands project. This will receive a stockbroker visit next week, as interest grows. On the market, CuDeco added A70c cents to close at a new 12 month high of A$6.35. The third copper stock that’s excited investors lately, Rex Minerals (RXM), had a quieter week shedding A25 cents to A$2.17, which takes it back to where it was 10 days ago. Equinox (EQN) continued to build on interest in its big Lumwana mine in Zambia, adding A26 cents to A$3.53. Citadel (CGG) added A1 cent to A39 cents, and OZ Minerals (OZL) rose A3 cents to A$1.15. 

Nickel stocks were mixed, with more fallers than risers. Independence (IGO), perhaps because of its gold assets, rose by A25 cents to A$5.00, while Mirabela (MBN), which has its best assets in South America, added A12 cents to A$3.30. After that it was all down. Mincor (MCR) slipped A12 cents lower to A$2.36, despite an excellent discovery which will extend the life of its Miitel mine. Minara (MRE) eased back by A3.5 cents to A88 cents, and Western Areas (WSA) closed down A5 cents at A$5.17. Zinc stocks were marginally stronger, with most rises in the A1 cent to A5 cent range. Terramin (TZN) added A1 cent to A75.5 cents, and Perilya (PEM) put on A4.5 cents to close at A54 cents. 

Minews. Iron ore and specials now, please. 

Oz. Mixed, much the same as the base metals. Atlas (AGO) dropped A3 cents to A$1.79. Iron Ore Holdings (IOH) was A1.5 cents lighter at A71 cents. Fortescue (FMG) fell A18 cents to A$4.07, and BC Iron (BCI) added A7 cents to A$1.09, after announcing the start of trial mining at its Bonnie Creek project. 

A few specials are worth mentioning. Bauxite Holdings (BAU) continues to attract investor interest despite the challenge it faces of making a profit shipping low-grade bauxite from the west coast of Australia to China. It gained another A11cents to close at A$1.20 last week. Six months ago the stock was selling for A25 cents. Another example of this new-found interest in bauxite came from Hudson (HRS), which announced plans to spin off its bauxite assets into a new listed company, helping its shares by A5.5 cents to a close of A24.5 cents. 

Minews. Thanks Oz.


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## drillinto

September 21, 2009

Will There Be An Autumn Wobble In Equities And Metals Prices?

By Rob Davies
www.minesite.com/aus.html


Keats said autumn is the season of mists and mellow fruitfulness. Most investors also know it as a period that can bring sharp financial shocks, and usually not good ones. The reasons are buried deep in the financial DNA of capital markets and, frankly, are not that important. What is important, though, is that everyone knows it. As a consequence market participants are currently seeking for clues in the financial undergrowth for any evidence that they are about to be ambushed.

And what makes them even more nervous this year is the steep rise in the price of risk assets like equities and commodities. Copper might be the best performer in the base metals, having doubled this year, but the others in the complex have also done well. Most equities have delivered good returns, as well, with major indices up nearly 50 per cent and emerging markets up 99 per cent. Mining shares combine the virtue of all three assets, and some of these have seen stellar rises. The best performers have tripled from their lows. It is not surprising that many investors are ready to sell and lock in the gains. 

With so much good news, or to put another way with so much relief around that the bad news has stopped, the markets are now feeling more optimistic. Yet there are tell-tale sigs that all is not well. The continued rise in the price of gold, and the start of some weakness in longer term bonds are the two most obvious. 

The reason both are moving is the incipient fear of inflation to come, as the scale of government borrowing is slowly being revealed. Printing vast amounts of money is politically more acceptable in the short term, but the ultimate “Zimbabweification “of the major economies is beginning to concern more and more people. The fact that the Financial Times has devoted a column to gold in two consecutive weeks is a measure of the change in mood. 

Just as telling is the widening spread of 10 year bonds over two year paper, now at three per cent, and the continued weakness of the two currencies, sterling and the dollar, that represent the two countries most impacted by the banking crisis. A steepening bond yield curve has implications for the base metals, as forward prices should now increase to reflect the higher cost of money in the future. And all metals now have higher forward prices than cash prices. That reinforces the view that the market is not being squeezed, but is in fact properly reflecting future demand and funding costs.  

The mining industry is unique in entering the recovery with very little spare capacity and with stockpiles at low levels even for normal times, let alone for one of the worst recessions on record. So the positive outlook for the sector can easily be justified. Indeed, one of the industry gurus, Jim Lennon of Macquarie Group, has suggested copper may rise a further 15 per cent this year to US$3.20 a pound. He is quoted on Bloomberg as saying that copper has the best prospects in the metals space because of its low stocks, limited idle capacity and the lack of new projects.  

Autumn is a time to reflect on the outlook for the remainder of the year and to look ahead into the next. Sometimes it causes a sharp change of view that is quickly reflected in valuations. Maybe that is what is going on now with bond and gold prices. But the strong fundamentals of base metals should not be overlooked either. Even if equities do have an autumn wobble, the chances are that commodities, and mining shares, will fare better than most sectors, even after the gains we’ve already seen this year.


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## drillinto

September 27, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. Those lower metal prices must have hit your market hard last week. 

Oz. They did, but the pain was largely felt in the gold stocks. There was a slightly happier result in the copper and iron ore sectors, where a few stocks swam against the tide. And overall the Australian stock market actually put on a few points in spite of the difficult conditions. The movement was a negligible 21 points, or less than half a percent, but the fact that the market rose at all gives an indication of the levels of international money currently flowing into Australia, chasing exposure to one of the healthier economies in the region.

Minews. But if most resource stocks were weaker, how did the overall market rise? 

Oz. Banks. Curious as it might seem, the four major banks in Australia have emerged from the global financial crisis strongly, and now rank in the top 20 worldwide. The cause is somewhat ironic and not really a credit to bank management. It was more a case of the government banning Australian banks from participating in some of the sillier investment schemes conceived on Wall Street. Our banks actually complained loudly about not being allowed to participate in the securitisation packages that were created out of US home and commercial property mortgages. They’re not complaining today, though. 

Minews. Time to look at the week’s numbers. 

Oz. Before getting to share prices, the indices are interesting. Overall, as mentioned, the all ordinaries rose by 0.4 per cent, thanks to a two per cent rise in the financial index, which offset a 2.6 per cent fall from the minerals index, and a four per cent fall on the gold index, with gold and other minerals hit by the pincer of lower metal prices and another modest upward move in the value of the Australian dollar against the US dollar. There is talk in the market of the two Australian and the US dollar trading at parity by the middle of next year, for the first time in 30 years. If parity does come it will put further pressure on mining company earnings. 

Minews. Prices now, please, starting with copper and the other base metals, leaving the bad news about gold for last. 

Oz. The twin stars of the copper sector were again Sandfire (SFR) and Talisman (TLM), the two stocks with the best exposure to the exciting Doolgunna discovery in central Western Australia. Sandfire added A59 cents to close the week at A$3.31, but did hit an all-time high of A$3.40 on Friday when its managing director, Karl Simich, was delivering an upbeat report to an investment conference on the Gold Coast. The essence of his presentation was that Doolgunna will become a mine - it’s just a question of how big it will be. He also said that a fourth drilling rig is due to start work at the project in the next few days to accelerate the work rate. Talisman continued to ride comfortably in Sandfire’s slipstream, and also benefited from appearing at the same investment conference. It is yet to do any drilling, but expects to start early in the new year. On the market, Talisman also hit an all-time high on Friday, of A75 cents, but eventually closed at A67 cents, up A12 cents on the week. 

Other copper stocks performed reasonably well, in a week when the price of the metal slipped. Syndicated Metals (SMD) attracted interest, courtesy of the overall Australian copper revival, and because it is working in the home of copper, the Mt Isa district of Queensland. It added A3 cents during the week to close at A26 cents. Also on the up, OZ (OZL) also rose A3 cents to A$1.18 and Marengo (MGO) put on A2.5 cents to close at A21.5 cents. Meanwhile, Ivanhoe (IVA) generated a lot of interest amid speculation that it might sell a slice of itself to a sovereign wealth fund, news that helped lift the stock by A43 cents to A$3.71. Going down, Citadel (CGG) slipped A1 cent lower to A38 cents, Rex (RXM) eased back by A2 cents to A$2.25, and the other recent copper favourite, CuDeco (CDU), dropped A62 cents to A$5.73. 

Minews. Nickel, zinc and iron ore, in that order, please. 

Oz. Not a lot in nickel and zinc, and most share prices moves were modest. Minara (MRE) was the best of the nickel stocks, putting in a rise of A7 cents to A95 cents. Mincor (MCR) managed a gain of A1 cent to A$2.37, while Breakaway (BRW) which is slowly getting back on its feet after a horrid 2008, crept fractionally higher to A8.7 cents. After that it was all down. Western Areas (WSA) fell A55 cents to A$4.62, and Poseidon (POS) fell A2.5 cents to A32.5 cents. 

No surprises among the zinc stocks, either. Terramin (TZN) was the only one to rise, putting in a gain of A8 cents to A83 cents. Perilya (PEM) fell A5.5 cents to A48 cents. Kagara (KZL) dropped A7 cents to A$1.03, and Bass Metals (BSM) eased back by A1.5 cents to A21 cents. 

Iron ore stocks were mixed. The best performer was BC Iron (BCI) which is making solid progress with its Nullagine joint venture with Fortescue Metals (FMG). Over the week BC added A8 cents to A$.17, although Fortescue dropped A6 cents to A$4.01. Also moving ahead, United Minerals (UMC) added A2.5 cents to A93 cents, Brockman (BRM) rose by A5 cents to A$1.72, and Giralia (GIR) put on A4.5 cents to A$1.03. Going down, Atlas (AGO) slipped A10 cents lower to A$1.68. Gindalbie (GBG) fell A11.5 cents to A88 cents, and Golden West (GWR) lost A2.5 cents to A36.5 cents. Finally, Centaurus (CUR), a stock we don’t hear much about because it’s developing small iron ore mines in Brazil, slipped half a cent lower to A33.5 cents, although it is a company with an interesting story to tell. 

Minews. Gold, uranium and any specials to finish, please. 

Oz. Before we list the gold stocks which fell, thanks to the double whammy of the gold price falling and the Aussie dollar rising, let’s have a few bits of good news. Saracen (SAR) reported a higher resource figure for its Carosue Dam project, and rose A3 cents to A32 cents. And Carrick Gold also boosted its resource base. Its shares rose A4.5 cents to A85 cents in response. And Scotgold (SGZ) delivered a similar result, reporting on work at its Cononish project in Scotland, and creeping half a cent higher to A18 cents. After that it was mainly downhill, although a few stocks held their ground. Perseus (PRU) managed to stand still at A$1.30, and Cortona (CRC) was steady at A18.5 cents. Going down, Troy (TRY) dropped A21 cents to A$2.39, thanks in part to a boardroom bust up between the former managing director, John Jones, and the incumbent, Paul Benson. Also worse off, Kingsgate (KCN) fell A26 cents to A$7.83, Sino Gold (SGX) lost A48 cents to A$6.75, Dominion (DOM) slipped A27 cents lower to A$3.85, and Allied (ALD) was A5 cents lighter at A48 cents. 

Uranium stocks showed much the same pattern as the price of uranium dropped another US$4.00 a pound to US$42.00. The one piece of good news was from Thundelarra (THX), which rose an eye-catching A15.5 cents to A44 cents after reporting excellent drill hits at its Thunderball prospect near Pine Creek in the Northern Territory. After that, it was all down. Extract (EXT) fell A73 cents to A$8.93, Uranex (UNX) lost A6.5 cents to A32.5 cents, Energy and Metals (EMA) eased back by A1 cent to A24.5 cents, and Paladin (PDN) lost A20 cents to A$4.49. 

No specials worth reporting, except Lynas Corporation (LYC) which has become the latest Australian company to have been prevented from selling effective control to a Chinese investor. “Not in the national interest”, ruled the Australian government. Lynas has a promising rare earths project and the Chinese are keen to cement their hold on that industry. On the market, Lynas rose A8 cents to A90 cents. 

Minews. Thanks Oz.


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## drillinto

September 28, 2009

Two Recoveries Are Underway, But Only One Is Strong And Good For Metals

By Rob Davies
www.minesite.com/aus.html

It is well known that the market can believe two things at the same time. Bear and bull theories can co-exist. The prevailing price of an asset is the best balance between the two arguments. However, the current state of the capital markets is more complex than usual because there are currently positive and negative arguments for not just one economy, but for two. There is the “normal” western economy that is still staggering along after the shock of the biggest financial crash in over half a century. And then there’s the totally new economy, represented by the emerging markets, and led by China.

Unsurprisingly the average investor can be left totally bemused as market commentators trip up trying to explain what is actually going on. According to John Authers of the Financial Times, the S&P 500 now exceeds the level that nine out of ten strategists forecast for the end of the year. Does that mean sell? 

Meanwhile, famed hedge fund manager Crispin Odey says that the while capital markets might be in a bubble, it is a rational bubble. He argues that because governments are underwriting the markets with gargantuan levels of cash, both real and fabricated, capital values can only go up. 

All this liquidity is being used by Western banks to buy short terms bonds, thus driving down yields on two-year paper to below one per cent in the US and UK. With such cheap money, it is not surprising that other assets, like equities and commodities, have risen as the opportunity cost of holding them is so low. 

The fear, of course, is that interest rates will rise at some point and disturb this happy story. Here is where the conflict between the two global economic systems comes to a head. China has US$2,000 billion worth of foreign exchange reserves to fund its growth. Western economies have… well a lot of debt and very low interest rates. 

Last week, reports that Chinese imports of copper fell 25 per cent in August to 219,000 tonnes were enough to drive copper prices down 3.4 per cent to US$6,089 a tonne. Other metals were dragged down in it its wake. But, according to Macquarie Bank, China still has 400,000 tonnes of copper stockpiled. At a value of US$2.4 billion that is quite a bit of cash to have tied up. But then China knows it can fabricate it to make products either to improve its own infrastructure or to sell to the west. It undoubtedly makes more sense for the Chinese to hold metal than dollars, especially if 60 per cent of its reserves are in dollars already. 

Contrast that policy to that of European carmakers in the face of massive overcapacity. Governments have become heavily involved in bailouts, but no firm action has been taken. Sergio Marchionne, the Fiat boss, described it well when he noted that no car plants have been closed in Europe as a result of the crash. 

Even so, it is clear that metal demand in Europe will remain weak while Western countries, companies, and individuals are so indebted. Any recovery will be weak and slow. That may be cause for concern for industries that service the developed markets, and explains the dilemmas many investors face in regard to current equity valuations. 

But commodities, and miners, are dancing to a different tune in a different market which is stronger and well funded. The news this week that Michael Geoghegan, chief executive of HSBC, is relocating to Hong Kong clearly shows which market he thinks is going to be more important in the years ahead. But commodity investors have known that for a long time already.


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## drillinto

Scotiabank bullish on copper as base metals lead commodities higher
John Morrissy,  Financial Post, Canada, September 29, 2009

Copper is expected to outperform all other base metals over the next five years, leading Scotiabank to raise its target on the red metal even as its price falters temporarily in the face of weaker Chinese demand.

The widely used industrial metal will average US$2.30 a pound in 2009, rising to an average of US$2.90 in 2010, said Scotiabank commodity analyst Patricia Mohr.

Her forecast coincides with the release Tuesday of Scotiabank's monthly commodity price repor, which highlighted an 8.1% surge in base metals prices in August. That led the broader index 3.5% higher after a dip in July.

"Base metal prices have already returned to profitable ‘mid-cycle' levels, a development normally taking several years following the end of a global downturn and a testimony to the resiliency and growing importance of China and ‘emerging' Asia (including India) in the world economy," said Ms. Mohr.

As a result, Ms. Mohr said, "copper will continue to outperform other base metals, given under-investment in new capacity during the last cyclical peak in 2007-2008."

Ms. Mohr expects average copper to rise again in 2011 to US$3.25 a pound. But she said prices could run much higher as Asian growth drives demand higher.

Prices have trailed off lately, trading now around US$2.75 from a high of US$2.94 in August, as a surge in Chinese buying in the first half of the year has slowed. Ms. Mohr expects prices could slide further, but firm up in the first quarter of 2010 once China returns to the market and demand from the West begins to pick up.

Precious metals also helped boost the index, with gold surging as high as US$1.024 an ounce in mid-September and silver outperforming gold to trade above US$17 an ounce. Continued declines in the U.S. dollar and news of Barrick Gold closing out its hedge book should be "quite supportive"of prices, Ms. Mohr said.

The index, which tracks prices paid for key Canadian exports, also found energy on the rise, up 3.9% for the month, during which oil prices spiked as high as US$75 a barrel, before settling back to the US$66 to US$67 range.

Mr. Mohr said commodity prices have been supported by the return of hedge funds, sovereign wealth funds and institutional investors, who have returned significantly to commodities as an asset class since last spring.

The agriculture subindex was the only one to fall in August, down 7.21%, "with seasonal harvest pressure pushing down grain prices."


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## drillinto

October 02, 2009

China Celebrates Its Advance Towards World Economic Leadership, As Should Investors In Resource Stocks

Source: www.minesite.com/aus.html

It is 60 years since Chairman Mao came to power, but it was certainly not he who set China on the path to economic power. The honour for that goes to Deng Xiaoping, the leader who started a series of economic and political reforms which led to the gradual implementation of a market economy and some political liberalization that relaxed the established communist systems.
His reforms did not come quickly enough for many who watched the political liberalisation that had been undertaken in the name of glasnost by Mikhail Gorbachev. The massacre in Tiananmen Square on 4 June 1989, came after a wave of protests all round the country and was intended to remind the protelariat of their position in life. It actually achieved the opposite as it reminded Deng of the power of the people and he accelerated his reforms. The result was the amazing progress of China over the last 20 years from a backward nation mired in poverty, a state-planned economy and held back by socialist dogma into the third biggest economy in the world.

Its progress is not going to halt here and this was what was being celebrated at Nation Day yesterday. The International Monetary Fund forecasts Chinese growth of 8.5 per cent this year and 9.0 per cent next, as the country leads Asia's recovery. The country's PMI (purchasing manager's index) rose to 54.3 in September up 0.3 points, with a value above 50 implying expansion, and manufacturing expanded at fastest rate for 17 months in September. Moreover stimulus funding and liberal bank loans encouraged manufacturers to continue to expand activity. A little bit different from our experience in the west.

Portraits of China's Communist leaders were paraded through Tiananmen square  while President Hu Jintao looked on. He was joined by his predecessor Jiang Zemin, Premier Wen Jiabao and other senior leaders. "The development and progress of the new China over the past 60 years fully proved that only socialism can save China, and only reform and opening up can ensure the development of China," Mr Hu told the crowd. After his speech, there was a two-hour parade of 8,000 soldiers, tanks and missiles - including long-range nuclear missiles. Later there was a spectacular fireworks show and a concert of patriotic songs and dancing.

Quite a day and it was amusing to see that the Empire State Building in New York lit up in red and yellow in honour of China’s Nation Day .Or maybe it was to acknowledge that the baton of economic power was passing from West to East. And just to give an idea of the scale of this progress Joel Bowman reported from Taiwan yesterday for Rude Awakening that China’s universities churned out 30,000 MBAs last year: back in 1998 there were none. Even more pertinent, there are now more English-speaking Chinese people than there are people living in the United States.

Although the country already has more than 160 cities with a population of greater than one million (the U.S. has nine, the U.K two), housing, feeding and catering to the needs of China’s 1.3 billion people is no small task. Today China consumes half of all the world’s cement as it strives to build 97 new airports, 500 additional coal fired plants and 30 nuclear plants in the next decade. It commissions a new power plant every four days and, in 2007 alone, added as much power generating capacity as the entire output of France.

Its supplies of energy, metals and minerals have to come from somewhere and last month China’s sovereign wealth fund, China Investment Corporation splashed out over US$3.6 billion on resource investments around the globe. Its latest purchase, an 11 per cent stake in Astana, an exploration and production arm of Kazakhstan’s state-run energy company, is right in line with the fund’s mandate - Buy the world’s resources and buy them now!

CIC’s latest Central Asia investment tops off a month in which the fund also secured a 15 per cent stake in Noble, a Hong Kong-based commodity supplier and a 17 per cent chunk of Teck Resources, Canada’s largest diversified mining company. Add to that a US$1.9 billion debt purchase from Bumi Resources, Indonesia’s main coal producer, and the  story starts to tell itself. Closer to the US, China has been doing deals in South America to great effect. Earlier this year Brazil’s national oil company, Petrobras, walked away with a US$10 billion loan to help develop its mega Tupi field. Petrobras will, in turn, supply 150,000 barrels of crude per day to China this year and 200,000 barrels next year. Every day a deal is the cry and in the last couple of days came news that China National Offshore Oil Corporation, is expected to join talks with UK independent Tullow  Oil over its  US$5 billion oil project  in Uganda.

China’s industrial revolution has been in progress for 20 years at most: the UK’s took 65 years. So what will the global economy look like  in 2005 when this revolution should have run out of steam? Dr Marc Faber who wrote the book ‘Tomorrow’s Gold’ back in 2002, which was essentially a preview of what is now happening in the  East, reckons that China will be the world’s biggest economy by then. The economies of the U.S. and India, should be neck and neck for the No 2 spot - about 60 per cent of the size of China’s. A personal view is that it will be good to see India in that spot. Indians speak English, they have a sense of humour and they understand cricket. Americans fail at all three.

A distant fourth, at maybe a quarter of the size of the U.S. economy, will be Brazil, followed closely by Mexico, Russia, Indonesia and Japan. No mention there of the European Union, but maybe Dr Faber deals with it country by country.He uses the motor industry to illustrate China’s future path to growth. Cars don’t operate in a vacuum. They require an entire operating system to run, as software does. You need roads, for instance, and you need petrol stations and fuel stations, and gasoline. In 2008 sixteen of the largest emerging markets, which includes China and India, passed the US, the EU and Japan as the world’s biggest automotive markets. What’s interesting here is that even in this recession that gap has widened. 

It is easy enough to  speculate how demand for oil will rises in these circumstances as the US uses 25 barrels per person per year. In China with its  vast population the figure is 1.5 barrels and in India, which runs it close in terms of population, even less. The argument can be taken even further as China  is nowhere near self sufficient in metals and minerals for all the building and construction that lies ahead so the theory of an economic super-cycle still stands even after the disastrous end to 2008. Commodity markets never rise in straight lines. Production tends to catch up with demand as prices rise and eventually  there is a hefty correction. 

“Hard asset booms,” explains Marc Faber, “are fueled as much by pessimism about economic prospects as by optimism about a continuously high appreciation of the commodity in question. “In this sense, commodity booms are characterized by greed based on fear.” Heard that somewhere before.

On the question of the dollar, Faber is convinced  that  it  will lose value against the real world of commodities. Sooner or later he expects major inflation thanks to government stimulus and money printing. Therefore the good doctor is  long of  gold and silver. He also thinks Japanese equities are depressed and points out that many Asian equities are near 20-year lows, except China’s. He also likes financial services in emerging economies and infrastructure stocks.

On this latter idea, Faber said, “There are bottlenecks everywhere,” and noted a potential problem of delays or cancellations. He likes farmland, too, which is encouraging for the writer who has farmland  in Kent close to the Channel ports. The overall message, however, is that the Chinese will continue to be key to growth in demand for energy, metal and mineral resources for many years to come and investors should not miss out on the companies concerned.


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## drillinto

October 04, 2009

That Was The Week That Was … In Australia

By Our Man In Oz
www.minesite.com/aus.html

Minews. Good morning Australia, a grim week all round by the look of things.

Oz. Not the happiest, with every sector down, even gold, which should have benefited from the twin boosts of a higher metal price and a lower Australian dollar. Despite that the gold index fell by 4.2 per cent, which was the same as the overall metals and mining index, with both close to double the 2.3 per cent drop in the all ordinaries which was again held up by the banks.

A trawl through the mining stocks found the odd nugget of good news, but you had to look hard. Kingsgate (KCN) was best among the gold miners thanks to news of a handy reserve increase and a fresh discovery near its A-pit at the Chatree mine in Thailand. Chalice (CHN) benefited from an updated scoping study at the Zara project in Eritrea, and a company with the delightful name of Montezuma (MZM) poured first gold at its Peak Hill mine in Western Australia and managed a small share price increase.

Minews. Time for prices, please.

Oz. Before that, it’s worth a few more observations about trends which might be emerging in the Australian market. The new floats game is returning, perhaps prematurely. From zero for most of 2009 there are now four mining stocks with applications to list in front of the ASX. No guarantee that any of them will succeed, but it’s a pleasing sight nevertheless.

Capital raisings by existing miners have also continued apace with Lynas (LYC) cobbling together a pool of capital for its Mt Weld rare earths mine after failing to win Australian Government support for a deal with a Chinese partner. Silver Lake (SLR) is looking for a spot of fresh capital to expand its exploration effort and Platinum Australia (PLA) has raised A$30 million, also because a Chinese deal fell through. 

One other curious trend is that the much-maligned zinc sector appears to have had the best week of all thanks to small price rises by Herald (HER) which put on A9.5 cents to A90 cents after directors accepted a takeover bid from an Indonesian company. Mt Burgess (MTB) hit a 12-month high of A3.2 cents, before easing to close at A2.9 cents, and Ironbark (IBG) did better than double from A13.5 cents to a mid-week high of A29 cents after announcing a deal with Nystar over its Citronen project in Greenland. It eased on Friday to end the week at A22.5 cent.

Minews. We might take a closer look at Ironbark next week, but for today let’s finish the base metals call-of-the-card and then travel through the sectors.

Oz. Sounds like a good plan, with a final word on zinc stocks, because life might be returning. If you look at the price trends of copper, nickel, lead and zinc it is zinc which has led the way for the past six months, though possibly because there have been more zinc mine closures than of the other base metals. Perilya (PEM), one of the local leaders, slipped A1.5 cents lower last week to A47 cents, and Terramin (TZN) was A7 cents lighter at A76 cents.

Copper, which has been the hottest of the base metals thanks to discoveries by Sandfire (SFR), Rex (RXM) and CuDeco (CDU), was relatively quiet last week. Sandfire added a modest A9 cents to A$3.40, but did hit a fresh all-time high of A$3.99 on Tuesday. Rex fell A19 cents to A$2.06 and CuDeco added A4 cents to A$5.75. Other copper moves were minor either way. Citadel (CGG) added half-a-cent to A38.5 cents. Syndicated (SMD) fell A1.5 cents to A24.5 cents. Vulcan (VCN) lost A1 cents to A13 cents after confirming its plan to merge with Universal (URL) which slipped one-tenth of a cent to A2.3 cents.

Nickel stocks were generally down with Western Areas (WSA) the one exception with a rise of A4 cents to A$4.66, while Mincor (MCR) lost the same amount of A4 cents to A$2.33. Minara (MRE) fell A6.5 cents to A88.5 cents and Independence (IGO) lost A19 cents to A$4.35.

Minews. Gold now, please, because that’s probably the most interesting metal in an uncertain world.

Oz. Kingsgate, as mentioned earlier, was the pick of a rather ordinary crop, adding A36 cents to A$8.28, which is almost back to its 12-month high of A$8.39 reached in the previous week. Both Chalice and Montezuma, the other two stocks mentioned higher up in this report, added A1.5 cents to A39.5 cents and A16.5 cents respectively. The only other rise among the gold stocks was a minimal half-a-cent gain to A12 cents by Southern Gold (SAU) which announced a joint venture with Dominion Gold (DOM), which slipped A4 cents lower to A$3.81.

After those blips of good news it was all down, with a few prices to convey the mood of the sector. Troy (TRY) fell A25 cents to A$2.14 as it battled boardroom disquiet. Silver Lake lost A5.5 cents to A88.5 cents in the wake of its capital raising. Adamus slipped A7 cents to A42 cents. Perseus (PRU) fell A12 cents to A$1.18. Resolute (RSG) lost A1.5 cents to A62 cents, and Scotgold (SGZ) eased back by A1.5 cents to A16.5 cents.

Minews. A pretty dull lot. Let’s move across to iron ore, uranium and coal, please.

Oz. One up and the rest down is a quick summation of the iron ore sector. The only rise came from Crusader (CAS), one of the small Australian players trying its hand in the Brazilian iron ore business. It announced plans to start a one million tonne-a-year mine, adding what was an eye-catching A7 cents in a flat week to close at A23 cents. Centaurus (CUR), another of the Aussies in Brazilian iron ore patch, slipped A1 cent lower to A32.5 cents. After that, it’s a long list of losers, like gold. Fortescue Metals (FMG) suffered a setback with its Chinese fund-raising plans, dropping A38 cents to A$3.63. Atlas (AGO) lost a less-painful A6 cents to A$1.62. Murchison (MMX) fell A15 cents to A$1.44, BC Iron (BCI) lost A11 cents to A$1.06, and Cazaly (CAZ) won the loser’s sweepstakes with a fall of A8 cents to A24 cents after failing with its latest round of legal argument over the Rhodes Ridge iron ore deposit controlled by Rio Tinto.

Uranium stocks were generally down, with two exceptions, not that their price rises amounted to much. Mantra (MRU) added A1 cent to A$4.51, and Nimrodel (NMR) added half-a-cent to A9 cents, though perhaps more because of fresh news from gold exploration in Kyrgyzstan. After that, it was all down. Paladin (PDN) fell A15 cents to A$4.34. Extract (EXT) slipped A10 cents lower to A$8.83. Toro (TOE) lost half-a-cent to A18 cents and Uranex (UNX) fell A2 cents to A30.5 cents. Coal stocks were mixed. Coal of Africa (CZA) lost A12 cents to A$2.12. Cockatoo Coal (COK) added A1.5 cents to A36 cents, and Riversdale (RIV) fell A16 cents to A$5.26.

Minews. Specials to end please.

Oz. There were a few specials worth mentioning. Lynas, the rare earths hopeful mentioned earlier, fell a sharp A25 cents to A65 cents after announcing a big share issue to make up for the collapsed Chinese deal, and OM Holdings (OMH), a manganese miner, lost A12 cents to A$1.69 after announcing a deal with Brian Gilbertson’s Pallinghurst group over the Tshipi manganese project in South Africa.

Minews. Thanks Oz.


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## drillinto

"Banks expand commodities trading desks"
Fri Oct 9, 2009 5:28pm EDT // Reuters


 ¤GOLDMAN SACHS (GS.N: Quote, Profile, Research, Stock Buzz)

Global head -- Isabelle Ealet

Staff -- Has more than 200 commodity professionals in locations throughout the world, such as New York, Calgary, Houston, London, Sydney, Singapore and Tokyo

History -- Entered the commodities business in 1981 with the purchase of a firm called J. Aron.

Focus -- Serving corporate clients and financial investors ranging from hedge funds to institutional investors and private equity firms. It is one of the few investment banks in the world that physically trades and ships crude oil.

 ¤BARCLAYS CAPITAL (BARC.L: Quote, Profile, Research, Stock Buzz)

Global head -- Benoit de Vitry

Staff -- The bank had 240 people in commodities at the end of the last fiscal year.

History -- Started trading commodities in 2000.

Focus -- Active in oil, refined products, metals, power and gas, coal, agriculturals, emissions and investment products.

Growth plan -- Plans to increase its commodities staff by over 30 percent to 320 by the end of the fiscal year.

The main area of growth is the physical markets and Barclays created a shipping division called Pendle in March to support its physical oil trading operations. [ID:nLR198602]

 ¤CREDIT SUISSE (CSGN.VX: Quote, Profile, Research, Stock Buzz)

Global head -- Adam Knight, who joined in 2007 from Goldman Sachs where he was head of global metals trading.

Staff -- At the end of 2008 it had more than 130 staff globally.

History -- Entered the business in 2005 and has accelerated its expansion since 2007.

Focus -- The bank is active in oil and refined products, coal, metals and agricultural commodities such as wheat, soybeans, milk and sugar.

It has a large presence in the physical market through its alliance with Swiss commodities trading house Glencore.

Growth plan -- The bank has hired 100 people since 2007 and plans to add another 100 in the next 18 months, Knight told Reuters in an interview last week.

It brought on two new directors in New York and a head of Vanilla Index Trading in July.

It is in the process of closing its U.S. power business but has now started trading European gas and power in-house.

 ¤STANDARD CHARTERED (STAN.L: Quote, Profile, Research, Stock Buzz)

Global head -- Vincent Van Pelt. He joined last year from Bear Stearns where he spent 14 years, mostly as co-head of European equities.

History -- The bank started its commodities business three years ago. It tripled its customer base in 2008 from the previous year and is hoping to double it again this year.

Focus -- It offers commodity-linked financing and structured products in precious metals, base metals, energy and farm products.

Growth plan -- The bank plans to expand its coal trading operations by hiring more people this year and will aim to start trading physical commodities trading by next year. It is keen to expand its presence in sugar and palm oil.

 ¤RBS SEMPRA (RBS.L: Quote, Profile, Research, Stock Buzz)

Global head -- Kaushik Amin. He joined in May and formerly worked for Lehman Brothers where he was global head of liquid markets.

History -- The commodities joint venture between the Royal Bank of Scotland and Sempra Energy (SRE.N: Quote, Profile, Research, Stock Buzz) was created in April 2008.

Focus -- RBS Sempra Commodities is mainly active in physical markets and its main markets are crude oil, base metals, European power gas and coal and North American gas and power. It also trades U.S. agricultural products and emissions.

Growth plan -- A spokesman said it is planning to expand and is currently hiring, but declined to give details. RBS Sempra appointed two new managing directors in June, both from Lehman.

 ¤MACQUARIE (MQG.AX: Quote, Profile, Research, Stock Buzz)

Global head -- Andrew Downe

Staff -- 680 in commodities and treasury combined.

History -- Macquarie has provided trade financing and risk management services across the commodities complex since the early 1980s. It is one of the longest standing providers of agricultural over-the-counter derivatives and tailored risk management services in the financial sector.

Focus -- Macquarie is active in metals, agricultural commodities, oil, products and natural gas.

 ¤AUSTRALIA AND NEW ZEALAND BANKING GROUP (ANZ.AX: Quote, Profile, Research, Stock Buzz)

Global head -- Christophe Renaud. He joined in 2006 from Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) where he was a commodity derivatives trader.

History -- Started in gold in 1996 and expanded into base metals and agricultural commodities in late 2000. Since 2000, it has entered the oil, thermal coal, electricity and emissions markets.


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## Garpal Gumnut

Its all about OIL stupid.

To paraphrase Bill Clinton

WPL CVN MOS and any other oiler you care to mention on the ASX.

gg


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## drillinto

October 12, 2009

Remember, Escondida Was Once A High Risk Project: Markets Are More Efficient Than Many Commentators Realise

By Rob Davies
www.minesite.com/aus.html

It is amusing that newspaper columnists are convinced that market prices are wrong. This week several pundits have taken the view that mining shares are too expensive and are due for a fall. And of course they all think the gold price is too high.
But for anyone who thinks metal prices are too high the simple riposte is to invite them to go out and find some more metals for themselves, and then to arrange finance and get permission to build a mine and then to actually dig the stuff up, refine and sell it. It’s not something that can be done overnight, even in a developed country - or maybe especially in a developed country. 

Then again it is not particularly easy in undeveloped countries either, as the stalemate this week over Tenke Fungurume in the Democratic Republic of Congo (DRC) shows. Tenke Fugurume is one of the world’s largest undeveloped copper deposits. If it was fully in production today its output would transform the supply and demand balance for copper. However, it is located in the DRC where the rule of law is still getting re-established after the kleptocracy of Mobutu. 

The current government thinking there is that owners Freeport McMoran and Lundin were given the licence on terms that were too easy, although given that the spend on the project has already run into the billions, and that the political risk on the project is just as intense as ever, the word “easy” may stick in the craws of some Freeport investors, 

In Mongolia, though, there is a different big project story. Rio Tinto and Ivanhoe Mines have reached agreement with the government to develop the Oyu Tolgoi deposit, one of the world’s other large known but unexploited copper deposits. Obviously the Western partners in this project are comfortable with the level of return they expect to get for the risks involved. It is unlikely, though, that the project would have got the green light when copper was trading at less than US$1.00 a pound, a price which is still in the not-too-distant past.   

What many observers outside the industry totally fail to comprehend is the level of risk, complexity, time and sheer expense in finding a new large metal deposit and bringing it to production. That commitment can only be made if the rewards are high enough and that means metal prices will rise until they are. 

Of course demand is needed to pull metal prices up. Implicit in many of the negative comments about metal prices and the valuations of mining shares is the expectation that demand is about to collapse. That seems an odd view as the Western world struggles with it worst recession for half a century. Can car making or construction get any more depressed? 

It is the strength of Chinese demand, though, that worries these doomsters. And, to be fair, there are some grounds for concern, especially on the issue of the stockpiles the Chinese have amassed. If these were used to satisfy internal demand then the impact on world metal prices would be severe, but only for a while. Once normal consumption had depleted the inventories fresh material would be needed. 

So the doomsters might be right. Maybe metal prices have risen too far too fast, but anchoring valuations to where they were at the beginning of the year is missing the point. For a real perspective, what’s needed is a look back ten or twenty years to when today’s mines were commissioned. It was low metal prices then that prevented more being built. Remember, Escondida was once a high risk project.


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## drillinto

October 15, 2009

Western Australia Shines Brightly While The Rest Of The Western World Is Still Feeling Its Way In The Dark 

By Alastair Ford
www.minesite.com/aus.html

If you’re sitting somewhere in the Square Mile, or in Canary Wharf, the West End, or in Toronto or Vancouver, you may still be feeling cautious about the global economy, and wondering if the recent positive trends will be sustained through to the end of the year. Not so in Australia, where the banks managed to avoid the worst excesses of the credit crunch, and especially not so in Western Australia, where most of the country’s resources companies are based. These are now back up and running after what turned out, from the Aussie perspective, to be a relatively minor blip in the economic cycle. Western Australia is busy selling commodities and assets to the Chinese, and the Chinese are only too happy to buy.

This trend is reflected in recent movements in the index of the top hundred Western Australian-listed companies as compiled by Deloitte. Overall the index, which is dominated by miners, has doubled in value since the start of the year. The total value of the companies on the index at the end of December was A$144 billion, up a further five per cent on the August number. It was noticeable, however, that of the three miners in the top five companies, Fortescue, Paladin and Equinox, the first two actually declined in value, while only Equinox rose. Equinox, of course has been helped by the bedding down of operations at its Lumwana copper project, and by the recent strength in the market for copper, centred around Chinese buying. The uranium market has been less helpful to Paladin, while questions around Fortescue’s financing options have wiped some of the smiles off the faces of an otherwise happy bunch of shareholders. 

So, with the top end underperforming, it was the lower levels of the index that really drove growth in the early autumn. Star performers were Sandfire Resources, up 97.7 per cent, Bauxite Resources, up 110.1 per cent, and Arafura Resources, up 59.7 per cent. Sandfire’s leap in value was based around excellent progress on its Doolgunna copper-gold project, and the announcement of a positive looking joint venture on another property. Shares in Bauxite Resources, meanwhile, moved up after it closed a A$57 million financing, and on the back market uncertainty about the overall bauxite market as major supplier Rusal teeters on the brink of insolvency. 

And Arafura was in positive territory as it issued A$23 million worth of shares to a Chinese investor, and embarked on a major round of promotion as regards its rare earth project in Northern Territory. Rare earths have been much talked about lately, as China, the major supplier, has been very public about its intention from now on to channel the bulk of production into the domestic market. This has led to a flurry of interest in rare earth companies with assets elsewhere, including Arafura and Greenland Minerals and Energy (which hasn’t, as yet, made it onto the index). There was even an article in the economist which mentioned Arafura, so full marks to the company’s PRs. 

Also on the move were uranium-focused Extract and gold-focused Centamin, both of which sit comfortably over the A$2 billion threshold these days, and both of which, it has to be said, look set to add more value in the future. Some think Extract overbought, given the lack of production, but powerful and acquisitive neighbours are very useful when it comes to supporting a share price, especially when the resource base just keeps on growing. There are no such worries about Centamin, which has just gone into production, and which, according to a presentation given by the company’s chief Josef El-Raghy to our October Minesite forum this week, ought to be producing at an annualized rate of 200,000 ounces by the end of the year. Centamin won’t be long for the Deloitte index, though, as the company will dispense with its ASX listing, following an imminent move up from Aim to the full list in London. Centamin’s Canadian listing will be retained. 

Deloitte’s managing partner in Western Australia, Keith Jones, sums up the current mood fairly well: “The powerful rebound in the value of West Australian entities is reflective of sustained demand for resources, stronger commodity prices, and growing market confidence. The market rebound has been underpinned by demand from China for resources and investment opportunities, with many companies capitalising on the improved sentiment by raising new capital to advance projects”. That’s it in a nutshell, and though it has to be said that the FTSE also improved by five per cent last month, and the US S&P was up by just over three per cent, neither of these indexes have come anywhere near to doubling since January. 

But the Aussies have hardly blinked in this recession. It now looks like Australian interest rates might be about to rise for the second month in a row, according to a recent Bloomberg survey of analysts. In the UK, by contrast, talk is that rates will be on hold for the better part of two years. It’s no wonder the Aussie dollar is so strong.


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## drillinto

October 19, 2009

It's Only A Matter Of Time Before Mick Davis Seduces Cynthia's Shareholders

By Rob Davies
www.minesite.com/aus.html

Last week Goldman Sachs reported net profits for its third quarter of US$3.2 billion. That’s a staggeringly large number by most standards. What’s sobering, though, is to put Goldman’s recent run of profits into context by comparing them with those generated by other industries. Take mining, for example. Such a comparison is timely because Xstrata announced last week it would not pursue a merger with Anglo American. In the first half of this year Xstrata made a net profit of US$643 million while Anglo American made US$3 billion. But before we can to a figure that is comparable to that generated by the bank over the same period, we need to add in the US$2.5 billion net profit that Rio Tinto made in the first half.

In other words the total effort made by three of the four largest mining companies generated the same reward as just one, albeit large, bank. And the money made by those miners is a consequence of capital committed decades ago by lots of clever people in some hostile locations and surmounting formidable technical challenges. The bank made its profit by shifting money, its own and other people’s, in very clever ways and using its balance sheet. So why don’t all the miners go and work for Goldman Sachs instead? 

Of course there is more to it than that. A lot more. Goldman Sachs would probably have failed a year ago if Uncle Sam had not bailed out AIG, which insured much of Goldman’s business, in aftermath of the credit crises. So close did the financial system come to failure that the US, and all major economies, flooded the market with liquidity and dropped interest rates to virtually zero. Those banks that survived suddenly found themselves in the nearest thing to financial heaven this side of the Pearly Gates. Not only had most of their competitors disappeared overnight but they had access to virtually free money. 

It took a little while for the remaining participants to pinch themselves and comprehend the windfall they had been given. That took until the beginning of the second quarter of this year. But then they went bananas. With the price of risk so expensive it meant every asset had become incredibly cheap. Commodities and equities were a one way bet. The gains in the last six months have been eye-watering and most of them have been captured by the banks which now have the status of endangered species. No government will be allowed to disturb their natural habitat, at least for a while. 

Even so, the view that risk assets such as commodities and equities have risen too far too fast is widespread. A correction can only be a matter of time. How the banks will cope with that remains to be seen. One thing is for sure though. Those super returns will attract lots of capital and people keen to get a small slice of those returns, even if they won’t be quite so large in the future. 

After all what do you need? Just an office in the City or Wall Street, an address book and, oh yes, some capital. Even after the 40 per cent collapse in global wealth there is still plenty of capital out there.  And, eventually, governments will be keen to introduce some competition into banking. 

What about mining? Well, that’s all a bit difficult and dangerous. Besides the returns aren’t great, just look at those profits in the first half. Anyway, Rio Tinto and Xstrata have just raised a lot of money. No, mining is unlikely to attract a lot more capital in the short term. And that is precisely why the returns from capital currently invested in mining are going to be high for many years yet. It is only a matter of time before Mick Davies seduces Cynthia’s shareholders and combines the two miners to make a powerful third force in mining. That will drive up the return on capital for it and its two rivals to the benefit of all mining investors. For those that have the patience, the long term investor in mining may well have the last laugh.  After all, who would be mad enough to start a new mining company?


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## drillinto

October 20, 2009

A Night In The Pilbara, And Other Chinese Tales: Frugality Is The New Watchword For Fortescue, But The Australian Boom Rolls On 

By Our Man in Oz
www.minesite.com/aus.html

If you’re sitting in London still somewhat bemused by the revival of the resources boom and the strength of the Australia economy, then an overnight stay in Western Australia’s Pilbara iron ore region might provide all the answers you’re looking for. In fact, it was at around 10pm on Sunday night, in preparation for a full day tour of the operations of Fortescue Metals Group (FMG), that the penny dropped for Minesite’s Man in Oz. There he was sleeping in Chinese-made “donga” - a fully-equipped flat, complete with washing machine and satellite television - in an Australian port city, getting ready to look at a Chinese ship being loaded with Australian iron ore. But wait, there’s more. The ore from FMG’s Cloudbreak mine had been delivered to Port Hedland in a Chinese-made railway wagon, riding on Chinese steel rails, and loaded via a Chinese-built shiploader, driven by an Australian crew.

The integration of the economies of these two radically different countries does not come more complete than that. A close parallel to the relationship between Australia (the quarry) and China (the factory) might be found in nature where remora (sucker fish) attach themselves to sharks to feed off the leftovers. In the case of Australia and China, it is China playing the role of shark, as it carves off a large helping of global economic growth, at the expense of the US and Europe, while Australia cruises along selling it the raw materials to do its job. 

Minesite’s visit to Pilbara, which included a half-hour private chat with FMG’s founder and chief executive, Andrew Forrest, in the back-end of an ancient Fokker 100 commuter jet, confirmed what has been coming through in the numbers. Rather than decline, like other western economies, Australia has continued to grow throughout the global downturn, not by much, but grow nevertheless. Unemployment, tipped to soar by the boffins working in the cloistered silence of Canberra’s economic ministries, has not moved to within a bull’s roar of the forecast 8.5 per cent. It is holding at 5.7 per cent, and while job creation is always last in a rebound, that official number now looks silly, with accelerating growth triggering an uptick in interest rates, and with more rises expected before Christmas.

Forrest, effervescent as ever, and looking forward to a quiet night with his wife on their 18th wedding anniversary on Monday evening, is in no doubt that demand for resources from China will not slow for decades to come. Always a man with a tendency for hyperbole, he is now glowing in the spotlight of success. A 30-man (and woman) media pack hang off every word when he holds an impromptu press briefing on the edge of one of seven pits being worked at Cloudbreak, as his “surface miners” scrape away in the background as they hasten to meet his forecast of 40 million tonnes of ore shipped this financial year.

Rivals and critics, of which there remain many in Australia and overseas, are simply being overpowered by the force of Forrest’s personality. His absolute confidence in his own decisions is the stuff normally seen in rhino-hided politicians justifying outrageous expenses, or indeed, outrageous policies. But Forrest has put his own money into FMG (and been well rewarded with the title of Australia’s richest man and a fortune of some A$4 billion), and he has used the funds of willing shareholders and New York dentists via bonds issued in the US.

Perhaps the best way of putting into perspective what Minesite saw during this hot day and night in the field is to stack up the positives of what’s happening right now in Australia against the negatives. On the plus side, shipments of iron ore, and other commodities from Australia to China and other Asian economies, have barely missed a beat over the past 12 months. There was a scare at the end of 2008 and early 2009 when global trade ground to a halt because banks could not (or would not) finance cargoes, but that blip has been more than overcome. The best example of the strength of demand came in the third quarter report of Rio Tinto, one of FMG’s arch-rival in the Pilbara region, which last week revealed that shipments of iron ore were up 12 per cent.

Other plus-side evidence on the ground is a strong revival in exploration spending, and last week’s remarkable offer by BHP Billiton to acquire United Minerals Corporation for A$204 million. That single deal yelled “the boom is back!” more loudly than any other single event in the past year, and for several reasons. Firstly, because BHP Billiton was only one of four “tyre kickers” interested in UMC. Secondly, because the price set a new benchmark for undeveloped iron ore in the ground, and thirdly because BHP Billiton was clearly flagging that it is interested in dealing with mining minnows, if there’s a profit to be made which is, hopefully, a sign that the arrogance shown by the big miners is dissipating.

One day, when time and space permits, Minesite’s Man in Oz will try to explain a seminal event in 2003 when companies such as BHP Billiton and Rio Tinto were forced under State Government law to relinquish exploration tenements they had held for almost 40 years. Back then, in the pre-boom days, even the companies involved recognised that it was fair to apply “use it, or lose it” laws in order to open exploration acreage. But perhaps it was no surprise when people like Forrest, acting on the advice of his trusty second-in-command, Graeme Rowley, pegged almost everything surrendered, and smaller explorers, such as the Rhodes family pegged high-grade chunks such as the Railway tenement which ended up in UMC.

In Forrest’s words, at 30,000 feet over a Bundaberg rum and coke: “they [the majors] said it wasn’t a problem because one day they would just buy it back” – an astonishingly conceited view which failed to take the China boom into account, and failed to recognise that the door had been opened on their once closed shop. It is now companies such as FMG, Atlas Iron, BC Iron, Brockman Iron, Iron Ore Holdings, FerrAus, Giralia, Aquila, and a flotilla of smaller fry which has stampeded through the open door, that are willing to do the basics which BHP Billiton and Rio Tinto forgot – to explore, develop, be nice to customers, talk to investors and the media, and never assume that being a big company means you sit closer to God.

The negative aspects to what’s happening right now are related to the prevailing prices of raw materials and the corrosive effect of the rising value of the Australian dollar against the sinking US dollar in which most commodities are traded. Earlier this year iron ore prices took a 33 per cent haircut. Everyone knows that. What’s less often considered is the additional 20 per cent haircut caused by currency movements. It’s the corresponding fear of falling revenue which has caused FMG to adopt a new corporate slogan, on display in the Cloudbreak mine mess room: “Fortescue frugality”. Given that the food flowed freely, if not the booze because of alcohol restrictions on mine sites, it was obvious that the new-found frugality applies to operating costs. Rowley says that the aim is to slice A$400 million out of annual expenditure.

Overall, investors in far-away places can be reassured that the Australian resources boom is not only intact, it is building up speed again after a temporary diversion caused by the global financial crisis. Currency is a worry, but underlying demand from Asian customers is strong, and customers are keen to see supply lines not only kept open, but expanded. If there are problems ahead they fall into the category of speed bumps, not brick walls. Skilled tradesman are in short supply again, and will become even harder to find once the promised boom in liquefied natural gas gets underway next year. Professionals, such as engineers and geologists, are also commanding higher salaries, while on a personal note it is sad to report that car parks are once again getting hard to find in West Perth, and the price of a fish lunch at the infamous Black Tom’s bistro is rising. Fortunately, though, most talented scribblers can find a mining company somewhere within 50 metres to foot the bill.


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## drillinto

October 20, 2009

Positive Noises In The Nuclear Space Bode Well For Uranium And Uranium Miners 

By Sally White and Alastair Ford
www.minesite.com/aus.html

Nuclear energy was a key centre of attention in alternative energy markets last week, as the spot uranium price moved up sharply. The main news turning the market bullish was that the Belgian government has put back its plans to phase out nuclear power by ten years, although the country's nuclear energy producers will have to pay for the privilege of continued operation. The U308 price published last week by UX Consulting was up US$2.50 a pound at US$46.50 

The Belgian Council of Ministers' decision follows on from recent recommendations from a specially founded expert group, and was set out in an announcement published by climate and energy minister Paul Magnette. A new nuclear agreement now stipulates that the country's nuclear producers make an annual 'contribution' to the country's budget.

Meanwhile, over in the UK, in its first annual progress report to parliament, the independent Committee on Climate Change (CCC) has said that the country must construct up to three new nuclear power plants by 2022 if it is to meet its greenhouse gas emission reduction targets. 

Under current new build replacement plans the first new reactor would start up before the end of 2017 and the next follow in mid-2019. No other build projects are as firmly slated as those from EdF Energy, although other consortia, such as one by RWE and EOn, are working towards new-build in a similar timeframe. 

Another bullish factor for the uranium price was the announcement of flat production figures this year from Energy Resources of Australia, producer of about a tenth of the world’s mined uranium. It expects that 2009 output will be similar to the previous two years. Third-quarter production increased four per cent to 1,405 metric tons, or 3.1 million pounds, from 1,349 tons a year earlier, the Darwin-based company said a statement. The company, controlled by Rio Tinto Group, says it will be expanding output at its Ranger mine in Northern Territory on indications of rising demand from power utilities. Energy Resources shares have climbed 40 percent in Sydney in 2009, compared with a gain of 30 per cent for the S&P/ASX 200 Index. The shares currently trade at around A$26.57 in Sydney. 

Elsewhere in the sector, Areva of France, the world’s biggest builder of nuclear reactors, has announced that it is to build a new fuel-processing plant in Japan to more than double that country’s domestic capacity to meet anticipated demand growth. The plan is part of a joint venture with Mitsubishi and Mitsubishi Heavy Industries, in which the French giant holds 30 per cent. Japan plans 12 new reactors to be built by 2019, as it increases nuclear dependence from 25 per cent in 2008 to at least 40 per cent by 2030, as part of efforts to reduce pollution blamed for global warming and to cut dependence on oil. Areva wants a bigger share of an estimated US$1.5 billion of revenues in this market. 

Still, the upside in the immediate term may yet be limited. Broker RBC is advising its clients not to get too carried away. “In the past quarter, Uranium spot activity has been high, but supplies were plentiful and demand discretionary, resulting in weak prices. We do not expect this to change in the near term”, the broker told clients towards the end of last week. Longer term though, the outlook for uranium and uranium miners looks fairly positive. 

RBC predicts growth in uranium demand of 4.7 per cent per year over the next 20 years. Much of that demand will be driven by China, which is expected to lead the way in new reactor builds over the next couple of decades. On the supply side, RBC forecasts an increase of 7.8 per cent annually until 2013, at which point the market will tilt back from surplus to deficit. Much of the new supply that’s coming on stream was stimulated by the uranium bull market of 2006-7, but RBC reckons that that still won’t be enough long term. “In our opinion”, says the broker, “the prevailing price is too low to stimulate sufficient supply to cover future reactor requirements”. Accordingly, RBC’s long-term forecast for the uranium price rises from US$45.00 per pound to US$55.00 per pound.


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## drillinto

October 24, 2009

That Was The Week That Was ... In Australia


By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. How was your week? 

Oz. Much quieter than recent weeks have been, with no extreme movement either way. The overall tone was up, but not by much. Gold stocks showed signs of recovery, though the high value of the Australian dollar continues to worry investors. Iron ore was again in the news in the wake of BHP Billiton’s bid for United Minerals (UMC). Brokers are busy hunting for look-alike deals. To put the flat week-on-week performance into perspective, both the all-ordinaries and gold indices on the ASX rose by less than half of one per cent, while the metals and mining index did a little better, putting in a rise of 1.9 per cent, thanks largely to healthy gains by BHP Billiton and Rio Tinto.

If there was a sector which outperformed it was uranium, thanks to troubles at the Olympic Dam mine in South Australia which has declared force majeure after a major hoist failure. Manhattan Corporation (MHC), one Minesite’s new members, was the strongest performer among the uranium stocks, putting in an impressive increase of A20 cents to A95 cents over the week, although it did hit a fresh all-time high of A$1.15 on Wednesday. The other sectors produced a handful of stars, but there were not many stocks which outperformed. 

Minews. Let’s start our weekly trawl with the pick of the bunch then, uranium. 

Oz. Before we run a call of the price card, let’s do a bit of a catch up on uranium news from down this way. The shut-down of a portion of BHP Billiton’s Olympic Dam mine was only one factor to stir the market. Another was the awarding of the first uranium mining lease in Western Australia since a ban on uranium mining was lifted last year. Mega Uranium, a Canadian-listed company was the winner, for its Lake Maitland project. The stock isn’t listed in Australia but a quick check of the Toronto exchange showed a small rise over the past week of about C0.2 cents to C8.2 cents in Mega’s price last week. 

Minews. That’s the first time a report on the Australian stock market has started with a Canadian share price. 

Oz. Globalisation at work. Canadians are very welcome in Oz. They might even brush up their cricket skills. 

Minews. Enough chatter. More prices, please. 

Oz. Finishing with uranium, the sector really was dominated by the speculative interest in Manhattan which has effectively doubled over the past month. Also on the move, with a rise of A1 cent to A21.5 cents was Northern Uranium (NTU), which is on the other side of an exploration joint venture with Manhattan. Elsewhere, Uranex (UNX) rose A3.5 cents, to recover some lost ground, but most other moves were modest. Toro (TOE) added half-a-cent to A20 cents and Top End Uranium (TEU) rose by A1 cent to A12 cents. 

Among the sector leaders Extract (EXT) looked tired after a stellar upward run for much of the past 12 months, easing back by A3 cents to A$9.91. Forte (FTE) lost half a cent to A17 cents. Nimrodel (NMR) was steady at A9.9 cents, and Mantra (MRU) lost A3 cents to A$4.92. 

Minews. Iron ore next, please. 

Oz. The hot stock there was Iron Ore Holdings (IOH), which a few brokers see as a UMC lookalike, due to its 160 million tonne deposit of high-grade ore in its Iron Valley project. The company rose an eye-catching A18.5 cents to A$1.05. Another emerging player in the iron ore game is Hemisphere Resources (HEM). Hemisphere is reported to have won a ballot for an exploration tenement close to BHP Billiton’s Mining Area C, a location which is also close to UMC’s Railway deposit, currently the subject of a A$204 million takeover bid from BHP Billiton. On the market, Hemisphere shot up by A24 cents to A54 cents. 

Minews. So, you’re raffling exploration ground now. How very Australian. 

Oz. It sounds odd, but a ballot, which really does involve drawing names out of a hat, is the legally approved process used by the Mines Department to separate rival applications for the same ground lodged at roughly the same time. The ground Hemisphere believes it has won covers 30 square kilometres and lies roughly 15 kilometres north-east of Mining Area C. 

Legacy Iron Ore (LCY) was another relatively unknown iron ore player to attract attention it announced plans to farm into tenements in the remote Robertson Range in the eastern portion of the Pilbara iron ore province. On the market Legacy, which listed in July last year, just in time to be hit by the global slowdown, added A4.7 cents to A9 cents. And yet another iron ore stock in the news, this time after four months on the sidelines, was Territory Resources (TTY) which has resolved complex debt issues. On the market, Territory posted a return opening sale of A25 cents compared with a previous close (on June 16) of A22.5 cents. The stock ended the week at A26 cents, with the modest rise a sign that some form of normality is returning after a difficult 12 months. 

Among the more prominent iron ore players share price movements were modest. Atlas Iron (AGO) added A2 cents to A$1.89. FerrAus (FRS) did a little better with a gain of A2.5 cents to A80 cents, and Mt Gibson (MGX) gained A5 cents to A1.29. After that it was generally down. Fortescue Metals (FMG) fell A14 cents to A$4.03. Brockman (BRM) lost A10 cents to A$2.07. Giralia (GIR) slipped A6 cents lower to A$1.15. Gindalbie (GBG) was A2 cents lighter at A93.5 cents, and BC Iron (BCI) shed A1 cent to A$1.15. 

Minews. Gold now, please. 

Oz. A handful of solid rises dominated a generally lacklustre gold sector thanks to the Australian dollar’s rise back over US92 cents. The outstanding performer of the week was Corvette Resources (COV) which reported highly encouraging assays from its Camaro prospect, located about 60 kilometres south of the big Tropicana project of AngloGold and Independence (IGO). Best result to date is three metres at 40.33 grams of gold a tonne starting at a depth of 97 metres. On the market, Corvette rose A10 cents to A24 cents, but did hit a 12 month high of A27 cents on Thursday and in earlier trading on Friday. 

Chalice (CHN) was another of the stronger stocks in a generally sluggish market as good news continues to flow following its merger with the Eritrean specialist, Sub-Sahara. On the market, Chalice added A5.5 cents to close at A44 cents, a fraction below the 12 month high of A45 cents reached during earlier Friday trade. Perseus (PRU) also attracted attention thanks to more good news from deep drilling at its Ayanfuri project in Ghana. It added A19 cents to A$1.73. Elsewhere, Resolute (RSG) shook off residual worries about its Syama mine in Mali, rising by A9 cents to A81.5 cents, and investors finally recognised that both sides in the Troy Resources (TRY) dispute have the same objectives for the company, and that recognition took Troy A18 cents higher to A$2.60. 

Other gold moves included Adamus (ADU) and Catalpa (CAH), both easing back by A1 cent to A44 cents and A16 cents respectively. Eleckra (EKM) lost half a cent after a solid upward run. Kingsgate (KCN) fell a sharp A60 cents to A$7.85. Silver Lake (SLR) lost A8 cents to A84 cents, and Alkane (ALK) fell A1.5 cents to A45.5 cents. 

Minews. Base metals, and specials to finish. 

Oz. Not a lot from the base metal complex despite more positive results from the Doolgunna copper prospect of Sandfire Resources (SFR) where the latest drilling has revealed what looks to be a repeat orebody, which is what might be expected from the type of structures so far outlined. On the market, this fresh news of an intersection of 15 metres of massive sulphide was not enough to stop the stock from shedding A17 cents to A$3.89. Near-neighbour, Talisman (TLM) managed a rise of A1 cent to A$1.19. Other copper moves were insignificant. Rex (RXM) fell A5 cents to A$2.04. Equinox (EQN) added A5 cents to A$4.17. And Blackthorn (BTR) continues to make a solid recovery thanks to work at its Kitumba project in Zambia. Blackthorn rose by A4.5 cents to A38 cents. 

Nickel stocks were generally down, or flat. Mincor (MCR) fell A4 cents to A$2.38. Independence (IGO) lost A15 cents to A$4.56, while Western Areas (WSA) added A9 cents to A$5.17. Zinc stocks were generally stronger, but not by much. Perilya (PEM) rose by A5 cents to A53 cents. Terramin (TZN) added A8 cents to A90 cents, but Bass Metals (BSM) lost A1.5 cents to A31.5 cents. 

Minews. Any specials? 

Oz. Not really. Lithium stocks were all over the shop. Galaxy (GXY) lost A28 cents to A$1.69 while Reed (RDR) added A11 cents to A59 cents. Manganese stocks were the same. Shaw River (SRR) added A3 cents to A23 cents, while Spitfire (SPI) lost A2.5 cents to A12 cents. 

Minews. Thanks Oz.


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## drillinto

October 26, 2009

Weakness In The West And Strength In The East Creates A Near Perfect Environment For Commodity Speculation

By Rob Davies
www.minesite.com/aus.html

To the surprise of no one except economists the UK recorded its sixth successive decline in GDP in the third quarter of 2009. That makes the current bout of economic upset the longest recession on record. Although worse than all its competitors in the West, the UK’s economy’s performance is at least comparable to its peers.

Contrast that with 8.9 per cent growth delivered by China over the same period and it is clear that the world economy is now clearly in two camps. More importantly, that dynamic now totally destroys the argument that the developing world can only grow if the Western world is sucking in imports. China, and its close neighbours, seems to have reached the critical stage when growth has become endogenous. 

The implications of all this for the metal markets are obvious, and were underlined as copper hit a new high for the year of US$6,595 a tonne on a three month basis, a gain of 8.1 per cent on the week. It would be unfair, though, to ascribe all this gain to China, because there were helpful data from the US too. A 9.4 per cent increase in US housing starts was also a positive factor for base metals. This data is particularly important for copper as the average new US house now contains about 400 pounds of copper, mostly in plumbing and electrical applications. 

As has been typical in this bull market, in which 2008 now looks increasingly like a small hiccup, positive news on the demand side was reinforced by news of problems on the supply side. Accident damage to the main haulage shaft at the Olympic Dam copper uranium mine in Australia means that its output will be reduced by 25 per cent until March 2010. 

This development, plus the strike at the Spence Mine in Chile, just reminds consumers and traders that there is simply no fat in this industry despite the Great Recession in the West. That’s a view that the Chinese have been taking all along, as we heard from Frontier Mining’s boss, Erlan Sagadiev, at our recent Minesite forum. His potential Chinese customers just don’t believe there’s that much copper left. 

But, although copper has the tightest fundamentals of all the base metals the whole complex had a strong week, and was aided by a continued decline in the dollar. The US currency fell one per cent in just one week. The effects of that fall helped fuel a 5.9 per cent rise in aluminium, which has the weakest short term prospects but the best in the long term. Also better off, nickel rose by 6.9 per cent to US$19,500. The two best performers, though, were lead and zinc. Lead increased by 12.6 per cent to US$2,436 per tonne, while zinc rose by 13.5 per cent US$2,258 per tonne. 

This combination of weak economies in the West and strong economies in the east is almost a perfect environment for commodity speculation. The weakness of the major economies means that interest rates are at record lows, and likely to stay that way for a long time. So the cost of trading and speculation is small, and that encourages long positions. 

On the other side strong demand means these positions can always be offloaded to willing buyers. Perhaps the only fly in the ointment for the mining industry is that a weak dollar is raising costs for miners outside the US. But at the current metal prices that is something most of them can happily live with.


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## drillinto

November 01, 2009

Even If Marius Kloppers Is Right, A Short Term Correction Could Be An Opportunity For Long-Term Buyers 

By Rob Davies
www.minesite.com/aus.html

A change of mood was detectable in the markets last week, but it is easier to quantify it than describe it. Pro-growth risk assets like equities and commodities gave ground over the week to end lower, in an atmosphere of more uncertainty than has been seen for some time. This sits oddly with the release of data showing the US economy probably emerged from recession during the third quarter. Maybe, like travellers to a holiday resort, it is sometimes better to travel than to arrive.

In the metal markets sentiment was not helped when Marius Kloppers, chief executive of BHP Billiton, stated at his company’s AGM that China has probably completed its restocking programme and that he expects demand to pull back a little from now on. Markets are driven by the disparity between expectations and reality - over the last six months expectations have been so low that reality did not have to be that strong for prices to move up. 

But now that recovery has been deemed to have arrived, expectations have risen to a level at which they probably exceed reality. That dynamic was bad enough on its own, but the negative tone was surely reinforced when this senior industry figure then underlined that things are probably not going to get a lot better. 

In the circumstances, then, the 2.1 per cent fall in the price of copper to US$6,454 a tonne and the 5.1 per cent fall in the price of nickel to US$18,500 a tonne, wasn’t too bad.  Aluminium also declined by 2.4 per cent and ended the week at US$1,936, while lead dropped 4.8 per cent to US$2,320 a tonne. Zinc fared the best, and only fell by 1.6 per cent, to US$2,223 a tonne. 

That said, it would be a brave man who put money on a sudden turnaround looking for higher prices. Deconstructing the US GDP figures showed that a large boost to the economy came from the car scrappage programme which will clearly not be sustainable for long.  

More worrying for metals are the comments about the size of the stockpiles in China. If these are not drawn down by consumption then soon reduced levels of Chinese imports will impact Western inventory levels, and from there prices, in short order. Since China alone accounts for 20 per cent of the sales of the world’s largest mining company, its actions on stocking levels cannot be underestimated. 

On a more positive note, some of the damage on metal prices was simply a function of a higher dollar. After being everyone’s favourite kicking stool for so long, the 1.4 per cent rise in the US currency would certainly have had some impact on the traditional dollar hedges like metals.  The good news for miners, though, is that the currency move will help reduce costs in mines outside the US.  

Rio Tinto was also updating its shareholders this week in its annual investor update. Having reduced its debt by 40 per cent this year through a rights issue and disposals it now feels able to double its capital expenditure programme for 2010 to US$5 billion. 

While the short term outlook for metals might be a bit soft, the world’s second largest miner still sees plenty of opportunities in the longer term. If there is a market correction, it could provide an ideal opportunity for long term investors to pick up cheap stock from short term speculators looking to get out.


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## drillinto

November 06, 2009

India Buys Up The First Tranche Of The IMF’s Proposed 403 Tonne Gold Sale – Who Will Buy The Second? 

By Charles Wyatt
www.minesite.com/aus.html

It is hard to imagine that the news that the Reserve Bank of India has bought the first tranche of gold sold by the International Monetary Fund under a recently agreed deal with constituent members will hit the headlines in the Minnesota Mail or the South Carolina Chronicle, but it should have. It is yet another small sign that the leadership claimed by the US over the world’s economy since the late 1930s is diminishing. The geopolitical axis of the world is moving to the east and the US will be rewarded, as was Rome many centuries earlier, with its comeuppance for having too many enemies and a currency which is devaluing. There is always a new high flier wanting to take over. In the case of Rome it was the Huns, but that was many years before America was discovered by Columbus in 1492. In the case of America it is the countries of the Middle and Far East led by China and India.

In September it was agreed that a total of 403.3 tonnes of gold held by the IMF would be sold so that its finances could be shored up and it could continue its prime job of providing funds to needy countries. The IMF is very much an arm of the US. It is run from Washington and was originally formed with a stated objective of stabilizing international exchange rates and facilitating development. The US has the largest single vote in an organisation consisting of 186 countries, but the EU has crept up on it as its 27 member states now have double the votes of the US. China has less votes than the UK and India has half the votes of China. The IMF is a relic of the past when the US ruled the world, and, without these gold sales, it can no longer carry out its role. 

The sale of this gold to India represents almost half of the total sales approved by the IMF. According to the World Gold Council (WGC), it is an important step in the IMF’s limited gold sales programme, which is designed to help put the Fund’s finances on a sound long-term footing. As Aram Shishmanian, chief executive of the WGC pointed out: “gold always plays an important role as a protector of wealth, and in these current times of financial instability, that role has taken on a newfound prominence. The fact that these sales will effectively rescue the IMF from a difficult situation regarding its own finances is proof of gold’s unique investment characteristics, long-recognised by central bankers and institutional and individual investors alike”. 

This statement might be regarded as a shade disingenuous by those who remember Gordon Brown’s long drawn out sales of UK gold reserves which started in 1999 and by the rather smaller number of gold bugs who have tried to monitor a conspiracy between the US Treasury and leading banks to muzzle gold in its role as a warning light on economic and currency problems. 

The IMF wants to sell this gold as quickly as possible rather than in dribs and drabs over an extended period of time via the separate Central Bank Gold Agreement, which was extended in August this year for another five years. Led by the European Central Bank, there were 18 countries which signed up to it this time around, but like the IMF itself, this agreement seems to be moving past its sell-by date. When introduced in 1999 it played a valuable role in controlling the gold market as central banks were queuing up to get out of gold after a bear market which had lasted for the best part of 20 years. As Matthew Keen, a director of Deutsche Bank, points out in an article in the London Bullion Market Association’s publication Alchemist, they got their timing badly wrong. “The irony is that the period between 1999 and 2005, which saw more official gold sector sales than at any other time in history, also marked the start of the bull run which is still going strong.” 

If India can hand over US$6.7 billion in the blink of an eye to buy 200 tonnes of gold at an effective price of US$1,045 per ounce, the big question is whether any controls are now needed in the gold market. If India does not want the second tranche, China will grab it, as gold accounts for less than two per cent of its reserves, according to published information. And if China doesn’t it’ll be Japan, or Viet Nam (another kick up the backside for the US), or Russia or Saudi Arabia. China and Russia are gold producers and may buy their own production, but this does not lessen the case. The point is that gold does not lack for buyers and India’s purchase has reminded Europe’s central bankers that they might be best advised to hang on to their gold reserves. 

Interestingly, India was not considered the most likely country to buy any IMF gold when the sale started. Another central bank was in the frame and John Meyer of stockbrokers Fairfax thinks it is still interested in buying the second slice. As a result he reported on Wednesday that London Bullion Market Association delegates had become bullish on the gold price, expecting it to be US$1,181 per ounce in 12 months time. Not too difficult to make that assumption in current conditions, and they are, after all, the experts. So let’s take a look back at what they were forecasting for gold at the beginning of the year. On the other hand, let’s not - it’s too painful, and John Reade of UBS would have to hang his head in shame for his pessimistic targets. 

Let us end with a game of ‘just suppose’. Just suppose that the US, after the disaster imposed on its finances by greedy bankers, is tempted to release some of its gold reserves, reckoned by the WGC to total 8,134 tonnes. There is no way it could do that without actually confirming how many tonnes of gold are held in Fort Knox. For a long time now the Gold Anti-Trust Action Committee has been trying to get this information from the Fed, but to no avail. Lack of information inevitably leads to conspiracy theories and the popular one is that the US Treasury may have already sold this gold. How would it explain that, and what would such a revelation do for the price of gold? Answers on a postcard please.


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## drillinto

November 07, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. It looks as if India’s 200 tonne gold purchase gave your market a kick along last week. 

Oz. It certainly did. In fact India was the hot topic in sport as well, as there’s a fabulous one-day cricket series currently underway as we speak. The final two matches in a seven match series are being played this weekend in India, and last week we saw Australia snatch a three-to-two lead in a big scoring game. Sachin Tendulkar whacked a glorious 175 but even that was not quite enough with India falling three runs short of Australia’s daunting 350.

Minews. Exciting stuff, but perhaps we should stick to financial matters. 

Oz. If you insist, though it is interesting to note the rise of India as a player in Australia’s present and future, after there’s been so much talk about the role of China. It’s been something of a curiosity down this way that India and Australia do not do more business, especially when you consider the common links that there are in sport, and the English heritage that runs through law, politics and business in both countries. And we both do our best to mangle the language, too. 

Minews. Your point being that Australia has more than one Asian horse running in its economic future. 

Oz. Precisely. And speaking of horses my tip for last week’s Melbourne Cup, Alcopop didn’t get up, but if you’d had a place flutter on Mourilyan you would have done well. 

Minews. No more sport, thank you. Time for the market. 

Oz. Gold is the obvious starting point, as the price hovers around the US$1,090 an ounce mark, and with US futures taking a peak above US$1,100 per ounce. One effect of the latest rise is that the Australian dollar has been dragged back up to around US92 cents, after sagging below US90 cents. On the stock market, the gold index was the star performer for the week, rising by 6.3 per cent, easily outperforming the overall metals index which added one per cent, and the all ordinaries, which slipped one per cent lower. 

There were no outstanding stock movements, as the currency effect eroded much of the US dollar gain, though it is worth pointing out that six of the top 10 stocks to rise on the ASX last week were gold miners. Among the better upward moves, Kingsgate (KCN) reclaimed most of its recently lost ground with a powerful rise of A93 cents to A$8.53, while Troy (TRY) benefited from the gold price and from an outbreak of peace in the boardroom, and rose A26 cents to A$2.58. Meanwhile, Resolute (RSG) regained lost support, putting in a rise of A10 cents to A80.5 cents. And also better off, Avoca (AVO) added 28 cents to A$1.73, Medusa (MML) rose A33 cents higher to A$3.63, while Apex (AXM) finally started to develop some traction after a tough 12 months, rising by A1 cent to A5.2 cents, which doesn’t sound much but on a percentage basis is a solid upward move. 

Other stocks to rise included Perseus (PRU), up A8 cents to A$1.55, and Sino Gold (SGX), up 65 cents to A$7.30. Saracen (SAR) was also stronger, after it reported good gold grades at its Carosue prospect. That helped lift the stock by A4 cents to A33.5 cents. Chalice (CHN) issued a bullish report on its Koka project in Eritrea, but that translated only into a modest rise of A1.5 cents to A48.5 cents. Silver Lake (SLR) reclaimed lost ground with a rise of A7.5 cents to A92.5 cents, and Integra (IGR) reported more good gold hits at its Salt Creek project, rising by A2.5 cents to A27.5 cents. 

Somewhat perversely in a week when gold was in the headlines around the world we also saw a number of stocks stall, or even fall. Adamus (ADU) slipped half a cent lower to A41.5 cents, Allied (ALD) lost A1.5 cents to A44 cents, and CGA (CGX) fell by A3 cents to A$1.64. 

Minews. Across to iron ore now, where there seems to have been plenty of action. 

Oz. There was, but not all of it was positive. Star of the week was Iron Ore Holdings (IOH) which we reported on in detail a few weeks ago. It added an impressive A18 cents over the week to close at A$1.25, although it did touch a 12 month high of A$1.30 during Friday trade. Centrex (CXM), a stock we hear little about, became the latest iron ore player to stitch up a Chinese connection, and as a result added A10 cents to its price to close at A72 cents. Ironclad (IFE), another low-key iron ore stock, gained A4 cents to A40 cents, while BC Iron (BCI) rose by A9 cents to A$1.17. After that there was a long list of losers, led by Gindalbie (GBG) which perhaps ought to have done better after it won final government approvals for its big Karara project, cementing in the process its ties to the Chinese steel maker, Ansteel. On the market, Gindalbie lost A3 cents to A85.5 cents. Other downward movers included Northern Iron (NFE) which slipped A10 cents lower to A$1.70, Giralia (GIR), which lost A7 cents to A94 cents, Atlas (AGO), which eased back by A5 cents to A$1.75, and Brockman (BRM), which was A6 cents lighter at A$1.95. 

Minews. Base metals now, please. 

Oz. The picture was mixed, with limited movement either way, apart from a few good moves in the copper sector. Highlands (HIG), which has done a good job of disappearing from view over the past couple of years, came back strongly with news of a monster copper and gold drill hit which included a 968 metre section of core assaying 0.5% copper and 0.4 grams a tonne of gold, classic Papua New Guinea stuff. On the market, news of that intersection boosted the stock by A9.5 cents to a closing price of A37 cents, just short of the 12 month high hit on Friday of A38 cents. Adelaide Resources (ADN) was the other copper newsmaker, as it reported good results from its Rover project in the Northern Territory. That was enough to boost the stock by A4 cents to A25.5 per cents. 

After those two items of excitement the moves were modest either way. Sandfire (SFR), the hottest of the local explorers, regained some recently lost ground with a rise of A7 cents to A$3.72. Talisman (TLM), its near neighbour, added A5 cents to A96 cents. Syndicated (SMD) was up A1 cent to A23 cents, and Exco (EXS) added A2 cents to A26 cents. Going down CuDeco (CDO) eased back by A21 cents to A$5.51, and Marengo (MGO) dropped A2.5 cents to A17 cents. 

Nickel stocks were slightly firmer. Western Areas (WSA) added A2 cents to A$4.87, Mirabela (MBN) rose by A23 cents to A$2.98, and Independence was up by A1 cent to A$4.32. Mincor eased back by A12 cents to A$2.07 and Minara (MRE) was A5 cents weaker at A84 cents, after being named as the favourite to buy BHP Billiton’s mothballed Ravensthorpe mine. Zinc stocks were flat. 

Minews. Uranium, coal, and any specials to finish, please. 

Oz. It was all much the same as it was in the base metals sector - some up, some down. Mantra (MRU) was the best of the uranium stocks, putting in a rise of A30 cents to A$4.75, while Extract (EXT) clawed back lost ground with a rise of A22 cents to A$8.54. After that it was downhill. Paladin (PDN) lost A5 cents to A$4.11. Uranex (UNX) was A3 cents lighter at A30 cents. Manhattan (MHC) slipped A2 cents lower to A93 cents. And coal stocks were equally uninspiring. Coal of Africa (CZA) was one of the better performers with a rise of A9 cents to A$1.95, but Riversdale (RIV) lost A10 cents to A$5.40. 

In specials, the lithium hopeful Galaxy (GXY) added A15 cents to A$1.63 after an on-site ceremony to mark the start of construction. Manganese leader, OM Holdings (OMH), remains under takeover watch, and that generated sufficient interest to boost its shares by A14 cents to A$1.89. Moly Mines completed a fresh capital raising, but the extra shares being issued dragged the price down by A6.5 cents to A85 cents, which is nonetheless still above the A75 cents being paid by Canadian investors in the Australian molybdenum hopeful. 

Minews. Thanks Oz.


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## drillinto

November 09, 2009

Gold Hits $1,100 As The Anglo-Saxon Economies Show Signs Of Becoming Addicted To Stimulus

By Rob Davies
www.minesite.com/aus.html

Without doubt the most important news last week for anyone interested in commodities was the announcement that India bought 200 tonnes of gold from the IMF. It might only represent US$6.7 billion out of the country’s US$277 billion of reserves, but its significance is greater than that. In combination with buying interest from other central banks, this move indicates that central banks this year will become net buyers of gold for the first time since 1998.

Not all central banks are equal of course, but it is instructive to note that some of them are moving nominal assets like dollars into hard assets like gold, while others are doing the opposite. The Bank of England is creating more nominal assets through quantitative easing and the US Federal Reserve is doing something similar with its ultra low interest rate policy. 

Another rise in US unemployment to 10.2 per cent, the highest unemployment rate seen for 26 years, was all the markets needed to be confirm their view that US rates will stay low for as long as necessary, for an “extended period” in the official jargon. 

The reaction to both news items was to push gold up to new high of US$1,109 an ounce, and to widen the spread between 10 year and two year US Treasuries to 264bps. Investors have decided that the authorities in the UK and US are simply going to print enough money to inflate their way out of this crisis. 

This view accords with that of Bill Gross who runs PIMCO, the world’s biggest bond fund manager. He believes that lax monetary policy over the last decade or so in conjunction with the growth in the shadow banking system and aggressive (or even irresponsible) lending by the traditional banks has inflated asset prices across the board.  

Some observers might think that the solution to this would be for asset prices to fall. But no, Gross argues that the only solution is for governments to continue pumping money into the developed economies in order to maintain asset prices at current levels. Like an addict, the only solution is more and more stimulus. 

That means anyone looking to buy cheap houses, cheap shares or cheap metals is going to be disappointed. After all, both the UK and the US governments have got vast shareholdings in banks that need to be refinanced and eventually sold off. It’s not just a case of the authorities changing roles from poacher to gamekeeper. They are playing both roles at the same time. 

In such an environment it is therefore no surprise to see gold rise and base metals follow in its footsteps. Over the past week, a 1.3 per cent fall in the dollar was mirrored by a 1.1 per cent rise in copper to US$6,526 a tonne, although the other metals were weaker. Aluminium fell 2.6 per cent to US$1,885, and nickel dropped 3.8 per cent to US$17,805. Lead fell 0.2 per cent to US$2,415 per tonne, while zinc fell 1.7 per cent to US$2,,185 a tonne. 

The sheer scale of the liquidity being pumped into capital markets by the Anglo Saxon central banks will be enough to overwhelm any doubt about the bearish outlook for the short term. In the medium term, the authorities will be sincerely hoping that normal economic growth will be resumed and that this will allow the stimulus to be gradually reduced. 

If that doesn’t work then the Indian central bank might be getting visitors from London and Washington asking for instructions on Plan B.


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## drillinto

The price of gold: an opinion from India
Nov 10 2009
Source:  Livemint.com  

Rock, scissors, paper, gold

We don’t share some of the grand beliefs of the gold bugs. But if central banks continue to print money, we won’t be surprised if gold prices continue to rise beyond this week’s record.
About a week after the Reserve Bank of India spent $6.7 billion to buy 200 tonnes of gold from the International Monetary Fund, prices of the yellow metal have hit a record in nominal terms, crossing $1,100 an ounce even though they are still below their 1980 peaks in inflation-adjusted terms. To cross the latter, gold will have to move beyond $1,885 an ounce.
It is interesting to see who has been buying to push up prices. The New York Times last week cited data from the World Gold Council to report that consumption of gold for jewellery dropped 20% in the second quarter of 2009 while investor demand increased 51%.
Gold bugs may be hoping for a return to the earlier era when gold was the currency of trade and exchange. But they are daydreaming. There is enough economic research to show that the inflexibilities of the gold standard made the Great Depression worse. Thus, nations that could not adjust their currencies were forced into protectionism, a move that made the 1930s crisis even worse.
An economy in a crisis needs extra liquidity and the supply of gold is fixed: No chances of quantitative easing there.
However, the current rally in gold prices does have quite a bit to do with the quantitative easing that many Western central banks have done to stave off a financial collapse. More paper money and the same amount of gold are bound to change the relative prices of these two assets. That is what is happening: A drop in the dollar is mirrored by the rise in gold prices.
The future direction of gold will depend on whether inflation rears its head and whether the dollar continues to decline. 
Investor Jim Rogers bases his forecast that gold prices will double to $2,000 an ounce on these two assumptions. Economists such as Nouriel Roubini””who shot to fame earlier this decade when he became one of the first to warn about a coming financial collapse””rubbish Rogers’ price forecast. They expect deflation rather than inflation.
We do not share some of the more grand beliefs of the gold bugs. But if central banks continue to print money, we would not be surprised if gold prices continue to rise.


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## drillinto

November 14, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. How was your week? 

Oz. The market finished up, but not dramatically so. Rises outnumbered falls by a comfortable margin, and all of the major indices moved ahead a few percentage points. Gold, perhaps because of the high Australian dollar against the US dollar, was the disappointment of the week. Despite scaling the US$1,100 an ounce barrier, and looking set for a period of continued strength, the gold index was the week’s laggard, adding 2.1 per cent compared with the 2.5 per cent put on by the all ordinaries and the four per cent rise enjoyed by the metals and mining index. As we speak, the Aussie dollar is back over US93 cents, a gain of about US1 cent over the week, which is not a lot in itself. But it is the trend which worries gold bugs.

Another gold worry is that the national business newspaper, the Australian Financial Review suddenly became a gold convert. Its Saturday morning cover told investors that they “shouldn’t laugh about gold hitting US$2,000 an ounce”. As a rule of thumb down this way whenever the AFR starts talking about resources, investors know it’s time to get out. 

Minews. If gold wasn’t the strong performer, which sector was? 

Oz. Iron ore produced more winners than any of the other sectors, with a few stand-out performers. Golden West (GWR) was the star, after months in the doldrums during which Minesite rabbited on about the hidden value in the stock to no avail. As recently as September 3rd we carried a report on the stock being overdue for a revival, if only to catch up to its peers. Back then, Golden West was trading at A35 cents. On Friday it shot up to A52.5 cents, for a gain of A18 cents and the title of the ASX’s top stock of the week. Driving Golden West was a report of fresh high-grade drill results from the company’s Joyner’s Find deposit near the outback town of Wiluna. These included nine metres at a near-perfect 69% iron. 

Minews. Since you’ve started on iron ore you might as well keep going, and then hop across to gold. 

Oz. Good decision, because there is chatter in the market that China is marshalling its forces to hit back at the curious recent alliance between BHP Billiton and Rio Tinto. Just how that hitting back will unfold remains to be seen but the speculation is that the game will start with China funding a fourth railway system and port to link together a number of “orphaned” or isolated ore bodies which have been struggling to gain access to the BHP Billiton and Rio Tinto rail and port systems. In other words, if China can’t buy a big iron ore producer, following its failure with Rio Tinto, then it will assemble its own source of supply, which will but the big boys under considerable pressure. 

The takeover of United Minerals (UMC) by BHP Billiton offers a clue as to how seriously the two leading local miners are treating the threat. Until BHP Billiton moved, UMC was close to doing a deal with a Chinese steel mill. Events at Iron Ore Holdings (IOH) look like repeating that pattern, as IOH is said to be close to revealing a fresh resource upgrade, and is possibly talking to three joint venture partners, or a bidder. On the market, IOH added A5 cents last week to close at A$1.30, but did trade up to a 12 month high of A$1.38 on Monday. 

Other iron ore moves last week included Gindalbie (GBG), which recovered from a period of heavy selling to close A10 cents higher at A95 cents. Mt Gibson (MGX) was also in strong recovery mode, rising by A13 cents to A$1.42. Elsewhere, Giralia (GIR) added A9 cents to A$1.06, and Atlas (AGO) rose A6 cents to A$1.81. Meanwhile, Fortescue (FMG) excited the investment banks with talk of an additional debt and capital raising designed to enable the company to expand output to a stratospheric 155 million tonnes a year, and more. That was enough to push the stock up by A20 cents to A$4.04. A handful of iron ore stocks went against the trend. FerrAus (FRA) dropped A3 cents to A73 cents, while BC Iron (BCI), which we took a look at last week, slipped A2.5 cents lower to A$1.15. 

Minews. Over to gold now, because it remains the talk of the financial world, even if your investors are a bit skittish. 

Oz. Overall, in the wake of the US dollar strength in gold, rises did outnumber falls, but there was a surprising number of stocks in decline too. Before we get to the bad news the good news was that some companies staged pretty impressive rallies. Resolute (RSG) finally seems to be winning points for solving the metallurgical mystery which has been holding back the Syama mine in Mali. Investors pushed the stock back through the A$1 mark for the first time in more than a year. At the close on Friday, Resolute was up A16.5 cents at A96 cents, but it did hit a 12 month high of A$1.04 on Thursday. 

The other stock in the precious metals category to outperform last week was one that we hear very little about, Cobar Consolidated (CCU), a company working up a silver mine in western New South Wales. It has reported robust economics at its Wonawinta project, and rose by A13.5 cents in heavy turnover last week to close at A38 cents, down a little on the 12 month high of A42.5 cents reach early on Friday - at which point the company copped a speeding fine from the ASX. 

Elsewhere among the gold stocks OceanaGold (OGC) added A13.5 cents to A$1.41, Regis (RRL) rose by A5.5 cents to A57.5 cents, Adamus (ADU) added A2.5 cents to A44 cents, Kingsgate (KCN) put on A86 cents to A$9.39, Chalice (CHN) rose by A1.5 cents to A50 cents, and Carrick (CRK) put in a star turn with a rise of A13.5 cents to A89.5 cents. Two new stocks that did well last week were Chesser Resources (CHZ), which has an interesting gold project in Turkey, and Matsa Resources (MAT), which is exploring in Western Australia and close to Kingsgate’s Chatree mine in Thailand. Chesser added A2 cents to A19.5 cents, and Matsa rose by A5 cents to A30 cents. Going down, St Barbara (SBM) raised more capital and dropped A2.5 cents to A31.5 cents, while Troy (TRY) retreated after a period of solid recovery, shedding A9 cents to A$2.49. Also weaker, Excalibur (EXM) slipped A1 cent lower to A17 cents. 

Minews. Base metals next please. 

Oz. This should be short and sweet. Most copper stocks barely moved. The three exceptions were OZ Minerals (OZL), which reclaimed recently lost ground with a rise of A7 cents to A$1.24, Anvil (AVM), which added A10 cents to A$3.31, and Sandfire (SFR), which received a boost from management presentations in Europe, including a well-received session at last week’s Minesite forum in London. Sandfire added A36 cents to close at A$4.08 despite (or perhaps because of) the ASX querying one of the slides in its presentation. This showed a future possible mine development, and the really stupid part about the ASX query is that the allegedly offending slide remains on the ASX’s own website. Curious readers can see the original unadulterated slide on page 15 of the document here.  

Nickel stocks were flat, apart from Western Areas (WSA), which added A20 cents to A$5.07, and Mirabela (MBN), which rose A32 cents to A$4.64. Zinc stocks did nothing, with Terramin (TZN) down A1 cent to A79 cents and Perilya (PEM) up A3 cents to A50 cents. 

Minews. Uranium and specials to finish please. 

Oz. Manhattan (MHC) was the uranium star of the week, up A27 cents to A$1.20 with nothing fresh reported. The company’s chairman, Alan Eggers, has a strong following. Most other moves were mildly weaker. Mantra (MRU) lost A13 cents to A$4.68. Uranex (UNX) was down A1 cent to A29 cents, while Extract (EXT) lost A23 cents to A$8.31. Companies with exposure to the other energy mineral, coal, were somewhat stronger, with Macarthur (MCC) rising by an eye-catching A82 cents to A$9.63, and Riversdale adding A18 cents to A$5.58. 

A few specials are worth mentioning. Bauxite Resources (BAU) announced the sailing of its first shipment of ore to China, a step which boosted the stock by A8 cents to A$1.07. Black Fire (BFE) became the latest lithium player on the ASX, as it purchased a project in Namibia - a move which lifted the stock by A4 cents to A16.5 cents. And NiPlats (NIP), which has a vanadium prospect on its books, added A10 cents to A66 cents after the acquisitive Cape Lambert Iron lifted its stake in the stock to 37.6 per cent in the latest in a rash of deals put together by the cashed up iron ore company which has emerged as the owner of the assets of the failed CopperCo. 

Minews. Thanks Oz.


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## drillinto

November 16, 2009

Once The Recovery Gets Fully Underway, The Battle Between Bond Investors And Commodity Investors Will Turn Serious

By Rob Davies
www.minesite.com/aus.html

The investment industry has even more clichÃ©s and aphorisms than the world of sport. Despite that, new ones still crop up that seem exactly to hit the spot. This one for example: “Investments always move in the direction that will disappoint the maximum number of people”. The reason this looks relevant is the recent record cash inflow into commodity funds.
According to the Financial Times, Clive Capital, the world’s largest commodity hedge fund, has just stopped accepting new money. Currently, Barclays Capital estimates that the amount invested in commodity assets stands at US$224 billion. That is not far off the record US$270 billion achieved in 2008 when oil peaked at US$147 a barrel. Now, though, the money is going into ETFs that are backed by metals, especially precious metals, encouraged by the record highs in gold. 

It is an unfortunate fact that the more hot money flows into an asset class when it’s at its peak rather than its trough. But no-one can know when the peak is until some time later when the second half of the price graph can be drawn. Until then everyone is in the dark.  

The bull case for commodities is based on the idea that rising industrial demand is tugging against limited production capacity after years of underinvestment in new mines and plant. That argument remains a potent one. However, abnormally low interest rates in almost all countries, except those that produce metals, have created vast amounts of capital seeking a better return. It is some of this promiscuous capital that has piled into commodities in anticipation of the market getting tighter in the next year or so, and its this that has been driving prices even higher. 

It may well be, though, that the actions of these investors have brought forward the next peak and that the good news is already in the price. Maybe, the peak might be this year, not next. As ever, currency moves complicate the picture but copper dropped 0.9 per cent over the week to US$6,470 a tonne, and nickel has continued its recent decline with a fall of 8.3 per cent to US$16,325 a tonne. Aluminium was unique, putting in a gain of 1.7 per cent to close out last week at US$1,917, even as lead and zinc dropped 2.8 per cent and 2.5 per cent respectively to US$2,250 and US$2,130 a tonne. 

What is odd about the financial markets at the moment is that commodities are flying at the same time that bond markets have reached a 28 year high. As a comparison more money, US$280 billion, has gone into bond funds this year alone than the total amount invested in commodities. It is true that bonds offer an income while commodities don’t. Even so, 3.4 per cent for ten year US Treasuries is hardly enticing. 

In a way commodities can be said to have a negative income, but investors expect the capital gain on the underlying asset to offset the lost income by some margin. Equally, the risk with bonds is that the potential capital losses will dwarf any income. That applies especially to the Japanese bond market where yields are only 1.48 per cent for ten year JGBs.  

While investors might worry about rising supply of UK and US debt, the real concern is the potential flood from Japan. Even after the recent fiscal incontinence of the two leading Anglo Saxon economies, debt to GDP ratios in both is around 90 per cent. In Japan it is 200 per cent. That is tolerable when interest rates are low. But a 21 per cent rise in the Baltic Dry Index over one week suggests that economic recovery is now well entrenched and that higher interest rates, and/or inflation, cannot be far away. 

When that happens, the battle between bond investors and commodity investors will turn serious. That will pit a 28 year bull market for bonds against a seven year bull market for commodities. The outcome will be interesting to watch, to say the least.


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## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
By Bill Matlack (USA)

http://www.kitco.com/ind/matlack/printerfriendly/nov092009.html


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## drillinto

November 17, 2009

Why Does The Financial Times Have A Fear Of Gold?

By Charles Wyatt
www.minesite.com/aus.html

What fun we are having with gold nowadays. Every time it goes up a few dollars an ounce the tired old Financial Times comes in and gives it a swipe. Minews suggested to Martin Wolf, the chief economics editor, that it was almost as if the newspaper was frightened of gold, but he replied, “Not really, no. I regard the news that Asians are buying more gold, as they become richer, and accumulate more reserves as very much a case of "dog bites man". It would be interesting if it were not the case”. What anyone can make out of this anodyne reply is up to them, but fear of gold is a disease that has also hit the Australian Financial Review, as our Man in Oz pointed out in this week’s review of events Down Under – That Was The Week That Was … In Australia.

He wrote, “Gold, perhaps because of the high Australian dollar against the US dollar, was the disappointment of the week. Despite scaling the US$1,100 an ounce barrier, and looking set for a period of continued strength, the gold index was the laggard of the week, adding 2.1 per cent compared with the 2.5 per cent put on by the all ordinaries and the four per cent per cent put on by the metals and mining index. As we speak, the Aussie dollar is back over US93 cents, a gain of about US1 cent over the week, which is not a lot. But it is the trend which worries gold bugs. Another gold worry is that the national business newspaper, the Australian Financial Review, suddenly became a gold convert with its Saturday morning cover telling investors that they ‘shouldn’t laugh about gold hitting US$2,000 ounce’. As a rule of thumb down this way”, continues our Man in Oz, “whenever the AFR starts talking about resources, investors know it’s time to get out which, this time, might not be correct but it does have an anti-gold reputation topped only by your Financial Times”. 

What is it about gold that upsets these otherwise respected journals? The answer seems to be that their leader columns are written by economists who do not understand the basic principles of investment, having never traded stocks nor commodities in their lives, and who have consequently been embarrassed by gold time after time. Just two examples: in August 2004 the F.T. published a piece sub-headed, “The pointlessness of holding bullion continues to sink in”. At the time the price of gold was just over US$400 an ounce, two years after Gordon Brown had sold a large chunk of the UK’s gold reserves at an average price of US$275 per ounce.  Exactly three years later, the Pinker than Pink ’Un came out with a piece entitled ‘Stolid Gold’ in its Lex column. It does not need a brain surgeon to know what that was about, and the timing was classic as the gold price then rose in what was very close to straight line from US$680 per ounce to just on US$1,000 early in 2008. 

Minews then embarked on an e-mail conversation with the writer of the last article to try to persuade him that gold was a useful part of any sensible investor’s armoury. It gives early warning, which politicians and economists do not want to hear, of when something is going adrift in terms of currency or inflation. The FT writer was having none of that, though, and Minews was dismissed as a gold nut, and shortly afterwards he was promoted to be Head of Lex in the US. Tells you all you want to know really as the current editor of the newspaper was previously the F.T.’s US managing director, and he clearly hates the one thing that emphasises the weakness of the once mighty dollar. 

To be fair, he did run a leader early in May of this year entitled “Fear has Made The Yellow Metal Desirable Once Again.” The financial clouds were still pretty dark at the time and metals, both precious and base, were one of the few sectors that were advancing. Since then, however, he has changed his mind again, and his minions were at it again in the leader column on Saturday 7th November, when a piece entitled ‘Bullion Quest Is No Golden Opportunity’ appeared, with the sub-heading ‘Gold Purchases Do Not Address Macroeconomic Challenges’. The argument seems to be that the shrewd nations of Asia who have built up huge reserves of currencies which they are using, in small part, to buy gold are behaving selfishly. According to the FT “real action means tough choices: saving less and greatly expanding swap agreements.” Well, bless my old boots, as my grandfather used to say. Who came through the recent economic shambles in better shape, countries in the West, or those in the East? 

Returning to the subject of gold, on Friday 13th, a very suitable day, the Lex column carried a piece headed ‘Peak Gold?’ The first sentence captured the whole argument as it went “Rare, malleable and immune to corrosion, gold made an ideal source of money before the development of modern currency”. So it did, and one of the prime reasons why investors are buying gold now is that it still demonstrates the fallibilities of paper money. Read a little further and the teenage scribbler reveals beyond doubt that he, or she, does not understand that the basic aim of investment is to make money. On the subject of demand for gold the writer says, “It is not really demand in the same sense as other finite commodities because gold is almost always just being held in order that it might later be sold, to a greater fool, at a profit”. 

So, all-knowing Lex, who was the greater fool? The investor who took your advice and sold gold in August 2004, or he who bought it off him? Anyone with anything between their ears would know which he would prefer to be, but the word fool grates a little, even in the context of the “greater fool theory”. In the days of that great editor of the F.T., Sir Gordon Newton, young journalists were taught the value of presenting both sides of the argument. Nobody wins by suggesting that the opposition are fools. There is always the danger that it could be the other way round. As a result of its stubborn stance the F.T. has been knocking gold throughout the eight years of a bull market during which  it has risen from US$275 an ounce to US$1,132 an ounce. How sensible is that?


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## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack (USA) - 17. NOV. 2009

Data is presented in tabular form:

http://www.kitco.com/ind/matlack/nov172009_junior.html


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## drillinto

Gold to Outperform U.S. Stocks on Stimulus, Marc Faber Says 
By Joyce Koh
Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aSoEpFEjNz3o&pos=5#

Nov. 18 (Bloomberg) -- Gold, which climbed to a record today, will outperform U.S. stocks as investors turn to the bullion on further government stimulus spending, said Marc Faber, publisher of the Gloom, Boom & Doom report. 

The support level for the commodity will now be at $1,000, which was the precious metal’s resistance level previously, Faber said in a Bloomberg Television interview in Singapore today. Immediate-delivery bullion gained as much as $7.10, or 0.6 percent, to $1,148.40 an ounce in London and was at $1,148.20 by 11:25 a.m. local time. 

“What will continue to happen is that the S&P 500 and the Dow Jones will go down relative to gold,” Faber said. “I think gold will go up more” from its support level. 

The outlook for gold sparked a debate between economist Nouriel Roubini and Jim Rogers earlier this month. Rogers, the investor who predicted the start of the commodities rally in 1999, said Roubini is wrong about the threat of bubbles in gold and emerging-market stocks. Roubini, who predicted the global economic crisis, said a forecast by the investor that gold will double to at least $2,000 an ounce is “utter nonsense.” 

“Will it go $2,000, $200,000 or $2 trillion? I don’t know,” Faber said. “But if you have money printing in the world, then the price will over time rise. It will go up more for things that you just can’t increase the supply, and the supply of precious metals is very limited.” 

‘Good Asset’ 

Gold is set for a ninth annual gain as central banks, pension funds and individual buyers seek to protect themselves from potential currency debasement and inflation. Policy makers worldwide have set interest rates near zero and spent $2 trillion to pull the world economy out of the worst recession since World War II. 

“With the crisis, people are realizing gold is a good asset to have,” Pierre Gay, chief executive officer at Newedge Financial Asia-Pacific, said in a Bloomberg Television interview today. “For me, the potential for gold is pretty high.” 

Faber expects the U.S. government to increase its stimulus spending should the Standard & Poor’s 500 Index fall toward 900. The U.S. budget deficit under President Barack Obama’s administration reached a record $1.4 trillion in the fiscal year that ended Sept. 30. Debt amounted to 9.9 percent of the nation’s economy, triple the size of the 2008 shortfall. 

“I don’t think the S&P will drop below 800 or 900, and eventually will go higher in nominal terms, but not necessary in real terms,” he said, predicting a correction in the measure in the “near term.” 

The index rose 0.1 percent to 1,110.32 yesterday. The investor predicted on March 9 in a Bloomberg interview that equities would rally because of government stimulus measures. The S&P 500 Index dropped to a 12-year low that day and has since climbed 64 percent as a four-quarter contraction in the world’s largest economy ended, while the MSCI World Index rallied 71 percent.


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## drillinto

November 19, 2009

Australia Powers On, For The Time Being At Least

By Alastair Ford
www.minesite.com/aus.html

For a quick indication of the best that Australia’s had to offer in recent weeks, a retrospective look at the share price performances of three companies we’ve had occasion to mention more than a few times on Minesite lately seems appropriate. During the month of October, shares in Focus Minerals rose by 47.5 per cent, shares in United Minerals Corporation (UMC) by 42.1 per cent, and shares in Centamin Egypt by 37.6 per cent. The slight caveat to the impression of a bumper month here given is that during October it was already widely known that Centamin’s ASX-listing was not long for this world. Possibly Aussies were buying while it was easy to do so. Or possibly the price rise was driven by market activity in the UK and Canada, where the company also has listings.

Still, in shares in companies based in Western Australia at least, which account for a clear majority of the Australian resources stocks, were marginally up in October, according to analysis done by Deloitte WA, as compared to the global indices which were broadly down. The Australian outperformance continues apace, it seems, powered on by iron ore and gold, and with only some of the shine being taken off by the strong Australian dollar. As Mark Reilly, the chief of Australian-based but African-focussed Forte Energy commented recently, “there’s only one currency around at the moment”. Still, it’s alright for him, his costs are denominated in the ailing US currency. 

Still, the strong Aussie dollar’s not discouraging spending at home either, it seems, even if it is putting extra costs onto the profit and loss accounts of those that are already mining. According to the latest data from the Australian Bureau of Agricultural and Resource Economics the value of Australia’s mining and energy projects currently under development hit a record A$113 billion in October. To be sure, much of that number is accounted for by the A$43 billion valuation of the giant Gorgan Liquified Natural Gas project in north-western Australia. Western Australia, however, accounts for 83 per cent of the capital expenditure on what the Bureau calls “advanced” projects. 

Two out of the three risers that we mentioned at the beginning of this piece fall into that category, as Focus is developing its project at Coolgardie in the Western Australian Goldfields, while UMC is working up iron ore properties in the Pilbara in the north of Western Australia. Focus has recently raised new money and looks on track to be in production at a rate of 100,000 ounces of gold per year by 2011 following refurbishment work at its Three Mile Hill mill. In the case of UMC you don’t have to look far to find the cause of October’s share price strength – the A$1.30 per share bid that came in from BHP Billiton. The back story to that bid is nonetheless interesting, though, as it’s fairly clear that BHP Billiton waded in late onto the scene to cut out a potential Chinese intervention in a territory that it still regards as its own back yard, a back yard in which Rio Tinto is the only other company allowed to play. 

There’s only so much gazumping of Chinese companies that BHP Billiton and Rio can do, that the Australian government can countenance, or that the Chinese will put up with. Waiting in the wings are a plethora of smaller companies, and one or two bigger ones too – Fortesque, Atlas Iron, BC Iron, Brockman Iron, Iron Ore Holdings, FerrAus, Giralia, and Aquila, to name but a few, and as the global economic recovery begins to take hold, demand for iron ore will only increase. 

That’s the theory, at any rate, and it bodes well for the miners of Western Australia. But, as the Chinese Iron and Steel Association (CISA) releases data that shows steel production continuing to outpace demand, some analysts are beginning to note the caution with which BHP Billiton’s boss, Marius Kloppers, spoke at a recent results presentation. He spoke in the context of what ended up being, to the surprise of many, a bumper year. Chinese restocking across a range of metals in 2009 went far beyond the expectations of most industry watchers. Indeed it might be fair to say, looking back at the state the world was in at the beginning of January 2009, that the Chinese demand for metal this year has been beyond the wildest dreams of many miners who might at that stage have thought they were a gonner. Some, of course, were – RIP CopperCo, amongst others. 

But most made it through on the strength of high levels of Chinese buying which brought the metals powering back. Much of that metal is still sitting around in warehouses, beggin the question – will the upward momentum continue in 2010? Mr Kloppers cautions that it might not, but market sentiment, for the time being, at least, says otherwise. Still, whichever way that plays out, the outlook for gold remains pretty solid. Inflation fears should keep the US gold price pretty high, while any drop off in demand for industrial metals will have a corresponding effect on the Aussie dollar, which will also be good for the Aussie golds. Focus Minerals, anyone? Catalpa? Norseman? There are hundreds to choose from, and here on Minesite we’ll continue to try to bring you the pick of the bunch.


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## drillinto

November 21, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. Your market seems to have benefited more from currency than from metal-price movements last week. 

Oz. Currency remains the big story down this way - and perhaps around the world - as the US dollar tries to find a fresh floor. For Australian mineral exporters, who get paid for almost everything in US dollars, the recovery in metal prices over the past 10 months has been severely impaired by twin effects of the US dollar falling and the Australian dollar rising. But last week, for the first time, we saw what can happen when currency moves are favourable, and gold stocks lead the way up. The gold index on the ASX rose by 4.3 per cent, comfortably ahead of the movement in the US dollar gold price, thanks to the Australian dollar sliding US2 cents lower, from US93.5 cents to US91.5 cents. The impact of the lower dollar was also felt in the broader mining market, with the metals index up 2.7 per cent - a strong performance when measured against the all ordinaries, which fell by about half-a-per-cent.

Minews. Let’s start this week’s wrap up with the strongest sector, gold. 

Oz. Okay, but before we get there it’s worth making a few comments about the big picture, to set the scene for London-based readers, and this includes a warning about signs of a little “irrational exuberance” sneaking into the Australian market. The best place to see irrationality is in the new floats game, which has returned with even greater gusto than we reported just three weeks ago. Back on November 3rd Minesite carried a story from Oz on the eight mining floats making their way through the ASX listing process. On Friday, that list had exploded to 18. 

It’s not the right place to do a completely fresh call of the card, but over the past 20 days companies which tossed their names into the ring have included Ausgold, Ishine International Resources, Kimberley Metals, MetroCoal, General Mining, NT Resources, Raisama, Rubianna, Stanmore Coal, and a gas company called Apollo Gas. However, topping it all off is a plan from Queensland iron ore and coal billionaire Clive Palmer which aims to raise A$3.2 billion floating off some of his assets via a company called Resourcehouse. Palmer’s plans include using Hong Kong as the primary exchange, another pointer to the growing ties between Australia, the mine, and China, the factory. 

Minews. Your point being that there seem to be too many floats too quickly? 

Oz. That’s the fear. Australia has come through the global downturn in pretty good shape, as you have noted in a couple of stories, which is in itself a worry, because whenever you Brits say something nice about Oz we know something bad must be lurking in the background. Banter aside, it seems that the rush of resource floats will test the local capital market and it’s a fair bet that quite a few of the hopefuls with their names before the ASX will not deliver a fast, or a even slow, profit. 

Minews. Warning noted. Now for prices, please. 

Oz. Just about every gold stock on the board posted a reasonable rise last week. Pick of the pack was Medusa (MML) which is having a bumper year at its Philippines projects, and confirmed last week that it would soon start trading on the Toronto market. That news helped lift the stock to a 12 month high of A$4.40 on Thursday, which was then followed by a modest slide for the company to close on Friday at A$4.27 for a gain over the week of A33 cents. Andean (AND), Carrick (CRK) and Chalice (CHN) also hit fresh 12 month share price highs during the week. Andean traded up to A$2.58 on Friday, before closing at A$2.54 for a gain of 14 cents over the week. Carrick cracked the A$1.00 mark on Friday, for a gain of A10 cents. Chalice added A7.5 cents to end the week at A57.5 cents, after hitting a fresh high of A59 cents. 

Amongst other notable gold movers Perseus (PRU) announced a suite of excellent gold grades from its Tengrela project in Ivory Coast, rising A9 cents to A$1.69. Also up, Kingsgate (KCN) added A27 cents to end the week at A$9.66, down slightly on a 12 month high reached on Wednesday of A$9.89. Meanwhile, Resolute (RSG) continued to charge back strongly after a year of difficult trading when the Syama gold mine was being brought up to full production. Last week, Resolute also claimed a fresh 12 month high of A$1.13, before easing to close at A$1.06, up A10 cents. Also better off, Troy (TRY) added A9 cents to A$2.58, Silver Lake (SLR) rose A10 cents to A$1.04, Catalpa (CAH) added A1 cent to A15.5 cents, and St Barbara (SBM) added A3 cents to A34.5 cents. 

Minews. Iron Ore next, please. 

Oz. Also a strong sector, although not as strong as gold. Most share price moves were up, but with a few sliders. Australasian Resources (ARH), which started life with an asset acquired from Clive Palmer a few years ago, announced an environmental all-clear on its Balmoral South project, a move which saw the stock add A6 cents to A50.5 cents. Ironclad (IFE), one of the emerging South Australian iron ore miners, announced a port-access deal, a critical step in getting product from its Wilcherry Hills project to market. That news boosted the stock by an eye-catching A23 cents to A66.5 cents. Aquila (AQA) confirmed its share issue to China’s Baosteel, rising by A98 cents to A$9.10 in the process, while Fortescue Metals chief executive, Andrew Forrest, got on his megaphone for a fresh blast, this time talking in terms of a resource base topping one trillion tonnes (yes, trillion!), a bold prediction which helped the stock climb A18 cents to A$4.22. Elsewhere, Golden West (GWR) continued its rapid recovery, adding another A9 cents to A61.5 cents. 

Other iron ore moves included Atlas (AGO), which rose A7 cents to A$1.88, Giralia (GIR) which rose A8 cents to A$1.14, and Iron ore Holdings (IOH), which remained a firm speculator’s favourite, and put in a rise of A17 cents to A$1.47. On the flipside, Northern Iron (NFE) disappointed with an update from its Norwegian project, which included news of a first shipment which was outside required ore specifications. That news knocked the share price down by A20 cents to A$1.58. BC Iron (BCI) also lost ground, putting in a fall of A4 cents to A$1.11, and Brockman (BRM) eased back by A3 cents to A$1.94. 

Minews. Base metals now, please. 

Oz. Copper was the best of the base metals, with most stocks stronger. Nickel stocks were mixed, and zinc remained as dull as it has been for much of the year. Star of the copper crop was Blackthorn (BTR), a company once known mainly for its zinc interests, but now delivering excellent copper results from its Mumbwa project in Zambia. It rose a very strong A24 cents to close at A65 cents, a shade under a 12 month high of A68 cents reached during Friday trade. 

Minews. We might take a closer look at Blackthorn next week. It seems to be a company making a solid return. 

Oz. Quite right. Other copper stocks on the move included Equinox (EQN), which reported a 77 per cent increase in profit for the September quarter, the best sign yet that its Lumwana project is delivering on its early promise. That result boosted the stock by A25 cents to A$4.06. Elsewhere, Vulcan (VCN) added half a cent to A13 cents after reporting a bargain-basement plant acquisition, and Cape Lambert (CFE), which is re-inventing itself as a base metals specialist, added A7.5 cents to A55 cents. Fallers among the copper stocks included Sandfire (SFE), down A14 cents to A$3.94, Talisman (TLM), down A2 cents to A96 cents, and Citadel (CGG), down by A1 cent to A43 cents. 

Mirabela (MBN) led the way down among the nickel stocks, losing A16 cents to A$2.84, while Mincor (MCR) lost A7 cents to A$1.99 and Western Areas (WSA) eased back by A3 cents to A$5.18. Panoramic (PAN) and Minara (MRE) evened the score out a little, with rises of A15 cents to A$2.50, and A3.5 cents to A86.5 cents respectively. Zinc stocks did very little. Perilya (PEM) fell A2 cents to A48.5 cents, and CBH (CBH) added A1.2 cents to A11 cents. 

Minews. Uranium, coal, and specials to finish, please. 

Oz. Most uranium stocks trended down with the exceptions being Manhattan (MHC) which continued to lead the sector, this week putting in a rise of A17 cents to A$1.37, and Paladin (PDN), which joined in with a rise of A10 cents to A$4.22. Extract (EXT) continued to ease back after its meteoric run, shedding A37 cents to A$7.94, while Mantra (MRU) lost A24 cents to A$4.44. Coal stocks were also generally easier with Macarthur (MCC) slipping A42 cents lower to A$9.21 and Coal of Africa (CZA) down a fractional A1 cent to A$1.89. Riversdale (RIV) went the other way with a rise of A17 cents to A$5.75. 

Best of the stocks in the specials category were Moly Mines (MOL) which continues its recovery after a difficult year, and rose another A13 cents to A$1.04, and Minemakers (MAK) which rose by A5 cents to A42 cents. 

Minews. Thanks Oz.


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## drillinto

November 19, 2009

When Will Inflation Really Hit Us?

By Terry Coxon, Editor, The Casey Report
www.minesite.com/aus.html

Most of us are gathered at the station, watching for the Inflation Express to come rumbling in. But we've been waiting for a while now. Just when should we expect the big locomotive to arrive and start pushing the prices of most things uphill? We’d all like to know the exact date, of course, but no one can know for sure. Not even a careful reading of the Mayan calendar will help. What we can do is estimate a time range for price inflation to show up, and that alone should have some important implications for investment decisions.

The reason for expecting price inflation is the recent, rapid growth in the money supply and the deficit-driven likelihood that more such growth is coming. As of July, the M1 money supply (currency held by the public plus checking deposits) had grown 17.5 per cent in a year's time. That's not just unusually rapid, it's extraordinarily rapid. Since 1959, M1 has grown more rapidly in only one other 12-month period – and that was the one ending last June, when the M1 money supply jumped 18.4 per cent. Even in the inflation-plagued 1970s, growth in M1 never exceeded 10 per cent in any 12 months. 

Dropping large chunks of newly created money into the economy leads to price inflation, because the recipients are likely to find themselves overprovisioned with cash. As they try to unload the excess, they bid up the prices of the things they buy, whether it be stocks, shoes, gasoline, silver coins, or granola. The sellers of those things then find themselves cash rich and start doing some buying of their own, and so the wave of excess money and the bidding it inspires propagate through the economy. 

The process isn't instantaneous. It takes time. Just as each player in the economy has a sense of how much of his wealth he wants to hold in the form of money, everyone will move at his own speed to make adjustments when his actual cash holdings seem to be off target. And the process can seem to stall, especially when fear is growing. When people are worried or otherwise feel a heightened sense of uncertainty, they will gladly hold on to abnormally large amounts of cash – for a while. But when fear abates, as it will when the economy begins to recover from the recession, that temporary demand for extra cash will also fade, and the hot-potato process of trying to pare down cash balances will emerge to do its inflationary work. 

But when? The speed at which the public tries to unload excess cash and the timing of the effects have actually been measured, in the work of the late Milton Friedman and his monetarist colleagues. The method was indirect and roundabout, and so the results, unsurprisingly, were nothing as precise as nailing down the value of a physical constant. 

What the monetarists (or the first of them to be equipped with computers) found was that when the growth rate of the money supply rises the initial effect is on the prices of bonds and stocks, an effect that comes within a few months; the peak effect on the growth rate of economic activity comes about 18 to 30 month; after the pick-up in the growth rate of the money supply; and the peak effect on the rate of consumer price inflation comes about 12 to 18 months after that, which is to say it comes 30 to 48 months after the peak growth rate in the money supply. 

As Friedman famously put it, the lags in the effects of changes in monetary policy are "long and variable." He might have said, "It's a big, wide blur, but we're sure we've seen it." And even that picture exaggerates the precision that's available to us. The emergence of money substitutes, such as NOW accounts and money market funds, has added its own muddiness to the picture of how growth in the money supply translates into growth in the level of consumer prices. It is only because the recent episode of monetary expansion has been so extreme that we can look to the results just listed for an indication of what's to come. 

If you apply the findings of the monetarists to the present situation, here's what you get. The peak growth rate in the money supply occurred last December, so based on the general monetarist schedule, some of the effect on stocks and bonds should already have been felt. The peak effect on economic activity should come between the middle of 2010 and the middle of 2011. The peak effect on consumer price inflation should come between the middle of 2011 and the end of 2012. 

This time around, should we expect things to move more rapidly or more slowly than average? My bet is on slow, which would push the peak inflation rate out toward the end of 2012. One reason for slow is that the government's rescue packages are delaying the process. Rescuing banks that are choking on bad loans postpones the day of reckoning for both the banks and the loan customers. It retards the pace of foreclosure sales (whether of real estate or other collateral) and puts the deleveraging that has been going on since last fall into slow motion. A wilting of the recent stock market rally would confirm this.
.
When you hear would-be opinion leaders cite the current absence of rising prices at the supermarket as proof that all the new money isn't a source of inflation, don't believe them. It is much too early for the inflation bomb to be going off, even though the powder has been packed and the fuse has been lit. If the large and growing federal deficits and the Federal Reserve's unprecedentedly easy policies tempt you to leverage up on inflation-sensitive assets, such as gold, give the idea a second thought. It likely will be a year or more until price inflation becomes obvious and undeniable (which is what it would take to bring the general public into the gold market). In the meantime, your inflation-sensitive assets could get paddled rudely as the deleveraging that began last year continues. 

For at least the next year, the simple, fire-and-forget strategy is 50-50 gold and cash – gold for what looks to be inevitable but on its own schedule, cash to be ready for the bargains that may show up while we're waiting for the inevitable to arrive.


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## drillinto

Buttonwood 

Something's gotta give

Nov 19th 2009 
http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14921319

Either central banks are wrong to keep rates low, or markets are wrong to expect recovery.

Like a truck rolling downhill, the rally in risky assets is proving hard to stop. Good economic news causes share prices to rise because it indicates the recovery is robust; bad economic news also causes prices to rise because it signals that central banks will keep interest rates near zero.

Those low interest rates have probably been the main driver of the rally, encouraging investors to put their cash to work in search of higher returns. But other factors have been at play. Forecasts for corporate profits have been revised steadily upwards as analysts anticipate the benefits of economic recovery.

This has been a revival in the bottom, rather than the top, line. According to Morgan Stanley, non-financial stocks in the S&P 500 beat third-quarter earnings growth estimates by an average nine percentage points. But the companies’ sales fell around a point shy of forecasts. A similar pattern was seen in Europe. 

In short, companies have used the crisis to achieve a remarkable expansion in margins. Tim Bond of Barclays Capital reckons that, on one measure, the improvement over the last two quarters has been the best since the second world war. The trick has been the corporate sector’s success in controlling labour costs; in the third quarter, operating costs for non-financial S&P 500 companies were down by 32% from the previous year. 

But the weakness in earnings and the job market means that consumer confidence is far from robust; the University of Michigan sentiment survey has fallen in each of the last two months. Nor are consumers borrowing to maintain their spending; instead they have been repaying their debts. 

American retail sales were stronger than expected in October, thanks largely to the car industry. Even so, they were still down on the same month last year. The decline might have been worse had homeowners not benefited from the sharp fall in mortgage rates. 

Against such a background, how long can an improvement in corporate profits be maintained? Cutting costs makes sense at the individual company level but not in aggregate; one company’s sacked worker or pay freeze translates into another company’s sluggish demand.

That may explain why the improvement in profits is not translating into a splurge of capital expenditure. Nevertheless, in the short term the revival in corporate profits is adding to the sense of recovery. Companies seem to be taking the chance to improve their balance-sheets, building up cash reserves instead of repaying bank debt; commercial and industrial loan books are still contracting. And with companies having little need for more debt, banks are indulging their appetite for buying government bonds. 

This strategy (with the help of central banks’ purchases of bonds) is helping to hold down yields, making it easier for governments to finance their deficits. With inflationary pressures still very low (American core producer prices rose just 0.7% in the year to October), there is very little need for the Federal Reserve to raise interest rates in the near future. The cost of borrowing for six months in dollars is now lower than the cost in yen, something that would have been unimaginable just five years ago.

Instead, the main threat to the rally seems likely to be disappointing growth, at least in the developed world. American industrial production rose just 0.1% between September and October and a number of other industrial-activity figures have been disappointing. The Economic Cycle Research Institute’s leading index slipped to an eight-week low in the week to November 6th. 

Meanwhile, the Chinese boom that seemed to revive the global economy is showing its dark side. Commodity prices are rising across the board, acting as a further tax on hard-pressed Western consumers (oil has roughly doubled since the start of the year). In some countries, particularly in Europe, actual taxes are starting to rise as well, as governments grapple with their fiscal deficits.

At some point, the central dilemma at the heart of this rally will have to be resolved. Low interest rates seem like good news for investors. But why are central banks holding rates so low? Either they are correct in assessing that the economy is still fragile, in which case corporate profits will ultimately disappoint. Or they are underestimating the strength of the recovery, in which case inflationary pressures will start to emerge (and bond yields will rise sharply). Markets will have a tricky time navigating between this Scylla and Charybdis in 2010.


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## drillinto

November 23, 2009

Commodity Bulls Bank On Inflation, But Bond Markets Say Otherwise

By Rob Davies
www.minesite.com/aus.html

The battle between the trillions of dollar invested in bonds and the relatively, miniscule US$240 billion that’s in commodity funds continued this week, with a decisive win for commodities. Even though yields on 10 year Treasuries fell to 3.34 per cent, aluminium and copper both rose by 4.4 per cent over the week. In reality the tussle is between those who think that inflation is not a problem and those that think while it might not be now it soon will be.
Consensus opinion is represented by the bond market. Its view of the economic world is that with such vast amounts of overcapacity in so many parts of the world there is absolutely no chance of inflation being a problem for the foreseeable future. Commodity bulls, on the other hand, think that the prodigious levels of liquidity being foisted on to the markets can only result in rampant inflation. 

Of course inflation is precisely what governments want, in order to shrink the real value of their debts. Not that they will admit it of course. And it is amazing how many people believe governments when they say they support a strong dollar and will not promote inflation. 

Bill Gross of bond fund management company PIMCO points out there is US$4 trillion dollars in US money markets earning precisely zero per cent, because its owners are so terrified of losing their capital. 

What will happen instead is that the stealth tax of inflation will gradually erode the purchasing power of cash. What costs US$100 to buy now will need, say, US$107 next year. Keep that up for ten years and the buying power of that cash will have halved. 

So, bizarrely for a bond fund manager Mr Gross is recommending people buy equities, simply because they yield more than cash and a more than lots lot of bonds. How long can it be before he starts promoting commodities for investors? 

Getting no income at all but preserving the real, not just the nominal, value of your capital might one day be the trade to go for. One thing that is significant about equities these days is the low level of trading. Most people are too shocked by the last two years to make any decisions at all. Trading will only happen once the obvious action is clear to all. That proof is, of course, generated by rising prices. And the same can be seen in commodities. 

Silver has maintained its reputation for steady growth by getting up to US$18 an ounce. Older heads will recall that it once traded at US$50 an ounce. Until such levels are re-attained many potential investors will look and wait for a pull back before buying. But of course when that happens many lose their nerve and assume the game is over. So they do nothing. 

Then, the price starts climbing again and they kick themselves for not taking the plunge and that reinforces their belief in the asset. It is only when the last sceptic capitulates and buys that the bull market finally ends. Judging by the sheer scale of assets currently in cash and bonds that process for commodities has hardly begun yet.


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## drillinto

November 23, 2009

Rare Earths: Is The Present Hype Justified ?   Can We Pick The Winners ?

By Michael Hampton
www.minesite.com/aus/html

What a difference a year makes. There has been a dramatic transformation in the outlook for the Rare Earth companies from no hopes to big hopes, as the Rare Earths have become the latest "hot" sector to capture investors' imagination. We all know that mining investors are prone to flights of fancy, and the staying power of dreams will be now tested on a long hard road from discovery to production.

Metal Events Ltd's “5th International Rare Earths Conference" held in Hong Kong last week, was a great place for a reality check on the current state of the Rare Earths sector. Despite its history, and an ability to attract the top companies in this growing industry, the conference was concerned about their numbers. A room had been booked for 70 people, but in March it seemed that the interest level was too small to attract the usual number of participants. The organisers decided to go ahead with the same size room anyway, with whatever numbers they could get. When the doors opened on November 18th for the two day conference, there were 170 delegates, a new record - and the room was groaning with people.

The changes in market capitalisation of companies involved in the conference revealed the extent of the turnaround. Picking ten public companies in the audience with Rare Earth mining projects at various stages of development, the aggregate market capitalisation as of mid-November was US$1.59 billion. Using the same number of shares outstanding, and the end-2008 stock prices, the market capitalisation would have been US$518 million. That's a rise of 206 per cent in 10 and a half months, far above the general stock indices. One cannot help but ask, is the present optimism justified? 

Dudley Kingsnorth of Industrial Minerals Company of Australia Ltd put it well in his presentation. Money is available, he said, but is not infinite. "Perhaps US$2 billion will be available to the Rare Earths sector," said Kingsnorth. "If it is spread evenly over the 57 existing projects, it will be squandered." The industry will need to advance the right projects, and advance them quickly, if it’s to prevent a destructive price squeeze in a few years time. The crunch may arrive as early as 2014 or 2015. 

Overall annual growth rates in consumption have mostly fallen in the range of between nine per cent and 22 per cent per annum, according to Baotou Research Institute of Rare Earths (BRIRE). In a paper prepared by Ms. Song Honghang, Director, and presented by her colleague Wang Yan, a review of 60 years of history showed China's remarkable role in taking production from just 1,000 tons 1978, to 2,500 in 1980, and then 20,000 in 1989. After that rapid pace, there was a slowdown in 1990, but after that, growth resumed. From 1991 to 1995, growth was again back over 20 per cent per annum. Over the past decade, growth has been much closer to 10 per cent annually, which is still rapid on this bigger base. Total demand for Rare Earth Oxides was near 130,000 tonnes in 2008. While 2009 is a clear down year, thanks mainly to a big destocking in Japan, the potential for high growth over the coming decade is excellent. Our green dreams cannot be realised without ongoing growth in production of these unique metals. 

The simple political reality, which we discussed in detail here when we covered last year's conference, is that the world is highly dependent on China for Rare Earths. Something like 90 per cent of annual production comes from China, and the Chinese are using more domestically and tightening their export quotes. BRIRE's figures show that Rare Earth Oxide ("REO") exports peaked at 55,000 tons in 2005, and have been falling as quotas are tightened. (REO figures are slightly deceptive, since the oxide is about five to 10 per cent heavier than its REE content.) Some industry sources estimate that as much as 10,000 tons of "gray" material leaves the country outside the quotas. But this "gray" figure is conjecture, and the Chinese government is aiming to restrain future leakage outside the quota. The inevitable nervousness over supply sources has brought about a race for new sources of production. Manufacturers in Japan, Europe, and the US all want to see diverse sources for these critical elements, as they launch new products with REE content. 

Prices are down year-on-year, but a mania for the Rare Earth miners was ignited by a report coming out of one of the Chinese ministries in the Spring of 2009 that China was considering a complete ban on the export of certain rare earths in their raw form, preferring to export value-added products and spur manufacturing the jobs in China. This report was later "clarified" in the summer, but it was followed by recommendations from various stock brokers and analysts that Rare Earth related mining stocks were a good way to play the emerging green energy boom, since new mines are needed to counter a possible stranglehold by the Chinese. 

In fact, with 2008 demand at 130,000 tons of REO, a resumption of 10 per cent-plus growth could add 15,000 to 20,000 tons annually to demand. That would essentially require perhaps one new world class Rare Earths mine being added each year for the foreseeable future. Fortunately, there are two giants waiting in the wings, and they are both outside China. 

Lynas Corp's (LYC.au) Mount Weld deposit in Western Australia is a high grade carbonatite deposit. According to the presentation from the company's Vice President, Matthew James, the project is progressing well again. The key step was raising money to fund remaining construction costs. In late April, China Non-Ferrous Metals agreed to invest A$252 million for a majority stake. But the terms were not approved by the Australian government. So the company turned to the equity markets, and completed a two stage financing totalling A$450 million at A$0.45 in October. This will allow it to finish the mine and related infrastructure, and build a large processing facility in Malaysia, where there will be access to cheaper power. Mr James expects production to commence in the first half of 2011, initially at an annual rate of 11,000 tons. Later, Lynas will ramp up to between 20,000 and 22,000 tons, which would give it perhaps 14 per cent of the global market in REO. 

Also at an intermediate stage is Arafura's (ARU.au) Nolans project, which chairman Nick Muir spoke about. Arafura has an approximate 30 million ton deposit, right in the "center of Australia." It has a pilot plant funded by the government, and is facing a capital expenditure of perhaps A$400 million to put a mine into production. Arafura will also be replacing its chief executive, who has recently resigned, and seeking possible strategic partners. 

Later, Ian Chalmers of Alkane Resources (ALK.au) described his company's Dubbo project in New South Wales, a Zirconium and HREE project, which was the subject of a feasibility study in 2002, and which received a government grant to build a pilot plant, and which went into operation in 2008. Prospective buyers are presently evaluating output products. The economics of starting up an enlarged mine will be improved if zirconium, niobium, and yttrium prices line up, and allow the company to sign long term off-take agreements at prices which will support construction of an expanded mine. 

Brief presentations were also given by privately-owned Frontier Minerals which has the high grade Zandkopsdrift carbonatite deposit in the Northern Cape province of South Africa, Greenland Minerals (GGG.au), which has the Kvanefjeld deposit in the country with the same name, privately-owned Mongol Gazar which has a deposit in Mongolia. 

Beyond these, although they didn’t present, are dozens of companies with Rare Earth projects. Industry expert Dudley Kingsnorth mentioned that there are 57 Rare Earth projects on the go, but another conference delegate said that the figure is over 120 projects, including some newly added ones, which are based upon only "a handful of grab samples." 

If history is any guide, and the market stays keen, a number of the new companies will raise enough capital to progress their projects. But how can anyone, especially an investor new to this sector, be expected to pick the winners, in what is becoming a crowded field at the early stage end? 

The old formula of going for size and grade may not work, because the development of RE deposits is a highly complex matter. Evaluating the potential for a gold deposit with straightforward metallurgy is relatively easy. A poly-metallic deposit with complex metallurgy is more difficult, and picking winners in the Rare Earths sector may be the most difficult game of all. That is because there are so many different elements involved, each with their own supply, demand and pricing dynamics. And then there are the problems which begin as you mine the deposit. The rare earths must be extracted and separated from each other. Furthermore, we then get to the "dirty secret" of rare earths, which is that virtually every deposit is radioactive, with a significant concentration of thorium or uranium bound up with the Rare Earths themselves. This makes the separation and handling of the materials even more complex and critical and is why the price tags for capital expenditures are so very high. 

But there is no doubt that the Rare Earths mining sector has a bright future. The likes of the gold rush that we saw after the nickel discovery at Voisey's Bay and the uranium price boom of 2007 may come to Rare Earths at well. But if too many early stage companies are floated, a large number of investors in these new companies are going to be disappointed.

[Text was too long. I had to shorten it]


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## drillinto

Aluminum ETF: Due For A Crash?
by Michael Johnston(USA) on November 24, 2009 

U.S. stocks and aluminum represent very different asset classes, but some investors have begun to notice troublesome similarities between the two. Following a furious bull market rally on Wall Street over the last several months, it is beginning to appear that U.S. stocks have run too far too fast. By many measures, domestic equity markets are now overvalued, perhaps by as much as 25%. 

[To read the full story and see the graphs, please click the link below]
http://etfdb.com/2009/aluminum-etf-due-for-a-crash/


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## drillinto

Brian Milner

Globe and Mail (Canada) 
Nov. 23, 2009 

Harvard University financial historian Niall Ferguson has climbed to the head of the doom brigade – and the bestseller lists – with his strong views, clear prose and prescient pronouncements about the global financial crisis. The Oxford-schooled native of Glasgow, whose latest best-seller, The Ascent of Money, is now out in paperback, continues to make waves. 


[Click the link below for the must read interview Mr. Ferguson did with Report on Business. At the end of the interview there are 34 comments from readers] 

http://www.theglobeandmail.com/repo...all-ferguson-is-still-bearish/article1374647/


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## drillinto

Tuesday, November 17, 2009
The Coming Nuclear Crisis
The world is running out of uranium and nobody seems to have noticed.

Source >> http://www.technologyreview.com/blog/arxiv/24414/
[To read readers' comments and Michael Dittmar's analysis of the nuclear industry, please click on the above link]

The world is about to enter a period of unprecedented investment in nuclear power. The combined threats of climate change, energy security and fears over the high prices and dwindling reserves of oil are forcing governments towards the nuclear option. The perception is that nuclear power is a carbon-free technology, that it breaks our reliance on oil and that it gives governments control over their own energy supply. 

That looks dangerously overoptimistic, says Michael Dittmar, from the Swiss Federal Institute of Technology in Zurich who publishes the final chapter of an impressive four-part analysis of the global nuclear industry on the arXiv today. 

Perhaps the most worrying problem is the misconception that uranium is plentiful. The world's nuclear plants today eat through some 65,000 tons of uranium each year. Of this, the mining industry supplies about 40,000 tons. The rest comes from secondary sources such as civilian and military stockpiles, reprocessed fuel and re-enriched uranium. "But without access to the military stocks, the civilian western uranium stocks will be exhausted by 2013, concludes Dittmar. 

It's not clear how the shortfall can be made up since nobody seems to know where the mining industry can look for more.

That means countries that rely on uranium imports such as Japan and many western countries will face uranium shortages, possibly as soon as 2013. Far from being the secure source of energy that many governments are basing their future energy needs on, nuclear power looks decidedly rickety.

But what of new technologies such as fission breeder reactors which generate fuel and nuclear fusion? Dittmar is pessimistic about fission breeders. "Their huge construction costs, their poor safety records and their inefficient performance give little reason to believe that they will ever become commercially significant," he says. 

And the future looks even worse for nuclear fusion: "No matter how far into the future we may look, nuclear fusion as an energy source is even less probable than large-scale breeder reactors."

Dittmar paints a bleak future for the countries betting on nuclear power. And his analysis doesn't even touch on issues such as safety, the proliferation of nuclear technology and the disposal of nuclear waste. 

The message if you live in one of these countries is to stock up on firewood and candles. 

There is one tantalising ray of sunlight in this nuclear nightmare: the possibility that severe energy shortages will force governments to release military stockpiles of weapons grade uranium and plutonium for civilian use. Could it be possible that the coming nuclear energy crisis could rid the world of most of its nuclear weapons? 



Ref: "The Future of Nuclear Energy: Facts and Fiction" 
By Michael Dittmar, Swiss Federal Institute of Technology, Zurich  

arxiv.org/abs/0908.0627: Chapter I: Nuclear Fission Energy Today
arxiv.org/abs/0908.3075: Chapter II: What is known about Secondary Uranium Resources?
arxiv.org/abs/0909.1421: Chapter III: How (un)reliable are the Red Book Uranium Resource Data?
arxiv.org/abs/0911.2628 :Chapter IV: Energy from Breeder Reactors and from Fusion?


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## drillinto

November 29, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. How did your market treat to Dubai’s debt default? As a speed bump on the recovery road? Or as a brick wall? 

Oz. More like a speed bump so far, but a sovereign default, even of a small Middle East country, is a reminder of the high level of residual risk in the global economy after last year’s failure of the banking system in the USA and Europe. Overall, the Australian market, as measured by the all ordinaries index, ended the week down 2.3 per cent, mainly thanks to some sharp falls from the banks. Mining stocks ended the week down by just 0.5 per cent, with the gold sector holding up best of all and posting a gain of 1.5 per cent. As you would expect, most of the damage was done on Friday after Dubai confessed to its debt problems, with all eyes now on Monday’s opening to see whether the default spreads to other emerging markets.

Minews. Is Dubai that important in Australia? 

Oz. Any sovereign default flows across borders, and we’re not immune to doubts about the strength of the recovery. Most of the countries in our region fall into the emerging market category and defaults have a habit of becoming contagious as we have seen in the previous cases of Argentina and Russia. The major immediate issue for Australia is whether the Reserve Bank raises interest rates for a third consecutive month when it meets on Tuesday. If it does ratchet rates up by another 0.25 per cent it will be the first time ever that our central bank has raised over three consecutive months. 

Minews. Enough of the big picture stuff let’s have some prices, please, starting with gold. 

Oz. A good choice, because gold and iron ore were once again the sectors favoured by investors last week. Adding to the gold market was a slide in the value of the Australian dollar against the US dollar. A few weeks ago the Aussie dollar was trading around US94 cents and was on track to achieve parity by Christmas. On Friday it closed at US90.6 cents. That decline combined with a US dollar gold price holding above US$1,170 delivered a 5.5 per cent rise in the Australian dollar gold price last week. 

The twin benefits of global demand for gold, and the currency effect - which might be tested in the weeks ahead if we get a fresh outbreak of market turmoil – meant that most Australian gold stocks gained ground, although the best work was negated by the Friday sell off. The gold index added 4.2 per cent between Monday and Thursday, before dropping by 2.7 per cent on Friday. 

Best of the gold stocks included Resolute (RSG), which we took a squiz at on Friday. It added A11 cents over the week to close at A$1.17, which was just half a cent below its 12 month high set on Thursday. OceanaGold (OGC), the New Zealand gold specialist, put on a star turn with a rise of A39 cents to A$1.92. CGA Gold (CGX), which has been reporting record ore throughput and gold production at its Mabate mine in the Philippines, shot up to a 12 month high of A2.23 on Thursday, before easing back to end the week at A$2.21, a gain of A29 cents. Also better off, Kingsgate (KCN) cracked the A$10 barrier on Monday, setting a fresh high of A$10.07, before trailing away to close on Friday at A$9.73 for a gain over the week of just A13 cents. 

Elsewhere, in a sector which remains in robust health, Silver Lake (SLR), rose by A14 cents to A$1.18 over the week, and closed slightly off an all-time high of A$1.26 reached on Wednesday. Meanwhile, Troy (TRY), where peace reigns after a tumultuous year, added A6 cents to A$2.64, but was as high as A$2.79 on Thursday. Also on the up, Avoca (AVO) rose by A6 cents to A$2.03, while Catalpa (CAH) added half a cent after announcing the final legal steps in its complex merger with Lion Selection. A few gold stocks swam against the trend, but not severely. Eleckra (EKM) slipped half a cent lower to A11 cents. Andean (AND) lost A2 cents to A$2.52, and Ampella (AMX) eased back by A1.5 cents to A62.5 cents. 

Minews. Iron ore now, please? 

Oz. There was strong interest again in iron ore stocks, though not quite as strong overall as in gold. Iron Ore Holdings (IOH), which has generated considerable interest in your part of the world, added another A15 cents to A$1.62 over the week, but dropped back from an all-time high of A$1.83 reached on Tuesday. Golden West (GWR) was another star, continuing a powerful revival which started a few weeks ago after a year in the sin bin. It rose by A26 cents to A87 cents, but did get as high as A$1.06 on Thursday, which is three-times its price of three weeks ago. Red Hill Iron (RHI), which rarely gets a mention anywhere, stood out with a rise of A53 cents to A$3.53 as it moves closer to developing its West Pilbara project in conjunction with Aquila Resources (AQA). Aquila itself was up A67 cents to A$9.77. Meanwhile, Giralia (GIR) put on A8 cents to A$1.22, and IMX (IXR) added A4 cents to A33 cents. Going down among the iron ore stocks Fortescue (FMG) dropped A21 cents to A$4.01, and Northern Iron (NFE) continued a losing streak, off another A5 cents at A$1.53. Atlas (AGO) shed A4 cents to A$1.84, and BC Iron (BCI) lost A6 cents to close the week as A$1.05. 

Minews. Let’s switch across to base metals. 

Oz. Not much joy there after Friday’s sell-off. Syndicated Metals (SMD) was the only copper stock to rise over the week, putting in a very modest gain of A1 cent to A21 cents. After that it was all red ink. Blackthorn (BTR), despite our optimistic assessment early last week, closed down half a cent at A64.5 cents with all of the damage done on Friday. Until the sell orders hit the market Blackthorn had been as high as A72.5 cents. Sandfire (SFR) continued to report strong results from its Doolgunna project but slipped A18 cents to A$3.76. Talisman (TLM) lost A7 cents to A89 cents. OZ (OZL) fell by A9 cents to A$1.18, and CuDeco (CDU) dropped sharply with a loss of A62 cents to A$5.25. Nickel stocks were generally weaker. Western Areas (WSA) dropped A11 cents to A$5.07. Minara (MRE) eased back by A4.5 cents to A81 cents, and Panoramic (PAN) fell A14 cents to A$2.36. Mincor (MCR) held its ground to close steady at A1.99 and Independence (IGO) added an eye-catching A27 cents to A$4.69, but was stronger mainly because of its gold interests. Zinc stocks did little. Terramin (TZN) rose by A4 cents to A75 cents. CBH (CBH) fell A1.2 cents to A9.8 cents, and Perilya (PEM) added A3.5 cents to A51 cents. 

Minews. Uranium, coal and specials to finish, please. 

Oz. Like the base metals sector it was hard to find a uranium or coal stock moving higher. Mantra (MRU) fell A28 cents to A$4.16, and Manhattan (MHC) ran out of puff after a strong upward month, shedding A21 cents to A$1.16. Extract (EXT), another recent uranium favourite, fell A17 cents to A$7.77. The only coal stock to rise was Riversdale (RIV), which added A48 cents to A$6.23 after news that a Brazilian company has acquired a stake in it from Australia’s Macarthur Coal (MCC). Macarthur itself slipped A1 cent to A$9.20. Coal of Africa (CZA) fell A16 cents to A$1.73, but might be worth a fresh look next week as it is getting closer to some major changes. 

Two specials worth noting were Nkwe Platinum (NKP), which has been holding a round-Australian roadshow, an event which helps explain a rise of A8 cents to A43 cents, and Mineral Resources (MIN), a very aggressive mine services outfit which has been busy bidding for construction work, launching takeover bids, and has emerged as a leader in the latest attempt to revive the mothballed Windimurra vanadium plant. It added A2 cents last week to close at A$7.15, but did hit a 12 month high of A$7.59 on Tuesday. 

Minews. Thanks Oz.


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## drillinto

Australia ousts US as second-biggest gold producer, SA slips to fourth 

Esmarie Swanepoel - 30th November 2009 
http://www.miningweekly.com/article...t-gold-producer-sa-slips-to-fourth-2009-11-30

Australia has surpassed the US as the world’s second-biggest gold-producing country in the first half of 2009, and is on track to maintain that ranking for the full year, Melbourne-based mining consultants Surbiton Associates said at the weekend.

China is the world’s number-one producer of the precious metal, with South Africa – which was the top gold-producing country for more than 100 years – slipping to fourth place.

Australia held the title as the world’s second-largest gold producer in 2005 behind South Africa, but it was overtaken by the US in 2006, and by China in 2007, putting it back to fourth place, explained Surbiton Associates director Dr Sandra Close.

“But with the continued decline in South African output and lower production in the US in the first half of 2009, Australia has regained the number-two spot.”

Surbiton’s figures showed that Australia produced 112 t of gold in the first half of 2009. By comparison, China’s Ministry of Industry and Information Technology recorded Chinese production at 147 t for the first half of 2009, while the US produced 105 t, according to the US Geological Survey.

The South African Chamber of Mines reported that output was around 103 t for the same period.

“Few people seem to realise just how important the gold industry is to Australia,” Close said. 

“Currently, the value of our mine production of gold at around A$7,5-billion is equal to the value of Australia’s exports of wool, wine and dairy products combined.”

She added that Australia had regained its ranking as the number-two world gold producer prior to the increase in production expected from new mines in the next few quarters.

NEW PRODUCTION

Earlier this month, Newmont Mining achieved commercial production at its new Boddington gold mine in Australia, which will produce an average of one-million ounces a year.

Boddington, located 120 km south east of Perth, poured its first gold at the end of September and will be the Australia’s largest gold mine.

“For some time, Telfer and the Super Pit have each produced between160 000 oz and 190 000 oz a quarter,” Close said, but added that both operations would be “well and truly overtaken” when Boddington reached full its production of 250 000 oz a quarter.

Surbiton Associates reported that Australian gold output totalled 56 t, or 1,8-million ounces in the September quarter 2009. This was a one-ton less than in the previous quarter and about half a ton less than in the September quarter in 2008.

Close noted that production had been relatively stable for several quarters.

Operations with lower gold output in the September quarter included Newmont’s Tanami mine, down 19 000 oz and the Super Pit, down 16 000 oz. 

Increased output came from the East Kundana joint venture, which was up 19 000 oz; Canadian miner Barrick’s Yilgarn South operations, up 13 000 oz; and South Africa’s AngloGold Ashanti’s Sunrise Dam mine, which was up 8 000 oz. 

“Most of Australia’s gold comes from mines which predominantly produce gold but some 6% to 7% comes from operations where gold is a by-product,” Close said. 

“Recently, we have seen a rise of some two-thirds of a ton per quarter of by-product gold owing to the contribution from Oz Minerals’ Prominent Hill operation.”

She added that although the US dollar gold price had risen to record levels, Australian gold producers had not received the full benefit of the rising price owing to the exchange rate impact. Australian gold prices peaked at A$1 547/oz in February compared with a current Australian gold price of around A$1 300/oz.

“Back in February, the Australian dollar was worth around $0,64,” Close said. 

“Today, it is over $0,90. Even though the gold price in US dollar terms has been setting a new record on a regular basis, or Australian producers much of this benefit has been eaten up by the rising exchange rate.”


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## drillinto

November 30, 2009

The Dollar Is Not The Only Risk: Dubai’s Crunch Is Likely To Be A Lot Less Transparent Than The USA’s

By Rob Davies
www.minesite.com/aus.html

The news that Dubai World had asked for standstill agreement on debt payments until the end of May next year sent capital markets into a frenzy last week. Investors had assumed that this state owned entity was backed by the government of Dubai and, in extremis, by its neighbour Abu Dhabi.

But the vagueness and confusion surrounding the statement that announced the standstill agreement depressed a number of asset classes. One market that suffered in particular was the sukuk market that trades Islamic bonds. Dubai World’s wounded Nakeel bond is one such. 

However, when all’s said and done, for every down trade there is usually a positive counterparty and last week the dollar benefited significantly from positive support. It gained as much as 2.3 per cent against some currencies, although it fell to a 14 year low against the yen. 

Yet, even in spite of the strength of the dollar, gold reached a new record of US$1,194 an ounce during the week, before it eased back. Also stronger, copper traded briefly over US$7,000 a tonne before closing at US$6,904, a gain of 2.1 per cent on the week.  

What the events in the Gulf demonstrated was that many risks other than the risk of weakness in the dollar remain in capital markets. While the dollar receives a lot of attention because of its wide international reach and transparency, there are many other assets that have the potential to trip up investors. 

The great beauty of Anglo Saxon-based investments is that investors usually have recourse to common law if they feel disadvantaged. Hedge funds holding sukuk bonds that are possibly, or possibly not, backed by governments in the Middle East, may not get very far in pressing claims in British or American courts. 

Uncertainty is part and parcel of the investing world and the contents of a presentation last week from Ambrian, a junior stockbroker, represented a timely reminder of just how difficult life is for analysts. Peter Davey, a self confessed long-in-the-tooth mining analyst, was ably supported by veteran metals experts Ted Arnold, covering base metals, and Jessica Cross on precious metals and bulk commodities. 

The essence of what Ted and Jessica had to say centred on the remarkable growth in Chinese demand over the last ten years, offset by the difficulty of getting much hard and reliable data from the country. There is no doubt that underlying demand is strong but it has been reinforced, says Ted, by a large amount of hoarding. This is not just at the state level in terms of bulging warehouses and piles at the dockside, but also at the individual and small company level. 

In some cases businessmen have armed guards patrolling outside houses and offices containing hundreds of tonnes of nickel. The fear that lies behind such hoarding is that inflation will take off in the future and raw material prices will rocket. 

In such a large industry there is a huge amount of information to digest but Peter Davey provided a neat summary. In his view the best performance in the mining and metals space - a sector that will do well as a whole - will come from three commodities: iron ore, copper and platinum, the commodities the Chinese will be hungriest for over time. 

Perhaps someone should tell the kingdom of Dubai to forget grandiose plans to build massive hotels on artificial islands. They should just issue bonds to buy a whole load of these three commodities instead.


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## drillinto

Viewpoints

December 2009 

Dubai: What the Immediate Future Holds 
Mohamed El-Erian, PIMCO, USA

Until last Wednesday, most investors saw Dubai as an attractive tourist destination, a regional financial centre and an example of what bold and visionary leadership can achieve.

Some worried that Dubai's impressive achievements came with a debt burden that would prove difficult to sustain after last year's financial crisis. 

This weekend, investors around the world are united in wondering "what does Dubai mean for me?" 

In calling for a standstill in its debt servicing payments, Dubai has triggered local, national, regional and global forces that will play out in the weeks ahead. 

At the local level, the standstill is an explicit recognition that the Emirate's debt and leverage levels cannot be sustained in what, at PIMCO, we have called the "new normal". The question for Dubai is now two-fold: can an orderly extension of debt payments be achieved; and how will this impact the risk premium that is attached to other economic and financial activities in the Emirate? 

The key issue at the national level is how Abu Dhabi, the largest and richest of the seven UAE Emirates, will react. Here, it is a question of willingness. The leaders of Abu Dhabi must strike that delicate balance between using enormous wealth to support Dubai and ensuring appropriate burden sharing among those that repeatedly failed to heed Abu Dhabi's past warnings about the excesses in Dubai. 

The regional dimension is captured by a word familiar to investors in emerging markets: "contagion". The immediate reaction of almost all markets (and too many commentators) is to lump together countries in the region that have very different characteristics. Witness how market measures of risk have surged for all the oil exporters in the region even though they share none of Dubai's debt and leverage characteristics. 

At the global level, the Dubai announcement serves as a catalyst to take the froth off expensive financial markets. For the last few months, massive injections of liquidity (primarily by the U.S.), aimed at limiting the adverse impact of the financial crisis on employment, have turbo-charged financial market valuations rather than make their way to the real economy. While many have worried about the generalized over-extension of equity markets, most have hesitated to take money off the table as there did not appear to be a catalyst to break the general "trend is your friend" mentality. Dubai is that catalyst. 

So, what next? 

First, it will take time to sort out the Dubai situation. Inevitably, this is an uncertain and protracted process that involves both on- and off-balance sheet exposures. It will cast a cloud not only on companies in the Emirate itself but also on institutions that have large exposures there, especially in the banking and real estate sectors. 

Second, the immediate indiscriminate sell-off in regional (and emerging market) names will, over time, give way to greater differentiation based on economic and financial realities. Those with strong fundamentals will recover (including Abu Dhabi, Brazil, Kuwait, Qatar and Saudi Arabia) while others, including countries with large deficits and debt burdens in eastern/central/southern Europe, may come under more pressure. 

Finally, and most importantly, Dubai serves as a warning to those that were quick to find comfort in the sharp market rally of the last few months. Since the summer, the appreciation of risk assets has been driven predominantly by artificial liquidity injections rather than fundamentals. The Dubai announcement is a reminder that a flood of government-induced liquidity cannot mask all excesses, all the time. 

Investors should treat last Wednesday's announcement as an illustration of the lagged financial effects of the global financial crisis. The Dubai situation is no different than that facing commercial real estate in the U.S. and U.K. 

Let Dubai be a reminder to all: last year's financial crisis was a consequential phenomenon whose lagged impact is yet to play out fully in the economic, financial, institutional and political arenas.


Source >> http://www.pimco.com/LeftNav/Viewpoints/2009/Viewpoints+Telegraph+Dubai+El-Erian+Dec.htm


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## drillinto

Gold run a reason to be wary of the stock market
Commentary: 10 years ago, everyone had lost interest in yellow metal

By Brett Arends 
BOSTON (MarketWatch, 30 NOV 2009) -- The booming gold price is making me very nervous. About Wall Street. 

Why? Because gold's rocketing boom -- it's risen from around $260 an ounce about a decade ago to just under $1,200 now -- is a vivid daily example of what a real bull market looks like. 

Sounds like common sense, yes? Maybe even a banality. 

But here's the problem: Those holding a lot of stocks right now are taking a gamble that the big bear market on Wall Street, which began in 2000, ended earlier this year. They're betting that the Dow Jones Industrial Average (INDEX:INDU) , now 10,309, won't tumble again toward, or even below, the intraday low of 6,440 seen on March 9. 

Are they right? 

No one yet knows for certain. Looking back to early March, there certainly was a lot of panic and capitulation, which you usually see at a market bottom. People talked of a new "Great Depression." One thing I noted at the time was that investors were shying away even from rock-solid defensive stocks with big, well-protected dividend yields. People weren't just scared; they were petrified. 

Is that really how a massive bear market usually ends? 

The last example before our eyes was gold, whose big bear market ended a decade ago. It looked very different. 

Like shares in the 1930s and the early 1980s, gold ended its secular bear market in 1999-2001 with a whimper, not a bang. People didn't panic; they simply lost interest. 

I remember calling around gold analysts in London in 2000, when gold was near its lows. There weren't many left; most of them had been laid off years earlier, as investor demand had dried up. The few who remained generally earned their keep by advising gold-mining companies on how to use the futures market to sell their output. It was dull work in a dull market. 

Key fact: Almost none of the analysts was bullish on gold! A number of them gave me reason upon reason why gold was going to fall even lower. 

Everyone now pretends they were buying gold back then. But of course if they had been, gold wouldn't have fallen as low as it did. 

I actually know two investors who really were buying. Everybody else rolled their eyes or laughed at them. 

Gordon Brown, Britain's hapless and accident-prone prime minister, was the chancellor of the exchequer, or Treasury secretary, at the time. He chose to sell more than half of Britain's entire gold reserves near the lows. According to Her Majesty's Treasury, the government sold about 395 tonnes in 17 auctions between 1999 and 2001, raising around $3.5 billion. 

The average sale price worked out at around $275 per troy ounce. At today's price of $1,178, those same 395 tonnes would sell for $15 billion. Put it another way, the move cost Her Majesty's government, or the British taxpayer, a stunning $11.5 billion in lost profits. 

Hindsight is 20-20. (The Treasury also made back a small amount of those losses by moving some of the money in currencies like the euro, which have risen.) What is important here is that Brown's move was not especially controversial at the time. 

Yes, some people warned it was a bad move, but they were a small minority. Some in the City of London criticized the way the government handled the sale. Yet the overall direction of the move -- cutting Britain's holdings of the "barbarous relic" of gold for more "productive" assets -- enjoyed broad support among the financial community. 

Indeed, around the same time other European central banks (notably the Swiss, Dutch and Belgian governments) quietly sold even more gold than Britain did -- more than 2,000 tonnes in all. 

(An aside: The U.S. Treasury kept its 8,134 tonnes. These show up in the national accounts as an asset of just $11 billion, because for historic reasons the gold is booked at just $42 an ounce. But at today's prices, the gold is really worth $308 billion, and account for the bulk of the U.S. government's entire foreign-currency reserves.) 

Ten years ago, pension funds and institutional investors around the world held little gold, if any. Merrill Lynch's monthly survey of institutional fund managers, probably the best barometer of their collective sentiment, didn't even include a question about gold until I (as it happens) asked them to start about five or six years ago. 

Gold was such a nonissue that neither Merrill Lynch nor the fund managers had noted the absence. 

This is how, on the financial markets, a big bear market tends to die. Not in a dramatic hail of gunfire, like Wall Street last March, but quietly, unnoticed, in the night of old age. 

No, this doesn't mean we necessarily have to see new lows in stocks. Financial markets don't function like clockwork. It is notable that even fund legend Jeremy Grantham, a long-standing bear, thinks we probably did see the lows last March. (My own preference, as an investor, is to buy good-quality companies when they look cheap, regardless of what I think of the market or the economy.) 

But history says a generational bull market, like Wall Street from 1982 to 1999, is usually followed by a generational bear market. I'd feel a lot more comfortable about stocks if everyone had lost interest completely, like they did in gold 10 years ago. 

Source: http://www.marketwatch.com/story/gold-run-a-reason-to-be-wary-of-the-stock-market-2009-11-30


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## drillinto

Green.view

Fuelling fears

Nov 30th 2009 
From Economist.com

A uranium shortage could derail plans to go nuclear to cut carbon emissions

There is an awesome amount of energy tied up in an atom of uranium. Because of that, projections of the price of nuclear power tend to focus on the cost of building the plant rather than that of fuelling it. But proponents of nuclear energy””who argue, correctly, that such plants emit little carbon dioxide””would do well to remember that, like coal and oil, uranium is a finite resource. 

Some 60% of the 66,500 tonnes of uranium needed to fuel the world’s existing nuclear power plants is dug fresh from the ground each year. The remaining 40% comes from so-called secondary sources, in the form of recycled fuel or redundant nuclear warheads. The International Atomic Energy Agency, which is a United Nations body, and the Nuclear Energy Agency, which was formed by the rich countries that are members of the Organisation for Economic Co-operation and Development, both reckon that, at present rates, these secondary sources will be exhausted within the next decade or so.

Once every two years the two agencies publish what is considered the best estimate of global uranium stocks, “Uranium: Resources, Production and Demand”, colloquially known as the Red Book. It estimates that there is enough unmined uranium to supply today’s nuclear power stations for at least 85 years for less than $130 per kilogram. But Michael Dittmar, a researcher at the Swiss Federal Institute of Technology in Zurich, thinks they are mistaken. He has studied the uranium supply and argues, in a recent series of papers, that shortages will drive the nuclear renaissance to an untimely end.

Dr Dittmar has unpicked the most recent Red Book numbers on primary production and asserts that they are founded on an alarmingly weak basis. The Red Book is compiled from questionnaires, each of which is handled differently in the countries to which it is sent. The forms might be completed by any number of different government agencies, with added input from mining companies. All, of course, will have their own agenda about the matter. He concludes, “The accuracy of the presented data is certainly not assured.” Dr Dittmar goes on to speculate about the accuracy of a great many figures, both of the amount of uranium that is known to exist, and estimates of how much more might be available. He predicts that shortages of uranium could begin as early as 2013.

For its part, the World Nuclear Association, a nuclear-industry body, argues that if uranium becomes more expensive, mining companies will devise cleverer ways of extracting it””from rock, other elements or even from seawater. Its estimates put the demand in 2030 at anywhere between 42,000 and 140,000 tonnes.

Although your correspondent suspects that Dr Dittmar is probably being overly pessimistic, he is inclined to agree with him that the Red Book’s precise assessments of what will be economically sensible over 85 years are far from accurate. But there are two other factors that could come into play. One is that there may eventually be enough economic incentive for the countries with weapons stockpiles of uranium to release much of it for warmth and peace.

The other is that the International Energy Agency thinks that nuclear power could more easily weather a storm in fuel markets. A 50% increase in the price of uranium would, the agency predicts, cause only a 3% rise in the cost of the electricity it generates, compared with 20% for coal and 38% for gas.

Either way, none of the figures take into account nuclear “new-build”. Where there is an economic incentive to extract more of a resource, industry has a long history of developing technology to do it. Just do not bet on electricity from nuclear power ever becoming too cheap to meter.


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## drillinto

Forbes.com

Point Of View
Income During Inflation
Steve Hanke, 12.14.09

Even as the Dow sits above 10,000, the public remains justifiably anxious about the state of the economy. The Federal Reserve has worked overtime to convince the public that it has saved the economy from a meltdown, but with unemployment at a 26-year high and the dollar tanking, it's a hard sell. What most people easily understand is that the Fed has produced a monetary time bomb. Since August 2008 the monetary base (bills in circulation plus bank credits at Federal Reserve banks) has increased 
by 137%. If not defused, this bomb will eventually explode into inflation. We are told by Fed Chairman Ben S. Bernanke and other members of the Fed's bomb squad not to worry. They assert that they know how and when to disarm the bomb.

Such assertions are a stretch. After all, it was the Fed's ultraloose monetary policy and disregard for the value of the greenback that fueled the asset bubbles that burst and set off the panic and subsequent destruction of jobs and wealth.

The time bomb hasn't exploded yet because, for now, the expansion in the monetary base has not given rise to a comparable expansion in a broader measure of the money supply called M2. That's the monetary base, plus demand deposits (commercial and individual) at banks, traveler's checks, savings accounts, time deposits and money market mutual funds.

The key here is something called the money multiplier, which is M2 divided by the monetary base. The multiplier measures, in a sense, the inflationary bang from every buck the Fed creates. In August 2008 the multiplier was 9.1. By December 2008 it had collapsed to 4.9 and since then has declined along an irregular path to 4.2. When the demand for the more narrowly defined kind of money goes down, as it eventually will, the money multiplier will move back into a normal range of 8 to 9. That is, the dollars manufactured by the Fed will give rise to more money (broadly defined) burning holes in people's pockets. An excess of money in spenders' hands is a recipe for inflation. This is when the Fed will need to shrink its balance sheet, but it will not be willing to do so because unemployment will probably still be elevated. In this scenario inflation expectations will become unhinged and inflation will accelerate.

With the Fed intent on keeping interest rates artificially low for an extended period of time, some of my previous recommendations should still work well. In September I recommended tapping into gold and commodities via the SPDR Gold Shares (GLD), iShares S&P GSCI Commodity-Indexed Trust (GSG) and PowerShares DB Commodity Index Tracking Fund (DBC). Since then, these funds have appreciated by 13% to 15%, while the S&P 500 has notched a 9.2% gain. Retain these positions to protect your portfolio from the Fed.

With the inflationary wolf at the door, what's an income investor to do? Go for dividends.

Leggett & Platt (LEG, 20), a manufacturer with a product line that started out as bedsprings and veered off into things like parts for farm machinery and retail shelving, generates plenty of cash, even when sales slump. The dividend, which eats up 50% to 60% of earnings, was raised last year and now comes to an annual 5% of the share price. Management has also spent cash on stock buybacks, shrinking the number of shares outstanding by 15% over the past three years.

Philip Morris International (PM, 50) is the second-largest tobacco company in the world. PM claims almost 16% of the non-U.S. cigarette market, a big plus for dollar bears. The market is currently pricing in a revenue growth rate that is lower than what the company has enjoyed over the past five years. The yield is 4.56%.

With its acquisition this year of Alltel, Verizon Communications (VZ, 30) has a customer base equal to 30% of the U.S. population. Annual revenue growth over the past ten years has averaged 11.9%. But Verizon is not receiving much credit for its rapidly growing wireless business (it owns 55% of Verizon Wireless). This segment is growing at an annual rate of 17% and is now larger than the wire-line side of the business. The dividend yield is 6.4%.

Kellogg (K, 53) has a yield of only 2.8%, but its dividend is well covered (it uses up only 44% of earnings) and has enjoyed seven increases over the past ten years. The cold cereal company gets 34% of its revenue from outside North America. That portion will go up, so here is another hedge against a weak dollar, as earnings abroad get translated into EPS gains here. Wall Street is expecting mediocre growth--too pessimistic. Take a bite.

Steve H. Hanke is a professor of applied economics at The Johns Hopkins University in Baltimore and a senior fellow at the Cato Institute in Washington, D.C. Visit his homepage at www.forbes.com/hanke.


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## drillinto

From Bear to Bull  
James Grant (USA)
wsj.com
September 20, 2009 


James Grant argues the latest gloomy forecasts ignore an important 
lesson of history: The deeper the slump, the zippier the recovery. 

By JAMES GRANT 

As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don't know, and can't. The future is unfathomable. 

Not famously a glass half-full kind of fellow, I am about to propose that the recovery will be a bit of a barn burner. Not that I can really know, either, the future being what it is. However, though I can't predict, I can guess. No, not "guess." Let us say infer. 

The very best investors don't even try to forecast the future. Rather, they seize such opportunities as the present affords them. Henry Singleton, chief executive officer of Teledyne Inc. from the 1960s through the 1980s, was one of these enlightened opportunists. The best plan, he believed, was no plan. Better to approach an uncertain world with an open mind. "I know a lot of people have very strong and definite plans that they've worked out on all kinds of things," Singleton once remarked at a Teledyne annual meeting, "but we're subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible." Then how many influences, outside and inside, must bear on the U.S. economy? 

Though we can't see into the future, we can observe how people are preparing to meet it. Depleted inventories, bloated jobless rolls and rock-bottom interest rates suggest that people are preparing for to meet it from the inside of a bomb shelter. 

The Great Recession destroyed confidence as much as it did jobs and wealth. Here was a slump out of central casting. From the peak, inflation-adjusted gross domestic product has fallen by 3.9%. The meek and mild downturns of 1990-91 and 2001 (each, coincidentally, just eight months long, hardly worth the bother), brought losses to the real GDP of just 1.4% and 0.3%, respectively. The recession that sunk its hooks into the U.S. economy in the fourth quarter of 2007 has set unwanted records in such vital statistical categories as manufacturing and trade inventories (the steepest decline since 1949), capacity utilization (lowest since at least 1967) and industrial production (sharpest fall since 1946). 

It isn't just every postwar disturbance that sends Citigroup Inc. (founded in 1812) into the arms of the state or has General Electric Co. (triple-A rated from 1956 to just this past March) borrowing under the wing of the Federal Deposit Insurance Corp. Neither does every recession feature zero percent Treasury bill yields, a coast-to-coast bear market in residential real estate or a Federal Reserve balance sheet beginning to resemble that of the Reserve Bank of Zimbabwe. Yet these things have come to pass. 

Americans are blessedly out of practice at bearing up under economic adversity. Individuals take their knocks, always, as do companies and communities. But it has been a generation since a business cycle downturn exacted the collective pain that this one has done. Knocked for a loop, we forget a truism. With regard to the recession that precedes the recovery, worse is subsequently better. The deeper the slump, the zippier the recovery. To quote a dissenter from the forecasting consensus, Michael T. Darda, chief economist of MKM Partners, Greenwich, Conn.: "[T]he most important determinant of the strength of an economy recovery is the depth of the downturn that preceded it. There are no exceptions to this rule, including the 1929-1939 period." 

Growth snapped back following the depressions of 1893-94, 1907-08, 1920-21 and 1929-33. If ugly downturns made for torpid recoveries, as today's economists suggest, the economic history of this country would have to be rewritten. Amity Shlaes, in her "The Forgotten Man," a history of the Depression, shows what the New Deal failed to achieve in the way of long-term economic stimulus. However, in the first full year of the administration of Franklin D. Roosevelt (and the first full year of recovery from the Great Depression), inflation-adjusted gross national product spurted by 17.3%. Many were caught short. Among his first acts in office, Roosevelt had closed the banks. He had excoriated the bankers, devalued the dollar, called in the people's gold and instituted, through the National Industrial Recovery Act, a program of coerced reflation. 

"At the business trough in 1933," Mr. Darda points out, "the unemployment rate stood at 25% (if there had been a 'U6' version of labor underutilization then, it likely would have been about 44% vs. 16.8% today. . . ). At the same time, the consumption share of GDP was above 80% in 1933 and the household savings rate was negative. Yet, in the four years that followed, the economy expanded at a 9.5% annual average rate while the unemployment rate dropped 10.6 percentage points." Not even this mighty leap restored the 27% of 1929 GNP that the Depression had devoured. But the economy's lurch to the upside in the politically inhospitable mid-1930s should serve to blunt the force of the line of argument that the 2009-10 recovery is doomed because private enterprise is no longer practiced 
in the 50 states. 

To the English economist Arthur C. Pigou is credited a bon mot that exactly frames the issue. "The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born not an infant, but a giant." So it is today. Paul A. Volcker, Warren Buffett, Ben S. Bernanke and economists too numerous to mention are on record talking down the recovery before it fairly gets started. They collectively paint the picture of an economy that got drunk, fell down a flight of stairs, broke a leg and deserves to be lying flat on its back in the hospital contemplating the wages of sin. Among economists polled by Bloomberg News, the median 2010 GDP forecast is for 2.4% growth. It would be a unusually flat rebound from a full-bodied downturn. 

***

The Fed's voice is among the saddest in the lugubrious choir of bearish forecasters, and for good reason. By instigating a debt boom, the Bank of Bernanke (and of his predecessor, Alan Greenspan) was instrumental in causing our troubles. You might have thought that it would therefore see them coming. Not at all. Belatedly grasping how bad was bad, it has thrown the kitchen sink at them. And it maintains this stance of radical ease lest it get the blame for a relapse. However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s. 

The Fed may be worried about something else. By sitting on interest rates, it is distorting every business and investment decision. If mispriced debt was the root cause of the narrowly-averted destruction of global finance, the Fed is well on its way to setting the stage for some distant (let us hope) Act II. In the meantime, ultra-low interest rates have lit a fire under the stock and debt markets. 

By rallying, equities and corporate bonds not only anticipate recovery, but they also help to bring it to fruition. By opening their arms wide to such previously unfinanceable businesses as AMR Corp., parent of American Airlines, and Delta Air Lines Inc., the newly confident credit markets are implementing their own stimulus program. "Reflexivity" is the three-dollar word coined by the speculator George Soros to describe the dual effect of market oscillations. Not only does the rise and fall of the averages reflect economic reality, but it also changes it. One year ago, the Wall Street liquidation stopped world commerce in its tracks. Today's bull markets are helping to revive it. 

I promised to be bullish , and I am (for once)””bullish on the prospects for unscripted strength in business activity. So, too, is the Economic Cycle Research Institute, New York, which was founded by the late Geoffrey Moore and can trace its intellectual heritage back to the great business-cycle theorist Wesley C. Mitchell. The institute's long leading index of the U.S. economy, along with supporting sub-indices, are making 26-year highs and point to the strongest bounce-back since 1983. A second nonconformist, the previously cited Mr. Darda, notes that the last time a recession ravaged the labor market as badly as this one has, the years were 1957-58 ””after which, payrolls climbed by a hefty 4.5% in the first year of an ensuing 24-month expansion. Which is not to say, he cautions, that growth this time will match that pace, only that growth is likely to surprise by its strength, not weakness. 

And that is my case, too. The world is positioned for disappointment. But, in economic and financial matters, the world rarely gets what it expects. Pigou had humanity's number. The "error of pessimism" is born the size of a full-grown man””the size of the average adult economist, for example.

[*** I had to delete four paragraphs for publication]


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## drillinto

December 05, 2009

That Was The Week That Was … In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. It looks like it was a strong start and a weak finish on your market last week. 

Oz. That sums it up very neatly. The week started with a bang, and then faded badly on Friday, though not by enough to wipe out all of the earlier gains. The challenge will be seeing how we open next week, because the big fall in the gold price after we closed will have shaken local investors. Sticking with what we know, the Australian market, as measured by the all ordinaries index, added 2.6 per cent last week; the metals index rose by 3.3 per cent; and the gold index added two per cent. It could have been so much better, as the metals index was up by 5.7 per cent before Friday’s sell-off. Factors weighing on our market included lower commodity prices, a third consecutive monthly increase in official interest rates, and a big political shake-up which caused the dumping of planned key emissions trading laws.

Minews. Surely your investors were happy with the political changes? 

Oz. It seems that way. The national government has gone a long way out on a limb to appease the global warming zealots. For some reason the government seems to think that if we put a high price on carbon, or to put it another way, an additional tax on most of Australia’s export industries, we will be whiter than white when the true believers, bongo players, and flag wavers gather in Copenhagen next week. Australia represents about 1.5 per cent of the global economy, is in the relatively pollution-free southern hemisphere, and whatever we do will be cancelled out in about a week by new coal-fired power stations in China, so there’s a certain futility to the government’s posturing. 

Minews. And that led to the dumping of your Opposition leader too? 

Oz. It was a big factor. The “climategate” fiasco is playing well down this way, not so much because someone at an obscure British university appears to have fiddled with global temperature data, but more because of the way the zealots have howled down any attempt at scientific debate, and now look like they have been caught with the fingers in the lolly jar. 

Minews. Let’s stick with the stock market - money is always simpler than politics. 

Oz. Agreed. The gold sector, as mentioned, was a little nervous towards the end of last week and will be a lot more nervous on Monday. Most local gold stocks gained ground, with a few stand-out performers, but the overall tone was choppy. Iron ore stocks behaved in a similar manner. Base metals were mixed, and uranium was generally stronger, thanks to the spot price putting on a few dollars during the week. Another interesting development was that a handful of new floats made it safely onto the market, but next week is shaping as a critical test of investor appetite for risk, with six new mining stocks scheduled to list over five days. 

Minews. Gold first, please. 

Oz. The newsmakers among the gold stocks included Morningstar (MCO) and Ramelius (RMS) which caught the eyes of investors courtesy of discovery and development. Morningstar added A10 cents to A44.5 cents after reporting a fabulous visible gold intersection assaying 137.4 grams a tonne (4.4 ounces) from the Maxwell Reef at its Morning Star mine north of Melbourne. The closing price on Friday was a little short of the stock’s 12 month high of A49 cents, reached the previous day. Ramelius, meanwhile, rose by A9 cents to A59 cents, and that was enough to cop a speeding fine from the ASX. In response, management pointed out that the company’s Wattle Dam mine should reach full production next month. 

Another solid upward move in the gold space came from Silver Lake (SLR), which hit a 12 month high of A$1.40 on Thursday, before dropping back to close up A11.5 cents over the week at A$1.29. That strong rise came in the wake of what is probably the best assay from anywhere in Australia over the past year, 555 grams a tonne (17.8 ounces) over an admittedly thin 0.35 metres - one foot to old timers. It probably represents the drill bit passing through a nugget. That result came from the Daisy East discovery zone, which lies just 40 metres east of the company’s main Daisy Milano mine. The company also reported a hit over 1.3 metres of core assaying 129 grams a tonne. 

After that it was a mixed picture, as the upward movement earlier in the weak was reversed on Friday. Kingsgate (KCN) galloped up to a 12 month high of A$10.30 on Thursday, before being slam-dunked on Friday to close the week at A$9.75 for a gain of just A2 cents. Troy (TRY) got to A$2.74, on Thursday, which was a gain at that stage of A10 cents, but ultimately closed the week down A4 cents, at A$2.60. Resolute (RSG) hit A$1.26 early but closed at A$1.16, down A1 cent. Tanami (TAM) continues its climb back from the desperate days of a year ago, when its share price plunged to as low as A1.4 cents. On Friday it hit A7.5 cents in early trade, before closing at A7.1 cents for a gain of A0.3 of a cent on the week. Elsewhere, Adamus (ADU) added A3 cents to A47.5 cents, and Chalice (CHN) rose by A2 cents to A61 cents, but was trading as high as A68 cents at one stage on Friday, a 12 month high. 

Minews. Iron ore next, please. 

Oz. It was more of a mix in iron ore than it was in gold, but share prices were nonetheless generally up. Murchison (MMX) was the star, as the market continued to digest an upbeat presentation put together for the benefit of European and North American investors. Murchison added A31 cents to A$1.96, but did trade up to A$2.04 on Thursday. Royal Resources (ROY) attracted support for its promising Razorback project in South Australia, rising by A8 cents to A26 cents. Giralia (GIR) continues its strong recovery, adding another A18 cents to A$1.40. IMX (IXR) benefited from a joint development deal with OZ Minerals (OZL), rising by A6.5 cents to A39.5 cents. Dragon Energy (DLE) joined the iron ore game through a deal to acquire a package of tenements. That news which lifted the company’s shares by A5 cents to A26 cents. Finally, Fortescue Metals (FMG) gained A28 cents to A$4.29. Going down, Golden West (GWR) ended a storming recovery with a fall of A14 cents to A73 cents, and Iron Ore Holdings (IOH) also retreated after a stellar run, losing A3 cents to A$1.59. Also weaker, Brockman (BRM) eased back by A4 cents to A$1.95. Aquila (AQA) had a yo-yo of a week, rising early to a high of A$11.50, and then falling sharply to close at A$9.45, down A32 cents overall, after it announced a bonus share issue. 

Minews. Over to base metals. 

Oz. Copper up. Nickel down. Zinc flat. That’s the sector in a nutshell. PanAust (PNA) was among the better performers in copper. The company is enjoying strong production from its Phu  Kham mine in Laos, and added A8.5 cents over the week to close at A58.5 cents. OZ Minerals rose by A4 cents to A$1.22 after giving an upbeat strategy presentation. Equinox (EQN) gained A19 cents to A$4.24, and Hillgrove (HGO) announced positive steps towards development at its historic Kanmantoo mine near Adelaide, news which stimulated an eye-catching rise of A6 cents to A35.5 cents. On the way down, Citadel (CGG) fell A4 cents to A39 cents, Syndicated (SMD) shed A2 cents to A19 cents, and Sandfire (SFR) was A10 cents weaker at A$3.69. 

Best of the pure nickel stocks was Pacific Ore (PSF), which rose by A0.9 cents to A4 cents after it announced a deal to run a bacterial leaching trial on low-grade nickel ore from the Forrestania mine owned by Western Areas (WSA). Western itself added A15 cents to A$5.22. On the way down, Mincor (MCR) fell A14 cents to A$1.85, Minara (MRE) was A3 cents weaker at A78 cents, and Poseidon (POS) dropped A1.5 cents to A25.5 cents. Zinc stocks were modestly stronger. Terramin (TZN) added A4 cents to A79 cents, and Perilya (PEM) gained A6 cents to A57 cents. 

Minews. Uranium and specials to close, please. 

Oz. Most uranium stocks performed well as the price of the fuel rose. Mantra (MRU) added A21 cents to A$4.37, but did get to A$4.47 in early Friday trade. Manhattan (MHC) continued to attract strong support, rising another A29 cents to A$1.35. Berkeley (BKY) reported a positive scoping study on its Salamanca project, and that news drove the stock A27 cents higher to A$1.35. Meanwhile, Raisama (RAI) made a strong debt as a new float with its A35 cent shares opening at A50 cents and closing out their first week at A55 cents. 

Minews. And specials? 

Oz. One worth mentioning, though it’s technically not a miner. Ausdrill (ASL) the drill rig operator, added A26 cents to close at A$2.00, just short of a 12 month A$2.02 high reached early on Friday. What’s interesting about that move is that investors are placing bets on a classic “pick axe” seller in the belief that exploration spending will rise in future years as the resources boom re-gathers strength. 

Minews. Thanks Oz, an interesting point to close on.


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## drillinto

Gold Isn’t the Best Protection Against Inflation 
Matthew Lynn 
http://www.bloomberg.com/apps/news?pid=20601039&sid=aF1zfwwrcA2w#

Dec. 8 (Bloomberg) -- Economic chaos? The dollar crumbling? Central banks printing money like crazy? Probably the only real surprise about the surge in gold prices over the last few months is that it took so long to arrive. 

Last week gold touched an all-time high of $1,227.50. Back in September it was still less than $1,000. Chalk that up as a victory for the gold bugs. 

This week, the price is heading down, dropping below $1,200. Chalk that up as a victory for the gold skeptics, who regularly point out that the metal’s value is just a sentimental memory from a long-buried era. 

In reality, while investors are right to be nervous about inflation, maybe they are catching on that it’s wrong to see gold as the best hedge against a general rise in prices. There are plenty of alternatives: equities, property, oil, luxuries or private-equity funds should prove just as effective a way of shielding yourself. 

It isn’t hard to figure out why investors had been getting interested in gold again. Central banks are pumping freshly minted money into the system. A few hundred years of economic history says that eventually this will lead to inflation. It might be next year, or the year after. It doesn’t make much difference -- it will arrive sooner or later, and you’ll need to get your portfolio in shape before it does. 

Alloyed Record 

But gold? Whether it’s a hedge against inflation depends on where you want to start drawing the graph. Back in 2002, gold was less than $300. If you bought it then, you’d certainly have protected yourself against rising prices -- and made a fat profit as well. The 1990s were a different story. Gold started that decade at around $400, and ended it below $300. Not so great. As for the 1980s, forget it: gold lost almost half its value during that decade. 

In reality, gold has a mixed record. Nor should you be surprised about that. A few industrial uses, and jewelry, aside, gold is valuable only insofar as other investors think it is valuable. By itself it isn’t necessarily worth anything. Nor does it generate interest or dividends. If the price doesn’t rise, you don’t get anything. 

There isn’t much chance, either, of the world’s central banks making their currencies convertible into gold once again. They would bankrupt their governments in the process. It may secure itself a greater role as a reserve asset. But the gold standard isn’t about to be re-imposed. 

In truth, while gold may have a role in protecting against inflation, there are plenty of alternatives. Here are five you should be thinking about -- particularly when you bear in mind that gold is already close to an all-time high. 

Real-Estate Rebound 

One, property. The price of real estate won’t always move exactly in line with inflation. And you might want to steer clear of the markets where there has yet to be much of a retreat from the exuberant prices of 2006 and 2007. Even so, if there is more money chasing a static amount of land and buildings, prices are going to rise. 

Two, oil. They used to call it black gold and maybe they should again. It has already stopped being just stuff we put in our cars, and use to heat houses, and become an investment asset in itself. How else can we explain the fact that oil has ticked up past $70 a barrel even while we’re living through the worst global recession since World War II? Oil is already, in effect, an alternative to gold. The one difference is that you can put it in your car and drive somewhere -- making it far more useful than stuff good for little more than dental fillings and trinkets to wear around your neck. 

Stock Picking 

Three, equities. Moderate, persistent inflation in the 3 percent range is good for the kind of big, blue-chip companies that dominate the major global stock markets. They can edge up prices along with everyone else. And they can usually get away with increasing wages just a bit less than inflation, so cutting labor costs as well -- particularly as unions are far less powerful than they used to be. In those circumstances, the shareholders should do fine -- and their equities will more than keep up with rising prices. 

Four, luxury goods and collectibles. Once inflation takes off, it is only real assets that will hold their value -- everything else is just paper, and that will be of dwindling use. Assets don’t get much more real than historic art, valuable antiques, vintage automobiles or fine wines. They should start to soar in price as the mega-rich realize they are among the few ways to protect wealth. And, heck, if you get it wrong, you can always hang them on the wall, or drink them. 

Five, private-equity funds. This one might not be obvious. But a leveraged buyout firm buys well-established companies, in basic industries, and then loads them up with lots of debt, while hanging on to a little bit of equity. Inflation will effectively wipe out all that debt. The result? The equity that is left over will be worth far more. 

Rate Squeeze 

Of course, none of these will necessarily work in the long- term. The only real way to control inflation once it gets started is to raise interest rates high enough to create a deep recession, and so choke off rising prices. That’s what central bankers did in the late 1970s and early 1980s, and may do again sometime around 2015 or 2020. Once that happens, you’ll need to think again -- you might not want to be in property or equities. 

That, however, is some way off. As we move into the early stages of an inflationary era, those five assets should do at least as well as gold, if not better.


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## drillinto

Dec. 9, 2009

What in the world is going on?
Commentary: Historic precedent need not apply
By Todd Harrison 

NEW YORK (MarketWatch) -- We've danced around some delicate topics through the years; subjects that many didn't want to hear, much less accept. 

We flagged Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) in 2005 before most folks blinked an eye. Read more about Fannie Mae. 

We mused in 2006 that seeds were being sown for something "entirely more depressing than a recession" as the markets climbed a slippery slope. Read keynote address from Minyanville retreat. 

When we offered that Wall Street was technically insolvent in 2007 -- as financial stocks were near all-time highs -- we didn't make many friends. Read "Will the banking industry survive?" 

When we pooh-poohed crude in the midst of the 2008 mania -- prior to the 75% oil slick -- and shared the variant view that lower energy prices would be equity negative, you could almost see conventional wisdom wince. Read "The oil of oy vey" 

Indeed, we've made a lot of prescient observations -- along with our fair share of mistakes -- as we navigated the twists and turns of this wild world. Read "The upside of anger" 

Class houses 
One of our mainstay observations the last few years has been the percolating societal acrimony and an emerging class war between the "haves" and "have nots." Read "Class clowns" 

As I wrote in my 2008 Themes, 

"The middle class steadily eroded between the lifestyles of the rich and a struggle to exist. Structurally, my sense is that this dynamic continues. The wealthy will endure on a relative basis as the "other side" gets squeezed. What will change, in my view, is the perception of wealth. Black cards, fast cars and private jets will be frowned upon while philanthropy and other acts of selflessness will be embraced." 

Channeling Kevin Depew, I continued, "If the 90s were about wealth, accumulation and consumption, 2008 will continue the mean reversion toward something altogether more austere, if not more sensible. Debt reduction and the rejection of (and guilt projection toward) materialism will continue what began in 2006 and 2007 as meditations on not just doing more with less, but doing less... period." 

I continued that thread of thought in this year's themes when I shared, 

"The age of austerity has officially arrived and we'll see a steady stream of social strife as the rejection of wealth increases in size and scope. While societal acrimony began to percolate last year, this dynamic will manifest through social unrest and geopolitical conflict as we edge ahead." 

Now, please understand I'm an optimistic person at heart. The mission of Minyanville is to effect positive change through financial understanding, not beat a steady drum of dire predictions. 

It's not always fun -- and not always right -- but as I told a producer in September 2008 when she whispered in my ear to be "more optimistic," immediately preceding the financial meltdown, my opinion isn't for sale. 

What's my point? Glad you asked; I sometimes have a tendency to go on tangents. 

We're not in Kansas anymore. What was once a craft -- trading was an art, not a science -- has turned into a polarizing profession predicated on predicting unforeseen actions of government entities and the corporatocracies they protect. 

This isn't sour grapes or a random rant; it's simply what is, whether we like it or not. 

Of mice and markets 
Free market capitalism; the mere mention invokes deep-rooted responses. 

For some, it's a longing for simpler times when an assimilation of primary trading metrics allowed for honest pay after a long day. For others, it's an opportunity to unleash vitriolic criticism on anyone and anything associated with Wall Street. Pick a side or stand aside, people, the nation is dividing as we speak. 

I believe history books may one day look back at Shock & Awe -- or perhaps, 9/11 -- as the beginning of World War III when it was broadcast on CNN. 

I'm not talking about a nuclear winter; I'm simply saying the entire global dynamic seismically shifted towards that short stretch of time and the needle is now pointing in an entirely unfortunate direction. 

Society acrimony to social unrest to geopolitical conflict; it's a tri-fecta that won't pay off for anyone. 

I share these thoughts with genuine intentions. When I read stories about Goldman Sachs Group (NYSE:GS) employees arming themselves with pistols so they're equipped to defend against a populist uprising, I take notice. 

When I see Ahmadinejad thumb his nose at the U.S and Russia -- and call out Israel, which already has an itchy trigger finger -- I take notice. 

When benevolent gestures and philanthropic efforts are immediately met with suspicion and distrust, I take notice. 

I view the world through a somewhat binary lens. On one side, there's painful yet inevitable debt destruction that will eventually lead to a prosperous outside-in globalization. That scenario requires lower asset classes, a higher dollar and a lot of patience. The U.S likely won't lead the world higher but that's all right; a little humility will go a mighty long way. 

On the other side, there is more credit creation, more stress on the system and cumulative imbalances that are destined to manifest in a meaningful way. I'm not smart enough to know how or when, but the "why" is self-evident. When the next phase of crisis arrives, it will be one of confidence that could shake our socioeconomic construct to the core. 

Harsh? Yeah, it is. Imminent? It doesn't feel that way, and corporate credit markets suggest it's not. Looming and ever-present? You betcha, and I'll again use the magic word: cumulative . As social mood and risk appetites shape financial markets, we would be wise to watch for the next progression of problems, be it sovereign defaults, state bankruptcies or commercial real estate. 

There are, as always, two sides to every trade and the bullish bent is akin to a relay race; the government-sponsored euphoria handed the baton to corporate America (who rolled mountains of debt and issued tons of equity) and the transfer of risk will land in the lap of an unsuspecting public. Yes, the best-case scenario doesn't cure the underlying disease; it simply masks the systems and pushes risk further out on the time continuum, perhaps all the way to our children. 

Know this; it's of no benefit to me or my business to communicate this view but I'll always give it to you straight, sometimes right, sometimes wrong and always honest. I offer these thoughts not only to open some eyes, but also to ask for help. As we're apt to say, if you're not a part of the solution, you're part of the problem and society is simply a sum of those parts. 

Now, more than ever, we need proactive problem solvers as we edge ahead through this uncertain world. 


Source >> http://www.marketwatch.com/story/story/print?guid=DC149BF7-5DDD-41F0-AF75-D1B385CB1C85


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## drillinto

Mohamed El-Erian: Tough times ahead

Pimco's CEO says individual investors must change their investing style, such as being less U.S.-centric.

By Geoff Colvin, senior editor at large
December 10, 2009


[  This must read article is too long for the ASF and I do not wish to amputate it. Here is the link to read it >> http://money.cnn.com/2009/12/09/news/economy/mohamed_el_erian.fortune/index.htm  ]


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## drillinto

December 12, 2009

That Was The Week That Was … In Australia 

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. Was that just a tough week for your miners, or was it the start of the Christmas slowdown? 

Oz. It was a bit of both, really. The tumble in the gold price certainly knocked the gold stocks for six. Other sectors did less badly, and the overall market, when you wrap in the banks and industrials, actually held up quite well. Of the major ASX indices gold dropped by eight per cent. Metals and mining fell three per cent and the all ordinaries slipped 1.4 per cent. Looked at another way, it was four down days, saved slightly by a stronger Friday. But with Christmas parties in full swing, and a lot of tired people just happy to have made it to the end of 2009, there is undoubtedly a lot of lethargy about.

Having said that, it is worth looking at why everyone is a bit tired of financial markets at the moment. We’ve gone from boom to bust to boom again in less than two years. Forgetting, if possible, the great sell-off of 2008, and starting again in early December of that year, over the last 12 months the Australian dollar has shot up by 40 per cent, the metals index has risen by 52 per cent, the all ordinaries by 41 per cent, and the gold index by 34 per cent. There was one slight downer – the higher Australian dollar rubbed some of the gloss of local gold price. 

Minews. Quite a recovery. Now for prices please, and keep it short today because there probably isn’t a lot to talk about. 

Oz. Just one more general news item before prices. First Quantum’s decision to buy the mothballed Ravensthorpe nickel mine from BHP Billiton was the big mining event down this way. While some critics see it as an overly ambitious step, others recognise it as an opportunity for First Quantum to cut its excessive exposure to some of Africa’s more dodgy countries, and that acquiring a US$3 billion factory at 10 cents in the dollar has its attractions. Even after spending on rehabilitation the world-scale project will have been brought back into production for around US$600 million, an entry price sufficiently low to make a profit even if nickel prices stay low and production is limited to half the theoretical output of 50,000 tonnes of metal in concentrate from Ravensthorpe per year. In other words, this could be a company-transforming deal for First Quantum, and it wouldn’t be a surprise to see some of its investments offloaded to allow it to focus on Ravensthorpe. Such as its stake in Equinox Minerals (EQN). 

Minews. Interesting. Now to prices, starting with gold. 

Oz. It really doesn’t matter where we start, it’s virtually all in red ink. Among the gold stocks there was only one or two significant winners for the week. Adelaide Resources (ADN) reported excellent gold and copper assays from its Rover project at Tennant Creek in the Northern Territory. Best hit from a project which adjoins a very promising discovery being worked by Westgold Resources (WGR) was 55 metres at 3.36% copper and 0.16 grams of gold a tonne. There was also a lower intersection in the same hole measuring 31 metres and assaying 2.16 grams of gold and 2.23% copper. In better trading conditions Adelaide’s shares would have flown. As it was the stock managed a rise of A4 cents to A32.5 cents, but did set a 12-month high of A39.5 cents on Wednesday. Westgold failed to benefit, falling A3 cents to A40.5 cents. Also better off, Robust Resources rose by 48 cents to 110 cents after hitting some good grades in drilling at its Indonesian project, Romang Island. 

Other gold movers included Silver Lake (SLR), down A20 cents to A$1.09, Kingsgate (KCN), down A52 cents to A$9.23, Troy (TRY), down A20 cents to A$2.40, Allied (ALD), down A7 cents to A34 cents, Chalice (CHN), down A15 cents to A46 cents and Resolute (RSG), down 23.5 cents to A93.5 cents. Also worse off, St Barbara (SBM) fell A4.5 cents to A31 cents after announcing another capital raising. Finally, Catalpa (CAH) fell A18 cents to A$1.54, a rough start in its freshly-merged condition. 

Minews. I think we get the picture. Let’s move on quickly now, with iron ore next, please. 

Oz. Two stocks up. Everyone else down. Murchison Metals (MMX), perhaps because it’s making up for lost ground after being ignored in previous weeks, rose by a stand-out A20 cents to A$2.14, while Jupiter Mines (JMS), one of the companies in the orbit of the legendary Brian Gilbertson, added A1 cent to A23.5 cents after announcing a big increase in the resource at its Mt Ida project. After that, it was all downhill. One company that might have gone against the trend was Golden West (GWR) which surprised the market by saying it would stick with its gold exploration effort as well looking for ways to get an early start on iron ore output. But that still wasn’t enough to prevent a share price fall of A8.5 cents to A64.5 cents. Meanwhile, Northern Iron (NFE) was hit hard after making a fresh statement on the sluggish production start at its Norwegian project, and dropped A13 cents to A$1.44. Atlas (AGO) reported the shipping of its first million tonnes of iron ore, and duly fell A11 cents to A$1.81. Iron Ore Holdings (IOH), which could do no wrong a few weeks ago, dropped by A14 cents to A$1.45. Elsewhere, Gindalbie (GBG) reported a minor setback to its Karara project and slipped A3.5 cents lower to A94 cents, while Mt Gibson (MGX) lost A9 cents to A$1.50 on chatter that its Koolan Island project is proving to be more difficult than first thought. 

Minews. Uranium and coal next, where there seems to have been some news. 

Oz. News, yes, but mostly bad news. PepinNini (PNN), which was a star in the 2007 uranium boom, shocked investors by declaring that its’ heavily promoted Crocker Well project, being explored with China’s SinoSteel, is uneconomic. PepinNini promptly crashed back by A11.5 cents to A21.5 cents, with all of that fall coming on Friday. Other uranium stocks were caught in the backwash. Paladin (PDN), another darling of the local market, fell A32 cents to A$3.86, perhaps hurt by reports of an earthquake close to its mine in Malawi. Manhattan (MHC) copped a bit of selling despite Alan Eggers star turn at last week’s Minesite forum, losing A9 cents to A$1.26. Mantra (MRU) lost A7 cents to A$4.30 after announcing a fresh capital raising, while Extract swam against the tide with a rise of A61 cents to A$8.28 after reporting more ore at its Namibian project. 

Coal stocks were boosted by the float of Stanmore Coal (SMR) - foundation investors were rewarded with a handsome A16.5 cent gain on their A20 cent subscription price when the stock closed on Friday at A36.5 cents. Interest in the entire coal sector has been remarkably strong over the past few weeks, almost as if investors are gleefully defying the bongo-drummers and flag wavers at the Copenhagen climate summit. Gloucester Coal (GCL) also managed a small rise of A5 cents to A$6.44, but the rest of the coal sector sank. Coal of Africa (CZA) lost A7 cents to A$1.72, while Aquila (AQA), which is half coal, half iron ore, fell A32 cents to A$9.13. 

Minews. Base metals and specials to finish, please. 

Oz. Not a lot to report. Most copper, nickel and zinc stocks declined. Among the copper stocks, Sandfire (SFR) lost A26 cents to A$3.63, Exco (EXS) was down A1 cent to A23 cents, Citadel (CGG) was off half a cent to A38.5 cents, and Rex (RXM) fell A6 cents to A$1.78. On the up, Talisman (TLM) reported the acquisition of a tenement adjacent to Sandfire’s Doolgunna ground, and that was enough to add a truly modest half a cent to its share price, which ended the week at A83 cents. Redbank Copper (RCP) also did better, creeping up one-tenth of a cent to A1.4 cents. 

All nickel stocks were weaker. Mincor (MCR) slipped A2 cents lower to A$1.83, despite good exploration news. Western Areas (WSA) fell A14 cents to A$5.08. Mirabela (MBN) was down A3 cents to A$2.48, and Panoramic (PAN) eased back by A11 cents to A$2.39. Zinc stocks barely moved. Perilya (PEM) fell A2.5 cents to A55 cents and Terramin (TZN) lost A4 cents to A75 cents. 

The special worth mentioning was Nkwe Platinum (NKP) which we reported on in some detail during the week. It added A3.5 cents to A44 cents after coming out of a trading halt and announcing a successful capital raising, and promising a more detailed report on its Garatau project in the next few weeks. The most interesting part of Nkwe’s Friday announcement was that there are currently 11 drilling rigs working on Garatau, which is being explored in joint venture with Xstrata. 

Minews Thanks Oz.


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## drillinto

December 14, 2009

An Investment In Metals Still Looks A Better Bet Than One In Currencies 

By Rob Davies
www.minesite.com/aus.html

Traders using The London Metal Exchange set prices for base metals that are used as benchmarks the world over. Most of them work for banks and many of them are based in London. The British government, it its wisdom, has proposed a bonus tax to discourage risk-taking by financial institutions. So far it is still unclear who exactly will be hit by the tax and what the impact on banks and employees will be.

But there is already a precedent of financial hotshots moving east to where the action is. Michael Geoghegan, chief executive of HSBC, and Antony Bolton, star fund manager at Fidelity announced this year that they are moving to Hong Kong to be closer to where the monetary action is - in and around China. Will metal traders follow them, to the detriment of the LME? 

Meanwhile, news that China’s imports of copper rose 10 per cent in November to 290,000 tonnes, and that smelter production increased by six per cent to 421,000 tonnes has only served to reinforce the point that the centre of gravity in the metals industry is moving east. 

The trick for governments and for money managers will be to ensure that the finance associated with the metals industry doesn’t all go the same way. Fortunately the UK, the USA and Europe all live in a democratic meritocracy. So theoretically, only the very best people, selected by their peers, end up running the country and the great institutions of finance. Surely these same people can be relied on not to push business and commerce into what is still a communist dictatorship where promotion is anything but transparent. Can’t they? 

This particular week metals traders decided that the continued strength of the dollar was a good reason to mark metal prices down. Metals did not suffer because capitalists suddenly decided they liked the dollar a lot more. It was more a case that the hidden tensions in the euro bubbled to the surface. The risks of a major financial accident in Greece, Ireland, Spain and Italy have all grown in recent weeks, and no one is entirely sure what that means for the euro. Better sell it just in case. 

“What shall we buy instead? Hummm… well, there is sterling… No forget that..." Which just leaves the yen and the dollar. Neither of those currencies rewards investors with much in the way of interest. Oddly gold, which pays none at all, and which is the usual haven in terms of uncertainty, suffered in these circumstances, and fell 1.6 per cent to US$1,114 an ounce.   

Other metals fell too as the dollar gained, leaving copper at US$6,805 a tonne, and nickel at US$16,465 a tonne. Aluminium, though, remained resilient and ended at US$2,163 a tonne, while lead and zinc gained ground to close the week out at US$2,259 and US$2,264 a tonne respectively. 

Unfortunately, these metal price moves were not enough to stop Xstrata putting a US$2.5 billion red line through a whole host of its nickel, lead and zinc assets. A falling US dollar means that operations in Canada are no longer viable, Xstrata reckons. The write-down in the value of its custom smelters also reflects the increased dominance that China now has in the smelting business. 

Effectively, what this announcement means is that at current exchange rates, the spot prices of nickel, lead and zinc are all at levels pretty close to the marginal cost of production. With that sort of underpinning to prices, metals look better bets than most currencies, even if they don’t pay any interest.


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## drillinto

December 15, 2009

There’s Been Plenty Of Activity In Uranium Lately, Even If The Spot Price Still Leaves A Lot To Be Desired

By Sally White and Alastair Ford
www.minesite.com/aus.html

Russia spooked the uranium markets last week, and that was no help at all in a market that had already been weakening. Prices had in any case been easing back on the transfer of uranium by the US Department of Energy to New York-listed USEC, which operates the only enrichment facility in America. That created an environment in which the latest spot price is around US$45 a pound, five per cent lower than it was three months ago, and in which long term contract prices are also weakening.

But last week Russia decided to assert itself, broadcasting that it would be supplying the world with nuclear fuel in a couple of years, and making it sound as though it would flood the market.  This new supply would be from the recycling of the country’s Cold War arsenal. Currently, Russia’s ageing nuclear arsenal is recycled for it by the US on a contract that runs out to 2013. Russia also said it would increase output from uranium mines and increase enrichment capacity. 

The Russian supplies from old warheads are currently key to the global uranium market, accounting for 13 per cent of world supply, and helping to fill the current shortfall from mined output. In fact, most analysts expect Russian supplies to the US to continue after the contract expires, but to fall to around two thirds of current levels. 

At Macquarie Securities, though, analyst Max Layton said concerns about global supply following the expiry of the Russia/US agreement were being overplayed. “The Russians will use it, sell it to the Chinese, or sell it as part of other reactor packages. From a global supply-demand balance perspective it doesn’t matter whether they sell it to the US”, he commented. 

Whether that’s true or not, there’s no doubt that Russia has been pursing lucrative deals to supply fuel directly to US power companies. “Six commercial contracts have already been signed with US nuclear power plant operators”, said Ivan Dybov, spokesman for Rosatom’s civilian arm, Atomenergoprom. 

Meanwhile, if the uranium price has been weaker, that weakness has not so far been felt on equity markets, or at least not directly. Uranium miners have been doing rather better than the mineral itself. The latest market valuation of uranium companies published by Resource Capital (RCR), and out last week, showed an average 12 per cent rise in value over the last month and of 353 per cent over the last 12 months. Canadian companies show a four per cent rise over the last month and 198 per cent on the last 12 months.  

An increasing number of projects have gained mining licences – RCR lists among others Toronto quoted Mega Uranium, for Lake Maitland in Western Australia, and Australian quoted African Energy Resources for Chirundu in Zambia. Meanwhile, several uranium juniors have been making serious progress with development projects, including Manhattan Corporation, which is currently drilling in Australia, and which has been ably promoted by boss Alan Eggers the world over. Manhattan’s share price has increased markedly over the past six months, and Mr Eggers says he sees no reason why it won’t continue to rise. Before we commit on that, we’ll have to let the drill bit have its say, but it was interesting to see, in a recent presentation at our Minesite Christmas forum, a schematic in which Mr Eggers represented the number of nuclear power stations either at the commissioning stage, or at the planning stage. The overwhelming majority of these were in China. 

That presents a likely dynamic which one or two mining company directors, including Andrew Bell of Red Rock, Clive Sinclair-Poulton of Beowulf, and Mark Reilly of Forte Energy have recently highlighted. The Chinese will increasingly be looking to lock up uranium supply to feed all these new power plants, while the Russian decommissioning can only go on for so long. Clive Sinclair-Poulton reckons that once the true scale of the Chinese requirements becomes clear – after the Chinese have already acquired most of what they need – then the upward pressure on the uranium price is likely to be substantial. Whether that will be felt next year remains to be seen, but there’s no doubt that uranium bulls have plenty to be cheerful about even if the short term price is weakening. And the way to play that seems to be in equities.


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## drillinto

December 15, 2009

Aussie Fraudsters Hit With $11.5 Million Fine For Kazakh Resources Scam
www.minesite.com/aus.html

To all junior miners operating in the risky wilds of Kazakhstan, be of good cheer - a Supreme Court judgement issued on December 11th in Sydney, Australia, has awarded the equivalent of US$11.4 million in compensation, penalties, and costs against a group of lawyers who have been found guilty of engaging in dishonest business practices.

Justice Clifford Einstein ruled in October that the Kazakhstan-based law firm of Michael Wilson & Partners had been defrauded by three lawyers who had been employed by Wilson and who had secretly moonlighted to earn fees and share bonuses for stock market listings and other transactions involving several major Kazakh resource projects. The projects in question included among their number Sunkar Resources’ Chilisai phosphate project, and Frontier Mining’s Benkala copper project. Also tangled up in the legal web were Roxi Petroleum, Max Petroleum, Urals Gold and Ablai, as well as four other projects tied to these and other operators in the same region - Karamandybas (oil and gas), Ravninnoye (oil), Beibars Munai (oil), Lancaster, and Kangamiut (seafoods).  

In his new order, Justice Einstein reiterated his finding from October - "the essence of the matter is that the defendants concealed these continuing activities from the plaintiff". Accordingly, the new judgement orders the lawyers to pay up what they gained unfairly in profit, and also to compensate Wilson & Partners for the cost of having to litigate across the globe for the recovery of its losses over the past three years. After itemizing invoices and share capital gains for each project transaction, the judge applied a 10 per cent discount, rejected a claim for compensation for losses in the Benkala copper project, and dismissed a claim for additional and exemplary damages as a punitive response to the alleged conspiracy of the defendant lawyers against Wilson. Total: US$3.5 million, plus â‚¬555,259, plus A$4 million.

"The plaintiff has succeeded in almost every aspect of its pleaded case against the defendants", Einstein ruled. "The usual rule as to costs, that they should follow the event, should apply" - another A$3.5 million. Grand total, US$11.4 million.

In his 216-page judgement, issued on October 6th, Einstein had ruled that John Emmott, Robert Nicholls, and David Slater had conspired together to exploit their positions in the Wilson law firm to breach their employment contracts and fiduciary duties by secretly creating a competing firm of their own, Temujin International, registered in the British Virgin Islands. Among the London Aim-traded listed companies targeted by the scheme, the court papers identify Sunkar, Frontier, Roxi, and Max.  

In a summary of his findings of fact, Einstein J said the conspiracy had begun in 2005, as soon as Slater had arrived at Wilson's office in Kazakhstan from Australia, where he had been an in-house solicitor for the Westpac Banking Corporation. In a sequence of Almaty watering holes over several weeks, Slater and his co-conspirators created their cut-out company, calling it Temujin, a name they borrowed from the hero of the Mongol empire and the Kazakh steppes, Genghis Khan. Temujin was his original name. 

Slater left Wilson’s firm almost immediately afterwards, in December of 2005. Nicholls, formerly a Sydney barrister and partner at Freehills, followed in March of 2006, while Emmott, who had been with Wilson since 2001, stayed on to keep the flow of Wilson’s client business moving out the backdoor to Temujin. He exited on June 30th 2006. Temujin’s new business was to advise Wilson clients on the purchase of formerly state-owned oil, gas, gold and mineral companies and the creation of financial vehicles to allow for their future listing on the Aim market.  

In last week's judgement, Einstein separates the defendants, and itemizes his rulings on culpability and financial liability. Slater, Nicholls, several companies of the Temujin group, and an associated Kazakh lawfirm are to pay up collectively. Emmott is named by the judge in both rulings as culpable, but he was not a defendant in the Sydney court. He is currently under investigation by the authorities in Switzerland and the UK.


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## drillinto

Awesome !

Worldwide Japanese Candle Sticks:  
http://www.americanbulls.com/Default.asp
{Here you will find the links to the major stock exchanges}

www.aussiebulls.com


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## drillinto

December 21, 2009

Don’t Yield To This

By Rob Davies
www.minesite.com/aus.html


Inflation, or at least fear of inflation, is the main reason people invest in commodities. Over the last three decades that threat has been policed by the bond market that simply would not allow governments to be profligate with debt. As former President Bill Clinton once said, this time probably truthfully, that if reincarnated he would want to come back as the bond market because it is the ultimate master.

Bizarrely over the couple of years of this financial crisis the bond market has accepted the huge demands made on it by governments everywhere. At a time when equities, property and commodities were all cratering fixed income was, on a relative basis, a safe place to be. But there are signs that view is changing as the sheer scale of the issuance required to refinance Uncle Sam, and other governments, becomes ever clearer. Over $1.6 trillion of US debt comes due by March 31st alone and 36 per cent of total US debt is short term, i.e. matures in less than one year. That makes the risk of holding it fairly low and is therefore popular. There is, though, the risk that interest rates will rise and the cost of refinancing this debt will soar uncontrollably.

Like any sensible finance manager Uncle Sam is seeking to extend the maturity of its debt by issuing long dated bonds of ten years or more as the short dated debt matures. These of course carry a lot more risk. While the nominal return might be known the real return, after inflation, is harder to gauge. To compensate for this additional risk investors want a higher return and yields for 10 year Treasuries have gradually been edging up and reached 3.51% this week. That had the effect of taking the gap between two year and ten year money to 276 basis points: its highest ever. Since analysts are expecting 10 year Treasury yields to increase to 4.5% next year this feature does not look like a temporary phenomenon.

This means two things. Firstly, bond markets are beginning to price in the level of issuance it is going to have to cope with. Secondly, fixed income investors are now starting to factor inflation fears into prices. Other asset markets price off US Treasuries as the biggest and most liquid asset class. Although gold had a poor week, base metals reacted positively because of a stronger dollar. Not only did spot prices move up, cash copper for instance rose 1.4 per cent to  US$6,900 a tonne, but forward prices increased slightly more. As interest rates move up the contango needed to keep future prices in line must also rise. So that was why copper for 15 months’ time rose 1.8 per cent to US$7,010. Although not all metals moved the same way the majority did. Cash nickel rose 3.25 per cent to  US$17,000 a tonne while 15 month metal increased 3.95 per cent to US$17,225. Zinc for immediate delivery rose 4.2 per cent to US$2,339 a tonne but 15 month metal increased even more, 4.33 per cent to US$2,460 a tonne.

The next year or so will see the start of a massive programme to refinance debt in the developed world. It may also be a time when interest rates start to rise. Since the US Treasury market is the 800 lb gorilla in the room how it decides to throw its weight around will demand the fate of all other asset classes. Commodities are tiny in comparison and metal prices will be very dependent on exactly how that primate behaves. Let’s hope he is well treated. If he is maltreated a lot of lesser beasts, including metals, could get badly hurt.


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## drillinto

Dec. 21, 2009 

Gas could be the cavalry in global warming fight
By MARK WILLIAMS

An unlikely source of energy has emerged to meet international demands that the United States do more to fight global warming: It's cleaner than coal, cheaper than oil and a 90-year supply is under our feet.
It's natural gas, the same fossil fuel that was in such short supply a decade ago that it was deemed unreliable. It's now being uncovered at such a rapid pace that its price is near a seven-year low. Long used to heat half the nation's homes, it's becoming the fuel of choice when building new power plants. Someday, it may win wider acceptance as a replacement for gasoline in our cars and trucks.

Natural gas' abundance and low price come as governments around the world debate how to curtail carbon dioxide and other pollution that contribute to global warming. The likely outcome is a tax on companies that spew excessive greenhouse gases. Utilities and other companies see natural gas as a way to lower emissions - and their costs. Yet politicians aren't stumping for it.

In June, President Barack Obama lumped natural gas with oil and coal as energy sources the nation must move away from. He touts alternative sources - solar, wind and biofuels derived from corn and other plants. In Congress, the energy debate has focused on finding cleaner coal and saving thousands of mining jobs from West Virginia to Wyoming.

Utilities in the U.S. aren't waiting for Washington to jump on the gas bandwagon. Looming climate legislation has altered the calculus that they use to determine the cheapest way to deliver power. Coal may still be cheaper, but natural gas emits half as much carbon when burned to generate the same amount of electricity.

Today, about 27 percent of the nation's carbon dioxide emissions come from coal-fired power plants, which generate 44 percent of the electricity used in the U.S. Just under 25 percent of power comes from burning natural gas, more than double its share a decade ago but still with room to grow.

But the fuel has to be plentiful and its price stable - and that has not always been the case with natural gas. In the 1990s, factories that wanted to burn gas instead of coal had to install equipment that did both because the gas supply was uncertain and wild price swings were common. In some states, because of feared shortages, homebuilders were told new gas hookups were banned.

It's a different story today. Energy experts believe that the huge volume of supply now will ease price swings and supply worries.

Gas now trades on futures markets for about $5.50 per 1,000 cubic feet. While that's up from a recent low of $2.41 in September as the recession reduced demand and storage caverns filled to overflowing, it's less than half what it was in the summer of 2008 when oil prices surged close to $150 a barrel.

Oil and gas prices trends have since diverged, due to the recession and the growing realization of just how much gas has been discovered in the last three years. That's thanks to the introduction of horizontal drilling technology that has unlocked stunning amounts of gas in what were before off-limits shale formations. Estimates of total gas reserves have jumped 58 percent from 2004 to 2008, giving the U.S. a 90-year supply at the current usage rate of about 23 trillion cubic feet per year.

The only question is whether enough gas can be delivered at affordable enough prices for these trends to accelerate.

The world's largest oil company, Exxon Mobil Corp., gave its answer last Monday when it announced a $30 billion deal to acquire XTO Energy Inc. The move will make it the country's No. 1 producer of natural gas.

Exxon expects to be able to dramatically boost natural gas sales to electric utilities. In fact, CEO Rex Tillerson says that's why the deal is such a smart investment.

Tillerson says he sees demand for natural gas growing 50 percent by 2030, much of it for electricity generation and running factories. Decisions being made by executives at power companies lend credence to that forecast.

Consider Progress Energy Inc., which scrapped a $2 billion plan this month to add scrubbers needed to reduce sulfur emmissions at 4 older coal-fired power plants in North Carolina. Instead, it will phase out those plants and redirect a portion of those funds toward cleaner burning gas-fired plants.

Lloyd Yates, CEO of Progess Energy Carolina, says planners were 99 percent certain that retrofitting plants made sense when they began a review late last year. But then gas prices began falling and the recession prompted gas-turbine makers to slash prices just as global warming pressures intesified.

"Everyone saw it pretty quickly," he says. Out went coal, in comes gas. "The environmental component of coal is where we see instability."

Nevada power company NV Energy Inc. canceled plans for a $5 billion coal-fired plant early this year. That came after its homestate senator, Majority Leader Harry Reid, made it clear he would fight to block its approval, and executives' fears mounted about the costs of meeting future environmental rules.

"It was obvious to us that Congress or the EPA or both were going to act to reduce carbon emissions," said CEO Michael Yackira, whose utility already gets two-thirds of its electricity from gas-fired units. "Without understanding the economic ramifications, it would have been foolish for us to go forward."

Even with an expected jump in demand from utilities, gas prices won't rise much beyond $6.50 per 1,000 cubic feet for years to come, says Ken Medlock, an energy fellow at the James A. Baker III Institute for Public Policy at Rice University in Houston. That tracks an Energy Department estimate made last week.

Such forecasts are based in part on a belief that the recent spurt in gas discoveries may only be the start of a golden age for gas drillers - one that creates wealth that rivals the so-called Gusher Age of the early 20th century, when strikes in Texas created a new class of oil barons.

XTO, the company that Exxon is buying, was one of the pioneers in developing new drilling technologies that allow a single well to descend 9,000 feet and then bore horizontally through shale formations up to 1 1/2 miles away. Water, sand and chemical additives are pumped through these pipes to unlock trillions of cubic feet of natural gas that until recently had been judged unobtainable.

Even with the big increases in reserves they were logging, expansion plans by XTO and its rivals were limited by the debt they took on to finance these projects that can cost as much as $3 million apiece.

Under Exxon, which earned $45.2 billion last year, that barrier has been obliterated.

The wells still capture only about a quarter of the gas locked in the shale formations. Future improvements could double that recovery rate. Bottom line: this new source of gas supply in Texas, Louisiana, Pennsylvania, North Dakota, New York and other states holds out the promise of as much as 2,000 trillion cubic feet of supplies. It is estimated that the U.S. sits on 83 percent more recoverable natural gas than was thought in 1990.

"The question now is how does this change the energy discussion in the U.S. and by how much?" says Daniel Yergin, a Pulitzer Prize winning author and chairman of IHS CERA, an energy consultancy. "This is domestic energy ... it's low carbon, it's low cost and it's abundant. When you add it up, it's revolutionary."

Source >> http://www.macon.com/nation/story/960198.html


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## drillinto

Doug Kass's 20 Surprises for 2010: Goldman Private, Gold Tumbles, etc.

Here is the link for this must read list of surprises for 2010 >> http://paul.kedrosky.com/archives/2009/12/doug_kasss_20_s.html


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## drillinto

Sliding back towards a Gold Standard
by Martin Hutchinson / December 07, 2009
http://www.prudentbear.com/index.php/thebearslairview?art_id=10318

Gold broke through $1,200 per ounce this week on rumors that the People's Bank of China might increase the percentage of gold in its reserves. The dollar, the euro, sterling and the yen all have good reasons to weaken, yet in our current global fiat money system, they have nothing to weaken against. Global foreign exchange reserves are at record highs, but there is nothing solid for central banks to buy. This all raises the interesting question: are we seeing the beginning of the end of the fiat money floating exchange rate system that has prevailed since 1973? And could something closer to a Gold Standard replace it?

At the extreme, it is very unlikely that in the near future we will go back to a full Gold Standard. We're unlikely in five years time to be wandering round with gold sovereigns or double eagles clanking in our pockets. Pity. However, it's quite possible for us to move some considerable distance towards a gold standard without actually getting to the final destination. And there are increasing signs that the world is heading in that direction.

The explosion in global liquidity in the last decade has had an effect on global central bank reserves, which increased 414% between 1998 and the second quarter of 2009 to $6.8 trillion, an annual rate of increase of 14.5%. This is more than three times the rate of increase of nominal Gross World Product of 4.6%. Put another way, central bank reserves increased from 4.2% of GWP to 11.1% during the 10 years 1998-2008.

The world therefore has been flooded with liquidity; Alan Greenspan and Ben Bernanke and to a lesser extent their counterparts in the ECB, the Bank of England, the Bank of Japan and the People's Bank of China, have a lot to answer for. Effectively they have by their own actions flooded the globe with paper money and made ordinary currency and short-term securities increasingly undesirable assets. It is thus not surprising that private sector investors and even central banks themselves are looking for something better. India's purchase in October of 200 tons of IMF gold (at a then value of $6.7 billion) was not a fluke.

The central bank search for an alternative to paper money holdings naturally leads them in the direction of gold. Gold has very few uses, so theoretically could lose its value almost completely if the world's markets decided that holding gold was no more sensible than collecting old tram tickets. However, in practice even in the disinflationary and economically ebullient 1980s and 1990s, the gold price dropped only to around $250 an ounce, a price equivalent to its extraction cost from the most efficient gold mining operations. (That cost is now around $400 per ounce.) After all, if investors had decided the stuff was of no interest, there's 50 years supply of it just lying around, so there would have been no need to produce any more, and no floor from mining costs on the gold price. In that case, gold would probably have dropped to around the $50 per ounce at which it becomes a plausible substitute for other metals in industrial uses.

So the world has bench-tested the Keynesian theory that gold is a barbarous relic, and found it wanting. Even in the 1990s, a time of peace and apparent disinflationary prosperity,  investors – including central banks – wanted to keep a certain portion of their reserves in gold. Ideologically driven decisions, such as then UK Chancellor of the Exchequer Gordon Brown's sale of half Britain's gold reserves in 1999-2002, quickly came back to haunt the fanatic, as inflation-free prosperity dissolved and the normal world of economic toil and monetary sloppiness returned. 

There are three ways in which the world could move towards a gold standard without actually getting there. First, the world's central banks, particularly the ones like China and Japan with the biggest reserve pools, could increase the percentage of their reserves kept in gold. According to IMF data, that percentage declined from 13.9% to 9.8% during the great increase in central bank reserves from 1998 to 2008 even though the gold price more than trebled during that period. 

A return to even the modest 1998 percentage of gold reserves would result in gold purchases of $324 billion, surely enough to shift the gold market a fair whack. A return to a still modest ratio of gold holdings of 20% of reserves, which prevailed as recently as 1994, would result in central bank gold purchases of $867 billion, about eight years' mine supply at current prices, and more than 15% of all the gold now in existence.

Second, the world's monetary authorities could start targeting the gold price as part of their monetary management, aiming to keep it within a certain range, thereby preventing excessive monetary expansion and dampening excessive exchange rate fluctuations. A "hard money" Federal Reserve chairman, for example, worried about the value of the dollar, could seek to keep the gold price between $900 and $1,000. He would sell gold from Fort Knox when, as now, the price was above that range, but would maintain a stated commitment to buying gold if and when the dollar had strengthened sufficiently that the price fell below $900. 

Such a policy would have the advantage that it would not result directly in manipulating the value of other currencies through central bank purchases or sales, thus minimizing the chances of protectionist retaliation. That's an especially valuable advantage when, as at present, the world is in a difficult and lengthy recession. Of course, as the United States sold gold from Fort Knox, the dollar might still decline against other currencies even as it rose against gold.

Finally, the world's politicians could decide that unlimited money creation was a thoroughly bad thing, and impose restrictions upon their monetary authorities, attempting to move monetary creation to the kind of automatic, limited mechanism that a gold standard naturally imposes. As the United States moves into its sixteenth year of Greenspan/Bernanke sloppiness since the monetary relaxation began in February 1995, we hard-money types have come to think nostalgically, not of the Gold Standard period, which almost nobody now remembers, but of the period of monetary stringency, sound economy and inflation reduction under Fed Chairman Paul Volcker and President Ronald Reagan, in the early 1980s.

Since even Paul Volcker will not live forever, it is necessary to Volckerize the Fed by some artificial statutory means, so whatever expansionary Princeton economics professor a deluded president may appoint to chair the institution, it is forced to follow a sound monetary policy. The best form of such a restriction would be to mandate that the Fed must keep the two-year average of the rates of growth of the M2, MZM and M3 monetary aggregates between 2% and 4% annually. The average of several aggregates would be used to minimize the distortions from one aggregate or another wandering off in a funny direction through technological change. (For example MZM increased exceptionally slowly compared to other aggregates during the 1970s and M2, the aggregate Greenspan occasionally glanced at, rose exceptionally slowly compared to other broad aggregates in 1995-2006.) That would prevent inflation from taking hold, while being sufficiently flexible to allow for technology-driven fluctuations in price levels and sufficiently expansionary to permit normal economic growth without deflation.

Such a program would mimic the Gold Standard, in which the increase in money supply depended on the rate of discovery of new gold, which fluctuated only slowly except with major gold discoveries such as California in 1849 and the Yukon in 1896-97. However, since the world's gold supply increases by less than 2% annually, an official Gold Standard may be thought somewhat deflationary – as well as giving apoplexy to the unfortunately numerous Keynesian economists who infest academia, officialdom and the media. A Volcker Standard, if sufficiently constitutionally embedded that short-termist politicians could not override it, would give the same advantages as a Gold Standard, without the dangers of deflation or Keynesian heart failure. 

In three ways therefore, official gold purchases, gold price currency targeting, and a quasi-gold Volcker Standard, we are likely to approach a Gold Standard ever closer in the years to come. Inflationists and official opinion will sneer at the possibility. However the markets are already making it inevitable, fueled as they are by the excessive global money creation of the last fifteen years, and the money supply explosion since September 2008.

The Bears Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that, in the long '90s boom, the proportion of "sell" recommendations put out by Wall Street houses declined from 9 percent of all research reports to 1 percent and has only modestly rebounded since. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.

Martin Hutchinson is the author of "Great Conservatives" (Academica Press, 2005). Details can be found on the Web site www.greatconservatives.com


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## drillinto

Doctor Doom
Commodities Will Crawl In 2010

Nouriel Roubini and Rachel Ziemba - 12.24.09
http://www.forbes.com/2009/12/23/oil-energy-commodities-opinions-columnists-nouriel-roubini.html

It's time we look at some of the trends that might move global energy markets in 2010. The OPEC meeting on Dec. 22, the first hosted by Angola, brought few surprises as countries pledged to maintain their current production cuts in the face of an uncertain global economic recovery. But as growth starts to pick up, could a combination of oil demand growth from emerging market economies and geopolitical supply vulnerabilities boost the oil price back to $100 per barrel--a level that could put the economic recovery in jeopardy? 

Probably not. The oil market still seems over-supplied, given ample inventories, an increase in OPEC and non-OPEC production, and high surplus capacity within OPEC. This supply, and a weak global economic recovery, could mute some of the pressure on the oil price. Fundamentals do not always drive prices--one might expect an oil price closer to $50-55 per barrel today--but they can be restraints. In second-half 2009, the increase in the oil price was much more muted than the oil spike (and spike in base metals) in 2008. Oil prices rose rapidly in the spring of 2009, then traded in a relatively narrow band around $75 per barrel for most of the year. 

With the U.S. Federal Reserve set to remain on hold--likely into 2011 in RGE's view--global liquidity conditions should be supportive of oil and other commodities. Any pressures on the U.S. dollar could strengthen oil. The fundamental outlook, however, could restrain this upward pressure. 

The sharp fall in demand for oil in 2009 following a shallower decline in 2008 marked the first back-to-back oil and oil product demand declines in two decades. At the end of 2009, oil and product demand began to recover, but they remain well below 2006 and 2007 levels. The strong pace of growth in emerging market economies, particularly in Asia, suggests EM fuel demand will be strong, only partly offsetting weak demand in OECD economies, making the global rebound in demand more muted than in 2004-2007. 

Despite the auto industry-focused nature of the fiscal stimulus in many countries--especially China--the incentive to buy more fuel-efficient cars suggests the growth in oil product demand will continue to be more muted than this buying surge would indicate. Moreover, with prices tied more closely to global market prices, more of a price increase would be passed on to the consumers in China. Other Asian countries have likewise poked holes in their subsidy regimes. Finally, the addition of refinery capacity in the Middle East and Asia removes one price pressure as the chance of product shortages are lower. 

Demand in the U.S. improved from the very weak levels seen in late-2008 and early-2009 but remains well below the level of recent years. Inventories of oil and oil products are well below five-year average levels. Miles driven are estimated by the U.S. Department of Transportation to be at levels not seen since 2004. With gas prices higher, we may begin to see a consumption response. 

There seems little shortage of supply in the near term. As oil prices stabilized around $70 per barrel in mid-year, output began increasing with both OPEC and non-OPEC countries increasing production. Despite an OPEC pledge to comply with past cuts and targets, a slow leak of increased production seems set to continue. As of November, aggregate compliance with the January 2009 cuts was at only 60%, down from the 80% seen in February and March 2009. The compliance with cuts varies dramatically across the GCC countries, with Saudi Arabia picking up the slack. Only a sharp drop in the oil price and demand would provoke much change. A slip in the oil price to the $60-per-barrel range would likely trigger renewed output cuts from both OPEC and non-OPEC members. 

Non-OPEC output is also on the rise. Russia has boosted output, offsetting 2008 declines, and output from Canada and Brazil has also increased. These increases, at least in the near term, reinforce OPEC trends and suggest that supply will continue to outpace demand in 2010. 

There are also some lurking geopolitical issues and higher security costs that could reduce oil supply on a temporary basis. Saudi Arabia is increasingly involved in Yemeni conflicts. Despite what many analysts call a proxy war with Iran, the effect on the oil supply seems limited. The resurgence of Iranian domestic opposition for the first time since the opposition was brutally suppressed in the summer of 2009 raises some uncertainties. Domestic politics and nuclear posturing suggest that foreign oil companies and expertise will be kept out of Iran for a longer period, deferring any output increase. Sanctions on Iran are tightening again. 

OPEC surplus capacity (still about 4 million barrels per day) should mute some of the geopolitical pressure on the oil supply, especially when coupled with a generalized increase in production. Similarly, the increase in refineries to process GCC sour crude could reduce the impact of supply shortages on the global oil price. 

Natural gas markets, which are regional, face some challenges in 2010. Last week, RGE's Jelena Vukotic highlighted the risk of a renewed gas crisis stemming from Ukraine as the cash-strapped government repeatedly struggles to pay its gas bill and refuses to pass on higher costs to domestic consumers. A year ago, Russia's Gazprom cut off gas supplies to Ukraine when it refused to pay its bills in full, and gas to the E.U. was reduced sharply. Given domestic political feuding in Ukraine, the chance of a repeat has risen. While Moscow will be reluctant to be seen as meddling in Ukraine's mid-January presidential elections, the country and its state-owned energy company Naftogaz seem to be running out of options. Funds from the IMF standby agreement are frozen following the approval of populist measures. The great recession has reduced natural gas demand in Europe, but it could be another cold winter, particularly for the countries in southeastern Europe which have few supply alternatives. Western Europe continues to have relatively ample natural gas supplies in storage. 

The longer-term oil supply outlook does not look quite as good as it does today, a dynamic that elevates today's prices. In particular, the increase in output from Iraq and Russian and African oil frontiers may be slow to come. Yet here again, Saudi Arabia may be a major source of supply. After adding new supplies in 2008, it has put further development on hold, a decision that could be reversed. 

Iraq recently extended servicing contracts to a number of fields and hopes to more than double oil output to 5 million barrels per day by midway through the next decade, offsetting other declining fields. It could wind up taking longer however--and the deteriorating security situation and lack of infrastructure makes some fields much less attractive. Only Sonangol, the Angolan owned company, was willing to bid on the two fields closest to the violence in Mosul. 

Shell seems about to cut some of its losses in Nigeria, reportedly preparing to sell $5 billion in assets in the Niger Delta. As RGE's Lee Hudson Teslik noted last month, Nigerian production remains well below its 2006 peak and the costs of providing security are making operations less attractive. 

Another source of uncertainty stems from environmental policy. More energy efficiency could reduce oil demand growth. Regulatory clarity, particularly surrounding anti-climate change policies, is key to future developments, not only of renewable energy technologies but also of hydrocarbons. Cleaner burning and ample natural gas could be attractive in efforts to reduce emissions. The political momentum may bring new energy-efficiency policies that could reduce demand for oil over time--something OPEC members are worried about. 

Further development in Canada's oil sands is contingent not only on oil prices above $60 per barrel but also clarity about how Canadian bitumen will be treated in the U.S. The U.S. cap and trade bill will be reconsidered by the Senate in the spring 2010. The compromise at Copenhagen leads to little clarity on these issues, and horse trading may be as necessary for the Cap-and-Trade bill as for the health care legislation. 

A strong and stable oil price could actually support efforts to diversify away from oil. A price of $75-80 a barrel not only unlocks a lot of new oil supply over a near-term perspective--including oil sands, pre-salt Brazilian oil, as well as appetite for Iraqi oil--but also makes a number of alternatives more viable. 

On a macroeconomic basis, a gradual increase in the oil price can be more easily absorbed than a spike. However, even if $80 a barrel is a price that consumers and producers feel they can live with, such levels could still put a crimp on the global recovery as consumers spend more on fuel, particularly if rising headline inflation prompts central banks to start tightening interest rates, given the higher share of food and fuel in consumer baskets. 

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE), is a weekly columnist for Forbes. (Read all of his columns here.) Rachel Ziemba is a senior research analyst at RGE for China and oil-exporting economies.


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## drillinto

What's The Gold/Oil Ratio Telling Us ?

http://www.greenfaucet.com/technical-analysis/whats-the-gold-oil-ratio-telling-us/13449


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## drillinto

December 23, 2009

Atlas Iron Has A Lot To Show For Five Years Work

By Rob Davies
www.minesite.com/aus.html

David Flanagan, managing director of Atlas Iron, can rightly claim to have brought the company a long way in the five years since he launched it. Then it had one employee, him, today it has hundreds and has just completed shipping its first million tonnes of iron ore to China. A A$700million market cap company is good going in that time frame.

You could argue that he has been lucky. But he didn’t set out to develop an iron ore company. Like any good shop keeper he went with the flow of business and tested every tenement for any conceivable value. The fact that iron ore prices doubled twice in the company’s first years of life, and he had a 50 metre intersection of 60 per cent iron ore 10 km from a highway, was a pretty good sign of the direction to take the company in. 

Iron ore mining is normally a business for the big boys because of the huge capital costs and logistical exercise of building and running iron ore mines. David’s approach has been to focus on small, high grade deposits close to infrastructure where he can exploit direct shipping ore. Moreover, he has dodged the lengthy process of getting definitive  feasibility studies costing millions of dollars that banks require before they even climb into a first class airline seat. Keeping his company free of debt and financing everything through equity has short circuited the usual multi-year development route and allowed Atlas to get in production while prices are still high and rising. 

David points out that it only cost A$18million to bring Pardoo, the company’s first mine, into production. Although as a mining minnow Atlas is a price taker, A$75 a tonne FOB is not bad for something that costs A$40 to put into the ship. Even if that involves using 107 tonne road trains over the 75 kilometres to Port Hedland from Pardoo.  This mine will be expanded to 3 million tonnes/year at a cost of A$14.4million and will be complemented by new mines at Wodgina, Abydos and Mt Webster. Altogether these mines will have a production capacity of 12 million tonnes a year by 2012.   Building them will absorb all the A$140million it currently has in the bank but it will be cash flow positive on an operating basis for the year to June 2010. 

That growth, though, is only part of the story. Atlas has made 32 acquisitions in its short life and the most recent was a merger with Warwick Resources that gives it access to much larger resources to the south.  In the meantime David is working on bringing a partner into its Ridley magnetite deposit at Pardoo. A sale of a strategic stake in that could raise hundreds of millions of dollars which  could be used for further expansion. One to watch in 2010. 

Iron ore mining is very different from base and precious metal mining as there is no terminal market. Atlas has four rolling three year contracts in place, one at benchmark prices and the other three on a hybrid of benchmark and spot.  While no one knows what the future holds David is relaxed. He doesn’t disagree with the forecasts from Jim Lennon of Macquarie that prices could rise 10 to 30 per cent next year. He points out that China produces half the world’s iron ore, all at a higher cost than he can produce it for.  If cutbacks have to be made because of weaker prices it won’t be in the Pilbara.  Atlas look as well placed as any company to benefit directly from China’s insatiable demand for resources.


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## drillinto

December 29, 2009

That Was The Year That Was … In Australia


By Our Man In Oz
www.minesite.com/aus.html

What global financial crisis? That was the view from Australia in 2009, a year when Europe and the U.S. hit a brick wall, and Australia was scratched by one or two falling bricks. Technically, there was not even a recession in Oz with no consecutive quarterly economic growth data dipping into the negative and unemployment, which the Australian Government’s budget as recently as May had tipped to hit 8.5 per cent appearing to have peaked at 5.7 per cent in November, and now falling.

On the market, the metals index soared up by 42 per cent in calendar 2009. The all ordinaries added 29 per cent, and the gold index, weighed down by a sharply higher exchange rate, crept up by 14 per cent. Among explorers and smaller miners some share price performances were simply stunning with a new Minesite member, Sandfire Resources, the star thanks to a rise of 8600 per cent between March 12 and October 16 when the stock rocketed up from A5 cents to a peak for the year of A$4.39 thanks to its copper discovery at Doolgunna in Western Australia.

Four factors saved Oz. They are a simple economy, which does not compete with China, but exports commodities to China and other Asian countries. Worldwide government stimulus spending which replaced private sector buying of commodities. The slide in value of the U.S. dollar which elevated demand for commodities, and a banking system which had been kept on a tight leash by government regulators in the good years, and which has kept lending through the bad.

Looking back to the start of 2009 and it felt a lot different. Like London, the air in Australia was thick with the smell of fear and loathing as everyone waited to see what the collapse of Lehman Brothers, and other banks, would do to world trade. Some companies suffered. Rio Tinto was the primary victim thanks to its astonishingly ill-timed acquisition of the Canadian aluminium producer Alcan. OZ Minerals also got the timing of its debt commitments completely wrong.

Look back now and both Rio Tinto and OZ have survived, albeit in diminished form and with management reputations in tatters. Chinese demand for iron ore saved Rio Tinto, first by making it a takeover target for China Incorporated, and then as a “merger” partner with BHP Billiton. OZ survived because its best asset, the Prominent Hill copper and gold mine, is located in an old British nuclear weapons testing zone at Woomera and the Australian Government banned a proposed Chinese takeover. Not many companies (or people) can say they have been saved by the bomb.

Other major issues in Australian mining in 2009 included:

The relatively poor performance of the domestic gold sector thanks to currency movements. Rather than rise, as it did everywhere else, the Australian dollar gold price fell 1 per cent from A$1,248 an ounce at the start of the year to A$1235/oz. The best of the Aussie gold stocks were those operating in West Africa, such as Perseus, Adamus, Gryphon, Azumah, and Resolute.
Tough times in the nickel sector with high-grade miners, such as Mincor, Panoramic and Independence, surviving thanks to the 3 per cent-plus ore found around the historic Kambalda Dome, offset by the mothballing by BHP Billiton of its US$3 billion Ravensthorpe laterite mine which has just been sold to Canada’s First Quantum for $US340 million – which will prove to be the bargain of the decade, or another case of death by laterite.
An unexpectedly strong performance by iron ore stocks thanks to China allocating much of its massive economic stimulus spending to infrastructure spending on railways, airports, roads and bridges. While China managed to screw down prices this year, and the high Aussie dollar added to the pain, there is a strong belief that prices will regain lost ground in 2010. Fortescue Metals has been the big winner from high iron ore demand, followed by Atlas Iron, Mt Gibson and Murchison Metals, which led the small end of the sector, and with new players such as Iron Ore Holdings getting set for stronger demand and a possible opening up of rail and port systems which have hampered small exporters for decades.
A dramatic increase in Asian demand for all forms of Australian energy, led by coal, uranium and natural gas. The coal boom, illustrated as recently as this week by Macarthur Coal’s proposed takeover of Gloucester Coal, has been the bane of the environmental movement. Some of the best performing stocks at the upper end of the market were coal companies, and a recent comparison of coal miners with developers of renewable energy projects showed a clear win for coal.
A second near-miss for the Australian economy when a carbon emissions trading scheme (which is actually nothing but a tax on energy-intensive industries) failed to pass through Parliament. That loss came days before a second big defeat for the Australian Government which is trying to market itself as having deep green roots. Just how green was on display at the shambolic Copenhagen climate change conference to which Australia sent a delegation bigger than that from Britain, only to achieve nothing.
A call of the sector-by-sector card puts iron ore as a clear leader of Australian mining in 2009, followed by copper and coal. Gold struggled against the currency which ended the year 27 per cent higher against the U.S. dollar, partly a result of the U.S. dollar declining and a flow of hot money into Australia as a proxy for Asia, and partly as a re-start of carry trade investors chasing high interest-rate currencies.

At the small end of the market five of the top 10 Australian stocks were miners. Sandfire topped the chart, but was followed by a group of little-known explorers, with modest market values, including:

Alchemy Resources, up from A4 cents to a peak of A$1.27 (3075 per cent), and now back to around A67 cents. Its major interest is a package of tenements close to Sandfire’s Doolgunna copper discovery. A classic case of “near-ology” which might, or might not, bear fruit. At its current price the stock is capitalised at A$44 million. 
Northern Mining, up from A1.2 cents to a high of A29 cents (2316 per cent), but now back around A24 cents. Northern is a mixed-bag explorer with gold, iron ore, copper and uranium targets, plus a nickel project in Poland. Currently capitalised at A$37 million.
Western Desert Resources, up from A5.1 cents to a high of A90 cents (up 1664 per cent), and now trading around A47 cents. It is exploring the Roper Bar iron ore project in the Northern Territory and has a gold tenement near Tennant Creek. Currently capitalised at A$50 million.
Emergent Resources, up from a low of A7 cents to a high of A$1.06 (1414 per cent) thanks to interest in its Beyondie iron ore project. It is now trading around A75 cents, which means it has retained its 10-bag claim to fame (a 10-times price increase). Currently capitalised at A$30 million.
Spectacular share price moves like those were commonplace during the second half of 2009 at the small end of the market, and while percentage rises off a low base always look good, they are not what you expect to see if an economy is in recession.

It was a similar, but more subdued market at the top end, where only one of the top 20 listed mining stocks ended the year down. The loser was Australia’s biggest gold producer, Newcrest Mining, which opened 2009 at A$34.48, a price driven back then by the rising U.S. dollar gold and the falling Australian dollar which produced an all-time record Aussie gold price A$1550/oz.

Among the best performers at the top end were: Fortescue (iron ore), from A$1.96 at the start of 2009 to A$4.36 this week. Aquila (coal and iron ore), A$3 to A$9.43, Centamin (gold), A94 cents to A$2.17. Mt Gibson (iron ore) A44.5 cents to A$1.55. Equinox (copper) A$1.60 to A$4.23. Kingsgate (gold) A$3.50 to A$8.50, and Murchison Metals A65 cents to A$2.29.

Boiled down, if 2009 was a recession year, then there are a lot of Australian investors doing an Oliver Twist impersonation right now – “please sir, can I have some more”.

With that, it’s Happy New Year from Minesite’s Man in Oz who is heading to the fridge for a cold beer.

ps: enjoy the Ashes while you’ve got them!


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## drillinto

Stocks will drop sharply, Pimco’s CEO predicts
December 28, 2009

NEW YORK - Homes are selling at their fastest clip in nearly three years, the unemployment rate is falling, and stocks are up 66 percent since their March lows - the best performance since the 1930s. What’s not to like?

Plenty, says Mohamed El-Erian, chief executive of the giant bond manager Pimco. The recovery may be gaining steam but is no different than a kid who eats too much candy, he says. “We’re on a sugar high,’’ El-Erian says. “It feels good for a while but is unsustainable.’’ His point: This burst of economic activity fed by government spending and near-zero interest rates will soon peter out.

El-Erian oversees nearly $1 trillion in assets. What he’s saying:

■Stocks will drop 10 percent in the space of three or four weeks, though he’s not predicting when.

■The unemployment rate will be hovering above 8 percent a year from now.

■US gross domestic product will grow at an average of 2 percent or so for years - a third slower than we’re used to.

El-Erian says people are fooling themselves if they think all the bullish data of late mean a strong recovery is in the offing. So he’s buying Treasurys and selling riskier stuff. His bet: Investors will get scared again and want US-guaranteed debt.

Investors betting on stocks or high-yield bonds are apt to be disappointed, he says.

Markets for those securities are rallying not because people like them but because they hate the puny yields of safer investments like money markets and feel they have no choice but to buy, he says. That makes the bull market as likely to last as a forced marriage, he quips.

The danger: If stock and junk bond prices start falling, lots of investors are likely to bail, feeding the drop.

Of course, there are true believers in the bull who are not buying El-Erian’s line.

James Paulsen, chief strategist at Wells Capital Management in Minneapolis, with $355 billion under management, has been pounding the table for months to buy stocks. Just as in the early 1980s, the recovery will take the form of a “V,’’ he says. The reason: Companies have cut inventories and payrolls to the bone, so just a little revenue growth could yield a bumper crop of profits.

El-Erian says many of the bulls don’t appreciate just how much the government props still under the economy are masking its weakness. Instead of focusing on the fundamentals today, he says, they’re looking to the past, expecting a quick economic rebound because that’s what’s happened before.

We’re trained to think the “farther you fall, the higher you’ll bounce back,’’ El-Erian says. “We’re hostage to the V.’’ 

Source >> http://www.boston.com/business/mark...stocks_will_drop_sharply_pimcos_ceo_predicts/


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## drillinto

Next Decade Will Be Good One for Stock Investors
Commentary by Matthew Lynn

Dec. 29 (Bloomberg) -- Even the most practiced soothsayer will struggle to make any detailed predictions for the next 10 years. It’s hard enough to know what will happen in the markets in January 2010, never mind December 2019. 

The main thing investors need to know about the coming decade can be summed up in one of those pithy Twitter updates. Will it be good or bad for stocks? Everything else is extraneous. 

The answer? Good. A shortage of capital from any source other than the stock market; moderate but persistent inflation; and the probability that economic growth will be stronger than many economists expect means that “the 10s” will be a time when equities start to have some rocket fuel in their engine again. 

Stock markets usually work in decade-long cycles. 

The “noughties” were bad for shares. Most of the major markets didn’t manage to make any progress at all over the course of the whole 10 years. The U.K.’s FTSE-100 index, for example, hit a record of 6,930 in December 1999. A decade on, it is now at about 5,300. Likewise, Germany’s DAX index passed 8,000 in March 2000, but is slightly less than 6,000 now. It doesn’t make much difference what benchmark you look at. A few emerging markets aside, they all had a dismal decade. 

Leaving aside the simplistic point that every run of under- performance by any asset class usually comes to an end sometime, there are three solid reasons for thinking that this decade will be a lot better for stocks than the last one. 

Capital Shortage 

First, there will be a shortage of capital. 

One reason why equities performed so miserably during the last decade was that companies, and their chief executives in particular, really didn’t need shareholders very much. Remember, a stock market is just a place where you can raise money for building new factories, shops or warehouses. But in the last decade, if you needed cash, there were lots of people who would give it to you: a bank, the bond market or a private-equity firm. So why bother looking after a lot of irritating shareholders when you didn’t really need anything from them? 

In the coming decade, that will change. Capital will be in far shorter supply. The only place many companies will be able to raise money will be in the equity markets. The result? Companies will have to make sure their shareholders are being well looked after -- and that means steady dividends and a rising share price. Or else there won’t be much point in asking them for more money. 

Rising Prices 

Next, inflation. 

There are plenty of people out there -- most of them gold enthusiasts -- predicting hyperinflation. That might happen eventually, if central banks keep printing money like crazy. There is another stage to get through first: moderate, persistent inflation in the 5 percent to 6 percent range. 

That’s pretty good for equities. The big, multinational companies that dominate the main indexes can usually lift their prices along with the inflation rate. So long as they can do that, they can keep profits and dividends ticking over nicely, roughly in line with price gains. 

In that scenario, equities will be one of the few asset classes that can be depended upon to keep up with inflation. Even better, they should get an additional boost as investors switch their money out of bonds -- which get hammered by inflation -- to protect themselves against price increases. 

Economic Spurs 

Finally, there will be a growth surprise. 

Given that we have just been through the worst financial crisis of the last half-century, people are pretty gloomy about the global economy right now. And, in fairness, there is plenty to worry about: a damaged banking system, the demise of the dollar, and huge government deficits. 

Even so, let’s maintain some perspective. Earlier generations overcame famines, plagues and world wars, so a few dodgy banks and some deficits hardly seem that bad. 

The chances are that growth in the new decade will give us a pleasant surprise. There are plenty of reasons to be optimistic. As Zurich-based UBS AG said in a recent research note to investors, global population in the next three to four decades will grow by about 3 billion, mostly in the emerging markets where incomes and consumption are rising rapidly. That will act as a powerful spur to the global economy, even if it will put a huge strain on the environment. 

The developed economies have big potential to increase the number of people in the work force if they overhaul their welfare systems. The looming fiscal crunch might well be the trigger for finally making that happen. That, too, would be an economic boost. 

And technology, the main driver of innovation and progress, shows no sign of slowing down. If anything, with so many more smart people being born, it should speed up. That’s another reason growth should accelerate. 

Of course, there will be plenty of choppy economic water ahead. Some more banks may crash, the dollar might implode, and a war or two might be fought. Even so, the stage is set for a great decade for shares. The FTSE, the DAX and the other global benchmarks should end 2019 higher than they started in 2010. 

Source >> http://www.bloomberg.com/apps/news?pid=20601039&sid=ad7L3gw_8wB8#


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## drillinto

Kass: Squawking About the Headwinds
Doug Kass, 12/30/09 

On Monday morning I appeared as guest host on CNBC's "Squawk Box," marking the sixth year I have guest-hosted the morning show. With Becky Quick on vacation, it was the three amigos: Carl Quintinilla, Joe Kernen and myself. 

Here is a synopsis of some of my remarks, a summary of my surprises for 2010 and some of my other comments from the show. 

Already, this week, one of my Surprises seems to have occurred. Surprise No. 16 was that one of the largest and most successful hedge funds would be troubled by legal issues. Indeed, yesterday The Wall Street Journal reported that hedge fund Harbinger Capital Partners has been accused of receiving inside information in a takeover bid several years ago. 

Back to the markets. 

The Steady Advance in Worldwide Equities Continues
This week the risk trade remained on, despite protests from some quarters (e.g., The Edge). The equity markets continued their ascent this week, marking six consecutive days of improving share prices. (We have to go all the way back to April 2007 to have seen a seven-day skein.) And assuming stability over the next two trading days, the Nasdaq's December rise will likely be the best since the bubble days of December 1999! 

N's (Nasdaq) continue to trump S's (S&P 500 Index), as the Four Horsemen of the Nasdaq picked up some additional Wall Street endorsements. Henry Blodgett-like price target raises for Google (GOOG) and Amazon (AMZN) are starting to make it look a lot like Christmas 1999 (!) as those shares continue to be buoyed by the sponsorship of momentum players (and other long-term believers). 

Pay Heed to Gilda

"It's always something." 
-- Rosanne Rosanna Danna (Gilda Radner), Saturday Night Live

Meanwhile, crude prices are challenging $80 a barrel. 

Fixed income has been pressured (and so has the U.S. dollar this week), while the yield on the 10-year U.S. note rose to a cycle peak of nearly 3.85% on Tuesday. With the future cost of servicing public policy moving ever higher, this represents a developing headwind to confidence and economic growth and, in the fullness of time, maybe even corporate profits. But, as lynx-eyed Jason Trennert of Strategas Research Partners noted on "Squawk," investors for now are ignoring the accumulating due bills. 


Another New Paradigm?
As I opined on Monday's "Squawk Box," disbelief and doubt have been suspended and driven from Wall Street as the clustered consensus forecast of 2010 corporate profit growth of 25%+, GDP growth of 4%, tame inflation and contained interest rates have supported the bullish view of a self-sustaining economic recovery (even capable of an historically normal 40+ months' lifespan), and that view has gained more adherents. 

While it is fortunate that equities as a class are not stretched in valuation to the degree of past cycles (e.g., 1999-2000) or like other asset classes (e.g., private equity, commodities and residential and nonresidential realty prices), the developing bullish view of uninterrupted growth has a tinge of another new paradigm to it. 

I continue to believe that the consensus outlook remains among the more likely economic outcomes next year -- perhaps even the most probable outcome. But where I stray is that 1) there exists (owing to cyclical, secular and nontraditional influences) a number of less benign outcomes that have a reasonable chance of occurring and 2) markets might have materially moved to discount consensus and optimistic expectations. 


The Short Tail of Cyclical Headwinds
While most already recognize that the 2010 economic recovery will be shallow by historic standards, consensus economic and corporate profit forecasts are on the ascent and growing ever more optimistic, perhaps following the rise in worldwide stock prices. A still-challenged consumer, structural joblessness, the prospects for potentially higher interest rates (and cost of capital) associated with the difficulty in engineering a smooth transition in fiscal and monetary policy, a large phantom inventory of unsold homes, the still-hesitant lending activity at our leading banks (which have faced a decimation in their capital bases) and the costs of new regulatory burdens (e.g., health care) remain among the many shorter-term threats to the consensus' benign forecast. 


The Long Tail of Populism
Importantly, as I underscored on "Squawk Box," there is an angry subtext -- the average American resents some of our largest institutions (especially of a financial kind), our politicians (Republicans and Democrats alike) and the wealthy. We face, as a result, a tidal wave of populism, which will become a major investment theme into 2010-11. 

The attitude toward big business and the wealthy has rarely been this bad. When the policies of populism (higher taxes and more costly regulation) are mixed with a number of other nontraditional headwinds (municipalities' disarray, a still-wounded lending mechanism, etc.), the trajectory of economic growth will almost certainly be stunted. These two factors -- public policy that grows from populism, nontraditional headwinds -- form a potentially toxic cocktail, especially within the context of the size of the market rally of the last eight months. 


A Keynesian Hangover Lies Ahead

"As we move into 2010, no doubt the horns will be blowing for the long-awaited U-shaped recovery. I suspect it won't be long before we realize we've drunk too much, and that the second dip of a W-shaped recession awaits us." 
-- Benn Steil, Wall Street Journal Op-Ed
Regardless of the logic surrounding my many concerns and my increasingly minority view that a Keynesian hangover lies ahead, the crowd continues to appear to outsmart the remnants, and there appears for now to be no place for a variant and negative view. (Unlike Gary "The Count" Dvorchak, I am steadfast in the notion that it is different this time.) With such a euphoric backdrop, warning signs and potential threats are dismissed as de minimis to the bigger picture (e.g., more tentative economic signals, still-sluggish residential real estate markets, rising interest rates, moribund consumer confidence, emerging geopolitical tension, etc.) 

In summary, the worldwide bull market (which, as Dennis Gartman so clearly cites in his commentary, produces a stock market chart line that moves rather convincingly from the lower left to the upper right!) remains intact while skepticism remains in its own well-defined downtrend and bear market. 

But, baby, it's cold outside ... and for me, tactically, on my trading desk, inside as well! But as Scarlett O'Hara (Vivien Leigh) reminded us many years ago in Gone With the Wind, "After all ... tomorrow is another day." 

My Grandma Koufax used to put extended stock market rallies into perspective (and in even more vivid prose!) when she said to me, "Dougie, it's getting too easy. Watch your tush!" 
-------------------------------------------------------------------------
Source >> http://www.thestreet.com/print/story/10654084.html


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## drillinto

January 02, 2010

Last Days Of Trading In 2009 Went Very Well Down Under

By Our Man In Oz
www.minesite.com/aus.html

Minews. Good morning Australia, and happy new year. How did your market end 2009? 

Oz. Strongly, is the one word answer. The final seven trading days, spread over two weeks before and after Christmas, saw the metal and mining sector rise by almost 1 per cent a day. When the final bell rang at lunchtime on Thursday the mining sector had gained 5.8 per cent since December 18, and 48.6 per cent since the start of 2009. Those gains by the pure mining stocks were comfortably ahead of the overall market with the all ordinaries index up by 4.4 per cent in the final two weeks and 27.6 per cent for the year.

Minews. Results which would seem to emphasise the dominant role of resources in the Australian economy. I have to point out, however, that the Mining Sector of the FTSE Index in London recorded an advance of no less than 108.11 per cent over 2009. 

Oz. Fair enough, but a lot  of your resource stocks fell much further than ours in 2008 and it has  been mining and natural gas which has led Australia safely through the global downturn, and which seem certain to lead future growth. As we’ve discussed before, Australia is not competing with China and India in the manufacture of goods and services, like Europe and the U.S. We are selling raw, and partly processed, materials to those two fast-growing countries, as well as the other Asian tiger economies, Japan, Korea, and Taiwan. 

Minews. Time for prices, and let’s keep it quick this week, so we can ease our way into 2010. 

Oz. Before we get to prices it’s worth mentioning a few newsworthy items about events which might colour the market over the next few weeks. First, there is the change we’re seeing in currency values as the U.S. dollars regains lost strength. This will have a significant effect on the earnings of Australian miners if it continues. A few weeks ago we appeared to be heading for parity, before slipping from close to US94 cents to around US89 cents in the final hours of 2009. 

Commodity prices are also a hot topic among the miners, none more so than iron ore and coal. After copping a big price cut in 2009, coupled with losses on currency conversion, the tables are turned once more. Australian iron ore exporters seem certain to win a price rise of between 20-and-30 per cent this year, and might even have a currency win to boost the increase. That’s why the strongest sector over the past two weeks on the Australian market was iron ore, followed by a return of interest in base metals, especially zinc and copper. 

Minews. Let’s start the price call with iron ore. 

Oz. All up, bar one, was how iron ore stocks finished 2009. The one fall was the Norwegian magnetite hopeful, Northern Iron (NFE), which lost A12 cents to A$1.22, as it struggles to achieve volume and quality targets at its Sydvaranger project. Better news came from Gindalbie (GBG) which added A9 cents to A$1.06 as it made brisk progress on construction of its Karara magnetite mine in Western Australia. Giralia (GIR), which has high hopes for its Mt Webber project, gained A18 cents to A$1.45, just short of its 12-month high reached in early December. Atlas (AGO) added A8 cents to A$1.88. Brockman (BRM) was up A36 cents to A$2.44. BC Iron (BCI) rose by A7 cents to A$1.18, and Fortescue (FMG) ended the year at A$4.46, up A20 cents in the final two weeks, thanks in part to the not guilty verdict in a long-running court case taken by corporate regulators against the company and its chief executive, Andrew Forrest. 

Minews. Base metals now please, if they’re starting to look interesting. 

Oz. They are, with both copper and zinc stocks benefitting from the rise in the price of both metals. Sandfire was among the copper companies to benefit, adding A41 cents to A$3.74, despite publicity surrounding the sudden departure of co-founder and chairman, Miles Kennedy, and the prospect of a divisive shareholders meeting in the next few weeks to approve a cash payout. Talisman (TLM), which is exploring on ground adjacent to Sandfire, rose by A19 cents to A$1.01. Citadel (CGG) regained lost ground to close the year at A37.5 cents, up A2.5 cents. Equinox (EQN) added A25 cents to A4.34, and Hillgrove (HGO) continued to win support for its decision to proceed with the re-development of its Kanmantoo project, rising by A3.5 cents to A42.5 cents. 

Zinc is shaping as the surprise packet in the early weeks of 2010 with a deal involving CBH’s Endeavour mine likely to be announced as early as Monday. Nyrstar, the company which grew out of the failed Pasminco, is believed to be preparing an offer for the mine, not that this moved the market last week with CBH closing steady at A10 cents. It was a better performance by Perilya (PEM) which added A8 cents to A67 cents and Terramin (TZN) which gained A6.5 cents to A81.5 cents. 

Nickel stocks also benefited from the combination of a rising metal price and a falling Australian dollar. Mincor (MCR) closed the year A5 cents higher at A$1.79. Independence added A13 cents to A$4.90. Panoramic (PAN) was up by A10 cents to A$2.34 and Minara (MRE) rose A8 cents to A81 cents. 

Minews. Gold, uranium, coal, now please. 

Oz. Gold stocks were up, but modestly, with the lower U.S. dollar gold price rubbing the gloss off the sector, offset only a little by the fall in the value of the Australian currency. Kingsgate (KCN) led the way up, adding A69 cents to A$9.19. Troy (TRY) rose by A10 cents to A$2.40. Perseus (PRU) put on A2 cents to A$1.76, and Silver Lake (SLR) crept A1 cent higher to A$1.05. Stocks to fall included Resolute (RSG) which eased back by A3 cents to A$1.04. Chalice (CHN), slipped A1 cent lower to A44 cents, while Cortona (CRC) and Allied (ALD) lost half-a-cent each to close at A14 cents and A32.5 cents respectively. 

Mantra (MRU) was strongest of the uranium stocks with a rise of A49 cents to A$4.65, and Manhattan added A7 cents to A$1.27. Those gains were offset by Extract (EXT) slipping A2 cents lower to A$8.48 and Forte (FTE) easing back by half-a-cent to A14 cents. 

Coal stocks all benefited from the higher oil price and the proposed takeover of Gloucester Coal (GCL) by Macarthur Coal (MCC). On the market, Macarthur shot up by A$1.73 to A$11.13, and Gloucester gained A$2.61 to A$9.11. Centennial put on A31 cents to A$4. Coal of Africa (CZA) added A7 cents to A$1.91 and Stanmore Coal (SMR), one of the final floats of 2009, was rushed by eager buyers, adding A32 cents to close at A75 cents. 

Minews. Any specials worth reporting. 

Oz. Only one. Venture Minerals (VMS) which took a look at couple of weeks ago, has started to gain traction, rising by A7.5 cents to A37.5 cents thanks to its tin and tungsten project in Tasmania. 

Minews. Thanks Oz. You can go to the beach now. I’m off snowballing.


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## drillinto

Blackstone Group's Byron Wien Announces Top Ten Surprises for 2010 

NEW YORK--(BUSINESS WIRE / January 4, 2010)--Byron R. Wien, Vice Chairman, Blackstone Advisory Services, today issued his list of the Ten Surprises for 2010. This is the 25th year Byron has given his predictions of a number of economic, financial market and political surprises for the coming year. He started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron Wien[He is my favorite forecaster] joined The Blackstone Group in September 2009 as a senior advisor to both the Firm and its clients in analyzing economic, political, market and social trends. 

The Surprises of 2010 

1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor’s 500 operating earnings come in above $80 

2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end 

3. Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening” 

4. In a roller coaster year the Standard and Poor’s 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors 

5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain 

6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000 

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020 

8. The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected 

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the U.S. market 

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the U.S. and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal


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## drillinto

January 04, 2010

Front-running The Anticipation Of Higher Metal Prices In 2010

By Rob Davies
www.minesite.com/aus.html

Successful investing is about what happens next more than focussing too much on what has just transpired. Even so, it is always useful to know how we got to where we are and what the state of play is. In base metals the massive 90 per cent bounce from the cyclical lows a year ago is unprecedented in recent times. To put it into perspective it is more than twice as much as the recoveries in 1976 and 1983. Starting from such a high level already means further progress is going to be hard to achieve. Nevertheless, the two reasons for current prices are not about to change. Amazingly low inventory levels and astronomic amounts of monetary stimulus from governments of all persuasions and locations provided the rocket fuel for the rally. The transition of dumping the first stage, state stimulus and low interest rates, to the second stage of growing industrial demand could yet be a tricky one.

It is already clear that governments everywhere are less worried about inflation than unemployed voters, even where they don’t have democracies. No central bank governor or Finance Minister wants to turn off the life support machine of free money just to see if the patient can live without it. The risks are too great so the authorities will err on the side of caution. Overall, that is probably better news for precious metals than base metals, but the whole sector should benefit. Far more experienced commentators than this one will give their views on when interest rates will rise.

When official rates do go up the markets will doubtless react badly. However, they should not be surprised because longer term rates, as set by the market not politicians, are already rising. All we can assume as observers is that policymakers will withdraw the life support mechanisms in an orderly fashion so as not to upset the horses of commerce. In the absence of any policy shocks prices will therefore be dictated by demand, supply and the utilisation of inventories.

According to the commodity team at RBS headed by the effervescent Nick Moore the world economy is forecast to grow at the steamy pace of 4.1 per cent in 2010. Bearing in mind that last year’s economic contraction of 0.6 per cent was enough to send global crude steel capacity utilisation rates from 95 per cent to 65 per cent, according to GFMS, the impact of a recovery on this scale should be dramatic. True enough the experts at RBS are predicting some sharp increases in metal demand on the back of this. Aluminium and nickel consumption, for example, are both forecast to rise by 10 per cent. Copper is expected to have a more subdued, but still respectable, recovery with demand expanding at a rate of 6 per cent. Zinc demand is forecast to outperform lead, its constant companion, with a forecast growth of 8.8 per cent against 5.5 per cent for the heavier metal.

There are many uncertainties to those forecasts, not least that of world growth which is usually the biggest unknown. This year though the largest variable is likely to be that of the producers. Seeing prices at these elevated levels requires an enormous amount of resolve by miners to say, no I am not going to reopen capacity just yet. Reactivating capacity in response to higher prices is much riskier than reopening plant in the face of higher demand. The danger is that the additional supply overwhelms the financial, rather than the commercial, holders of the metal and they sell into the weakness and exacerbate the fall.  Demand led reactivation is much more soundly based and has the potential to underpin a solid recovery.

A fascinating chart in the RBS study details how much capacity is currently shutdown and how much has been reopened. Nickel is the metal with most capacity currently idled with about 20 per cent of the industry out of action. Even so, 2 or 3 per cent has already restarted in response to higher prices. Aluminium producers have been the most enthusiastic about reopening plant. About half of the 20 per cent of mothballed capacity has already been restarted. Zinc and lead are around the 10% level and demonstrating the much sounder fundamentals these metals enjoy. Zinc smelters have already taken action to fire up about 5 per cent of the capacity that was closed. There is no doubting though that copper is streets ahead in having little idled capacity waiting in the wings. Only 5 per cent of mine supply and 10 per cent of smelter capacity has been shutdown in the crisis and not much has been restarted.

Given the low level of stocks, healthy demand outlook and only modest amounts of spare capacity the outlook for base metals cannot be anything other than rosy. Trouble is that is already widely known and is why prices have rebounded so far already. In that sense the metals have already discounted the recovery and all the good news is now in the price. In such an environment the market is vulnerable to bad news that upsets the consensus. It is this logic that makes the team at RBS fairly cautious about the outlook for prices in 2010.  In terms of year on year gains the numbers look favourable, but compared to current spot prices the arguments looks less exciting.

Aluminium is forecast to rise 32 per cent on a yearly average basis to US$2,200 a tonne. That estimate is 10 per cent higher than the bank’s previous one, but is exactly the same as the current spot price. Copper is forecast to have a similar story and the bank has not changed its price forecast. A 31 per cent increase in the yearly average to US$6,750 a tonne and that is actually 8 per cent below the closing price for 2009. The story for nickel looks quite mundane. Its average price for 2010 is expected to be US$14,750 a tonne, only 1 per cent more than last year and 20per cent below the year end quote. Indeed, the new forecast from RBS is actually 5 per cent less than its previous one. Lead and zinc usually move in tandem and that remains the case. Lead is expected to be 31 per cent higher on average in 2010 than 2009 and zinc 20 per cent higher and these estimates have not been revised. In both cases though, the spot prices are above the estimates for the year. While lead is currently US$2,390 it is forecast to average US$2,250 for the year. In the case of zinc its current price of US$2,569 is 23 per cent above the forecast US$1,975 for the year.

The outlook then for base metals is bright. But the market already knows that so making money from the sector might be much harder in 2010 than in 2009.  The easy money has probably already been made.


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## drillinto

January 05, 2010

Mincor’s Mr Moore Goes Fishing, And That’s Good News For Mining In Australia

By Our Man in Oz
www.minesite.com/aus.html

Proper British fortune tellers use tea leaves to foretell the future, in much the same way the early Romans used sheep entrails. In the Australian mining industry there is an equally effective way of predicting what’s ahead, but before we reveal the technique, we must just state that the result represents good news for 2010. So, why is Minesite’s Man in Oz confident about the future? Because David Moore has taken a long holiday!

This discovery, which has nothing to do with what, or how much, Minesite’s Man was drinking over Christmas, has method in its madness. David is chief executive of Mincor, a nickel specialist with exploration fingers in other metallic pies. It has been largely through his guidance that Mincor has racked up 10 remarkably successful years, and ridden out, almost seamlessly, the great unpleasantness which started in 2008. 

Mincor without Moore at the helm is almost unthinkable, so it came as an enormous surprise just before Christmas to discover that the man himself has taken a six-week break, and when you think about it, that is an extremely positive indication that he reckons the worst is over, and that now is a perfect time to get ready for the next upward leg in the resources sector. 

There are a number of reasons, apart from optimism, that would have encouraged David to take a long break. Firstly, the company itself is performing. At 15,768 tonnes, nickel production in the 2009 financial year was down slightly on 2008’s 16,562 tonnes, but that was all to do with tailoring output to suit market conditions. The more important measures were that cash cost per pound of nickel fell by 16 per cent from A$6.40 to A$5.37, and that the grade of ore mined rose by 17 per cent from 2.63% nickel to 3.08%. 

Those key performance indicators meant Mincor was able to pay a dividend and still start the current financial year with A$76 million in the bank against just A$1.3 million in debt. In fact, it’s better than that because the opening three months of the financial year saw the cash balance swell to A$91.3 million, after an A$8 million dividend payment, and after a modest celebration to mark the production of the company’s 100,000th tonne of nickel in concentrate, a production number which, satisfyingly, is just four-times the original reserve of 25,400 tonnes that Mincor booked when it acquired its first ex-Western Mining Corporation mine in 2001. 

Healthy as that looks the key to Mincor is not past financial performances. It’s the future, and that’s why the two most important recent events in Mincor’s history are the confidence that allows the chief executive to take a breather, and the December 10th exploration update which brimmed with positive news. In fact, there was so much to digest that Minesite’s Man in Oz felt obliged to begin a conversation with Steve Cowle, Mincor’s chief operations officer, and the man left holding the fort over Christmas, with a simple question: what’s the pecking order of importance? “They’re all pretty important,” was Cowle’s answer. “We just happen to have a lot on right now.” 

That’s certainly true. A pre-Christmas drilling rig count had seven underground rigs operating and one big rig on the surface, with another scheduled to start work in January. What they’re busy doing is expanding Mincor’s unique resource base in the nickel-rich Kambalda area of Western Australia. The aim is to catch the widely-expected upturn in nickel demand in 2010, and beyond, and to position Mincor as a world-class producer of the most profitable form of nickel, high-grade sulphide ore. 

Despite its reputation as a difficult metal, and as a slow-mover behind the recovery recently enjoyed by copper, nickel is regaining traction. First Quantum certainly thinks so, given its courageous US$340 million purchase of BHP Billiton’s mothballed Ravensthorpe laterite nickel mine near the south coast of Western Australia. 

For a novice investor, or even a long-term holder of Mincor paper, the way to see the company as 2010 rolls around is to follow the lead of the chief executive on his return. He’s returning to a company getting ready for a fresh start. Production from current mining operations in the company’s northern and southern operations, which are roughly speaking, north and south of Kambalda, are capable of ticking over at a rate similar to last year, and generating solid cash to service dividend and exploration requirements. The real value in Mincor resides in the exploration bonus, and that looks like it will come in from all directions. 

In its December 10th update Mincor reported that exploration at the South Miitel mine, which was mothballed in the early days of the global financial crisis, had revealed fresh discoveries, including an eye-catching 10.14 metres at 3.17% nickel. This reinforced a view in the company that Miitel is a “sleeping giant” ready to wake when the nickel price is right. Other results results from recent drilling have included a new, high quality, target close to the Otter Juan mine called the Serp Trough, which is being drilled now, and a fresh zone of mineralisation at the Mariners mine. Meanwhile Mincor has also identified 10 nickel prospects ready for drilling along the Bluebush Line, and is also currently drilling at the McMahon, Ken and Carnilya Hill mines. There’s also an expectation that results will be delivered soon from drilling the company’s first USNOB (Ultra-Sized Nickel Ore Body) target at North Kambalda. 

Steve Cowle agrees with Minesite’s suggestion that the hectic pace of Mincor’s exploration is setting the company up for a solid flow of news in 2010, but he balks at the question which every Mincor shareholder wants to ask: when will the mothballed mines be brought back into production? “There’s no question we’re doing a lot of drilling”, Steve said, “but that doesn’t mean we’re any closer to make a firm decision on mine re-opening”. 

He continued: “There is no question that well will re-open Miitel. It’s a question of when. What we have to look at is the nickel price and the level of nickel stocks in the warehouses of the London Metal Exchange. While nickel stocks are still high we’re still a little cautious about the nickel price in the short term. I have to say we’re no closer to opening Miitel than we were several months ago, but at today’s prices we would be generating cash at Miitel. What we want to see is a sustained rise in the price and fall in stockpiles.” 

What all that means is that Mincor can be seen in several ways. It is a proven generator of cash, with an established dividend record, and can stay that way for years. Or it can be seen as an exploration play with much of the prolific Kambalda Dome as its playground. Short-term, or long-term, it is definitely a stock to watch, which David Moore is no doubt doing from the back of boat somewhere enjoying a well-earned break.


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## drillinto

Global Boom Builds for Epic Bust: Peter Boone and Simon Johnson  
Commentary by Peter Boone and Simon Johnson, Jan. 5 (Bloomberg)  

There are three main lessons to be learned from the past year. 

First, we’ve built a dangerous financial system in Europe and the U.S., and 2009 made it more dangerous. 

You can bet the bank, and, when the gamble fails, you can still keep your job and most of your wealth. Not only have the remaining major financial institutions asserted and proved that they are too big to fail, but they have also demonstrated that no one in the executive or legislative branches is currently willing to take on their economic and political power. 

The take-away for the survivors at big banks is clear: We do well in the upturn and even better after financial crises, so why fear a new cycle of excessive risk-taking? 

Second, emerging markets were star performers during this crisis. Most global growth forecasts made at the end of 2008 exaggerated the slowdown in middle-income countries. To be sure, issues remain in places such as China, Brazil, India and Russia, but their economic policies and financial structures proved surprisingly resilient and their growth prospects now look good. 

Third, the crisis has exposed serious cracks within the euro zone, but also between the euro zone and the U.K. on one side and Eastern Europe on the other. Core European nations will spend a good part of the next decade bailing out the troubled periphery to avoid a collapse. For many years this will press the European Central Bank to keep policies looser than the Germanic center would prefer. 

Bigger Crises 

Over the past 30 years, successive crises have become more dangerous and harder to sort out. This time not only did we need to bring the fed funds rate near to zero for “an extended period” but we also required a massive global fiscal expansion that has put many nations on debt paths that, unless rectified soon, will lead to their economic collapse. 

For now, it looks like the course for 2010 is economic recovery and the beginning of a major finance-led boom, centered on the emerging world. 

But look a little farther down the road and you see serious trouble. The heart of the matter is, of course, the U.S. and European banking systems; they are central to the global economy. As emerging markets pick up speed, demand for investment goods and commodities increases -- countries producing energy, raw materials, all kinds of industrial inputs, machinery, equipment, and some basic consumer goods will do well. 

On the plus side, there will be investment opportunities in those same emerging markets, be it commodities in Africa, infrastructure in India, or domestic champions in China. 

Surplus Savings 

Good times will bring surplus savings in many emerging markets. But rather than intermediating their own savings internally through fragmented financial systems, we’ll see a large flow of capital out of those countries, as the state entities and private entrepreneurs making money choose to hold their funds somewhere safe -- that is, in major international banks that are implicitly backed by U.S. and European taxpayers. 

These banks will in turn facilitate the flow of capital back into emerging markets -- because they have the best perceived investment opportunities -- as some combination of loans, private equity, financing provided to multinational firms expanding into these markets, and many other portfolio inflows. 

We saw something similar, although on a smaller scale, in the 1970s with the so-called recycling of petrodollars. In that case, it was current-account surpluses from oil exporters that were parked in U.S. and European banks and then lent to Latin America and some East European countries with current account deficits. 

Sad Ending 

That ended badly, mostly because incautious lending practices and -- its usual counterpart -- excessive exuberance among borrowers created vulnerability to macroeconomic shocks. 

This time around, the flows will be less through current- account global imbalances, partly because few emerging markets want to run deficits. But large current-account imbalances aren’t required to generate huge capital flows around the world. 

This is the scenario that we are now facing. For example, savers in Brazil and Russia will deposit funds in American and European banks, and these will then be lent to borrowers around the world (including in Brazil and Russia). 

Of course, if this capital flow is well-managed, learning from the lessons of the past 30 years, we have little to fear. But a soft landing seems unlikely because the underlying incentives, for both lenders and borrowers, are structurally flawed. 

Boom Goes on 

The big banks will initially be careful. But as the boom goes on, the competition between them will push toward more risk-taking. Part of the reason for this is that their compensation systems remain inherently pro-cyclical and as times get better, they will load up on risk. 

The leading borrowers in emerging markets will be quasi- sovereigns, either with government ownership or a close crony relationship to the state. When times are good, everyone is happy to believe that these borrowers are effectively backed by a deep-pocketed sovereign, even if the formal connection is pretty loose. Then there are the bad times -- think Dubai World today or Russia in 1998. 

The boom will be pleasant while it lasts. It might go on for a number of years, in much the same way many people enjoyed the 1920s. But we have failed to heed the warnings made plain by the successive crises of the past 30 years and this failure was made clear during 2009. 

The most worrisome part is that we are nearing the end of our fiscal and monetary ability to bail out the system. We are steadily becoming vulnerable to disaster on an epic scale. 

(Peter Boone, a research associate at the London School of Economics’ Center for Economic Performance, is a principal in Salute Capital Management Ltd. Simon Johnson, a professor at MIT’s Sloan School of Management and former chief economist of the International Monetary Fund, is co-author of “13 Bankers” to be published in April 2010. The opinions expressed are their own.)


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## drillinto

January 07, 2010

All’s Quiet On The Western Front, And The East Looks Pretty Snowed In Too Right Now

By Alastair Ford
www.minesite.com/aus.html

The early signs are that the first part of 2010 will shape up fairly well for mining companies. Miners were among the strongest performers on the FTSE as the trading year opened, and there’s plenty of that hackneyed old product “cautious optimism” around, although the markets weren't exactly on fire. Copper’s trading strongly, and gold is as robust as ever. And what with a global freeze on in the northern hemisphere there’s a new buzz on around thermal coal.

Coal has in any case been widely tipped as one of the better performing commodities for 2010, although the pundits and analysts have generally tended towards the higher end metallurgical variety on the basis that the Chinese steel industry will suck in ever increasing amounts. But, as Beijing attempts to recover from its heaviest snowfall for 60 years and prepares to grapple with its lowest temperatures since 1951, the pressure on China’s power networks is growing. Already, the Chinese government has ordered some restriction on electricity use, as a response to the inability of transport networks and coal mines to handle the heavy demand. 

What’s more, bottlenecks at two of the world’s greatest export terminals for coal, Newcastle in Australia, and Richard’s Bay in South Africa, mean that the ability of global markets to respond to a major increase in demand remains limited. Those major companies that already have space allocated in these terminals for the shipment of thermal coal, like BHP Billiton and Xstrata, could be direct beneficiaries of increased prices. Other, smaller, companies could benefit too, although ironically one of Australia’s smaller domestic suppliers, Griffin Coal, has just been put into administration after failing to keep to its debt covenants. Still, on the plus side, at least relations between China and Australia seem to have got off on the right foot this year, as Yanzhou Coal Mining has just bought Felix Resources in a A$3 billion deal. 

It’s not only China that’s suffering from the unexpectedly cold winter conditions. The US, Mexico, and much of Europe are also experiencing exceptionally cold conditions, and it’s not only China that’s experiencing pressure on its power supplies. In the UK too, power supplies look shaky, and the opposition Conservative party has highlighted that high consumption of gas in response to the cold has meant that the UK’s gas reserves are running dangerously low. Now would not be a great time for Russian energy giants like Gazprom to start playing up, and thankfully, apart from an ongoing dispute with Belarus, supplies from Russia seem to be flowing smoothly. The same can’t be said about Russian coal shipments into China and the east, which are under some strain, but that’s because of export capacity constraints rather than any sort of brinkmanship. 

Such is the impact this year of the winter cold that the likes of London broking house Fairfax feel able to issue in daily research notes such catch-all phrases as: “Metals prices are rising on the disruption”. The thinking seems to be that with transport networks under pressure, buyers will pay that much more to secure supply. But, that said, there are plenty of other microeconomic factors affecting prices – a planned strike at a Codelco mine put upward pressure on copper this week, and the ongoing action at Voisey’s Bay continues to skew the nickel markets, to name but two. 

Meanwhile, although the cautious consensus for 2010 is optimistic there’s still plenty of uncertainty around, and one or two naysayers too. Try this one for size from the Daily Telegraph’s Ambrose Evans-Pritchard: “As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era”. This from one of the few global commentators who really knows what he’s talking about. He may not be right, of course, but his basic thesis that the new economies have not yet matured enough to take up the demand deficit left by a West still struggling to come out of depression surely bears scrutiny.  

That apocalyptic scenario isn’t with us yet, though, and in the meantime there’s likely to be plenty of interest in mining companies during the first few months of the year, as the momentum built up towards the end of 2009 continues to roll on. In truth, in spite of the upward trend, markets have been quiet during the first week of 2010, and probably won’t pick up for a week or two. Indaba beckons in February, and PDAC in March. Those two events will likely spawn a deal or two, although one will be a lot snowier than the other. No prizes for guessing which will be the better attended as far as the London contingent is concerned!


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## drillinto

Bubble warning 

The Economist 
Jan 7th 2010 

Markets are too dependent on unsustainable government stimulus. Something’s got to give.

The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That’s largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets. 

For all the panic last year, asset values never quite reached the lows that marked other bear-market bottoms, and now the rally has made several markets look pricey again. In the American housing market, where the crisis started, homes are priced at around fair value on the basis of rental yields, but they are overvalued by almost 30% in Britain and by 50% in Australia, Hong Kong and Spain.

Stockmarkets are still shy of their record peaks in most countries. The American market is around 25% below the level it reached in 2007. But it is still nearly 50% overvalued on the best long-term measure, which adjusts profits to allow for the economic cycle, and is on a par with two of the four great valuation peaks in the 20th century, in 1901 and 1966.

Central banks see these market rallies as a welcome side- effect of their policies. In 2008, falling markets caused a vicious circle of debt defaults and fire sales by investors, pushing asset prices down even further. The market rebound was necessary to stabilise economies last year, but now there is a danger that bubbles are being created.

Forever blowing bubbles?
Aside from high asset valuations, the two classic symptoms of a bubble are rapid growth in private-sector credit and an outbreak of public enthusiasm for particular assets. There’s no sign of either of those. But the longer the world keeps its interest rates close to zero, the greater the danger that bubbles will appear””most likely in emerging markets, where growth keeps investors optimistic and currency pegs import loose monetary policy, and in commodities.

Central banks have a range of tools they can use to discourage the growth of bubbles. Forcing banks to adopt higher capital ratios may curb speculative excesses. As Ben Bernanke, chairman of the Federal Reserve, argued this week, the rise in American house prices could have been limited through better regulation of the banks. The most powerful tool, of course, is the interest rate. But central banks are wary of using it to pop bubbles because it risks crushing growth as well. And, with the world economy in its current fragile state, they are rightly unwilling to jack up interest rates now. 

But even if governments judge that the risks posed by raising rates now outweighs that of keeping them low, investors still have plenty of reasons to worry. The problem for them is not just that valuations look high by historic standards. It is also that the current combination of high asset prices, low interest rates and massive fiscal deficits is unsustainable. 

Interest rates will stay low only if growth remains slow. But if economies grow slowly, then profits will not rise fast enough to justify current share prices and incomes will not rise far enough to justify the prevailing level of house prices. If, on the other hand, the markets are right about the prospects for economic growth, and the current recovery is sustained, then governments will react by cutting off the supply of cheap money later this year.

It doesn’t add up
But the more immediate risks may be posed by fiscal policy. Many governments responded to the crisis by, in effect, taking the debt burden off the private sector’s balance-sheets and putting it on their own. This caused a huge gap to open up in government finances. Deficits in America and Britain, for instance, stand at more than 10% of GDP. 

Most developed-country governments have managed to finance these deficits fairly easily so far. In the early stages of the crisis, investors were happy to opt for the safety of government bonds. Then central banks resorted to quantitative easing (QE), a polite term for the creation of money. The Bank of England, for example, has bought the equivalent of one year’s entire fiscal deficit. There are signs, however, that private-sector investors’ appetite for government debt may be just about sated, as they contemplate the vast amount of government bonds that are due to be issued this year and the ending of QE programmes. The yields on ten-year Treasury bonds and British gilts have both risen by more than half a percentage point since late November. 

Investors (along with this newspaper) would like to see governments unveil clear plans for reducing those deficits over the medium term, with the emphasis on spending cuts rather than tax increases. But politicians are nervous about the likely reaction of electorates, not to mention the short-term economic impact of fiscal tightening, and are proving reluctant to specify where the cuts will be made.

Markets have already tested the ability of the weakest governments to bear the burden of their debt. Dubai had to turn to its wealthy neighbour, Abu Dhabi, for help. In the euro zone, doubts have been raised about the willingness of Greece to push through the required austerity measures. Electorates are likely to chafe at the cost of bringing down government deficits, especially if the main result is to repay foreign creditors. That will lead to currency crises and cross-border disputes like the current spat between Iceland, Britain and the Netherlands over the bill for compensating depositors in Icelandic banks. Such disputes will lead to further outbreaks of market volatility.

Investors tempted to take comfort from the fact that asset prices are still below their peaks would do well to remember that they may yet fall back a very long way. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dotcom mania. Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus. Something has to give.


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## drillinto

January 09, 2010

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. It seems that 2010 has started strongly for you. 

Oz. It has, and in a pleasing way too. Much of last week’s action was at the small end of the market, with solid rises among gold, iron ore, and uranium. There were even a few zinc stocks on the move such as CBH (CBH). That won’t have taken Minesite readers too much by surprise though, as CBH was the subject of some discussion when we last spoke.

Minews. Has anything happened with CBH? 

Oz. No detail, yet, but a deal is on the way, as the company requested a trading suspension on Friday after its shares jumped from A10 cents to A14.5 cents. The speculation in the local media is in line with what we reported a week earlier, namely that the big zinc specialist, Nyrstar, is interested in CBH’s Endeavour mine, and in its Broken Hill assets in New South Wales. Interest in CBH hit a peak on Thursday when more than 20 million shares changed hands in a frenzy of buying. 

Minews. Interesting that zinc is making a return. But let’s start our price report with gold stocks as gold remains the major interest among international investors. 

Oz. Okay, but before we get going with that, it is worth looking in more detail at the overall market because while there examples of stocks rising by 20 per cent, and more, abounded, those moves were not reflected in the indices. The all ordinaries added a modest 1.2 per cent last week, the metals index rose by 3.1 per cent and the gold index gained 3.3 per cent. The disconnection with the small end, where the best rises were recorded, was that the big boys of mining, BHP Billiton and Rio Tinto, did not perform as strongly. BHP, for example, was precisely in line with the overall market, up by just 1.2 per cent. 

Minews. Noted. Prices now please, starting with gold. 

Oz. Best of the gold stocks was Beadell Resources (BDR), which added A8 cents to A31 cents after announcing encouraging results from its Handpump project in the remote West Musgrave region of central Australia. Interest in the discovery has been growing and while the latest assays look modest - 15 metres at 2.3 grams a tonne, for example - the company believes it has outlined a major new mineralised system. On Tuesday, as interest in Beadell grew, the stock traded up to a 12 month high of A40 cents, in heavy turnover. One to watch. 

Catalpa (CAH), which is putting the finishing touches to its redevelopment of the Edna May mine and has successfully bedded down its merger with Lion Selection, was also better off, ending the week at A$1.54, up A16 cents. Meanwhile, Cortona (CRC) finalised a troublesome capital raising million, putting an additional A$10.3 million in the kitty for its Dargues Reef project, and adding A4 cents to its share price in the process. The shares closed at A18 cents. Meanwhile ElDore Mining (EDM), which has rarely hit the headlines, was the subject of much speculative interest this week, after it announced a deal to buy the Wyo Well gold prospect east of Kalgoorlie, ElDore rose by A4 cents to A14 cents in heavy turnover. 

It was hard to find a gold stock which fell last week, which is interesting in itself, because the Australian dollar gold price did decline fractionally thanks to the US dollar price holding steady, and the Aussie dollar adding US1 cent. Among the sector leaders, Centamin (CNT) rose by A14 cents to A$2.30,  Avoca (AVO) put on A9 cents to A$1.90, and Perseus (PRU) hit a 12 month high of A$2.10, before easing to close at A$2.05, a rise of A29 cents. Elsewhere, Adamus (ADU) rose by A4 cents to A47.5 cents, Troy (TRY) added A11 cents to A$2.51, and Chalice (CHN) was A2 cents higher at A46 cents. Kingsrose (KRM) was also better off as buyers pushed the shares up to a 12 month high of A78 cents on Friday, before the price eased off a little. Kingsrose eventually closed out the week at A75 cents for a gain of A13 cents on the week. 

Minews. Iron ore now, as that is in the news with the annual price talks getting underway with Japanese and Chinese steel mills. 

Oz. No doubt about the news-generating qualities of iron ore, but there are plenty of doubts about the price-setting process. Neither the mills nor the miners seem interested in giving any ground at this year’s talks, which might indicate the death of annual price agreements and the start of a quarterly process, or some other trading system. Chatter down this way is that a 20 per cent price increase is on the cards, but that China is far from happy at having terms dictated by the three major suppliers, BHP Billiton, Rio Tinto and Brazil’s Vale. 

It’s the combination of the potential for a breakdown in the benchmark price system, and China’s encouragement of companies competing with the big three which continues to drive activity at the small end of the iron ore sector. The best performer last week was Fortescue Metals Group (FMG), which added A60 cents to A$5.06, but did get as high as A$5.57 on Thursday, a 12 month high. Fortescue will be the biggest winner from any breakdown in China’s relationship with BHP Billiton and Rio Tinto, as it has its own rail and port system 

Other iron ore moves came from Atlas (AGO), up A27 cents to A$2.15, BC Iron (BCI), up A9 cents to A$1.27, Giralia (GIR), up A24 cents to A$1.69, and Brockman (BRM), up A36 cents to A$2.80. Also stronger, Iron Ore Holdings (IOH) rose A35 cents to A$1.80, Hampton Hill (HHM) rose A11 cents to A43 cents, and FerrAus (FRS) rose A9 cents to A75 cents. And Magnetic Resources (MAU) rose an eye-catching A15.5 cents to A33.5 cents, thanks to publicity during the week about its novel iron ore exploration technique which involves following railway lines and looking for orebodies close to transport, rather than wandering into the Australian wilderness and hoping that someone will build a railway for you. 

Minews. Novel, and clever by the sound of it. Base metals now, please. 

Oz. Zinc, as mentioned, has made a modest return to favour, with CBH leading the way. Elsewhere in the space Perilya (PEM), the major owner of tenements in the Broken Hill area, added just A1 cent to A68 cents, but it’s worth noting that a year ago the stock was trading at just A12.5 cents. Terramin (TZN) continued its rise, adding A10 cents to A90.5 cents, and TNG (TNG) rose a modest A0.2 of a cent to A8.2 cents. Finally Kagara (KZL) rose by A9 cents to A$1.18, but perhaps because it announced first nickel production from its Lounge Lizard project. 

Other nickel stocks were also stronger thanks to the price of the metal holding at around US$8.25 a pound, which represents a strong profit margin for most producers. Mincor (MCR), which we took a look at last week, added A11 cents to A$1.90. Minara (MRE) rose by A2.5 cents to A84 cents. Mirabela (MBN) gained A15 cents to A$2.68, but Independence (IGO) slipped A7 cents lower to A$4.84, despite trading as high as A$5.11 early on Friday. 

Copper continued to generate interest thanks to reports of supply shortfalls and industrial action in some of the bigger South American mines. Sandfire (SFR) added A15 cents to A$3.99, Citadel (CGG) was A2.5 cents higher at A40 cents, Equinox (EQN) gained A23 cents to A$4.57, Exco (EXS) closed the week at A24.5 cents, up A2 cents, and OZ Minerals (OZL) added A6 cents to A$1.24. Meanwhile, Gunson (GUN) which we took a look at midweek, partly on account of its Mt Gunson project in South Australia. popped up a very pleasing A3.5 cents to A14 cents, and did get as high as A16.5 cents, a 12 month high. There was no other news about apart from the Minesite story, so it looks like investors were taking their cue from Minesite. And who can blame them? 

Minews. Enough of the back-slapping. Uranium and coal next. 

Oz. It was a surprisingly strong week for most uranium stocks, given that the price of the metal hasn’t moved recently. Greenland Minerals (GGG) was the star, shooting up by A22 cents to A80 cents, although it did get as high as A93.5 cents after it drew the market’s attention to the new mining law that has just come into effect in Greenland. Stonehenge (SHE) also drew in the speculators, and rocketed up by A6.5 cents to A10 cents after it announced the acquisition of a uranium project in South Korea. At one stage, though, Stonehenge traded as high as A17.5 cents. Elsewhere, Toro (TOE) also generated news flow with government approval for a trial pit at its Wiluna project, and the shares rose by A2 cents to A16 cents in response. Forte (FTE) added A2 cents as well, to close at the same price, A16 cents, but recent sector leaders, Extract (EXT) and Mantra (MRU) fell by A19 cents and A27 cents respectively to A$8.29 and A$4.38. 

Coal stocks were stronger across the sector, in line with the higher oil price. Whitehaven (WHE) was up A22 cents to A$5.37, Coal of Africa (CZA) was up A45 cents to A$2.36, Macarthur (MCC) was up A92 cents to A$12.05, and Centennial was up A13 cents to A$4.13. 

Minews. Any specials to finish? 

Oz. We did have a few interesting moves last week from molybdenum stocks. Moly Mines (MOL) added A20 cents to A$1.04, and Aussie Q Resources (AQR) roared ahead after reporting a discovery at Whitewash South in Queensland. The discovery looks like a large porphyry system rich in molybdenum, copper and tungsten. Traders piled into the stock, driving it up by 243 per cent, and it closed the week at A27.5 cents. At one stage the stock was trading at A33.5 cents, in heavy turnover. 

Minews. Thanks Oz.


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## drillinto

January 11, 2010

Wise Man Say: You’re Better Off In Bulks

By Rob Davies
www.minesite.com/aus.html


Gold might be exciting, and the base metals more volatile, but for sheer cash flow in the mining business there’s no avoiding the bulk commodities of iron ore and coal.

According to analysis from RBS, annual global production of iron ore amounts to 2,167 million tonnes a year. China, adds RBS, imports about 620 million tonnes of that. Bear in mind that the FOB price for Australian lump was just over US$120 a tonne in 2009 and that fines averaged US$83 a tonne, and it becomes all too easy to visualise the huge cash flow this industry generates. 

Those prices were over 90 per cent up on the previous year as China decided that its best strategy in the prevailing markets was to steamroller its way through the global financial crisis. So, instead of declining in 2009, Chinese steel production rose by about 25 per cent to between 560 million and 575 million tonnes. 

That demand dragged prices up, in an industry that is already working flat out. And this tension is the reason analysts expect contract process to rise a further 10 per cent in 2010, although spot prices are forecast to drop by between 30 and 45 per cent. But that still points to prices comfortably above recent levels. 

And that is just this year. The team at RBS is looking at a 20 per cent price rise in 2011 and then a 10 per cent increase in 2012, before the price finally weakens in 2013. No wonder so many junior miners are jumping on the iron ore gravy-train and not leaving it all to the majors. An 11 per cent jump in spot prices last week suggests that those forecasts look good. 

Coal is the other bulk sector in the mining industry, although within the coal space the common subdivisions consist of thermal coal for power generation, and coking coal for steel making. Despite the best efforts of politicians to build windmills everywhere they are not wanted, coal still supplies the bulk of the world’s energy. The Carboniferous period lasted for 64 million years - it seems unlikely that man is about to unlock all that carbon in a couple of decades. 

Once again China is in the driving seat, as it has gone from exporting 10 million tonnes of coal a month in 2003 to importing more than three times that for all types of coal in 2009. Total seaborne thermal coal volumes are estimated by RBS to have risen by six per cent in 2009 to 690 million tonnes. 

The expectation is for further steady single digit percentage increases in the years to come. That volume increase in 2009 drove prices in Australia up from US$55 a tonne to US$125 a tonne. In 2010 though, prices are expected to fall back to US$69 a tonne before turning positive again in 2011. 

Coking coal is closely tied to the steel market and we already know that looks good.  A six per cent rise in export volumes in 2009 to 249 million tonnes will be followed by more subdued single digit growth from here on. 

Consequently prices are forecast to drop sharply from US$308 a tonne in 2009 to US$128 a tonne in 2010. After that RBS sees prices jumping to US$185 a tonne in 2011 which is an increase from its previous forecast of US$150 a tonne. 

Bulk commodities might be a little dull, but the cash flow they provide the industry is anything but. It’s no coincidence that the biggest miners are big in bulks.


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## drillinto

The Recovery We Could Have And The One We Do
Brian S. Wesbury and Robert Stein 
Forbes.com / 01.12.10 /


In the past year, equity values have soared and a wide array of economic data has turned upward. But pessimism is still rampant. While different people worry about different things, conservatives focus on jobs and government policy.

Don't get us wrong. There is nothing "good" about a 10% unemployment rate. And, in our view, the health care bills being discussed in Congress would undermine the dynamism of the U.S. economy and hurt health care. Yes, in their desire to "change" America, many politicians want the U.S. to look more like France.

But none of these things will derail the V-shaped recovery. Nor are they good reasons to run for the hills, with your gold, guns and canned goods. It is times like these when it's important for politically conservative investors to not let their view of the way things ought to be cloud their view of what investment returns are going to be. 

Even France has economic recoveries and even French companies make profits. While French stocks have trailed U.S. stocks this year, they are still up significantly from their lows. There is less dynamism in France, with far fewer entrepreneurs and less potential for success, but an economy still exists.

In a certain way, the U.S. is about to find out what the 1980s economy would have been like without the tax cuts enacted by President Reagan. The last time the jobless rate spiked to 10% and higher was during the brutal recessions of 1981-82. If high unemployment is a reason not to invest today, it was an even bigger reason not to invest back then. But staying out of the market--remaining pessimistic because of high unemployment--meant you missed out on at least a part of the bull market. 

Back in the early 1980s, President Reagan cut marginal tax rates across the board and, at least for a few years, restrained the growth of government social spending. Now we have similar 10% unemployment and public policy is moving in the exact opposite direction, with higher taxes and bigger government.

But the recovery in 1983-84 was enormously powerful, with real GDP growing at a 6.6% annual rate. We are not going to experience such rapid growth. Instead, we're more likely to get about 4.5% over the next couple of years. So the shift in health care policy will have an impact, but it doesn't mean a recovery won't take hold at all. It also doesn't mean stocks that are undervalued relative to profits won't keep heading toward fair value. 

If you're looking for the effect on the economy of the shift in policy, look to the long term. During every recovery in the 1970s the unemployment rate fell, but its low point was higher than in the previous recovery. This is happening again now. The unemployment rate fell to 3.9% in 1999, but just to 4.4% in 2007. Given the growth in government we have already seen, we'll be lucky to see 6% during the current recovery.

That's the price we will pay: not continued unemployment at 10% for as far as the eye can see, but good times ahead that never get quite as good as they ought to be. We don't expect clear sailing forever, but the seas look calm enough to enjoy for the time being.

Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly column for Forbes. Brian S. Wesbury is the author of It's Not As Bad As You Think: Why Capitalism Trumps Fear and the Economy Will Thrive.


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## drillinto

Is China the Next Enron ?
Thomas L. Friedman believes it is dangerous to sell short China.

http://www.nytimes.com/2010/01/13/opinion/13friedman.html?ref=opinion


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## drillinto

FRIDAY, JANUARY 15, 2010 
UP AND DOWN WALL STREET

Government Bonds -- the New Junk? 
RANDALL W. FORSYTH | Barron's | USA

That's gold's message, more than inflation.

FROM GREECE TO CALIFORNIA TO JAPAN, markets are beginning to worry about what traditionally is deemed a risk-free asset: government debt securities. And that arguably lies behind the rise in the price of gold.

In a provocative analysis, Standard & Poor's finds that gold is reflecting investor skittishness. And those concerns aren't just the usual ones typically associated with demand for the precious metal -- inflation -- but also concerns about the other safe harbor in times of trouble, supposedly risk-free government securities.

The traditional worry about excessive government debt is that it can be inflated away by central-bank money printing. The Federal Reserve can always buy Treasury securities without limit, forestalling any chance of default by the U.S. government. That, however, would involve an expansion of the central bank's balance sheet and, inevitably, produce Weimar-style hyperinflation.

But, at the risk of invoking the most dangerous term in finance and economics, there's something different this time. The governments about whose debts the markets most fret now cannot resort to the printing press.

These are the PIIGS of Europe -- Portugal, Italy, Ireland and Spain -- and most particularly the Hellenic Republic. As part of the European Monetary Union, their adoption of the euro has precluded their past easy out of devaluation.

Now, by contrast, the PIIGS are forced to conform to the monetary orthodoxy of the European Central Bank. And the ECB is doing its best to maintain the tradition of the German Bundesbank under its French president, Jean-Claude Trichet.

Greece, the PIIG whose finances are most suspect, won't get any "special treatment," Trichet vowed Thursday. He made that statement as the cost to insure Greek government debt against default soared even as Athens announced a plan to cut its deficit by 10 billion euros, or roughly $14.5 billion.

Meantime, the other sovereign debtor whose situation evinces real concern is the State of California, which is the seventh- or eighth-largest economy in the world, depending upon whose statistics you cite. As such, it vastly overshadows in importance other dicey sovereign debtors, such as the PIIGs. And like members of the EMU, California can't devalue to reduce its real debt burden.

According to CMA, a unit of the CME Group (CME) that provide data on credit derivatives, California is ranked as No. 10 of the Top 10 default candidates among sovereign debtors, right behind Greece. No. 1 and 2 are Argentina and Venezuela, whose bonds should be rated M for mierda. (That's Spanish I didn't learn in school but on the streets of Washington Heights. If you took French, the comparable term is merde.)

S&P cut its ratings on California general-obligation debt to single-A-minus earlier this week reflecting the Golden State's severe budget deficit projected at $19.9 billion. Moody's already rates California GOs a notch lower, at Baa1, while Fitch Ratings has the bonds two grades lower, at triple-B.

Remember that unlike the federal government, states and localities typically have to balance their budgets. But, senior Obama adviser David Axelrod told Bloomberg News that Washington can't solve all the problems of the states such as California's.

Writing in its Market Intellect research note, Michael Thompson, S&P's managing director of Market, Credit and Risk Strategies, and Robert Keiser, senior director of the unit, contend the strength of gold reflects concerns about sovereign debt and inflation. A move above $1200 an ounce, its peak touched last month before its retreat back to the $1100 range, would signal renewed worries on those scores.

If consumer-price inflation concerns recede, gold out to trade lower, according to Thompson and Keiser, possibly below $1,000 an ounce, which ought to rally government securities. They note global investors would "appear to be worried that subpar global growth is damaging sovereign fiscal stability and credit quality, which may lead governments to respond by inflating their way out of their current predicament." If so, they contend investors ought to keep a close watch on gold, measures of consumer-price inflation and sovereign-debt risk.

For now, the biggest sovereign debtor -- the U.S. Treasury -- is attracting strong demand for its debt, as shown by spirited bidding for its $84 billion of new notes and bonds this week. Of course, the U.S. is unique in being able to borrow in what is, for now, the world's main currency for transactions and as a store of wealth.

Other debtor governments that don't enjoy that privilege, such as Greece and California, are seeing their bonds bid lower in price and higher in yield. Concerns that heretofore risk-free bonds of governments no longer are risk-free may be reflected in the gold price.

But these debtor governments can't inflate away their debt burdens. So, their bonds have not-insignificant default risk. Given that, gold's rise may be seen as demand for an asset not subject to the vagaries of government borrowings.


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## drillinto

January 16, 2010

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. It looks as if the most exciting event down your way last week was the cricket. 

Oz. Almost correct, though watching Pakistani batsmen run themselves out is hardly cricket. At one stage yesterday they had a batsman on 28 who could also claim two wickets in the same innings, which in other circumstances might have been enough to earn him the title of the ultimate all-rounder. Shame the two wickets were of his team mates. Bit like a pair of own goals.

Minews. And have you had time to watch your stock market? 

Oz. Yes, but when you have a week in which the all ordinaries slides lower by 0.25 per cent, the metals and mining index closes down by 0.29 per cent and the gold index falls by 0.74 per cent you can understand why watching self-inflicted run-outs in cricket is more exciting. In fact, watching the weather in Britain has been more exciting than our market, thought admittedly that’s from 20,000 kilometres away. How’s the global warming debate going up there? 

Minews. That’s enough of the chit chat. Time for prices. There must have been some action? 

Oz. There was. The best performers were in the iron ore sector, where speculation is growing that the next pricing agreement between miners and steel mills will deliver a price increase of around 20 per cent. Gold stocks, apart from a few eye-catching upward moves among the explorers, and a few sharp falls by some producers, were generally flat. Uranium explorers firmed, as did zinc, where there has been a flurry of corporate activity. Copper and nickel were mixed, while our handful of platinum plays delivered encouraging results thanks to the sharply higher platinum price. 

Minews. Interesting that you noted events in platinum. The strength seems to be being driven by the creation of a new crop of exchange-traded funds specialising in the metal. We might have a look at that later. Let’s start with iron ore and coal, though, because bulks seem to be where the best profits are being made today. 

Oz. Correct. As reported mid-week on Minesite, the bulks might be a little dull, but the cash flows are enormous. Best of the iron ore stocks last week was Iron Ore Holdings (IOH), one of the few smaller companies in the region to have successfully negotiated an infrastructure and off-take sales agreement with a major miner, in this case, Rio Tinto. Last week, IOH reported fresh success in the field, with more ore found at its Koodaideri and Boundary discoveries. Those results sent the stock up to a 12 month high of A$2.46 during Friday trade, before it eventually closed at A$2.40. At this time last year IOH was at A18 cents. 

The discovery news continued when FerrAus (FRS) announced more ore at its Mirrin Mirrin prospect. That news that lifted FerrAus to a 12 month high too, in this case to A96 cents, before a late slide set in and the shares closed out the week at A91.5 cents. Other iron ore stocks to rise included Atlas Iron (AGO), which added A19 cents to A$2.34, Giralia (GIR) which gained A6 cents to A$1.75, Red Hill Iron (RHI), which added A20 cents to A$4.10m and BC Iron (BCI), which rose A3 cents to A$1.30. Meanwhile, Cazaly Resources (CAZ), that try-hard which has launched repeated raids on tenements held by other explorers, but without success so far, appears to be doing better on its own ground. The company released details of a positive feasibility study on its Parker Range project, a result which lifted the stock by A10.5 cents to A36.5 cents, and with one small brokerage tipping Cazaly as a A$1.00 stock. 

Minews. Gold now, because it is so widely followed. 

Oz. It was an odd week for gold. The price did little, and neither did its counterweight, the Australian dollar. The result was a bit of a stalemate. Among the producers, Kingsgate (KCN) did best, rising by A30 cents to A$9.52, while newest of producers, Focus Minerals (FML) added half a cent to A7.6 cents, which is not a bad result for a company with a very large number of shares on issue. The other new producer, Centamin Egypt (CNT) went the other way, despite announcing its first gold shipment, slipping A5 cents lower to A$2.25. 

It was a similar picture right across the gold sector, some up, some down. Adamus (ADU) added A2 cents to A49.5 cents, after issuing a construction update on its Southern Ashanti project. Perseus (PRU), which is working in the same part of West Africa, fell A14 cents to A$1.91. Westgold (WGR) reported more strong drill results from its Tenant Creek project, and lost half a cent to A40 cents. Carrick Gold (CRK) raised a fresh A$18 million for its projects on the eastern outskirts of Kalgoorlie, and its shares rose by A16 cents to A$1.17. But Norton Goldfield (NGF), which is operating the old Paddington mine on the northern outskirts of the same town, fell A5 cents to A27 cents after reporting a boardroom bust-up which saw the chief executive head for the exit. 

Minews. Base metals now, please. 

Oz. Zinc has become the interesting metal in that complex, thanks largely to deals involving Blackthorn (BTR) and CBH (CBH), though these have had different results. Blackthorn investors welcomed the company’s tie-up with Glencore on the partly-built Perkoa mine, news which lifted the stock by A23.5 cents to A97.5 cents, although at one stage the stock did get to a 12 month high on Friday of A$1.02. CBH, which is making slow progress with a takeover proposal from Nyrstar, slipped A1 cent lower to A13.5 cents. Other zinc stocks were mixed. Perilya (PEM) added A8 cents to A76 cents, while Terramin (TZN) fell A3 cents to A88.5 cents. Interestingly, one of our old favourites, Mt Burgess (MTB) caught the eye of a few investors, adding A0.7 of a cent to A2.2 cents which, on a percentage basis, is quite a jump. 

Minews. We might take a closer look at Mt Burgess next week. For now, let’s finish base metals, and move across to uranium and any specials. 

Oz. Most copper and nickel stocks trended down, with one or two modest exceptions. Equinox (EQN) lost A26 cents to A$4.31. Exco (EXS) was A2 cents lighter at A22.5 cents, and Avalon (AVI) also fell A2 cents to A21 cents. Going up, just, Sandfire (SFR) and Citadel (CGG) both added A1 cent each to A$4.00 and A41 cents respectively. Among nickel stocks, Mincor (MCR) slipped A3 cents lower. Minara (MRE) lost A4 cents, and Independence (IGO) fell by A9 cents to A$4.75. 

Minews. Uranium and specials to finish, please. 

Oz. Two stand out performers among the uranium stocks were Mantra (MRU) and Manhattan (MHC). Mantra shot up by A66 cents to A$5.04, with most of that move coming on Friday. Manhattan added A21 cents to A$1.72. Extract (EXT) added A26 cents to A$8.55, but elsewhere it was down or flat. Paladin (PDN) fell by A26 cents to A$4.12. Uranex (UNX) lost A4.5 cents to A28.5 cents. And Deep Yellow (DYC), despite reporting a JORC-code compliant resource for projects in the Mt Isa region of Queensland, was steady at A32 cents. 

Specials were led by the platinum stocks, as the platinum price jumped through the US$1,600 an ounce mark last week. Platinum Australia (PLA) added A19 cents to A$1.26, Nkwe Platinum (NKP) hit a 12 month high of A69.5 cent, before closing at A66 cents for a rise on the week of A11 cents. Zimplats rose by A47 cents to A$11.97, but did trade as high as A$12.20, also a 12 month high. Molybdenum stocks were also in the news. Moly Mines (MOL) added A7 cents to A$1.11, while a newcomer, Zamia Gold (ZGM) rose by A1.4 cents to A6.2 cents, but did trade up to A8 cents on Friday after reporting encouraging molybdenum assays from drilling at its Anthony project in Queensland. 

Minews. Thanks Oz. You can go back to your cricket while we fret over our tour of South Africa and the hearing ability of Australian umpires. 

Oz. Perhaps you can arrange some funding for the South African Broadcasting Corporation so it can buy the technology we use down here. 

Minews. Goodbye.


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## drillinto

January 18, 2010

Metal Markets Are Increasingly Reliant On The Chinese Economy, For Better Or Worse 

By Rob Davies
www.minesite.com/aus.html

Eugene Fama is one of the original proponents of the efficient market markets hypothesis. In a recent interview he claimed that it is impossible to identify a bubble in asset prices before they burst. Instinctively most market operators and observers would reject that concept and observe that it is patently obvious when something is overpriced or underpriced. Yet how many people actually predicted the collapse in equity, property and commodity prices in 2008?

After a dramatic recovery in these prices last year the subsequent performance to date of markets this year is starting to make it look as if the global financial crisis of 2008/9 was just a minor blip that was resolved by the ritual defenestration of a few investment banks. 

That said, there can be few observers who view the addition of another US$126 billion to China’s reserves in the last quarter of 2009 simply with equanimity. That latest addition takes the total to US$2,399 billion. 

And the giant sucking sound that is China’s appetite for natural resources continues unabated, as it consumes natural resources at a prodigious rate to feed its growth. Unfettered by any need to devotee vast amounts of capital into unproductive domestic property, because they can’t, China’s denizens can devote all their efforts and money into building artefacts, wealth, businesses and infrastructure. All of which require metal. 

Although base metal prices have drifted down a touch since the start of the year, the prices of all the main metals remain at attractive levels, especially for producers with a dollar cost base. 

It’s possible to guage the tightness of the current market by making reference to the 38 per cent price cut recently negotiated by BHP Billiton for copper treatment costs, as smelters in China and Japan compete for scarce supplies of concentrate. 

Rumours from Pakistan that it may cancel the exploration agreement for the massive Reko Diq copper project, which contains 4,100 million tonnes of 0.5% copper, only add to concerns over future sources of supply. 

It is a combination of issues like those outlined above that has hepled push metal prices up from marginal cash costs to the marginal full costs of production. You need copper prices at last week’s close of US$7,453 a tonne to make new projects in risky areas viable.  

While copper has the tightest fundamentals, other metals are also trading at prices closer to the full marginal cost of production than to marginal cash costs. Aluminium at US$2,293 a tonne is too cheap for European countries to produce at a profit but it is a viable price for steady production from the new plants in the Gulf that can exploit cheap electricity. 

Nickel may have a lot of shut in capacity, but a price of US$18,345 a tonne is not too bad for many miners. Toledo Mining’s Reg Eccles was one nickel mining executive this week who expressed a general satisfaction with the prevailing price, even though there’ll need to be a price at some stage for him to restart his company’s direct shipping operations. And the same logic applies to lead at US$2,450 and zinc at US$2,492 a tonne. 

The metal markets are now massively reliant on Chinese demand. If anything happened to slow the 10 per cent growth in the Chinese economy, the metal markets would be the first to feel it. Whether that growth is sustainable has been the subject of much debate lately, and no-one has yet produced a conclusive argument on either side. 

Professor Fama says it is impossible to determine if China is a bubble economy, and that therefore no one can predict if it will collapse. On that basis we should all stop worrying and just enjoy the ride.  Until it stops, that is. But, as Scarlett O’Hara said, “Tomorro is another day…”


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## drillinto

THE INTELLIGENT INVESTOR / WSJ / USA / JANUARY 16, 2010
"Why Many Investors Keep Fooling Themselves" 
By JASON ZWEIG

What are we smoking, and when will we stop? 

A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years.

Robert Veres, editor of the Inside Information financial-planning newsletter, recently asked his subscribers to estimate long-term future stock returns after inflation, expenses and taxes, what I call a "net-net-net" return. Several dozen leading financial advisers responded. Although some didn't subtract taxes, the average answer was 6%. A few went as high as 9%.

We all should be so lucky. Historically, inflation has eaten away three percentage points of return a year. Investment expenses and taxes each have cut returns by roughly one to two percentage points a year. All told, those costs reduce annual returns by five to seven points.

So, in order to earn 6% for clients after inflation, fees and taxes, these financial planners will somehow have to pick investments that generate 11% or 13% a year before costs. Where will they find such huge gains? Since 1926, according to Ibbotson Associates, U.S. stocks have earned an annual average of 9.8%. Their long-term, net-net-net return is under 4%.

All other major assets earned even less. If, like most people, you mix in some bonds and cash, your net-net-net is likely to be more like 2%.

The faith in fancifully high returns isn't just a harmless fairy tale. It leads many people to save too little, in hopes that the markets will bail them out. It leaves others to chase hot performance that cannot last. The end result of fairy-tale expectations, whether you invest for yourself or with the help of a financial adviser, will be a huge shortfall in wealth late in life, and more years working rather than putting your feet up in retirement.

Even the biggest investors are too optimistic. David Salem is president of the Investment Fund for Foundations, which manages $8 billion for more than 700 nonprofits. Mr. Salem periodically asks trustees and investment officers of these charities to imagine they can swap all their assets in exchange for a contract that guarantees them a risk-free return for the next 50 years, while also satisfying their current spending needs. Then he asks them what minimal rate of return, after inflation and all fees, they would accept in such a swap.

In Mr. Salem's latest survey, the average response was 7.4%. One-sixth of his participants refused to swap for any return lower than 10%.

The first time Mr. Salem surveyed his group, in the fall of 2007, one person wanted 22%, a return that, over 50 years, would turn $100,000 into $2.1 billion.

Does that investor really think he can get 22% on his own? Apparently so, or he would have agreed to the swap at a lower rate. 

I asked several investing experts what guaranteed net-net-net return they would accept to swap out their own assets. William Bernstein of Efficient Frontier Advisors would take 4%. Laurence Siegel, a consultant and former head of investment research at the Ford Foundation: 3%. John C. Bogle, founder of the Vanguard Group of mutual funds: 2.5%. Elroy Dimson of London Business School, an expert on the history of market returns: 0.5%.

Meanwhile, I asked Mr. Salem, who says he would swap at 5%, to see if he could get anyone on Wall Street to call his bluff. In exchange for a basket of 51% global stocks, 26% bonds, 13% cash and 5% each in commodities and real estate””much like a portfolio Mr. Salem oversees””the institutional trading desk at one major investment bank was willing to offer a guaranteed rate, after fees and inflation, of 1%.

All this suggests a useful reality check. If your financial planner says he can earn you 6% annually, net-net-net, tell him you'll take it, right now, upfront. In fact, tell him you'll take 5% and he can keep the difference. In exchange, you will sell him your entire portfolio at its current market value. You've just offered him the functional equivalent of what Wall Street calls a total-return swap.

Unless he's a fool or a crook, he probably will decline your offer. If he's honest, he should admit that he can't get sufficient returns to honor the swap. 

So make him explain what rate he would be willing to pay if he actually had to execute a total return swap with you. That's the number you both should use to estimate the returns on your portfolio.


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## drillinto

A long-term look at inflation... in one picture

http://dshort.com/inflation/inflation-since-1872.html?inflation-1872-present


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## drillinto

Stocks May Suffer ‘Severe Correction’ This Year, Zulauf Says 
By Meera Bhatia

Jan. 14 (Bloomberg) -- Stocks may suffer a “severe correction” this year as a recovery in global economic growth fades, according to Felix Zulauf, owner and founder of Swiss fund manager Zulauf Asset Management AG. 

“The snap back in the stock market will probably peak this spring and then we go into a correction into the fall,” Zulauf, born in 1950, said in an interview in Oslo today after speaking at a conference organized by Skagen Funds. “It could be a severe correction, it could be 20 percent to 25 percent.” 

Economies are recovering after governments around the world committed trillions of dollars on measures to revive growth after worst the recession since World War II. The rebound may be fragile with unemployment rising in Europe and expected to average 10 percent in the U.S., according to economic surveys. 

Any “hint” of governments cutting the major stimulus programs will “weaken” markets, Zulauf, who founded the Zug- based company in 1990, said. The first stocks to suffer will be the “emerging markets” and the “natural resource theme.” 

The MSCI World Index of 23 developed stock markets has gained 3.2 percent this year, adding to last year’s 27 percent surge. The index plunged 42 percent in 2008. 

Bond yields will probably rise in the first half of the year because of the “snap back” in growth, Zulauf said. There will be more fiscal “problems” in the government bond markets, which will widen the difference in yield between “good borrowers and bad borrowers,” he said. 

“I don’t know how long the fiscal crisis will go on this year,” he said. “It will only be the second step in a fiscal crisis of many more to come.” 


http://www.bloomberg.com/apps/news?pid=20601085&sid=asAiwCctxgqo


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## drillinto

Boom and Busts
Steve H. Hanke | Globe Asia, issue of January 2010   

Before the great depression got underway, members of the Austrian school of economics developed a theory of business cycles. For the Austrians, things go wrong when a central bank sets short-term interest rates at artificially low levels. Such rates fuel credit booms. 

In consequence, businesses overestimate the value of longlived investments and an investment-led boom ensues – where a plethora of investment dollars is locked up into excessively long-lived and capital-intensive projects. 

Investment-led booms sow the seeds of their own destruction.The booms end in busts. These are punctuated by bankruptcies and a landscape littered with malinvestments made during the credit booms. Many of these malinvestments never see the light of day. 

The accompanying chart depicts how, given the length of a project's life, a decline in the discount rate pumps up the present value of a capital project. 

An artificially low interest rate alters the evaluation of projects – with longer-term, more capital-intensive projects becoming more attractive relative to shorter-term, less capital-intensive ones. 



[To read more and view all the charts, please click on the link below]

http://www.cato.org/pub_display.php...ign=Feed: CatoRecentOpeds (Cato Recent Op-eds)


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## drillinto

January 23, 2010

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. A tough week? 

Oz. Yes, but weren’t we all expecting 2010 to be worse than 2009 as artificial government stimulus spending ended and the time came to pay back the borrowed money? The big worry in your market seems to have been the effect on banks. Down this way we have big worries too, as there is talk of a new form of resource rent tax, which looks like whacking the iron ore, coal and gold miners for six.

Minews. Is a new resource tax being seriously considered? 

Oz. It seems to be, as is the introduction of a fresh levy on banks that used a government deposit guarantee scheme. Seasoned observers of the market see these events as being as natural as night following day, but there are always some investors who believe that a good time can continue forever. Last week was a wake-up call for anyone who expected the government to not tighten the tax screws, which is why fallers on the market easily outnumbered risers, and why the key indices were all down. The all ordinaries fell by 3.2 per cent, the metals and mining dropped by 5.8 per cent and the gold index slumped by 7.6 per cent. What’s more, there is unlikely to be a recovery next week because European and North American markets kept falling after we had closed. 

Minews. Time for prices now, perhaps starting with whatever good news you can muster. 

Oz. That’s a hard ask, but if you look closely you can find a few stocks that are still attracting interest, mainly thanks to deals or discoveries. In the deals department the best performer was Northern Iron (NFE), the Norwegian-focused iron ore producer, which has secured additional funding from the manganese specialist, OM Holdings (OMH). On the market, Northern Iron rose by A11 cents to A$1.41, while OM slipped A14 cents lower to A$1.89. Investors seemed to be concerned that OM’s move was more to do with defending itself against the acquisitive Ukrainian, Gennadiy Bogolyubov, than any demonstration of a genuine interest in iron. 

Another deal of interest involved a stock we’ve never mentioned before, Orocobre (ORE). Orocobre hit the headlines after announcing a joint venture with a division of Toyota Motors of Japan. Toyota will come in with Orocobre on the development of a lithium project in Argentina. Investors loved it, pushing Orocobre up by A74 cents to A$2.10, a price which is 10 times the A21 cents the stock was trading at a year ago. Interestingly, and ominously, the Toyota deal put the wind up the small band of Australian lithium stocks, perhaps because the news sent out a reminder to the market that even if lithium in batteries for electric cars is the next big thing, there is no shortage of the stuff. Galaxy (GXY) one of the local leaders, fell A10 cents to A$1.33, and Reed Resources (RDR) slipped half a cent lower to A80 cents. 

Elsewhere, Ironclad Mining (IFE) reported progress at its Wilcherry Hill project in South Australia. It added A26 cents to A$1.31, while Trafford Resources (TRF), a partner in the development, managed a modest gain of A2 cents to A$1.02. Meanwhile, over at Magnetic Resources (MAU), there was increased interest in the company’s radical exploration approach of looking for iron ore deposits along railway lines rather than in the middle of nowhere. Last week, Magnetic rose by A14 cents to A54 cents, but did get as high as A59 cents in early trade on Friday. 

Minews. And that’s the best of the week? 

Oz. Pretty much so. From now on it’s a call of the fallen, or flat. As good a place to start as any is the iron ore space, as that is the sector most likely to be hurt by a new form of resource tax. Atlas Iron (AGO), one of the stronger emerging producers, fell A20 cents to A$2.14. Fortescue (FMG), the self-proclaimed third force in Australian iron ore, dropped by A57 cents to A$4.81. Mt Gibson (MGX) copped a double whammy, the possibility of the new tax combining a cyclone on the coast which shut operations at its Koolan Island mine to shave A22 cents off the value of its shares, which fell to A$1.58. Other movers included Gindalbie (GBG), down A15 cents to A$1.07, Brockman (BRM) down A11 cents to A$2.60, BC Iron (BCI), down A12 cents to A$1.18, and the speculator’s favourite, Iron Ore Holdings (IOH), down A11 cents to A$2.31. 

Minews. Gold next, please. 

Oz. Plenty of digging required to find winners among the gold stocks. Ampella (AMX) was one of the few, adding A6 cents after revealing a maiden 1.2 million ounce resource on its Batie West project in Burkina Faso. This company is currently being pushed hard in London by junior resource broker Fairfax. Meanwhile, Carbine Resources (CRB), which has developed a close working relationship with Ampella, also rose, by A1.5 cents to A15 cents. Chalice (CHN), which continues to get strong results from its projects in Eritrea, put on A5 cents to A48.5 cents, and Medusa (MML) added A1 cent to A$3.34 thanks to rising production at its Co-O mine in the Philippines. Allied (ALD) also added A1 cent to A30.5 cents, while New Zealand goldminer, OceanaGold (OGC) put on A6 cents to A$1.91. 

After that it was largely downhill. Kingsgate (KCN) was in favour early in the week, trading as high as A$10.02 after a strong production report, but faded to end down A12 cents at A$9.40. Other movers included Adamus (ADU), down A6 cents to A43.5 cents, Perseus (PRU), down A12 cents to A$1.79, Troy (TRY), down A32 cents to A$2.13, Resolute (RSG), down A20 cents to A98.5 cents, and Silver Lake (SLR), down A8 cents to A$1.02. 

Minews. Sobering stuff. Base metals, uranium, and that should do us this week. 

Oz. Most base metal stocks were down. In the sector that was all, bar one. CBH (CBH) added A2 cents to A15.5 cents after announcing a fund-raising, courtesy of its biggest shareholder, Japan’s Toho Zinc. The deal is designed to beat off a takeover bid from the big refiner, Nyrstar, and, while it will raise A$67.5 million it now leaves Toho with a 31 per cent stake in CBH. The rest of the zinc sector was down. Perilya (PEM) lost A6 cents to A70 cents. Terramin (TZN) fell by A5.5 cents to A80 cents, and Mt Burgess (MTB) fell half a cent to A1.7 cents. 

Copper stocks performed a similar trick, all down bar two. Jabiru (JML) and Tiger Resources (TGS) went against the trend with rises of A1 cent and A3 cents respectively. Jabiru closed at A43 cents after reporting strong production numbers from its Jaguar mine, and Tiger closed at A29 cents having reported exploration success at its projects in Congo. Elsewhere, Equinox (EQN) lost A39 cents to A$3.92, Citadel (CGG) fell by A1.5 cents to A39.5 cents, Sandfire (SFR) closed the week at A$3.75, off A25 cents, and Exco (EXS) shed A1.5 cents to A21 cents. Nickel stocks were down across the board. Notable fallers included, Mincor (MCR) off A18 cents at A$1.69, Minara (MRE) down A12.5 cents at A72 cents, and Independence (IGO) down by A21 cents to A$4.54. 

Uranium had one winner, Forte (FTE), which continues to attract interest in its Mauritanian projects and rose a fractional half a cent to A19.5 cents. Manhattan (MHC) ran out of puff after an excellent few months, shedding A20 cents to A$1.52. Mantra (MRU) lost A9 cents to A$4.95. Paladin (PDN) fell by A19 cents to A$3.93, and Extract (EXT) dropped by A54 cents to A$8.01. 

Minews. Any specials before we close? 

Oz. Moly Mines (MOL) has returned to favour courtesy of a Chinese funding deal, but lost A11 cents over the week to A$1.00. Apart from that, nothing of note. 

Minews. Thanks Oz.


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## drillinto

January 25, 2010

Obama’s Move Against The Banks May Take Some Of The Hot Money Out Of The Commodities Markets

By Rob Davies
www.minesite.com/aus.html

President Carter’s period in office is not fondly remembered by history. However, he did though do one thing that dramatically changed the course of it. In 1979 he appointed Paul Volcker as President of the US Federal Reserve, and this man’s subsequent actions in raising interest rates killed inflation and established the foundations for the bull market that lasted for the next thirty years. President Reagan thought him too conservative and replaced Volcker with Alan Greenspan in 1987 and we all know now the consequences of that decision.

After two decades in the wilderness President Obama has brought Mr Volcker back to the fore, and is endorsing his idea that banks should be split so that the boring utility bit, which is underwritten by the tax payer, is separated from the sexy trading bit that carries most of the risk. 

Some banks are already making this change. Indeed RBS is in the throes of selling its Sempra commodities division. While there is no certainty that Mr Volcker’s proposals will be enacted, the idea certainly upset bank shares last week. A year ago bank shares would probably have risen on this sort of development, as investors would have rewarded banks for shedding risky business. The fact that bank shares declined on the news is further evidence that the market is now forgetting risk and is focussing on potential returns. 

If legislation is passed along the lines that President Obama proposes, it could have the effect of taking some of the hot money out of the commodity market. Whether that is a good or a bad thing is harder to judge. 

In theory speculative traders should be selling at the top and buying at the bottom and thus reducing volatility. More likely is that most of them are not much more than momentum players and simply jump on whichever bandwagon it is that’s passing. In that case they would be adding to volatility, so their absence may actually lead to a more orderly market. 

Speculative trading will always exist and hedge funds and their ilk will doubtless continue to incur risk in order to trade metals. But at least shareholders in those funds will know the risks they are incurring. People who bought shares in RBS thinking its balance sheet was helping Mr and Mrs Pettigrew of 47 Acacia Avenue to refurnish their kitchen probably had no idea that the same balance sheet was also funding long positions in nickel at US$45,000. 

But removing unwitting commodity speculators from the market is probably a good thing. That way the field is left clear for those that know what they are doing. Or at least are more aware of the risks. 

That said, removing speculative capital from commodity markets would have the knock on effect of reducing the available pool of capital for producers to dip into to hedge against price volatility. 

This is most often used to allow companies to fund new mines, or expand existing ones, by selling production forward. Over the last few years this has become an increasingly important way of financing new production. Any reduction in the availability of this source of capital could effectively increase the capital costs of new mines and projects, and have a direct impact on the marginal cost of production.   

Mr Volcker’s proposals may not become reality. However, if they do, it surely cannot be a bad idea for industries to stick to things they know about. Let miners dig, hedge funds hedge and let banks let Mrs Pettigrew have a new kitchen.


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## drillinto

Political Economy
The True Meaning Of Inflation
John Tamny, 01.25.10, Forbes.com


Seeking to provide clarity as to the true meaning of inflation, the late Nobel Laureate Milton Friedman helpfully described it as "always and everywhere a monetary phenomenon." At first glance Friedman's definition is hard to improve on--from post-WWI Germany to the 1970s in the United States and modern-day Zimbabwe, inflation has always been a monetary symptom of collapsing currency values. 

The problem, however, is that Friedman was actually defining something quite different. In the monetarist model that he practiced, money growth beyond a pre-set point was inflation. Friedman's point was that money quantities themselves always told the inflationary tale. But did they?

In truth, the Fed's monetary base grew the same in the 1970s as it did in the 1980s, with two completely different results. The dollar was weak in the 1970s, as evidenced by a skyrocketing gold price, whereas in the '80s the price of gold fell. It should be noted that Friedman, captive to money supply targets, warned of renewed inflationary pressures in the mid-1980s that were surely belied by a very strong dollar. 

The Federal Reserve is empowered by Congress to keep inflation in check, but its definition is even more wanting than the monetarist view. According to the Fed's leading lights--including Chairman Ben Bernanke--inflation is a function of too much economic growth. This impoverishing definition is even easier to discredit than the monetarist description.

In an increasingly interconnected global economy, shortages of labor and manufacturing capacity in any one country cannot be inflationary. They can't because, as we've regularly seen with U.S. companies, they have always accessed the world's supply of labor and capacity when producing the goods we buy. Even if we assume--as the Fed seemingly does--that the U.S. economy is closed the Fed's definition still wouldn't pass the most basic of scrutiny. 

Indeed, labor shortages in any one country are always solved by new labor force entrants seeking to achieve the higher pay created by shortages, by the certain migration of workers from weak to strong labor markets and--most notably--by technological innovations that reduce the need for human labor inputs. High capacity utilization is nothing more than a market signal suggesting more is needed. And because of robotics and other production innovations, capacity is hardly a static concept. 

Then there are those theorists who simply use consumer prices as the truest, most market-driven measure of inflation. It's hard at first to argue with this approach since changes in the value of money often show up in prices, but the largely quiescent consumer-price figures during a weak-dollar decade also come up charitably short. 

For one, producers can raise prices without actually increasing the nominal prices of the goods they sell. One easy example here would be Skippy peanut butter. The marketers for the product decided to indent the condiment's container in order to reduce its content by 9%. Forbes Chairman Steve Forbes has similarly noted that while Starbucks has held the line on the cost of the pastries it sells, it has reduced the size of each pastry. 

For two, high prices usually mean that they'll soon fall. Flat-screen televisions used to cost over $10,000, but a visit to any electronics retailer today reveals that these prices have gone down considerably. High prices lead to competition on the sale of all sorts of goods (think personal computers), which invariably leads to price reductions regardless of whether the dollar is strengthening. 

Finally, rising prices due to a strong demand for one consumer item are not a sign of inflation. If consumer demand for one good is driving its price up, demand for other products must be falling in ways that will drive the prices of other goods down. In short, if there's such a thing as a true price level, it cannot be altered by expensive goods anymore than cheap imports can drive it down. 

So what is true inflation? It seems the answer resides in the price of gold. Used as a money measure for thousands of years, gold achieved its purely monetary role precisely because its role in the productive economy is so minuscule. As a result, nearly every ounce of gold ever mined is still with us, which means gold's real price is hard to alter thanks to a great deal of gold stock in existence relative to new discoveries. 

When the price of gold moves, gold's price isn't moving; rather it is the value of the currencies in which it's priced that is changing. Gold is the objective indicator of inflation: When its price in any currency rises substantially, that means the unit of account is weakening and that we're inflating. 

What does this mean for the economy? Broadly it means that when the dollar weakens such that the price of gold spikes, what is limited capital seeks safe-haven in hard, unproductive assets like gold, oil, art and property. Physical assets least vulnerable to monetary debasement win out over less tangible investments of the innovative or knowledge variety. In that sense it's no surprise that technology investments thrived in the '80s and '90s when the dollar was strong. 

Getting back to inflation, rather than a measure of prices that change for various reasons that have nothing to do with currency policy, inflation is at its core the painful process by which capital flows to the hard assets of the earth and away from innovative, wage-creating industries. As individuals we don't so much hate inflation for the rising prices as much as we balk at it because our chances to capture good jobs and good wages are compromised for capital essentially hiding. 

As the rising price of gold has revealed throughout the decade we've been inflating, no matter what the more quiescent government measures of consumer prices have been telling us. A weak dollar explains our economic unhappiness because a weak dollar is what has made capital disappear. 

At this point the only question is which political party will pick up on inflation's true meaning. Money quantities, economic growth and consumer prices are decidedly poor measures of inflation, but the dollar's price in terms of gold is. Right now inflation is delivering pain throughout the economy as it always has through reduced investment in our economic future. 

In short, inflation is about capital going on strike. And the political party that catches on to inflation's true meaning will thrive. The problem, however, at least for now, is that politicians and economists on both sides of the aisle are captive to false inflation definitions that have blinded them to the true inflation that is very much with us, and that weighs on the economy more than any other policy today.


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## drillinto

Guy Sorman
An Asian Century? Not So Fast
The first global century is more like it.
City Journal / 22 January 2010

Pundits are proclaiming the beginning of an Asian century. Many think that the next G20 meeting, which will take place in Seoul this autumn, represents a transfer of power from West to East, a decline of Western influence, and a geopolitical tectonic shift. Such a hyperbolic vision of history seems justified, at least on the surface, by a series of recent events. China, for instance, is said to have surpassed Germany’s exports and should thus be considered the leading global economic power. Actually, the statistic is irrelevant, because it considers as exports products that are merely assembled in China: the imports that make possible the assembly””and eventual exporting””should be deducted from the measure. Other observers have pointed to the South Korean company Korean Electric, which recently outbid Ã‰lectricitÃ© de France to build three nuclear reactors in Abu Dhabi. Like the Chinese exports, though, this success should not be overstated. The South Koreans will build and manage American-made reactors, using technology from . . . Westinghouse.

Recent Asian breakthroughs do make for a contrast with the pervasive gloom in the West, where the economic crisis is far from over. Governments in the U.S. and Europe seem unable to understand why huge public expenses have failed to stimulate their economies. Neither the Obama administration nor the Nicolas Sarkozy and Gordon Brown governments grasp the fact that public spending and welfare statism may have broken the backs of would-be entrepreneurs. Asian governments didn’t make the same mistake. South Korea, for example, has simultaneously helped its poor and deregulated its labor market. Asia has used the crisis to reinforce free-market mechanisms.

But proclaiming the end of the West and the advent of the Asian century would be premature, to say the least. First, what do we mean by Asia? Perhaps South Korea, Japan, Vietnam, and the Eastern China seaboard share some common cultural characteristics. Central and Western China, however, remain mired in the medieval era; Indonesia belongs to an entirely different world; India, too, is wholly different from the rest of Asia. Asia knows no political unity: parts of it are democratic, other parts ruled by despots. There is no Asian economic system as such: China’s state-run capitalism doesn’t belong to the same category as Japanese and Korean private capitalism. India remains by and large an agricultural economy, dotted with an emerging small-business dynamism. Asia has no decision center, no coordinating institutions like NATO and the European Union.

For all its problems, moreover, the West is relatively at peace with itself; Asia is not. The continent is riddled with active conflicts around Pakistan and potential ones all around the China Sea. What guarantees border stability and open communication in Asia is NATO to the West and the Seventh American Fleet in the Pacific Ocean. If the U.S. Army and Navy were to leave, war would threaten the continent; at the very least, trade would suffer heavy disruptions. Asian economic dynamism would not survive the departure of the global cop. It’s hard to believe in an Asian century when Asian security depends on non-Asian security forces.

Another of Asia’s weaknesses has to do with its poor record on innovation. Chinese exports contain little added value beyond cheap manpower. China sells sophisticated objects like smartphones to the rest of the world, but these devices are invented in the West. Though Japan and South Korea are much more creative than China, they, too, mostly improve products and services initially conceived in the West. Asia’s lagging innovation is probably rooted in its brand of rote education: when they have the opportunity, Asian students flock to North American and European colleges. And the brain drain doesn’t run the other way: 80 percent of Chinese students in the United States never return to China.

Asia’s undoubted progress happens to be related to its conversion to Western values. Capitalism, democracy, individualism, equality of the sexes, and secularism are all Western notions, and they’ve been adopted in varying degrees in Asia. Reactions against Westernization have also set in, alongside efforts to promote so-called Asian values, both Buddhist and Confucian, such as the Harmony Principle. Such attempts are weakened, however, by their evident political intentions. It’s well known among Asia scholars that China and South Korea manipulate the Harmony Principle to prevent democracy and weaken workers’ rights, respectively. Such political mangling is regrettable: the classic Harmony Principle, which essentially tells us that personal happiness is rooted in a natural social order and that one cannot be happy alone, is a rich philosophical concept and deserves better than to reappear in Communist or despotic garb. One also regrets that not much is done in India to keep alive the philosophy and spirit of Mahatma Gandhi, one of the very few twentieth-century universal thinkers who rose from Asia.

Though the prophecy of an Asian century is premature, that doesn’t mean that Western domination won’t eventually subside. Despite its universities, cultural values, entertainment industry, and strong military, the West may not maintain its edge forever. Still, we should note that whenever we compare the relative power of West versus East, we may be clinging to an obsolete vocabulary. Our criteria themselves may belong to the past. Today, geography is a poor framework: there is no such thing as a national economy any longer. All products and services are global. The more sophisticated a product or a service, the more its national identity tends to disappear. There are no Western or Eastern cell phones, to say nothing of financial derivatives. When China buys American Treasury bills, which nation is depending on which? Exchange generates interdependence. When Asia grows, the West doesn’t necessarily become poorer. From now on, we rise or fall together. There is no contradiction, either, between West and East when it comes to threats against our global security, like terrorism or nuclear rogue states. Barriers have broken down even in popular culture: Korean rock singers are all the rage in China. Are they Korean or American?

So forget the Asian century; we’re entering the first global century. Globalization is so new that we don’t yet fully understand what’s happening to us; we cling to old concepts and lack the language to describe an emerging new world. We can argue about whether it will be a better world; what’s certain is that it will be a very different one.

Guy Sorman, a City Journal contributing editor, is the author of numerous books, including Economics Does Not Lie.
Source > http://www.city-journal.org/2010/eon0122gs.html


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## Andrew Forex

I think the most interesting commodity is the gold. At least as far as I can observe it lately.


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## drillinto

Beware the 4 new asset bubbles
By Shawn Tully
January 25, 2010

NEW YORK (Fortune) -- Here we go again.

Less than two years after the housing market collapsed, the U.S. economy is threatened by a new bubble in asset prices. This time, four billowing balloons are hovering: two commodities -- gold and oil -- stocks, and government bonds.

Don't be fooled into thinking that last week's 5% drop in the S&P, and the recent sell-off in oil, remotely makes them fairly valued, let alone bargains. Equities and commodities, as well as Treasuries, which actually rallied as stocks dropped, still have a long way to fall. The reason: They've already seen huge run-ups that put their prices far above their historic averages, and far above the levels justified by fundamentals. 

Two examples: Most companies can't possibly grow earnings fast enough to support their lofty valuations, and oil and gold are so expensive that we'll see what high prices always bring, a surge in new supply. That makes a price-pounding glut inevitable.

Since the start of 2009, oil has returned to the danger zone by jumping 63% to $75 a barrel, and gold has risen more than 20% to set astounding new records by climbing above $1,100 an ounce. After briefly returning to historically normal valuations in March, stocks are now selling at price-to-earnings multiples 40% above their historic range of 14, and 10-year Treasuries are so pricey that they yield 1.5% less than they did in 2007.

What's causing this resurgence of speculative fervor? One view blames the same policy that caused the real estate rampage -- incredibly low interest rates that are flooding the banks with cheap funds that, in theory, are available for loans. (The current Fed target rate is between 0 and 0.25%.) 

"Investors can borrow at extremely low rates to buy assets," says Brian Wesbury, a monetary specialist at mutual fund manager First Trust. "So they're using cheap debt to bid up prices. The Fed's expansionary policies are making assets look a lot less risky than they really are."

Other prominent economists dispute that we're in bubble territory, at least right now. Allan Meltzer, the distinguished monetarist at Carnegie Mellon, argues that even though banks are loaded with cheap money, they aren't lending -- which is why we have a credit crunch. "I would be a lot more concerned if loan demand were higher," says Meltzer.

The one asset that definitely isn't bubbling is housing. There, prices have fallen to a level where new buyers buy a house for the same total monthly cost as rental. That's gravity operating.

So how do you spot a bubble? My view is that we're now seeing the same signs that exposed the frenzy in real estate: prices flying far above their historic averages, measured either in inflation-adjusted dollars (commodities) or as a ratio of the income they produce (stocks and Treasuries). Watch for gravity to take over, just as it did in housing.

Treasuries

The rate on the 10-year Treasury is now a mere 3.6%, well below the 5.5% rate that it averaged between 1993 and 2007, a period where inflation ran at an annual 3% clip, meaning that the "real rate" after inflation, stood at about 2.5%. 

So let's assume that future inflation also averages 3%, about where it stood in the second half of 2009. At today's prices, Treasuries are offering a real yield of just 0.6% -- 1.9 points below our 14-year average. 

But as the economy recovers and the threat of inflation causes the Fed to tighten monetary policy by raising rates, the yield could rise to 5.5%, handing investors a big loss. Reminder: When yields rise, bond prices fall. 

Yet even that scenario is optimistic. Given the huge deficits from the bailouts, it's likely that investors will want a far bigger cushion for expected inflation -- which suggests, says Wesbury, that the yield on 10-year bills could go over 6% in 2011.

Oil

At around $75 a barrel, oil may look like a bargain compared to the record of $147 in July 2008 (see editor's note). But we've simply moved from an immense bubble to a moderate one. 

For oil, as in all commodity markets, the highest-cost unit that customers are willing to buy to "clear the market" sets the price. Indeed, prices can go far above cost for short periods, since it takes time for producers to drill new wells or because they hoard inventories. 

So how much are oil companies paying to produce the world's most expensive barrels of oil? A good estimate is $55 to $60 a barrel. That's what it costs Anadarko Petroleum (APC, Fortune 500) to extract oil from deep wells in the Gulf of Mexico, according to Anadarko CEO Jim Hackett. 

Hence, the world's highest-cost producers are now earning 30% to 40% margins. It won't last; to take advantage of the prices, oil companies will ramp up production, and that extra supply will cause prices to fall back into the $55 range, or even lower.

Gold

Investors are rushing to gold, because they rightly fear far higher inflation in the next couple of years and want to hedge against both rising prices and a declining dollar with a commodity that, they claim, has a fixed supply. 

Since early 2009, the price has jumped to $1,100 an ounce from $875, triple its average price between 1990 and 2004. Yet the supply of gold is far more fluid than the gold bugs admit, partly because mining companies are investing heavily to increase production. 

The real threat: Prices are so high all over the world that people who once treasured their gold jewelry are now rushing to sell it. Swiss refiners are offering irresistible prices for bracelets and brooches, "cash-for-gold" stores are in Chicago malls, and suburbanites are hosting Tupperware-style parties where neighbors show up to hock their gold teeth. 

When this happened in the early 1980s with silver, prices plummeted from $50 to $15 in less than a year. Look for gold to end up below $500 an ounce within two years.

Stocks

Let's assume that investors want a 10% return from stocks (a 7% real return plus 3% gains from inflation). But at current prices, there is no way that the S&P can deliver those kind of gains in future years. 

Here's why: Think of the S&P as one company that provides a total return in two components, a dividend yield and a capital gain. Together, the two should equal 10%. But the two are inversely correlated. The lower the dividend yield, the higher the earnings growth rate must be to get you to that 10%. When yields are extremely low, those growth rates become mathematically impossible.

Right now, the P/E multiple for the S&P is an extremely high 20, based on a formula developed by economist Robert Shiller that removes the constant gyrations that can under or overstate the ratio, and the dividend yield is just over 2%. So to hit that 10%, earnings must rise 8% -- assuming 3% inflation, 5% annually in real terms. 

But earnings tend to track GDP, which rises about 3% a year over long periods, though far more slowly in a recession. So 3% real GDP growth isn't nearly enough to lift profits 5%. That implies that stock prices must drop sharply: A fallback to their historic P/E of around 14 would require a 29% correction, taking the S&P from its current level of 1,092 to around 770. 

"Stocks will disappoint us if we buy them when they're expensive and delight us if we buy them when they're cheap," says Rob Arnott, chief of asset manager Research Affiliates. Now, they're extremely expensive, and destined to disappoint.


Source >> http://money.cnn.com/2010/01/25/news/economy/assets_bubbles.fortune/index.htm


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## drillinto

January 30, 2010

That Was The Week That Was ... In Australia


By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. The correction continued last week? 

Oz. It certainly did. Finding a winner in last week’s sea of red ink was a major challenge. All sectors were down, even gold, which was a bit odd because the price of the metal actually rose about A$10 an ounce, thanks to a combination of a slightly stronger U.S. dollar gold price and a fall in the Australian dollar exchange rate. As it turned out Australian gold stocks lost quite a bit of ground taking the gold index on the ASX as a guide. This dropped by 6.7 per cent. However, it is worth noting that most of that big drop in the index was caused by weakness in the top two goldminers, Lihir (LGL) and Newcrest (NCM). Lihir plunged by A29 cents to A$2.77, as speculation continued over the sudden departure of its chief executive two weeks ago. Newcrest lost A$1.78, as it tumbled to A$31.53. Elsewhere among the gold stocks the damage was not quite as bad.

Minews. Let’s start with gold, and we’ll keep this week’s report quite quick because you’re probably in a hurry to catch a flight to Cape Town for the annual Indaba gabfest. 

Oz. Off soon, and a short report might actually be a blessing, unless you like reading long lists of losing stocks. Gold’s a good place to start, because the moves there looked a bit odd. The 6.7 per cent fall in the gold index was greater than the 6.5 per cent decline in the overall metals and mining index, and roughly double the 3.8 per cent fall that afflicted the all ordinaries. And that in an environment in which the gold price was stronger! Taken together it seems that investors simply decided that after the strength gold companies have enjoyed in the past few weeks it was time for a correction, as we all wait to see clear signs of what lies ahead in 2010. 

Minews. A big question. Let’s stick to some simpler. Gold prices, please. 

Oz. As hinted earlier, smaller gold stocks seemed to do better than the big boys. Troy (TRY) for example, which we will probably take a look at soon, actually added A3 cents to A$2.16 over the week, and while it is down from a mid-January price of A$2.50, a small uptick on Thursday indicates that interest is returning to a company which is once again getting on with business. Another modest rise was posted by Ramelius (RMS), which announced an expanded exploration effort, and rose A1 cent to A53.5 cents. After that it was flat or down. Stocks that held their ground included Centamin (CNT) at A$2.02, Focus (FML) at A6.7 cents, Allied (ALD) at A30.5 cents, and Resolute (RSG) at A98.5 cents. Weaker companies included Silver Lake (SLR), whic lost A9.5 cents to A92.5 cents, Adamus (ADU), which was down A2 cents to A42.5 cents, Perseus, (PRU) which was down a sharp A22 cents to A$1.57, and Kingsgate (KCN), which fell A14 cents to A$9.26. 

Minews. We get the picture. Lots of relatively small falls, no disasters. Let’s scurry along, iron ore next, please. 

Oz. A similar picture, two rises and the rest down. Brockman (BRM) was the only well-known stock to swim against the tide, as it posted an increase of A15 cents to A$2.75 after releasing an optimistic quarterly report. Venus Resources(VNS), which comes from the same stable as one of last year’s success stories, United Minerals, added A3.5 cents to A63.5 cents, after filing a positive exploration report. After that the list looks like this: Fortescue (FMG), down A28 cents to A$4.53, Atlas (AGO), down A20 cents to A$1.94, Mt Gibson (MGX), down A18 cents to A$1.40, Grange (GRR), down A3 cents to A33.5 cents, and Gindalbie (GBG), down A12 cents to A95 cents. Territory (TTY) was also weaker, down A2.5 cents to A18.5 cents, despite reporting a return to profitability. 

Minews. Base metals next, please. 

Oz. Only one up, as far as can be seen. Blackthorn (BTR), which successfully introduced Glencore to the Perkoa zinc project two weeks ago, has now announced that BHP Billiton has opted to extend and expand the joint venture at its Mumbwa copper project in Zambia. That helped Blackthorn rise by A9.5 cents to A90 cents. After that the red ink prevailed. Among the copper stocks, Citadel (CGG) was down A3.5 cents to A36 cents, Sandfire (SFR) was down A5 cents to A$3.70, Equinox (EQN) was down A21 cents to A$3.73, OZ Minerals (OZL) was down A13 cents to A$1.06, and on the list goes. All nickel stocks lost ground. Mincor (MCR) fell A23 cents to A$1.64, Independence (IGO) fell A38 cents to A$4.16, and Mirabela (MBN) fell A27 cents to A$2.04. Zinc stocks, apart from Blackthorn, were all lower. Terramin (TZN) lost A5.5 cents to A76.5 cents. Perilya (PEM) fell A8.5 cents to A61.5 cents, and Ironbark (IBC), which reported encouraging results from its Citronen project in Greenland, slipped A2 cents lower to A44 cents. 

Minews. Uranium, coal and any specials to finish. 

Oz. We’ve saved the best for last. Three uranium stocks did rise, though two not by much. Mantra (MRU) reported excellent results from its Nyota project in Tanzania, and rose A81 cents to A$5.73, a closing price which was a shade below a 12 month high of A$5.81 reached during earlier Friday trade. The other uranium companies on the rise were Uranex (UNX), up A2.5 cents to A30.5 cents, and Manhattan (MHC), which added a lowly half a cent to A$1.53. Paladin (PDN) lost A29 cents to A$3.64, after reporting more problems at its African mines. Forte (FTE) slipped A1 cent lower to A18.5 cents, and Toro (TOE) lost A1 cent to A13.5 cents. Not much to report from coal sector, with all stocks down a few cents, and no specials of note. 

Minews. Have fun at Indaba, and keep us posted, it’s the first big mining conference since the financial crisis officially ended, so a measure of the mood of the miners and bankers could be quite interesting.


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## drillinto

February 01, 2010

Indaba Starts With Optimism And With Trepidation, But One Thing’s Certain: Cape Town’s A Great Place To Hold A Conference

By Our Man in Oz, in Cape Town
www.minesite.com/aus.html

More delegates, but plenty of uncertainty as to how things are panning out. That’s a snapshot assessment of the first day at the annual Mining Indaba conference in Cape Town. The head count, according to organisers is around 4,000 delegates versus 3,800 last year, when miners and bankers stayed away in droves. This year, the first big mining conference to be held since the end of the global financial crisis, Indaba is expected to serve as a pointer as to how the mining sector will perform in 2010. And if comments from delegates at the Cape Town Convention Centre are a guide then both bankers and miners are delighted to have simply made it to the meeting, but no-one is expecting an overnight miracle.

Craig McGown, an Australian investment banker who is a regular at Indaba, believes bankers are taking the lead in the curious mating game that is played out behind the scenes at big resource-sector conferences. “The bankers need this year’s bonus, that’s why they’re keen to deal”, he said. “Miners are more cautious because they’re thinking about 10 years of revenue rather than a short-term fix.” 

Day one at Indaba is not the official start of the event. That’s day two. Minesite’s man will not try and explain why the event has a sort of false start, but is reminded of a comment made about South Africa on his first visit in 1984: “Welcome to South Africa, where clocks run backwards and water flows uphill”. 

Formal talks on day one all involved commodity forecasting, and delivered a steady stream of observations about rare metals, uranium, iron ore, gold and copper. Somewhat predictably most forecasts were optimistic about the outlook, though a clear message was that 2010 will be a year when supply issues dominate demand. 

Having said that it is also worth pointing out that no-one could really take away a clear picture of what to expect over the next 12 months, as seen in this simple example from the talk by Kevin Norrish of Barclays Capital about the copper market. In a generally positive view of the copper market which centred on the central role of China, Norrish said the copper price could pass the US$8,000 per tonne mark in the first half of the year, as he showed a slide which had a peak copper price of US$7,800 per tonne. Nit picking? Perhaps, but when the words don’t match the table it leaves a degree of uncertainty, and adds to a belief that no-one really knows what lies ahead, as the world crawls out of the financial crisis. 

David Hale, a prominent American forecaster of the future, made a series of underwhelming observations, pointing out with a flourish of hand waving that China will play a leading role in the world commodity sector “for decades to come.” Golly! Really? Hale also sang the praises of the US corporate sector for laying off a record eight million workers and said better times would return – another remark in the “we all know that category”. But the best was an observation that the world (especially Africa) needed nuclear power to solve its long-term power needs – at which point Minesite’s Man started to drift off. 

Better news will come on day two at Indaba when companies get their time in the sun, and the forecasts fade as all forecasts do. That’s when companies such as Nkwe Platinum, Centamin Egypt and Peninsula Minerals get time at centre stage, and lesser-known companies such as Australian-listed Sabre Resources also get to catch the ear of casual observers and explain what they’re achieving on the exploration front. In Sabre’s case that involves a grass roots copper discovery close to the historic Tsumeb copper mine in Namibia – making it one of Africa’s the more interesting exploration stories. Keep an eye on Minesite for more about Sabre in the next few days. 

If optimism tinged with uncertainty is the mood, so far, at Indaba then one aspect of the event is more certain. The location remains one of the great places in the world to hold a conference. The weather is fine, if slightly overcast, but with the temperature around 24 degrees it is easy to see why Indaba is a major attraction to snap-frozen London-based investment bankers. Even if the deals don’t flow, the beer does.


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## drillinto

Here is a very fine article on J. K. Galbraith.

The article is a bit too long for ASF.

Please click the link below to read it.

http://www.city-journal.org/2010/20_1_otbie-john-kenneth-galbraith.html


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## drillinto

February 03, 2010

Indaba Winds Down, Leaving Some Delegates Talking Of A Restart To The Super-Cycle, And Others Warning Of Choppy Waters Ahead

By Our Man in Oz, in Cape Town
www.minesite.com/aus.html


Day Three at the Mining Indaba in Cape Town, and the verdict is in: Success. Not outstanding, but at least according to veteran Australian stockbroker Hugh Wallace-Smith, worthy of a score of “six to seven out of 10”. Given what the mining world has been through over the past two years that’s a very positive rating. Not everyone agrees. They never do, and even Hugh had his own “only in Africa” story to tell which shaved a point or two off his rating. Over the past few years he has been following the story of ASX-listed Sundance Resources which owns the Mblam iron ore project in Cameroon, a promising but marginal prospect which needs, among other things, a 1,000 kilometre railway and a port. So, curious to hear first hand what’s afoot in Cameroon, Hugh popped along to a presentation from the Cameroon Minister for Mines – who duly failed to turn up. Africa, as seasoned investors know, always wins.

Pricing-in frustration is an impossible challenge, but Africa is definitely a place where frustration can almost be measured in dollars and cents. The trick for investors is to appreciate that a price has to be paid, and to make the appropriate allowance. It was with Hugh’s reality check in mind, and an enjoyable lunch provided by Melissa Sturgess, chief executive of ASX-listed and Aim-traded Nyota Minerals, behind him, that Minesite’s Man on the Cape embarked on his final survey of Indaba, finding that the dark continent (or the hopeless continent as The Economist dubbed it a few years ago) can throw up stories and investment opportunities worth pursuing. 

Melissa’s company has one of those stories of substance to tell, though for a reason that her staff have failed to appreciate. The key asset in Nyota is the Tulu Kapi gold project in Ethiopia. With a JORC-code compliant resource of 690,000 ounces Tulu Kapi is on the way to development. Fresh drilling is likely to see the resource base expanded to one million ounces over the next year, or so, with the Ethiopian government keen to see production start as soon as possible. But what caught the ear of Minesite’s Man was a comment that the gold close to the project site was mined by Italian diggers in the 1930s. Surely, thought a casual observer, if Centamin Egypt could promote itself for a decade or two as the company mining the gold of the pharaohs then Nyota could promote itself as the company planning to mine the “gold of Il Duce”, as Benito Mussolini, Italy’s dictator of the 1930s, was known? 

Names aside, Tulu Kapi is one of those projects that Africa throws up from time-to-time which have the potential to grow into something of substance. Centamin has certainly proved that with its Sukari mine which ranks as one of the best new gold developments of the past 20 years. Nyota could be onto something similar, operating in a country with an historic gold industry which got lost in the politics of the region. On the market, investors are starting to take a shine to Nyota, lifting the stock on Wednesday by nine per cent to A18 cents as the Tulu Kapi story was spread a little further. 

It was while listening to Melissa, and her co-workers, that Minesite was able to take two additional readings of the mood of the meeting from London-based financiers. Clive Sinclair-Poulton from Beowulf Mining gave the event a high rating as a useful pointer to better conditions ahead for mining stocks. Brad George from Matrix Corporate echoed that view, but suggested that deals would remain elusive, largely because of differing views on asset values. Both men saw this year’s Indaba conference as an effective re-start of the commodities super-cycle which hit a speed bump in 2008 but which has decades to run. 

Other companies that caught the eye at the conference, or on the cocktail circuit, included Resolute Mining, which continues to make headway with its Syama goldmine in Mali, and Nkwe Platinum which is approaching key decision points on its Garatau project in South Africa. Peter Sullivan from Resolute didn’t have much that was fresh to say, but Nkwe issued a nice resource upgrade on the day. 

As a final thought, Indaba organisers might consider making an award for the most honest paper of the conference, with a clear leader being James Smither, an associate director of Control Risks, a risk assessment consultancy. It took a very youthful Mr Smither to point out that rising metal prices are not all good news because many African countries are poised to increase taxes and royalties, that piracy around the African coast is becoming a significant problem, that assets can be nationalised on a whim, and that Nigeria has rocketed up the “kidnapping table”, all comments which drew mid-speech applause from a jaundiced audience. Smither’s warning was “do your homework” and expect the unexpected. His remarks were aimed at miners. They also apply to investors.


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## Edwood

not looking too good for copper - & by extension the Aussie market.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAid0.8z1qBs

Any thoughts drillinto?

Ed


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## drillinto

February 04, 2010

Diary Of A Private Investor At Indaba: Interest Aplenty In Gold, Coal, And Iron Ore

By Susie Boeckmann
www.minesite.com/aus.html

On day one the crowds pouring in and the South African Minister of Mines, Susan Shabangu, opened with a speech saying that mining companies would “not be nationalised in her lifetime”, but said she would not oppose the proposed 35 per cent increase in Eskom’s electricity charges as this is necessary to upgrade and improve power in S.A. over the coming years.
In the exhibition hall it was noted that there were more service companies than mining companies with booths. Many mining companies are holding meetings all around town so they can remain flexible and confidence prevails, with many private service companies commenting that the phones are now ringing regularly and business is moving, in spite of worries about China and America. 
.  
Chalice Goldmines is making good progress in Eritrea and own 80 per cent of operating company Sub Sahara, with Dragon Mining at 20 per cent. They have a 900,000 ounces of JORC compliant orebody, have completed the scoping study and expect feasibility study in June/July. What makes this exciting is that Chalice is on the same ‘Nubian Shield’ as Centamin Egypt.  Chalice has A$6 million in the bank. 

Agrekko is a worldwide company supplying generators and temporary power increasingly to the mining industry.  If there are world disasters they move in with power generators of every size. Unfortunately they are in their closed reporting season and results expected on Monday  but with all the power problems increasing especially in South Africa and other remote areas this is a company that can only grow in this part of the world. Power is a worry to all and the comments that Eskom will increase the electricity prices by 35 per cent made one risk management consultant comment that if this was the case every ferro chrome and aluminium producer will be out of business in three years in S.A. 

Rangold was a popular stand and it was good to hear that Mark Bristow visits Kinsasha at least every month to brief the government on progress at the recently acquired Moto Mine. This hands-on approach speaks for itself with the success of Randgold to date. 

Perseus was another company which created a lot of interest with its two million ounces of reserves and five million ounces of resources, and plan to start producing mid 2011. The mine will be open pit leading onto multiple pits. If the company gets that far – the predators are circling. 

On the subject of takeovers, First Quantum has finalised its acquisition of Kiwara. Kiwara was a small copper exploration company in Zambia which had fantastic grades in initial drilling. It will be interesting to see how F.Q. now manages with the takeover of the Ravensthorpe nickel operation that it bought off BHP Billiton. The company has entered into international arbitration against the fine recently levied on it by the DRC government at the Frontier copper mine with a dispute over mining rights. Overall First Quantum produced over 130,000 ounces of gold for nine months of 2009, and over 275 tonnes of copper over the same period. 

Rockwell Diamonds (TSX) is very busy showing that it has completed a successful capital raising for between C$13.2 million and C$16 million. The company has reopened two of its diamond mines in the Kimberly region. The view on diamonds is that there will be a shortage of rough stones in a couple years’ time, so that sector is beginning to come to life again. 

Coal of Africa is the envy of many, having finally signed and completed on some more coal leases and the company’s share price duly jumped by 17 per cent. London broker Evolution doubled its price target for the company to 220p. 

And coal seems to be the place to be right now. One project development director at BHP Billiton said that that if the company could stick to producing just coal and iron it would be great, as the company could make 10 times the amount on iron ore and coal than it can on copper. Whether this was an official BHP Billiton view wasn’t clear. 

Another company which is gaining interest is Aim-traded Baobab Resources which is based in Mozambique. The company has a portfolio of mineral projects exploring for iron ore, base and precious metals. The results are beginning to show, with high grades for iron, vanadium and titanium coming through at the company’s Tete magnetite project. Baobab is based near Tete and shares license boundaries with Vale and Riversdale, both of which have mega coal projects on the go out there. Power is abundant and infrastructure refurbishment well on hand. In 2008 Baobab entered into a strategic partnership with the IFC, the corporate arm of the World Bank, giving both corporate and project finance. The IFC has a long view, and believes that Tete will become the industrial hub of Southern Africa, particularly given the local hydro power and coal projects and the rail link from the interior to the coast. Baobab has money in the bank after a couple of London capital raisings and it’s ‘drills away!’ in April after the wet season. 

Dinner was held at the Vergelegen Wine Estate owned by Anglo. It was an elegant, invitation only, affair in the most beautiful setting. The gardens and trees are absolutely splendid, full of colour, with huge camphor trees lit up all around. The Dutch style house was really worth a visit and dinner was served for 800 in a huge marquee on the lawn. Cynthia Carol greeted us but as she had been one of Indaba’s early speakers, was welcoming with very little voice left!


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## drillinto

February 01, 2010

There May Be Wobbles Ahead, But Gold Remains The One Part Of The Equation That Cannot Be Tampered With 

By Rob Davies
www.minesite.com/aus.html

Someone once said that there is always a bull market going on somewhere. Well, last week it certainly wasn’t in the metals markets. Bizarrely, the cause of the weakness in metals was the markets finally giving up hope on Greece. That put pressure on the euro, which fell by 1.6 per cent against the dollar. A strong dollar usually means weaker metals prices. At least in dollar terms, as the greenback rises values in other currencies will remain at similar levels.
Metal prices have been heading for a correction for some time. Even the fan club at RBS, under the guidance of Nick Moore, expect prices to consolidate this year, so the near nine per cent drop over the week in copper, to US$6,840 a tonne, should not have been wholly unexpected. Even so, it wasn’t very nice and it did no favours to the miners, until they put on a late rally on Friday. 

In percentage terms the drop suffered by lead was similar to that suffered by copper. Lead was off by 9.6 per cent to US$2,055. Zinc did even worse, and dropped by dropped 12.1 per cent to US$2,150 a tonne. Aluminium and nickel escaped relatively lightly, however. Aluminium dropped by 5.9 per cent to US$2,097 per tonne, while nickely fell by 3.5 per cent to US$2,097 a tonne. 

What makes these downward moves somewhat odd is that they happened in a week when the US recorded exceptionally strong economic growth. The latest data shows that the US economy grew at a rate of 5.7 per cent over the fourth quarter of 2009. As ever, the trick to understanding the data is to know what the market was expecting in the first place, and what it was not. The US growth figures were expected. What upset the market was that China denied it was going to refinance Greek debt after the Greeks dropped strong hints it was.  As a consequence spreads on Greek bonds shot out to 400 basis points and the euro took a hit.

No one expects the euro to collapse because the Greeks have been economical with the actualitÃ© – no one’s surprised about that fast and loose approach in any case. But this situation does remind investors that the euro is actually a political fudge masquerading as an economic solution. Europe is saying let’s pretend Greece has a similar democratic and economic system as the rest of developed Europe, and let’s let Greece pretend to agree. 

The more that compromise is probed and stretched the more strain it will put on the euro. That can only depress it relative to the dollar, which is anyway looking a lot better than the yen as the credit rating agencies are now starting to put Japan on negative watch. 

The weak reaction of gold to all this tension is at first glance a little odd. Is the dollar a much better bet simply because everything else looks a bit worse? Not really. Nothing has actually happened to boost the greenback. It just looks safer in relative terms. Gold, even at US$1,076 an ounce, is the one part of the equation that cannot be tampered with. 

So, over the next few months, and more, it would not be a surprise to see some of the recent confidence surrounding the global economic recovery drop away a little. That could put more downward pressure on base metals, due the metals’ economic sensitivity, and because their prices have already discounted a rosy scenario. 

It might well be that higher levels of uncertainty could well translate into higher precious metal prices, as some supposed certainties start to unravel. For example, emphatic statements of support for Greece by senior politicians in the Eurozone might be viewed by some as a buy signal for gold.


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## drillinto

Edwood said:


> not looking too good for copper - & by extension the Aussie market.
> 
> http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAid0.8z1qBs
> 
> Any thoughts drillinto?
> 
> Ed




Ed: please have a look at comments by Rob Davies (Feb 01, 2010).


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## drillinto

February 05, 2010

Treasure Hunting At Indaba: Diary Of A Private Investor, Day Two

By Susie Boeckmann
www.minesite.com/aus.html

With over 4,000 delegates converging on Cape Town for Indaba and many having gone on to Livingstone for the All Africa Conference it seems suddenly much quieter in the aftermath. But deals and announcements are coming thick and fast. Sylvania and Jubilee have signed an agreement regarding the Conroast technology. Jubilee chief Colin Bird was conspicuous by his absence this week, so rumours circulated that something was afoot. He also signed off Kiwara to First Quantum. FQ is a growing mining and metals company engaged in mineral exploration, development and mining. The company currently produces copper, gold and sulphuric acid and expects to become a significant nickel producer by 2012. It operates in Zambia, DRC and Mauritania, with additional projects to be added in Finland, DRC, and Zambia. The company has a market cap of around C$7.6 billion and is quoted in Canada and London.

A preponderance of different corporate and project risk assessment companies and law firms were busily writing notes and huddled in meetings throughout this year’s Indaba. One example was law firm White and Case, a company which specialises in representing people coming into Africa with money to buy resource projects, and which has offices in Russia, Shanghai, Paris, London, and Johannesburg.  A very global industry! 

There were hardly any Chinese at the conference this year. One that was spotted was representing the Anhui Uni-pacific Nmetal and Minerals Import & Export Company Limited which is an iron ore trading company. He was handing around a leaflet amongst a group that included Doug Willock, the chief executive of Polar Star Mining Corporation and who talked to him in fluent Chinese. This was a little surprising as Polar Star is a Canadian company with what has been described as an ‘elephant’ copper discovery in Chile, positioned between high producing mines owned by Antofagasta and Codelco. 

There were a lot of Canadians around which seemed a bit surprising as they have PDAC, in a couple of weeks but also many British, Australian, and of course African corporate and investment people with clients to service. Only the one Chinese gentleman was spotted in person. 

A person well known in London, Jamie Strauss, is about to start raising money for a company called Kameni which has PGM prospects in South Africa and Zimbabwe. It was put together by an experienced management team led by the very canny Loucas Pouroulis, whose son, Adonis, heads Petra Diamonds. 

Extract Resources confidently presented their latest update on the 100 per cent owned Husab Uranium Project which contains two known uranium deposit areas, the famous Rossing South, and the Ida Dome, both in Namibia. The former has to be the most important uranium discovery of recent years. Extract’s project is complicated by the fact that Kalahari Minerals, Rio Tinto, Polo Resources, and others, all have hefty stakes in the company. Extract has a market cap of over A$2 billion, after the share price increased ten-fold in value during 2009. 

The Tenke Fungurume Project in the DRC is 57.75 per cent owned by Freeport-McMoRan Copper and Gold, 24 per cent owned by Lundin Mining/Tenke Mining Corp., and 17 per cent owned by GÃ©camines. This vast copper/cobolt venture has already had an investment of over US$1.75 billion and produced its first copper in March 2009, ramping up to 115,000 tonnes per year with an additional 8,000 tonnes of cobalt. At present there is an estimated 40-plus years of production. This is giving several thousand jobs of varying skills to the local community with many training and development programs in progress. Infrastructure is being improved, with the recent completion of a 175 kilometre highway between towns of Fungurume and Likasi. The way to benefit from this interesting story is through Freeport-McMoRan. 

Another interesting story is African Rainbow Minerals, a leading South African diversified mining and minerals company which has long-life, low cost, assets in commodities such as coal, manganese ferrous metals and platinum. It has forged partnerships with major companies in the resource sector such as Xstrata Coal and Vale. Platinum Australia has an agreement to earn in up to 49 per cent of ARM Platinum’s Bushveld project on completion of a bankable feasibility study.

Mantra Resources, listed on the JSE and Australian stock exchanges, and which has been a favourite amongst uranium investors, is a rapidly developing a uranium company in Tanzania with strong potential, confirmed by scoping studies.  Mantra has A$67.5 million in the bank and a proven and experienced board. It also boasts a 84.3 million pounds U308, 34 per cent of which is indicated, 66 per cent inferred). The projects benefits from soft, shallow open pittable mineralisation. First production is targeted for 2012. 

There was a lot of interest shown in a brownfields potash exploration project owned by Elemental Minerals Ltd.  Several nosey brokers and analysts were circling this booth. Headed by Iain Macpherson and with a very strong experienced board the company is targeting potash at its’ 93 per cent owned Sintoukola Potash project in the Democratic Republic of the Congo. Historic data collected by a French oil company in the 1960s and 70s suggest that this could be a low cost fast track project. The potential export markets would be Brazil, India and China. Infrastructure is good, as the property is 55 kilometres from Pointe Noire which is the largest port in West Africa.  The ROC government is building a 400MW power station, telecommunications there are good, gas is cheap and being flared off at present. Elemental is at present listed on the ASX (ELM) and Frankfurt exchanges, with a listing planned possibly on the TSX at the end of this year.  Market cap is A$43 million and the company has A$31 million in the bank.


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## doogie_goes_off

Just looked up ELM as the figures sounded good. They had $2.8M in the bank according to the quarterly and now have another $8.75M which makes $11.55M in my book. Can't seem to see the $31M quoted in the article. Either poor source or I cant see $20M staring me in the face.


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## drillinto

February 06, 2010

That Was The Week That Was ... In Australia

By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia, or should we say South Africa, as you’ve been at the Indaba talking shop all week? 

Oz. Still here actually. Just finishing up before heading home, so this week’s market report is a long distance look, and might have to be a bit shorter than usual.

Minews. Before getting to the market, then, perhaps a final word on Indaba, and how you read the mood of the mining industry. 

Oz. Healthy is the one-word answer, but not yet robust. It seemed that the conference itself was dominated by suppliers and service providers trying to sell their assorted wares. Genuine miners and bankers were perhaps a little thin on the ground, which was to be expected after such a tricky time over the past 18 months. Australian miners were well represented, and the London banking crowd was here at about 75 per cent strength. There were plenty of bow ties and pinstripe suits on display, a look which is so totally out of place on the Cape Town waterfront, but at least Jeremy Dowler from Baobab Resources had the good sense to look much more relaxed, complete with a long fruity drink, when he hosted a very pleasant farewell lunch at Camps Bay on Friday. 

Minews. And with your binoculars on at Camps Bay how did the Australian stock market perform last week. 

Oz. If you ignore Friday’s sell off, not badly. The last day of the week was the bad one, with the all ordinaries index on the ASX diving by 2.4 per cent and the metals and mining index plunging by 3.9 per cent after the sharp fall on Wall Street. But, if you take a longer view, the picture wasn’t quite so bad. There were two up days last week and three down. That averaged out as a pretty modest decline in the metals index of just 0.7 per cent. The gold index was down two per cent, and the all ordinaries 1.4 per cent. BHP Billiton, the local market leader, actually ended the week up A15 cents, a good sign that even in a sell-off there are buyers hunting out quality stocks. 

Minews. Time for prices, and since you’re in South Africa let’s start with gold. 

Oz. Falls across the sector, as expected, but most by modest amounts. If you look really hard you can even find a couple of stocks which rose. Ramelius (RMS), which released a statement outlining the likelihood of good profits on Friday, added A2.5 cents to A56 cents. And Emmerson Resources (ERM), one of the Tennant Creek crowd, crept half a cent higher to A20 cents. After that it’s all down. The biggest fall was a drop of A22 cents to A77.5 cents suffered by Carrick Gold (CRK). Other movers included Kingsgate (KCN), down A67 cents to A$8.51, Resolute (RSG), down A4 cents to A94.5 cents, Gryphon (GRY), down A3.5 cents to A40 cents, Chalice (CHN), down A7.5 cents to A35.5 cents, and Troy (TRY), down A6 cents and A$2.10. 

Minews. We get the picture, let’s move through the sectors with iron ore next, please. 

Oz. Same story, one up and lots down. The odd man out was FerrAus (FRS), one of the emerging small players in the Pilbara region, which will probably do a deal with a major, eventually. It added A3 cents to A76 cents over the week. Now comes the list of the fallen. Firstly, Fortescue Metals (FMG) dropped just A2 cents to A$4.51, despite the corporate cops announcing that they would appeal the verdict in the case they lost against FMG’s chief executive, Andrew Forrest. Other movers included Atlas (AGO), down A9 cents to A$1.85, Gindalbie (GBG), down A4.5 cents to A90.5 cents, Giralia (GIR), down A2 cents to A$1.52, Brockman (BRM), down A4 cents to A$2.71, and Iron Ore Holdings (IOH), down A5 cents to A$2.13, though that fall needs to be seen in the context of a A16 cents drop on Friday alone. 

Minews. In other words, Iron Ore Holdings was well ahead before Friday’s shake out? 

Oz. Precisely. It makes the point that it was more a case of one bad day wiping out a reasonably positive trend. 

Minews. Let’s move along to the fuel twins, uranium and coal, please. 

Oz. All down among the uranium stocks, but it was a surprisingly strong week for coal. Extract (EXT) led the way down among the uranium stocks, despite plenty of Indaba-linked publicity and a good story to tell about the Rossing South project. It fell A60 cents to A$7.30. Manhattan (MHC) lost A16 cents to A$1.37. Mantra (MRU) fell A43 cents to A$5.30. Forte (FTE) lost A1.5 cents to A17.5 cents, and Paladin (PDN), which had been the darling of the Australian uranium pack, fell another A12 cents to A$3.52, a price which is exactly A$2.00 off the peak of A$5.52 reached last June. 

Coal was the sector which performed best over the week despite losing ground on Friday. Coal of Africa (CZA) was the star attraction, adding A19 cents to A$2.34, in spite of some heavy selling on Friday. Macarthur Coal (MCC) added A8 cents to A$9.53, an even more impressive result because it dropped A56 cents on Friday. Whitehaven (WHC) rose by A15 cents to A$4.58, while Riversdale (RIV) had a tougher week than most, losing A49 cents over the week to close at A$6.96, with A43 cents of the fall coming on Friday. 

Minews. Base metals now, please. 

Oz. Not much joy here. The most notable performance came from Sabre Resources (SBR), which appears to have been the only base metal play to gain ground, perhaps courtesy of our mid-week report on its exploration activities near the historic Tsumeb copper mine in Namibia. Sabre added A3 cents to A40 cents. The only other stock to avoid the sector-wide sell-off was zinc hopeful Mt Burgess Mining (MTB), which managed to stand still at A1.4 cents, not a bad effort in a sea of red ink. Other zinc movers included Terramin (TZN), down A6 cents to A70 cents, Perilya (PEM), down A7 cents to A54 cents, and CBH (CBH), down A1.5 cents to A12.5 cents. 

Other copper movers included OZ Minerals (OZL), down A9.5 cents to A97.5 cents, Sandfire (SFR) down A28 cents to A$3.42, Equinox (EQN), down A13 cents to A3.60, and Marengo (MGO), down A1 cent to A12.5 cents. 

Nickel stocks were led by Mincor (MCR), which slipped A4 cents to A$1.42, and which like so many others, had its worst day of the week on Friday. Other nickel movers included Independence (IGO), down A39 cents to A$3.75, and Panoramic (PAN), down A12 cents to A$1.72. 

Minews. Thanks Oz. Travel safely.


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## drillinto

February 08, 2010

The Trend Is Your Friend Until The Bend At The End: Man Group’s Woes Offer A Cautionary Tale To Commodities Investors

By Rob Davies
www.minesite.com/aus.html

The rout in commodity prices continues, driven by a strong dollar and a general move away from assets deemed too risky. A relatively modest rise of one per cent in the dollar last week was outweighed by a 6.5 per cent fall in the price of copper to US$6,570 a tonne.
So, even though the Aussie dollar fell by 2.5 per cent, producers in that country still saw a real fall in their domestic price. Other metals experienced similar declines. Aluminium dropped 3.5 per cent to US$2,051 a tonne, lead by 4.3 pre cent to US$2,000 a tonne, zinc by 3.4 per cent to US$2,082. Only nickel that managed a gain, and even that was modest, a mere 0.7 per cent increase to US$18,250 a tonne. 

These falls gave back a lot of the ground that commodities have gained in recent months. Not only is copper now down 14 per cent on the year, but it is actually back to the level it was at in mid-October. The same argument goes for other asset classes that share the pro-growth attributes that metals do. The most notable downward moves have been visible on the stock markets on the southern fringe of the euro zone. The Athens market was marked down by 8.3 per cent, Spain’s fell by 7.7 per cent, and Portugal’s by 7.2 per cent. 

This sudden about turn in the mood of capital markets has had one high profile casualty, so far. Man Group grew out of the ED&F Man sugar trading business to become one of the most powerful hedge funds in the business, with a flagship worth over US$20 billion. 

The exact nature of Man’s investment process is a closely guarded secret, but it is known that the strategy is based around the futures markets with a significant exposure to commodities. In essence it seems that the complex algorithms are very good at following and extrapolating trends. 

Or at least were. The last financial year, and especially the last few months, have not been kind to Man, which has suffered the double whammy of an underperforming fund and redemptions. Funds under management have now fallen from US$47 billion to US$42 billion, and this poor performance means that the fund cannot charge its lucrative performance fees. 

As a consequence its market value has fallen from £5 billion to £3.7 billion, and its current yield is over 12 per cent. For anybody seeking a cheap and highly geared way to play the commodity markets Man Group must be an interesting opportunity. Provided of course it can get its computers to work out which trend it should be following. 

That of course is the nub of the problem for everyone following the commodity markets. The trend is your friend until the bend at the end. 

Last year was an exceptional period for commodities, and China seemed to be the only game in town. While that story has not gone away, it is being pushed into second place by the other cross currents in world capital markets. 

Now, there is real concern over the eurozone, and the dollar, despite all its problems, is deemed to be a much safer place to be. Perhaps the oddest development last week was the weakness in the gold price. Gold’s fall of 2.3 per cent was due to more than the rise in the dollar. If traders buy gold when they are worried about the dollar why do they buy dollars when they are concerned about the euro? Perhaps someone at Man Group is working on that.


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## drillinto

February 08, 2010

Diary Of A Private Investor In the Aftermath Of Indaba: Treasure Hunting Still...

By Susie Boeckmann
www.minesite.com/aus.html

Lots of impressions are left after my first trip to Cape Town. Everyone is very - friendly even the taxi drivers who managed to charge this visitor varied prices of between 37 and 103 rand (on a meter) for a five minute journey to the colourful Waterfront area from the Conference Centre. One taxi called from the upmarket Mount Nelson Hotel had a DVD screen on his dashboard showing a very racy girly show – this passenger kept telling him to keep his eyes on the road (video was pretty riveting).

The Minesite team was at the Mount Nelson Hotel, firstly for a networking reception organised by Tony Mahalski on behalf of Forbes Manhattan Group from Brazil at the splendidly named ‘Lord Kitchener Fountain’. There was a good mix of over 100 people from many countries, including Dubai. Then it was on to dinner with Polar Star Mining Corporation in a private dining room with an influential group of well known UK and Canadian advisors and brokers. 

After Indaba your diarist took a trip to the Cape of Good Hope with Our Man in Oz, who was reluctantly dragged along by his better half – he only cheered up after a few beers at the Radisson Hotel terrace, near the Waterfront, watching a large pod of whales frolicking and blowing in Table Bay. On the tour trip, Table Mountain was in cloud, the penguins at Boulder Beach were lying down so that the wind could pass over them and massive traffic jams had built up in Cape Town as it was the first major rugby ‘friendly’ at the new stadium, and this had attracted thousands of fans.  

The internet connection at Indaba was a nightmare, frequently cutting out even if connection is initially possible. Even nifty modems were causing trouble. Also not working: the ferry to Robben Island, though they have a temporary one running occasionally. Last week the cable car to Table Mountain was closed. In light of all this, a long-time resident of Johannesburg voiced concern that although lots of new towns are being set up to accommodate the burgeoning population these lacked infrastructure, water and power. However the new football stadium looks splendid and the impressive newly built airport is facilitating travel enormously. Football fans coming to Cape Town will be very happy. 

There are many and varied restaurants serving delicious food and wine and all good restaurants are booked days in advance. A trip to the nearby wineries is a must. This trip ended with a visit to the Steenberg Estate, which was one of the first farms, built in 1682, and is now a ultra luxury vineyard, with golf course, hotel, and spa thrown in, all surrounded by acres of green vines with views of the sea in the distance and imposing granite hills behind. This is the oldest vineyard on record in the area known as Constantia, and only 20 minutes from central Cape Town. 

Back to companies. 

Amongst the companies exploring in Ghana, which is the 2nd biggest gold producer in Africa, is ASX-listed Azumah Resources. This company aims to build the first commercial scale gold mine North West Ghana. It has an inferred and indicated resource of 754,000 ounces, following a recent successful scoping study, has had a recent capital raising and currently enjoys a market cap of around A$46m. Macquarie bank holds 15 per cent of the equity. Infrastructure, water and telecommunications are good. 

Across the border in Burkina Faso Ampella Resources’ licences are in the same Birimian greenstone belt. That geological good fortune has resulted in healthy grades for Ampella’s maiden inferred resource at the Konkera deposit where the company has announced 1.2m ounces of gold inferred at a grade of two grammes per tonne, with potential to double this resource in next 12 months. Ampella has recently acquired two new permits over four kilometres of old artisanal workings, with very high grades reported at relatively shallow depths, and visible gold seen. 

Artisanal gold mining in Burkina Faso is apparently organised and less troublesome than it is in some other parts of Africa. When leases are granted and mining companies start working on a site, the government will help move the camps and artisanal workers to new locations as they are pretty transient anyway.  Ampella expects to have a drill on one of its new leases shortly. The word is that a 2 ½ kilo nugget was found recently on its site by artisanal workers. This company seems to have several promising projects at various stages of exploration. 

Still on the gold track, Great Basin Gold has quite a following amongst the South Africans. It has a market cap of US$630 million and is listed on TSX, JSE and NYSE Amex. It is fully funded and has been producing at its Hollister project in Nevada since 2008, aiming to have annual production of 120,000 ounces per year, with a current mine life of 10 years. Great Basin Gold is also developing the first new mine in the Witwatersrand Basin in 30 years. It is a shallow, open pit, low cost, low risk, long-life mine that should produce over 250,000 ounces per year at a cash cost of US$319 per ounce. Both projects have potential for exploration growth, and the company also has early projects in Mozambique and Tanzania. 

Now to a company that pays a dividend!  IAMGOLD is a leading mid-tier gold mining company that produces nearly 1,000,000 ounces per year from seven mines on three continents and which is aiming for a production rate of 1.8 million ounces.  The company’s projects are primarily located in West Africa, on the Guiana Shield of South America and in Quebec, Canada. IAMGOLD has a market cap of US$6.6 billion is listed on the TSX and NYSE. 

But enough about pure gold plays, and on instead to a higher risk but very rewarding project portfolio, if, that is, Zimbabwe continues to make progress opening up its mining prospects. African Consolidated Resources, listed on Aim, has identified and purchased over a dozen extraordinarily rich deposits with prospects for diamonds, nickel, gold, copper, platinum, and rock phosphate. Most of these potential projects already have extensive databases proving up their estimated reserves. This company is run from UK and has quite a following in London where its management is well known and respected. 

Mount Burgess, by contrast is listed on the other side of the world, in Australia, but it also has its assets in Africa. The company is operating in Botswana, and its two leading, but early stage projects exploring for zinc, lead and silver have made good progress. Lead and zinc recoveries have come in at greater than 90 per cent, and the company is taking steps to enable the production of metal cathode which will eliminate fees paid to external smelters and boost the project margins. These could well turn out to be viable operations if the zinc and lead prices stay at current levels.  

On the rare earth front Avalon Rare Metals Inc. is mineral exploration and development company focussed on rare metal deposits in Canada. Its flagship project, the 100 per cent owned Nechalach Deposit, near Thor Lake, NWT, is emerging as one of the largest undeveloped rare earth elements resources in the world.  Avalon is well funded, has no debt and is listed on the TSX. The company’s Indaba stand was manned by enthusiastic young people who seemed well qualified and knew what they were talking about. Sadly, this is not always the case with the people manning the booths.  As China has to date most of the rare earth elements market it is worth following projects outside this region. 

It has been a fascinating week with many insights for this investor on this first trip to the Indaba, and it will be interesting to watch the various companies developing in the future.


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## drillinto

Yale professor sees commodities decoupling 

* Sees long term benefits to commodity exposure
* Research helped spark commodities investing boom

By David Sheppard
www.guardian.co.uk

LONDON, Feb 8 (Reuters) - Commodity prices will decouple from equity markets in the near future, providing investors with more diversification, Yale University professor K. Geert Rouwenhorst told Reuters.
The academic, whose 2004 paper was instrumental in convincing institutional investors that commodities could be a new asset class, said he stood by his findings from six years ago, despite huge volatility in most commodity markets over the last 36 months and rising correlations with equities.
"The correlations between commodities and equities that we've seen since the start of the crisis are unlikely to continue. If the oil price was to soar again it's unlikely that's going to be accompanied by a sharp increase in equities," Rouwenhorst said by telephone from New Haven in the U.S.
"The long side of commodity future contracts continues to provide diversification to traditional portfolios of stocks and bonds and unlike some other asset classes commodities have been shown to be positively correlated with inflation."
Rouwenhorst's 2004 paper, 'Facts and Fantasies about Commodity Futures' with now fellow Yale professor Gary Gorton argued that commodities provided attractive long-run returns similar to equities, but crucially, the correlation between the two markets was weak, providing a useful hedge for investors.
In the six years since the paper's publication, institutional investors have allocated an increasingly large amount of their portfolios to commodities. The value of commodity funds looks set to grow by one third in 2010, leaping by a further $100 billion, with many funds considering allocations of up to 10 percent. 

UNUSUAL SHOCK
While some analysts have argued new participants have changed the way commodity markets operate, with many investors now taking bullish or bearish views on both equities and commodities at the same time based on the macroeconomic outlook, Rouwenhorst said the impact had been overstated. 
"When investors started taking larger exposure to the future markets, it was also at a time when these markets themselves grew," Rouwenhorst said.
"At the peak the notional size of commodity derivative markets was in excess of $10 trillion. Investments in commodity indices are generally estimated at just $200-$300 billion -- it sounds a lot but it's not when compared with the overall size of the market."
Commodity and equity markets have often moved in tandem since the peak of the economic crisis in the Autumn of 2008. After both crashed in the wake of Lehman Brother's demise, the two markets both rallied by more than 70 percent in 2009.
"We saw a very unusual shock last year which was not unique to commodities - investors were simply pulling risk off the table across all classes at this time," Rouwenhorst said.
Rouwenhorst is also a partner in SummerHaven Investment Management, a fund specialising in commodities and indices which takes an active approach to managing positions in the market. The fund launched last year. 
"I think people should look both at outright returns and diversification when investing in commodities," he said.
"Investors will receive higher compensation in periods of scarcity. In the emerging markets we will continue to see increased demand for resources which will likely be paired with the view of long periods of scarcity."


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## drillinto

ISM Commodities Survey Shows Increasing Inflation Pressure 

http://www.bespokeinvest.com/thinkb...rvey-shows-increasing-inflation-pressure.html


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## drillinto

February 13, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia, it seems your return from the Indaba mining conference in South Africa has had a positive effect on the ASX. 

Oz. It'd be nice to think so, but the real reason for last week’s recovery was a sharp upward revision in price forecasts for iron ore. Rather than talking about a 30 or 40 per cent rise, there is now open discussion about a 90 per cent increase. What’s driving speculation of this near-doubling in the price is demand in the spot market, where prices currently sit at around US$125 a tonne. And that compares very favourably indeed with the benchmark (long-term) price of around US$60 a tonne.

Minews. And the miners, presumably, are arguing that all sales should be at the spot price? 

Oz. It’s a little more subtle than that, but it appears the Chinese steel mills might have last year kicked the world’s most expensive own goal when they initially refused to sign a new benchmark price agreement. That move forced more iron ore onto the spot market, and triggered a series of events which appears to have desTroyed a pricing system the Japanese invented in the 1960s to ensure annual price stability. 

Minews. Which means that your market was led last week by iron ore stocks? 

Oz. Yes, with gold miners also making a solid contribution. The overall effect of iron ore and gold could be seen in the indices. The all ordinaries, held down by European sovereign debt concerns and the flow-on effect on global borrowing costs for banks, managed a modest rise of 1.2 per cent last week, whereas the metals and mining index added 4.4 per cent whilethe gold index was up by 5.6 per cent. 

Minews. Time for prices,then. Let’s start with iron ore as that seems to be the news-making sector. 

Oz. It was, but before we drill into the detail a small heads-up warning for investors. The promise of higher prices has put the government on full alert, especially as the global trade is dominated by the three big boys of mining, BHP Billiton, Rio Tinto and Vale. They’re leading the push for the spot price to become the standard market price, while at the same time BHP and Rio are also trying to get European Union agreement on the merging of their Australian mining operations. To add to that heady mix, the state government of Western Australia is also demanding higher royalty payments. All of which means that the fatter profits that might be expected from current market conditions could in fact be trimmed, while at the same time, it might also create an opening for smaller miners to lever themselves into business. 

Minews. Interesting stuff, but let’s stick to prices for the time being. 

Oz. One of the best upward moves among the iron ore stocks came from Giralia (GIR), which has a series of iron ore projects under investigation. The latest to attract interest is the Yerecoin magnetite property, located in the wheatbelt of south-west Western Australia. Like some other explorers, Giralia has recognised that iron ore is all about rail and port access, which is precisely what Yerecoin has. On the market, Giralia rose by A18 cents to A$1.70 last week. Also on the move, Mt Gibson (MGX), rose A26 cents to A$1.60 after filing a strong first half profit result, and Iron ore Holdings (IOH) rose by A27 cents to A$2.40 after reporting an increase in its resource base. Other strong performers included Atlas (AGO), up A24 cents to A$2.09, Fortescue (FMG) up A42 cents to A$4.93, Brockman (BRM) up A25 cents to A$2.96, and Gindalbie (GBG) up A6 cents at A96.5 cents. Territory (TTY) was also better off, continuing its slow but steady recovery with a half cent rise to A15.5 cents. 

Minews. Gold next, please. 

Oz. Stronger across the board, and with a few stand out movers. Barra (BAR) was the star, after it reported bonanza drill hits at its Phillips Find project near Coolgardie. Best assays included three metres at 70.78 grams a tonne (or more than two ounces to the tonne) and a skinny 0.7 metres intersection grading 299 grammes per tonne, which probably means the drill-bit hit a nugget. On the market, Barra’s share price shot up from A7.6 cents to close the week at A9.1 cents. At one point on Friday it was trading as high as A10.5 cents. Meanwhile, CGA Mining (CGX) completed a major capital raising for its gold projects, and delivered a share price rise of A28 cents to A$2.28. Chalice (CHN) regained lost ground with an eye-catching gain of A9.5 cents to A43 cents. Kingsgate (KCN) added A48 cents to A$8.99. Andean (AND) continued to build on its reputation as an emerging South American gold specialist, and put in a rise of A27 cents to A$2.55. Catalpa (CAH) rose by A15 cents to A$1.40, and Troy (TRY) ended the week at A$2.28, a rise of A18 cents. 

Minews. Base metals, which should have done well with the copper price rising strongly towards the end of the week. 

Oz. There was a welcome return of interest in the copper and nickel sectors, but a more modest performance from zinc stocks. Copper led the way, as the price firmed above the US$3.00 a pound level. The best of the Australian copper stocks was Sandfire (SFR) which charged back after a post-Christmas sell-off, adding a very strong A98 cents to A$4.20, helped along by the release of fresh drill results from its Doolgunna project. Talisman (TLM), which has adjacent tenements, rose by a sympathetic A15 cents to A$1.02, but is yet to report any drilling results. Other copper moves included Equinox (EQN), up A22 cents to A$3.81, Citadel (CGG), up A1.5 cents to A35 cents, and OZ Minerals (OZL), up A5 cents to A$1.02. Jabiru (JML) rose A4 cents to A40 cents after acquiring the mining finance house, MetalsX, as a major shareholder, while Hillgrove (HGO) was also better off, up A4.5 cents to A39.5 cents, although that was mainly thanks to positive news from its gold exploration program in Indonesia. 

Minews. We might take a closer look soon at that Hillgrove work. Meanwhile let’s finish the base metals call and move along to uranium, coal and any specials, please. 

Oz. Nickel stocks were stronger, but not to the same extent as copper. Mincor (MCR) added A5 cents to A$1.47. Minara crept up by A1 cent to A63.5 cents. Western Areas (WSA) rose by A22 cents to A$4.28. Independence (IGO) gained A26 cents to A$4.01, though that rise could be more to do with its gold projects than its nickel ones. 

Perilya (PEM) was the best of a lacklustre zinc sector, putting in a rise of A4 cents to A58.5 cents. CBH (CBH) added A1 cent to A13.5 cents. Terramin (TZN) put on A3 cents to A73 cents, and Mt Burgess (MTB) slipped to A1.1 cent, down A0.3 of a cent. 

Uranium stocks were mixed, with one stand-out winner in Manhattan Corporation (MHC), which added A29 cents to A$1.66. Paladin (PDN) crept up by A2 cents to A$3.54 after an uninspiring profit report. After that it was generally weaker. Extract (EXT) slipped backwards by A15 cents to A$7.15, and Bannerman (BMN) lost A2.5 cents to A59.5 cents. 

The coal sector produced more winners, including an excellent debut by a new float. Hunnu Coal (HUN) which is exploring in Mongolia and planning to cash in on Chinese electricity demand. Hunnu’s A20 cent shares started trading on Friday at a very strong A36.5 cents, before they eased slightly, to end day one at A33.5 cents. All of which made the stags very happy. The best of the established coal stocks was Macarthur (MCC) which gained A$1.32 to A$10.85. Riversdale (RIV) added A$1.04 to A$8, and Coal of Africa (CZA) crept A1 cent higher to A$2.34. 

Minews. Any specials? 

Oz. Lithium stocks continued to suck in the speculators, as Galaxy (GXY) added A17 cents to A$1.23, while a new player in the game, Black Fire Minerals (BFE), reported encouraging rock chip samples from its Karibib project in Namibia, news which helped lift the stock by A4.5 cents to A15.5 cents. 

Minews. Thanks Oz.


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## drillinto

February 15, 2010

Overcapacity Everywhere, Except In Mining
By Rob Davies
www.minesite.com/aus.html


2009 was the year when capital markets realised that capitalism still worked. This year seems to be turning out to be the year when the same people are deciding that although it’s good that it works, it is not quite as exciting as they would like it to be.

Bizarrely, overcapacity exists in almost every industry in every country, with only one glaring exception. Car manufacturers still have heaps of under-utilised plants, despite the environmentally ludicrous incentives from governments encouraging consumers to scrap perfectly good cars. 

Toyota has so little to do it is going to rebuild several million cars it has already made. 

The only industry that is struggling to meet demand is mining, and even there the picture is mixed. The obvious exception is nickel. But every copper mine is going flat out, and so are coal and iron ore mines. Aluminium does have a bit of spare capacity, as do zinc and lead mines. And platinum operators are struggling a bit. But gold production has not risen in ten years, even though prices have quadrupled and demand is at a record. 

The answer to this conundrum is that while the developed world has invested squillions of dollars, euros, yen, and renimbi to make things like cars and fridges there has been a famine of investment in mining. 

Often regarded as low tech and embarrassing in today’s digital world, too many people overlook the fact that on the London Stock Exchange, the third biggest exchange in the world, 30 per cent of the distributable profits come from companies that extract resources from the ground. Virtually nothing comes from businesses making cars, fridge or “clean technologies”, whatever they are. 

Despite this simple demonstration of what makes money, and what does not, no government ever wants close a car plant, or indeed any industrial facility that employs voters. As a consequence there is a massive surplus of car plants and other factories. 

That suits miners. As long as General Motors and Toyota keep building cars demand for metals will hold up, irrespective of the capital structure of the owners. 

It is this strong underlying demand that drove metals back up last week so that, before Friday’s sell off, they had recovered much of the ground that was lost the previous week.  In the end copper closed 1.5 per cent ahead at US$6,672 a tonne, and the other metals made similar recoveries. However, nickel, as is often the case, went its own way and fell by 1.7 per cent to US$17,940 a tonne. 

The undercurrent to this renewed demand is China, and it was worries about the impact of efforts to slow the economy there that caused the setback on Friday. Whether the increase in the reserve ratio for Chinese banks by 50 basis points will have the desired effect is unknown. But, for the moment, all commodity producers are grateful for the pull from China, as the economic data from Europe stays unrelentingly grim. 

Growth of 0.1 per cent from the eurozone in the fourth quarter hardly merits the name.  At some point politicians will accept the inevitable and invite Greece to leave the euro for its own good. But that is probably many months away and the intervening period will do nothing to encourage investor confidence in the euro. 

In the meantime, commodity investors just have to hope that the Chinese authorities slow the Chinese economy by just enough, but not by too much - a tricky balancing act indeed.


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## drillinto

The Boom Is Nigh
Why the coming recovery will hurt like hell. 
By Gregg Easterbrook | NEWSWEEK  

Published Feb 12, 2010 
From the magazine issue dated Feb 22, 2010


Excerpted from SONIC BOOM: Globalization at Mach Speed 
Copyright 2009 by Gregg Easterbrook, Published by Random House 

Home prices keep falling, but productivity is rising fast. GDP grew 5.6 percent in the fourth quarter, yet unemployment remains stubbornly high. Inflation is nonexistent, while the consumer confidence index just rose to 55.9 from 53.6””whatever that means. Can't make sense of these economic indicators? Don't worry, because nobody else can, either.

Here is what you really need to know: a Sonic Boom is coming. It will be caused by globalization. And while globalization may be driving you crazy, it's just getting started. Thirty years ago, Shenzhen, China, did not exist; today, it has nearly 9 million residents, roughly the same as New York City. In a single generation, it has grown from a village of tar-paper shacks into an important urban center. It has become the world's fourth-busiest port, busier than Los Angeles and Long Beach combined. Never before has a great city been built so fast, nor a productive economy established from so little.


The international recession that began in 2008 has made the Sonic Boom quieter, but history shows that when a crisis ends, the larger trends in place before the crisis usually resume. Shenzhen represents the larger trend of growth, change, and transformation at unprecedented velocity. Thanks to vast increases in productivity, worldwide economic growth soon will pick up, creating rising prosperity and higher living standards for most people in most nations. The world will be far more interconnected, leading to better and more affordable products, as well as ever better communication among nations.

But there's a big catch: just as favorable economic and social trends are likely to resume, many problems that have characterized recent decades are likely to get worse, too. Job instability, economic insecurity, a sense of turmoil, the fear that even when things seem good a hammer is about to fall””these are also part of the larger trend. As world economies become ever more linked by computers, job stress will become a 24/7 affair. Frequent shakeups in industries will cause increasing uncertainty. The horizon has never been brighter, but we may not feel particularly happy about it. Here are five things to keep in mind during these dizzying times:

CLIMATE CHANGE WILL CHANGE EVERYTHING
Dramatic economic change will happen at the same time as climate change. Either one would be a challenge in itself. Now, they're going to occur simultaneously, which will cause economic convulsions unparalleled by any event other than World War II. Winners are likely to be those in high-latitude regions. Yakutsk, Russia, located in Siberia just below the Arctic Circle, is currently home to the world's leading museum of woolly-mammoth fossils. But what if Siberia were to become a temperate expanse? The minerals and oil thought to lie beneath the permafrost could boost the global supply of commodities, not to mention Russia's national wealth.

MANUFACTURING WILL BE OBSOLETE
The factory-based economy is nearly over, because of technological improvements. Fifteen years ago, Boeing took 22 days to build a 737 airliner; today, it takes 12 days. Such changes mean fewer factory jobs, even as production rises. China is losing factory jobs much faster than the United States, as efficiency improves. Soon there won't be any nation with a factory-based economy, and that would have happened regardless of whether there was trade liberalization. Higher productivity, in turn, generates the social wealth that creates more jobs for teachers, health-care providers, and other essential needs. The world is actually better off with declining factory employment, which is no consolation if you lost a job.

COLLEGE IS OUR SECRET WEAPON
College is more valuable to the future economy than petroleum. America leads the world in many areas””economics, military power, loud music””but nowhere is the lead more important than higher education. The United States has more great colleges than the rest of the world combined. Yet California, Texas, and other states are cutting back their public-university systems. This is a terrible mistake. In the long run, extra college may even cost society less, because people with college educations are better suited to look after themselves in a turbulent economy, rather than asking the government to subsidize them.

WOMEN WILL DOUBLE THE WORLD'S SUPPLY OF IDEAS
In Western nations, women's education levels and personal freedom already are on track to equal men's; in much of the developing world, this could happen in the next two generations. Throughout history, most women have been denied a fair shot at contributing to research, engineering, business-management, and leadership roles. Asthis changes, there will be twice as many people applying their brainpower to the world's problems.

MILITARISM WILL DECLINE
Iraq, Afghanistan, and Darfur are awful exceptions to a two-decade trend of fewer wars and less combat in the world. Right now a person's chance of dying because of war (via combat or through indirect causes) is the lowest it has been in human history; nuclear warheads are being disassembled instead of built; per capita global arms spending has declined 40 percent in the last quarter century. Some of the reason is economic: nations are more interested in acquiring market share than in acquiring territory. But that's good! And there has never been a superpower relationship like the one evolving between the United States and China. The world's two leading powers are not arming against each other; rather, they're cooperating on economic production.

Many of these developments will have far-reaching positive consequences. But they will all add to our uncertainty. One reason our economic anxiety soared during the recent crisis is that it seems like no one is in charge of the U.S. economy. In fact, there is no one in charge. The president doesn't "run" the economy””no one does. In a way, this is a source of stability. There is no one person who can make a fatal economic blunder. Think of all the crazed, conflicting statements about the economy that were made by government officials, Democratic and Republican alike, in the fall of 2008, as economic grand plans and emergency theories changed daily. Imagine if any one of them had actually been in charge of the economy””surely he or she would have made the situation considerably worse.

Because no one runs the economy, no one knows where the economy is headed. And that means that even when most things are OK for most people, the sense that everything is about to fall apart is palpable. Americans have had this sense before. At many points in our history, it was commonly felt the nation was about to enter a cycle of sharp decline. Probably this won't happen, but we can't know that for sure. Today, this fear manifests as collapse anxiety: the worry that resource exhaustion, or international chaos, or something we haven't even thought of will bring down the Western way of life.

Bear in mind the seemingly iron law of human events””new problems always arise to replace the old. Suppose the economic downturn ends, and what comes next is a flowering of productive efficiency and higher material well-being. The same forces likely to bring about these desirable ends also will cause economic tumult to grow more frequent. Job anxiety will be endless. Celebrity inanity, political blather, targeted advertising, scream-and-shout discourse, the paving over of nature””they're going to get worse. Winner-take-all wealth accumulation at the top, already the worst fault of capitalism and among the least-attractive aspects of American society, may worsen in the West while infecting newly free nations.

Plus, every little thing that goes wrong anywhere in the world will scare us. Now if something explodes in Pakistan or a new product from Malaysia challenges a Midwestern product, we have live television images within minutes. The terrific aspects and the anxiety-inducing aspects will be intertwined, and we're just going to have to live with this. No matter how crazy and chaotic events become, with each passing year, the world likely will be a better place than at any point in the past. A chaotic, raucous, unpredictable, stress-inducing, free, prosperous, well-informed future is coming. It will be a Sonic Boom. Just remember to cover your ears.

Find this article at 
http://www.newsweek.com/id/233528


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## GumbyLearner

drillinto said:


> The Boom Is Nigh
> Why the coming recovery will hurt like hell.
> By Gregg Easterbrook | NEWSWEEK
> 
> Published Feb 12, 2010
> From the magazine issue dated Feb 22, 2010
> 
> 
> Excerpted from SONIC BOOM: Globalization at Mach Speed
> Copyright 2009 by Gregg Easterbrook, Published by Random House
> 
> Home prices keep falling, but productivity is rising fast. GDP grew 5.6 percent in the fourth quarter, yet unemployment remains stubbornly high. Inflation is nonexistent, while the consumer confidence index just rose to 55.9 from 53.6—whatever that means. Can't make sense of these economic indicators? Don't worry, because nobody else can, either.
> 
> Here is what you really need to know: a Sonic Boom is coming. It will be caused by globalization. And while globalization may be driving you crazy, it's just getting started. *Thirty years ago, Shenzhen, China, did not exist; today, it has nearly 9 million residents, roughly the same as New York City. *In a single generation, it has grown from a village of tar-paper shacks into an important urban center. It has become the world's fourth-busiest port, busier than Los Angeles and Long Beach combined. Never before has a great city been built so fast, nor a productive economy established from so little.
> 
> 
> The international recession that began in 2008 has made the Sonic Boom quieter, but history shows that when a crisis ends, the larger trends in place before the crisis usually resume. Shenzhen represents the larger trend of growth, change, and transformation at unprecedented velocity. *Thanks to vast increases in productivity, worldwide economic growth soon will pick up, creating rising prosperity and higher living standards for most people in most nations.
> 
> And it doesn't pay one cent of tax.
> 
> Go commods!*


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## drillinto

"A chaotic, raucous, unpredictable, stress-inducing, free, prosperous, well-informed future is coming. It will be a Sonic Boom. Just remember to cover your ears."
Excerpted from SONIC BOOM: Globalization at Mach Speed 
by Gregg Easterbrook, Published by Random House

I am ready for the sonic boom in commodities >>  http://www.amazon.com/gp/product/im...age_text_0?ie=UTF8&n=3375251&s=sporting-goods


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## drillinto

February 17, 2010

Private Equity, State Owned Entities, And Sovereign Wealth Funds: The New Arbiters Of Power In The Post Credit Crunch World
By Alastair Ford
www.minesite.com/aus.html

Over the last five or six years stock markets, and mining markets in particular, have managed to confound both bears and bulls in almost equal measure. No sooner had analysts caught up to the idea that the Supercycle wasn’t just a promoter’s daydream but a hard economic reality, and updated all their financial models accordingly, when all of a sudden the global financial crisis smashed into everything and sent the whole world into a tailspin. Given that rollercoaster, it’s perhaps understandable that lots of research these days seems to have more than one heading. In many cases the shell-shocked analysts involved can’t decide what they really want to say. There was certainly plenty of that kind of research around at the back end of 2008 and in the early part of 2009, when a read-through of much of what was written could simply have been rendered as: Life is terrible, things can only get better. Another way of putting it might have been: You can now make a killing, provided you haven’t already been killed. 

So it was nice to see that the commentary accompanying the latest research from Ernst & Young Global Mining and Metals team doesn’t mince words. And neither does it hedge its bets. “Longer term fundamentals look compelling for miners”, blasts out from the top line. The secondary heading follows up with an equally bullish: “Confidence in super cycle returning to drive mining deals”. Interesting too, to note that “A new era of financing has dawned that will forever be changed”. The precise meaning of that statement may not be entirely clear, but the sentiment certainly is: it’s a brave new world. 

At the beginning of the actual Ernst & Young document, which runs to a choice 132 pages, the initial tone seems to be backward-looking. “2009: The Year of Survival and Revival”, reads the first major heading, ahead of the photo parade of the report’s myriad authors, principal among them Mike Elliot and Michael Lynch-Bell. “2009 Was An Extraordinary Year For Mining And Metals Companies, With Changes That Will Resonate Through The Industry For Years To Come”, reads a further heading. So rather than looking back, what it’s actually doing is setting the scene for the future. 2009 was the year all the clocks were reset to zero. 

Looking ahead, says Ernst & Young, China remains a key driver for markets and the major companies have now all been recapitalized and are reasonably well positioned to take advantage. But in spite of that restored equilibrium, certain dynamics have changed for ever. The disappearance of the availability of debt financing in 2009 meant that Asian buyers with cash emerged as an even greater force in the market, while follow-on equity and bond raisings hit record levels. Good news for certain sections of the markets, though one can’t help wondering whether, with metals prices delivering a strong recovery during last year, the debt boys didn’t miss a trick. 

Too late: the world’s moved on. Ernst & Young’s headings are once again all that’s needed for guidance: “Flight To Equity”, “Resurgence In Corporate Bonds”, “Demise Of The Bank Loan” tell you almost all you need to know about how money’s being raised in the post credit crunch world. Project finance was on a real downer last year. Only one project with a value of over US$1 billion made it through to the home stretch: Antofagasta’s Minera Esperanza project. 

But, as many of the attendees at our 65th Minesite forum - packed to the rafters on Tuesday 16th February – will attest, there’s plenty of positive sentiment around as far as mining in general goes. And Ernst & Young would heartily agree. “Continued demand from China and India to fuel rapid economic development means the mining and metals sector’s longer-term fundamentals remain compelling”, says Ernst & Young. “2010 has begun strongly, continuing the momentum that built up at the end of 2009. We expect the number and size of deals to increase, although megadeals are likely to remain scarce. Many mining and metals companies that are pre-occupied with debt reduction are looking to organize growth and strategic bolt-on acquisitions before valuations become too expensive. Even the most cautious players are looking at how to prosper from economic recovery. And competition from cash-rich Chinese companies and increasingly resource hungry Indian investors will promote a strong seller’s market.” 

That can only be good news for the juniors, many of whom showed commendable resilience during the tough times over the last couple of years. For the survivors it could all be about to come good again. One thing’s for sure at any rate – the era of cheap debt is over. Look now to sovereign wealth funds, state-owned entities, henceforth to be abbreviated as SOEs, and private capital to make much of the running as far as financing is concerned. Equity funding will assume an even greater prominence, and the IPO market should recover strongly. And we’ll continue to bring you the best of those stories here on Minesite.


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## drillinto

The link to download the Ernst & Young's report "2009 - The year of survival and revival", is at the bottom of the article below

http://www.ey.com/UK/en/Newsroom/News-releases/Mining---10-02-16---Longer-term-fundamentals


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## drillinto

Bespoke's Commodity Snapshot
Charts for ten major commodities

http://www.bespokeinvest.com/thinkbig/2010/2/19/bespokes-commodity-snapshot.html


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## drillinto

February 20, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html  < < Registration to this site is free

Minews. Good morning Australia. It looks like it was a flat week on your market. 

Oz. It certainly was. Share price movements across all sectors were negligible, with only a few exceptions. Top sector of the week was nickel, as the nickel price moved back through US$9 a pound. Gold stocks were mixed in the wake of the uncertainty stirred up by the midweek announcement of a big bullion sale by the International Monetary Fund. Iron ore strengthened marginally, but received a setback on Friday when Fortescue Metals Group (FMG) announced disappointing financial results and a slowdown in its expansion plans. The other sectors all had their handful of interesting performers, but the overall tone was definitely lacklustre.

To colour in the picture of a market which really went nowhere over the course of the week, the all ordinaries index rose by 1.5 per cent, the metals index slipped 0.5 per cent lower, and the gold index lost 2.7 per cent. That in a week when the gold price rose by about US$30 an ounce and the Australian dollar fell about US2 cents to US89 cents. 

Minews. Not much to write home about, then. Let’s move through the sectors, picking out any highlights, please. 

Oz. We’ll start with nickel for a change as it can often be the first mover among the base metals if there is a trend developing. And, if you look at the 30-day level of nickel in the warehouses of the London Metal Exchange, and the corresponding price reaction, it is possible to discern a trend. Stockpiles have declined by about 2,000 tonnes after a steady rise over the past year, and the price of nickel has risen from US$7.70 a pound to US$9.30 per pound. We’ll need to see a further continuation of that trend before we can suggest that nickel is making a full-blown return, but the direction is encouraging. 

On the market, Western Areas (WSA) delivered one of the better performances among the nickel miners, adding A21 cents to A$4.49 after reporting a solid increase in revenue for the half-year to December 31st. Mincor (MCR) rose by A4.5 cents to A$1.52, but did trade up to A$1.60 on Wednesday after reporting a return to profits for the December half. Although modest by past standards, Mincor’s A$14.2 million profit represented the sort of turnaround which nickel investors have been waiting for. Elsewhere, Minara (MRE), which will be a major beneficiary of a higher nickel price, put on A11.5 cents to A75 cents, and Independence (IGO) rose a modest A6 cents to A$4.07. However, Panoramic (PAN) surprised by shedding A2.5 cents to A$1.74, a decline which looks even worse when you consider the stock traded as high as A$1.93 on Wednesday. There’s no fresh news from Panoramic, but a fall of that suddenness would normally justify a query from the ASX. 

Minews. Interesting on two counts: that nickel is on the march, and that there was a sharp fall from Panoramic, especially given that the company reported a return to profit in early February. 

Oz. Indeed. Moving on, let’s wrap up the base metals before switching to iron ore, which is newsworthy, and gold, which isn’t. 

Minews. And coal, which seems to be producing a few star performances recently. 

Oz. Indeed. After nickel, the other base metals were flat, in the case of the zinc companies, and mainly down in the case of the copper miners. Zinc stocks moved no more than one or two cents either way. Terramin (TZN) added A2 cents to A75 cents, while Ironbark (IBG) crept up by half a cent to A15.5 cents. Perilya (PEM) was steady at A58.5 cents, and Zinc Company (ZNC) slipped half a cent lower to A19.5 cents, despite reporting an interesting manganese discovery. 

Copper had one star, Exco (EXS) which is attracting support again after a long break on the sidelines. It has gold and copper projects moving forward, twin attractions which should generate even more interest as the year progresses. On the market, Exco rose by A5 cents over the week to close at A24 cents, but did trade as high as A26.5 cents on Wednesday. The only other copper stock in the black was Talisman (TLM), which added A5 cents to A$1.07. Then comes a long list of fallers which included Sandfire (SFR), down A40 cents to A$3.80, Equinox (EQN), down A31 cents to A$3.51, CuDeco (CDU), down A35 cents to A$3.63, Citadel (CGG), down A1 cent to A34 cents, and Hillgrove (HGO), down half a cent to A39 cents. 

Minews. Iron ore next, please. 

Oz. Fortescue (FMG) was the big surprise, and disappointment, for the week. Overall, the company’s shares slipped by a seemingly insignificant A4 cents to A$4.89, but that closing price needs to be seen against the A$5.20 reached on Wednesday and Thursday, two days before Fortescue reported a disappointing set of financials, and delayed its expansion plans. Most other iron ore stocks managed modest gains, with one stand-out performer, Brockman Resources (BRM). Brockman hit a fresh 12 month high of A$3.29 during Friday trade, before ending the week at A$3.16 for a gain of A20 cents. Magnetic (MAU), which has triggered interest with its “follow the railway lines” exploration technique, put on A9.5 cents to A48.5 cents, while Giralia (GIR), which is applying the same concept, was steady at A$1.70. The difference can possibly be explained by heavy-duty day-trader speculation, as Magnetic is the talk of the chattering class. Other iron ore moves included Atlas (AGO), which rose A2 cents to A$2.11, and BC Iron (BCI), also up by A2cents to A$1.23. On the downside, Iron Ore Holdings (IOH) dropped by A11 cents to A$2.29. 

Minews. And gold? 

Oz. Surprisingly boring, given that there was some good exploration and production news. Focus (FML) reported more high-grade assays from its Tindals and Empress mines, but the market gave that news a very modest reward, and only lifted the stock by A0.1 cents to A6.1 cents. Cortona (CRC) got similar treatment after delivering good drilling results, initially adding A1.5 cents to A15.5 cents, but ending the week steady at A14 cents. The rest of the sector was fairly flat, moving a few cents either way here and there. Going up, Kingsrose (KRM) rose by A4 cents to A64 cents, Troy (TRY) rose by A2 cents to A$2.20, and Perseus (PRU) put on A4 cents to A$1.72. Going down, OceanaGold (OGC) lost A23 cents to A$2.11, Andean (AND) slipped A2 cents lower to A$2.53, and Kingsgate (KCN) slid A21 cents lower to A$8.78. 

Minews. Time for the energy twins, coal and uranium, and any specials to finish, please. 

Oz. Coal first, because Coal of Africa (CZA) moved in response to our midweek story, adding A17 cents to A$2.52, with trades on Friday up as high as A$2.58, A1 cent short of the stock’s 12-month high. Other coal moves included Riversdale (RIV), up A19 cents to A$8.19, and Centennial (CEY), up A6 cents to A$3.82. 

Uranium stocks were all over the shop. Bannerman (BMN) which has been trying hard to cash in on the success of its near-neighbour in Namibia, Extract Resources (EXT), was marked down sharply to A50.5 cents, a fall of A9 cents, but was sold off to as low as A48 cents on Friday, a 12 month low. Extract, however, reported more promising results from its Rossing South project, and added A25 cents to A$7.40. Paladin (PDN) recovered lost ground thanks to a bit of buying by the company’s chief executive, John Borshoff. It added A30 cents to A$3.84. Manhattan (MHC) lost A21 cents to A$1.45 and Forte (FTE) added half a cent to A17.5 cents. 

Minews. And specials? 

Oz. Nothing of note, except to report that the slow-moving float of Scandinavian Resources has been given a boost after the manganese miner, OM Holdings (OMH), ensured that the offer will close successfully by taking a cornerstone 19.9 per cent stake in the company. That makes it the second adventure by OM into Nordic mining, as it splashed out a few weeks ago with a A$61 million investment in the Norwegian iron ore producer, Northern Iron. 

Minews. Which means either that OM loves cold-climate investing, or that it’s making itself less palatable to its would be suitor, the Ukrainian oligarch, Gennadiy Bogolyubov. 

Oz. Precisely. 

Minews. Thanks Oz.


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## drillinto

Three Reasons Why The Copper ETF (JJC) Is Soaring
by Eric Dutram on February 19, 2010 | ETFs Mentioned: JJC

Copper prices have continued their impressive rally this week, as the widely-used industrial metal finished higher on Thursday up for the seventh time in eight trading sessions, bringing its return over that period above 15%. The recent surge in copper prices has been driven by a number of factors, and many investors believe that the metal still has room to climb. Copper’s recent run-up is attributable to three primary factors: 

[To read the full article and see the chart, please click the link below]


http://etfdb.com/2010/three-reasons...ed:+etfdb+(ETF+Database)&utm_content=My+Yahoo


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## olharryboy

I have scanned a lot of the previous threads and can't find any mention of NKP. 
Why is it so?
Anybody out there have anything for me on this one?
I purchased recently.


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## drillinto

February 22, 2010

Metals And The Dollar Go The Same Way, As The Fed Raises Rates
By Rob Davies
www.minesite.com/aus.html

It is one of the unwritten rules of the market that when the dollar goes up metal prices go down. But last week markets witnessed a clear demonstrated the maxim that rules are made to be broken, as the US currency rose 0.9 per cent against the euro, taking it to a nine month high, and two per cent against the yen. Concurrently, metals prices on the LME, as measured by the LME Index collectively rose by six per cent.

Taken together the two moves are great news for miners mining anywhere outside the US, and London-listed mining stocks duly rose on the market by some considerable margin. That increase was all the more surprising given that, in the same week, Anglo American confirmed the gravity of its own situation by passing up the opportunity of paying a dividend, again. 

Most financial commentary aims to explain the reasons behind events rather than trying to predict them. But in fact the event that triggered this particular rally should have been totally predictable. All that happened was that the US Fed raised the rate it charges for emergency loans to banks by 0.75 per cent. Since these are not being utilised there is no impact. What the move does do, though, is offer evidence that the Fed is starting to envisage a return to “normal” economic conditions. 

And that in turn means that it is no longer fanciful to imagine higher US interest rates, which would be good for the dollar. More importantly, higher rates are only needed if growth takes off, and renewed growth will be good for metal prices. And a higher dollar and higher metal prices are just what the doctor orders for mining investors. 

That said, the results from the mining companies over the last few weeks have underlined the full extent of the damage done by the collapse in commodity prices a year ago. Overall, industry profits have probably halved. While the recent strength in metals is to be welcomed it only goes part of the way to getting the industry back on a stable financial footing. 

There is little point in established, mature mining companies digging vast holes in the ground, and shipping commodities all round the world, only to find that they have no cash left for shareholders, having paid off suppliers and invested enough to ensure their futures. 

It may well be that miners are building up cash reserves in anticipation of a very slow recovery, or even in anticipation of a double dip recession. Certainly, the economic news in Europe does not offer much in the way of encouragement, and situation in the US is not much better, notwithstanding last week’s news. 

Once again it seems that all the bullishness is contained in the Middle Kingdom. Whether that actually justifies the gains seen on the markets last week is perhaps more questionable. After all, a 12.8 per cent rise in nickel to US$20,230 a tonne is not to be sneezed at. Especially as it is one of the metals with the greatest overhang of mothballed capacity.  

Copper’s 6.2 per cent jump to US$7,085 a tonne is a little more understandable, as it has stronger fundamentals - and a 1.8 per cent rise in LME inventories to 555,075 tonnes still leaves copper inventories at abnormally low levels. 

Zinc was more subdued. It gained 4.6 per cent to US$2,250 a tonne. Lead did rather better, shooting up 15.7 per cent to US$2,238 a tonne. Finally, aluminium brought up the rear with a 3.2 per cent increase to US$2,076 a tonne. The coincident rise of the dollar and metals might not make a lot of sense as far as the unwritten rules of the market are concerned. But it sure is nice.


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## drillinto

February 22, 2010

The Balance Of Power In the World’s Gold Markets Is Swinging From West To East
By Charles Wyatt
www.minesite.com/aus.html


The sun rises in the east and sets in the west. It is certainly setting in the west now, as China has won a huge economic battle with the US without firing a shot. It has over US$3 trillion in the kitty at the moment and is really the only source for further borrowings by Obama’s government as it seeks to get its economy back on track. It will be a huge lesson for the US Government to learn to live with a country whose views may conflict with its own, but China is simply too big and powerful to be ignored. It is also conscious of the power of its position as demonstrated when Major General Luo Yuan of the People’s Liberation Army told a Chinese magazine, “We could sanction them using economic means, such as dumping some US Government bonds”.

China and other countries in the Middle and Far East also distrust the US dollar, and that is something else which Americans simply cannot understand. That is why some of the old men of the US investment world such as Buffett and Soros see a bubble growing in gold. If you look for a bubble you will always find one in the end, even if you have to blow it yourself. But these men do not speak with the wisdom of the ages, they simply talk their own book. If they want to buy gold, what better than to talk it down first and then buy it cheaper? 

The plain facts about gold demand are there for all to see in the figures issued by the World Gold Council last week. In 2009, dollar demand for gold remained above the US$100 billion mark for the second year in succession, against the backdrop of continued turbulence in financial and commodities markets. This resilience in demand was achieved in the context of average gold prices 12 per cent higher than in 2008, at US$972.35 per ounce, and even though total tonnage sold was down.  

From all this the World Gold Council  draws the conclusion that diversity in the gold market both on the supply and the demand side, as well as geographically, has provided significant price support for gold over the course of the year. Aram Shishmarian, the chief executive, tries to explain what this means, “2009 was a year which provided a clear illustration of the diversity inherent in the global gold market. As the year progressed a rebalancing of gold market fundamentals occurred, ensuring that as investment demand came off from the exceptional levels seen in the first quarter, total demand for the year remained robust thanks to a rebound in jewellery and industrial demand”. 

The 2009 figures show that the 49 per cent recovery in jewellery demand from a very weak first quarter was largely driven by a rebound in the Indian market, a rebound which enabled it to maintain its position as the world’s largest gold consumer. China, however, was the only gold jewellery market actually to grow in 2009. While total jewellery demand was eight per cent lower in the final quarter of 2009 when compared with the same period last year, it showed clear signs of a rebound in the last quarter of 2009 when compared to earlier quarters in the year. Demand recovered to 500.4 tonnes, up from 336.3 tonnes in the first three months of the year, suggesting increasing consumer confidence within the context of a higher gold price. 

On this note it is worth considering a comment by Justin Tooth of Ocean Equities who noticed the ratchet effect on commodity prices whilst he was at Indaba. The constraint factors highlighted by pundits on commodity prices were the same as the previous year, but are now at a higher pitch of intensity. The obvious one, says Justin, is the perennial concern about the price elasticity of Indian demand for gold. The argument goes that Indian jewellery demand will falter when gold reaches a certain level. Last year that level was US$1000 per ounce. This year it was US$1,200 per ounce. 

The point he is making is that Indian jewellery is actually just a part of the investment sector, not an alternative sector as many analysts seem to think, and the same probably applies to China as well. As prosperity creeps up in these huge countries, a little more jewellery gets purchased by households as much as an investment as for decoration. A simple sum is in order at this time. Let us just suppose that every single person in India and China bought one gramme of gold a year (one gramme NOT one ounce) at the current price of US$35.2 per gramme (Rupees 1632.37, Yuan 240.4). Demand for gold from these two countries alone would rise by 45.5 million ounces a year. Set that figure against world annual gold production of 86 million ounces, and it makes quite an impact. 

Yes, it’s all very simplistic, but there is no avoiding the fact that the citizens of these two countries may soon be capable of mopping up half the world’s gold production every year. No wonder their governments don’t blink when the IMF announces that it is selling more gold. In fact they probably go in for a quiet bit of celebration, and this in turn must make the clever gold analysts of the western world a bit worried as their minds are still set on the poor old dollar. This time the IMF is selling 191.3 tonnes, and it should be no surprise if it is snaffled up as quickly as the 212 tonnes sold last November, of which 200 tonnes went to India, 10 tonnes to Sri Lanka, and two tonnes to Mauritius. 

The lesson is even getting through to the West as the latest Gold Demands Trend for 2009 released by the World Gold Council indicates that Central Banks are continuing to diversify their portfolios with an increased allocation to gold. Last year net official sales amounted to only 44 tonnes, compared to a yearly average of 444 tonnes during the five year period up to 2008. The Gold Demand Trends report revealed a significant reduction in net official sector sales. In fact Central Banks turned buyers in the last three quarters of 2009, but there is still little doubt that the balance of gold demand is tipping to the East.


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## drillinto

Must read !

"Mining booms and the Australian economy"
Speech by Ric Battellino, Deputy Governor, Reserve Bank of Australia
Sydney, 23 Feb 2010

http://www.rba.gov.au/speeches/2010/pdf/sp-dg-230210.pdf

*************************


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## drillinto

USA - S&P 500 Sector Stats 

http://www.bespokeinvest.com/thinkbig/2010/2/24/sp-500-sector-stats.html


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## drillinto

February 25, 2010

What’s A Company's Gold Worth?
Louis James & Andrey Dashkov, Casey’s International Speculator
www.minesite.com/aus.html

At any given time, there's a single international spot price for an ounce of refined gold. Gold is priced in US dollars: $1,106.10 per ounce as we go to press. But what about the gold an exploration or mining company has in the ground? How do we value that?
Given sufficient data, you can estimate a reasonable net present value (NPV) for a project and deduce what each of the company's ounces should be worth. To do this, you need to know annual output of the proposed mine, proposed capital expenditures, energy and other costs, and many more things. But for most deposits held by the junior companies we tend to follow, there's just not enough data available. Another approach is to compare the value the market is giving a company per ounce of gold in hand against the average value the market gives companies with similar ounces. 

The most obvious way to define “similar” ounces in the ground is to use the three resource and two mining reserve categories defined by Canada's National Instrument NI43-101 regulations – the industry standard. We combine these into three broad groups, as we believe the market tends to do as well. Firstly, inferred: the lowest-confidence category, based on just enough drilling to outline the mineralization. Secondly, Measured & Indicated (M&I): these higher-confidence categories have been drilled enough to establish their geometry and continuity reasonably well. And thirdly, Proven & Probable (P&P): These are bankable mining reserves – basically Measure and Indicated resources with established value. So, what does the market give a company, on average, for an Inferred ounce of gold? 

To answer this, we combed through every company listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V) and pulled out the ones with 43-101-compliant gold resource estimates (or mostly gold) – no silver, copper, etc. Of these, we kept only those with resources that fall almost entirely into only one of our three broad groups: Inferred, M&I, and P&P. In other words, we did not include companies with half Inferred and half M&I resources (though we did include companies with mostly P&P reserves, because most are producers – or soon will be – and are regarded that way). That left us with about 90 companies to calculate some averages on. 

That's not a large sampling universe, and we had to make some judgment calls when it came to defining what companies should fall in each category, but it's what we have. So take these averages with a large grain of rock salt, but here they are: US$20 per ounce inferred, US$30 per ounce for M&I, and US$160 per ounce for P&P. 

Armed with this information, if you didn't know anything else about an M&I resource (political risk, type of ore, etc.), but you saw that the company that owned it was trading at US$10 per ounce, whereas its peers are valued at around US$30 an ounce, you can conclude that there must either be something very wrong with the project or the stock is a great speculation. If there's nothing wrong with the project, there's an implied growth potential in the stock price, based on the difference between what the company is getting per ounce and the market average for similar ounces. In this case, it would be: $20 x the number of ounces Ã· the number of shares. 

As a matter of perspective, a few years ago the market was giving a company about US$25 per ounce inferred, US$50 for M&I, and about US$100 for P&P. Then, when gold ran up over US$1,000 before the crash of 2008, these valuations went out the window, and some companies were getting over US$100 for merely inferred ounces. Do we have your attention now? 

Conversely, just after the crash, there were companies having a hard time getting US$10 for M&I. That was clearly a sign that it was time to buy, and we did, with gusto. It's also why, when the Mania phase gets underway, we'll be selling into it as gold approaches the top; we will not be attempting to time the top. It's far better in this business to be a day early than a day late. 

Today, the market is willing to pay more for advanced and producing stories (US$160 P&P) but is discounting earlier-stage stories, hence the lower M&I valuation than in previous years (US$30). These figures will change again as the market's appetite for risk changes. 

We often get asked what an Inferred, or M&I, or P&P ounce is worth in the ground. The $20, $30, and $160 figures are only rough guides, and you must consider the reasons why some ounces are given more or less by the market, but they're a good starting point.


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## drillinto

February 27, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. How was your week? 

Oz. In a word, flat. In fact, it was so flat that we probably set some sort of record for the number of stocks which opened the week and then closed at the same price, or at best which shuffled A1 cent either way. A handful of stocks managed to shake off the inertia by presenting better-than-expected profit results or a hint a deal in the wings, but nothing could shake the fact that the metals and mining index slid half a per cent lower, or that the all ordinaries lost one-tenth of a percentage point. If the market was on life support equipment you could barely measure the pulse.

Minews. That bad? 

Oz. Well, let’s put it in cricketing terms for any sporting minded readers. Last week’s Australian stock market was about as exciting as watching Geoff Boycott bat for England, or Bill Lawrie for Australia. In fact, if you could picture those two batting together, with nothing happening as they dropped dead bats on even the loosest of deliveries, you will understand how dull things were. 

Minews. We get the picture. So, let’s start with the few stocks that did excite, before moving on to a call of the dead-bat card. 

Oz. Panoramic (PAN) caused a little excitement when it released a better than expected profit result for the half-year to December 31st. The A$23.1 million earned was about 15 per cent above the company’s own guidance of a A$20 million profit, and confirmation that the nickel price is recovering faster than some naysayers had expected, as we discussed a few weeks ago here. On the market, Panoramic added A13 cents to A$1.87, making it easily the best performer in the nickel sector. 

Another upward move which caught the eye was a sharp jump from the transparently-named South Australian uranium explorer, UraniumSA (USA). Shares in UraniumSA shot up by A9 cents to A29 cents after the company reported excellent exploration results from its Blackbush project, near Whyalla in South Australia. Best assays included 13.8 metres at 1392 parts of uranium per million (ppm), and 9.7 metres of 1357 ppm. Uranium assays are always confusing because of the way they are reported in such minute amounts, but as a general rule anything over 1000 parts per million (which equates to 0.1%) is considered to be positive. 

Among the iron ore stocks the only rise of note came from FerrAus (FRS). FerrAus delivered a positive feasibility study for a 15 million tonne-a-year project at its Pilbara prospect, not far from the Jimbelbar mine of BHP Billiton. On the market, FerrAus added A4 cents to A77.5 cents, but did trade as high as A80 cents on Friday. 

Minews. Pretty tame stuff. Time for a call of the card, but keep it short if the market was so flat. And start with gold. 

Oz. Like all sectors last week, in the gold space a handful of stocks managed to add a few cents, while the rest were flat-to-negative performers. Two of the best were stocks we featured during the week, Medusa (MML) and Andean (AND). Medusa added A11 cents to A$3.70, as investors began to appreciate the value contained in its Co-O mine in the Philippines. Andean reported more discoveries at its Cerro Negro project in Argentina, and rose A4 cents to A$2.57. 

Other upward moves came from OceanaGold (OGC), which reported excellent production figures and a strong profit for the year to December 31. The company also plans to wipe out its hedge book. OceanaGold rose by A18 cent to A$2.20. More modest upward moves came from Kingsrose (KRM), which put on A1cent to A65 cents, and Kingsgate (KCN) which added A3 cents to A$8.81. 

After that it was flat, or down. Cortona (CRC) had good news to reporte from its Dargues Reef project in New South Wales, but remained stuck at A14 cents. Chalice (CHN) continues to add ounces to its Eritrean project, but slipped half a cent to A40.5 cents. Alkane (ALK) delivered more positive news about its emerging Tomingley mine, but opened and closed the week at A31 cents. St Barbara (SBM) returned to profits, only to see its shares shed A1.5 cents to A22 cents. Finally, Tianshan (TGF) dropped A1 cent to A10.5 cents despite reporting the completion of a merger with Corvette Resources (CVX) and a name change which will see the merged companies trade as Corvette, under the new code of CVX, from Monday. 

Mines. Iron ore and base metals next, please. 

Oz. Apart from FerrAus there wasn’t much that was positive to report. Two of the emerging producers of heavily-processed magnetite ore, Grange (GRR), and Gindalbie (GBG), crept higher, Grange by half a cent to A36 cents, and Gindalbie by half a cent to A$1.00. Magnetic (MAU), one of the stocks following railway lines rather than remote rock outcrops, also added a very unexciting half a cent to close at A49 cents. Brockman (BRM) ran out of puff after a few strong weeks, losing A5 cents to A$3.11. BC Iron (BCI) lost A9 cents to A$1.14. Atlas (AGO) was also A9 cent lower at A$2.02, and Fortescue Metals (FMG) fell A24 cents to A$4.65. 

The base metals were led by copper, again, though OZ Minerals (OZL) was the only producer to finish the week in the black after it reported a strong profit of A$203 million for 2009. On the market, OZ added A6 cents to A$1.04. After that it was all down. Fallers included PanAust (PNA), which said it was engaged in merger talks, and promptly dropped A2.5 cents to A46.5 cents. Sandfire (SFR), meanwhile, completed a fresh capital raising, and dropped A20 cents to A$3.60 in the process. Not to be outdone, Talisman (TLM), which is exploring alongside Sandfire, fell further proportionately speaking, with a drop of A17 cents to A90 cents. Citadel (CGG) was A4 cents weaker at A30 cents. Marengo (MGO) lost A1 cent to A11 cents. Hillgrove (HGO) fell A3 cents to A36 cents, while Equinox (EQN) held its ground, ending steady at A$3.51. 

The only nickel stock, apart from Panoramic, to rise, was Poseidon (POS), which popped up by a surprise A2.5 cents to A27.5 cents. Mincor (MCR) and Independence (IGO) shed A2 cents each to A$1.50 and A$4.05 respectively. Zinc was all in the red. Perilya (PEM) fell A4.5 cents to A54 cents. CBH (CBH) lost A1 cent to A11.5 cents, and Kagara (KZL) lost A5.5 cents to A83 cents. 

Minews. Let’s wrap up a lacklustre week with uranium, coal and any specials, please. 

Oz. UraniumSA, as mentioned, was the stand-out uranium stock. The only other explorer to rise was Bannerman (BMN) which ended a few bad weeks by adding A3 cents to A53.5 cents. After that it was all down. Extract (EXT) fell A15 cents to A$7.25. Manhattan (MHC) also lost A15 cents to A$1.30. Forte (FTE) shed A2 cents to A15.5 cents, and Paladin (PDN) continued to lose supporters as it struggles to post profits, falling another A23 cents to A$3.61. 

Coal stocks were all weaker, in line with the lower oil price. Macarthur (MCC) fell A60 cents to A$10.20. Whitehaven (WHC) lost A40 cents to A$4.65. Coal of Africa (CZA) was A12 cents weaker at A$2.40, while Riversdale (RIV) was the week’s heaviest coal loser, shedding A83 cents to A$7.36. 

There are no specials worth reporting in what was a remarkably dull week. 

Minews. Thanks Oz.


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## drillinto

March 01, 2010

As Metals Track Sideways In A Finely Balanced Market, What Happens Next In Terms Of Demand Will Be Crucial
By Rob Davies
www.minesite.com/aus.html

The New Year is no longer quite so new, and some of the optimism that surrounded markets at the start of 2010 has started to look a little frost damaged. It is now clear that the major developed economies are recovering, but that they are recovering more slowly than they have done from past recessions. On the other hand, the economic powerhouses of China and India are still advancing rapidly, despite some timid attempts to check the headlong rush in China.

It’s in that context that capital markets have now gone into a state of limbo, uncertain whether to power ahead in anticipation of further good news or consolidate to lock in the gains already secured. 

The LME Index gives as good a guide as any as to what’s been going on in the base meatls space since the start of the year. The Index began January at 3,450, and then drifted down to 2,900. A strong rally took it back up to 3,400, but a lack of direction has seen it drift it back to 3,200. 

And the ups and downs in the LME Index are not too out of sync with what’s been going on in equities markets, a similarity that’s down to the remarkable nature of the economic position last year. 

Metals and equities spent most of 2009 repricing from a position that discounted financial Armageddon, to one that was back to business as usual. The rise in these asset prices was not driven by rising profits or demand but by the anticipation of them returning.  And a classic case in point is the mining sector. 

Even though metal prices rose strongly throughout the year, the starting point was very depressed. Profits for the sector overall were about half that of the previous year. That though, did not stop many major miners from tripling in price. 

A similar argument applies to the underlying metals. Prices rose strongly over the previous twelve months, yet inventories of some metals have increased on a reported basis. Given that we know some entities, like China, have been stockpiling metals such as copper, the real situation is probably even worse. 

That is not a problem if demand eventually comes through and starts to erode inventories. That’s what the bulls expect will happen. But the bears fear that demand growth will be anaemic, and won’t be strong enough to match the increased supply that has been reactivated by higher prices. 

Thus it seems markets are pretty much evenly balanced, as of course they should be. Some commentators prefer to describe this as an uncertain market. In the experience of some market observers the time to get worried is when the markets are certain about what is about to happen. Because such certainty is usually misplaced. 

So, in the context of that even balance, last week copper fell 0.6 per cent to US$7,045 a tonne, a fall which was pretty representative of all the base metals. Only nickel made any upward progress, but a 0.2 per cent gain to US$20,270 hardly merits the award. Lead fell by four per cent to US$2,148 a tonne, thereby giving up some of the steep gains made in the previous week. Its sister metal zinc kept it company with a fall of 4.5 per cent. 

Overall, it was a pretty lacklustre week. After the gyrations of the last few years, not everyone will be too upset about that.


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## drillinto

The last time we posted our table of sovereign debt default risk was on February 5th, when worries about Greece and Europe were pretty much at their peaks.  The S&P 500 ended up making a short-term low on the following trading day, and since then, sovereign default risk has eased substantially around the world.  Below we highlight the change in credit default swap prices (default risk) for various countries both year to date and since February 5th.  The table is sorted by change since February 5th.  As shown, default risk has fallen for all but three countries since 2/5.  It has fallen the most for Portugal, Austria, Spain, AUSTRALIA, and the US.  If you look back at the table from 2/5, you'll see that the countries that had spiked the most year to date at that point are the ones that have fallen the most since then. 


The link to view the tables:
http://www.bespokeinvest.com/thinkb...debt-default-risk-declines-significantly.html


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## MR.

drillinto said:


> The link to view the tables:
> http://www.bespokeinvest.com/thinkb...debt-default-risk-declines-significantly.html




The last chart appears the clearest. The prices on the bar graph represent the cost per year to insure $10,000 worth of sovereign debt for five years per country in USD's. 

With thanks drillinto for the various articles.


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## drillinto

March 06, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesitz.com/aus.html

Minews. Good morning Australia. It looks like you had a much happier week. 

Oz. The stock market was certainly better. The cricket wasn’t. New Zealand gave us a lesson in how to win, and how to behave properly on the field, in the first of our one-day series. You had a much easier time of it against Bangladesh. So, sticking to financial matters, the best results last week came from three sectors: gold, iron ore and nickel. Mining stocks overall comfortably outperformed the wider market. The gold index was up an eye-catching 7.4 per cent, the metals and mining index added 4.9 per cent, while the all ordinaries could manage a rise of just 2.6 per cent.

Minews. Movements which seem to underline the importance of mining in the Australian economy. 

Oz. Correct, but we also had another interesting measure of the importance of mining, in the form of the annual list of Australia’s richest people, as compiled by Forbes magazine. Seven of Australia’s 40 richest people are classified as miners, with Andrew Forrest, the founder and major shareholder of Fortescue Metals Group, reclaiming his title as Australia’s richest person. Gina Rinehart, who also who owes her fortune to iron ore, came in seventh, and ranks as Australia’s richest woman. 

Minews. Interesting, but let’s get down to prices, starting with gold. 

Oz. Mostly up. The challenge this week was to find a stock that fell, given that the gold price rose modestly and the Australian dollar kept its head above the US90 cent mark. One of the best performers was Silver Lake (SLR) which added A8 cents to A$1.12, after it reported the completion of a significant upgrade of its Lakewood processing plant. Production has been expanded by roughly one-third, and that rise should ensure that output comfortably meets the 2010 target of between 60,000 and 70,000 ounces. And just to underline the growing stature of Silver Lake, it’s worth noting that it has just been added to the S&P 300 index, after its market capitalisation eased past the A$200 million mark. 

Minews. Quite a success story. We might take a close look in the next few days. 

Oz. Other noteworthy gold movers included Catalpa (CAH) which added A12 cents to A$1.47, Kingsgate (KCN), which rose A30 cents to A$9.15, Resolute (RSG), which rose A7.5 cents to A$1.00, and Perseus (PRU), which rose A12 cents to A$1.93. Alkane (ALK) was also a notable riser, up A2 cents to A33 cents after the big American goldminer, Newmont, exercised an option to take 75 per cent of the company’s promising McPhillamys project in New South Wales. Even though Alkane is watered down to 25 per cent, that’s still a valuable stake to have in a discovery which promises to be world class. The conceptual target of up to four million ounces gives Alkane a million ounces on an attributable basis. 

In other news, Focus (FML) Minerals reported a pleasing half-year profit of A$4.9 million, confirming the success its Coolgardie re-development strategy. Much of that good news must already have been priced in, as the market rewarded the stock with only a modest rise of A0.2 of a cent to A5.9 cents. Elsewhere, Citigold CTO) said it would spin out its Charters Towers project into a new company, a move which lifted the stock by A0.9 of cent to A9.9 cents. And Norton Gold Fields (NGF) received a A$20 million cash injection from a Chinese partner, ending a period of considerable instability. Shares in Norton rose A4.5 cents to A21 cents. 

Meanwhile, one of our entrepreneurs who’s been missing in action for a few months, Michael Kiernan, made a return splash as he announced the completion of the recapitalisation of Monarch Gold. It’s now been renamed Swan Gold Mining, and has been set a production target of 100,000 ounces within the next 12 months. 

Minews. Ambitious, but good luck to him. Let’s quickly finish with gold and shuffle along to other sectors. 

Oz. Lihir (LGL), a troubled gold major, finally rid itself of its failed Ballarat project. Htat pleased investors who lifted the stock by A17 cents to A$2.91. Troy added A14 cents to A$2.20. Andean (AND) hit a 12 month high of A$2.74, up A15 cents. And the Tennant Creek twins, Westgold Resources (WGR) and Excalibur (EXM) were also on the rise. Westgold added a modest half a cent to close at A9 cents, while Excalibur rose A0.1 cents to A34.5 cents. 

Minews. Iron ore next, please. 

Oz. Strong performances all round, thanks to continued speculation that the long term iron ore price will rise by up to 80 per cent when contracts are negotiated later in the year. Star of the week was Brockman Iron (BRM) which rose to a 12 month high of A$3.55 on Thursday, before dropping back to end the week at A$3.53, an overall rise of A41 cents. Territory (TTY) had its best week in a long time, as it booked a profit of A$13.7 million for the December half. Territory’s shares rose A3 cents to A18 cents. FerrAus (FRS) revised its exploration target upwards such that it now stands at 300 million tonnes of ore. This optimism encouraged investors to lift the stock by A16.5 cents to A97 cents.  BC Iron (BCI) put on A8 cents to A$1.12, while Mt Gibson (MGX) rose by A11 cents to A$1.69. Fortescue (FMG) added A8 cents to A$4.78, despite confirmation that American hedge funds, which had been long-term supporters of FMG had been sellers recently. Other iron ore movers included Giralia (GIR), up A25 cents to A$1.87, Atlas (AGO), up 6 cents to A$2.12, Grange (GRR), up A7 cents to A44 cents. Batavia (BTV), which we took a look at last week, slipped half a cent lower to A17.5 cents. 

Minews. Nickel, and the other metals now. 

Oz. All the nickel stocks were up, as nickel powered back through the US$10 a pound mark. Mincor (MCR) added A12 cents to A$1.67, Western Areas (WSA) rose by A42 cents to A$4.85, Minara (MRE) gained A5.5 cents to A79 cents, and Poseidon (POS) moved A1.5 cents higher to A29 cents. Also moving strongly was Panoramic, after it reported additional ore lenses deep beneath its Savannah mine in the Kimberley region. That news boosted the stock by a very impressive A44 cents to A2.41. 

Most copper stocks rose, but not as strongly as the nickels. Equinox (EQN) added A14 cents to A$3.80. Citadel (CGG) put on A3 cents to A33.5 cents. CuDeco (CDU) rose by A22 cents to A$4.18. Talisman (TLM) gained A6 cents to A$1, and Exco (EXS) added A1.5 cents to A25.5 cents. Syndicated (SMD) gained A1 cent to A16 cents after our midweek report, but Sandfire (SFR), which has just completed a big capital raising lost A14 cents to A$3.63. 

Zinc stocks were mixed. Perilya (PEM) put on A6 cents to A59.5 cents, and CBH (CBH) added A1 cent to A12 cents, but TNG (TNG) slipped half a cent lower to A7 cents, and Terramin (TZN) lost half-a-cent to A73.5 cents. 

Minews. Time for the two energy minerals, coal and uranium, and then specials to close. 

Oz. It a nutshell, coal up, uranium down. Gloucester Coal (GCL) added A95 cents to A$9.75 after its directors recommended a takeover bid from Macarthur Coal (MCC). In turn, Macarthur rose A15 cents to A$11.69. Riversdale (RIV) put on A74 cents to A$8.33, but recently-floated Stanmore Coal (SMR) lost A10 cent to A69 cents. Among the uranium stocks Mantra (MRU) swam against the tide with a rise of A50 cents to A$5.70. But elsewhere there were fallers. Manhattan (MHC) fell A29 cents to A$1.16. Bannerman (BMN) fell A2 cents to A49.5 cents, and Paladin (PDN) fell A13 cents to A$3.56. 

Minews. And specials? 

Oz. Lithium stocks, which have been the darlings of the day traders, went quiet, putting in moves of just a few cents either way. Manganese stocks attracted a bit of support, as OM Holdings (OMH) rose A7 cents to A$1.76, and Spitfire (SPI) rose A1.5 cents to A10.5 cents. That strength was perhaps in sympathy with the nickel sector, as both metals are used in making speciality steels.


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## drillinto

March 07, 2010

Look To The Australian Economy For A Guide To Sentiment, As Coal And Metals Power Ahead
By Rob Davies
www.minesite.com/aus.html [Free registration]

Cobalt and molybdenum trading has been underway on the LME for two weeks now and by all accounts has made a good start. These minor metals have high values and both are vital constituents for making steels, and especially the high quality special steels. Some measure of their importance can be gleaned from the prices they trade at. Cobalt is priced at around US$39,950 a tonne, while molybdenum is a tad cheaper at US$37,500 a tonne, although most mining hands tend to think of prices for these metals in pounds rather than tonnes.
Despite their speciality nature the total annual value traded in these two metals now amounts to about US$7.5 billion a year. 

The great advantage of trading metals through the LME is that all participants know exactly what they are getting in terms of the quality and purity of the commodity. There is no subjectivity, and hence no room for debate on the price, relative to the constituents of the metal. 

And of course, that’s also one of the reasons why the largest commodities by volume are not traded on the LME. Which is a shame because that is where the really big bucks lie. 

Last week Japanese steel makers agreed to a 55 per cent increase in the price of the coking coal that they will buy from BHP Billiton. That takes prices up to US$200 a tonne, albeit only for one quarter. Which is why, from the perspective of the LME it is unfortunate that the great many variables in the different types of coal make it unsuitable for trading through a terminal market like the LME – because at these sorts of prices the seaborne coking coal market alone is worth over US$40 billion a year. 

Underlying these price increases are the constant rises in Chinese steel production, an inability of Chinese miners to meet demand, and heavy rain in Queensland that has curtailed output there. It is not surprising that the producers like BHP Billiton are keen to move from annual to quarterly pricing to capture this bull market as best they can. 

But it was not just coal that had a good week. The earthquake in Chile had a dramatic effect on the copper market, and pushed the price of the red metal up by 6.25 per cent to US$7,485 a tonne, even though the actual impact on production seems limited. 

Nevertheless, the earthquake and the consequent increase in the copper price was a good enough catalyst to stimulate price rises across the board. Aluminium rose by 6.8 per cent to US$2,202 a tonne, and nickel jumped by 12.7 per cent to US$22,850. Lead rose by 2.3 per cent to US$2,196 per tonne, and zinc rose by 6.6 per cent to US$2,289 per tonne. 

Overall, there is no denying the bullish tone to the markets, even though a huge number of problems remain. Greece is still a concern, but ultimately only accounts for two per cent of the Eurozone. Its problems are its own, not the Euro’s. 

Perhaps the best indicator of market sentiment is provided by Australia, the ultimate commodity country. Things are going so well down there that the Reserve Bank of Australia feels able to increase interest rates by 25 basis points to four per cent. That may not please Aussie miners, but it does show that not all countries have made a complete Horlicks of their economies in recent years, and that at least some of them are well placed to benefit from the upturn.


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## drillinto

March 09, 2010

Party Like It’s 2007: At The 2010 PDAC
By Our Canadian Correspondent
www.minesite.com

Individuals that make their living in the mineral resource sector are well aware of the dramatic volatility that comes with the run-of-the-mill commodity cycle. So, in theory the quick bounce back from the 2008-2009 commodity meltdown was predictable. It’s not always easy when times are tough, though, to keep the faith, which is why, now that the upswing is in sight, most of the expected 18,000 plus attendees at the 78th annual Prospectors and Developers Association of Canada Conference in Toronto are in a jubilant mood.

Canada’s biggest mining show started things off on Sunday with a bevy of upbeat commodity analysts touting a positive outlook for commodities. Those projections were almost a 180 degree transformation from the subdued outlook statements presented by analysts in 2009.  Leading the charge was Andrew Keen of HSBC Securities in London. He started out by stating what everybody in the audience already knew……that the doubling of the metal prices has been largely driven by the demand from China. While positive in the medium term on most of the commodities, he tends toward favouring iron ore, coking coal and platinum versus copper. Donald Drummond from TD Bank financial Group concurred with these general sentiments, adding that a global economic recovery would spur the currencies of commodity-rich nations like Canada to higher ground. 

Meanwhile, Alan Galley of the Geological Survey of Canada stated that the metal market has hit a plateau, with supply now just keeping up with growing demand. In the future, explorationists will need to explore deeper to find the required supply. Interestingly, he points out that nickel currently has the largest global reserves, while silver has the lowest. 

The difference between copper and gold mineral exploration success was also well documented on Sunday. Michael Doggett of HanOcci Mining Advisors stated that in 1979 copper reserves totaled 350 million tonnes and over the following 30 years the mineral industry produced 322 million tonnes of copper. That said, by 2008, copper reserves still stood at around 550 million tonnes. In other words, the copper explorationists and engineers have done a decent job in replenishing supplies. 

The replenishment of gold reserves has not been quite so efficient, according to Stephen Enders of Renaissance Resource Partners. The median gold deposit is 350,000 ounces, while the mean deposit size is between one million and two million ounces. Gold reserves are being depleted at a much faster rate than exploration is replenishing them. The net effect of that dynamic is that the major gold companies are now moving into the mega copper-gold porphyry deposits to boost reserves. This analysis was well received by the gold bugs, who have had plenty to cheer about in the early days of PDAC. 

Martin Murenbeeld of DundeeWealth Economics sees economic reflation and bad government balance sheets being the drivers for the future price of gold. Given that mine output is not increasing significantly, and that central banks are becoming buyers instead of sellers, that all adds up to a bright future for the price of bullion. As per usual, the demand for bullion is coming from Asia, with China and India alone accounting for more than 25 per cent of the global demand. 

For those investors looking for the best of both worlds, the platinum group metals offer the attraction of investment characteristics like gold, with an added industrial use in automobiles. Once again, China and India are projected to carry the demand torch for platinum in 2010. 

On the property asset front, this year’s PDAC could yield a number of deals with resource assets in locations ranging from British Columbia to Egypt being discretely shopped around for the right buyers. Unlike 2009, the exploration companies attending in 2010 seem cashed up, and that usually means a number of rather hefty hangovers will be felt in the mornings. 

A sign that happy times at the PDAC are here again can be seen in the presence of Teck Resources, which is the biggest sponsor of PDAC 2010. Less than 18 months ago Teck looked to be on the financial ropes after taking on huge debt with its purchase of Fording Coal. With a little help from a major Chinese investment and from rebounding coal prices, Teck is once again Canada’s diversified mining darling. Yes, we in the mineral industry are surely accustomed to the booms and busts that follow economic cycles. 

Your correspondent will take to the floor tomorrow to see what’s hot from the investment side of the mineral resource space in a tour of the 400 or so exhibitors at the conference. Early touts from the purely speculative side point to interest in Gold Bullion Development with its Granada gold project in Quebec, and to Tasman Metals with its Norra Karr rare earth element zirconium project in Sweden. Both seem to be churning a lot of stock on very preliminary results, but perhaps more on these and a few others later this week.


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## drillinto

March 13, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. How did your market perform last week? 

Oz. In a word, oddly. If you’d looked only at the major indices you might have suspected that not much happened. The metals index rose by 1.2 per cent, the all ordinaries rose by 1.3 per cent, and gold rose by 1.5 per cent. But, when you try to fit those modest increases into the pictures painted by the moves from individual companies it just won’t go, especially when you rule out the mining majors, BHP Billiton and Rio Tinto. The big boys crept up a per cent or so. But smaller stocks in the iron ore sector rocketed up, gold and copper stocks were stronger, nickel improved, and even zinc delivered a few pleasant surprises.

Minews. A difference which might, perhaps, reflect increasing interest in smaller stocks? 

Oz. Precisely. The indices are a useful guide, but there is no doubt they are dominated by big companies and fail to pick up moves like this week’s 187 per cent increase from Aurox (AXO), a small iron ore player which received a takeover bid from Atlas Iron (AGO) during the week. Nor do they reflect the 50 per cent rise by the zinc producer, CBH (CBH), which is back in the takeover sights of the Belgian-based zinc refiner, Nyrstar. 

Minews. That iron ore bid is interesting because it seems to have little to do with ore in the ground and more to do with port capacity. 

Oz. That’s exactly what Atlas wants, further emphasising what I’ve been rabbiting on about for some time. There’s no shortage of iron ore in Australia, but there is a shortage of railways and ports. That’s why Magnetic Resources (MAU) and Giralia (GIR) are exploring along railway corridors rather than wandering too far into the scrub, and why Atlas becomes a much more interesting stock when it gets Aurox and its space allocation at Port Hedland expands to 33 million tonnes a year, which is more than the company currently plans to produce. 

Minews. We might look closer at the port question another time. Let’s push along, though, sticking to the iron ore theme for the moment. 

Oz. Quite right. There was a second factor driving iron ore last week. The big Brazilian miner, Vale, tossed another bucket of kero on the iron ore price when it told Asian steel mills that it expected a 90 per cent increase in the long-term contract price this year. That means Christmas could be coming early for everyone in iron ore, including investors. 

Minews. Prices now, please. 

Oz. Aurox was the star with its stellar A50.5 cent rise to a closing price of A77.5 cents, slightly below its Friday peak of A81 cents. Shares in Atlas also reacted positively to the deal, adding A35 cents to close at A$2.47, also a fraction off the Friday peak of A$2.55. Joining in the upward rush Giralia (GIR) rose A20 cents to close at A$2.07, a shade below the 12 month high of A$2.10 reached in early Friday trade. Meanwhile Sphere (SPH), which hasn’t been heard from since the 2008 meltdown, stormed back courtesy of its Mauritanian iron ore project, adding A40 cents to A$1.67, and also setting a 12 month record of A$1.75 on Friday. 

Other iron ore moves included Gindalbie (GBG), up A10 cents to A$1.15, Grange (GRR), up A5 cents to A49 cents, Brockman (BRM), up A23 cents to A$3.76, BC Iron (BCI), up A17 cents to A$1.39, Iron Ore Holdings (IOH), up A17 cents to A$2.57, FerrAus (FRS), up A10 cents to A$1.07, and Fortescue Metals (FMG), up A16 cents to A$4.94. The only iron ore stocks to fall were Territory (TTY), down A1 cent to A17 cents, and Magnetic (MAU), down A3.5 cents to A42.5 cents. 

Minews. Strong moves indeed. Now for gold, please. 

Oz. Not quite as good as iron ore, but not bad either, in a week when the Australian dollar crept higher and the gold price weakened. Among the best performers was Azumah (AZM), which you reported on mid-week. It added A2.5 cents to A23 cents. Allied (ALD) recovered some of its recently lost ground after reporting a handsome resource increase at its Simberi Island project, rising A4 cents to A31.5 cents. Castle Minerals (CDT) added A6 cents to A34 cents, after a positive report on its exploration assets in Ghana. And St Barbara (SBM) blasted back from the past to announce a new gold mine development and a clean-up of its messy balance sheet, moves which helped the stock put on A2.5 cents to A27.5 cents. 

Other gold risers included Silver Lake (SLR), up A4 cents to A$1.16, Resolute (RSG), up A4 cents to A$1.04, OceanaGold (OGC), up A21 cents to A$2.77, and Catalpa (CAH), up A2 cents to A$1.49. Stock in retreat included Excalibur (EXM), down half a cent to A1.2 cents, Chalice (CHN), down A2.5 cents to A37.5 cents, Kingsgate (KCN), down A7 cents to A$9.08, Troy (TRY), down A9 cents to A$2.11. One of the most notable fallers was Norseman Gold (NGX), down a sharp A19 cents to A69 cents, after it encountered similar problems to those which dogged earlier miners of the nuggetty ore at the Norseman mines south of Kalgoorlie. 

Minews. Base metals now. 

Oz. Mixed, but mainly up. Base metals lately seem to have fallen behind their “bulk” cousins in coal and iron ore which are enjoying stronger demand in China. The best performer was CBH with its A6 cent rise to A18 cents, a rise which came after the company confirmed that Nyrstar had returned with a second takeover proposal. Ironbark (IBC), which has an interesting zinc project in northern Greenland, closed the week steady at A44 cents, but that was only because it requested a trading suspension ahead of an announcement which could affect control of the company. Other zinc stocks were less exciting. Perilya (PEM) added A1 cent to A60 cents. Terramin (TZN) slipped half a cent lower to A73 cents. But Mt Burgess (MTB) won fresh support and managed a rise of A0.4 of a cent to A1.5 cents. 

Copper stocks were led up by CuDeco (CDU), a speculator’s favourite thanks to the sometimes ultra-optimistic statements by its chief executive, Wayne McRae. Last week, the stock hit the headlines after reports of a deal with a Chinese investor. That caused shares in CuDeco to run up by A56 cents to A$4.74. Equinox (EQN) attracted increased support after raising fresh debt and reporting a maiden profit, news which lifted the stock by A16 cents to A$3.96. Other copper stocks to rise included OZ Minerals (OZL), up A6 cents to A$1.18, Sandfire (SFR), up A11 cents to A$3.72, and Hillgrove (HGO), up A1.5 cents to A38.5 cents. Also on the move, AussieQ Resources (AQR) reported rich copper and molybdenum assays from its Whitewash South project, news which drove the stock up by A16.5 cents to A70.5 cents. Stocks to lose ground included Talisman (TLM), down A6 cents to A94 cents, Rex (RXM), down A9 cents to A$1.59, Syndicated (SMD) down A1 cent to A15 cents, and Sabre (SBR) down A1.5 cents to A46 cents. 

Nickel stocks were marginally stronger. Mincor (MCR) put on A10 cents to A77 cents. Poseidon (POS) added A2 cents to A31 cents, and Minara rose A2 cents to A81 cents. Pick of the pack was a relative unknown called South Boulder (STB). South Boulder is in a joint venture with Independence at the Duketon nickel exploration project, where encouraging assays have been reported, included 4.55 metres at 4.05% nickel. South Boulder popped A6 cents higher to A32 cents. Independence was steady at A$4.19. 

Minews. The energy twins coal and uranium, with specials to finish. 

Oz. Uranium stocks were mixed. Manhattan (MHC) was the strongest performer, putting in a rise of A14 cents to A$1.30. Paladin (PDN) also added A14 cents to close at A$3.70. Extract (EXT) slid A22 cents lower to A$7.18, while Bannerman (BMN) touched a 12 month low of A46.5 cents, down A3 cents over the week. Best of the coal stocks was freshly-listed Hunnu (HUN) which has assets in Mongolia. It rose by A9 cents to A54 cents. Elsewhere, Gloucester (GCL) added A3 cents to A$9.78, while Coal of Africa (CZA) slipped A4 cents lower to A$2.36. 

Lithium stocks were the best of the specials, with Orocobre (ORE) continuing to build support on the back of its joint venture with an associate of Toyota in Argentina. It put on another A40 cents last week to close at A$2.35. Galaxy (GXY) added A5 cents to A1.21, and Reed Resources (RDR) rose A1.5 cents to A73 cents. 

Minews. Thanks Oz.


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## drillinto

StreetTalk With Bob Lenzner

Gold Is The Ultimate Asset Bubble 
Robert Lenzner - March 12, 2010
www.Forbes.com

It must still be early in the gold bubble. Two masters of the hedge fund universe, George Soros and John Paulson, have vastly increased their bets on gold. 

Both men have substantially raised their holdings in a Canadian mining enterprise, NovaGold Resources. Precious metals entrepreneur Tom Kaplan, through his private family concern, New York-based Electrum Strategic Resources, holds about 40% of NovaGold shares. Kaplan also has a large position in Gabriel, a Toronto-listed gold miner with an operation in Romania that the company boasts is one of the largest gold mines in the world. 

Then there's Frank Giustra, a close friend of former President Bill Clinton, who is waging a takeover battle to gain control of a Guinean gold company named Crew. Crew is also a target of Russian business mogul Alexey Mordashov, who controls Severstal, a large Russian steel concern. 

Here's a compelling factoid in support of the early bubble thesis. Gold ETFs, led by SPDR Gold Shares, hold assets equal to only 1.5% of all the assets of money market funds. That indicates the public and the mutual fund industry, except in their precious metals funds, are still very small participants in gold.

I've met privately with veteran investment managers like Morris Offit of Offit Capital Advisers and learned that gold is fast becoming a more highly weighted asset in portfolios.

The gold bubble is a function of the growing unrest about the debasement of currencies, not only the dollar, but also the euro and other European currencies whose nations have too great a debt load and must raise gobs of money or risk default. 

Gold's investment glimmer is also a function of growing unease, specifically about the ability of the Obama Administration to reduce the budget deficit and finance extending health care. The rising interest in gold reflects a concern about America's place in the world, an expectation of slower growth in comparison with more dynamic economies in China, India and other developing nations. 

In the spirit of the Greek historian and chronicler of the rise of Rome, Polybius, Kaplan, a 47-year-old precious metals entrepreneur with a Ph.D. from Oxford, tries to understand the life cycle of nations in terms of stages: first growth, then stagnation and finally decline. "Globalization," he says, "has accelerated this cycle for the U.S."

The attributes of gold are that it is a precious metal without a counterparty or credit risk. It should not trade in as volatile a fashion as oil, copper or other commodities dependent on the health of the economic cycle, suggests Kaplan.

The enigmatic Chinese should be considered a positive factor for the gold price, too. China, however, wants to avoid buying vast amounts of gold on the open market, and becoming the cause of the bubble is becoming dangerous. Yi Gang, vice governor of the People's Bank of China and director of China's State Administration of Foreign Exchange, indicated recently that China would face serious constraints if it wanted to increase its gold holdings. Supply is limited and aggressive Chinese buying would push up the price. China has indicated it can acquire gold more cheaply from domestic production and doesn't want to push the price up in a way that will "hurt Chinese gold consumers."

There is a good deal of misunderstanding in the gold market, because many financial experts don't believe gold is anything more than a volatile fad. They thought Soros was dissing gold when he called it some weeks ago "the ultimate bubble." 

Bubbles are thought to pop sooner or later, so timing is everything. In this instance, Soros' point is that we are not at the "ultimate" stage yet, and buying gold early in the stage of a bubble is eminently rational.


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## drillinto

March 15, 2010

Are Commodities Just A Binary Play On China?
By Rob Davies
www.minesite.com/aus.html

Any assessment of commodities as an asset class doesn’t get far before China comes into the discussion. Although most people know that China is important, it is difficult to overstate just how vital it is to today’s commodity market.

But the following data from the RBS Commodity Report of December 2009 makes it fairly plain. The report detailed what percentage of the world’s consumption of each of the base metals is accounted for by China. The numbers make for staggering reading: China currently consumes 38 per cent of the world’s aluminium output, 35 per cent of the world’s copper, 36 per cent of its nickel, 40 per cent of its lead, and 40 per cent of its zinc. 

No other single country comes close to the Middle Kingdom in its importance to base metals consumption. Just to ram the point home the report also includes a graph depicting the evolution of industrial production, which is an 
excellent proxy for metals demand. It runs from the year 2000, and contains two lines. One shows that industrial production in the advanced economies since the start of the millennium has been essentially flat. The other line shows that Asian demand ex Japan has increased by 240 per cent over the same period. In other words virtually all of the additional global demand for metals has come from China. 

That sounds great, and is in accord with conventional wisdom, even if the dependence of a major global industry on one single non-democratic country with its own unique version of capitalism is a little scary. Any industry that finds it is relying on one customer for nearly half its business is naturally going to take a keen interest in the well being of that client. 

So, recent press reports that China is taking steps to curtail its surging growth should merit the close attention of miners everywhere. Some observers even describe the Chinese economy as a bubble, citing parallels with the Japanese economy in the 1980s. 

The Financial Times reports that per capita spending on real estate in China has grown by 27 per cent a year for the last decade. Even so, a price/earnings ratio of 16.9 for the Shanghai Composite Index doesn’t look too demanding for an economy growing at close to 10 per cent a year. 

The reality is that no one will know if China is a bubble economy until it isn’t. And that may never happen. And investors in metals and the mining space can only act on the best information available at the current time. 

So far, all the evidence suggests that the growth is sustainable. It’s on that basis that metals prices are continuing to trade strongly, against a background of tight supplies. At current levels, overall price levels are pretty satisfactory for the majority of the mining industry, even though prices drifted slightly over the past week. 

On spot markets aluminium eased by 0.4 per cent to US$2,194, copper dropped by 1.3 per cent to US$7,384, and nickel dropped 6.8 per cent to US$21,300. Lead, however, firmed by a modest two per cent to US$2,240, and zinc drifted up by 0.7 per cent to US$2,305 a tonne. 

China is the 800 pound gorilla in the mining industry and any move it makes could have dramatic implications for metal prices and mining stocks. Investors in both would do well to keep an eye on the level of the Shanghai Composite Index as a leading indicator of where metal prices might go next. Because where they go, mining shares will be sure to follow.


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## drillinto

Trading range charts for 20 major country indices around the world

http://www.bespokeinvest.com/thinkbig/2010/3/11/bespokes-international-snapshot.html


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## drillinto

March 17, 2010

West Africa Elbows Its Way Into The Spotlight At The Paydirt 2010 Australian Gold Conference
By Our Man in Oz
www.minesite.com/aus.html

Being a prophet in your own country has always been a bit of a burden, a fact that was first mentioned in The Bible, and which has been illustrated most recently by the swathe of Australian gold miners trying to convince investors that they were on to something good in West Africa. For the past 20 years small Aussie exploration companies have been making excellent discoveries in countries such as Ghana, Ivory Coast, Mali and Burkina Faso, only to be ignored back home and eventually forced to shift their stock exchange listing to Canada, or London, or simply to take the easy option, accept a handsome takeover bid, trouser the proceeds, muttering “I told you so”. That very point was made, somewhat more diplomatically, by one of Australia’s most skilled mining experts, Rick Yeates, when he gave a short West African history lesson at the Paydirt 2010 Gold Conference in Perth this week. He went on to explain why the future looks very different.

“Traditionally, gold companies have had to go to extraordinary lengths to convince the Australian market that West Africa is a great place to invest,” Rick told Minesite’s Man in Oz after delivering his formal talk. “But, if you look at what’s been happening with companies such as Perseus, Adamus, Gryphon, Ampella, Azumah, Resolute, and Castle, to name just a few, you start to appreciate that West Africa has arrived in the eyes of Australian investors.” 

Not before time, is the retort from Minesite’s Man who has himself battled for years to get recalcitrant editors to open their eyes (and pages) to the stories of discovery, and low-cost gold production, coming out of West Africa. Fear of foreign places is one reason why the editors of Australia’s frontline newspapers, such as the Australian Financial Review and the Sydney Morning Herald, give most Aussies in Africa only a brief mention, if any at all. It’s all too clear that they have a preference for miners working closer to home. 

Rick, best known for his time as chief executive of the mineral consulting business, RSG Global, reckons that “this time it is different”, and for several reasons. Firstly, because there are now too many Aussies in the region to be ignored. Secondly, even the dopiest editor can see that Australian companies, unable to tell their story at home, have flocked to London and Toronto where (a) stockbrokers listen, (b) investors reach into their pockets, and (c) publishers with a nose for good stories (such as Minesite) find the space to spread the word. That all adds up to classic win-win-win for all concerned. 

“The turnaround has taken a long time to happen, but there is no doubt that it’s happening now”, Rick said. “Ghana has been the centre of a lot of action for Australian mining companies in the region, and they’re being followed by drillers and other service companies. More importantly, they have introduced Australian geological standards, as well as Australian occupational health and safety standards. There has been none of the rape and pillage associated with some other countries which have marched across Africa over the centuries. The Australian miners have gone in with high standards and introduced those standards to local employees. In fact, Ghanaian workers and service companies have learned so well that they are now exporting those skills across the African resources sector.” 

Rick said Australian companies had been able to acquire extensive ground positions, and drill up large resource bases, because of the skills brought with them, and because of the similarities between West African geology and that of in Australia. “There has also been a notable lack of competition from other countries which you might have expected to be active in the region”, Rick said. “The Canadians are there in force, but the South Africans are absent, perhaps because they have never developed a junior market to fund grass roots exploration, and because of capital outflow controls in their country.” 

“The risk element in West Africa today is relatively low”, Rick said. “What pops up from time-to-time are historic issues of instability which people remember, without fully understanding that those issues have been resolved and the country has moved on. Australia, for the reasons mentioned, has been slow to recognise the changes, whereas UK and Canadian investors have been more receptive. As far as the UK is concerned the area is a British backyard and has been for centuries. The Brits are perfectly comfortable with West Africa.” Rick said a number of major mining houses had been burned by the early involvement in West Africa. “Newmont was one of those which bailed out, vowing never to return to Africa”, he said. “Look today, and it’s back in force.” 

Of the Australians in West Africa with a story to tell Yeates rattles off a long list of companies with excellent mining projects under construction, or exploration assets likely to be developed. “My current list of favourites are Ampella, Gryphon and Perseus”, Rick said. “They’re the three I would pick out. Azumah, Castle and Resolute are also making the right moves in terms of exploration and development targets.” Resolute in particular stands out, as it has managed to bring the Syama gold mine in Mali into production and that is what Randgold Resources failed to do. 

Rick’s list is more than just the casual thoughts of a mining professional. He’s a man being sought out by American investment funds for guidance. “Some of the big US funds are developing greater interest in African gold opportunities”, he said. “I’ve been approached by a number of funds saying they’re looking to increase their exposure to West African gold. Which companies should we be loking at? Fifteen years ago you would never have heard anything like that. Today, West Africa is almost the flavour of the month”


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## drillinto

Bespoke's Sector Trading Range Charts - S&P 500 
Thursday, March 18, 2010  

Below we highlight 6-month trading range charts for the S&P 500 and its ten sectors.  For each chart, the light blue shading represents between one standard deviation above and below the 50-day moving average.  The red zone is between one and two standard deviations above the 50-DMA, and vice versa for the green zone.  Moves into or above the red zone are considered overbought.  In each chart, we've also included a line to show if the sector has broken out to new bull market highs yet on this most recent rally.

As shown, the S&P 500 has indeed taken out its prior highs, but it is now near the top of the red zone, which has typically been met with pullbacks (or at least sideways trading) over the last six months.  Of the ten sectors, only Industrials, Consumer Discretionary, and Consumer Staples have blown through their prior highs.  The Financial sector just made a new high yesterday, but it hasn't yet broken out convincingly.  The Technology sector is the next closest to its prior highs.  ENERGY, MATERIALS, Health Care, Utilities, and Telecom still remain below their prior bull market highs.


This is the link to view the charts:
http://www.bespokeinvest.com/thinkbig/2010/3/18/bespokes-sector-trading-range-charts.html


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## drillinto

Roubini Global Economics Chairman, Nouriel Roubini on 0% Interest Rate
Tuesday, March 16, 2010 

SUSIE GHARIB: Joining us now with more analysis about today's Fed decision, noted economist Nouriel Roubini, chairman of Roubini Global Economics. How are you doing? 

NOURIEL ROUBINI, CHAIRMAN, ROUBINI GLOBAL ECONOMICS: Very well. Hi. Good being with you. 

GHARIB: Good. Let me just start off by asking you, do you think the Fed is doing the right thing by keeping interest rates so low, at 0 percent? 

ROUBINI: Well, yes, in the sense that the economy is still very weak and the recovery is anemic. Unemployment is going to be remaining high. There are more downsides rather than upside risks. So I expect the Fed's going to keep the Fed funds rate at zero through the middle of next year. And they might even do more quantitative easing. Even today, they signaled they may end that program at the end of March. If there was a backup in mortgage rates and that's something you cannot exclude, the last thing you can afford in an election year is a sharp increase in mortgage rates when construction activity is still very weak. So I expect more easy money (INAUDIBLE). 

GHARIB: Well, putting the political aspect of this aside, you heard in our reporting that the one policy maker, Tom Hoenig, voted against keeping interest rates low. He says that it increases risks to the financial stability. In your view, what does that mean? What are the risks? 

ROUBINI: Well, on one side we need lower rates because the recovery of the real economy is still very anemic. On the other side, by keeping rates so low, we're planting the seeds of the next asset bubble, because easy money means a (INAUDIBLE) rough trading, dollar funded (INAUDIBLE) trades, and a lot of increasing asset prices U.S. and globally looks like now the beginning of another asset bubble that might lead to further financial instability. So we are between a rock and a hard place, because we need zero rates for the real economy, and we have (ph) to tighten sooner rather than later to avoid another bout of financial instability. 

GHARIB: You heard our report just a moment ago about the debate over whether the next bubble might be a bond bubble in the bond market. What is your view on that? 

ROUBINI: Well, for the time being, I expect that long-term bond yields in the U.S. are going to remain low because growth is going to be weak. You'll have deflation. You'll have bouts of risk aversion. The Fed is committed to keep zero rates. The Fed might do more QE. The rest of the world is buying and accumulating (ph) reserves to the rate of $1 trillion annualized to prevent their currency from appreciating. That's going to U.S. Treasury, and for the first time in a decade, we have some domestic financing of the U.S. fiscal deficit because savings have gone up, so we don't depend on the kindness of strangers. Given all that, I don't expect (INAUDIBLE) bond yields to spike for the time being, but if after the election, we're a divided government, we have (ph) run-away fiscal deficit (INAUDIBLE) monetize them, then at some point even in the U.S., the bond market vigilantes may wake up the way they did in Greece and UK, around Europe and then you could have a spike in rates. That's a 2011 story, not this year. 

GHARIB: Let me get a little more of your view on the economy. You said it was anemic. In the Federal's policy statement, they said that the job market is stabilizing, business spending has risen significantly, but that new housing construction is at a depressed level. So what is basically the view of the economy? How is it really doing? 

ROUBINI: Well, in my view, the recovery is going to be extremely anemic because consumers have to save more to deleverage, therefore consumption growth is going to be anemic, with a glut of capacity, and therefore spending is going to be anemic. Real estate and commercial real estate are still in a major slump. Given the glut of capacity, there is still some evidence of a credit crunch. And there is talking of inventories in the fiscal stimulus going to disappear by the second half of the year. So I expect that while the first half might be growth closer to 3 percent. But the second, we can go back to 1.5 percent growth, which is well below potential. 

GHARIB: How about negative growth because you have been warning about the economy slipping back into recession. Are you less worried about that? 

ROUBINI: Well, you know, my basic scenario is a U-shaped anemic recovery. There is a downside risk of a double-digit recession, low probability, but if growth is going to be only 1.5 percent, it is going to feel like a recession, even if we're technically not in a recession. 

GHARIB: OK, we're going to have to leave it there. Nouriel Roubini, thank you so much for coming on our program. 

ROUBINI: A pleasure. 

GHARIB: My guest tonight, Nouriel Roubini, chairman of Roubini Global Economics. 


Here is the link for the video with Nouriel Roubini:
http://www.pbs.org/nbr/site/onair/transcripts/nouriel_roubini_on_interest_rates_100316/


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## drillinto

March 20, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [free registration]

Minews. Good morning Australia. It looks like your market was slightly stronger last week. 

Oz. ‘Slightly’ is correct, if you look at the indices, but this week it was a two-speed event. The big miners, BHP Billiton (BHP) and Rio Tinto (RIO), crept up by 1.5 per cent and one per cent respectively, almost precisely in line with the ASX metals index, which rose by 1.1 per cent, and with the all ordinaries, which added 1.2 per cent. Dull stuff. But looking a little lower down the food chain very vibrant market was very much in evidence, which is perhaps one of the best reasons for us having this weekly chat, given that we invariably discover stocks which do not affect the index but which represent handsome money-making opportunities for any investors prepared to do their homework.

Minews. Good point, and one which goes some way to explaining why a fund manager up here, with an appetite normally restricted to major companies, mentioned Ampella (AMX) to us last week. 

Oz. An interesting example. Ampella is probably not on the radar screens of most City investment types, but when you look at what it’s got and who’s running it you discover why it hit a 12 month share price high of A$1.25 last week. Imagined the fun you could have had if you had jumped a aboard a year ago, when the stock was trading at A13 cents. In fact, Ampella’s Batie West and Konkera gold projects in Burkina Faso have been delivering such strong results that the shares have doubled from around A60 cents just in the short time since Christmas. 

Minews. Two issues there. The location and management. Burkina Faso is one of the West African countries that London is getting rather excited about these days, and some of the Australian stocks in the region have a reasonable pedigree. 

Oz. Isn’t that a recipe for something interesting to happen? Ampella has an excellent team driving it, led by an old mining hand in Bill Ryan. Burkina Faso is smack in the centre of a vast gold-rich region, and London money has driven the stock up to an eye-catching market value of just over A$200 million, with solid daily trading volume. It isn’t alone, either. There is a crop of Aussies in West Africa, many of which we mentioned during the week. All did quite well on the market. Perseus (PRU) put on A10 cents to A$2.04. Gryphon (GRY) added A1.5 cents to A48 cents. Adamus (ADU) rose by A4.5 cents to A44.5 cents, and Azumah was up A3 cents to A26 cents. 

Minews. A good collective result, that. Most up by between five and 10 per cent, in a week when the overall market was up by one per cent. Let’s move along with prices, continuing with gold. 

Oz. Mostly up, with a few stocks slipping lower. After the West Africans there were some good performances by the locals. Catalpa (CAH) caught the eye of investors at last week’s Australian Gold Conference, rising by A14 cents to A$1.63. Silver Lake (SLR), another presenter at the event, added A8 cents to A$1.24. Two gold stocks to make a return after a long absence were Tribune (TRB) and Rand (RND), which operate the small Raleigh mine. Tribune added A9 cent to A90 cents, and Rand rocketed up by A19 cents to A40 cents, but in very thin trade. The real star of the gold sector was Independence (IGO) which we took a look at mid-week. As expected, it announced the discovery of more gold at the Tropicana project in which it has a 30 per cent stake. The market was impressed, and the shares rose A42 cents to A$4.61. 

Other notable risers during the week included Troy (TRY) up A9 cents to A$2.20, Chalice (CHN), up A1.5 cents to A39 cents, and Andean (AND), up A5 cents to A$2.81. Investors also piled into Doray Minerals (DRM), which floated last month, and gets its first mention in this regular report, after it rose by A2.5 cents to a high of A22 cents, on the back of increased interest in drilling at its  Meekatharra North project. Among the handful of gold stocks to fall last week were Kingsgate (KCN), down A15 cents to A$8.93, Allied (ALD), down A1 cent to A30.5 cents, and Focus (FML), down A0.2 cents to A5.7 cents. 

Minews. Iron ore next please, as interest builds ahead of another conference you have in Perth next week. 

Oz. It is actually the world’s major iron ore event. All of the big producers send speakers, not that they ever say too much. The problem with holding the annual Global Iron Ore and Steel Forecast Conference in March is that it clashes with annual long-term contract price talks. And that might be one reason why iron ore stocks ran out of steam last week after a very strong burst of trading over the previous four weeks. Most share price movements were down, although not by much. Among the handful to rise were Sphere (SPH), which continued a strong rebound, rising A9 cents to a 12 month high of A$1.78, and Territory (TTY), which put on A1 cent to A18 cents. Also on the move, Discovery Metals (DMA) rose by A4.5 cents to A25 cents after announcing a 450 million tonne resource at its Prairie Downs project. Stocks to fall included Fortescue (FMG), down A9 cents to A$4.85, Brockman (BRM), down A6 cents to A$3.70, Atlas (AGO), down A7 cents to A$2.40, and Giralia (GIR), down A10 cents to A$1.97. 

Minews. Base metals next, please. 

Oz. Not a lot to say about copper, nickel or zinc. Most moves were modest, either way. The star of the copper stocks was a newcomer called Argo Exploration (AXT) which announced a funding deal with Xstrata on its Intercept Hill project in South Australia. That news put a rocket under the share price early in the week, when the stock more than doubled in a day, shooting up to a high of A11.5 cents. Argo eventually settled to close at A7.4 cents for a gain over the week of A3.2 cents. Other copper stocks to rise included Equinox (EQN), up A4 cents to A$4.00, CuDeco (CDU), up A28 cents to A$5.04, Citadel (CGG), up A3.5 cents to A39.5 cents, and Syndicated (SMD), up A1 cent to A16 cents. On the way down, or going nowhere, were OZ Minerals (OZL), off by A2 cents to A$1.16, Sandfire (SFR), steady at A$3.72 and Exco (EXS), steady at A25.5 cents. 

Nickel stocks strengthened a little. Mincor (MCR) was the pick of the nickels, up A9 cents to A$1.86. Minara (MRE) added A3.5 cents to A84.5 cents, and Western Areas (WSA) rose by A19 cents to A$4.95. Zinc stocks were flat. CBH (CBH) was the only zinc stock to gain, putting in a rise of A1 cent to A19 cents in the context of competing bids for control of the company from Nyrstar and Toho Zinc. Perilya (PEM) fell by A4 cents to A56.5 cents, and Terramin (TZN) was steady at A73 cents. 

Minews. The energy twins next please, coal and uranium. 

Oz. Coal stocks were the energy favourite last week with at least three hitting 12 month share price peaks. Gloucester (GCL) traded up to A$10.35, before easing to end the week at A10.15 for a gain of A77 cents. Riversdale (RIV) rose to A$8.88 at one point, but closed at A8.74, up A38 cents. And Macarthur (MCC) hit A$12.52, but ended at A$12.34 for a rise of A48 cents. Going down, Coal of Africa (CZA) lost A12 cents to A$2.24, and Stanmore (SMR), dropped A3 cents to A74 cents. 

Uranium stocks trended up, in line with a slightly higher price for the metal. Paladin (PDN) led the way with a rise of A36 cents to A$4.06. It was closely followed by Manhattan (MHC), which we took a look at towards the end of the week, which rose A4 cents to A$1.34. However, the stars of the sector were Mantra (MRU), which closed at a 12 month high of A$6.14 for a rise of A33 cents, and Oklo Uranium (OKU), which reported a big phosphate discovery in Mali, and rose A1.4 cents to A5.4 cents. 

Minews. And specials to close, please. 

Oz. Manganese stocks are back in the news, and interest is growing in Monax Mining (MOX). Monax has reported encouraging results from its Waddikee project on the Eyre Peninsula of South Australia. It rose strongly early in the week, hitting a 12 month high of A14.5 cents, before easing to close at A13.5 cents, up A1.5 cents. Spitfire Resources (SPI) also attracted interest, putting in a rise of A1 cent to A12 cents. Lithium stocks firmed again, as Galaxy (GXY) added A4 cents to A$1.25. Also on the move in the lithium space, Orocobre (ORE) rose by A10 cents to A$2.38, although that was after it hit a 12 month high of A$2.45 on Monday. 

Minews. Thanks Oz.


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## GumbyLearner

Read the thread all the time drillinto
Thankyou for the constant heads up!

Just thought I'd add another reason

Cheers Gumby

http://www.adelaidenow.com.au/business/rural-stocks-to-rebound/story-e6frede3-1225837309270


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## drillinto

March 22, 2010

The Breakup Of The Eurozone Would Be Bad News For Base Metals, But Gold Bugs Would Be Smiling
By Rob Davies
www.minesite.com/aus.html  [[ Free Registration ]]

Despite the concerns that some observers had at the start of the year, the first quarter of 2010 has turned out to be a relatively good one for base metals. Back in January analysts at RBS, for example, worried that prices had advanced too far in relation to underlying demand. The thinking was that this would trigger the reactivation of mothballed capacity leading in turn to an oversupply.

For a while it looked as if those concerns would turn out to have been well justified, as the London Metal Exchange’s own index, the LMEX, fell from 3,450at the start of the year to 2,900 at the beginning of February. 

However, hitting that 2,900 level marked the trough of the quarter, and since then prices have climbed right back to where they started. Oddly, this upward movement was in step with a rise in the US dollar and not inverse to the value of the US currency as might have been expected. 

To some degree metals were helped by the ongoing crisis in Greece, which boosted the dollar on the basis that it was the ‘least worst’ currency around. That drama is a long way from its final curtain call and the subsequent acts could be very damaging for the euro, and hence good for the dollar. 

If the Europeans really can’t resolve a financial wrangle without involving external assistance, in the shape of the International Monetary Fund, it confirms the fundamental flaw in the structure of the Euro that many have long suspected. 

Even so, a rally in the dollar, and possibly metals, simply because the euro is in danger of breaking up is not really something to look forward to, or to celebrate. It might suit gold bulls but it would probably be less good for base metals. 

The strength in the bulk commodities and base metals is really down to China, once again, which continues to provide the underlying demand pull for these foundations of modern industrial society. China has been the only source of growth in demand for a decade. 

If the euro really started to shed peripheral countries like Greece it would only be a matter of time before Portugal, Spain, Ireland, and maybe even Italy went the same way, like so many layers of an onion. That would leave a solid core, but the accompanying economic destabilisation would not be good for economic activity in any of the countries involved. 

Demand bulls might argue that as consumption in Europe is already low, how much worse could it get? Who knows? But surely it would be better not to find out. 

Relying on the one locomotive of China to pull the global economic train is not without its risks. Especially when it is clear that China is taking steps, albeit gentle ones, to moderate demand. 

And China is not alone in being worried about expanding too rapidly. Last week the Reserve Bank of India raised interest rates from 3.25 per cent to 3.5 per cent to restrain inflation, now standing at 9.89 per cent.  This move brings it into line with Australia, Malaysia and Vietnam, countries that have all raised rates recently. 

If Europe has to raise interest rates, it will not be to restrict inflation but to protect the currency. In that task it can only fail unless it ejects the weaker members.


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## drillinto

World Market Cap at $46.8 Trillion 
March 22, 2010 

Australia is 11th !

http://www.bespokeinvest.com/thinkbig/2010/3/22/world-market-cap-at-468-trillion.html


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## drillinto

S&P 500
The ENERGY and the MATERIALS sectors are currently trading at neutral levels:

http://www.bespokeinvest.com/thinkbig/2010/3/22/an-excuse-to-sell.html


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## drillinto

Must read US comment on inflation
:::::::::::::::::::::::::::::

My Inflation Nightmare
Am I crazy, or is the commentariat ignoring our biggest economic threat ? 

By Michael Kinsley
The Atlantic  
April 2010

Right-wing talk radio these days is carrying fewer commercials for second mortgages. (Consolidate your debts, lower your monthly payments, and have enough left over for that dream vacation!) They’ve been replaced by commercials for gold. Gold bugs have long had a small place on the map of the American right, but to most people gold seems like a crazy investment. It doesn’t produce anything, unlike a company in which you might own shares. It can’t provide shelter, like a house. It’s too expensive to use widely in industry or commerce, except for tiny amounts that go into people’s mouths, wrap around their fingers, or hang from their ears. Gold just sits there. And yet the price of gold has gone from about $280 an ounce 10 years ago to about $1,140 today. 

The only reason to buy gold is fear that the currency may collapse. Paper currency used to represent claims on a share of the gold in Fort Knox. Now it is just “fiat money,” backed only by the “full faith and credit” of the United States government. Ditto electronic money””the $5,000 you allegedly have in a savings account at the bank, whose only corporeal existence is on a hard drive somewhere. That $5,000 is $5,000 only because the government says it is. For the gold bugs, trusting the government seems as unwise as hoarding gold seems to most other people. 

Another way to say “collapse of the currency” is to say “hyperinflation.” Hyperinflation is when inflation feeds on itself and takes off beyond control. You can have stable 2 to 3 percent inflation. But you can’t have stable 10 percent inflation. When everybody assumes 10 percent, all the forces that produced 10 percent push it to 20 percent, and then 40 percent, and soon people are lugging currency in a wheelbarrow, as in the famous photos from Weimar Germany. 

Thirty years ago, we peered into this abyss and pulled back just in time. As inflation neared its peak of more than 13 percent, Jimmy Carter appointed Paul Volcker as chairman of the Federal Reserve Board. Using his control over the money supply, Volcker purposely plunged us into a deep recession, which is the only certain remedy. Carter got blamed for both the inflation and the recession that cured it. The columnist Robert Samuelson tells the story in his book, just out in paperback, The Great Inflation and Its Aftermath. 

Even 13 percent inflation was a nightmare. A stable currency is firm ground on which you can build a life. Inflation turns life into Through the Looking-Glass: you have to run faster and faster to stay in the same place. Saving is for suckers, and money needs to be spent sooner rather than later. Planning even a year or two ahead becomes nearly impossible. Worst of all, economically, the hard knocks and lucky breaks of life, which people generally accept when they are distributed by fate, become politicized, and therefore embittering. Stop fighting, and you start losing. 

Furthermore, as Samuelson notes, the damage is more than just economic. These days everyone is disenchanted with civic institutions and government. They hate the press, they loathe Congress, and so on. Studies by foundations puzzle over why. Was it the ’60s? No, it was the late ’70s and early ’80s, when government failed to deliver on its obligation to provide a stable currency. 

Samuelson worries that “the entire episode” may “slip from our collective consciousness.” I’ll spare you the Santayana and just say that if we are doomed to repeat this particular bit of the recent past, the press has failed in its self-imposed obligation to be the “first draft of history.” 

According to the considerable discussion of inflation on the Web, my alarm is misguided. Every economist I admire, from Paul Krugman and Larry Summers on down, is convinced that inflation will remain low for as long as we can predict. Greg Mankiw, who was George W. Bush’s economic adviser, has examined the evidence in his New York Times column and concluded that a return of debilitating inflation is pretty unlikely (although “current monetary and fiscal policy is so far outside the bounds of historical norms” that who can say for sure?). Krugman has charged that inflation fearmongering is a nefarious Republican plot. The Congressional Budget Office (usually known by its nickname, “the nonpartisan Congressional Budget Office”) projects inflation rates of less than 2 percent for the next decade. Some say the real danger is the opposite: deflation, or prices (and wages) going down across the board. 

Maybe I’m like those generals who are always fighting the last war, but I am not reassured. I worry that when and if the recession is well and truly over, there is a serious danger of another round of vicious inflation. (If the recession is not over, or gets worse, we’ll have other problems.) This time, inflation will be a lot harder to stop before it turns into hyperinflation. Whether Obama navigates these shoals successfully will be a big factor in his historic reputation. And journalists will be kicking themselves (and other people will be kicking journalists) for missing a disaster story on the level of Hurricane Katrina, if not 9/11 itself. 

In short, I can’t help feeling that the gold bugs are right. No, I’m not stashing gold bars under my bed. But that’s only because I lack the courage of my convictions. 

My fear is not the result of economic analysis. It’s more from the realm of psychology. I mean mine. The last time I wrote about this subject, The Atlantic’s own Clive Crook called me a “fiscal sado-conservative.” I would put it differently (you won’t be surprised to hear). Maybe, at least on economic matters, I’m a puritan. The recession we’ve been going through did not occur for no reason. Even though serious misbehavior by the finance industry triggered it, sooner or later it was bound to happen. For a generation””since shortly after Volcker saved the country, and except for a brief period of surpluses under Bill Clinton””we partied on borrowed money. We watched a real-estate bubble get larger and larger, knowing but not acknowledging that it had to burst. Then it did burst, and George W. Bush slunk off to Texas, leaving Barack Obama to clean up the mess. Obama has done the right things, mostly, pushing through a huge stimulus package and bailing out a few big corporations and banks. Krugman says we need yet another dose of stimulus, and maybe he’s right. 

But this cure has been one ice-cream sundae after another. It can’t be that easy, can it? The puritan in me says that there has to be some pain. That’s not to say that there hasn’t been plenty of economic pain. But that pain has come from the recession itself, not the cure. 

My specific concern is nothing original: it’s just the national debt. Yawn and turn the page here if you’d like. We talk now of trillions, not yesterday’s hundreds of billions. It’s not Obama’s fault. He did what he had to do. However, Obama is president, and Democrats do control Congress. So it’s their responsibility, even if it’s not their fault. And no one in a position to act has proposed a realistic way out of this debt, not even in theory. The Republicans haven’t. The Obama administration hasn’t. Come to think of it, even Paul Krugman hasn’t. Presidential adviser David Axelrod, writing in The Washington Post, says that Obama has instructed his agency heads to go through the budget “page by page, line by line, to eliminate what we don’t need to help pay for what we do.” So they’ve had more than a year and haven’t yet discovered the line in the budget reading “Stuff We Don’t Need, $3.2 trillion.” 

There is a way out. It’s called inflation. In 1979, for example, the government ran a deficit of more than $40 billion””about $118 billion in today’s money. The national debt stood at about $830 billion at year’s end. But because of 13.3 percent inflation, that $830 billion was worth what only $732 billion would have been worth at the beginning of the year. In effect, the government ran up $40 billion in new debts but inflated away almost $100 billion and ended up with a national debt smaller in real terms than what it started with. Ten percent inflation for five years (if that were possible) would erode the value of our projected debt nicely””but along with it, the value of non-indexed pensions, people’s savings, and so on. The Federal Reserve is independent, but Congress and the White House have ways to pressure the Fed. Actually, just spending all this money we don’t have is one good way. 

Compared with raising taxes or cutting spending, just letting inflation do the dirty work sounds easy. It will be a terrible temptation, and Obama’s historic reputation (not to mention the welfare of the nation) will depend on whether he succumbs. Or so I fear. So who are you going to believe? Me? Or virtually every leading economist across the political spectrum? Even I know the sensible answer to that. 

And yet … 


Source >>>>>>> http://www.theatlantic.com/magazine/archive/2010/03/my-inflation-nightmare/7995/


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## drillinto

March 24, 2010

As Nickel Begins To Stage A Comeback In The Metals Markets, Mincor And Independence Strike It Big At Kambalda

By Our Man in Oz
www.minesite.com/aus.html  [FREE REGISTRATION]

Nickel price up. Stockpile down. Discovery news flowing in from Kambalda. No, you have not made a trip back in time to 1966, when Western Mining Corporation was setting the mining world alight and London brokers were growing fat on share tips from drilling crews in outback Western Australia. This is today’s news, complete with fresh exploration reports from Kambalda, a nickel region that keeps on giving, even though WMC is long gone. The latest developments involve two mines discovered in earlier nickel booms, but never fully exploited. Miitel and Long are the jewels in the crowns of Mincor Resources and Independence Group respectively, and although they are in separate locations on the vast geological feature known as the Kambalda Dome, they both reported excellent exploration news on the same day this week.

Independence was first cab off the rank, putting out a report about the discovery of a new zone of nickel-rich mineralisation in the northern extension of the Long mine just after midday on March 23rd. Mincor followed an hour later with its own report about fresh discoveries in both the southern and northern sections of the Miitel mine. 

In the case of Independence the best assay was a 9.3 metre wide zone at 6% nickel. The true width of the drill hit was 3.9 metres, which is broadly in line with the main Long orebody. What that means for Independence is that Long will not only have years added to its productive life, but might even be expanded. Independence chief executive, Chris Bonwick, said the results were “highly significant”, and when combined with the continued success at the company’s Moran discovery, which lies in the southern portion of the Long orebody, he added that it was “likely to lead to further resource and reserve growth at the mine in the coming years”. 

For Mincor the news from Miitel was that drilling to the south has returned a best hit of 10.15 metres, or 5.82 metres true width, assaying 2.94% nickel, while to the north the best hit was a new discovery measuring 4.78 metres (2.74 metres true width) at 4.86% nickel. Those two intersections mean that Miitel might be taken out of mothballs earlier than had been planned, for the simple reason that it is looking too good to be kept off line for much longer. Mincor chief executive David Moore described the drill results as a breakthrough. “We believe these are very significant results and really open up the whole exploration story at Miitel”, he said. “We now see strong potential confirmed at both the northern and southern ends of the prolific Miitel ore system, and we intend to mobilise substantial resources to realise this potential over the next few months”, he added 

Apart from Minesite’s Man in Oz no-one else in this part of the world seems yet to have connected the dots which link discovery news from Kambalda to what’s happening on the nickel market. However, a cursory glance at the London Metal Exchange shows that the stockpile of nickel, which hit a five-year peak of around 167,000 tonnes in early January has been steadily sliding lower, and currently stands at 157,000 tonnes. As always happen when stockpiles fall the price rises, and sure enough, since plunging to little more than US$4.00 a pound last year, nickel is now back up at over US$10 a pound. 

Mothballed mines, such as Miitel, and the failed attempt by BHP Billiton to make technical and commercial sense of the complex Ravensthorpe laterite project also in Western Australia, are among the many reasons for the nickel-price recovery. As the mothballed mines come back into production the price recovery could stall, though that assumes all closed mines will resume production, which they will not, and that hectic expansion of the Chinese economy will slow, which is also unlikely. 

For investors, nickel miners have entered an interesting period in their recovery from last year’s lows. The share price of Independence, which also has a stake in an emerging gold mine, has risen from a low of A$2.43 to recent trades around A$4.50. Mincor is up from A78 cents to A$1.93, and has risen A20 cents since March 1st, as the nickel price cleared the US$10 per pound barrier and interest built up in the company’s Miitel drilling and its search for ultra-large nickel orebodies to the north of Kambalda. 

No investment adviser has yet been brave enough to claim a re-run of nickel booms past. But, if you go back in time there is a certain inevitability to the idea that nickel will eventually produce one of its stellar upward runs, before crashing back, as it did in early 2007. That crash came a short time after a mad dash up to a whopping US$24 per pound. The key to making money from nickel has always been (a) an ability to ride out the peaks and troughs, (b) an ability to keep production costs down, and (c) to mine high-grade ore. That’s why Kambalda’s mines have survived, and why the companies working the area look as if they’re getting set for the next big upswing in the price of the metal – not that they really need it. 

Missing, so far, from most analysis of Mincor and Independence is the fact that they are already handsomely profitable at a nickel price around US$10 per pound. In the second half of 2009 Mincor’s cash cost was US$5.29 per pound. The realised nickel price was around US$9.30. Today, every pound of nickel earns an extra US$1.00. Independence is doing even better with a cash cost in the December quarter of US$3.90 per pound, leaving the company with US$6.17 per pound, or a profit margin of 63.3 per cent. The nickel boom might not have returned, but with margins like that, and discovery news flowing in, it might be time to refresh your knowledge of nickel stocks.


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## drillinto

Bespoke's Commodity Snapshot 
Friday, March 26, 2010  

Below we highlight our trading range charts of ten major commodities.  For each chart, the green shading represents between two standard deviations above and below the 50-day moving average.  Moves above or below the green shading are considered extremely overbought or oversold.  Commodities have taken a back seat to stocks in recent weeks.  As equities charge higher, commodities have mostly traded sideways.  The only commodity shown that appears to be in a strong uptrend is platinum.  While platinum has been strong, gold and silver have been trending lower.  The auto industry has been strengthening lately, which could be a reason why platinum is outperforming the other precious metals (platinum is used in catalytic converters). 

Of all the commodities, natural gas looks the worst.  It is in a steep downtrend and is trading right at the bottom of its range.  Is natural gas due for a bounce?

Finally, agriculture commodities like corn and wheat have really been performing horribly lately.  Both are in nasty downtrends.


Link for the commodities charts:
http://www.bespokeinvest.com/thinkbig/2010/3/26/bespokes-commodity-snapshot.html


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## drillinto

March 27, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. How was your week? 

Oz. Astonishingly flat, if you look only at the indices. In fact the mining and metals index was so flat that it ended almost exactly where it started at 4,535 points. To get a difference you had to go beyond the decimal point, and even then it was 4,535.4 against 4,535.6.

Minews. In other words, nothing happened? 

Oz. Oh, I wouldn’t say that. As with previous weeks it was incorrect to rely solely on the indices to get a handle on the market, such is the overweight influence of the handful of mega-miners, like BHP Billiton and Rio Tinto. Once you looked below the top end players there was plenty of action in most sectors, with a few stand-out performances among the smaller gold stocks as the lure of West Africa grew stronger. 

Minews. Let’s start with gold this week. 

Oz. Before getting to prices a few observations which might help your readers pick up the trends which seem to be evolving down this way. Firstly, the nickel revival we mentioned mid-week picked up pace, as nickel closed on the London Metal Exchange at US$10.71 a pound, its highest for two years. That takes the 30-day gain to US$1.50 per pound. The best of that latest rise occurred after we had closed, which will make the nickel sector worth watching on our market on Monday. 

Another trend worth noting was an interesting revival in the titanium minerals sector. The local market leader, Iluka Resources (ILU), rushed up to a 12-month high of A$4.52 on Thursday, thanks to reports that the zircon price is rising strongly. Iluka closed the week at A$4.34 for a gain of A19 cents, with good volumes going through the market. A bit of that changed fortune rubbed off on smaller players in the titanium and zircon sector, with Gunson (GUN) putting on A1 cent to A10 cents. 

Minews. Time for prices now. 

Oz. Starting with gold, as requested, where prices were mixed as the gold price slipped slightly lower. That weakness in gold, however, was mitigated locally by the modest decline in the Australian dollar. Among the better performers were a number of those Aussies in West Africa we’ve talked about before. This week the companies which stuck out included Carbine Resources (CRB), a small company with a high-powered board, which announced on Tuesday a change of focus towards West Africa. That announcement helped lift Carbine to a new high of A32 cents, in heavy turnover on Friday. It closed at A30 cents, for a gain on the week of A6 cents. Azumah (AZM) continued the West African theme, adding A9.5 cents to A35.5 cents, after reporting a substantially increased gold resource at its Wa project in Ghana. And Noble Mineral Resources (NMG) chimed in with a report of a maiden 605,000 ounce resource at its Bibiani project, also in Ghana. Shares in Noble rose A1.5 cents to A40 cents. 

Elsewhere, there was fresh interest in Gryphon Minerals (GRY) as it hit more high-grade gold at its Banfora project in Burkina Faso. The company added A5.5 cents to close at A53.5 cents, but did get as high as A55 cents on Friday. Troy Resources (TRY) was a star performer on Friday with a gain of A10 cents on the day, ending the week at A$2.34, though that strength was perhaps more because of encouraging nickel sulphide drill hits rather than its gold assets. 

Also worth a special mention was Korab Resources (KOR), which has outlined a million ounce resource in Ukraine, news which pushed the company’s shares up by A5.5 cents to a closing sale at A39 cents, a little below the 12 month high of A40.5 cents reached on Friday. Tribune Resources (TBR), meanwhile, continues its impressive revival after time in the doghouse. It rose by a further A13 cents to A$1.03, a fresh 12 month high. 

Most other gold stock were down, but not by a lot. Integra (IGR) fell A1.5 cents to A25.5 cents after announcing a forward selling program for its Randalls project near Kalgoorlie. Andean (AND), lost A11 cents to A$2.70, despite reporting a fresh resource increase at its Cerro Negro project in Argentina. Adamus (ADU) slipped A2 cents lower to A42.5 cents. Kingsgate (KCN) lost A39 cents to A$8.54. Resolute (RSG) was A4 cents lower at A$1, and Silver Lake (SLR) fell by A10 cents to A$1.14. 

Minews. Iron ore next please, given all the news events in that sector. 

Oz. It was the news-making sector, though perhaps it would be more accurate to say noise-making sector, as speculation grows about a whopping 90 per cent iron ore price hike, as a Rio Tinto iron ore sales team pleaded guilty to accepting bribes in China and as a big, but very boring conference started, and ended, in Perth. Most iron ore stocks posted small gains, although there were a handful of losers. DMC Mining (DMM) posted the best rise, after receiving a takeover bid from the aggressive Cape Lambert Resources. That bid lifted DMC by A9 cents to A40 cents. Elsewhere, BC Iron (BCI) added A8 cents to A$1.40. A couple of newcomers also did well, including the oddly-named Ferrum Crescent (FCR), which has an iron ore resource in South Africa. It added A2.5 cents to A17.5 cents, but did trade up to a 12 month high of A19.5 cents on Friday. 

Meanwhile, Western Plains Resources (WPG), which owns the even more oddly-named Peculiar Knob iron ore project in South Australia, also touched a fresh price peak of A88 cents, before closing at A84 cents for a gain on the week of A1.5 cents. Batavia Mining (BTV) continued its upward run, adding another 3.5 cents to A21.5 cents, while Giralia (GIR) put on A7 cents to A2.06. Going down, Brockman (BRM) dropped A10 cents to A$3.60, Murchison (MMX) fell A7 cents to A$2.62, Atlas (AGO) slipped A1 cent to A$2.39, while Gindalbie (GBG) lost A1 cent to A$1.10. 

Minews. Base metals now, starting with nickel, please. 

Oz. As we mentioned earlier, the latest US50 cent uptick in the nickel price occurred on Friday in London after we had closed, which means last week’s gains might be extended on Monday. Among the winners, Mincor added A7 cents to A$1.93 and Western Areas (WSA) added A11 cents to A$5.06. Fallers included Panoramic (PAN), down A2 cents to A$2.29, Mirabela (MBN), down A4 cents to A$2.31, and Poseidon (POS) down by A4 cents to A30 cents. 

Copper stocks weakened across the board. Equinox (EQN) fell A10 cents to A$3.90. Hillgrove (HGO) lost A2 cents to A37 cents. Sandfire (SFR) was A10 cents lighter at A$3.60. Talisman (TLM) weakened by A6 cents to A91 cents, and Syndicated was off A2 cents to A14 cents. Zinc stocks were even less interesting. CBH (CBH) dropped A1 cent to A18 cents. Perilya (PEM) added half a cent to A57 cents, and Terramin (TZN) added A3.5 cents to A76.5 cents. 

Minews. The energy twins, coal and uranium, with specials to finish, please. 

Oz. The extra US$1 per pound on the uranium price last week kindled a flicker of interest in that sector, but not much. Oklo (OKU) added A2 cents to A7.4 cents, after announcing the acquisition of a prospect in Namibia, and Marathon (MTN) continued its recovery with a rise of A10 cents to A48 cents. After that it was downhill. Extract (EXT) fell A53 cents to A$7.82. Paladin (PDN) lost A18 cents to A$4.88. Manhattan (MHC) was A12 cents weaker at A$1.20. Bannerman (BMN) continued its alarming slide, closing at A49 cents, down another A3 cents, which takes the stock’s fall since early December to A73 cents, or 60 per cent. 

Coal stocks were equally mixed. Coal of Africa (CZA) added A9 cents to A$2.34. Macarthur (MCC) fell A64 cents to A$11.70. New Hope (NHC), lost A17 cents to A$4.97, and Stanmore (SMR) rose by A11 cents to A85 cents. A newcomer was Coalspur (CPL), which has an interesting management team and assets in western Canada. It added A4 cents to A50.5 cents, but did touch A52 cents at one stage. 

No specials worth mentioning. Lithium stocks skidded a little lower. Galaxy lost A5 cents to A$1.20, while Orocobre (ORE) fell 25 cents to A$2.13, and Reed (RDR) dropped A2 cents to A68 cents. 

Minews. Thanks Oz.


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## drillinto

March 29, 2010

Hyperinflation Has Yet To Make An Appearance, But Careful Commodity Investments Have Still Paid Off Handsomely
By Rob Davies
www.minesite.com/aus.html

A recent report from a hedge fund focussed on commodities stating that it lost 86 per cent of its value in February serves as a brutal reminder of the risks involved in trading this asset class. The unfortunate fund manager did not detail exactly what he had done to lose so much money so quickly.

One wonders how much comfort it will be that his reasoning for taking the position that he took was sound, just wrong in the short term. His view was that the massive injection of liquidity into global capital markets from governments printing money would lead to massive inflation. That didn’t happen in February, though that is not to say it won’t happen at some time in the future. In this case, the call went spectacularly wrong. 

The view now of this same fund manager is that an alternative to hyperinflation will now prevail in the world’s major developed economies, akin to the experience Japan has had for the few decades. That can be summarized as an extended period of low growth, a stagnant economy and modest deflation. 

Such an environment is clearly not so positive for commodities, but as long as it doesn’t turn into a full on depression then metals and commodities should not be overly impacted. 

It was the depression of the 1930s that occasioned the first major organised devaluation of currencies against gold, when President Roosevelt increased the dollar price of gold shortly after taking over the presidency from Herbert Hoover. 

Even that depreciation took a long time to take effect, though, and it was not until the Second World War that US industrial production really got going again. The lesson learned back then, although it took some time to be absorbed, was that the first countries to devalue came out of recession soonest. 

This time around the parallels are not quite so clear-cut, but the devaluation of the dollar, as measured by the price of gold, has been under way for some time. That said, the pace of decline certainly quickened in 2009, although it has since stabilised. 

Unfortunately, the US is no longer the dominant manufacturing powerhouse it was in the 1930s, so increased demand there has actually been met by greater industrial activity in China. The net effect on base metals and most commodities has still been beneficial, but more for Australia, Canada and South Africa, than the US. 

What’s more, the umbilical link between China and the US through the tightly controlled dollar-renminbi exchange rate has also delivered a devaluation to China, though this has been masked by the gradual appreciation of the renminbi against the dollar. 

Over ten years the renminbi price of gold has risen from Rmb2,500 to Rmb7,500. Interestingly that tripling in value is of similar magnitude to the rise in the sterling value of gold from about £230 an ounce to today’s £738. However, both of these moves are less than the quadrupling of the gold price in dollars over that period. 

Throughout this period base metal prices have performed even better. The price of nickel rose ten times from trough to peak during the period, and even now copper is still almost four times the low it was trading at at the start of the century. 

In some ways then, the failed commodity speculator was right. He was just ten years too late. What will happen in the next ten years remains as difficult to determine as ever. One thing’s for sure: as always, there’ll be big winners and big losers.


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## drillinto

The Oil to Natural Gas Ratio

The ratio of oil to natural gas has really spiked again in recent months as oil has outperformed natural gas.  (When the line is rising in the chart below, oil is outperforming natural gas, and vice versa for a declining line.)  Last September, the ratio of oil to natural gas hit its highest level since at least 1995.  After that peak, natural gas outperformed oil for a few months, but this trend reversed quickly once 2010 started.  The average ratio since 1995 is 8.94, and it is currently more than twice that at 21.49.  But even though the ratio is extremely high compared to historical levels, it has gone higher as we saw just a few months ago. 


Link to view the chart >>> http://www.bespokeinvest.com/thinkbig/2010/3/29/oil-to-natural-gas-ratio.html


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## drillinto

March 31, 2010

Atlas Iron Aims To Be Producing 12 Million Tonnes Of Direct Shipping Ore Annually By 2012
By Our Man in Oz
www.minesite.com/aus.html

It is unlikely that you will find the word “wonderful” in any corporate reporting manuals, nor in the rules of the Joint Ore Reserves Committee which governs mineral reporting. “Wonderful”, however, is the preferred (non-JORC) way of describing this week’s 100 per cent rise in the official price of iron ore, at least according to David Flanagan of Atlas Iron. “We’re yet to see the detail of how the new pricing system will work”, David said when chatting with Minesite’s Man in Oz about the recent deal done by BHP Billiton and Vale with Asian steel mills. “But there’s no doubt that it’s going to have a substantial impact on the industry.”

The impact on Atlas is already being reflected in the company’s share price. Atlas shares have risen by 20 per cent over the past month, and the company reclaimed its title as a A$1 billion business in early March when its price ticked over A$2.23. At its latest price of A$2.45 Atlas shares are close to their highest level since mid-2008, just before the full impact of the global financial crisis hit home. When it did, Atlas crashed to a low of A44 cents as some shareholders rushed for the exit, possibly making one of the biggest mistakes of their investing lives, because Atlas is now well on its way to becoming one of Australia’s most successful iron ore stocks. 

Last calendar year, as the world fumbled its way through the GFC, Atlas graduated from explorer to producer. This year, as the iron ore price rises, the company is getting ready to start its second mine. A third is on the way, and should help Atlas hit an annual production target of 12 million tonnes of premium-quality direct shipping ore (DSO) by 2012. That is when the financial numbers underpinning Atlas become seriously interesting, as the following “back of the envelope” calculation demonstrates.

We’ll start with the background. BHP Billiton and Vale have negotiated a new quarterly pricing mechanism to replace annual price-fixing, a system which in part helped to trigger a crisis in relations between Australia and China, and the jailing this week of an iron ore sales team working for Rio Tinto. Ore quality will vary under the new arrangement, and discounts (and premiums) will be applied on the level of impurities such as phosphorous, alumina and silica that the ore contains. But a number to file away is US$110, because that seems to be the new average price of a tonne of iron ore. 

When that price is applied to the 12 million tonne annual target of Atlas you discover directly a business generating revenue of US$1.3 billion. The next step requires a bit of guesswork, but it’s a fair bet that half of that revenue, say about US$650 million, will stick in the Atlas accounts as gross profit. The accountants will then soak up their share in depreciation and other charges, but when you convert the US dollar revenue stream to Australian dollars at today’s exchange rate of US92 cents to the Aussie dollar, Atlas suddenly become a company with a market capitalisation which stands at less than two years of its projected gross profit – A$1 billion value on the market against A$705 million in projected annual gross profit from 2012. 

All of those numbers are in the “best guess” category but they’re not hard to work out, and will be done soon by a stockbroker close to you. Minesite is happy to be first to take a stab at what Atlas will look like. And this is just the start of what should be a sustained growth path, paved with a combination of mine developments, rising production, and corporate deals. 

As it currently stands, Atlas is the producer of around one million tonnes of iron ore a year from a start-up mine called Pardoo. Next cab off the rank is a mine called Wodgina. After that, depending on planning and approvals, come mines at Abydos and Mt Webber. As an occasional visitor to these remarkably remote locations Minesite’s Man in Oz can vouch for the ore in the ground (also a non-JORC code compliant comment), and is happy to take the word of David that ore reserves are not an issue for Atlas. What is an issue, and one which is being cleverly resolved, is access to roads, railways and ports. 

In early March Atlas stitched up a merger agreement with the smaller Aurox Resources on what looked like very generous terms: one Atlas share for every three Aurox. But the deal had little to do with ore in the ground, given that Aurox’s primary asset is a big deposit of magnetite, an iron ore which requires large licks of capital to be developed - and by large we’re talking no change out of A$1.3 billion, versus A$12 million for a modest-sized DSO project. “The cost structure for magnetite projects is 50 to 100 times higher than a DSO”, David said. “It’s a pretty easy equation to think through.” What Aurox does have going for it is access to capacity in Australia’s biggest iron ore export centre, Port Hedland. 

So, the Aurox merger is much more of an infrastructure play than a grab for ore in the ground. An earlier Atlas deal was about ore in the ground. That was the merger with Warwick Resources, which gives Atlas access to another iron ore mining district, close to the BHP Billiton’s inland hub at Mt Newman. 

All of which adds up to a business which has cash flow (small but growing), a mine development pipeline, and assets ideal for joint venturing in the shape of two magnetite deposits, Ridley, which is already on the books of Atlas, and Balla Balla, which comes with Aurox. The introduction of an Asian steel mill keen to secure future supplies of iron ore pellets, of the type produced from magnetite ore, looks like the likely outcome for those two assets. And while that works its way through the pipeline, Atlas will get on with its preferred business of selling high-value DSO ore.


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## drillinto

Copper Peak

Link below has several charts on Australia.

http://europe.theoildrum.com/node/6307


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## drillinto

The average year-to-date performance of the 81 countries listed below is 6.94%.  With a YTD gain of 5.27%, the US is just below average.  Only 12 of the countries shown are down so far in 2010.  Three Eastern European countries are leading the way this year with the biggest gains -- Ukraine (58.87%), Estonia (41.36%), and Romania (29.89%).  Bermuda is down the most with a YTD decline of 31.39%.

Looking at just the G-7 countries, Japan is up the most so far in 2010 with a gain of 6.62%.  Japan is followed closely by Britain (+6.13%).  The US ranks third out of G-7 countries, while Italy has been the worst of the group with a decline of 0.18%.  Of the BRIC countries, only Russia is doing better than the US in 2010.  Brazil, India, and China have all underperformed the US.  China is one of the 12 countries that is down.

[Resources rich countries(Australia, Canada, South Africa) had a modest performance, so far]


The link below has the ranking for 81 countries:
http://www.bespokeinvest.com/thinkbig/2010/4/1/first-quarter-country-stock-market-performance.html


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## drillinto

April 01, 2010

Nuclear Power Is Vital For Maintaining Our Ongoing Global Energy Growth Profile
By Charles Wyatt
www.minesite.com/aus.html

In the spirit of provoking a stimulating debate over Easter which could result in a profitable investment thereafter we offer a single word – uranium. There was an uptick of a dollar or so in the price of uranium last week to US$42.25 per pound, but no one should forget that the price was as high as US$128 per pound in 2007. OK, all prices of metals and minerals were near all-time highs in that year, but then followed the crash. Since then, most have caught up significantly since the dark days at the end of 2008. The exception is uranium, but the fundamental case for it in terms of supply and demand has not changed: it has grown stronger.

Spring is here again and with the new buds and shoots has come a new mindset among the population of the world. No longer do they want to be fleeced of what money they have hung onto through the recession in the name of climate change and global warming.  As Abraham Lincoln said: “you can fool all of the people some of the time and some of the people all of the time, but you cannot fool all of the people all of the time”. No truer words have been said, but  a motley collection of politicians, scientists and greenies have managed, very conveniently, to muddle global warming and climate change in a way that made fools out of a lot of people. 

The  scepticism of the hoi polloi has finally reached the ears of politicians and many, such as Presidents Sarkozy and Obama, realise they have more pressing problems at home. Pragmatically, Western nations are not going to enforce greenhouse targets or standards at a significant cost, if they are going to be left at an economic disadvantage to major developing nations such as China and India who do not comply. 

There has always been climate change, so what is new about that?  Global warming is a different matter, but can the Meteorological Office, which cannot forecast weather accurately four days ahead, tell us what is going to happen 40 years hence? What we should be fearing instead are peak oil and atmospheric pollution, but these realities rarely get a mention. 

Still, we cannot go on using oil and gas to generate power at present rates for much longer. Back in 2007 Mark Simmons, founder and chairman of  what was then the world’s largest energy investment banking company,  Simmons and Co. International,  reckoned we had passed the peak two years earlier. Oil and gas are becoming ever more difficult and expensive to find and recover. And whenever fossil fuels are burned to generate power or drive machinery more carbon particles are released into the atmosphere causing as much danger to our lungs as a pack of cigarettes. 

Every effort is being made to lessen pollution by cars, but again we have been fooled. CO2 is named as the culprit when it is the very staff of life. Without CO2 in the  atmosphere all plants would die and we would follow. The only efficient form of non-polluting energy, which is not dependent on fossil fuels, comes from nuclear power stations. And the fuel for nuclear power stations is uranium. Greenies like to spread the word that nuclear reactors are dangerous, but it is simply not true. The new generation is as safe as it is possible to be. 

It is a question that cannot be ducked.  If we want to keep the lights on in 20 years time and have a cleaner atmosphere we have to build nuclear power stations now.  Wind power is inefficient and has to be subsidised by its own consumers, as Tracy Corrigan of the Daily Telegraph pointed out recently.  These stations take the best part of ten years to build, and uranium mines take almost as long from discovery to production. No use building power stations unless there is a firm supply of fuel, so the pressure is on the junior explorers to come up with the goods. 

Minesite is not a tip sheet so we will not produce a list of junior exploration companies most likely to succeed, but any investor worthy of the name should have some exposure to uranium in their portfolio. It is the fuel that underpins the future for the world. That is our thought for Easter. Last word to brokers WH Ireland: “hundreds of new nuclear reactors will have to be built just to maintain  our on-going global energy growth profile”. What will that do for the price of uranium and the ratings of uranium companies?


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## drillinto

April 03, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia, and happy Easter. Takeover bids seem to have been the driving force behind your market last week. 

Oz. Very much so. We saw corporate activity in the gold and coal sectors, and another zinc deal keeping interest alive in a metal which normally has a very low profile. Newcrest’s (NCM) proposal to merge with Lihir Gold (LGL) was hardly a surprise, but it did serve to remind investors that some gold stocks are undervalued. And Peabody’s bid for Macarthur Coal (MCC) was a reminder that Australia is plugged directly into the Chinese economy, which is what US-based Peabody wants, even if it means steamrolling the Asian investors who already dominate the Macarthur share register.

Minews. Perhaps a bit more detail on Macarthur to help our London readers. 

Oz. Well, Macarthur serves well as an example in miniature of how the Australian mining industry at large is evolving. It has a Chinese investment company, CITIC, as its biggest current shareholder, with a 22.4 per cent stake, an Indian steel maker, ArcelorMittal, in second spot with 16.6 per cent, and Korea’s biggest steel maker, Posco, third with 8.3 per cent. Peabody’s A$13-a-share offer for Macarthur was quickly rejected by management, and by the market too which ran the stock up by A$3.70 to a closing trade on Thursday at A$14.87 - a whopping gap premium to the bid price, and a definite pointer to the level of interest in Australian coal. 

Minews. Presumably the rest of coal sector also went for an upward ride. 

Oz. It did, with some very handy moves. Whitehaven Coal (WHC) added A53 cents to A$5.33. New Hope (NHC) rose by A29 cents to A$5.21. Centennial (CEY) also put on A29 cents to A$4.39. Stanmore (SMR) added A4 cents to A89 cents. Two of the African-focused coal stocks listed on the ASX joined in too, with Riversdale (RIV) rising by A42 cents to A$9.32, and Coal of Africa (CZA) adding a modest A5 cents to A$2.39. 

Minews. Did the Newcrest bid for Lihir have the same effect and rub off on other gold stocks? 

Oz. Perhaps, though that’s a little harder to tell. The trend among the gold stocks was positive, thanks largely to a firmer tone in the gold price. Risers comfortably outnumbered fallers with Lihir, obviously, leading the way as it powered ahead by 31 per cent, or A95 cents, over the week, to close at A$4.04. That was just A1 cent short of the fresh 12 month high of A$4.05 set during Thursday trade. Newcrest did less well, as is expected of the bidder, but did manage a rise of A84 cents to A$33.78. 

The really big mover of the short week was a relative newcomer. Doray Minerals (DRM), only listed on February 8th at A20 cents, but closed last week at A76 cents after a spectacular set of assays from its Andy Well prospect near Meekatharra. Best hits were four metres at 120.71 grams a tonne, contained in a wider zone grading 62.53 grammes per tonne over eight metres. High-grade assays came in from four separate drill holes which all encountered gold at relatively shallow depths starting at 16 metres

Other upward movers in gold included Ampella (AMX), which rose by A8 cents to A$1.30, Azumah (AZM), which rose by A2 cents to A37.5 cents, Perseus (PRU), which rose A3 cents to A$1.99, and Resolute (RSG), which rose A10 cents to A$1.10. Also better off, Silver Lake (SLR), rose A9 cents to A$1.23, and Kingsrose (KRM), rose A9 cents to a fresh 12 month high of A80 cents. Chalice (CHN) also did well, putting on A6.5 cents to A47 cents on fresh drilling results from its Zara project in Eritrea, including one intersection of seven metres at 18.71 grammes per tonne. Fallers were harder to find. Allied (ALD) and Adamus (ADU) both slipped half-a-cent, Allied to A32 cents and Adamus to A42 cents. 

Minews. Iron ore now because the new pricing system and the expected 100 per cent price rise has generated plenty of interest. 

Oz. It certainly has. A number of iron ore companies hit fresh share price highs, though most of the heavy lifting was done in the lead up to the announcement of the changed pricing system. Best of the iron ore stocks were BC Iron (BCI), which hit a 12month high of A$1.69 on Thursday before easing to close at A$1.60, up A20 cents, and Mt Gibson (MGX), which climbed to A$1.98 on Wednesday before easing to close the week at A$1.91, for an overall gain of A10 cents. Giralia (GIR) performed a similar trick, hitting A$2.33 on Wednesday, and closing the week at A$2.29 for a gain of A23 cents. 

Other iron ore movers included Atlas (AGO), which rose A17 cents to A$2.58, down a fraction on a new peak price of A$2.60 hit early on Thursday. Also better off was Gindalbie (GBG), which rose A14 cents to A$1.24, Brockman (BRM), which rose A19 cents to A$3.79, Iron Ore Holdings (IOH), which rose A20 cents to A$2.66, and Fortescue (FMG), which rose A17 cents to A$4.97. 

Minews. The base metals now, please. 

Oz. Nickel stocks starred, as we suggested they might do when we last spoke. With the nickel price now sitting around US$11.30 a pound, or A$12.20 on conversion, it’s reasonable to expect nickel stocks to continue performing strongly. Best of the nickels last week were Panoramic (PAN), up A32 cents to A$2.51, Mincor (MCR), up A12 cents to A$2.05, Minara (MRE), up A13.5 cents to A97 cents, and Mirabela (MBN), up A28 cents to A$2.59. Also better off, Independence (IGO) rose A40 cents to A$4.78, though perhaps due more its gold assets than its nickel ones. 

Copper stocks were mixed, about half up, half down. Equinox (EQN) was the pick up the sector, putting in a rise of A37 cents to A$4.27. Sandfire (SFR) also managed a healthy rise of A17 cents to A$3.77. Meanwhile, Sabre (SBR) put on A5 cents to A45.5 cents as drilling started on its Namibian prospect. Companies which lost ground included CuDeco (CDU), which eased back by A5 cents to A$4.80, Discovery (DML), which lost A3 cents to A75 cents, and Exco (EXS), which was half a cent lighter at A24 cents. 

Zinc, as we hinted at earlier, was back in the news, as more deals surfaced. Nyrstar, which has been busy trying to secure control of CBH Resources (CBH), has now boosted its stake in Greenland-focussed Ironbark (IBC) to a 31 per cent holding. The deal did nothing for Ironbark, which closed as it opened at A44.5 cents. CBH also went nowhere, steady at A18 cents. 

Minews. Uranium, and any specials to finish. 

Oz. A mixed bag in the uranium sector, some up, most steady. Paladin (PDN) was the surprise packet, adding A32 cents to A$4.20, and earning a speeding ticket from the ASX with the reply being the standard “know of no reason”. Extract (EXT) crept up A8 cents to A$7.90, ending a few weeks of decline. Manhattan (MHC) was steady at A$1.20, and Bannerman (BMN) reversed its worrying decline by adding half a cent to close at A49.5 cents. 

There was not a lot of action among the other metals. Iluka (ILU) continued its recovery on stronger zircon prices, closing at A$4.53, for a gain of A19 cents. The lithium stocks were mixed. Orocobre (ORE) added A12 cents to A$2.25. Galaxy (GXY) lost A2 cents to A$1.18. Manganese stocks firmed. OM Holdings (OMH) added A12 cents to A$1.82, and Spitfire (SPI) rose by A2 cents to A15 cents. 

Minews. Thanks Oz.


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## drillinto

Bill Matlack(March 30, 2010): Metals and Mining Analysts' Ratings and Estimates - Senior Producers [OZ miners included]

http://www.kitco.com/ind/matlack/mar302010.html


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## drillinto

The Cost of Rising Commodities on the Consumer [USA]
April 5, 2010 

With $85 providing nothing in the way of resistance, the price of oil is up sharply today and trading above $86.  While commodity traders who are long are loving the rise in oil prices, consumers aren't nearly as ebullient, especially ahead of the Summer driving season.  To them, higher prices mean more pain at the pump, and in their wallets. 

In the chart below we have calculated the cumulative daily price change of the major food and energy commodities in the CRB index (Corn, Soy, Wheat, Cattle, Hogs, Oil and Natural Gas) since the beginning of 2008.  We then multiplied the changes by the annual per capita consumption of each item.  When the line is in the red zone, commodity prices are acting as a tax on consumers, while the green shading indicates that lower commodity prices are providing a 'rebate' for consumers.  While this method may oversimplify the actual costs, it provides a good idea of how changes in commodity prices have impacted consumers' wallets over the last 18 months.

As shown in the chart, from the beginning of 2008 through the Summer of 2008, rising commodity prices became an overwheming tax on consumers.  At the peak in commodity prices, the average American was being taxed $4.77 more per day due to rising prices than they were at the start of 2008.  For a family of four, this works out to more than $19 a day, or just under $7,000 per year.  As commodity prices declined, the tax of commodities eventually turned into a rebate of $4.99 per day by early 2009.  So within the span of a year, a $7K annualized tax turned into an annualized rebate of more than $7K. 

Since March 2009, commodity prices have once again been rising, although the increase has been more gradual.  In the process, though, the rebate has been slowing dwindling away.  Commodity prices are still having a positive impact compared to where they were at the start of 2008, but much less so than they have been at other points in the last year.  As of today, the average impact on the consumer is still a rebate of $1.35 per day, which works out to $5.40 for a family of four and just under $2K per year on an annualized basis.  It's not $7K, but consumers will still take whatever they can get.

Link to view the chart:
http://www.bespokeinvest.com/thinkbig/2010/4/5/the-cost-of-rising-commodities-on-the-consumer.html


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## drillinto

Base Metals ETF List (USA - CND - UK)

http://etf.stock-encyclopedia.com/category/base-metals-etfs.html


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## drillinto

The Twelve Most Overbought ETFs ((USA))
Tuesday, April 6, 2010  

Usually, only one or maybe two of the 200+ key ETFs we track are trading more than 10% above their 50-day moving averages, but currently there are twelve.  The STEEL stocks ETF (SLX) is trading the farthest above its 50-day of all the ETFs we track (non-leverage) at 16.53%.  SLX and the other eleven ETFs trading well into overbought territory are listed below.

Link to see the ETF list:
http://www.bespokeinvest.com/thinkbig/2010/4/6/the-twelve-most-overbought-etfs.html


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## drillinto

April 08, 2010

Coal: The Contrarian’s Investment 
By Joe Hung, Editor, Casey’s Energy Report
www.minesite.com/aus.html

Imagine the price of gold jumping to US$1,500 overnight... what would that do to the price of junior mining companies? That’s what just happened to the price of coal – it jumped 38 per cent in one day!
Coal is dirty, it’s dusty, and it sends environmentalists into a tizzy. It’s also the most rapidly growing fuel source in the world, it’s broadly distributed with almost 70 countries having economically recoverable resources, and the energy found in it still exceeds that in all other fossil fuels combined. 

Whether you love it or hate it, coal will be playing the most important role in global energy supply over the next 50 years – and it is the focused investor who stands to profit from this. As far as energy prices go, coal has historically been lower and less volatile than oil and gas. 

For developing nations, this makes coal a first pick as an energy source, and combined with considerable deposits, it is simply the cheapest and most convenient thing around. This isn’t to say it’s not important for the rest of the world: in the United States, almost 50 per cent of all electricity generated and 90 per cent of the steel production is fired by coal. 

Where it gets really interesting is when we look at the demand for thermal coal (the coal used to generate electricity) from the emerging Asian markets. With looser environmental concerns, the emissions cap threat that is dogging producers in the United States and, to a lesser extent, Canada, is not quite as real here. 

India is seeing rising demand even as coal resources shrink, while China consumes almost half of the world’s production of coal each year. With a rapidly expanding industrial sector that needs constant fueling, and cleaner alternatives still too expensive, China and India are out shopping and undeveloped coal resources from Mozambique to Canada are the hot items. All of which makes the companies holding on to these assets prime targets for takeovers and joint ventures. 

Adding the sparkle to this rather lucrative picture is that the European and South American companies that were dependent on Asian coal exports are now looking towards North America for exports. 

Then there is metallurgical coal. Known more widely as coking coal, it is essential in refining iron ore and the production of steel, and carries none of the environmental stigma that comes with thermal coal. Nor is it as abundant as thermal coal, since only a relatively narrow range of coal rank and compositions make good coking coals. 

It thus demands a much higher price. Any industrialized nation has a high demand for steel, and with housing booms and rapid infrastructure development, Japan, China, India, and Korea (to name a few countries) are desperate seeking to fuel their growing appetite. 

With the demand for thermal and coking coals becoming red-hot in the strong Asian markets, the team at Casey’s Energy Report knows coal is the invisible bull market. 

In 2009, China’s total coal imports tripled, reaching 125 million tonnes, and last month it signed yet another multi-billion coal supply contract. India’s growing negative coal balance saw a record-breaking 80 million tonnes of coal imported last year – and that number is set to rise for 2010. The global energy market is set, and the profits are there for the taking.


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## drillinto

The Eight Ps of Resource Stock Evaluation - Special Report (2009)
by Doug Casey

http://www.caseyresearch.com/pdfs/20090820_0908208PsPROOFED.pdf


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## drillinto

April 10, 2010

That Was The Week That Was … In Australia
By Our Man in Oz
Source: www.minesite.com/aus.html [ The registration is FREE, but the quality of the commentary is TOP NOTCH ]

Minews. Good morning Australia. Your market seems to have been a bit flat while you went on your rounds visiting gold projects last week. 

Oz. That's an understandable view from London, especially if one only looks at the indices on the ASX. There, the metals and mining index and the all ordinaries added less than one per cent and the gold index added 3.6 per cent. Apart from gold, which is in a world of its own, last week's indices did nothing more than reflect the dominance of BHP Billiton and Rio Tinto on the Australian mining markets. Both of those stocks dropped a few cents over the four-day trading week, and left an incorrect impression of what was actually a fabulous week for small to medium miners and explorers.

Minews. In much the same manner as in previous weeks? 

Oz. Exactly. It is a rather interesting phenomenon, and can be interpreted two ways. Either there is a bubble forming in some sectors, such as in our hyper-active West African gold stocks, or the performance of the smaller miners is part of an ongoing rush to make up for the falls over the past two years, when many good companies were sold off too heavily. In truth, it's probably a bit of both, because demand for all sorts of commodities, particularly metals is very strong. Copper at US$3.60 a pound and nickel at US$11.30 per pound are indicative of a market that keeps getting stronger. 

Minews. Enough theories. Time for prices, starting with gold, please. 

Oz. Good rises across the sector, with the Aussies in West Africa leading the charge. Ampella (AMX), which has attracted a lot of interest in London, rushed up to a fresh 12 month share price high of A$1.53 on Friday, before easing to close the week at A$1.48, for a gain of A18 cents. Azumah (AZM) performed a similar trick, hitting a new high of A50 cents before easing to end at A49.5 cents, up A12.5 cents over the week. Ampella had nothing fresh to report, but Azumah released more assays from recent drilling at its Collette prospect in Ghana, and these included a 20 metre zone grading 7.43 grams a tonne, starting at 76 metres. 

Another West African on the move was Carbine (CRB), which is yet to do anything on the ground, but which rose A10 cents to close at A36 cents last week, A1 cent short of its 12 month high of A37 cents also set on Friday. Meanwhile, Castle (CDT) joined the party with a rise of A5 cents to A45 cents, a little short of its high of A47.5 cents set in early Friday trade. Adamus (ADU), one of the players in the region with a well advanced mine plan rather just an exploration plan, rose by A4 cents to A46 cents. Perseus (PRU), meanwhile, officially ended the week at A$2.05, up just A6 cents, but that was after the shares were limited by a trading halt which started early on Friday, following a report of spectacular assays from its Tengrela project in Ivory Coast. One hole produced a stunning 1,216 grams a tonne (39 ounces to the tonne) over a narrow two metre section from 98 metres, contained within a wider zone of 325 grams per tonne (10 ounces) over eight metres. 

Minews. Fabulous assays. Little wonder your miners are rushing to the region. How did the rest of the gold sector perform? 

Oz. Well, but not in the same league as the West Africans, as this quick call of the card shows. Stocks to rise included: Navigator (NAV), up A4 cents to A21 cents, Saracen (SAR), up A8 cents to A47 cents, Doray (DRM), up A4.5 cents to A80.5 cents, Troy (TRY), up A8 cents to A$2.47, Kingsgate (KCN), up A59 cents to A$9.14, and Alkane (ALK), up A4.5 cents to A34 cents. 

Minews. Let's start moving through the other sectors now - perhaps across to coal as that seems to be attracting a lot of attention. 

Oz. It certainly is. A myriad of bids drove Macarthur Coal (MCC) as high as A$16.03 on Friday, a 12 month high, before the shares then eased to close at A15.55, up A68 cents on the week overall. The race for Macarthur has started a fire under the entire sector, which is being driven by rising Chinese demand for coal. Other movers included Gloucester (GCL), which rose a spectacular A$2.89 to A$12.20, a closing price which was just short of the stock's all rime high of A$12.36 reached on Friday. Meanwhile, Whitehaven (WHC) added A46 cents to A$5.79, Stanmore (SMR) rose by A4.5 cents to A93 cents, and Centennial (CEY) put on A13 cents to A$4.52. A couple of relative newcomers also did well. NuCoal (NCR),which is exploring in New South Wales, closed at a fresh high of A32.5 cents, up A8 cents, and Aspire Mining (AKM), which has coal assets in Mongolia, rose by A3 cents to A12.5 cents. 

Minews. Time left for a quick run-down of the iron ore and base metal sectors, please. 

Oz. It was all up in iron ore, as continuing Chinese demand for all forms of bulk commodities underpinned the sector. The sector leaders all did reasonably well, but some of the best results came at the smaller end. Atlas (AGO) added A20 cents to A$2.78, but did trade as high as A$2.93 on Wednesday. BC Iron (BCI) rose by A19 cents to A$1.85. Fortescue (FMG) managed a modest increase of A4 cents to A$5.01. Grange Resources (GRR) was up A6 cents to A65 cents on reports of higher prices for premium quality iron pellets which it proposes to produce at its Southdown mine in Western Australia. Gindalbie (GBG), which is also in the pellet-processing business, rose by A9 cents to A$1.33. 

Interesting as those moves are, there was more interest at the smaller end of the sector, as Territory (TTY) made a welcome return as an investment favourite, adding A7 cents to A26 cents. Meanwhile, Midas Resources (MDS) announced plans to drill a target in the iron rich Pilbara region, a seemingly insignificant piece of news which nevertheless triggered a mini-rush into the stock. Midas then scampered up to a 12 month high of A8.8 cents before closing at A8.6 cents, an overall rise of A2.7 cents, or 46 per cent, on the promise of drilling. 

Minews. With assays to come, perhaps. 

Oz. That's the point. Rises of 45 per cent on a report of a drilling start are rather silly. 

Minews. Or a sign of a boom heading for a peak. 

Oz. That's the worry. We do seem to have an awful lot of heat in the market at the moment. To finish with iron ore, other upward moves included Ferrum Crescent (FCR), which rose A4 cents to A21 cents, and Ironclad (IFE), which rose A20 cents to A$1.50. Fallers included Brockman (BRM), off A1 cent to A$3.78, Giralia (GIR), down A8 cents to A$2.21, and DMC Mining (DMM), down A1 cent to A40 cents. 

Minews. Base metals now. 

Oz. Copper and nickel up, zinc sideways. Best of the coppers stocks were Equinox (EQN), up A30 cents to A$4.57, Discovery (DML), up A9.5 cents to A84.5 cents, Talisman (TLM), up A10.5 cents to A$1.10, and CuDeco (CDU), up A30 cents to A$5.10. Citadel (CGG) was steady at A38.5 cents, and Sabre Resources (SBR) closed as it opened at A45.5 cents. 

Mincor (MCR) was the pick of the nickels, up A14 cents to A$2.19. Also better off, Independence (IGO) rose by A20 cents to A$4.98. Falcon Minerals (FCN) made a return with a rise of A6 cents to A30 cents as it gets ready for fresh drilling at its Collurabbie project. Zinc stocks were flat, or moved a few cents either way. Perilya (PEM) added A4 cents to A63.5 cents, while CBH (CBH) was steady at A18 cents, and Terramin (TZN) was also flat, at A74.5 cents. 

Minews. Uranium and specials to close, please. 

Oz. There was minimal movement among the uranium stocks. Paladin (PDN) continued its recovery after a big sell-off, rising by another A39 cents to A$4.35, but after that it was flat. Manhattan (MHC) was steady at A$1.20. Extract (EXT) added A5 cents to A$7.95. 

The only specials of note were Zamia Mines (ZGM) which reported interesting molybdenum assays, news which helped the stock more than double from A4.5 cents to A9.7 cents. Lithium and manganese stocks were quiet, while the titanium revival continued, and sector leader Iluka (ILU) rose another A37 cents to A$4.90. 

Minews. Thanks Oz.


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## drillinto

Staples and Health Care Stumble: Eight Sectors Still Overbought [USA]
Thursday, April 8, 2010 

Link to view the charts:
http://www.bespokeinvest.com/thinkb...are-stumble-eight-sectors-still-overboug.html

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## drillinto

Right on, Mick !
:::::::::::::::::::::::

Commodity demand outlook is strong
Ongoing funding tightness in the mining sector is one of the factors feeding into Xstrata’s belief that the recession was merely a blip on the super cycle in commodity prices and the short- to medium-term outlook is positive albeit fraught with uncertainty said CEO Mick Davis.

Click the link below to read more
http://www.miningmx.com/news/markets/commodity-demand-outlook-is-strong.htm


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## drillinto

April 17, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free registration]

Minews. Good morning Australia. You seem to have escaped the Goldman Sachs-inspired sell-off which hit northern markets on Friday. 

Oz. We did, but our turn for a touch of panic selling will come on Monday. It will be interesting to see how the ghost of a Goldman deal from two years ago impacts on today’s China-driven boom on the Australian market. The feeling down this way is that alleged naughty behaviour by some of the chaps in New York will have a minimal impact, because of the pace of growth in the Asia Pacific region.

Two numbers released last week show how closely aligned the Australian economy has become with that of China. Housing prices in China rose by an eye-catching 11.7 per cent last year, leading to some speculation that the Chinese economy may be over-heating. Australian house prices were almost a mirror image, rising by 12.7 per cent during the same period. 

Minews. Your point being that Australia is riding on China’s coat-tails. 

Oz. Precisely. Where China goes, we follow - as a supplier of the raw materials that become the manufactured goods that continue to flood out of China. 

Minews. Time for prices, and news from your market. 

Oz. Overall, the market last week was flat. Technically, we finished in the black, with the all ordinaries index hanging on grimly to close above 5,000 points, with a gain of less than one per cent. The metals and gold indices fell by similar modest amounts. In fact, wherever you looked movements in share prices and indices were remarkably modest. The Australian dollar opened and closed the week at US93 cents. Gold opened and closed the week with a US$1.00 difference, starting at US$1,152 an ounce at finishing at US$1,151. Base metals held their ground, and uranium slipped slightly. 

The only action that stirred investors’ blood was in takeovers where bid and counter-bid for Macarthur Coal (MCC) has sent the company’s shares into the stratosphere. At the close on Friday Macarthur shares stood at A$16.54, double the price they were trading at six months ago. A handsome 22 per cent of that rise has come over the past two weeks. Other coal stocks were mixed, though. Some up, some down. 

But before we get to the call of the card, let’s set the context with a few numbers on how the Australian market is becoming takeover driven. According to analysis by the bean-counters at Dealogic, last year saw 566 takeover bids for Australian-based mining companies. The collective value of the bids was US$76 billion. Those numbers represent a 38 per cent increase in the number of bids, and a 4.5 times increase in value, on 2008. So far this year there have been 114 resource-related bids valued at US$17.2 billion. 

Minews. Numbers which seem to indicate that if you are to match last year’s totals there needs to be a significant increase in takeover action over the rest of 2010. 

Oz. Exactly, which is why we’re starting to see lists of likely targets being published. The most recent, in Saturday’s Financial Review newspaper, had two companies that will be familiar to Minesite readers at the top: Medusa Mining (MML) and Kingsgate Consolidated (KCN). Medusa scored 10 out of 10 as a certainty to cop a bid. Kingsgate was rated seven out of 10. On a score of five were Dominion Gold (DOM), and OceanaGold (OGC). 

On the market, bid speculation helped three of that foursome rise last week. Medusa put on A30 cents to A$4.45, OceanaGold added A11 cents to A$2.76, and Dominion rose by A3 cents to A$2.68. Kingsgate, perhaps weighed down by the ongoing political troubles in Thailand, fell by A42 cents 
to A$8.72. 

Minews. Prices now, continuing with gold. 

Oz. Star of the week was Cortona (CRC) which got some air time on Minesite a week ago, after we got an early peek at assays from the company’s Majors Creek project near Canberra. Pleasingly, we were spot on with that story, and the stock duly added A7.5 cents last week to close at A23 cents, although at one stage it did get as high as A28 cents. Other rises were hard to find, and small. Independence (IGO) added A6 cents to A$4.96, on fresh news from drilling at the Tropicana gold project it shares with AngloGold. Troy (TRY) added A13 cents to A$2.60. Silver Lake (SLR) rose A3 cents to A$1.25, and Kingsrose (KRM) put on A3 cents to A83 cents. Gold stocks to fall included Adamus, down A4 cents to A42 cents, Perseus (PRU), down A11 cents to A$1.95, Catalpa (CAH), down A4 cents to A$1.56, and CGA Mining (CGX), down A3 cents to A$2.22. 

Minews. Let’s complete the coal story you started with Macarthur, and then move on to iron ore, please. 

Oz. After Macarthur it was a mixed bag among the coal stocks. Gloucester (GCL), which is intimately tied to the Macarthur bidding war, slipped A2 cents to A$12.18. Stanmore (SMR) lost A1 cent to A92 cents. Coal of Africa (CZA), however, went the other way, and put on A17 cents to A$2.57. Aside from Macarthur, the star of the coal sector was the recently-listed Hunnu Coal (HUN) which announced more deals in Mongolia, and rocketed up by A34 cents to close at A87 cents, having briefly touched a high of A95 cents on Friday. 

Iron ore stocks continued to move higher as investors factored in the latest sharp increase in the iron ore price. Batavia (BTV) has been the speculator’s favourite over the past few weeks, stacking on another A5 cents to close at A28.5 cents last week, just short of the 12-month high of A29.5 cents set on early Friday trade. Other iron ore stocks to set fresh price peaks last week included Giralia (GIR), which got as high as A$2.45 on Friday before closing at A$2.44, for a gain of A23 cents, IMX Resources (IXR) which hit A51 cents before closing at A50 cents, up A5.5 cents, and Sphere Minerals (SPH), which closed at its peak of A$2.10, up A25.5 cents. Other upward movers included Atlas (AGO), up A2 cents to A$2.80, Iron Ore Holdings (IOH), up A7 cents to A$2.51, Fortescue (FMG), up A33 cents to A$5.34, and BC Iron (BCI), up A6 cents to A$1.91. Fallers included Territory (TTY), down A1 cent to A25 cents, FerrAus (FRS), down A5 cents to A$1.05, and Brockman (BRM), down A6 cents to A$3.72. 

Minews. Base metals next. 

Oz. All over the shop. If pushed to pick a trend - up, but only just. Copper companies on the rise included Exco (EXS), up A4 cents to A33.5 cents, Hillgrove (HGO), up A3 cents to A43 cents, and CuDeco (CDU), up A8 cents to A$5.18. Fallers included Sandfire (SFR), down A14 cents to A$3.79, Rex (RXM), down A8 cents to A$1.71, and Equinox (EQN), down A14 cents to A$4.43. Going nowhere were PanAust (PNA), stuck on A55 cents, Sabre (SBR), steady at A45 cents, and Citadel (CGG), flat at A38 cents. 

Nickel and zinc stocks barely moved. Panoramic (PAN) led the nickels with a rise of A10 cents to A$2.68. Mincor (MCR) added A3 cents to A$2.22, while Western Areas (WSA) lost A9 cents to A$5.50, and Minara (MRE) was steady at A97 cents. Zinc movers included CBH (CBH), which added A1.5 cents to A19.5 cents, and Blackthorn (BTR), which rose by A2.5 cents to A91 cents. Meanwhile Kagara (KZL) slipped half a cent lower to A83 cents, despite announcing the details of its gold spin-off, Mungana Goldmines. 

Minews. Uranium and any specials to close, please. 

Oz. No good news from the uranium sector. Extract (EXT) dropped A55 cents to A$7.40, amid concern that the uranium market will be over-supplied for a few more years. Manhattan (MHC) slipped A3 cents lower to A$1.23, and Paladin (PDN) lost A29 cents to A$4.06. 

There are a few specials worth mentioning. One is Alkane (ALK), which is attracting close interest because of its Dubbo zirconium and niobium project. It ended the week at A36.5 cents, a gain of A2.5 cents. The manganese stocks, OM Holdings (OMH), and Spitfire, crept a little higher, while the most popular of the lithium plays, Galaxy (GXY) moved up a sharp A22 cents to A$1.41. 

Minews. Thanks Oz.


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## drillinto

April 19, 2010

Commodity Prices Drop On Shock News: Not All Investment Bankers Are Saints
By Rob Davies
www.minesite.com/aus.html


Markets were having a good time last week until the SEC decided to ruin things by suing the world’s most prestigious investment bank. Commodity and equity prices fell sharply on Friday when it was announced that Goldman Sachs was to be sued for selling ropey products designed to lose money for some clients and make money for others.

As a news story it must rate as one of the all time least surprising to anyone who has ever dealt with an investment bank. The only thing that is exceptional is that it has taken the authorities this long to get round to doing anything about it. 

As with all sell-offs, there were also underlying reasons why traders chose to take money out of the markets. Both aluminium and nickel had reached post crash highs last week. Aluminium hit US$2,494 and nickel hit US$27,544 a tonne, driven by incessant demand from China. 

And the strength of the Chinese economy was confirmed by a report stating that it grew by 11.9 per cent in the first quarter of this year. Independent evidence for that came from Macquarie, the Australian investment bank, which reported that the spot price for 62% iron ore delivered in China rose 8.7 per cent over last week alone, to reach US$182 a tonne.  

While demand from the middle kingdom remains exceptional, the same cannot be said of other parts of the world. In the US, housing starts only rose by 1.6 per cent, although building permits did increase by 34 per cent to their highest level since October 2008.  

But, as we know from the SEC action, the economic environment then was already under huge pressure. It is hard to envisage a return to the pre-crash levels in the foreseeable future. 

So, while Chinese growth is better than no growth at all, the conjunction of last week’s different macroeconomic news stories served to remind the market of how dependent it still is on one huge, non-democratic, communist country enjoying its own real estate boom. 

The Chinese authorities are aware of the property bubble. How could they not be, with real estate on the island of Hainan up 50 per cent in the last year? Like all bubbles, though, the trick is to deflate them gently without precipitating a dramatic crash. 

So far the move to raise mortgage rates and the minimum size requirements for deposits – 50 per cent for second homes - has not worked. Betting against millions of would-be capitalists is going to take a lot more firepower than has been delivered so far. 

Meanwhile, the other big story last week was the release of GFMS’s review of the gold market in 2009. Others will dissect it in more detail, but the salient point is that even as gold prices achieved record levels, mine production still did not surpass its previous peak. 

In terms of supply, mine production was outstripped by supply from scrap. That fact, combined with the collapse of jewellery consumption, very effectively demonstrates the price sensitivity of two major elements in its market – in a strong price environment jewellery sales fall as buyers feel the pinch, while sales of scrap gold rise. 

Fortunately the biggest factor, investment demand, has a strong direct correlation with price, and exceeded jewellery offtake for the first time in thirty years. As long as investment bankers don’t get involved in it, the prospects for gold look better than ever.


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## drillinto

April 20, 2010

Strong Leverage To Rising Metals Prices: Mincor Resources And Batavia Mining Ride The Australian Mining Boom
By Our Man in Oz
www.minesite.com/aus.html [Free registration]

You know that the mining boom is back in Western Australia when coffee shops shut at 3pm because the owner can’t find staff for a second shift, the local Porsche and Bentley dealer is expanding his salesroom, car parks are full, and mining company executives present to packed houses. Those were four of the impressions gathered by Minesite’s Man in Oz after he got stuck in traffic and arrived late last Friday to listen to talks by David Moore from Mincor Resources and Greg Bittar from Batavia Mining. The location was Fraser’s restaurant in Kings Park, which overlooks Perth, a city which went into overdrive last week thanks to the remarkable revival of business activity, and the arrival of the Red Bull air race circus which attracted a crowd of 100,000 spectators around the banks of the Swan River and on a flotilla of yachts and launches.

For young stockbrokers, accountants, lawyers, and investors, the mood in Perth today is exhilarating. For older hands it is more a case of welcoming back the boom, an old friend who probably never went away, just paused for breathing space. China is the driver of what’s happening in Australia, especially in the west and the north. Large-scale investment in iron ore, coal, and natural gas projects are the headline grabbers, but the boom is reaching down into every layer of the economy and society, and it’s not all good. The boom has brought the return of ugly Australians: heavy drinking, loud-mouthed yobs known as CUBS, or cashed-up bogans. For anyone that’s uncertain about what “bogan” means, he/she is an unsophisticated, poorly educated, lout – with oodles of cash from high-paying labouring work. And to get an idea of what “oodles” means down here, a good is example is the base rate for a worker on the Gorgon liquefied natural gas (LNG) project, which is A$150,000, or £90,000 in British pesos. Skilled workers get much more. 

It was against this background of a boom in its early revival stages that around 200 investors and interested spectators battled through the hardships of heavy traffic, scarce parking space, and a dubious fish lunch, to learn more about two companies that are plugged directly into the Chinese demand for raw materials. Mincor is the better-known story because it has been successfully mining nickel at Kambalda for almost 10 years. Batavia is less well known, but is showing signs of replicating Mincor’s formula by developing a resource which was discovered by a major mining house, and then ignored because of better opportunities elsewhere and the low mineral prices which slowed the Australian resources sector in the 1970s and 80s. 

David Moore’s presentation on Mincor ran over-time, not that he bored anyone. But it was while he competed with waiters distributing fish floating on something orange, that careful listeners were able to identify the next events which will drive the Mincor share price higher. First step up will be a decision scheduled for next month regarding the re-opening the company’s mothballed flagship mine, Miitel. Closed in late 2008, when the nickel price crashed, Miitel is described by David as Mincor’s “sleeping giant”. That’s not just because of significant past production, but more because the exploration which continued during the global slowdown has significantly expanded the known amount of nickel in Miitel, where the possibility of a link with the nearby Mariners mine is now realistic, a development which would significantly lower future mining costs. 

And even as it cues up Miitel for production, Mincor is also expecting to learn more about its curiously-named US-NOB project, a high-tech search for ultra-sized, nickel orebodies. News from US-NOB will be a longer-term value driver for Mincor’s shares, which have risen from trades at less than A$1.00 this time last year, to recent trades around A$2.17. That’s a solid recovery, but nonetheless one that is actually well behind the upward move in the price of nickel, a point made rather delicately by David. While other company chief executives might have highlighted the gap that has opened between the nickel price and Mincor’s share price, David simply used a graph to show how Mincor tracks the nickel price. Right now there is a fascinatingly large gap, which David describes as: “strong leverage to the nickel price”. 

If Mincor is a fairly-well known, if currently undervalued nickel story, Batavia is a stock at the foot of the same escalator. Although it plans to develop a different mineral, iron ore, the parallels with Mincor are nevertheless there for anyone looking closely. Mincor’s claim to fame was its gutsy acquisition in 2001 of nickel mines effectively abandoned by the company which discovered them decades earlier, Western Mining Corporation (now part of BHP Billiton). Batavia is following the same route, having acquired an iron ore deposit discovered by BHP at Roper River in the Northern Territory more than 50 years ago. But, in a similar vein, the Roper River project was never developed because BHP discovered the giant Mt Whaleback iron ore deposit at Newman in Western Australia at about the same time. 

Batavia’s plan is similar to the one developed by Territory Resources when it was briefly an investor’s favourite thanks to the re-opening of another Northern Territory iron ore deposit, Francis Creek. Unlike most of the small iron ore projects across the border in WA the NT deposits have the advantages of a nearby rail system which is open for business, and an open port in Darwin, which will be able to handle two million tonnes of Roper River ore from 2012, and then up to five million tonnes a year as port space becomes available. Further down the track there is the possibility of export via Maria Island in the Gulf of Carpentaria, about 200 kilometres south of BHP Billiton’s big Groote Island manganese operations. 

If a common theme can be spotted linking the provenance of Mincor and Batavia a second theme can be found in the way both companies are being followed by Australian investors familiar with resource project development. In both cases there is an underlying commodity enjoying a significant price re-rating as global growth accelerates. There is a link back to discovery by a mining major, and later abandonment in pursuit of bigger targets, and there is the common management heritage - in the hothouse which is Perth at the start of a boom.


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## drillinto

April 24, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [[ Registration is free ]]

Minews. Good morning Australia. You seem to have suffered a rather bleak week. 

Oz. It was, but one tiny crack of light did peek through. The gold sector reacted to the negative publicity surrounding banks, Greece, and other floppy European economies, by posting a very modest rise of 0.5 per cent, as measured by its index on the ASX. However, having pointed that out as one of the few pieces of positive news from last week’s trading, it should also be said that it was awfully hard to find many gold stocks that actually rose by much.

Minews. Perhaps you’re tracking different gold stocks to those in the ASX index. 

Oz. You might think that, but a survey of 24 gold companies - not a bad sample - found three which rose last week, three which didn’t move at all, and 18 which fell modestly. Analysis of the iron ore, base metal, and coal sectors delivered much the same result, while uranium was all down, as investors fretted over another flood of de-commissioned weapons-grade nuclear material flooding the uranium market. 

Minews. Before we get to prices it might be useful to bring London investors up to speed on some of the political chatter in your part of the world, not that we really need any more politics in this country. 

Oz. That’s a good suggestion, because we had a spot of good news last week, and a large dose of potentially very bad news. The good news is that the government of Western Australia has promised to not increase the royalty on gold production - an issue which had bugged the gold boys. The bad news is that the national government is said to be thinking about whacking a monster new tax on the entire resources sector, to help pay for its stimulus spending in the wake of the global financial crisis. 

Minews. Now, that is a worry. 

Oz. It’s more than that, because media reports are suggesting, perhaps in an exaggerated way, that the new federal resource rent tax might be as high as 40 per cent. Mining lobby groups reacted with horror on Saturday morning when they read that on the front page of a national daily. The Minerals Council of Australia said that a new tax would kill projects, jobs and investment. I suspect that on Monday we might see some fairly substantial falls on the ASX as investors try to factor in the possibility of any such new tax. Even if it is as low as 10 or 20 per cent, it will eat deeply into profits. 

Minews. Thanks for that. We might take a closer look later, because a new tax on Australian mining will make your country much less attractive as an investment destination. But let’s change tack now and call last week’s share-price card. 

Oz. Well, as I warned earlier there isn’t much to talk about. There were a few stand-out moves but the trend was flat. Overall, the all ordinaries index slipped two per cent lower. The metals and mining index was down 3.2 per cent, and the gold index was up 0.5 per cent, possibly aided by a modest slide in the value of the Australian dollar, given that the US dollar gold price was down slightly. 

Sticking with gold, the best upward moves came from Avoca (AVO) which added A6 cents to A$2.23, Allied (ALD) which added A4 cents to A37 cents, and Chalice (CHN) which rose by half a cent to A47.5 cents, a move so small that the fact that a rise of half a cent makes you a winner says all that is required about the activity in the rest of the sector. Falls came from all directions. The Aussies in Africa were marked down, with Perseus (PRU) leading the way as it shed A4 cents to A$1.90. Resolute (RSG) dropped A4 cents to A$1.15. Adamus (ADU) fell by A1.5 cents to A40.5 cents. Other downward movers included Silver Lake (SLR), down A6 cents to A$1.19, Kingsgate (KCN), down A5 cents to A$8.67, Troy (TRY), down A13 cents to A$2.47, and Medusa (MML), down A6 cents to A$4.51. Even the sector leaders dropped marginally. Newcrest (NCM) was off A21 cents to A$34.20, while its potential merger partner, Lihir (LGL) lost A3 cents to A$3.95. 

Minews. Not much to write home about in that lot. Iron ore now, please. 

Oz. More of the same, I’m sorry to say. The only rises of any consequence came from two explorers that are on the cusp of making the transition to mining. Brockman (BRM) added A10 cents to A$3.82, and BC Iron (BCI) put on A8 cents to A$1.91. After that it was downhill. Fortescue (FMG) fell a  fairly sharp A33 cents to A$5.01, after more selling from one-time strong supporter, Harbinger Capital of the US, and even in spite of a bold new expansion plan at its Christmas Creek project. 

Minews. Harbinger continuing to sell must be making news down your way. 

Oz. It is. The prevailing theory is that Harbinger boss, Phil Falcone, has formed a negative view on China’s growth outlook, and might not be overly impressed with FMG’s complex finances and what seem to be perpetual expansion plans. FMG founder, Andrew Forrest, meanwhile, has been making more noises about heading for the exit to spend more time on charitable work. 

Minews. Interesting stuff, but let’s move on and finish the iron ore call and move on to base metals. 

Oz. All other iron ore moves were down, or flat. Atlas (AGO) lost A17 cents to A$2.69. Giralia (GIR), fell A13 cents to A$2.31. Iron Ore Holdings (IOH), dropped A16 cents to A$2.25. Gindalbie (GBG) was off A7 cents to A$1.27. Mount Gibson (MGX) shed A4 cents to A$1.90, and Batavia (BTV) was steady at A28.5 cents. 

Over among the base metals it was nearly all red ink, although two copper stocks moved against the trend. Equinox (EQN) added A14 cents to A$4.57. And Sabre Resources (SBR) added A5.5 cents to A50.5 cents after it reported an expanded drilling target at its Namibian project. Citadel (CGG) lost A2 cents to A36 cents. Sandfire (SFR) fell A14 cents to A$3.65. Talisman (TLM) dropped a sharp A23 cents to A87 cents, after an inconclusive first-up drilling result from claims adjacent to Sandfire’s Doolgunna discovery. Discovery (DML) slipped A2 cents low to A87 cents. 

Nickel stocks were all down, while some zinc stocks managed small rises. Among the nickels, Mincor (MCR) lost A10 cents to A$2.12, Western Areas (WSA) fell by A24 cents to A$5.26, Panoramic (PAN) dropped A11 cents to A$2.57, and Independence (IGO) was A30 cents lighter at A$4.66. Zinc companies on the rise included Kagara (KZL), Terramin (TZN), CBH (CBH) and Mt Burgess (MTB), but by amounts so modest that they varied from just a fraction of a cent to a mere A1.5 cents. 

Minews. Coal, uranium and any specials to finish, please. 

Oz. Coal continued to attract supporters, but the overall trend was flat. Stand-out performer was the Canadian-focussed Coalspur (CPL), which announced it had attracted the support of the successful investment group, Highland Park. Shares in Coalspur jumped by A29 cents to A84 cents on the news. There were only two other significant upward movers. One was Indonesian-focussed Apac Coal (AAL), which rose by A2.3 cents to A6.2 cents. The other was Continental Coal (CCC), up A0.8 of a cent to A5.6 cents. Also in positive territory, Centennial (CEY) rose a marginal A14 cents to A$4.51. But after that all down, if only fractionally. Takeover target Macarthur (MCC) fell by A39 cents to A$16.15. Stanmore (SMR) fell by A11.5 cents to A80.5 cents, and Coal of Africa (CZA) slipped A7 cents lower to A$2.50. 

Uranium stocks all fell. Paladin (PDN), the local sector leader, fell by a very sharp A22 cents to A$3.84. Manhattan (MHC) lost A23 cents to A$1. Extract (EXT) dropped A12 cents to A$7.28, and Bannerman (BMN) lost A2.5 cents to A46.5 cents. 

Minews. And specials? 

Oz. The lithium stocks rose slightly. Galaxy (GXY) rose A8 cents to A$1.49, and Reed (RDR) added A2 cents to A75.5 cents. Rare earths specialist Lynas (LYC) added A8 cents to A$1.49, perhaps thanks to the highly detailed survey of the arcane rare earths market that we ran at the end of the week. But emerging manganese hopeful Southern Hemisphere Mining (SUH), which we also took a look at late last week slipped A2 cents lower to A49 cents. 

Minews. Thanks Oz. Tell us more about your big new tax regime when you find out, and we’ll tell you about ours.


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## drillinto

Phosphorus Futures

Peak Phosphorus: the sequel to Peak Oil  
by Professor Stuart White1 and Dr Dana Cordell1,2

1 Director, Institute for Sustainable Futures, University of Technology, Sydney (UTS) Australia. 
2 Research Principal, Institute for Sustainable Futures, University of Technology, Sydney (UTS) Australia and Department of Water and Environmental Studies, LinkÃ¶ping University (LiU) Sweden. 

Read the article here >>> http://phosphorusfutures.net/peak-phosphorus


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## drillinto

April 26, 2010

It’s A Crisis, But Don’t Panic, Buy Something
By Rob Davies
www.minesite.com/aus.html [Free Registration]

Capital markets have now regained a sense of order that seemed hard to envisage twelve to eighteen months ago. Someone who had been denied any news for the last two years would look at today’s prices and see them as roughly in line with where they were in early 2008. Well, at any rate, apart from bank shares looking a bit odd.

Whether it is commodities, equities, or bonds, none of the asset classes seem to be pricing in the near death experience that the capitalist countries faced at the end of 2008. 

Yet the damage caused by the crisis is not far below the surface, and is most evident in the scale of debt incurred by various countries, most notably the two leading Anglo-Saxon economies of the USA and the UK.  

Collateral damage in the euro zone is also obvious in the Greek crisis, which seems certain to get worse before it is resolved. It would also be sensible to remember countries like Ireland, Iceland, Portugal and Spain that all have massive economic problems of varying degrees. 

But other than various governments offering to step into the breach and provide the demand stimulus that the private sector is currently unable to deliver, there seem to be few viable solutions to the current crisis. 

Sure, governments have rounded on the banks and threatened to sue them, tax them or break them up to get their money back, and/or make sure this never happens again.  But that doesn’t solve today’s problems. 

Banks are a convenient whipping boy to deflect attention away from the real culprits - politicians who spent more than they raised in taxes for decades. One solution is to change the politicians. 

But in a world where popularity is determined by looks and sound-bites, few would-be ministers are going to stand up and say: “Elect me and I will make you poorer by raising taxes and cutting spending to improve your country’s credit rating”. None will say it, even if it is what they are actually planning. 

In reality governments will use the legerdemain of devaluation to reduce the real value of sovereign debt, and nominal assets. The only protection for investors will be to hold the hard assets of commodities, and the slightly softer one of equities, to preserve their wealth. 

That’s why metals prices and share prices have bounced to current levels. At the beginning of 2009 the LMEX index, reflecting the basket of base metals that are traded on the LME, was trading at about 1,900. It finished the year at 3,500 and has moved even higher since to stand today at 3,637. 

Demand for metal outside China remains lacklustre so prices are being maintained by low stock levels, and a lack of new supply. 

Many investors will deride commodities by pointing out that they do not generate any income. That is true. If you want income you can buy a two year Greek bond that yields over 10 per cent. While that bond may well be redeemed at par in two years time, it is clear that investors are unsure what its real value will be then. 

If, as many suspect, Greece is forced to leave the euro, any company that has a producing metal mine in that country could be about to see its cost base reduced dramatically, and virtually overnight.


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## Temjin

*MARKET MUSINGS & DATA DECIPHERING 
Breakfast with Dave 
David A. Rosenberg   April 28, 2010 
Chief Economist & Strategist   Economic Commentary 

CHINESE STOCK MARKET LEADS COMMODITY PRICES *

To very little fanfare, the Chinese stock market ”” the first index to turn around in late 2008 ”” has slipped into a bear market.  It is down 15 % from the nearby high and 20% from last year’s interim peak.  Why this is important is because  the Shanghai index leads the CRB commodity spot price index by four months with a 72% correlation (and over an 80% correlation with the oil price).  Don’t get us wrong ”” we are long-term secular commodity bulls; however, we have been agnostic this year from a tactical standpoint ”” never hurts to take profits after a double! 







I also had the same viewpoint with David Rosenberg for a while. Commodities have certainly overran its fundamental over the past few months due to global stimulus effort and unrealistic expectation of a V-shape recovery.

I have been quite defensive in regards to my commodity positions. If the correlation continues to exist (which I believe it will be), expect a drop in commodity prices across the board soon. (maybe including gold too depending on how BAD Greece and others PIIGS euro countries fare out)


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## drillinto

May 01, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html [Registration is free]


Minews. Good morning Australia. It seems a little fear and loathing is creeping into your market. 

Oz. It is, but readers of Minesite might not be as surprised about it as those Australian investors who ignored the warning contained in our chat last week. Back then we was clearly reported that the Australian government was planning to hit the mining sector with a new tax to help recoup its stimulus spending, and to aid the country by building up a layer of financial fat ahead of the next downturn. Despite all the signs, which were being quite well semaphored by government spokesmen, the local market sailed on as if nothing was happening. In fact, on Tuesday, when the market re-opened after the Anzac Day holiday, mining shares actually rose modestly.

Minews. Which caused your blood pressure to rise alarmingly because you were certain this was a case of the market being wrong, not that we can ever really second guess the market. 

Oz. Yes, it is a brave man who does that, but to me it was crystal clear that every layer of government in Australia has tax on its collective mind, and that the industries most likely to be whacked are mining and oil. So, when the tom-toms started beating in Canberra that a major report written by Treasury boss, Ken Henry, featured a national Resource Rent Tax (RRT), it was clear that mining stocks were in for a shock. 

Minews, When will we know what Mr Henry plans? 

Oz. Sunday is release day for the Henry Report, with legions of journalists and analysts already heading to Canberra to be briefed on what promises to be a generational change in the Australian tax system. One of the aims is to smooth out the economic performance of the country as it’s developing a two-speed nature, with the resource-rich states growing and the rust-belt in the south-east struggling to keep up. In theory, and said quickly, Mr Henry’s tax plans sound admirable, but the result could be a one-speed Australia, and that will slow-speed. If there is any good news in what might come out of the Henry Report it’s the possible introduction of a flow-through tax deduction scheme similar to the one which operates in Canada. Fingers crossed because that could provide a significant boost to the small end of mining, especially explorers. 

Minews. Even a tax cloud can have a silver lining, but presumably your market started to wake up to the changes ahead as the week progressed. 

Oz. It did, but Monday has the potential to be a grim time for resource stocks if the new RRT is as high as some tipsters are suggesting, or if it is introduced too quickly. One suggestion is that the tax will apply from Sunday night to prevent any last minute asset shuffling by miners. 

Minews. Interesting times, but we’re here to talk about last week so let’s re-focus on prices. 

Oz. The overall tone of the past week was down, after that strange Tuesday start when prices crept up despite the tax threat. Overall the market, as measured by the all ordinaries, fell 1.6 per cent. The gold index lost two per cent and the wider mining and metals index fell three per cent. There were, as ever a few companies which swam against the tide. 

Surprise of the week came in the return to the public arena - if in fact he had ever left it - of Miles Kennedy. Regular Minesite readers will remember Miles as a diamond hunter and, more recently, as chairman of the tear-away copper stock Sandfire Resources (SFR). Unfortunately for Miles he had a vigorous disagreement with Sandfire’s chief executive, Karl Simich, and they parted company. Last week, the business now being run by Miles, Resource & Industry (RNI) was the star performer among the miners, more than doubling to A16 cents, after it announced the acquisition of a package of copper exploration tenements alongside Sandfire’s Doolgunna project. 

Minews. Which means Miles and Karl are now neighbours, if not partners. 

Oz. Precisely. Let’s continue with copper and the other base metals before calling the card of the other sectors, not that there’s a lot to talk about. Apart from Resource & Industry’s sharp rise, the only other copper stock in the black was Rex (RXM) which added A5 cents to A$1.69. Sandfire, which was in the news courtesy of interest in its new neighbour, held up well but still ended the week down A5 cents at A$3.60. Other copper movers included Oz Minerals (OZL), down A4 cents to A$1.15, Equinox (EQN), down A40 cents to A$4.35, Exco (EXS), down A2 cents to A29 cents, and Discovery (DML), down A1.5 cents to A85.5 cents. 

Nickel stocks were all down, bar Minara (MRE) which was steady at A88 cents. Mincor (MCR) fell A21 cents to A$1.91. Mirabela (MBN) lost A35 cents to A$2.40. Western Areas (WSA) dropped A43 cents to A$4.83, while Independence (IGO) dropped a modest A2 cents to A$4.64, supported as it is by gold assets. Zinc stocks, somewhat curiously, were the best of the base metals. CBH (CBH) added A2.5 cents to A23 cents, as interest grows in assorted bids for control of the company. Prairie Downs (PDN), which rarely gets a look-in these days, put on A1 cent to A17.5 cents. Perilya (PEM), fell A4 cents to A56 cents and Blackthorn (BTR) lost A2 cents to A82 cents. 

Minews. Back to a normal flow now, with a switch to gold and iron ore please. 

Oz. Gold was a mixed bag with rises and falls in roughly equal proportion. Pick of the gold sector was Ampella (AMX) which hit a 12 month high of A$1.55 on Friday, but slipped marginally to end the week at A$1.52 for an overall gain of A18 cents. Other Aussies in Africa did well, as speculation about Australia’s new tax regime attracted increased attention in offshore opportunities. Perseus (PRU) rose A3 cents to A$1.93. Adamus (ADU) rose A2 cents to A42 cents, and Resolute (RSG) put on A2.5 cents to A$1.17. Another mover of note was Goldminex (GMX), a Papua New Guinea explorer with some hot tenements. Goldminex shot up an eye-catching A8 cents to A30 cents. Catalpa (CAH) reported a maiden gold pour at its Edna May project, an event which helped the company’s shares rise by A9 cents to A$1.64. Kingsrose (KRM) gained A3 cents to A83 cents, and Medusa (MML) hit a 12 month high of A$4.73 on Friday, before closing at A$4.72 for gain over the week of A21 cents. 

Also on the rise, Thor (THR) added one-tenth of a cent to A1.9 cents after our midweek report. Meanwhile, Silver Lake (SLR) remains a market favourite down this way and put in a gain of A3 cents to A$1.22. Stocks to fall in a week dominated by quarterly reports included Troy (TRY), off A2 cents to A$2.45, Kingsgate (KCN), down A18 cents to A$8.59, and Dominion (DOM), which lost a sharp A26 cents to A$2.90. 

Iron stocks were hit harder than gold, perhaps because of profit-taking after a few excellent weeks and also because of the looming tax hit. Batavia (BTV) ran out of puff, shedding A4.5 cents to A24 cents. Fortescue (FMG), which is leading what will become a pointless anti-tax campaign, fell A43 cents to A$4.58. Giralia (GIR) lost A22 cents to A$2.09. Gindalbie (GBG) fell A9 cents to A$1.18. Also worse off, Atlas (AGO) lost A17 cents to A$2.52 despite winning approval to develop its Wodgina project. The only iron ore stock to rise was DMC Mining (DMM). DMC added A2 cents to A48 cents thanks to being on the receiving end of a takeover bid and after being rated as a very under-valued stock by your friends at Ambrian Capital. 

Minews. Time’s short, uranium and coal and any specials to finish please. 

Oz. Uranium was interesting for corporate reasons, and for a small rise in the price of the metal. Paladin (PDN), the local star, “outed” a raiding party organised by Uranium One which snapped up a parcel of around two per cent of the stock, generating a bit of heat in Paladin’s share price. Paladin added A16 cents to A$4.00. Manhattan (MHC) also clawed back some lost ground with a rise of A5 cents to A$1.05. Meanwhile, the oddly-named Pepinnini (PNN) shot up to a calendar year high of A29.5 cents on Thursday on news of success at an iron ore exploration project. It then announced a downgrading of its Crocker Well uranium project and ended the week even at A22 cents. 

Most coal stocks retreated after a few brilliant weeks. Takeover target Macarthur (MCC) dropped A68 cents to A$15.47. Riversdale (RIV) fell A20 cents to A$9.20. Whitehaven (WHC) lost A29 cents to A$5.32. Coal of Africa (CZA) slipped A14 cents lower to A$2.36. Centennial (CEY) lost A22 cents to A$4.30. Lonely with the only rise of the week was Stanmore Coal (SMR), which added A4.5 cents to A85 cents. 

No specials of note. The lithium twins Galaxy (GXY) and Reed (RDR) fell marginally, while the local manganese explorer, Spitfire (SPI) added A1 cent to A14.5 cents. 

Minews. Thanks Oz. Have fun with your great tax overhaul.


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## drillinto

May 04, 2010

The Australian Tax Man Cometh, Guided By A Long-Shining Light Of Arrogance From BHP Billiton And Rio Tinto
By Our Man in Oz
Source >>> www.minesite.com/aus.html [Free Registration]

If you’re an investor feeling a little peeved with the Australian Government for ruining the mining boom with a monster tax hike, then you might be pointing your finger in the wrong direction. Yes, there is no doubt that it is the increasingly unpopular Labor government of Prime Minister, Kevin Rudd, which pulled the tax trigger.

But since Rudd and his comrades have spent the past 12 months loading the gun as a means of recouping post-GFC stimulus spending you might care to ask why it came as such a surprise to investment banks, stockbrokers and others further down the pecking order? The answer is that those in the mining industry, particularly the companies at the top end of town, have no friends in Australia. In fact, BHP Billiton and Rio Tinto are not even seen by the locals as being Australian. 

Rudd played the “foreign investor” card yesterday, as a chorus of protests rang around the mining sector about the new 40 per cent blanket resource rent tax (RRT), and while what he said is partly true, given that the share registers of both companies are dominated by offshore interests, it was a line swallowed all too willingly by the Australian media. The problem for BHP Billiton and Rio Tinto, which will be forced to pay about 75 per cent of the RRT, is not their multiple stock exchange listings or head offices tucked away in discrete corners of London. It is that they have done nothing to keep lines of communication open with the Australia media or wider community. 

Minesite’s senior man, Charles Wyatt, has played the “open communications tune” on his time-worn keyboard for eons. His target has been smaller miners which overlook the importance of talking to the wider market and the media. But what Charles has written about the lower levels of the mining sector applies in spades at the top end, where people like BHP Billiton’s South African-born boss, Marius Kloppers, and Rio Tinto’s American boss, Tom Albanese, are playing dual roles as the mining world’s equivalent of Tom Wolfe’s infamous “masters of the universe” and H.G. Wells’ “ Invisible man”. 

If, for example Minesite’s Man in Oz was to seek comment, or an interview with Kloppers and/or Albanese they would not be available. Nor would their second ranking executive, or their No. 3, 4, 5, 6 or 7. No need to go on. You get the picture. These are executives, and companies, which have outgrown the Australia mass media, and now move in international circles, available only to the cream of the global print and television world. The other possibility, which Minesite’s sometimes scruffy Man in Oz acknowledges, is that we are simply small fry and not worth the time. 

But, that attitude of flitting around the world in corporate business jets, chatting to government heads in Canada, South Africa, Chile, Peru and goodness knows where else, is that none of those countries make the rules (especially the tax rules) under which BHP Billiton and Rio Tinto operate. Just as the two big boys became too important (or, perhaps just too busy) to talk to the local media, so too they became too busy to talk to local politicians, the very people who make the laws under which about half their assets operate. 

In fact, it goes a step further. Neither master of the mining universe actually seems to understand how Australian government works. When they started talking last year about merging their iron ore operations, the two companies dashed off to Canberra to brief the national government, only getting around to the Western Australian state government as an afterthought, despite the fact that mining law is state law, and both companies operate under state agreements. Talking to WA Premier, Colin Barnett, after talking to his rivals in Canberra was a big-time blooper, as Barnett willing says publicly. 

So, what’s the result of this collective arrogance of the masters of the mining universe? Tax trouble, with two capital Ts, for everyone in mining.  Neither company has friends in places where it matters. Governments dislike like them. The media has lost touch with them. Their doors are closed to the public, and their executives seem to believe that they are global citizens answerable to no-one. Perhaps their next career moves will be to join Goldman Sachs. They certainly have the credentials.


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## drillinto

May 04, 2010

In Terms Of Environmental Risk, Mining Will Always Be A Better Bet Than Oil 
By Rob Davies
Source >>> www.minesite.com/aus.html

Investors often lump mining companies into the same natural resource bucket as oil and gas companies. In fact BHP Billiton does indeed cover both bases. However, that behemoth aside, there are two huge factors that separate the mining industry and the oil and gas industries and impact on valuations.
The first is that unlike in metals, there is no secondary market in oil. Once it is burned or turned into a plastic bag oil never returns to the supply chain. In contrast recycled metal accounts for over a third of most metal consumption, and in lead as much as 60 per cent. 

That means for every unit of demand growth, primary output only need increase by 70 per cent for the major metals. So metals have a lower correlation to positive economic growth than oil does. This goes some way to reducing their appeal, and hence the pricing power and the valuation of the companies that produce them. 

On the other hand metals have only a limited capacity to damage the environment, and the corporate wallet, in the way that a large oil spill can, and does. The impact on BP’s share price of the blowout in the Gulf of Mexico has been dramatic, although arguably overdone. 

According to the Financial Times, in an analysis which chimed well with research on the same subject issued by stockbroker Evolution last week, BP’s value has fallen by US$23 billion since the explosion, but the cost of the clean-up is estimated at “only” US$12.5 billion. 

To be fair that is cash cost and will make a big dent in the company’s cash flow. That said, as BP pays the largest dividend of any company in the world it is better placed than most to cope with the problem.  

Nevertheless, the incident reminds investors that extracting natural resources comes with other risks, in addition to those of price volatility. At least for mining companies the costs of any such an environmental disaster are likely to be a lot less than those for an oil spill. 

Oil might be 100 per cent organic, but in the public eye it is still pretty nasty stuff. That fact should provide a justification for the market to give higher valuations to miners than oil stocks and give them a lower cost of capital. 

It is certainly true that the major miners currently enjoy higher ratings than the large oils. The reasons for that are many and complex and it would be a brave analyst who argued that it was because they might do less harm to the environment.  

But away from the theoretical side, metal prices continued to slide last week, along with other pro-risk capital markets. It is not difficult to find reasons, sorting the valid from the spurious isn’t always an easy exercise. Is it Greece, Goldman Sachs, the UK election or something else more important? 

Are we surprised that the Greeks cheated, Goldman Sachs legged over its clients or that the last British Government spent more than it earned? Actually, none of these things should surprise us, but the market has decided now is the time to worry about them. 

Overall, the LMEX index declined by 4.9 per cent over the week, led by falls in copper and nickel, but the other metals were all weaker too. After the spectacular gains of the last year it is easy to see the appeal of taking some risk off the table. Having said that though, working out which asset class is risk free these days is no easy task.


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## drillinto

May 08, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html [Free Registration]

Minews. Good morning Australia, how does it feel to have been spot on with your tax warnings over the past two weeks? 

Oz. Cold comfort, really. The slump was always going to come, and hopefully that’s as far as we go. Since the warning signs emerged, the overall market has retreated by around 10 per cent, including 7.5 per cent last week among the base metal, iron ore and coal miners, with a much more tolerable 2.5 per cent retreat from the goldminers. That’s the statistical extent of the damage. It’s likely that more harm was done to Australia’s reputation. Not because of the tax hit itself, and we really don’t quite know how it will work out yet, but because of the rather sneaky way in which the government behaved.

Minews. You are feeling delicate. Since when have governments not been sneaky? 

Oz. Point taken, but in this case we spent much of the past year hearing how the resources sector had saved Australia from the full effects of the global financial crisis, and yet the reward for that was whopping new tax. 

Minews. Presumably there wasn’t much call for black ink when recording price movements last week. 

Oz. Very little, but before we get to those  - and it really is a case of ticking off a long list of falls, with just half-a-dozen rises - it’s worth reflecting on what happened down here, and on how you’re about to get the same sort of treatment in the UK, in reverse. We have had two big tax hits in a week here, because before the miners received their so-called super-profits tax, which looks like pulling in an extra A$9 billion from 2013, assuming prices stay high, Australian smokers were stung with a A$2.5 billion rise in the tax on their fags. Next week, if the chit-chat is correct, it will be the turn of Australia’s banks to cough up, perhaps by the same amount as the miners. 

Minews. In other words the Australian government is rushing to recoup its stimulus spending as fast as possible. 

Oz. Precisely, and if the banks get hit as hard as the miners you can already see an extra A$20 billion lined up, which is roughly half what was spent stimulating the economy. Now, the question moves over to the UK, and the timing of any move in taxes there, because without extra revenue you might be in for a rough ride. In our case we got taxes first, with an election expected sometime later this year. You got the election, with taxes to come, if you can form a government with the stomach to do what happened here last week. 

Minews. Enough philosophising, let’s call the card, starting with the easy sector, gold. 

Oz. Two stocks rose. The rest fell. Lihir (LGL), which has changed its tune and now welcomes takeover approaches, added A9 cents to A$3.90. And Adamus (ADU) performed a minor miracle with a rise of A2 cents to A44.5 cents. However, Lihir’s suitor, Newcrest (NCM) was hammered for pitching a bid onto troubled waters, dropping A$1.60 to A$31.49. Meanwhile, the other Aussies working alongside Adamus in West Africa all sank lower, despite being relatively immune from Australia’s new tax regime. 

Minews. Interesting that the African stocks fell. Is that a tell-tale blowing in the wind which might indicate that you’re exporting a new tax system? 

Oz. Could be. Australia’s mining industry has successfully exported its mines reporting code, the so-called JORC-code, so why not export the tax act? On the other hand, we have had a few governments, such as the Canadian, commenting that mining is welcome in their countries, away from those high-taxing Aussies. But, wait until the Canuks see how much cash is being peeled off our industry. It would be hard for any government to resist, so perhaps there could be an outbreak of tax contagion. 

Minews. Let’s finish gold and move along. 

Oz. From here on it’s all down, so let’s ease our way in and start with some of the smaller falls. Silver Lake (SLR) fell A5 cents to A$1.17. Avoca (AVO) fell A16 cents to A$2.06. Troy (TRY) fell A5 cents to A$2.40. Perseus (PRU) fell A9 cents to A$1.84. Chalice (CHN) fell A7.5 cents to A42.5 cents. Kingsgate (KCN) fell A14 cents to A$8.45. Finally, Resolute (RSG) fell A3 cents to A$1.17. 

Minews. Iron ore next, please. 

Oz. There were a few heavy falls among the iron ore stocks, perhaps because they were very much in the news in light of the focus by the government’s tax team on the massive profits flowing in from the recent 100 per cent iron ore price hike agreed by China. Fortescue Metals boss, Andrew Forrest, led the protests, which is understandable given his personal pain. Fortescue (FMG) fell by A41 cents to A$4.17, taking its drop over the past three weeks to A$1.24, meaning that Forrest, with his billion FMG shares, has lost more than A$1.2 billion personally. 

Other iron ore movers included Giralia (GIR), down A21 cents to A$1.88, Atlas (AGO), down A29 cents to A$2.23, and Batavia (BTV), down A5.5 cents to A18.5 cents. Iron Ore Holdings (IOH) fell a very heavy A61 cents to A$1.61 on reports that a deal to sell a discovery to Rio Tinto might now fall through. Gindalbie (GBG) fell A9 cents to A$1.09. BC Iron (BCI) lost A23 cents to A$1.58, and Mt Gibson (MGX) shed A18 cents to A$1.53. 

Minews. Base metals next. 

Oz. One up, two held their ground, and the rest fell. Swimming upstream was the new exploration vehicle of Miles Kennedy, Resource & Industry (RNI). It remained a favourite of the day traders, adding A8.5 cents to A24.5 cents. The two which were flat were Saudi copper developer, Citadel Resources (CGG), which was steady at A34 cents, and zinc producer, CBH (CBH) which held on to A23 cents. Then comes a long list of falls. In copper, OZ Minerals (OZL) fell A11 cents to A$1.04, Equinox (EQN) fell A42 cents to A$3.93, Sabre (SBR) fell A8.5 cents to A42 cents, Sandfire (SFR) fell A16 cents to A$3.44, Rex (RXM) fell A32 cents to A$1.37, and Hillgrove (HGO) fell A7 cents to A30 cents. 

Among the nickel stocks it was all red ink, as a sharp fall in the price of nickel did as much damage as the tax rise. Mincor (MCR) was hit hard, despite having the courage late on Friday to announce the re-opening of its mothballed Miitel mine, a decision which might have cut the ground out from under the anti-tax lobby. Mincor fell A31 cents to A$1.60. Other movers included Western Areas (WSA), down A63 cents to A$4.20, Panoramic (PAN), down A51 cents to A$2, and Mirabela (MBN), down A16 cents to A$2.24. Among the zinc stocks only CBH held its ground. Otherwise it was all down. Perilya (PEM) dropped by A7.5 cents to A48.5 cents, Kagara (KZL) by A11 cents to A64 cents, and Terramin (TZN) by A5 cents to A75.5 cents. 

Minews. Uranium, coal and any specials to finish. 

Oz. There was one bright light among the uranium stocks. Mantra (MRU) popped up by an eye-catching A44 cents to A$5.00 in what was probably the biggest rise in any section of the market. All other U-stocks were down. Paladin (PDN) fell A30 cents to A$3.70. Manhattan (MHC) lost A21 cents to A84 cents. Extract (EXT) shed A31 cents to A$6.99, and Uranex (UNX) dropped A4.5 cents to A21 cents. 

Among the other classes of stocks the lithium players weakened quite sharply, as did the manganese companies. Orocobre (ORE), one of the leading lithiums, lost A35 cents to A$2.03. Galaxy (GXY) fell A20 cents to A$1.07, and Reed (RDR) was A13 cents weaker at A55 cents. OM Holdings (OMH) led the way down for the manganese stocks, with a fall of A17 cents to A$1.82. 

Minews. Thanks Oz.


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## drillinto

May 10, 2010

Metals Prices Will Strengthen As A Result Of The Australian Tax Hike
By Rob Davies
www.minesite.com/aus.html [The registration is free]

Companies don’t vote, so they always present an easy target for governments looking to raise additional revenue. And governments always want to raise more money, even if only to give back to the population. The population, after all, is more important since it has the votes that sustain the politicians that constitute the government. So it is perhaps not surprising that the Australian Government in its mammoth Henry Tax Review has decided that it makes sense - to it - to increase taxes on mining companies and reduce taxes on voters.
But although companies can’t vote, shareholders in them can, both literally and with their wallets. That was why the big Aussie miners started the week with sharp falls in their share prices. The tax review proposes that the resource taxation rises to a flat 40 per cent, which compares badly to the current industry level of about 20 per cent. 

In other words, a big chunk of the Australian mining industry’s cost base has just been doubled and, as Australia is a major producer of some the world’s most important commodities, it effectively means that the global production costs will move up a notch or two. 

You might think this would upset the Chinese, as they will have to pay even more now for their iron ore, coal and base metals. If it did, that upset got drowned out by all the other bearish news in the market. 

Nevertheless, if implemented this tax change will have two effects. It raises the cost of capital for the industry and it makes Australia a less attractive place for exploration. Fortunately, the country has sufficiently good geology and a sound enough business climate that most miners cannot afford to ignore it. No wonder they call it the Lucky Country. 

And having said all that, the effect on metal prices should be beneficial. Last week there was a maelstrom of bad news, so the 6.5 per cent decline in average base metal prices was perhaps not surprising. But in the longer term the increase in Australian taxes must be positive for commodity prices, since it increases the cost of capital to the mining industry. 

If the industry cost of capital is going to increase, new projects, or expansions to existing ones, will have to meet higher hurdle rates before being approved. If nothing else changes on a project, those higher hurdle rates will only be achieved by using higher metal prices in any feasibility studies that are undertaken.      

At this stage the changes are only proposals, and even on that basis they are a few years away. But if a country like Australia, that is perceived to be mining-friendly, can propose these sorts of increases it sends a strong signal to others that the industry is fair game. 

In many countries mining is tolerated rather than encouraged, and those of a more socialist leaning will find this move a good excuse to review their own mining tax regime. If the trend catches on, then we really could see a worldwide shift in the industry cost base. 

In the short term that might be bad for miners. But is a very positive development for the underlying commodities over the longer term. In the meantime other forces are at work on global capital markets, and metals will be pushed hither and thither by these. What this news does, though, is to reinforce the strong fundamental position of commodities in diversified portfolios.


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## drillinto

The US Shines 
Wednesday, May 12, 2010  

Below we highlight the year to date performance of the major stock market indices for more than 80 countries around the world.  The G-7 countries have black borders while the BRIC countries are shaded in light blue.

After trading mostly higher for the first four months of the year, global markets hit the skids in late April and early May on sovereign debt concerns.  China and parts of Europe have gotten hit the hardest, while some emerging markets have done really well in 2010.  As shown, Ukraine is up the most year to date with a gain of 52.92%.  Estonia ranks second at 46.64%, followed by Nigeria (33.59%) and Kenya (30.61%).

Going down the list from best to worst, the US is the first developed country to show up with a gain of more than 5%.  Canada has been the second best performing G-7 country with a gain of 3.83%, followed closely by Germany at 3.79%.   Britain, Japan, France, and Italy (the rest of the G-7) are all down year to date. [AUSTRALIA is down -6.11%]

Russia is the only BRIC country up year to date with a gain of 2.71%.  India is down 1.54%, Brazil is down 4.91%, and China is down a whopping 18.96%.  Only Greece and Bermuda are performing worse than China so far in 2010.

As we've been highlighting for awhile now, the US is currently the place to be when it comes to equities.

To view the stockmarkets performance table, please click the link below:
http://www.bespokeinvest.com/thinkbig/2010/5/12/the-us-shines.html


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## drillinto

May 15, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]

Minews. Good morning Australia, or should that be good morning America? 

Oz. Bit of both really, as today’s report on the Australian stock market is coming from an Australian visiting America’s oil capital, Houston. Despite being about 20,000 kilometres from home it has been possible to follow the Australian market from here and from other points visited last week, including New York and Chicago, where it was interesting to discover that the new “super tax” on Australia’s mining sector has attracted widespread negative comments.

Minews. You shouldn’t be surprised, because that tax plan is appalling. 

Oz. No argument there, but it is interesting to note the development that the proposed new tax on mining has now become a key element in Australian politics with the Opposition promising to abolish the tax if it wins office at the next election, due to be held sometime later this year. While that’s good news in that a change of government could bring an end to the super tax, there is also a real danger that mining in Western Australia, the major mining state, could be headed into double trouble because there are plans afoot to increase the traditional royalty rate. 

Minews. You mean that the re-election of your Labor Government at a national level would see the new super-tax introduced, while a conservative state government applies a higher local royalty rate? 

Oz. It is that bad - a classic pincer squeeze with higher taxes at a state and national level, a squeeze that will potentially kill off old and new projects. 

Minews. Time for prices, and since you’re on the road this week you can keep it short. 

Oz. Gold was the story of the week on the Australian market, aided by the rising US dollar gold price and a small decline in the exchange rate which pushed the local gold price up to over A$1,400 an ounce. The net result was positive for almost every gold stock. The only fall was posted by Bendigo Mining (BDG) which slipped half a cent to A24 cents. And after that one discordant note it was all up. The movers included Avoca (AVO), up A23 cents to A$2.29, Silver Lake (SLR), up A21 cents to A$1.38, Troy (TRY), up A46 cents to A$2.86, Perseus (PRU), up A18 cents to A$2.02, and Adamus (ADU), up A10.5 cents to A54.5 cents. Also better off were Kingsgate (KCN), up A50 cents to A$8.95, and Kingsrose (KRM), up A13 cents to A85 cents. 

Minews. Presumably the rest of your market did not perform as well. 

Oz. You might reasonably think so, but that wasn’t the case. Iron ore stocks staged a pleasing recovery after the sell-off of the past few weeks. Base metals and uranium were mixed, though the trend was positive. A useful snapshot of the Australian market is in the indices, because that’s where you see the effect of the European wobbles showing through in bank shares. The gold index, naturally, led the way up with a rise of 7.2 per cent last week. The overall metals sector added 4.1 per cent, while the all ordinaries managed a modest gain of 2.1 per cent. The test for us will come on Monday, when those heavy European market falls endured on Friday flow through into the Asia-Pacific. 

Minews. Iron ore first, please. 

Oz. There were solid rises across the board, perhaps partly because one of the implications of the planned tax-grab is that new projects might actually be favoured over old, courtesy of enhanced tax write-off provisions. The call of the card looks like this: Fortescue (FMG), up A14 cents to A$4.31, Atlas (AGO) up A9 cents to A$2.31, BC Iron (BCI) up A33 cents to A$1.91, Batavia (BTV) up A3 cents to A21.5 cents, Iron Ore Holdings (IOH) up a very sharp A48 cents to A$2.08, and Giralia (GIR) up an even sharper A62 cents to A$2.50. 

Minews. Some of those rises are really quite remarkable. 

Oz. They are, and may be related to those revised tax calculations, but we now have to see whether they can stick. Over in the base metals sector it was also a case of rises outnumbering falls, although activity was by and large more subdued. Copper-focussed risers included Equinox (EQN), up A22 cents to A$4.15, OZ Minerals (OZL), up A4 cents to A$1.08, Sabre (SBR), up A7 cents to A49 cents, Talisman (TLM), up an eye-catching A13.5 cents to A80 cents, and Sandfire (SFR), up A2 cents to A$3.46. Also better off, Hillgrove (HGO) rose A1.5 cents to A32 cents. Marengo (MGO) was steady at A10.5 cents, while Citadel (CGG) lost half a cent to A33.5 cents, and Resource and Investment (RNI) ran out of puff, slipping A2.5 cents to A22 cents. 

Nickel stocks rallied after big falls over the past two weeks. Zinc stocks were more subdued. Mincor (MCR) rose A12 cents to A$1.72. Minara (MRE) rose A4 cents to A80 cents. Western Areas (WSA) put on A9 cents to A$4.29, and Panoramic (PAN) recouped A19 cents to close the week at A$2.19. Best of the nickels, but mainly because of its exposure to gold, was Independence (IGO) which put on a sparkling A40 cents to close at A$4.52. Among the zinc stocks most rises modest. Perilya (PEM) rose A1 cent to A49 cents. CBH (CBH) added the same amount to close at A24 cents. 

Minews. Coal, uranium, and any specials to close. 

Oz. There was a modest upward trend among the coals. Uranium stocks were mixed. Riversdale (RIV) was the pick of the coal companies, putting in a rise of A66 cents to A$9.45. Coal of Africa (CZA) rose A11 cents to A$2.15. Stanmore (SMR) rose A3 cents to A75 cents. Macarthur (MCC), which has been the subject of competing and complicated bids, fell A19 cents to A$13.50. 

Paladin (PDN) was the uranium newsmaker as interest grows in the Russian raid on its share register. Paladin shares rose A38 cents to A$4.08. Extract (EXT) was also in demand, rising A52 cents to A$7.51. Other moves were more modest, and on the downside Manhattan (MHC) slipped A4 cents lower to A80 cents. 

Minews. And specials? 

Oz. Venture Minerals (VMS), the Tasmanian tin and tungsten explorer, released a very optimistic report regarding enhanced mineral recoveries at its Mt Lindsay project. Its shares duly rose A4 cents to A35.5 cents. Orocobre (ORE), one of the lithium hopefuls, delivered a sparkling A55 cent rise to A$2.58. 

Minews. Thanks Oz. Enjoy Houston.


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## GumbyLearner

Just getting through the yellow dust cack here on the Korean Peninsula. Usually a good sign of production out of China. 

It would great to see what this commod will do when things "pick up". *cough*

*Record demand for platinum in 2009*

http://www.shanghaidaily.com/sp/article/2010/201005/20100518/article_437354.htm


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## drillinto

May 17, 2010

Metals Soar As The Euro Goes Soft
www.minesite.com/aus.html <<< Free registration

Until last week the euro and the European Central Bank (ECB) had stood apart from the quantative easing programmes carried out by the US and the UK. That all changed on Monday 10th May when between them the ECB, 16 Eurozone governments, and the IMF all came up with a mind-bendingly complex refinancing package totalling â‚¬720 billion.

The full intricacies of that package are beyond the pay grade of this commentator, and are, anyway, less important than the principle. Ever since the euro was formed the default assumption has been that it would inherit the rock solid record of the deutschmark as a sound currency incapable of being debased. 

But this year, as the northern hemisphere winter turned to spring, that assumption was increasingly challenged by the insurrection in Greece, and by growing concerns over Portugal and Spain. 

Rather than take the simple, but humiliating, decision to admit that the euro is fundamentally flawed and break it up, politicians have taken the easier, but probably ultimately disastrous, decision to bail it out. 

At a stroke the decision destroys the status of the euro as a bulwark against inflation. It transfers it to the category of currencies controlled by leaders would rather debase them than accept the electorally unpopular consequences of making difficult decisions. 

The realisation that the euro had gone soft was the main reason commodity prices enjoyed a bounce last week. The bounce took gold to a new high of US$1,232 an ounce, while the LME base metals index rose by 3.2 per cent to 3,339. 

It is now clear that all the major governments and monetary authorities have voted for inflation over deflation, and will do what it takes to keep economies growing in nominal if not in real terms. 

All the base metals are well placed to benefit from monetary stimulus, but nickel made the biggest progress, as it jumped 4.7 per cent to US$22,675 a tonne. Copper moved slightly less, but did recover to close the week over the US$7,000 a tonne mark at US$7,010. 

In the real economy most companies updating shareholders took pains to stress that what recovery existed was patchy and that current conditions remain challenging. It would not take much reduction of government spending to tip a number of economies into a double dip recession, or just one very long one. 

Gold, with its financial connections, is probably better placed than base metals right now to make advances in price. The advent of ATMs in the Gulf dispensing gold at the touch of a button rather than cash is surely the best example of the diminution of faith in paper currency. 

Even so, governments will want their voters to be employed in some activity rather than creating mayhem on the streets of Europe. That suggests that make-work schemes like great national projects, or even just subsidies to make more cars, will find favour in the corridors of power. Such plans must be good for metal consumption. 

But having said that, the rows of newly built but unoccupied houses in Ireland are testament to the follies of bad capital allocation. So, if politicians and central bankers, or even commercial bankers, cannot make rational decisions on where to allocate capital it falls to the investing public to make doubly sure their decisions are even more rational. 

To the list of currencies that cannot be trusted we must now include the euro.  No wonder the Germans held onto their gold when the euro was created.


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## drillinto

Commodity ETFs: A word of caution

http://opinion.financialpost.com/2010/05/18/the-commodities-con/


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## drillinto

May 29, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. It seems some sanity returned to your market last week. 

Oz. It did, if you look only at the pleasing recovery in share-prices. But, a curious event late on Friday added to fears that Australia’s Great Tax Crisis (henceforth known as the GTC) is far from over. In a truly astonishing demonstration of panic, or determination, depending on your point of view, the national government invoked emergency powers to launch an advertising campaign designed to counter comments being made by miners about the proposed 40 per cent super tax on resource profits.

Minews. Could you say that again, a little more slowly, it sounded like you said emergency powers. 

Oz. I did. I’m sure your government in the UK has them for when the Taliban comes to town, or when Mr Hitler takes up position in Calais. Well, in this case it appears that Australia’s mining industry is seen in a similar light, perhaps not as bright, but the principle is the same. In this case normal laws controlling government-funded advertising have been suspended so a spare A$38 million can be spent telling Australia that its mining industry is run by a pack of liars. 

Minews. Remarkable. How on earth could a government spend taxpayers money to attack its own major industry? 

Oz. I’d like to say it’s because the loonies have taken charge of the asylum, although that’s probably not politically correct in these enlightened days. 

Minews. Never mind the political correctness. But anyhow, let’s leave the politicians in the asylum and concentrate on the market. 

Oz. As you started saying, it was a better week on the market, though probably only thanks to bargain hunters moving among the wreckage of a rather gloomy May. In fact, if we had not staged a recovery over the past five trading days it would have been a very bad May indeed. A few numbers illustrate what happened. Last week the metals and mining index on the ASX rose by 6.4 per cent, cancelling out much of May’s overall loss, though the index still ended down 6.2 per cent on the month. Without last week, the metals index would have been down more than 12 per cent. It was the same story with the all ordinaries which added 3.5 per cent last week, a rise which limited the May fall to 7.3 per cent. The strong man among the indices was gold, which rose 4.6 per cent last week, to end May up, but only just. The gold index gain for May was 0.3 per cent. 

Minews. Time for prices, please, starting with gold. 

Oz. Gold was where we had a few stand-out performers, and the upswing was led by one of the local favourites, Silver Lake (SLR). Silver Lake reported excellent assays from its Magic deposit, which lies within what should become the company’s second mining centre at Mt Monger. Best intersections were 11 metres at 59.4 grams of gold per tonne from a depth of 251 metres, and 10 metres at 19.1 grams per tonne from 52 metres. Those results propelled Silver Lake up by A26 cents to A$1.42. 

But it’s equally interesting to look at Silver Lake as a proxy for the turbulence in the market as Australian investors battle the GTC (remember that, the Great Tax Crisis). Over the past two weeks the stock has been all over the shop. On May 17th it hit a 12-month high of A$1.44. Four trading days later it plunged to A$1.11. Five trading days after that low it was back to A$1.42. 

Minews. Fun for traders, but unsettling if you’re a long-term investor. Let’s get our skates on and call the card across the sectors, first of all by finishing up with gold. 

Oz. Most companies ended up on the week, although a few lost ground. Best of the risers included Andean (AND), up A18 cents to A$3.24, Medusa (MML), up A21 cents to A$4.61, and Kingsrose (KRM), up A10 cents to A86 cents. Also better off was Castle (CDT), one of the new Aussies in West Africa, which was up A6 cents to A46 cents. Meanwhile, Azumah (AZM) rose A3 cents to A43 cents, Ampella (AMX) rose A5 cents to A$1.45, and Golden Rim (GMR), also a new entrant in West Africa, rose A2 cents to A10.5 cents. 

Minews. Iron ore and base metals next, please. 

Oz. Most of the iron ore stocks rose, but not by much. Iron ore remains a sector very much in the sights of the tax-mad mandarins of Canberra, who continue to claim that their computer models show that their new big new tax would have a neutral effect on mine investment. That claim was countered during the week by Citi Group, which estimated the potential value of lost iron ore production at A$27 billion. 

On the market, the best rises came from Mt Gibson (MGX), which recouped ground lost during the big May sell-off, by rising A16 cents to A$1.50, and Fortescue Metals (FMG) which shot up an eye-catching A47 cents to A$4.19. Other upward iron ore moves included Atlas (AGO), up A13 cents to A$2.08, Brockman (BRM), up a very sharp A54 cents to A$3.15, Iron Ore Holdings (IOH), up A25 cents to A$2.01, Batavia (BTV), up A1.5 cents to A19.5 cents, Gindalbie (GBG), up A10.5 cents to A$1.08, and Grange (GRR), up A9 cents to A55 cents. There were also a few losers over the week, including Giralia (GIR), which slipped A7 cents lower to A$2.13, and Sphere (SPH), which fell by A4.5 cents to A$1.60. 

Base metals were stronger, though zinc was lacklustre. Best of the copper stocks were Equinox (EQN), which rose by A41 cents to A$4.15, Sandfire (SFR) which added A26 cents to A$3.31, and Resource and Investment (RNI), which gained A3.5 cents to A22 cents. Also better off was Citadel (CGG), which put on A3 cents to A34 cents, after reporting more encouraging exploration results from its Jabal Sayid project in Saudi Arabia, where it has just been granted a mining licence. 

The nickel sector produced a few surprises. Mincor (MCR) stormed up after a few bad weeks, adding A30 cents to A$1.73, and Independence (IGO) followed suit with a gain of A36 cents to A$4.59. Other upward nickel movers included Western Areas (WSA), up A16 cents to A$4.00, and Panoramic (PAN), up A36 cents to A$2.16. Also better off was Poseidon (POS), which rose A2.5 cents to A24.5 cents after announcing that it might seek up to A$100 million from Chinese investors to finance the re-opening of the historic Mt Windara mine. On the flipside of that good news, Mirabela (MBN) slipped A5 cents to A$2.17. Zinc stocks did nothing to write home about. Only Blackthorn (BTR) caught the eye of investors, putting in a rise of A6 cents to A68 cents. 

Minews. Coal, uranium, and specials to finish, please. 

Oz. Most coal stocks rose, except Coal of Africa (CZA) which lost A4 cents to A$1.87, perhaps in the aftermath of a major management change. Coal companies on the rise included  Macarthur (MCC), up A83 cents to A$11.48, Whitehaven (WHC), up A40 cent to A$4.85, Centennial (CEY), up A21 cents to A$4.00, and Gloucester (GCL), up A23 cents to A$11.98. 

Uranium stocks were flat, remarkably flat. Manhattan (MHC), Uranex (UNX), Bannerman (BMN), Toro (TOE), and Deep Yellow (DYC), all failed to move over the week. Extract (EXT) was the best upward mover, putting in a gain of A44 cents to A$7.29. Paladin (PDN), added A12 cents to A$3.87. 

Minews. Any specials? 

Oz. Nothing of note. The lithium crew crept a few cents higher. Galaxy (GXY) added A10 cents to A$1.10, and Orocobre (ORE) rose by A6 cents to A$2.18. 

Minews. Thanks Oz. Enjoy those advertisements criticising your mining industry which you’re helping pay for.


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## drillinto

May 28, 2010

The Chinese Gold Rush
By Chris Mayer of Daily Reckoning
www.minesite.com/aus.html [FREE REGISTRATION]

While in Beijing last week, I visited the Cai Bai gold market. China is the largest buyer of gold in the world... and becoming larger by the day.
Anecdotally, I can tell you the Cai Bai gold market was bustling with people. I wish I could show you, but a guard promptly stopped me when I pulled out my video camera. I was there in the middle of the day, and there was a good crowd of people buying gold in all its forms - from jewellery to bars. 

The numbers coming out of China back that street-level view. May is a peak gold-buying season in China, as it is a popular time for weddings. Even so, gold sales are up over 70 per cent year-over-year, and the sale of gold bars has doubled from a year ago, according to CCTV, the large state Chinese television station. 

The surging demand may be the result of Chinese investors shifting their focus from real estate to gold. This is a snippet from CCTV's report, which gives you a peek into what is starting to happen: 

“Housing speculators from Wenzhou City in southeastern China are switching their money from property into gold, following government restrictions on the real estate market. Tao Xingyi, president of Beijing-based Jinding Group, a company specializing in high-end gold trading and investment, said the company's customers have increased by 300 to 400 per cent recently... Tao said that within one month, three groups of Wenzhou investors made purchases of gold from his company worth more than 10 million yuan (about US$1.5 million)." 

We often heard on our trip that the Chinese buy empty apartments and just sit on them, treating the investment as a store of value. Their other favorite place to park cash is gold. 

So this transition from real estate to gold is potentially a very big story, if such actions become common across China. That's a lot of buyers coming to the market. It's a story we heard more than once on our trip. 

While in China, I met with Patrick Chovanec, a professor at Tsinghua University in Beijing. We dined one night at a 500-year-old restaurant in town, amid a striking interior made up of thick wood beams and traditional Chinese woodwork. 

In addition to his professorial duties, Chovanec advises hedge funds and investors in China.  He is an expat and writes a blog called An American Perspective From China. Commenting on CCTV's gold story, he wrote: 

"I find it very interesting given the analogy I've always drawn between the way Chinese invest in empty apartments as a 'store of value' and investment in nonproductive assets like gold. 

So it might very well make sense that, if they are no longer so certain stockpiled real estate will act as a reliable store of value, they would opt for gold as an attractive alternative." 

This dramatic surge in Chinese gold demand is just one more trend in the yellow metal's favour. When you consider that robust Chinese gold- buying is occurring in the context of volatile currency markets and the deteriorating government finances in the developed world, it is easy to imagine a much higher gold price.


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## drillinto

Sector Performance Year to Date and % From 200-DMA 
Thursday, June 3, 2010  

The S&P 500 is still down 1.2% year to date, and four of the ten S&P 500 sectors are outperforming the overall index so far in 2010.  Consumer Discretionary continues to show the most strength of any sector.  It is up 9.34% on the year and remains 8.68% above its 200-day moving average.  The Industrial sector is up the second most year to date at 6.23%, followed by Financials at 2.34%.  Telecom, Materials, Utilities, Energy, and Health Care have held the market back year to date.  Telecom is down 9.44%, while Materials isn't far behind at -8.70%.  The Energy sector is currently the farthest below its 200-day moving average at -6.21%.  Along with Industrials and Consumer Discretionary, the Technology sector is the only other sector currently above its 200-DMA.


Source >>> http://www.bespokeinvest.com/thinkbig/2010/6/3/sector-performance-year-to-date-and-from-200-dma.html


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## drillinto

World Economy in Chaos
Roubini and Bremmer debate the real meaning of political and economic problems throughout the world””and whether the U.S. still has power.

To read the conversation, please click the link below:
http://www.thedailybeast.com/blogs-...el-roubini-and-bremmer-on-world-economy/full/

*********************


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## drillinto

June 05, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [FREE REGISTRATION]

Minews. Good morning Australia, your mining-tax debate seems to be building a rather explosive head of steam. 

Oz. It is, and in more ways than one. It has obviously damaged investor confidence with the overall mining sector down by an estimated 12 per cent since the Australian Government said a month ago that it wanted to impose a 40 per cent super-tax on mining profits. But it is also starting to damage the re-election prospects of the man who masterminded the daft idea, the Prime Minister, Kevin Rudd. Over the past week a whiff of panic has been wafting off the government with two of its principal non-political advisers calling for an immediate halt to the open warfare that has broken out with the miners who hit back this week with a series of stinging anti-government television advertisements, and an announcement from Xstrata that it was shelving a series of coalmine expansion projects.

Minews. It sounds like common sense might be breaking through. 

Oz. Perhaps, though it is also likely that neither side will back down without a fight, and that means weeks, and possibly months, of uncertainty. On the market last week we saw glimmers of hope with the slide in prices slowing. The metals a mining index lost a relatively painless 1.8 per cent with most of the damage done by BHP Billiton and Rio Tinto, the primary targets of the super tax. The all ordinaries was steady, and the gold index crept up by three-quarters of a percentage point. There were a few stand-out rises. No dramatic falls, and with most share price movements quite modest. 

Minews. Before going through the prices just a bit more detail on the latest developments in your mining tax because if it is going to be dropped, or significantly altered, then a few buying opportunities might emerge. 

Oz. It’s far too early to be confident of the tax proposal being dropped, but a compromise is on the cards. Last week we saw the head of Australia’s sovereign wealth fund, also known as The Future Fund, David Murray, call for a re-think. Murray is the retired head of Australia’s biggest bank, the Commonwealth, and the fund he now runs has A$60 billion under management for the government. His remarks followed a similar call from Rod Eddington, the former chief executive of British Airways and now a director of Rio Tinto. But the greatest damage to the Prime Minister’s case came in the form of a Minerals Council advertising campaign which savagely lampoons the PM. If there is one thing a politician cannot tolerate its being laughed at, and that’s starting to happen with several prominent newspapers suggesting that Rudd will have to go with the only question being whether it is before or after the election expected in August. 

Minews. That’s all very interesting, but it’s also not a pretty outlook for your market, with the tax debate rolling into the uncertainty of a national election. Enough of the chit chat, time for prices. 

Oz. In a word, mixed. Try as I might there was no discernable pattern to be detected. Iron ore stocks seem to have performed best. Coal stocks regained lost support. Base metals weakened in line with copper and nickel prices, gold stocks were all over the shop and uranium was flat. Five of the stronger stocks came from three different sectors. Silver Lake (SLR) and Ampella Mining (AMX) starred among the golds. Silver Lake shot up by A29 cents to A$1.71 thanks to discovery news from its Magic project. Ampella added A35 cents to A$1.80 without anything fresh reported. Coal of Africa (CZA) was the star of the coal stocks, rising by A18 cents to A$2.05, and Cazaly (CAZ) and IMX Resources (IXR) were the pick of the iron ore stocks. Cazaly added A8.5 cents to A58 cents after reporting progress at its Parker Range project, and IMX added A5 cents to A48 cents after reporting the first shipment of iron ore from its Cairn Hill mine in South Australia. Of those five stocks the most interesting from an investment perspective was Ampella because of a belief down this way that all Aussie miners with major offshore assets are targets for takeover bids from Australian companies trapped inside our proposed new tax net. 

Minews. Now that is a very interesting theory because there is no doubt that your investors have been undervaluing Australian goldminers working in West Africa. 

Oz. A correction could be underway with Ampella the first hint of position-taking by an Australian miner plotting an escape route, though it should be quickly added that other West African stocks did not copy Ampella’s rise. Most fell modestly. Perseus (PRU) slipped A3 cents lower to A$1.89. Adamus (ADU) lost A2 cents to A45 cents, and Resolute (RSG) was A6 cents lighter at A$1.03. Azumah (AZM) added A2.5 cents to A45.5 cents and Castle Minerals (CDT) ended the week steady at A46 cents. 

Other gold moves included: Allied (ALD), up A2 cents to A39 cents. Kingsgate (KCN), up A13 cents to A$8.61, and Chalice (CHN), up A1 cent to A48 cents. Going down we saw Excalibur (EXM) drop by A0.2 of a cent to A0.5 of a cent after confirming reports of a major downgrade in resources at its Juno project. At one stage the stock was trading as low as A0.3 of a cent, so someone did a lot of buying late on Friday. Troy (TRY) slipped A2 cents lower to A$2.54, and Avoca (AVO) was A3 cents lower at A$2.12. 

Minews. Let’s move quickly through the sectors given that most price movements were not significant. The rest of the iron ore news next, then the base metals, please. 

Oz. Mixed results, as mentioned earlier. Iron ore stocks going up included Brockman (BRM) which added A5 cents to A$3.22. Mt Gibson (MGX), was up A6 cents to A$1.61. Murchison (MMX), crept A2 cents higher to A$1.98, and Emergent (EMG) put on A6 cents to A49 cents after positive developments at its Beyondie project. The list of stocks to weaken was somewhat longer, but with no major falls. Fortescue (FMG) lost A4 cents to A4.15. Atlas (AGO) was A7 cents weaker at A$2.01. Giralia (GIR) slipped A9 cents lower to A$2.04 and Iron Ore Holdings (IOH) fell by A19 cents to A$1.82. 

Copper stocks were generally weaker with Equinox (EQN) the only stand out performer on the positive side of the ledger with a rise of A25 cents to A$4.40. Sandfire managed a rise of A1 cent to A$3.32. After that, it was all downhill. OZ Minerals (OZL) lost A5 cents to A$1.02. Citadel (CGG) eased back by A2 cents to A32 cents. Exco (EXS) was A1.5 cents lighter at A22.5 cents and Sabre (SBR) fell by A4.5 cents to A38.5 cents. Nickel stocks were equally mixed, but with price movements even more muted. Western Areas (WSA) added A8 cents to A$4.08. Mincor (MCR) lost A5 cents to A$1.68, and Independence (IGO) added A1 cent to A$4.60. Zinc stocks were generally weaker, except Blackthorn (BTR) which added A2 cents to A70 cents, though probably due more to its copper and gold interests. Perilya (PEM) posted the biggest loss among the zincs with a fall of A5 cents to A40.5 cents. CBH (CBH) slipped half-a-cent lower to A23 cents. 

Minews. Coal, uranium and any specials to finish, please. 

Oz. As mentioned, Coal of Africa was the stand-out coal stock though useful rises were posted by Whitehaven, up A18 cents to A$5.03. Riversdale (RIV), up A54 cents to A$9.87 and Stanmore (SMR), up A5.5 cents to A75.5 cents. Uranium stocks were generally down though Manhattan (MHC) added A2.5 cents to A72.5 cents, and Paladin (PDN) rose by A2 cents to A$3.89. Extract (EXT) fell A31 cents to A$6.98. Mantra (MRU) slipped A3 cents lower to A$4.61, and Uranex lost A2.5 cents to A17.5 cents. 

There were no significant specials to mention. The lithium stocks were mixed. Galaxy (GXY) lost A5 cents to A$1.02 while Orocobre (ORE) added A1 cent to A2.19. Manganese stocks also weakened with OM Holdings (OMH) sliding A5 cents lower to A$1.68 and Spitfire (SPI) easy back by half-a-cent to A12 cents. 

Minews. Thanks Oz. Enjoy your tax debate.


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## drillinto

June 07, 2010

Getting Scary Again
By Rob Davies
www.minesite.com/aus.html


Just when politicians think they can pluck a few more feathers from the tax goose without provoking too much squawking markets have an uncanny ability to remind why they can’t. Last week metals continued to sell-off and took the LME Index down to 2966, 21 per cent below the peak reached in mid April. A 20 per cent fall is usually regarded as a bear market so this certainly falls into that category. It was of course about a month or so ago that the Australian Government decided that the mining industry could withstand a 40 per cent corporate tax rate. If this drop doesn’t persuade it to think again then maybe the news that Xstrata and AngloGold Ashanti are both reviewing their development programmes in that country in the light of these proposed tax changes will do the trick.

Resource stocks are always easy meat for politicians and the popular press. Either they are making too much money and are seen as easy tax targets or they are accused of making a mess of the environment. The Macondo oil disaster in the Gulf of Mexico has generated the unlikely spectacle of a US President trying to influence the dividend policy of a British multi-national.   What is slightly bizarre is while the UK economy is one of the more advanced in the world in terms of its use of technology and finance over 30 per cent of the income into its stock market comes from resource stocks. In many ways it is a third world stock market in a first world economy. 

Given this sensitivity to global resource consumption it is little surprise that the LSE indices are closely correlated with base metal prices. Last week it was the turn of the US to put the frighteners on capital markets as jobs growth turned out to be lower than hoped for.  However, China is a more important metal consumer than the US and the underlying weakness in demand growth there, as expressed through shipping rates, provides a poor backdrop to metal prices. 

Add in comments that Hungary has got a massive debt problem and may have to restructure, i.e. default, on some of its loans it is not surprising that markets turned wobbly again at the end of the week. Isn’t it strange how countries only discover how bad their debt really is after an election? 

Not only is the demand side of the mining industry starting to look a bit shaky but the cost side isn’t looking so hot either. According to the Gold Mine Cost report global production costs for gold rose by 20% per cent to US$544/oz in the first quarter of 2010 compared to the first quarter of 2009. Although a big chunk of that of that was due to the rise in the rand those cost pressures will be present across the whole industry. And that’s before taxes go up. 

The first half of the year has seen a better strength in metal prices than many were expecting. It might be that the second half of 2010 will not be so pleasant.


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## drillinto

Recent Country Stock Market Performance 
Wednesday, June 9, 2010  

Below we highlight the performance of major equity market indices in 81 countries around the world.  While most of the world is struggling, there are 8 countries that are within 1.7% of 52-week highs.  Sri Lanka, Chile, Bangladesh, and Venezuela are all basically at 52-week highs.  Of the G-7 countries, Germany and Canada are closest to their 52-week highs at about -6%.  The US ranks third out of seven at -12.74%, followed by Britain (-13.41%), France (-16.41%), Japan (-17.26%), and Italy (-23.63%).  It's not surprising to see Greece the farthest from its 52-week high at -50.15%.  Other key countries that are more than 20% away from their 52-week highs include Russia, China, and Spain.

In terms of year to date performance (local currency), Bangladesh ranks first at +36.59%, followed by Estonia (32.86%) and Sri Lanka (31.87%).  Of the G-7, Germany is doing the best with a decline of just -0.05%, followed by Canada at -1.74% and the US at -4.49%.  Of the BRIC (Brazil, Russia, India, China) countries, India is holding up the best so far in 2010 with a decline of 4.62%.  Brazil ranks second at -6.67%, followed by Russia at -7.54% and then China at -21.15%.  Greece (-33.44%), Bermuda (-28.33%), and Spain (-26.55%) are down the most of any countries year to date. [AUSTRALIA is down: -9.96%]

To see the table please click the link below:
http://www.bespokeinvest.com/thinkbig/2010/6/9/recent-country-stock-market-performance.html


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## Southern X

Any thoughts on where "Dr." Copper is headed to year's end? I'm leaning towards the bear side because of the amount of speculative interest and the rise from the lows to this year's highs.

Not very intersted in the soft commodities... I play gold, have dropped niobium, tantalum, moly, silver, platinum, but continue to hold REEs. Currently scratching my head over met and thermal coal, and have an iron ore exploreco.

SX


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## drillinto

June 11, 2010

What Will Happen To Gold Supply If Demand Remains Very High?
By Julian Phillips
www.minesite.com/aus.html  [The registration is free]

Investment demand for gold has never been so high, and it is likely to rise still further. Normally when a commodity is in high demand supply is accelerated and holders of that commodity often take profits, thereby increasing supply. Economic history tells us the same, "rising prices and high demand should result in rising supply." When it comes to gold all rules have to be re-written. That's because gold is only part commodity.

From the exploration  to the start of gold production takes at least  five years, probably nearer ten. That's assuming there is a gold resource available to mine in a gold mining-supportive country of sufficient size to make the mine worthwhile. During the last 15 years of last century, support to such ventures from central banks through bullion banks was so strong that the mines would be loaned the gold they were going to produce. They then sold it forward to the time when the mine would produce and often even further out. This allowed the mine to earn a  relatively high gold price, as long  as the price was dropping. Then, from production, they repaid the Bullion bank/Central bank the amount of gold they had borrowed. 

While wise at the time, it did quickly exhaust the easily mined deposits of gold leaving us with a situation today, where good gold deposits are getting increasingly rare and difficult to mine. Add to this the propensity of governments to wait until the mines do really well then hit them with heavy taxation. This is deterring new investment in gold mining. That's where we are now. The result is that from now on, gold mining companies are hard-pressed to replace the resources they have exhausted. Consequently, newly mined gold production is set to decline from 2010 onwards, irrespective of what the gold price is.

From 1985 until 1999, the gold markets sat under the cloud of potential central banks sales. Central banks across the globe encouraged an atmosphere that expected unrestrained gold sales. Naturally the gold price fell from its US$850 high down to US$275 during that time. Then the "Washington Agreement" was signed which capped European Bank sales at 400 tons a year. The gold market breathed a sigh of relief and the gold price turned to the upside. Sales under this agreement and the next (that terminated on September 26th 2009) at first, did reach the ceilings levels that were set, right up until the last two years of the second agreement (where a target of 500 tons a year had been set). Then they petered out with hardly any sales in the last half of the last year of the Agreement. Since then no significant European central bank sales have taken place. In fact only a total of 1 ton of gold has been sold to date from the inception of the Third Agreement. It can then reasonably be concluded that central banks sales have dried up. In their place have come central bank purchases of 400 tons a year.

As we said at the beginning of this article, demand is very high, primarily from investment demand. Both western jewellery and Indian demand have been low until recently. Both of these markets have eventually accepted the current record price levels as being sustainable. Demand from these two sources has now begun to rise again. It's clear that demand is at a high, without the usual froth that accompanies peak demand. So a combination of peak demand and restricted supply leaves only one potential source of supply and a capricious one at that.

With no other source of supply markets usually take prices to a level where holders of a commodity sell and take profits, in the belief that such prices are not sustainable and will soon fall. Since gold hit the high of $1,215 for the first time, prices did fall, with many forecasting a low price of $850. This didn't happen. Instead a low of $1,050 was seen, before the gold price began to climb again. During that time and until recently 'weak holders' of gold in India did sell and were the main suppliers of that market, in particular. Now they too have accepted current prices as a new 'floor.'

Most of you will have seen adverts for 'gold parties', rather like the  old Tupperware parties, where housewives get together and sell old gold that's lain in the attic for years. This has largely run its course now and such supplies are drying out. Once these sellers have sold out, that supply too will dry up too. This source of scrap is not important to the supply side of the gold market.

The next potential source of scrap gold is from the current holders of gold, who bought solely to make an eventual profit. Once they believe prices are as high as they will go, they will sell. These can be termed 'weak holders' in the gold market for long-term investors from central banks, to institutions, to individuals hold gold to preserve wealth, in a world where it is threatened. Such investors hold gold simply to be prudent in the face of uncertainty and instability in the financial world. They may only hold a small proportion of their portfolios in gold. But be sure that they won't sell until certainty and stability are likely to return to the financial world. A look at what's going on now in that world tells us that we may see a squadron of pigs circling the White House at the same time.


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## drillinto

June 12, 2010

The Was The Week That Was … In Australia
By Our Man In Oz
www.minesite.com/aus.html [FREE REGISTRATION]

Minews. Good morning Australia, was anybody watching your market last week or was it all about the great mining-tax debate? 

Oz. It was actually more than that because the super-tax proposed by our Prime Minister, Kevin Rudd, looks like it might be about to claim its first victim – Rudd himself. All through the week there was a fascinating equal-but-opposite event taking place. Mining company share prices crept higher, in inverse proportion to the sagging popularity of Rudd and his tax. Headline writers have even started using his initial and surname without the full stop with the resulting name, KRudd, pretty much spelling out how he is being referred to, even within his own Labor Party.

Minews. Remarkable. Are you saying the super-tax is dead and now’s a time to start looking at oversold Aussie mining stocks.

Oz. Perhaps, is the best answer to that question, but there’s no need to rush. We have the tax debate to run its course, and there is still a chance that the miners will undo the good work done so far. An example of what might go wrong could be seen in the over-kill category last week when two of the country’s richest people, the mining billionaires Andrew Forrest and Gina Rinehart, mounted flatbed trucks to lead a rent-a-crowd anti-tax demonstration. Given that most Australians dislike the rich as much as they dislike politicians it’s a fair bet that more harm than good was done by Twiggy and Gina pretending to be two of the oppressed masses given that both are down to their last three or four billion dollars.

Minews. So, what next?

Oz. Well, we have Parliament to meet next week in what should be the last time before the election expected sometime between August and October. Then there is the election itself. Each of those steps is destabilising, though right now it’s a 50/50 bet that KRudd gets dumped by his own party before the election, which might restore Labor as a winning force and see the tax return under a new leader, after the election of course.

Minews. Very sneaky. Let’s get back to what we’re supposed to be talking about, your stock market.

Oz. As mentioned, prices moved higher when looked at week-on-week with all of the gains posted after solid falls on Monday. The metals and mining index on the ASX added 1.7 per cent, just ahead of the all ordinaries which rose by 1 per cent, and well behind the star of the week, the gold sector, where the index added 5 per cent. Iron ore stocks trended down. Copper, nickel and uranium stocks were mixed. Coal producers eased, and a handful of new floats actually performed quite well.

Minews. You mean there are still floats moving through the market despite the proposed super-tax?

Oz. There are, at last count there was a queue of 12 miners waiting to start trading on the ASX, adding to the three which listed last week, Renaissance Minerals (RNS) opened and closed at A25 cents, a useful A5 cent (25 per cent) pay day for stags. Renaissance raised A$7 million to help restore production at the mothballed old Radio goldmine near Southern Cross. West African Resources (WAF) played to the crowd with its name given that West African gold is very much in favour down this way. Its A20 cent shares opened at A22 cents and clicked a little higher to close at A24 cents. Mungana Goldmines (MUX), a spin-off by Kagara (KZL), did less well with its A95 cent shares ending the week slightly underwater at A92 cents.


Minews. We’ll keep an eye on your floats, they’re always interesting. For now let’s call the price card of last week, starting with gold.

Oz. There were a few stand-out winners among the gold stocks, led by Kingsgate (KCN) which shot sharply higher after announcing receipt of a Thai government go-ahead for expansion of its Chatree mine. Over the week Kingsgate added an eye-catching A$1.36 to close the week at A$9.97 after briefly scaling the A$10 mark. Avoca (AVO) was another star, adding A23 cents to A$2.35 on news that it is on track to hit its target of 400,000 ounces of annual gold production. Other noteworthy gold moves included: Perseus (PRU) up A21 cents to A$2.10. Adamus (ADU), up A6 cents to A51 cents, and Integra (IGR) which reported high-grade drilling results from its Maxwell project and rose by A1.5 cents to A26 cents. Going down we saw Robust Resources (ROL) drop A17 cents after announcing a plan to buy a bigger share in its Romang Island project. Medusa (MML) lost A29 cents to A$4.30 as doubts creep in regarding its expansion plans, and Ampella (AMX) dropped a surprising A18 cents to A$1.62 after a few very strong weeks. Other downward moves included: Catalpa (CAH), down A10 cents to A$1.37, Troy (TRY) down A4 cents to A$2.50 and Carrick Gold (CRK), down A1 cent, a modest loss after the company announced the death of its founder and guiding force, Frank Carr who, at 62, lost a two year fight with cancer.

Minews. Iron and base metals next, please.

Oz. One iron ore stock rose, a handful held their ground, but the trend was down, though not strongly. Gindalbie (GBG) was the odd stock out, adding A1 cent to A$1.07. Batavia (BTV) and Northern Iron (NFE) opened and closed at A18 cents and A$1.44 respectively. After that it was one-way traffic, including: Fortescue (FMG), down A4 cents to A$4.11. Atlas (AGO), down A9 cents to A$1.92. Brockman (BRM), down A2 cents to A$3.20. Iron Ore Holdings (IOH), down A9 cents to A$1.73, and BC Iron (BCI), down A5 cents to A$1.53.

Copper stocks were mixed, but the sector was the pick of the base metals with the price of the metal seeming to have turned a corner, perhaps getting ready to challenge the US$3 per pound barrier. Pick of the Australian copper stocks was CuDeco (CDU) which added A44 cents to A$4.43. Exco (EXS), which has a mix of assets including the recently opened White Dam goldmine in South Australia, rose by A2.5 cents to A28 cents. Discovery (DML) added A1.5 cents to A75 cents, and Rex (RXM) reported more positive drilling news from its South Australia copper exploration projects, rising by A4 cents to A$1.26. Going down we saw Equinox (EQN) slip A3 cents lower to A$4.37. Sandfire (SFR) lost A7 cents to A$3.25. Citadel (CGG) eased by back by A1.5 cents to A30.5 cents, and OZ Minerals (OZL), shed A2 cents to A$1.02.

Nickel and zinc stocks were as equally mixed as their copper cousins. Western Areas (WSA) lost A11 cents to A$3.95 despite opening a new mine. The problem seems to have been that all the talk at the opening was about the proposed super-tax on profits. Mincor (MCR), which kept its corporate head down last week, added A3 cents to A$1.71. Minara (MRE) also added A3 cents to A$1.71 and Panoramic (PAN) rose by A2 cents to A$2.15. Zinc moves were minor either way. Perilya (PEM) lost A1 cent to A39.5 cents, and CBH (CBH) added half-a-cent to A23.5 cents. Best of the zinc, though it is also very much a copper and gold story, was Blackthorn (BTR) which added A3.5 cents to A73.5 cents.

Minews. Coal, uranium, specials and close, please.

Oz. Apart from Riversdale (RIV) adding A40 cents to A$10.27 and Centennial (CEY) which gained A7 cents to A$4.43 all coal stocks lost ground. Coal of Africa (CZA) dropped A25 cents to A$1.80. Macarthur (MCC) fell A24 cents to A$11.60, and Whitehaven (WHC) lost A32 cents to A$4.61. Uranium stocks were all over the shop. Manhattan (MHC) lost A4 cents to A68 cents. Paladin (PDN), added A6 cents to A$3.95, and Extract (EXT) crawled A2 cents higher to A$7.

There were no specials worth mentioning but for followers of the lithium plays Orocobre (ORE) added A6 cents to A$2.25, and Galaxy (GXY) lost A4 cents to A98 cents.

Minews. Thanks Oz. Enjoy your tax war.


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## drillinto

June 14, 2010

The Search For Safety: Gold Continues To Strengthen, But The Outlook For Base Metals Is More Uncertain 
By Rob Davies
Source >> www.minesite.com/aus.html

Trust, or the lack of it, seems to be the defining feature of capital markets these days. BP’s novel approach to uncertainty, admitting it does not have all the answers yet, has not played well. President Obama just want to kick someone’s ass, though he didn’t specify if that was that was before or after the buck had stopped with him. In most cases lack of trust is reflected in price, and that is certainly the case with BP. But it is also the case with many other securities.

Top of the list of securities with a lack of trust priced in are those for the European banks. Unlike US and UK banks, this group has never been stress tested. Despite, or perhaps because of that, the market is increasingly coming to the conclusion that many of them have far too many Greek bonds for their own good, and that their property portfolios probably would not want to be seen in daylight. 

But in spite of all the uncertainty, according to the Financial Times there is one activity that is booming, and that is the storage of gold bullion. The FT reports that vaults are bulging, not least with the 42 million ounces now owned by the SPDR Gold trust. Such demand helped push gold to a new high of US$1,251 an ounce last week, and, given the nervousness in the market, there seems to be no reason to think the strength in the gold price will dissipate any time soon. 

Quite what happens to the gold sitting in the vault of a failed bank is unclear. Would owners be asked to form an orderly queue behind the receiver, as creditors of Lehman are still doing? 

While the current environment favours precious metals, it is not a good one for base metals. The LME index fell a further two per cent last week, leaving copper trading at US$6,290 a tonne. It was only a few months ago that copper was flirting with US$8,000. 

Meanwhile the 20 per cent decline in the aluminium price from US$2,400 a tonne in mid April to the current US$1,905 has provoked Mr Deripaska of Rusal, the world’s biggest producer, to threaten the shutdown of two to three million tonnes of capacity in the next two quarters. That sort of response is exactly what the industry needs and will, if enacted, keep the market tight. 

In the longer-term, the dearth of project finance for new mines will undoubtedly act to limit new capacity. So far, equity markets have done the job of stumping up the cash. But this is high cost money and not all promoters will go down that route. 

Right now banks are not in the business of financing risky things like new mines. And even when funding is forthcoming, endless due diligence and requests for all price risks to be hedged drags out the process. Maybe the banks would just prefer to wait for their Greek bond portfolio to come back into the black before doing anything scary, like lending money for new businesses? 

Risk aversion does carry its own risks though. President Obama’s moratorium on new drilling to protect him from anymore oil slicks is surely creating the potential for a significant rise in the oil price. 

If one twentieth of the world’s population insist on consuming one quarter of its oil then it will become increasingly dependent on oil from places like Russia, Iran and that other Gulf. And that will carry a very high price indeed, and perhaps isn’t really what the President wants after all.


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## drillinto

Bespoke's Commodity Snapshot 
Tuesday, June 15, 2010  

Below we highlight our trading range charts for ten major commodities.  For each chart, the green shading represents between two standard deviations above and below the commodity's 50-day moving average.  Moves above or below the green shading are considered overbought or oversold. 

Oil has bounced off of oversold levels in recent days, but it is still closer to the bottom of its trading range than the top.  Natural gas, on the other hand, continues to surge higher, and it is now trading well into overbought territory.  Gold remains in a strong uptrend, and it is pretty close to the top of its range.  Platinum really sold off sharply when equity markets took their dive, and it is just now starting to recover.  Silver is just about in the middle of its range.

Corn, copper, and wheat are currently in downtrends and have just bounced slightly in recent days.  Finally, coffee has made a huge move higher this week and is trading at a fresh 52-week high.

To view the charts, please click the link below:
http://www.bespokeinvest.com/thinkbig/2010/6/15/bespokes-commodity-snapshot.html


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## drillinto

Gold vs Dollar Correlation 
Friday, June 18, 2010 

With gold trading at a record high, we wanted to highlight the shifting correlation between it and the US Dollar.  Normally, when gold rallies, the dollar declines and vice versa.  However, as the chart below illustrates, gold and the dollar have become increasingly unlinked.  In the chart, positive readings close to one indicate a strong positive correlation, while readings closer to negative one indicate a strong inverse correlation.  The current level of -0.18 indicates a very weak inverse correlation.


To view the chart, please click the link below:
http://www.bespokeinvest.com/thinkbig/2010/6/18/gold-vs-dollar-correlation.html


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## drillinto

June 19, 2010

That Was The Week That Was ... In Australia 
By Our Man in Oz
www.minesite.com/aus.html  [The registration is free]

Minews. Good morning Australia. Sanity seems to be returning to your market. 

Oz. Up to a point it does, yes. The great mining tax debate remains unresolved, though both sides are now showing a bit of give. The government has been offering special deals to a handful of miners, although not the big three, BHP Billiton, Rio Tinto and Xstrata. Next week could see some of the other miners break ranks and side with the government. And, a general hope that we might see a touch of stability was reflected in share prices, as there was a general uplift across all sectors, with gold, coal, and iron ore leading the way.

Minews. Surely splitting the small miners from the big three might not be such a bad thing? 

Oz. You would think so. The two groups have little in common. But there is something grubby about the way the big miners are effectively being hit with a retrospective tax on investments made over the past 20 years. However, when you're as big and ugly as BHP Billiton, Rio or Xstrata, you should be able to look after yourself. At the other end of the market, for investors in small to medium stocks, the revised tax structure could represent a rather positive signal, and it wouldn't be at all surprising to discover that some of the buying we saw last week was by early-bird speculators taking positions in stocks that they deem likely to emerge as winners. 

Minews. All of which is roughly in line with what you were saying last week was likely to happen. 

Oz. No prize for that observation – the government was being hit so hard in opinion polls that it had to deal or risk a backbench revolt. And on the market last week we might have seen the first financial impact of the government splitting off the big miners from their smaller cousins. Overall, the metals and mining index rose by a pleasing 2.4 per cent, which was roughly in line with the performance of the biggest miners. Much better rises came in the second and third tier stocks, and several gold explorers/miners actually reached new 12 month share price highs as gold hit a record in both US and Australian dollar terms. At Friday's closing price of US$1,258 an ounce, gold in Australian dollars was selling for A$1,445, with the Aussie dollar itself playing its old trick of tracking the gold price. Over the week our dollar added US2 cents to reclaim a rate above US87 cents, and 58 British pence.
Minews. Which makes gold the obvious starting point for this week's call of the card. 

Oz. No argument there. Among the gold companies that hit share price highs last week were Avoca (AVO), which rose to A$2.59 before easing to close the week at A$2.56, a gain of A21 cents, Kingsgate (KCN), which added A53 cents to close at a new peak of A$10.50, and Perseus (PRU), which closed at its new high of A$2.35, a gain of A20 cents for the week. Elsewhere, Kingsrose (KRM) hit a peak of A98 cents on Friday before slipping back to end the week at A95 cents for a gain of A13 cents. Silver Lake (SLR) did much the same, peaking at A$2, but closing at A$1.97, up A24 cents. St Barbara (SBM) was back in the winner's circle with a modest rise for the week of A1 cent to A38 cents, but did set a fresh 12 month high of A39 cents during Friday trade. And Sihayo Gold (SIH), which hasn't been mentioned here before, added A3.5 cents to close at its new peak price of A14 cents as interest grows in its gold projects in Indonesia. 

Minews. Strong stuff. Apart from stocks setting new share price highs it's fair to assume that the rest of the sector headed upwards as well, I presume? 

Oz. Pretty much so. There was the odd decline, but nothing significant. First among the other stand-out movers wase Catalpa (CAH), up a very strong A24 cents to A$1.61, after a management tour of potential investors in Singapore and Hong Kong. It was followed by Adamus (ADU) up A2.5 cents to A54 cents, Ramelius (RMS), up A1.5 cents to A47 cents, and Chesser Resources (CHZ), another stock we haven't heard much about, which rose A7 cents to A39 cents thanks to interest in its gold projects in Turkey. Going down, there were a handful of stocks which shed a cent or two. Chalice (CHN) dropped A2 cents to A43 cents, and Troy (TRY) slipped A2 cents to A$2.48. 

Minews. Across to iron ore, please. 

Oz. Shares in iron ore companies were mostly up, perhaps because there’s a feeling that while the big boys of iron get whacked with a super tax, the small fry slip may away with a special deal. Atlas (AGO) and Gindalbie (GBG) were among the stronger movers. Atlas rose A23 cents to A$2.15 and Gindalbie rose A9 cents to A$1.16, both better off in anticipation of positive media coverage following planned site visits. 

Fortescue Metals (FMG) was also back in the news for a slightly tricky reason, persevering with its expansion projects having previously said they were on hold because of the tax threat. That news lifted Fortescue shares by A26 cents to A$4.37. Other iron movers included Giralia (GIR), up A11 cents to A$1.98, BC Iron (BCI), up A7 cent to A$1.60, Murchison (MMX), up A20 cents to A$2.15, Mt Gibson (MGX), up A10 cents to A$1.63, and Brockman (BRM), up A7 cents to A$3.27. The only iron ore companies that were weaker were Iron Ore Holdings (IOH), down A4 cents to A$1.69, and Ironclad (IFE), down A1 cent to A98 cents. 

Minews. The base metals next, please. 

Oz. Nickel companies led the base metals complex higher, but copper and zinc stocks were also stronger. Among the nickels, Mincor (MCR) led the way after reporting fresh exploration success at its Kambalda mines. Its shares rose by A18 cents to A$1.89. Western Areas (WSA) was also strongly supported, putting in a rise of A31 cents to A$4.26. Elsewhere, Minara (MRE) added A8 cents to A70.5 cents, and Mirabela (MBN) gained A21 cents to A$2.32. Good as those moves were, the real surprise among the nickel stocks was that Independence (IGO) added A20 cents to close at A$4.82, despite negative comments about the Tropicana gold project from partner Anglo American, which reckons the threatened super-tax will push Tropicana down its list of preferred developments. 

Copper stocks were all up, apart from Resource and Investment (RNI), the small explorer which has acquired a tenement adjacent to the rich Doolgunna project owned by Sandfire Resources (SFR). Resource and Investment slipped A2.5 cents to A19.5 cents, although Sandfire itself added A17 cents to close at A$3.42. Other movers among the copper stocks included Citadel (CGG), up A2 cents to A32.5 cents, Sabre (SBR), up A7 cents to A42 cents, Discovery (DML), up A3 cents to A78 cents, OZ Minerals (OZL), up A3 cents to A$1.05, and Equinox (EQN), up A3 cents to A$4.40. 

Zinc stocks moved modestly. Blackthorn (BTR), which also has copper and gold assets in its portfolio, added A1.5 cents to A74 cents. Perilya (PEM), was up A3.5 cents to A43 cents. Kagara (KZL) gained A3 cents to A55.5 cents, and Terramin (TZN) put on A1.5 cents to A59.5 cents. 

Minews. Now for the energy twins, coal and uranium. 

Oz. There were strong upward moves from most coal stocks, and a few handy rises from selected uranium explorers. The best of the coal stocks were Centennial (CEY), up A28 cents to A$4.71, Whitehaven (WHC), up A32 cents to A$4.93, Coal and Africa (CZA), up A16 cents to A$1.96, Macarthur (MCC), up A90 cents to A$12.50, Riversdale (RIV), up A53 cents to A$10.80, and Stanmore (SMR), up A8 cent and A81 cents. Manhattan (MHC) was the pick to the uranium companies, rising by A19 cents to A85 cents. Berkeley (BKY) added A5 cents to A$1.20, while Paladin (PDN) crept up by A5 cents to A$4.00. Extract (EXT) added a modest A3 cents to close at A$7.03. 

Minews. And specials to close, please. 

Oz. Not much there, except a bit of interest among the few platinum stocks that are listed on the ASX. Nkwe (NKP), added A7 cents to A58 cents as the price of platinum rode on the coat-tails of gold, and Platinum Australia (PLA) put on A6 cents to A75 cents. 

Minews. Thanks Oz.


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## drillinto

June 21, 2010

BP’s Gulf Oil Spill Will Cause Oil Prices To Go Up, And The Attractiveness Of The USA As An Investment Destination To Go Down
By Rob Davies
www.minesite.com/aus.html

Here’s a premise. Companies survive and thrive in democratic capitalist countries by providing goods and services. These are then sold for prices that, all being well, exceed the cost of providing them. If the goods turn out to be faulty, then the supplier can be expected to suffer costs, fines and penalties, as defined in the legal and business code of the given country in which the transaction originally took place. States with a common law legal system generally provide a more benign business environment than those using Roman law, but commerce thrives under both systems.

Go off the beaten track into parts of the third world where the legal code is, shall we say, more flexible, and business practice is more opaque, and the practice of making money is correspondingly harder. A less developed private sector means that generally these countries tend to be poorer, as there is less clarity on the business of commerce. One reason many companies do business in the US is because it is a large market of very rich people with clear rules. 

Not any more. 

Last week President Obama extorted, persuaded, cajoled or simply bullied a large multi-national company into putting US$20 billion into the hands of a third party. As yet no inquiry has been held into the Macondo oil disaster and certainly no one has admitted liability or even been found guilty of any mistakes in procedures. The precise legal basis for this “transaction” is not at all clear.   

In practice everyone could see that the chief executive of BP would be tried in a Kangaroo Court in front of US politicians that manage even to make MPs here in Britain look good. The company was subject to an unprecedented adverse PR campaign with the clear intention of preparing the ground for the deal. 

Whether BP is guilty of anything is now almost irrelevant. The US has sent a clear message to oil companies, and others, that it can impose arbitrary penalties at will.  Without a doubt that will act as a deterrent to oil exploration in US territory over and above the suspension of deepwater offshore drilling. 

In practical terms the sequestration of assets has increased the cost of capital to the oil industry. On top of that the reduction in areas that can be explored for oil will limit the opportunity for new discovery. A higher cost of capital for any commodity will increase its marginal cost. What makes this situation even worse is that even higher prices will not open up fresh exploration acreage. 

So oil prices now have two reasons to go up. 

Now to mining. Since energy, and oil in particular, accounts for about one third of mine production costs this decision will lead to higher metals prices. However, few mining companies will be encouraged to start spending exploration dollars in the US. All of a sudden, somewhere like Paraguay looks a lot more appealing.  

In the short-term, the events of the last few months will not be material. Last week base metals prices rose by a modest 1.5 per cent. In overall terms the weak economic position of many countries, and the ongoing possibility of more currency devaluations, still favours precious metals over base metals. 

There is no doubt though that the events of the last week mean that from now on commodity prices will gradually start to include an “environmental” premium.  But if politicians want resources to be produced at no ecological risk they need to tell their voters it will cost them money. Don’t expect a rush for the podium.


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## drillinto

Must read !

June 24, 2010

Kevin Rudd Is Ousted As Australian Prime Minister, And Compromise Now Looms In The Great Australian Tax Kerfuffle
By Our Man in Oz
www.minesite.com/aus.html [Registration is free]

Mining 1. Rudd 0. In football terms that’s the score in Australia today after the (now former) Prime Minister, Kevin Rudd, was red-carded by own political party after kicking a spectacular own goal in the form of an attempted 40 per cent super tax on mining.
In Rudd’s place enters Australia’s first female PM, Julia Gillard, bearing an olive branch and a plea for a truce with the mining industry, an industry which has clearly won a bruising advertising and public relations war with Rudd. 

But, before anyone with an interest in mining cracks the Moet, the detail of what Ms Gillard is offering has yet to be seen, and initial euphoria on the ASX faded as a few harsh realities dawned. For one thing, it’s worth factoring in several statements from Gillard in her acceptance speech that Australians deserved “a fairer share” of the profits made from mining. What’s more, the Treasurer, Wayne Swan, a man with as many fingerprints as Rudd on the original super-tax proposal will lead fresh negotiations with the miners, while there’s always the possibility that Gillard might prove so popular with the electorate that she restores support for a tatty Labor Government and snatches victory from the hands of the pro-mining Liberal Party at an election expected within months. 

Those three points explain why shares in some companies like Atlas Iron (AGO) ticked up on the news, rather than soaring. Atlas added a fairly meagre A11 cents to reach A$2.25, a gain of 5.1 per cent. Still, given the turmoil in the Australian mining sector since the super-tax was announced on May 2nd, most reasonable investors would gratefully acknowledge that a one day gain of five per cent is a reasonable win. 

Some other Australian-focussed companies did better than Atlas. Some worse. Fortescue Metals (FMG) added A10 cents to A$4.53, Avoca (AVO) gained A3 cents to A$2.58. Mincor (MCR) rose by A4 cents to A$1.86. But Silver Lake (SLR) lost A6.5 cents to A$1.83. The best gains were at the top end of town where BHP Billiton (BHP) added A39 cents to A$39.53 and Rio Tinto (RIO) rose by A96 cents to A$71.50. If speculation proves correct it is the big miners which have most to gain from a watered down super-tax, especially in the application of the tax to existing, largely-depreciated, assets. Overall the metals and mining index added a pleasing 1.6 per cent, especially when measured by the 0.2 per cent rise in the all ordinaries index, on a day that a deeply unpopular PM is replaced by a far more popular leader. 

Time is short for Gillard to repair the damage done by Rudd to Australia’s credibility as a mining-friendly country. She has to call an election by early next year, but it is traditional for national elections to be held in the second half of the year. It’s the time factor which will be weighing on the mining lobby as it analyses Gillard’s bouquet olive branches. These include an immediate end to the government’s anti-mining advertising campaign, and an offer of fresh consultation with the miners. 

In return she asked that the miners cancel their advertising too. This did more to destabilise Rudd than any other factor, even including his unilateral dumping of a carbon emissions trading scheme, and his astonishingly wasteful economic stimulus spending on household roof insulation and school hall building programmes. In her words, Gillard said: “Today, I will ensure that the mining advertisements paid for by the government are cancelled. In return, I ask the mining industry to cease its advertising campaign as a show of good faith and mutual respect”. She added that: “to reach a consensus we need to do more than consult, we need to negotiate. We must end this uncertainty which is not good for this nation”. 

Politically, all good stuff. The devil will be in the detail, and Gillard’s first big mistake could be that she has asked Treasurer Swan, who has added the title of Deputy PM to his CV, to handle the fresh talks with miners, alongside the Resources Minister, Martin Ferguson. Minesite’s Man in Oz has been around long enough to know that most people find it difficult to turn the other cheek on a man who has just spent the past month slapping your face with a gauntlet, in this particular case a gauntlet holding a copy of the Tax Act. Widely seen as a bit of a goose, Swan is a career Labor politician, a species well-known in Britain. Ferguson is different, and almost certainly more pro-mining, which does offer some hope for a breakthrough. 

So, what we appear to have is a government which has panicked in the face of a blistering attack from the miners, and been shocked by the collapse of its electoral support. The full horror of the 40 per cent super-tax has faded, but the principal of the tax has not gone away. Talk among miners is that they can live with a “resource rent tax” of between 20 and 30 per cent, so long as they win offsetting rebates for mineral exploration costs, and that the tax only applies after a fair return is earned on capital. 

The original plan defined a fair return as the long-term government bond rate of 5.75 per cent, which was clearly a ridiculous academic concept. The new “starting” return is likely to be a return of between 12 and 15 per cent on capital, before the resource tax cuts in. That, however, is pure guesswork by Minesite’s Man in Oz. He, like you, now waits to see the next act in a fabulous story of money, power, betrayal and tax. All that’s needed to round the story off is for a Welsh-born girl to migrate to Australia where she rises to become the country’s 27th PM – oh, sorry, we’ve got that too.


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## drillinto

June 26, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html (Registration is free)

Minews. Good morning Australia. What a week you’ve had, with a new Prime Minister, the promise of a truce in the mining tax wars, and the loss of the entire board of Sundance Resources in a plane crash. 

Oz. It has been an interesting time, in the true sense of that famous Chinese curse. The Sundance crash in Cameroon was a shocker, and a reminder of the risks miners take every day when working in remote locations such as central Africa. Sundance (SDL), naturally, remained suspended from trading at its own request all week.

As for the political execution of former prime minister Kevin Rudd by his own party, well, that really was a remarkable act of political brutality and electoral expediency. The sacking of Rudd was very much the result of a personality clash. One man, universally disliked by a nation. No-one is mourning his departure, which means investors ought to be on full alert as his successor, our first female PM, Julia Gillard, takes the reins. Her early comments about the deeply-disliked mining tax have been positive, but there seems no chance that it will disappear off the policy agenda altogether. Mining is seen as an easy target by voters in Australia’s biggest cities, and the government needs cash from the miners to get its budget back into surplus after two years of anti-recession spending. 

Minews. How did your market react to all the political games? 

Oz. Initially with a sense of relief, but by Friday there was a cooler mood, as investors realised that much of what happened mid-week was a deck-chair re-arranging job ahead of the national election. The real fear is that Gillard will lull the miners into a false of security. Make all the right noises about consultation and negotiation which will eliminate the mining tax as an election issue, and then call a snap poll. Early newspaper sampling of the electorate’s mood indicates that Gillard could be the winner the Labor Party is looking for, which means tough times remain ahead for the miners. 

Minews. Okay, enough politics. Time to look at the market. 

Oz. For such a tumultuous week there is really very little to talk about in terms of market news, largely because the political shenanigans took all the limelight, but also because we’re close to the end of the financial year. Overall, the ASX, as measured by the all ordinaries, ended down about three per cent, but that was largely down to the banks continuing to react to global factors. The mining index slipped one per cent lower, held up by the gold index, which added one per cent. Most gold moves were modest, either way, but a strong opening can be expected on Monday because the gold price rose sharply after we had closed. As Australian investors were toddling off to the pub on Friday evening gold was around US$1,238 an ounce. When they woke up on Saturday morning it was back up to US$1,258 per ounce. 

The pick of the gold stocks last week was a Minesite member, Troy Resources (TRY), which as we noted during the week, was flying under investor radar screens. Someone must have read our positive report because Troy added A14 cents to close at A$2.62. Kingsrose (KRM) was another favourite, adding A10 cents to A$1.05 as it moves to with a few weeks of the first gold pour at its Indonesian mine. After those two the moves become rather boring, as quite a few gold companies ended the week where they had started. Gains were posted by Perseus (PRU), up A6 cents to A$2.41, Newcrest (NCM), up A66 cents to A$36, Ampella (AMX), up A6 cents to A$1.74, and Catalpa (CAH), up A2 cents to A$1.63. Also on the up Focus (FML) rose half a cent to A5.3 cents, and Resolute (RSG) rose A9 cents to A$1.12. Losses were posted by Allied (ALD), down A2.5 cents to A34.5 cents, Silver Lake (SLR), down a sharp A18 cents to A$1.79, Medusa (MML), down A5 cents to A$4.40, and Azumah (AZM), down A1.5 cents to A44.5 cents. 

Minews. Not much to get excited about there. Let’s move through the sectors quickly. Iron ore first and then the base metals, please. 

Oz. Iron ore produced a similar picture to gold. Some up, some down, but nothing extraordinary. On the plus side we had Iron Ore Holdings (IOH), up A8 cents to A$1.77, BC Iron (BCI), up A8 cents to A$1.68, FerrAus (FRS), up A5 cents to A83 cents, Atlas (AGO), up A3 cents to A$2.18, and Gindalbie (GBG), up A4 cents to A$1.20. On the negative side we had Brockman (BRM), down A12 cents to A$3.15, Giralia (GIR), down A7 cents to A$1.91 and Fortescue (FMG), down A1 cent to A$4.36. 

The movement in the Fortescue share price was probably the best measure of what a strange time we experienced last week. While the shares ended down by just A1 cent it was actually up by A28 cents at A$4.63 on Thursday as investors greeted the departure of Rudd. On Friday, as concerns grew about the “deck chair syndrome”, and Gillard even made noises about keeping Rudd in her Ministry, Fortescue then went into a sharp retreat which wiped out all of the gain. 

Over among the base metals it was slightly worse. A trawl through the copper, nickel and zinc stocks shows only one winner, and then only by the smallest margin possible. CBH (CBH), the oft-troubled zinc producer added half-a-cent to close at A24 cents. After that it was all down, or steady. Staying with zinc, Terramin (TZN) dropped A1 cent to A58 cents, Ironbark (IBG) fell A3 cents to A16 cents, and Kagara (KZL) slipped A2 cents lower to A53 cents. 

Copper and nickel stocks were all weaker. Citadel (CGG) lost A4.5 cents to A28 cents after raising A$250 million for its Saudi copper and gold projects at A29 cents a share. Equinox (EQN) slipped A10 cents lower to A$4.30. Sabre (SBR) fell a sharp A10 cents to A32 cents, despite reporting positive news on the exploration front. Sandfire (SFR) was A22 cents weaker at A$3.20, and OZ Minerals (OZL), eased by A5 cents to A$1.00. Among the nickels, Mincor (MCR) fell A9 cents to A$1.80, Independence (IGO) fell A15 cents to A$4.70, and Western Areas (WSA) dropped A22 cents to A$4.02. 

Minews. The energy twins now, coal and uranium, with any specials to finish. 

Oz. Coal stocks were mixed, uranium stocks were all down. Riversdale (RIV) rose A41 cents to A$11.21 to top the coal sector. Whitehaven (WHC) rose A9 cents to A$5.02. Among the losers were Stanmore (SMR), down A9 cents to A72 cents, Macarthur (MCC), down A41 cents to A$12.09, and Coal of Africa (CZA), down A11 cents to A$1.85. 

Extract (EXT) posted the heaviest fall among the uranium stocks, dropping by A35 cents to A$6.68. Manhattan (MHC) lost A9.5 cents to A76.5 cents. Paladin (PDN) fell by A24 cents to A$3.76, and Uranex (UNX) lost A1.5 cents to A15.5 cents. There were no specials of note. 

Minews. Thanks Oz.


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## drillinto

July 03, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source: www.minesite.com/aus.html [Free Registration]


Minews. Good morning Australia. You must be relieved that tour tax war is over. 

Oz. Yes. At least for the time being there is certainly a general sense of relief that that the battle between the mining industry and the national government over the planned new system for taxing miners has ended, though no-one believes that the war is over. What happened last week amounts to the application of a political band-aid by a government which is facing an election in the next few months. Getting the mining tax off the front page was its number one priority. Next week we’ll see the cleaning up of another political problem, illegal immigration. The end result of this mopping up of problem issues will be the re-election of a Labor government and the ascent of Julia Gillard, who is proving to be a very astute Prime Minister.

Minews. Is the new tax workable? 

Oz. It appears to be. Rather than hit every extractive industry down to quarrying with a blanket resources tax conceived by boffins in the basement of the Treasury Department, the new version applies only to iron ore and coal, sectors that are generating whopping profit margins. All other minerals have been excluded, which is very good news for gold, copper, nickel, zinc and uranium. The rate of the tax has been cut from 40 per cent to 30 per cent, and will only be applied after a project has generated a 12 per cent return on capital, and even then will only apply to projects earning more than A$50 million a year. 

Minews. In other words, it’s a tax on BHP Billiton, Rio Tinto and Xstrata. 

Oz. Toss in Anglo American and a few other big miners and you’re about right. On the markets, though, the resolution of what’s been a bruising struggle between miners and government was greeted cautiously. Initial enthusiasm faded under the weight of global issues, particularly concerns about the pace of recovery in the US, and fears about Europe’s debt mess. Those negative factors pushed the Australian market down over the week. The metals and gold indices both fell by five per cent, and the all ordinaries fell by four per cent. For the full financial year which ended on June 30th the picture was a little better. The gold index gained 28 per cent over the past 12 months. Metals added 15 per cent and the all ordinaries 11 per cent. It looked much better in April, though. Heavy selling over May and June has since taken the gloss off. 

Minews. Time for prices. Let’s start with the base metals, as they appear to have done best out of the tax changes. 

Oz. Many of the winners last week came from the copper and nickel sectors, alongside the energy twins, coal and uranium. Among the copper companies, the best results came from Sandfire (SFR), and Resource and Investment (RNI), the two companies with maximum exposure to the new Doolgunna discovery, who are now exposed to a spot of corporate action as well. The big news was that OZ Minerals (OZL) has snatched a 19 per cent stake in Sandfire. On the market, Sandfire added A2 cents over the week to close at A$3.22, but that ignores the A$3.55 peak reached on Friday when OZ waded into the stock. RNI benefited from the OZ deal, adding A3.5 cents to A20 cents, but did trade as high as A22 cents on Friday. 

Elsewhere among the copper stocks the risers roughly balanced out the fallers. CuDeco (CDU) posted the best gain for the week, up A19 cents to A$4.88. Sabre (SBR) added A3.5 cents to A35.5 cents. Rex (RXM) gained A2 cents to A$1.22, while Exco (EXS) closed half-a-cent up at A24.5 cents. Going down, PanAust (PNA) slipped A3 cents lower to A48 cents. Discovery (DML) lost A10 cents to A66 cents, and Equinox (EQN) fell A12 cents to A4.18. 

Nickel stocks lagged behind copper. There was really only one worthwhile rise as Mincor (MCR) added A11 cents to A$1.91. The only other nickel company in the black was Poseidon (POS) which rose half a cent to A20.5 cents. The biggest loser among the nickels was Western Areas (WSA) which dropped A19 cents to A$3.83. Elsewhere, Independence (IGO) lost A6 cents to A$4.64, while Mirabela (MBN) was down A6 cents to A$2.07. 

Zinc remained out of favour, and all the zinc companies lost ground. Blackthorn (BTR) fell by A5 cents to A60 cents. Terramin (TZN) slipped A1.5 cents lower to A56.5 cents. Ironbark (IBG) eased back by A1 cent to A15 cents, and Kagara (KZL) lost A5 to A48.5 cents. 

Minews. Gold next, please. 

Oz. Gold started the week well, but then fell into a hole on Thursday and Friday, as the price of the metal retreated sharply. Almost all the gold miners ended down, though most of the falls were modest. The handful of risers included Shield Mining (SHX), which benefited from the terms of a merger proposal from Gryphon (GRY). Shield added A6 cents to A22 cents, while Gryphon went the other way, falling A14.4 cents to A71 cents. Next up, Canyon Resources (CAY) gets its first mention here since listing last month. The company posted a rise of A3 cents to A31 cents on news that it is about to start its first drilling campaign near the historic mining centre of Cue in Western Australia. Also better off, Avoca (AVO) added A1 cent to A$2.63, but was trading as high as A$2.75 on Wednesday. And Allied (ALD) gained half a cent to A35 cents, although that was down A3 cents on the mid-week peak of A38 cents. 

After that there were only fallers. The local leader, Newcrest (NCM), lost A$1.66 to A$36. Kingsgate (KCN) fell A48 cents to A$9.55 after opening on Monday at A$10.55. Troy (TRY) dropped A11 cents to A$2.51. Ampella (AMX) dropped a very sharp A29 cents to A$1.43. Perseus (PRU) fell A21 cents to A$2.20. Andean (AND) fell A18 cents to A$3.14. Medusa (MML) lost A60 cents to A$3.80, and Kingsrose (KRM) slipped A10 cents lower to A95 cents. 

Minews. Iron ore and coal next, which should be interesting, given their status as tax targets. 

Oz. There was only one rise among the iron ore sector. Territory Resources (TTY), which we reported on late in the week, was the only iron ore play to swim against a fast-flowing tide, and even Territory only just managed to stay in the black, with a rise of A1 cent to A21 cents. After that it was all negative in the iron ore sector. Fortescue (FMG) fell A28 cents to A4.08, though it did trade as low as A$3.90 on Thursday before the tax deal was hammered out. Atlas (AGO) fell A9 cents to A$2.09. BC Iron (BCI) fell A3 cents to A$1.65. Mt Gibson (MGX) fell A11 cents to A$1.53. Batavia (BTV) fell A1.5 cents to A18.5 cents. Giralia (GIR) fell A10 cents to A$1.81. Finally Iron Ore Holdings (IOH) was hammered down by A31 cents to A$1.46, after its highly-touted rail and port deal with Rio Tinto went off the rails. 

The coal sector, like the iron ore sector, had few winners. Pick of the pack was a company we’ve not heard from before, Atomic Resources (ATQ), which is exploring in Tanzania. It reported positive exploration news and rose by A2.5 cents to a 12 month high of A19 cents. Also better off, Macarthur Coal (MCC) rose A3 cents to A$12.12, while Gloucester Coal (GCL), which is on the receiving end of a takeover bid from the Hong Kong trading house, Noble Group, added A1 cent to A$12.45. The rest of the sector went into reverse. Among the fallers were Whitehaven (WHC), down A50 cents to A$4.52, Stanmore (SMR), down A7 cents to A65 cents, Riversdale (RIV), down A$1.05 to A$10.16, and Coal of Africa (CZA), down A12 cents to A$1.73. 

Minews. Uranium and specials to finish please. 

Oz. Uranium stocks were mixed, but trending up, thanks to a small rise in the uranium price during the week. Uranex (UNX) reported a reserve increase at its Manyoni project in Tanzania, adding A2.5 cents to A17 cents. Curnamona (CUY) put on A3.5 cents to A19 cents. Bannerman (BMN) added A1 cent to A28 cents. Toro (TOE) rose A1.1 cent to A7.9 cents. Extract (EXT) lost A10 cents to A$6.58, and Paladin (PDN) fell A29 cents to A$3.45. 

Two companies which fall into the “other” metals category are worth mentioning. North Australian Diamonds (NAD) attracted a few speculators late in the week, though why, we don’t yet know. The company rose a tiny A0.1 of a cent to A3.3 cents over the week, but was up by A0.7 of a cent on Friday, which represents a rise on the day of 27 per cent. North Australian owns the Merlin diamond mine in the Northern Territory. And Venture Minerals (VMS), the Tasmanian tin and tungsten explorer, also caught the eyes of a few punters on Friday, putting in a gain on the day of A2 cents, a move which helped the stock end the weeks square at A27 cents. 

Minews. Thanks Oz.


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## drillinto

July 07, 2010

Geological Anomalies Are Like Opinions: Everybody Has One
By Louis James, Senior Editor, Casey’s International Speculator
www.minesite.com/aus.html

There’s a great deal of chatter in the press and online about the tremendous US$1 trillion mineral “discovery” in Afghanistan headlined by The New York Times recently. Most of the discussion seems to centre on whether or not this is really news and whether or not the NYT was played by the powers that be for purposes of their own. Few, if any, people seem to be questioning the value of the so-called discovery itself. The US$1 trillion figure, at best, cannot be anything more than the wildest of hopeful guesses.

One does not have to be a geologist or an engineer to understand why. When geologists find outcropping mineralization, or other signs that an economic deposit of minerals may be present, that is not called a discovery. Even if the signs come from the latest scientific equipment flown over the country, as the US government appears to have used, the result is still just an anomaly: a hopeful indication of where to look. And anomalies are like opinions: everybody has one. 

Once an anomaly is identified, it takes extensive and very expensive field work to determine the best locations for drilling holes in the ground - which you have to do to calculate a volume of mineralized rock, from which you can estimate the metal contained. It usually takes at least a year, and often several, to identify targets for drilling. And drilling off a deposit of any significant size takes several more years, usually after many false starts and setbacks, because you can’t see through rock to know where the goods are. 

But even after you drill off a deposit, and know how big it is, how deep it is, and roughly what’s in it, you still don’t know what it’s worth. For that, you have to conduct extensive testing on the mineralized material, not just to quantify the metals or other desirable minerals within, but also to see if there are contaminants, or other elements present that can complicate, or even make impossible, the economic recovery of the valuable mineral. 

In short, until you know how much it would cost to mine and process any sort of mineralized material into a saleable product, like gold bars, copper concentrate, etc., you cannot say what it’s worth. Even a huge deposit of gold may be completely worthless if the grade is low and there’s lots of carbon that would mess up the gold recovery. 

Now, back to Afghanistan. A “small team of Pentagon officials and American geologists” cannot possibly have drilled off these deposits, let alone done the engineering required to value them. At very best, they’ve spotted some outcrops and taken some samples. This is not a discovery ”” no serious exploration geologist would call anything a discovery until enough holes have been drilled into it to outline a significant volume of potentially economic material. 

What we have here is a regional survey that may or may not lead to significant discoveries. Where do they get the trillion dollar figure? We can only guess, but given their own description, they cannot have done the work necessary to generate any reasonable estimate. It’s worth pointing out that the vast majority of mineral outcroppings and other anomalies never lead to economic discoveries, much less mines. Even a very rich vein sticking right out on surface can turn out to be the last dregs of a system that has been eroded away, leaving nothing but a tease behind. For gold, the odds of an anomaly leading to an economic discovery are often cited as being on the order of 300 to one, against. 

No responsible geologist would circulate a valuation figure at this stage of the process in Afghanistan. In fact, if a public company put out a press release like the story in the NYT, the exchange would likely reprimand it severely and require a retraction. Now, the soldier quoted admits that “There are a lot of ifs,” but that does not excuse putting out the US$1 trillion figure, a number that cannot be reasonably supported at this point. 

Note that this doesn’t mean the minerals are not there ”” Afghanistan has, for obvious reasons, not seen any modern exploration, or even antiquated exploration, for decades. It is, in all likelihood, a terrific place to look for minerals. But the government’s story sounds like the sort of PR stunt put out by Pink Sheet scammers. 

It will take time for any real discoveries to be made, especially given the time required to draft a workable mining law and for physical security to be established in the country. It would be a great benefit to the people of Afghanistan, and to the people of the world, if this would happen.


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## drillinto

July 24, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source: www.minesite.com/aus.html [Free registration]

Minews. Good morning Australia. How is your election campaign affecting the market? 

Oz. Not badly is the answer, not that politicians can take any credit. Last week’s better-than-expected 3.5 per cent rise in the metals and mining index was all about China, again. Strong demand for coal, iron ore, and base metals has pushed national export income back to record levels. Exports in the June quarter surged upward by 16 per cent, the highest quarterly rise ever, with China now accounting for 23 per cent of Australia’s exports and 17 per cent of imports. One possible dampener on that apparent good news is that the Reserve Bank has its finger poised over the interest-rate button and, election or not, the bank’s Governor, Glenn Stevens, says he will jack rates higher for theseventh time since last October if he gets a whiff of inflation.

Minews. Are you prepared to tip an election winner yet? 

Oz. All of the informed money is going on the return of Labor, supported by Green preference votes, which are very important under our electoral system. The Prime Minister, Julia Gillard, is making all the right moves to rid the government of the dowdy legacy left by the dumped Kevin Rudd, and she’s even making an effort to soften her appalling Aussie accent. Some miners harbour reservations about her true intentions, and there were some indications last week that the anti-tax advertising campaign which helped end Rudd’s career might splutter into life again. Andrew Forrest, boss of Fortescue Metals, claims the new tax regime is little more than a sweetheart deal between the government and the big miners, BHP Billiton and Rio Tinto. Unfortunately for Andrew, no-one seems to be listening this time. 

Minews. Time for prices, starting with the best-performing sector. 

Oz. That’s a tough request because while there were outstanding performers in all sectors there was no one dominant sector overall. Sandfire (SFR) was the pick of the base metals companies, for the third week, after a resource upgrade and a fresh share deal with a Korean investor. Mt Gibson (MGX) and Giralia (GIR) did best among the iron ore stocks. Andean (AND) led the way among the golds. Continental (CCC) was the pick of the coals, and Energy and Metals (EMA) was the best of the uranium companies, following a fresh legal win. 

Minews. Let’s stick with base metals, then, since that sector seems to be in a reasonably strong recovery mode. 

Oz. Sandfire was the outstanding performer, soaring to an all-time high of A$5.11 on Friday after it announced a 12.5 per cent placement with LS-Nikko Copper, the world’s third largest copper smelter. The deal, priced at A$5.02 a share, brings in a fresh A$93.5 million to fund a massive drilling campaign at the company’s Doolgunna discovery, and also waters down the stake in Sandfire of OZ Minerals (OZL) which drops from around 20 per cent to 17 per cent. It also means that Korean companies now speak for around 27 per cent of Sandfire, and have two board seats, while OZ is yet to be invited onto the board, setting the scene for some sort of future showdown. While unhappy with the board position, OZ will be happy to see the value of its recent investment rise sharply. After hitting A$5.11, Sandfire eased to end the week at A$5.00, up A60 cents, while OZ chimed in with a gain of A8 cents to A$1.21. 

Other copper stocks rose in the wake of the positive Sandfire situation. Equinox (EQN) continued its powerful upward run, adding A38 cents to close at A$4.95, down slightly on the 12 month high of A$5.02 reached in early Friday trade. Resource and Investment (RNI), one of the explorers working on the fringes of Doolgunna added A2.5 cents to A30 cents. PanAust (PNA) put on A3 cents to A55 cents. Rex (RXM) added A1 cent to A$1.6. Exco (EXS) rose by A2.5 cents to A29 cents. And NiPlats (NIP) put on a star turn rising 32 per cent to A27 cents on Friday after it announced copper assays as high as 16.5% from surface sampling in the Speewah Valley in the far north Kimberley region of Western Australia. 

Nickel, the other base metal attracting plenty of attention down this way, had a relatively quiet week. Pick of the pack was Independence Group (IGO) which added A41 cents to A$5.71, a rise mainly attributed to fresh gold assays from its Tropicana gold joint venture. During Friday trade Independence touched a 12 month high of A$5.73. Other nickel movers included Western Areas (WSA), up A44 cents to A$4.79, Mirabela (MBN), up A6 cents to A$2.20, Panoramic (PAN) up A4 cents to A$2.31, and Mincor (MCR) up by A1 cent to A$2.01. Poseidon (POS) fell A3.5 cents to A18 cents. 

Zinc stocks were flat. Terramin (TZN) added A3 cents to A61 cents. Blackthorn (BTR) lost A6 cents to A67 cents, and Kagara (KZL), rose A4.5 cents to A59 cents. 

Minews. Gold next, please. 

Oz. Not a particularly strong week for gold, which suffered from a pincer effect of a falling US dollar gold price, and a rising Aussie dollar. Among the best performers was Andean (AND), which reported more strong drill results from its Cerro Negro project in Argentina. That boosted the share price over the week by A37 cents to a closing price of A$3.67, which was down slightly on the all-time high of A$3.88 reached on Wednesday. Elsewhere, Chalice (CHN), announced an exploration deal with Newmont in Eritrea, a deal which lifted the stock by A5 cents to A49 cents. Drummond Gold (DGO), the return vehicle of former St Barbara Mines boss, Ed Eshuys, won strong support from day traders, rising by A2.1 cents to A6.5 cents. Norton Gold Fields (NGF) put on A3 cents to A19 cents after settling a hedge dispute with the failed Lehman Brothers. CGA Gold (CGX) added A8 cents to A$2.24. Other upward movers included Perseus (PRU), up A11 cents to A$2.34, Kingsgate (KCN) up A16 cents to A$9.73, and Silver Lake (SLR), up A2 cents to A$1.80. Among the fallers were Ampella (AMX), down A5 cents to A$1.47, Azumah (AZM), down A2 cents to A40.5 cents, Resolute (RSG), down A4.5 cents to A87.5 cents, and Alkane (ALK), down half a cent to A33 cents. 

Minews. Over to iron ore now. 

Oz. A mixed bag, trending up. Mt Gibson (MGX) led the way, putting in a gain of A16 cents to A$1.59 after it released a strong June half profit of A$93 million. Giralia (GIR) also attracted support, rising A27 cents to A$2.19. Territory (TTY) delivered on its promise of a strong June quarter profit result, but managed only a half cent share price rise to A23.5 cents. Other upward iron ore movers included Atlas (AGO), up A7 cents to A$4.05, Brockman (BRM), up A8 cents to A$3.12, and Fortescue (FMG), up A17 cents to A$4.21. Fallers included Murchison (MMX), which lost A5 cents to A$1.85, and Iron Ore Holdings (IOH), down A10 cents to A$1.33. 

Minews. Coal and uranium now, and any specials to finish, please. 

Oz. Continental Coal (CCC) announced a fresh off-take sales agreement for its Project X, adding A1 cent on the market to close at A6.8 cents. That might not seem like much of a rise, but that A1 cent means the stock has now doubled in two weeks. Riversdale (RIV) rose by A29 cents to A$10.59. Stanmore (SMR) added A8 cents to A90 cents, and Whitehaven (WHC) crept A3 cents higher to A$5.55. 

Among the uranium stocks Energy and Metals (EMA) celebrated another legal win over a mystery protagonist relating to its Mulga Rocks project, and put in a share price rise of A3 cents to A20 cents as a result. Elsewhere, Manhattan’s chief executive, Alan Eggers, delivered an optimistic report to a uranium conference in Fremantle which helped the stock add A2.5 cents to A75 cents. Most other moves were down modestly. Berkeley (BKY) lost A4 cents to A$1.12, and Bannerman (BMN) slipped A2 cents lower to A37 cents. 

There weren’t any specials to catch the eye. The lithium stocks, such as Galaxy (GXY) and Orocobre (ORE) didn’t move, and OM Holdings (OMH), the manganese specialist, managed a rise of A2 cents to A1.57. 

Minews. Thanks Oz.


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## drillinto

July 26, 2010

Investment Demand Is Becoming Increasingly Important In Setting Base Metals Prices
By Rob Davies
>>> www.minesite.com/aus.html

Industrial demand has long been commonly accepted as the key factor in the setting of base metal prices. In recent years, though, the secondary importance of investment demand in setting prices has increased markedly. This has mainly been evident in the precious metals sector, although in a clear sign of increased demand, the number of base metal ETFs has risen significantly. What is now needed is a framework to incorporate metal exposure into portfolios, to give a rational asset allocation.

Asset allocation is usually regarded as the geek in the corner of the investment classroom, especially when compared to the shining brilliance of the star stockpicker. But one investment company that takes the business of asset allocation seriously is Valu-Trac, based in Morayshire. It was founded in 1985 by Peter Millar who has an investment history that is probably only exceeded by Warren Buffet. 

A spell at the Abu Dhabi Investment Authority during the inflationary 1970s was a seminal time for him. He is a commodity bull and has the data to show why. Interestingly, his process prices base metals from the gold price - a relationship that has often been studied, but rarely formalised. 

Last week the LME base metals index rose by 4.3 per cent, although gold continued to drift. To some extent gold suffered from the successful conclusion of the stress tests applied to European banks and announced on Friday the 23rd. It is doubtful if any serious observers take the results at face value. However, the exercise can be presented as a fig leaf to demonstrate that the financial plumbing in Europe is sound to those that have a need to be convinced. 

This writer is no economist, still less a bank analyst, but it was extremely noteworthy that the test was based on capital adequacy rather than liquidity. Since the banks started lending out more money than they actually have, on the assumption that depositors won’t all withdraw their money on the same day - a process known as fractional banking - it has been liquidity that has been the key to banking survival. Of course any bank could survive anything if it went back to 100 per cent gold backing, but economic growth would suffer. The trick is to balance the two. 

The tests demonstrated that banks can survive another recession, but did not prove that they could collectively survive a loss of confidence. Holding liquid assets, such as commodities like gold and base metals, is the insurance that investors like Valu-Trac take against the failure of the banking system. 

True, measuring confidence, or the lack of it, is perhaps the hardest part of the investment game. But the gold price is one simple measure. It’s currently telling us that people are nervous, but not as nervous as they were a few weeks ago. 

Putting base metal prices into this equation is much more difficult. What we don’t know is the marginal impact of investment demand in the base metals price equation. But maybe the industrial side will now become more important. Metal demand from China is undoubtedly still strong, although there is plenty of evidence to suggest that it is not as solid as it was. 

Moreover, data in Europe suggests economic growth is now recovering, as German business confidence reaches its highest for three years. Stockpiles, aluminium excepted, are low and most facilities are operating at close to capacity. Industries buying metal to make widgets is much healthier than investors hoarding it in fear of financial Armageddon. But how that information is accommodated by asset allocation gurus is best left to them.


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## zipzap

"The best place to be is in commodities"

The best play to be is to stop punting based upon a view and learn risk management and timing techniques so regardless of market you can make more money than speculating based upon a fundamental view.


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## drillinto

July 27, 2010

The Uranium Shortfall Is Coming, According To Alan Eggers Of Manhattan Corporation
By Our Man in Oz

No-one is better qualified (or named) to egg on investors in uranium companies than Alan Eggers, chief executive of the Australian explorer, Manhattan Corporation. For the past year he has been chief cheer leader of a rather despondent group of Aussie uranium companies which, every time they get a little up-kick in their share prices, get whacked down again by the simply awful spot price for the metal/fuel. Last week, Eggers was at it again as one of the star attractions at the annual Australian Uranium Conference in the port city of Fremantle. In a quick-fire 20 minute address he revved up the 200 or so delegates, explained the exploration plans of Manhattan at its Ponton project in central Western Australia, showed a snappy illustration of the planned in-situ recovery there, and predicted a recovery in the uranium price, something the audience had undoubtedly heard before (yawn), although not lately with such promising echoes in the background.

To read the full article, please visit >>> www.minesite.com/aus.html
The registration is FREE.


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## drillinto

July 31, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source: www.minesite.com/aus.html  [FREE REGISTRATION]


Minews. Good morning Australia. More election doldrums for you? 

Oz. Yes, and no. The market was certainly flat, but the election campaign picked up speed, as the conservative Liberal and National Parties squeezed past Labor in the latest opinion polls, published on Saturday. We’ve got three weeks to go before the August 21st vote, so anything could happen. For the mining sector, which has been harshly treated by Labor, the latest newspaper polling is a breath of fresh air, which might be reflected in prices on Monday.

Minews. The polling should also boost the mood at next week’s Diggers & Dealers forum. 

OZ. It will, especially as Diggers is all about the juniors. It’s juniors that have been howling the loudest about the quick fix put in place by our recently imposed Prime Minister, Julia Gillard. The complaint, which has now becomes serious enough to merit the re-launch of damaging television and newspaper advertisements by the mining industry, is that the fix pleased only BHP Billiton, Rio Tinto and Xstrata, and did nothing at all for smaller companies. Those ads, plus a flood of leaks from within her own political party, have sparked some feisty headlines. “Honeymoon ends abruptly for Julia Gillard” was one such, featuring in this Saturday’s Financial Review. 

Minews. All very interesting, and potentially market moving, but let’s get to last week’s action. 

Oz. If you insist, though it was a case of modest movement in both directions, with only a handful of stars, and few names we’ve never heard before. Overall, the ASX added a tiny 0.75 per cent last week. The metals index was up even less, by a mere 0.6 per cent, and the gold index lost two per cent as the gold price retreated. After we closed it was a different matter though, as gold then climbed back over US$1,180 an ounce. The Aussie dollar followed, and took a peek above the US90 cent mark. 

The best sector last week, or at least the one that generated the most news, was copper, where the Sandfire (SFR) situation simmered, Rex Minerals (RXM) reported a pot of copper even bigger than Sandfire’s, Resource and Investment (RNI) hit a fresh 12 month high, and a company only the oldies remember, Bougainville Copper (BOC), reclaimed a spot in the headlines. 

Minews. How interesting. Movement at Bougainville must surely be another indication of a revival in the entire copper sector. 

Oz. Precisely. For the past month copper has been the metal watched most closely down this way. Interest has been strong on the back of a combination of discovery news, the price moving back over US$3.20 a pound, and the steady decline in the global stockpile of the metal. In the case of Bougainville, which is actually a non-trading arm of Rio Tinto, a move up from A71 cents to a 12 month high of A87 cents over the past week earned the company a speeding inquiry from the ASX. There was no fresh news, just a belief that copper mining might re-start on the Papua New Guinea island of Bougainville. Work there stopped just over 21 years ago after the outbreak of a small civil war. Any re-opening at Bougainville will require a total re-think in how the copper is mined, plus new processing and transport facilities, so it will not be a small lift. 

Elsewhere among the copper companies, Rex was the big news, as it reported a maiden 700,000 tonnes of copper, plus 650,000 ounces of gold, at its Hillside project in South Australia, a total that pipped Sandfire’s Doolgunna discovery by roughly 50,000 tonnes of copper. The big difference, however, is that Hillside is a bulk, low-grade discovery averaging 0.7% copper. Doolgunna is a high-quality orebody averaging 5.5% copper. On the market, Rex rose by A29 cents to A$1.91, copping a speeding inquiry on the way, after what appears to have been a spot of early trading by someone a little too well informed. Sandfire did less well, slipping A16 cents lower to A$4.84. It was also in the news because it refused to offer a board seat to OZ Minerals (OZL), which raided Sandfire’s share registry three weeks ago. 

Other copper movers included Resource and Investment, which rose to a 12 month high of A51 cents, before easing to close on Friday at A47.5 cents. Talisman (TLM), another Doolgunna player, added A16 cents to A90 cents. Equinox (EQN) put on A7 cents to A$5.04. OZ rose by A1.5 cents to A$1.23. Redstone (RDS), which is exploring the Tollu project in central Australia, rose by 3.5 cents to A26 cents after it reported encouraging assay results, including 18 metres at 2.7% copper from a depth of 180 metres. 

Minews. Let’s finish with the base metals. Then over to iron ore and gold, please. 

Oz.  Panoramic (PAN) was the best of the nickel companies, putting in a rise of A15 cents to A$2.46, but that was probably more because of a new gold exploration deal in Alaska. Western Areas (WSA) was second best, up A6 cents to A$4.85 after it announced the first shipment of concentrate from its Forrestania operations. After that it was downhill, although the falls were fairly modest. Mincor (MCR) slipped A3 cents lower to A$1.98, and Independence (IGO) fell A11 cents to A$2.60. 

Zinc companies had a mixed time of it. Perilya (PEM) added A3 cents to A43.5 cents after reporting strong June quarter production numbers. Kagara (KZL), added A6 cents to A65 cents, while Terramin (TZN) was stady at A61 cents, and Blackthorn (BTR) was also flat, closing the week out at A67 cents. 

The performance among the gold companies was mixed, trending down. Among the handful of risers Kingsgate (KCN) added A5 cents to A$9.78 after it announced a big resource upgrade. Silver Lake (SLR) rose by A8 cents to A$1.88. Alkane (ALK) continued its revival with a rise of A2.5 cents to A35.5 cents, but did get as high as A40 cents on Tuesday. Argent (ARD), which we rarely hear from, added A3.5 cents to A23.5 after it announced the acquisition of the Bullant project near Kalgoorlie from Barrick Gold. 

Gold fallers included Dominion (DOM), down A18 cents to A$2.22, after it warned of a reserves downgrade, Medusa (MML), down A21 cents to A$3.88 despite solid June quarter production report, and Resolute (RSG), down A10 cents to A77.5 cents, also in the face of good production numbers. Kingsrose (KRM), fell A4.5 cents to A90.5 cents as investors wait for news of the first gold pour at its Sumatran mine. Perseus (PRU) fell A25 cents to A$2.09. 

Iron ore stocks also had a mixed week. Giralia (GIR) was the star, putting in a very impressive rise of A22 cents to A$2.41 after it announced a resource upgrade at its McPhee Creek project. Also better off, Mt Gibson (MGX) rose A7 cents to A$1.66, Grange (GRR) rose A5.5 cents to A56 cents, and Fortescue (FMG) rose A8 cents to A$4.29. Territory (TTY) was A3 cents better off at A26.5 cents as the market factored in a more positive outlook for the company. On the negative side, Atlas (AGO) fell A4 cents to A$2.01, BC Iron (BCI) fell A4 cents to A$1.64, and Gindalbie (GBG) fell A1.5 cents to A97 cents. Iron Ore Holdings (IOH) fell another A3 cents to A$1.30, meaning the company has more than halved in value since hitting a peak of A$2.71 on March 11th, and all because of a failed sales agreement with Rio Tinto. 

Minews. Fuel stocks now, please, coal and uranium. 

Oz. Let’s look at uranium first, because the US$4.25 a pound rise in the spot uranium price during the week triggered quite a lot of renewed interest in the sector. Price moves were not large but almost all uranium companies ended in the black. The two losers were Energy Resources (ERA), which slipped A24 cents lower to A$13.78, after poor production numbers, and Extract (EXT), which dropped A7 cents to A$6.69. Among the risers, Berkeley (BKY) continues to build on interest in its Spanish uranium projects, and added A16 cents last week to A$1.28. Energy and Metals (EMA) rose by A3.5 cents to A23.5 cents, Alliance (AGS) was up A1.5 cents to A34.5 cents, and Bannerman (BMN) gained A1.5 cents to A38.5 cents. 

Coal companies were weaker across the board, but not by too much. Stanmore (SMR) slipped A3 cents lower to A87 cents. Whitehaven (WHC) was off by A13 cents to A$5.42, Coal of Africa (CZA) dropped A9.5 cents to A$1.83, while Kangaroo Coal (KRL), which we took a look at midweek, fell by A3.5 cents to A14.5 cents. The only coal play to rise was Bathurst (BTU), which has plans for the Buller project in New Zealand. It added A4.5 cents to A25 cents. 

Minews. And specials to close. 

Oz. Orocobre (ORE), one of the local lithium stocks, jumped A27 cents higher to close at A$2.05 after it was included in a new exchange-traded lithium fund. Galaxy (GXY), the other local lithium favourite, added A6 cents to A$1.15. 

Minews. Thanks Oz.


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## drillinto

Bespoke's Commodity Snapshot 
Thursday, July 29, 2010  

Below we provide trading range charts of ten major commodities.  In each chart, the green shading represents between two standard deviations above and below the 50-day moving average.  Moves above or below the green zone are considered overbought or oversold.  As shown, oil is currently at the top end of its trading range, while gold has moved into oversold territory.  Silver is also at the bottom of its trading range, while platinum and copper are at the top of their ranges.  And wheat and copper have done exceptionally well recently.  Wheat has basically gone vertical, and coffee has made a significant breakout out of a long-term sideways trading pattern.

To view the charts, please click this link:
http://www.bespokeinvest.com/thinkbig/2010/7/29/bespokes-commodity-snapshot.html

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## drillinto

Another Lower High in Gold? 
Tuesday, August 3, 2010  

Ever since stocks made a short-term low back in late June/early July, gold hasn't been able to get out of its own way.  After several months of higher highs and higher lows, the commodity has now been making a series of lower highs and lower lows.

To see the charts please click the link:
http://www.bespokeinvest.com/thinkbig/2010/8/3/another-lower-high-in-gold.html

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## drillinto

August 14, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html [Free Registration]


Minews. Good morning Australia. How did your market behave, in what was a fairly tough week everywhere? 

Oz. The market was down, as you might have expected, but not by much after it staged a reasonable recovery on Friday. At one stage on Thursday the metals and mining index was down by four per cent, but a late return of optimism saw the index end the week down by just 1.5 per cent. Gold reacted well to a whiff of fear that washed over world markets. Our gold index gained 1.1 per cent over the week, but that included a one day rise of 3.1 per cent that came through on Friday, as the gold price went up and the Aussie dollar went down.

Minews. Were there any signs of pre-election jitters ahead of your poll next Saturday? 

Oz. Not really. Investors seem relaxed about the policies of both parties. The conservatives, Liberal and National, do have the better offering for miners, but the Labor Party was given a jolly good scare over its attempt to hit the sector with a super tax, and seems much more quiescent. The only person still bleating, loudly, is Fortescue Metals boss, Andrew Forrest, but he is having a tough job convincing anyone, including other shareholders in Fortescue, that the sky will fall in if Labor returns to power. Last week, as he mounted a strident attack on the Labor Party, the share price of FMG slipped a mere A5 cents lower to A$4.40, and actually rose by A12 cents on Friday. That means that even as Forrest says Labor is bad, and the latest opinion polls continue to predict a Labor win, his personal fortune is steady, at comfortably above A$4 billion. 

Minews. We might take a closer look at your possible election outcome later in the week, for now let’s move on. 

Oz. Okay. Before we get to the prices, it’s worth just observing a rather interesting disconnect that’s arisen, between the financial and commodity markets. Last week, as financial markets teetered and tottered all over the place, most commodity prices held their ground, or slipped only marginally. Uranium, zinc and gold rose. Copper ended the week at a very respectable US$3.25 a pound. Nickel also did well, hanging on to a price of US$9.60 per pound. What seems to be happening is that demand for commodities remains strong in robust economies such as China, and is recovering in other major manufacturing countries, such as Germany. But while that’s good for commodities, the financial markets are continuing to fret about sovereign debt. 

Minews. And that underlying strength in commodity demand is good for the Australian economy, and Australian mining companies. 

Oz. Precisely, as it is for Canada and other commodity exporting countries. All will soon start to feel the benefits of a lack of recent investment in new mines, which means that supply is increasingly inhibited just as demand grows. 

Minews. Enough theory. Prices, please. 

Oz.  As mentioned earlier, the week started badly, and ended strongly, with the net result being that a large number of companies ended where they started, or displayed very little change. We’ll start with gold first, as it was the strongest sector, though the only stand-out move was from Scotgold (SGX) which has run into a few problems with the executive of the National Park Authority in Scotland over its plans to redevelop the Cononish mine. A formal decision has yet to be made, but a negative executive report, which goes to a full board meeting of the authority next week, meant that Scotgold was hit hard, dropping A3.1 cents to A5.1 cents. 

Minews. We’ll take a closer look at that situation next week 

Oz. Glad to hear it. From this distance, it looks a crazy decision. Maybe you can make more sense of it from closer at hand. On the positive side of the scale, the best upward move for the week came from Andean Resources (AND), which we took a look at earlier in the week, and which continues to deliver excellent news from its Cerro Negro project in Argentina. It added A29 cents to A$4.27, but did trade as high as A$4.42 on Friday, an all-time high. Kingsrose (KRM) was another to attract attention, after it reported that it had poured first gold at its Way Linggo mine in Indonesia. Kingsrose shares added A6 cents to A$1.06, with all of that rise coming on Friday. Avoca (AVO) was also in demand at the end of the week, adding A11 cents to close at A$2.89. 

After those three, there was a long list of companies that made modest moves, up and down. Companies that were better off included Silver Lake (SLR), up A3 cents to A$2.10, Integra (IGR), up A1.5 cents to A38.5 cents, and Perseus (PRU), up A2 cents to A$2.35. Ramelius (RMS) was also stronger, up A5 cents to A48 cents, after it reported a bonanza drill hit that assayed 781 grams of gold a tonne (25 ounces) over a thin half-metre intersection at its Wattle Dam mine. Slipping lower were Troy (TRY), down A2 cents to A$2.61, CGA (CGX), down A13 cents to A$2.15, Eleckra (EKM), down A1 cent to A8.5 cents, Medusa (MML), down A22 cents to A$3.78, and Azumah (AZM), down A2.5 cents to A41.5 cents. 

Minews. Across to the base metals now, with copper first. 

Oz. There was one riser, and a lot of fallers among the copper companies, as the sector’s two month upward run came to a halt. The company swimming against the tide was Exco (EXS), which has the added benefit of having a gold mine already in production. Exco rose A5 cents to close at a 12 month high of A40 cents, and managing director Michael was clearly in a confident mood as he emailed investors to explain the details of the latest funding deal for the Cloncurry copper project. After that, though, it was all down in the copper space. Leading the fallers were companies exposed to the Doolgunna discovery area, companies which, until now, had all enjoyed pretty much one-way upward traffic. Sandfire (SFR) shed A60 cents to A$5.09, but did trade as low as A$4.85 on Thursday. Resource and Investment (RNI) slipped A4 cents lower to A61 cents, but did drop as low as A51 cents on Wednesday. Lodestar (LSR) lost A3 cents to A14 cents, and Rubianna (RRE), which has just announced an increased exposure to the Doolgunna area lost A3.5 cents to A22 cents. Other copper fallers included Rex (RXM), which fell A20 cents to A$2.20, although it did trade as low as A$1.90 on Wednesday. OZ Minerals (OZL) slipped A4 cents lower to A$1.21, and Equinox (EQN) lost A23 cents to A$4.98, despite a strong production and profit report. 

Nickel and zinc stocks were weaker across the board, with two exceptions. Western Areas (WSA) and Panoramic defied the downward spiral. Western Areas added A15 cents to A$5.01, and Panoramic rose by A4 cents to A$2.52, and both companies had a stellar Friday. On the final day of the week Western Areas stacked on 53 cents, or 11.8 per cent, while Panoramic did even better, putting in a rise of A29 cents, or 13 per cent. After that there was a long list of losers. Mincor (MCR) fell by A14 cents to A$2.01 across the week, although on the Friday it did actually rise by A7.5 cents. Independence (IGO) lost A8 cents to A$5.57 on the week, a fall which incorporated a rise of A22 cents on Friday. 

Minews. Looks like the nickel sector is playing catch up with copper. But time’s too short for a full analysis of that trend, so across to iron ore, coal, uranium and specials to finish, please. 

Oz. Iron ore stocks trended down all week, although the Friday recovery repaired most of the damage. Atlas (AGO) was a rare example of an iron ore company that closed higher, as it put in a gain of A2 cents to A$2.19 across the week, helped by a rise of A5 cents on Friday. After that it was virtually all red: Mt Gibson (MGX) fell A5 cents to A$1.71, Brockman (BRM) fell A12 cents to A$3.00, Gindalbie (GBG) fell A6 cents to A98 cents, Murchison (MMX) fell A13 cents to A$1.67, and Iron Ore Holdings dropped A3 cents to A$1.62. Batavia (BTV) dropped a tiny half sent to A19 cents, while Territory (TTY) fell by half a cent too, to A31 cents. 

Coal companies were also generally down. Aquila (AQA) was the exception after it released positive exploration news from its coking coal project in Queensland. Shares in Aquila added A13 cents to close at A$8.33. Losses came from Riversdale (RIV), down A27 cents to A$9.82, Stanmore (SMR), down A5 cents to A87 cents, Continental (CCC), down half a cent to A6.3 cents, and Whitehaven (WHC), down A8 cents to A$6.07. Coal of Africa (CZA) was also worse off, down a sharp A43 cents to A$1.37 in the wake of problems with government officials in South Africa. 

Another modest upward move in the uranium price during the week set a favourable context for uranium companies, but only Extract (EXT) actually managed a rise, and even that rise was modest. Extract added A6 cents A$6.78 on news of a resource upgrade in Namibia. Paladin (PDN) dropped A6 cents to A$3.94 across the week, despite putting in a rise of A10 cents on Friday. Manhattan (MHC) shed A5 cents to A80 cents, while Berkeley (BKY) ended steady at A$1.23. 

Minews. Any specials worth reporting? 

Oz. Venture Minerals (VMS), the Tasmanian tin and tungsten specialist, is powering along, and added A2 cents to A38 cents over the week. That modest move actually masks a powerful one day rise of A6 cents or 19 per cent put in by the company on Friday. Jupiter Mines (JMS), the manganese explorer under the spell of former BHP Billiton boss Brian Gilbertson, announced plans to start construction at its Tshipi project in South Africa, and fell A1 cent to A26.5 cents. 

Minews. Thanks Oz.


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## drillinto

August 16, 2010

Debt, Deflation, And Double-Dip: Metals Markets Point The Way
By Rob Davies
www.minesite.com/aus.html  [The registration is free]

Germany's GDP report for the second quarter was better than had been expected, of that there can be no doubt. However, German growth at 2.2 per cent was not enough to offset poor economic news from the US. In the US, the Federal Reserve prepared the ground for a further injection of liquidity, as data pointed towards continued weakness in the over-indebted US economy.

The Fed’s view is that it needs to carry on throwing cash at consumers in order to prevent deflation. That was the reason bond markets rose still further, and US 10 year Treasuries now yield 2.7 per cent. In Germany, which has strong growth, 10 year bunds rose to yield 2.4 per cent. 

So, the markets are clearly not worried about the inflationary effects of the current economic conditions in Germany, even in the face of best data to come out of the country for 16 years. Investors are saying the German data is a blip representing a strong recovery from very depressed conditions, and that it won’t be maintained. 

Here’s the conundrum, though. If everyone really thought deflation was the dragon to worry about, why has the price of gold gone up and stayed up, and why does the SPDR gold trust now hold a record 1,286.7 tonnes? At US$1,214 an ounce, gold is still trading at close to record highs. 

Base metals, too, have all delivered good returns over the summer months. The LME index stands at 3,351.9, an 18 per cent increase since the lows in early June, and surely not compatible with fears of deflation. 

Part of the explanation lies with the continued high levels of industrial production in China and South-East Asia. But there is another reason too, one that is related to the global financial crisis, or as the Aussies would have it, with their fondness for shortening things, the GFC. Global economic well-being is a fine balancing act. 

But at the moment, things are out of kilter. On one side of the current economic scales there are over-indebted consumers and sovereign states. On the other side, there are the banks, and the banks are doing all they can not to lend more money to anyone else. That includes viable mining projects in reasonable parts of the world. 

A recent demonstration of the prevailing trends came courtesy of Andean Resources and its C$235 million equity issue. The money was raised to fund the development of its Cerro Negro property in Argentina. This deposit contains over three million ounces of gold and 25 million ounces of silver in the Santa Cruz province, a province that has a track record of being mining friendly. Even with a feasibility study that is to the standard required by banks, the company found it easier to raise the funds through equity rather than debt. 

That may suit the company’s management in this particular case, but for the industry it is yet another demonstration that its cost of capital has risen and that means metal production is more expensive. For this kind of project debt would, or at least should, be cheaper than equity.  If production costs, albeit fixed rather than cash, rise then prices must go up to maintain the same level of supply.      

In a bizarre way the deflationary consequences of the GFC are now sowing the seeds of commodity inflation. As banks limits their lending, in order to rebuild their balance sheets, all as part of the hangover after the lending splurge of the naughties, they are directly raising the financing, and hence fixed, costs of mining. 

There is a sweet synergy here, in that the market seems to be working out a solution to these problems in its own way without the influence of politicians and regulators.


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## drillinto

August 16, 2010 [Five days before The Elections]

The Bookies Are Predicting A Return Of Labor In The Australian Elections, But Voters In The Bush Might Yet Swing It The Other Way
By Our Man in Oz
www.minesite.com/aus.html << FREE REGISTRATION

If you were a betting man you would put your money on a return of the Labor government in Australia on Saturday, even if that is a result which will not please the mining industry. But, as everyone in a democracy knows, strange things can happen on polling day. For a glimpse of what that something might be you only have to look back two years to an unexpected defeat incurred by Labor in the Western Australian state election, a defeat that was due to a grass roots revolt in the outback. In September, 2008, Labor went to an election with the Perth metropolitan area under its control. What it overlooked was a resurgent National Party, once called the Country Party, which campaigned on a promise of “royalties for the regions”. It sounds somewhat trite, but what the Nationals promised was a bigger share of mining royalties for people in the bush. All through the campaign no-one in the city took the Nationals and their pitch to the country seriously. But they should have.

The result in WA was effectively a hung Parliament, something that we might now get on Saturday across the whole country, with the Nationals once again holding the balance of power courtesy of their appeal to farmers and miners. In a way such a result might look like a re-run of what happened in Britain earlier this year, when the Liberals held the balance between the Labour and Conservative Parties, and considered power sharing with both Labour and the Conservatives before plumping for the latter. But the difference lies in the nature of the power-broker. If the Australian result is a cliff-hanger, the Nationals, as the most right-wing of the parties contesting the election will deliver power to a coalition with the Liberals, a party which shares little in common with its left-leaning UK party of the same name. 

But while, investors are hoping that the bush will do on a national scale what it did in the WA State election, but the bookmakers do not agree. The latest odds from Centrebet, a betting agency, show a 74 per cent chance of a Labor win, and a 26 per cent chance of a conservative coalition. The actual offering is A$1.30 for a A$1.00 punt on Labor, and A$3.65 for a A$1.00 punt on the conservatives. Given that the bookies normally know their nags it would be a courageous punter to dispute those odds. But that’s before two factors are considered - the surprise bush revolt in WA, and the fact that most opinion polls are based on city-only surveys. 

A seat-by-seat breakdown shows that Labor is in trouble in the bush courtesy of its attempt to whack the mining industry with a super-tax. In Queensland, home to the country’s biggest coal and copper industries, Labor is tipped to lose five seats. In New South Wales, a big coal producer, four Labor seats could be lost, and in WA, with its iron ore, gold and alumina industries, two more Labor seats would go. But those 11 losses still leave Labor with 77 out of the 150 seats in the lower house, where governments are formed, a nose in front. Rock solid Labor support in the rust-belt manufacturing states of Victoria and South Australia would thereby have ensured a continuation of a Labor Government. 

If the bookies are right then a narrow win for Labor will not be all bad news for the mining industry, unless Labor is forced into a coalition with the Greens, a party yet to win a seat in the lower house, and a mob virulently anti-mining. But Labor alone, with a reduced majority will have been given the scare of its life, and a warning that it cannot tamper with Australia’s most import export industry and expect to stay in power for long. Labor has been forced to water down its super tax, claiming it will now only be applied to the iron ore and coal sectors, and then only to the biggest profit earners. Yet sticking to that promise will be tough for Labor if it teams up with the Greens who want to tax the mining industry out of business. 

If the unexpected happens and a conservative coalition gets in then the whoops of delight will be heard from Mt Isa to Kambalda. Liberal leader Tony Abbott has been working closely with the small miners, promising a range of concessions, including no super tax at all. In his latest proposal Abbot also suggested a form of tax concession for investors, similar to the Canadian flow-through share scheme. The tax credits system would cost an estimated A$150 million over three years, with the aim being to encourage small explorers. Naturally, the miners love the idea. The Association of Mining and Exploration Companies has said that a tax credit system is essential to re-starting work in the exploration sector, which stalled during the super tax fiasco. 

Like the British election, it is unlikely that Australia will know on Saturday night which party will form the next government. Not only are the polls too close to call, and no-one knows what the bush will do, but there is the added complexity of the electoral system itself, which operates on a preferential basis, not first past the post. Anyone with a few spare days on their hands is welcome to research how preferences are distributed, though time spent in the pub would be far more enjoyable, as long as you’re prepared to accept that it’s complicated and can take days (or even weeks) to be worked through, as postal and absentee votes trickle in from around the world. 

On balance, Minesite’s Man in Oz is tipping a return of Labor with the aid of Green preferences. He might not like bookies but they do have a nose for picking winners.


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## drillinto

August 22, 2010

That Was The Week That Was … In Australia
By Our Man In Oz
Source >> www.minesite.com/aus.html

Minews. Good morning Australia, what a mess you seem to have made of your government. 

Oz. We certainly have, a classic hung Parliament, perhaps worse than what you went through in the U.K. a few months ago. The good news, from the mining industry’s perspective, is that any immediate attempt to revisit the super tax, or expand it to smaller companies and minerals other than coal and iron ore is dead. The bad news is that the Greens have emerged a much stronger party and they could attempt to revive the issue in the Senate where they have significantly increased their representation, and will hold the balance of power between Labor and the conservative coalition.

Minews. What is the position of the left and right wing parties? 

Oz. In the lower house, where government is formed, it looks to be dead set even, with a slight bias towards the conservatives. As we talk, the Labor Government’s tally in the 150-seat House of Representatives has dropped from 88 to 72 which, in our system, is a big decline. The Liberal National coalition has lifted its number of seats to 72 in the latest counting, with four independents, and two undecided, or simply too close to call yet thanks to our complex preference distribution system, and the late arrival of postal and absentee votes. 

Minews. Then who actually runs the country? 

Oz. In the short term Labor hangs on and will probably be given first chance at forming a government. An invitation, incidentally, which will be extended by the Governor General who is The Queen’s representative in this country so, it could yet be that our royal roots get a bit of an airing, again. The problem, however, for Labor is that three of the four independents are from the far right, all ex Nationals, the mob once called the Country party. Their success is a reflection of the “bush surprise” we discussed last week. If you look at a map of the political landscape in Australia today it is blue in remote and regional areas, and red in the inner cities. The mining states of Queensland, Western Australia and the Northern Territory are dark blue. The rust-belt south and east is red, with a green tinge around the edges. 

Minews. How pretty. With a little less colour, would you like to tip how your market open on Monday? 

Oz. Tough question. Some investors will be happy that the government has been given a good whacking and see mining shares staging a rebound. Others will be concerned about weeks, or months of instability, and keep their cash in the bank. I would lean towards their being little market reaction from the political events over the weekend, with a touch of optimism that we might get a conservative government. The really big question, however, is for how long any minority government, left or right, can survive before its back to the electorate for a fresh poll. 

Minews. Enough politics, time for prices and a look at how your market performed last week. 

Oz. Good, in parts, bad in others. Gold led the way thanks to the twin forces of a higher U.S. dollar gold price and a mildly lower Australian dollar. Copper stocks were mixed with a few strong performers and one disaster. Iron ore trended down, and the rest were all over the shop. The week started well, but faded away as election day drew nearer, the U.S. and Europe weakened, and fear returned about a slowdown in the Chinese economy. Both the all ordinaries and the metals indices on the ASX declined by 1.1 per cent. Gold was up by almost 1 per cent. The surprise packet came in the shape of the rare earth stocks which reacted positively to news that prices are rising as China clamps down further on exports. Alkane (ALK), Lynas (LYC) and Arafura (ARU) all rose quite sharply. 

Minews. Let’s do something different and start with the rare earth stocks, they never normally get a mention. 

Oz. Righto. What appears to have happened is that Arafura popped out a media statement on Wednesday which noted a substantial price rise for rare earths such as lanthanum and cerium as reported by the U.K. web service, Metal Pages. According to Arafura the new prices boost the value of a kilo of its mixed material, called Nolans Rare Earth Mix (after the Nolans Bore project) by 255 per cent to US$43/kg. That got the market rather excited with Arafura shooting up by A21 cents from a low on Monday of A65.5 cents to a high on Wednesday of A86.5, before easing to end the week at A78 cents, a gain of A12.5 cents. Lynas rose from A85 cents to a mid-week peak of A$1.05, a 12-month high, before easing to close at A99 cents. Alkane repeated the performance, up from an opening low of A39.5 cents, up to a 12-month high of A54 cents on Thursday, and a close on Friday at A50 cents. 

Minews. All hit, it seems, by the same Friday sell-off which marked down your overall market. 

Oz. Yes, the same effect can be seen across the all sectors, even gold took a bit of a knock on Friday. 

Minews. Let’s switch across to gold, it’s very topical in the U.K. with Scotgold battling bureaucracy at its Cononish project. 

Oz. We’re following that with a mix of amusement and sympathy as Scotgold is dual listed on the ASX and AIM. It seems that governments around the world are getting more bolshy every day when it comes to mining. On our market Scotgold had a bad start to the week with trades as low as A4.7 cents, picking up mid-week to A6.6 cents, and then fading to close at A5 cents. 

Pick of the gold stocks last week was one we rarely hear from, Auzex (AZX) which reported a whopping 450 per cent increase in the resource at its Bullabulling project near Kalgoorlie to a shade under two million ounces contained in ore assaying 1.5 grams a tonne. It opened the week at A14 cents, rushed up to A25 cents before ending the week at A20 cents. Our Aussies in Africa also did well, perhaps as more capital migrates away from high taxing Australia across to low tax Africa, or is that low tax anywhere else. 

Perseus (PRU) was the best of the Africans after reporting more good drill result. It added A33 cents to A$2.68, just below the 12-month high of A$2.71 reached on Friday. Azumah (AZM) did better on a percentage basis, adding A9.5 cents to A51 cents. Resolute (RSG) rebounded after a few quiet weeks, rising by A8 cents to A83 cents, but did trade up to A92 cents on Tuesday, and Adamus (ADU) added A3 cents to A58 cents. Other stocks to rise, some modestly, included: Catalpa (CAH), up A5 cents to A$1.61. Integra (IGR), also up A5 cents to A43 cents. Eleckra (EKM), up A0.9 of a cent to A9.4 cents, and Avoca (AVO), up A13 cents to A$3.02. Going the other way were: Norton (NGF), down A1.5 cents to A1.5 cents. Gryphon (GRY), down A1 cent to A84 cents. Focus (FML), down A0.4 of a cent to A3.8 cents, Kingsrose (KRM), down A6 cents to A$1, and Medusa, down A5 cents to A$3.73. 

Minews. Copper and the other base metals where there seems to have been a bit of news. 

Oz. There certainly was. CuDeco (CDU) which has been one of the new discovery stars of the copper sector disappointed its supporters with a lower ore resource than had been expected at its Rocklands project. Four years ago CuDeco boasted that it had made a discovery bigger than Mt Isa with a starter resource of 50 million tonnes of material at 2 per cent copper. On Wednesday it reported 30.94 million at 1.24 per cent copper. On the market, CuDeco was trashed. Plunging by 55.5 per cent from A$2.66 to A$2.13. Back in the good old days, CuDeco was a A$10 stock. Oops!. 

Other copper moves were less spectacular, and few stocks did quite well. Discovery Metals (DML) goes from strength to strength, adding A21 cents to A97.5 cents, a fraction under the 12-month high of A98 cents reached in early Friday trade. Exco (EXS) also continues to please its supporters, adding A8.5 cents to A48.5 cents, also a 12-month high. The Doolgunna crew had a mixed week. Sandfire (SFR) added A4 cents to A$5.13. Resource and Investment (RNI), also rose by A4 cents to A65 cents. Rubianna (RRE), lost A2 cents to A20 cents, and Thundelarra (THX) slipped A1 cent lower to A89 cents. Elsewhere among the copper stocks Marengo (MGO) rose a marginal A0.2 of a cent to A9.5 cents, and Hillgrove added A1.5c cents to A27.5 cents after reporting the departure of long time chief executive, David Archer. 

The other base metal stocks trended down. Among the nickels Mincor (MCR) reported a strong profit, but lost A2 cents to A$1.85 after trading up to a mid-week high of A$1.95. Western Areas (WSA) fell A8 cents to A$4.93. Panoramic (PAN) lost A8 cents to A$2.44 and Mirabela (MBN) fell A9 cents to A$1.81. Zinc stocks went nowhere. Terramin (TZN) slipped A1 cent lower to A54.5 cents, and Blackthorn (BTR) lost A2 cents to A63 cents. 

Minews. Iron ore, coal and uranium next, please. [This section was deleted to fit ASF message size requirements]

Minews. Any specials before closing. 

Oz.  Only the rare earth stocks which we covered earlier. 

Minews. Thanks Oz. Enjoy your politics this week.


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## drillinto

August 23, 2010

Resources Companies Jostle For Position As China Moves To The Number Two Spot In The Global Economic Rankings
By Rob Davies
www.minesite.com/aus.html [The registration is free]

Chinese Walls were, and maybe still are, the mythical barriers established in investment banks to prevent the flow of price sensitive information from those departments that know something to those that can make money from whatever it is that the other departments know. Given that investment banks only exist to make money for themselves, and only give what’s left over to clients, the efficacy of such barriers was always more theoretical than practical.

True, the banks did employ business prevention officers, the compliance department, to demonstrate to the authorities that these Chinese Walls worked. However, all that succeeded in doing was proving that the only people who did not know what was happening were the compliance officers. 

Now there is a new Chinese Wall. And it is a wall of money aimed squarely at the resources industry. Last week provided ample demonstration of this: three resource companies turned up in the sights of corporate predators who want to get in ahead of this inflow of money, and who want to service the seemingly insatiable demand for commodities from the Middle Kingdom. 

BHP Billiton, which knows a thing or two about the Chinese after supplying China with coal and iron ore for decades, was the biggest company to make a big Chinese-related corporate move. It’d like to get on the right side of the Wall nice and early, and here’s it’s latest strategy. China’s rising prosperity is increasing its demand for meat. That requires more grain. Eight kilograms are needed to make one kilogramme of beef, which in turn requires more fertilizer. Hence the big Australian’s bid for Potash Corporation of Canada, one of the last major resource companies in Canada. 

Then there was the hostile bid for Dana Petroleum from Korea National Oil Company. Now that China is the largest manufacturer of cars in the world, the demand for oil looks set to carry on rising. Combine that with best efforts of a xenophobic US administration to restrict exploration in one of the most geologically attractive regions in the world, and the concomitant supply squeeze must be good for prices. 

It is understandable, although lamentable, for US politicians to blame oil spills on foreign companies and not their own good ’ole boys, but the long-term consequences are dire. If Americans want to drive SUVs consuming tax-free petrol at the rate of 15 miles to the gallon, they either have to find oil in their own territories or rely on others, like Russia and Venezuela, to sell it to them. Although given the alacrity with which the White House imposed a US$20 billion charge on BP, maybe its new business methods mean it has more in common with the governments of those countries that we might suppose. 

One region where the rule of law has always been, shall we say, flexible, is Africa. For that reason the acquisition by ENRC of a 50.5 per cent stake in Camrose Resources is a bit surprising. Sure, it gives it control of the renowned Kolwezi tailings project in the Democratic Republic of Congo, but as this property is already the subject of international arbitration there is a question of how easy will it be to develop. It is a measure of how difficult it is now to secure supplies of raw materials that deals such as these are being done. 

But having said all that, the UK isn’t immune from problems with the development of resources either. In Scotland the planners have just refused a planning application for a gold mine at Cononish, as Charles Wyatt has explained in his recent article. Taxpayers fund civil servants in Edinburgh to take decisions that prevent others from joining them. 

Three hundred years ago men like Adam Smith and James Watt made Scotland the cradle of industrial capitalism. Not now. Today it is a fusty socialist museum, while across the world China has taken the mantle of the world’s second largest economy. Its appetite for growth and its drive to increase the wealth of its people means it will continue to demand resources from all corners of the world. And it, and its suppliers, will invest accordingly. Just not in Scotland. Even the Democratic Republic of Congo seems more welcoming just at the minute.


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## drillinto

August 28, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html  (Registration is free)


Minews. Good morning Australia. How did your market perform in a week when there was no clear indication of who is governing the country? 

Oz. Not badly. All the indices were down marginally, but that was largely because of the weak US market. Monday should see better conditions, especially for gold stocks, as the American central bank has been making more noises about firing up its printing presses again to pump out more paper money, in the belief that a flood of cash will boost growth in the economy. You could see the early gold reaction to that US news in the kick up in the gold price to around US$1,237 an ounce at the end of the week, after it dipped as low as US$1,218 an ounce on Tuesday.

Minews. Monday will be interesting for all commodities, although here in London we will, of course, be shut for our August bank holiday. So let’s focus for a little longer on what’s happening with your government, and what the future holds for the proposed mining tax. 

Oz. If you had to put money on it, the mining tax is dead. As at this morning the caretaker government of Labor Party leader Julia Gillard was talking about a formal alliance with the Green Party, which looks like holding control of the upper house, the Senate. If she does that she will alienate the right-leaning independents who have the controlling vote in the lower house, where government is formed. It’s tricky stuff, and subject to change on an hourly basis, but sometime over the next few weeks the politicians will stop playing word games and realise that they have a job to do. 

Minews. And that job will be to promote your Liberal Party leader, Tony Abbott, to Prime Minister? 

Oz. Looks that way. We actually have a long track record of minority governments that have survived with the support of independent members. The four independents that we look like having in the next parliament might be swayed by the numbers, as Abbott appears to have won 73 seats, Gillard 72, with one Green in the lower house already aligned with Gillard. Then come the four independents, and that one seat lead held by Abott, plus a lot more first preference votes, will provide the ammunition the independents need to support Abbott. 

Minews. Confusing stuff. Let’s move to the market where money is much easier to understand. 

Oz. Agreed. As mentioned, the overall market was down a modest 1.3 per cent, as measured by the all ordinaries index. The minerals and metals index was down 1.8 per cent, while gold lost 0.3 per cent, largely because of a late sell-off on Friday. Across the sectors there was minimal movement, although one takeover bid did enliven the iron ore space. Xstrata’s agreed bid for Mauritanian explorer Sphere Minerals (SPH) put a rocket under Sphere’s shares which added A94 cents to close at A$2.49, just below the bid price of A$2.50, a sure sign that it will go through comfortably. Other iron ore stocks barely moved after the bid was revealed, though, which may be a sign that the deal involves assets too far from home to have any real impact on other valuations. 

Minews. Let’s continue with iron ore, if that’s where the action was. 

Oz. It was, but in a confusing sort of way. Apart from Sphere, there were only two other iron ore companies that finished the week better off. Giralia (GIR) responded well to our update report early in the week, closing at A$2.35 for a gain of A9 cents, while IMX Resources (IXR) added A4 cents to A44 cents after the official opening of its Cairn Hill mine in South Australia. Once that party was over IMX flexed its muscles in the uranium sector, demanding a board spill at Uranex (UNX). The activity at Uranex sent that stock up by A1.5 cents to A15.5 cents. 

Elsewhere among the iron ore stocks there was plenty of news as profit reports came in, but not a lot of market activity. Fortescue Metals (FMG) slipped A6 cents lower to A$4.58, after it reported a 14 per cent increase in profits to a record US$581 million, and said it was steaming ahead with expansion plans. Atlas Iron (AGO) reported a loss of A$42.1 million, largely because of costs associated with starting up exports. On the market, Atlas eased back by A4 cents to A$2.04. 

Other iron ore moves, bar one, were small. The big one came from Royal Resources (ROY), which dropped an alarming A8.5 cents to A21.5 cents after it filed a disappointing resource report on its Razorback Ridge project in South Australia. There were plenty of tonnes in the maiden resource, 277 million of them, but at 26% iron it was low grade and high in impurities. What’s even more interesting is that the sell-off occurred less than a month after Royal won the gong as best emerging company at the Diggers & Dealers forum. 

Finishing with iron ore, other movers included Gindalbie (GBG), down A5 cents to A89 cents, Murchison (MMX), down A12 cents to A$1.45, Brockman (BRM) down A5 cents to A$2.81, Territory (TTY), down A1 cent to A29 cents, and Mt Gibson (MGX), down half a cent to A$1.74. 

Minews. Over to the gold sector now, please. 

Oz. No stars in flat week. Andean (AND) continued its upward charge, adding another A18 cents to close at A$4.51, although it did set a 12 month high of A$4.53 during early Friday trade. Medusa (MML) delivered a strong rise of A19 cents to A$3.92, perhaps more as a recovery reaction after a few weeks of decline. Dominion (DOM) was much the same, regaining A4 cents to A$2.10 following a sharp fall after it lowered the reserve estimate in its Challenger mine. Silver Lake managed a rise of A3 cents to A$2.14 after reporting a steady profit of A$11.8 million, while St Barbara (SBM) added A2.5 cents to A32 cents, Perseus (PRU) gained A4 cents to A$2.72, and Focus (FML) rose by A0.4 of a cent to A4.2 cents. After that it was largely a dreary list of modest declines. These included Troy (TRY), down A7 cents to A$2.55 after reporting a loss of A$6.7 million, Adamus (ADU), down A1.5 cents to A56 cents, Kingsrose (KRM), down A6 cents to A94 cents, Gryphon (GRY), down A4 cents to A80 cents, Avoca (AVO), down A10 cents to A$2.92, and Alkane (ALK), down A4.5 cents to A45.5 cents. Scotgold (SGZ), your very newsworthy Scottish gold hopeful, was steady at A5 cents. 

Minews. Base metals next. 

Oz. A similar picture to gold, but with a more pronounced downward trend. Best of the copper stocks was Syndicated (SMD), which gained A2.5 cents to A13 cents. Best of the nickels was Western Areas (WSA) which added A27 cents to A$5.20. None of the zinc stocks rose. So, a straightforward call of the copper card looks like this: Exco (EXS), down A2 cents to A46.5 cents, Equinox (EQN), down A17 cents to A$4.80,  Sandfire (SFR), down A11 cents to A$5.02, Discovery (DML), down A14 cents to A83 cents, and Rex (RXM), down A13 cents to A$1.90. 

The nickel sector after Western Areas revealed falls from Mincor (MCR), down A11 cents to A$1.74, and from Mirabela (MBN), down A12 cents to A$1.67, Panoramic (PAN), down A9 cents to A$2.35, and Independence (IGO), which was down A15 cents to A$5.41 despite a solid profit rise. 

Zinc movers included Kagara (KZL), down A4 cents to A59.5 cents, Perilya (PEM), down A1.5 cents to A40.5 cents, and Blackthorn (BTR), down half a cent to A62.5 cents. 

Minews. Dreary stuff, indeed. Coal and uranium to finish, please. 

Oz. Both mixed. Best of the coal stocks was Riversdale (RIV), which added A11 cents to A$9.29. Aston (AZT) managed a gain of A3 cents to A$6.08, after its flat float last week. All other moves among the coals were negative. Coal of Africa (CZA) fell A9 cents to A$1.32. Stanmore (SMR) slipped A1 cent lower to A83 cents, while Macarthur posted the biggest fall putting in a loss of A$1.24 to A$11.20. 

Uranex led to way up among the uranium stocks with its gain of A1.5 cents, as mentioned earlier. Most other moves were down. Manhattan (MHC) lost A6.5 cents to A73.5 cents. Extract (EXT) slipped A13 cents lower to A$6.39. Paladin (PDN) ended the week at A$3.71, down A14 cents, and Berkeley (BKY) was half a cent lighter at A$1.27. 

Minews. Any specials? 

Oz. Nothing to write home about. The rare earth stocks ran out of puff after their solid rises a week earlier. Lynas (LYC) slipped A2 cents lower to A97 cents, and Arafura (ARU) was off by A5 cents to A73 cents. 

Minews. Thanks Oz.


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## drillinto

September 18, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. The gold price must be doing wonders for confidence in your market. 

Oz. It certainly is, though much of what gold is delivering, the dollar is taking away, for local miners at least. Last week’s US$30 an ounce rise in the gold price was reduced to A$20 an ounce over here, after accounting for the rise in the value of the Australian dollar, or fall in the US dollar, depending on what side of bed you got out of this morning. That didn’t stop the gold sector from outperforming everything else, though. The gold index rose a sharp 6.4 per cent last week, roughly double the 3.3 per cent rise in the metals and mining index, and more than three times the 1.8 per cent rise in the all ordinaries index.

Minews. Are currency movements having a serious effect on your market? 

Oz. Yes, and no. Exporters are certainly starting to feel the pinch as we rush towards parity with the US dollar and near-record highs against other currencies. Last week the Aussie dollar, once referred to as the South Pacific Peso, hit â‚¬0.72, and 60 British pence, which means our wine exports have become less competitive, we’ve become an expensive tourist destination, and you’re going to get more Australian tourists. 

Minews. Sounds ominous, but good for the pubs. Enough chit-chat, time for prices, please. 

Oz. The big story down this way was unquestionably the rapid rise in the gold price, which, even allowing for the currency effect, helped a string of companies reach fresh 12 month highs. And following in the wake of the golds, there were plenty of interesting upward moves among copper companies, and in another sector which also seems to be developing a head of steam, those notoriously fickle rare earths, with their unpronounceable names. 

Just for a change let’s look at some of the companies that are proposing to mine rare earths like yttrium, praseodymium, and dysprosium. Those odd elements are essential in high-tech gadgets and electric cars, but they’re also being hit by export restrictions in the major supplier, China. And that single salient fact has triggered a rush by other manufacturing countries such as Korea, Japan and Germany, to find fresh sources of supply. 

Among the listed rare earth companies, Arafura (ARU) won the most headlines last week, with announcements that it has successfully tested separation techniques for its cocktail of rare earths, and chosen a chunk of land next to a steel mill in South Australia to process ore from its Nolans project in the Northern Territory. On the market, Arafura rose A13 cents to A$1.02, meaning it has more than doubled in three months. Meanwhile, Lynas (LYC) said it was making good progress with its Mt Weld project in Western Australia, and closed the week at A$1.37 for a gain of A15 cents, a few cents short of an all-time high of A$1.39 reached in early Friday trade. Alkane (ALK) was a third winner from both the rare earth rush and the gold rush, hitting a 12 month high of A73 cents on Tuesday and ending the week at A67 cents for a gain of A3.5 cents overall. Alkane has tripled its price since June 1st. 

Minews. Those are interesting developments in an unusual sector, but time for the mainstream now. Over to gold, please. 

Oz. All the gold companies were up, bar one. Adamus (ADU) slipped half a cent lower to A64 cents after it finalised a capital raising which included a rights issue at A55 cents. After that, it was one-way traffic, with a plethora of companies hitting 12 month highs. These included CGA Gold (CGX), up A48 cents to A$2.91, Kingsgate (KCN), up A94 cents to A$11.70, Perseus (PRU), up A6 cents to A$3, Troy (TRY), up A24 cents to A$3.07, Avoca (AVO), up A51 cents to A$3.43, Medusa (MML), up A24 cents to A$4.81, Azumah (AZM), up A17.5 cents to A71.5 cents, Ampella (AMX), up A26 cents to A$2.68, Ramelius (RMS), up A11.5 cents to A85 cents, Resolute (RSG), up A17 cents to A$1.31, and Gryphon (GRY), up A32 cents to A$1.45. Catalpa (CAH) rose A16 cents to close at A$2.07, A1 cent short of a new high of A$2.08 reached on Wednesday. And among other gold companies that did well, but didn’t hit fresh highs, was Thor (THR), which added a seemingly tiny A0.6 of a cent to A2.1 cents, a rise which was still sufficient enough to earn a price-rise query from the ASX. Elsewhere, Focus (FML), rose half a cent to A5.6 cents. 

Minews. Base metals next, as you mentioned that copper provided a few strong moves. 

Oz. The biggest surprise among the copper companies came from Marengo Mining (MGO) which has been very quiet for a couple of months, but which last week bolted upwards by more than 50 per cent during mid-week trade. At one stage it hit A15 cents, a gain of A5.6 cents on its close the previous week, before it then eased to end the week at A13.5 cents. That meant that overall Marengo had risen by A4.1 cents on the week, enough for an ASX speeding inquiry which drew the standard response that the company knew of no reason for the rise. As in the gold space, among the copper companies there were several that traded at fresh 12 month highs during the week. OZ Minerals (OZL) rose to A$1.49 on Thursday, before closing on Friday at A$1.45, a gain of A7 cents. Sandfire (SFR) reached A$6.33 on Tuesday, easing later in the week to close at A$6.11, a rise of A4 cents. Sandfire’s competitor for in the award for best copper discovery of the decade, Rex Minerals (RXM), added A11 cents to A$2.46, but did hit a high of A$2.58 on Monday. Other copper movers included Equinox (EQN), up A12 cents to A$5.49, Talisman (TLM), up A14 cents to A$1.14, Exco (EXS), up A3 cents to A52.5 cents, Citadel (CGG), up A1.5 cents to A39 cents, Sabre (SBR), up 6 cents to A32 cents, and Discovery (DML), up A12 cents to A$1.05. 

Nickel was the best of the other base metals, while zinc and lead companies traded flat, despite an increase in both the zinc and the lead price. Lead is back at over US$1.00 a pound, so perhaps we’ll see a reaction on the stock market soon. Among the nickels, Mincor (MCR) was the best of the producers, adding A20 cents to A$1.98, though that might perhaps have been more thanks to the story we carried earlier in the week about its gold exploration properties at Lake Cowan. The best of the nickel explorers was a company we rarely hear about, Malagasy Minerals (MGY), shares in which surged after it reported highly-encouraging drill results from its first hole into the Ianapera nickel and copper prospect in Madagascar. No assays were reported, just plenty of massive sulphides in the first core, but that was enough to trigger a remarkable response among traders, who tripled the price of the company in a matter of hours, running it up from A7.1 cents to A24.5 cents on Friday, before it then closed at A23 cents. Other nickel movers included Panoramic (PAN), up A18 cents to A$2.59, Western Areas (WSA), up A64 cents to A$5.96, and Poseidon (POS), up A5.5 cents to A24 cents. 

Zinc companies, as mentioned, barely moved. Terramin (TZN) added A1 cent to A54 cents, and Blackthorn (BTR) rose by A1.5 cents to A68.5 cents. 

Minews. Iron next, please, followed by coal, uranium and any specials to close. 

Oz. Shares in iron ore companies rose, but not with any conviction, given worries that China’s steel industry is slowing. Best performer was Sundance (SDL), the company which lost its board in a Congo plane crash. It seems to be making solid progress with its Mblam project following a string of joint ventures with Chinese partners, and rose by A4.5 cents last week to A24.5 cents, although it did trade as high as A30 cents on Tuesday, and that was a 12 month high. Other moves were more modest. Atlas (AGO) added A11 cents to A$2.17. Batavia (BTV) rose by A2.5 cents to A21 cents. Territory (TTY) put on A3 cents to A30 cents. BC Iron (BCI) gained A3 cents to A$1.81, and Brockman (BRM) added A28 cents to A$3.48. 

Coal companies were stronger, as Coal of Africa (CZA) staged a comeback after a few bad weeks. Coal added A22 cents to close at A$1.57. Riversdale (RIV) rose by A$1.14 to A$10.79. Aston (AZT) gained A22 cents to A$5.90, and Stanmore (SMR) closed the week at A$1.05, up A9 cents. 

Uranium companies were broadly flat. Extract (EXT) added A7 cents to A$6.40, Paladin (PDN) slipped A3 cents lower to A$3.76, and Manhattan (MHC) was steady at A70 cents. 

The rare earth stocks were the best of the irregular metals, though the top two tin plays on the ASX continued to attract support. Venture (VMS) added A5 cents to A47 cents, and Kasbah (KAS) gained A1.5 cents to A15.5 cents. 

Minews. Thanks Oz.


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## drillinto

Trading range charts for ten major commodities:
http://www.bespokeinvest.com/thinkbig/2010/9/22/bespokes-commodity-snapshot.html


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## drillinto

September 24, 2010

China and India: Still Hungry for Coal
By Marin Katusa, Chief Energy Strategist, Casey Research
Source: www.minesite.com/aus.html  [Free Registration]

One can only hope that the “Don’t shoot the messenger” adage is still popular in the international community. UK-based consultants M&C Energy Group have become the latest to join the chorus of voices asking the international community to increase the pressure on China and India to switch to cleaner energy sources.

As far as energy analyst David Hunter is concerned, it is the Western businesses that are carrying the financial burden of reducing carbon emissions. China and India, on the other hand, are benefitting from much cheaper energy, and their companies don’t have to bear the costs of reversing the effects of global warming. 

Mr Hunter, however, should steel himself for disappointing news. Industry experts are expecting anything but a cut in coal demand for the foreseeable future. By their analysis, global coal demand – already at a record high – will remain strong even as the recession cuts down on oil and gas use. And the numbers are certainly matching up to these expectations. 

India’s coal demand is expected to reach 653 million tonnes this fiscal year, with only 572 million tonnes expected to be produced in the country. The China National Coal Association expects demand to grow by between four per cent and six per cent in 2010 and for coal consumption to expand to roughly 3.4 billion tonnes. 

And with power-starved economies to feed and millions of people to lift out of poverty, neither country is going to take kindly to any interference with its energy agenda. 

There are two different types of coal – in fact two different types of demand – when it comes to the coal market. Though they can’t be considered to be totally separate, the criticism levied against these two Asian tigers becomes somewhat blunted when we take this angle. 

The first is for thermal coal, the cheapest and most popular way for emerging economies to produce electricity. Almost 75 per cent of China’s electricity comes from coal-fired plants, but this picture is rapidly changing. 

Irritated by the “world’s biggest energy consumer” sticker, Beijing is investing heavily – US$736 billion – into clean energy investment plans. The aim: increase the non-fossil fuel supply component to 15 per cent of the total primary energy demand by 2020. So really, Mr Hunter’s desire for a less coal-intensive China might just come true. As for India, it never likes to be too far behind its Asian rival. 

The second type of demand is for metallurgical, or coking, coal. This is what China and India really need – good-quality metallurgical coal, something that North America has in plenty. And this demand is not going away anytime soon. 

For a strong economy, one needs strong infrastructure. For strong infrastructure, one needs steel. Steel is the backbone of an economy, and it is metallurgical coal that is used to produce the heat in 90 per cent of the world’s steel production processes. And for as long as the economy continues to blaze, it is metallurgical coal imports that will be stoking the furnace. 

The heyday of the coal market is far from over. We’ve called coal the invisible bull market before. Today it’s very much at the forefront of the market, and it isn’t going away. Coal suppliers know as well which side their bread is buttered. While traditional markets in Europe continue to struggle with their debt crises, China and India will be only too happy to race on ahead and pick up the slack.


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## drillinto

September 27, 2010

Heads You Win, Tails You Win: Commodities Start To Look Like A One Way Bet, As The Fed Gets Set To Print More Money
By Rob Davies
Source >> www.minesite.com/aus.html << Free Registration


Ben Bernanke, Chairman of the US Federal Reserve, seems set to embark on the next stage of his programme to convert the US dollar into the US peso. But is there still a recession in the US? Yes, and no. Despite data saying that the US emerged from recession in June 2009, the man many rate as the world’s greatest equity investor, Warren Buffett, argues that the US is still in recession, and that it will be some time before the economy gets back to where it was. If interest rates at zero, and one round of quantative easing, couldn’t jump start the economy, then it seems that the only answer is to do it again.

Ever since the time of Roosevelt, with the exception Paul Volcker’s reign at the Fed, the US Government has always done everything it could either to avoid a recession or to get out of one as quickly as possible. The end result has been a steady devaluation, of the dollar and there is every sign that that will continue. Gold traded at US$1,300 an ounce last week not so much because there was a shortage of the yellow metal, but because there was a surplus of dollars and, the market thinks, even there will be even bigger surpluses to come. 

Observers now believe risky, but real, assets like commodities and equities are a one way bet. Either the economy improves which raises demand, and hence prices, or it doesn’t, and the authorities just throw paper money at it until inflation takes over and raises prices anyway.  With such an easy bet it is obvious why gold rose 1.9 per cent over the last week. What some won’t know is that base metals turned in a better performance, putting in a gain of 2.7 per cent, as measured by the LME index. 

Gold is less a commodity than a currency. Most people view the gold price through the prism of the dollar, because that is what it is denominated in. So it becomes an alternative to the greenback, and effectively is just a way of playing dollar weakness. In some sense, then, the base metals enjoy even greater attractions. The base metals have all the inflation proofing benefits of a commodity, but are also assets that respond positively to economic growth. 

In effect, base metals give you two bites at the cherry. They will go up if the dollar is debased, as gold will, but they will also go up if industrial growth in the US or elsewhere raises demand and increases prices. As the US is still in recession and Europe is pretty weak, betting on some kind of eventual economic recovery looks fairly safe. 

The only two mechanisms that could derail this story are a sudden increase in supply, or another lurch downwards in the global economy. Both are possible, but unlikely. New mineral resources take decades to move from the discovery stage, through financing and into production. At the moment only two groups of companies are in a position to expand. 

The first are mega-miners like Rio Tinto that can afford investments on the scale of the recently announced US$230 million spend on the expansion of iron ore shipping capacity at Port Dampier. The second group are smaller, but well capitalised miners, like Atlas Iron, that can fund growth through equity. Debt finance for new mining projects is part of the collateral damage that was inflicted by the financial crises. It is not available to expand the supply side. 

Deflation is also a possibility. But as the world’s central bankers, led by Ben Bernanke, are doing everything they can to avoid it, the chances of it actually happening must be low. Voters accept price rises better than job cuts. So either the authorities succeed in helping to stimulate growth in their economies, or they disguise their failure with inflation. Either way base metals should do well.


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## c-unit

Really good article and sums up my thoughts exactly.

I don't think we will have another GFC. That would require a fresh catalyst (the first one was US property). The only catalyst I see big enough to cause the next global recession is a US government default, as we have navigated the eurozone crisis reasonably well. I can't see this happening in the US as the Fed would rather inflate their way out than make the hard decisions. 

What I do see though is a gradual decay of the dollar over the next 10 years with purchasing power shifting to Asia. The Dow will likely remain reasonable stagnant over this period, and there will be significant inflation which IMO will provide Asia Pac equities and commodities with reasonable support. Central bank reserves will gradually start looking for a new home so one would expect a reasonable allocation in gold and other precious metals.

Not only that but one would expect China to let the yuan appreciate against the USD as they won't want exposure to US inflation, which will help to support the aussie miners.


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## drillinto

The gold and silver rallies

http://www.bespokeinvest.com/thinkbig/2010/9/28/gold-silver-ratio-near-a-two-year-low.html

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## drillinto

Friday, September 24, 2010

DYSPROSIUM WAR: CHINA HALTS RARE EARTH EXPORTS TO JAPAN.

Japan today announced that it is releasing the captain of a Chinese fishing boat arrested two weeks ago in disputed territorial waters of two uninhabited islets you've never heard of in the East China Sea. China quickly declared economic war, suspending shipment to Japan of dysprosium, a rare earth metal of which youve also never heard. Dysprosium is highly valued for its magnetic coercivity, a property of which youve also probably not heard. Dysprosium is important in the production of hybrid cars, such as the Toyota Prius. So why do rare earths have to come from China? They don't; rare earths (the lanthanide series plus scandium and yttrium) are actually fairly abundant in the Earth's crust, but 20 years ago China began marketing rare earths at well below production cost, forcing mines outside China to shut down, creating a monopoly. For other nations, including Japan, to resume mining would involve considerable delay. The word "dysprosium" is derived from Greek meaning, "difficult to get at." 

Source >> http://bobpark.physics.umd.edu/


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## drillinto

You Don't Bring a Praseodymium Knife to a Gunfight
China thinks it can withhold its exports of obscure but important minerals to get its way with its neighbors. Why it picked the wrong weapon. 
BY TIM WORSTALL | SEPTEMBER 29, 2010


Click the link below to read the enlightening article
http://www.foreignpolicy.com/articl...-a-praseodymium-knife-to-a-gunfight?page=full

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## SM Junkie

It has been a long time coming, but it is so nice to see some enthusiasm returning to the market.  I'm seeing it here on ASF where people are starting to talk stocks again.  Money is also going into the resource sector with some fabulous results (ie. PEK). So people are starting to play higher risk stocks again.  I breath relief.


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## drillinto

October 04, 2010

Metals And Bonds Both Rise, Indicating That The Market Has Yet To Decide Whether Inflation Or Deflation Is The Greater Threat
By Rob Davies
www.minesite.com/aus.html [Free Registration]


Investing has always been about securing returns - the best returns. In the past achieving that goal has often involved reliance on a lot of educated one-way bets. These days, though, the pioneering work of Harry Markowitz and others in developing Modern Portfolio Theory is beginning to show through in a big way. The concept is quite simple: asset diversification can increase returns by reducing risk, even if some investments underperform. It’s all about not putting all your eggs in the same basket.

Coincidentally, acceptance of this idea took root at the same time as the dramatic improvement in connectivity that the world experienced with the advent of the internet. Not only has the importance of different asset classes now been recognized, but the ease and ability with which one can invest in them has improved. Any change, positive or negative, in one asset is now rapidly detected by the market, and adjustments made accordingly. 

Frustratingly, though, this combination of improved theory and communications has actually made the business of investing even harder because the market has become ultra-efficient and price distortions are harder to exploit. Fortunately they have not completely disappeared, and that is partly because not everyone believes that the price moves are genuine. 

Last week base metal prices, as measured by the LME Index, rose by a healthy 0.9 per cent, but that lagged the 1.9 per cent advance made by gold. It was, though, in line with the rise in equities in major markets. All of which have to be seen in the context of a 2.1 per cent slide in the dollar. 

In the short term these moves can be confusing and disorientating. What a credible investment process needs is a long term strategic asset allocation, so that short term moves in asset prices can be exploited to the investor’s advantage without them having to second guess what each move means. Even though all asset prices are rising at the moment some will be rising faster than others. And that provides an opportunity to rebalance portfolios by trimming some assets and topping up on others. 

The key to this process is to have a clear understanding of the current environment and what this could mean for the future. While the market might be efficient for today’s scenario, it doesn’t mean that it is correctly discounting what might happen next. The battle in the minds of investors between the need to protect assets and the need to grow assets is beautifully reflected in the simultaneous rise in prices for bonds and metals. 

Bonds are viewed as safe and unlikely to hurt investors, especially if deflation becomes embedded in the western world, as it has done in Japan. The risk that inflation will erode capital value is regarded as less important. Conversely, metals provide no income but will protect holders from the ravages of inflation. 

The bizarre fact is that rising prices for both bonds and metals suggests that the markets are equally worried about inflation and deflation. Both views cannot be correct, and it remains to be seen who will be proved right. But at least as insuring against the return of inflation is concerned, holding metals as part of diversified asset allocation strategy continues to make a lot of sense.


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## drillinto

Commodity Trading Range Charts

http://www.bespokeinvest.com/thinkbig/2010/10/7/commodity-trading-range-charts.html

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## drillinto

October 11, 2010

Commodities Hit Multiple Highs Again, But Analysts Will Continue To Err On The Side Of Caution
By Rob Davies
www.minesite.com/aus.html  [Free Registration]

Much of what passes for news these days is actually speculation about what an upcoming report might say, or what prominent businessmen or politicians might say, or do. The media is also keen on punditry as regards stock markets, interest rates, exchange rates and commodity prices.

But almost without fail the opinions expressed publicly are close to the current consensus, with a variation of 10 per cent to one side or the other. 

Yet the big money is to be made in really large calls that might take decades to play out.  If anyone had told Gordon Brown not to sell gold at US$300 an ounce in 1999 because it would be worth  over US$1,000 more in ten years time he or she would have been laughed out of the Treasury. 

In a similar vein anyone forecasting a tenfold increase in the price of nickel, or a fourfold rise in copper over the first eight years of this century would not have been given house room at the Association of Mining Analysts. In practise, it is far safer to take the current price and add 10 per cent for next year’s price target. 

But that misses the point. What really matters are major geopolitical events like the rise of China, the creation of a shadow banking system in the US, democratisation of new countries and the usual elbowing around of one country by another. 

Right now, every country in the world is trying to devalue its currency in order to paper over huge fault lines in their respective domestic economies. Only Europe is not engaged in this process because even though it has one currency, it is not one country. The likes of Ireland and Greece are just collateral damage. 

This process of global devaluation is doing wonders for commodities. Half a dozen of them hit new highs last week, including gold at US$1,364 an ounce, copper at US$8,261 a tonne, tin at US$26,500 a tonne , not to mention rubber and a bunch of other agricultural commodities. 

Some, like those sages at the FT, argue that these price rises will ultimately desTroy these markets, as consumers look for cheaper substitutes. Widespread substitution is definitely a possible outcome in the current environment, but it would be difficult to execute when everything else is going up as well. 

In reality the current price trends are not so much to do with the metals going up, as the dollar going down. The dollar’s one per cent fall over the week is certainly not being viewed as anything approaching the end game, given the rumours about the launch of a second round of quantitative easing. 

A bold analyst now would say that in view of the approach taken by all financial authorities, but especially by those in the US, the price of gold is likely to double in the next few years and possibly increase tenfold in the next few decades. 

And if that were to happen, other commodities, including base metals, would all experience strong nominal gains, although probably not to the same extent. The only mechanism that might prevent this would be the appointment of a new, monetarist, Chairman of the Federal Reserve. 

It was one such appointment, that of Volcker in 1979, that slayed the inflationary dragon in the late seventies and early eighties. Unless, and until, that happens hard commodities look like a one way bet.  But don’t expect any serious analysts to forecast US$2,500 gold until it gets to US$2,400.


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## drillinto

October 13, 2010

A World From Upside Down: A Private Investor’s View Of The Growing Strength In Commodities
By Susie Boeckmann
Source: www.minesite.com/aus.html


Interesting times for some of the Minesite team. One is preparing to spin off another company (think it’s a girl). Another key player has just completed high definition drilling and results are eagerly awaited. DFS to follow (get well soon Charles). Meanwhile, this occasional contributor and private investor, on constant exploration watch, is now looking at blue sky for three months (broken vertebrae from car crash).

One small positive in that otherwise dismal development is the opportunity for stepping aside from the hustle and bustle to consider the complexities of today’s mining scene from a broader perspective, and especially the obvious two tier differences that are emerging globally. With output and workforce not about to grow in Europe and US in the foreseeable future, the growing fight between countries to devalue their own currencies has made the long-running arguments of believers for investing in commodities ever stronger.  

Minesite began several years ago, keenly supporting companies and the mining community. Many of those companies have now made the transition from exploration to production, whilst retaining exploration upside. Some are even paying regular dividends or are predicted to do so shortly. 

If one looks beyond the mainstream media, and talks instead directly with the mining companies, it transpires that the companies and their directors are cautiously optimistic. Those with good exploration projects are raising finance, often from within the mining community itself, or from high net worth individuals. Finance houses are also loosening the strings as they see the increasing upside in the commodity cycle against other asset classes. 

IPOs are emerging again and companies are spinning off various assets into new vehicles, as their exploration target burgeon, and some move towards development. Following on from the global financial crisis, many companies that have survived are lean, careful, and, what’s more interesting, cash flow positive. 

And in spite of the Australian problems over the proposed mineral resources tax, and unrest and uncertainty in South Africa, those mining iron ore, coal, zinc and other base metals are making record profits, and gold looks likely to go higher as long as currency volatility continues and Asia prefers to continue on in its historical addiction to gold. 

Ever better exploration methods are available, therefore revealing new prospects for ongoing exploration. Parts of Africa are emerging as major mining centres, and in areas which would have been inconceivable five years ago. Burkino Faso, Mozambique, and Eritrea have both started to emerge as serious mining jurisdictions, and both now play host to serious mining operations and even more development opportunities. 

Other parts of the world may be regressing but, all told, there has never been such an exciting time for the private investor to research, network and travel the world, forgetting government cuts, strikes, unemployment, and the relative merits of the US and China. Far better to be on the ground with an intrepid mining company, and part of an intrepid mining community. 

So roll out the blue sky, says this investor lying on a flat bed (not truck) for the next three months, buckle down, and get researching! Minesite will be with you all the way.


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## drillinto

"China and the Future of Rare Earth Elements"

To view this report, please click the link below:
http://web.stratfor.com/images/writers/CHINA_RARE_EARTH_ELEMENTS.pdf?fn=9617327557

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## drillinto

"Gold: Get it while you can"

To read the article please click the link below:
http://www.minesite.com/nc/aus/minews/singlenews/article/gold-get-it-while-you-can/1.html
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## drillinto

October 16, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]


Minews. Good morning Australia. So, now that you’ve scaled the heights of dollar parity, what next? 

Oz. Interesting question, and one which has a lot of people scratching their heads. I’m one of them, but my head scratching is taking place in New York, where I can say that having suffered the problems of shopping with an Aussie dollar valued at just US60 cents a few years ago, and even with the Aussie as low as US48.5 cents in 2001, it feels pretty damned good to be getting one US dollar for one Aussie dollar, especially as some people used to call ours the South Pacific Peso.

Minews. Good for your bar tab, but what does it mean for the market? 

Oz. Uncertainty. That’s the short version of how things look through Australian eyes. The market last week was pretty nervous, as a global currency war threatened to escalate into a full-scale trade war. For a country heavily dependent on exports, even if the exports are mainly raw materials, a trade war could be pretty costly. The other big issue for Australia is working out who our best friends are. The US, with its protective military umbrella and decades of alliance, or China, which is where the money is coming from? 

Minews. Interesting times, indeed. Across to the markets now with a run-down of the week’s prices, please. 

Oz. It will have to be an abbreviated report this week because of the time difference we’re dealing with, but the big event for Australian financial markets last week was the push to parity. This is starting to cause a few domestic problems. You can see where the problems lie by a quick reckoning up of the scores on the different market indices. Metals and mining added 2.3 per cent last week, as commodity prices continued to rise, at least in US dollar terms, but the all ordinaries could only manage a rise of 0.3 per cent, as currency issues hit exporters not exposed to commodity prices. The gold index was also muted as the currency effect cut in, posting a modest rise of 1.4 per cent. 

Minews. Let’s look at gold first, because that remains the hot commodity as the US accelerates its paper-money printing experiment. 

Oz. Gold stocks were up, as you would expect, but most rises were not significant, and we even had a few falls too. Top performer was Alkane (ALK), shares in which are being driven as much by its rare earth assets as its two promising gold investments. Alkane added A26 cents to close at A$1.06, but did reach a 12 month high of A$1.19 on Thursday, five-times its low for the year of A23 cents. Avoca (AVO) was the second best performer, putting in a rise of A40 cents to A$3.30, but they were the stand out performers. Other gold stocks to do well, but not by much after a very weak Friday, included Medusa (MML), up A26 cents to A$5.51, Kingsgate (KCN), up A20 cents to A$12.15, Perseus (PRU), up A9 cents to A$3.00,  Troy (TRY), up A3 cents to A$3.52, and Ampella (AMX), up A4 cents to A$2.49. Meanwhile, Eleckra (EKM) which seems to be attracting a steady increase in interest, added A1.5 cents to A15.5 cents. Among the few companies to swim against the modest upward trend was Azumah (AZM), which slipped A3 cents lower to A61 cents, and Adamus (ADU), which lost A4.5 cents to A63.5 cents. 

Minews. Over to iron ore, as it seems to be attracting revived interest. 

Oz. Among the iron ore companies Fortescue Metals (FMG) generated the most interest, as it continues to plot a major production expansion, perhaps inspired by the failure of BHP Billiton and Rio Tinto to win German approval for their big iron ore merger. On the market, Fortescue rose by A34 cents to A$6.14. Atlas (AGO) was another winner from the ongoing uncertainty in the iron ore trade after the big merger was sidelined, and added A13 cents to A$2.68. Other iron ore companies on the rise included Sundance (SDL), up A2 cents to A30.5 cents, Brockman (BRM), up A12 cents to A$3.86, BC Iron (BCI), up A12 cents to A$2.11, and Gindalbie (GBG), up A6 cents to A$1.05. Among the few iron ore companies to lose ground was Territory (TTY), which slipped A1 cent lower to A31.5 cents. Sherwin (SHD) was also weaker, down half a cent to A22 cents, and Northern Iron (NFE) was chopped back a sharp A19 cents to A$1.60 after announcing a big capital raising. 

Minews. Base metals next please, starting with copper. 

Oz. Star of the copper companies, although we’ve yet to find out why, was Marengo (MGO,) which shot up an eye-catching A10 cents to A27 cents. In the wake of that strength the company requested a voluntary suspension as interest grew in its selection of a development partner for its big Yandera project in Papua New Guina. Another company with a copper interest that was attracting support was Breakaway resources (BRW). Breakaway rose A2.2 cents to A8.6 cents on news that the Eloise mine in Queensland will re-open. Sandfire (SFDR) was another copper company that performed well, closing at a fresh high of A$8.04, up A56 cents over the week. Sandfire’s near-neighbour, Talisman (TLM) was less of a star, slipping A2 cents to A$1.14. Other copper movers included Rex (RXM), up A4 cents to A$2.81, OZ Minerals (OZL), up A7 cents to A$1.64, Equinox (EQN), up A21 cents to A$6.00, and Discovery (DML), down A16 cents to A$1.17. 

Nickel companies were weaker,  despite a nickel price of close to US$11 a pound. Mincor (MCR) lost A4 cents to A$1.97. Minara (MRE) fell by A4.5 cents to A78.5 cents. Western Areas (WSA) dropped A23 cents to A$6.34, and Poseidon (POS) closed at A18.5 cents, down A2 cents. Independence (IGO) was the only nickel miner to gain ground, putting in a rise of A54 cents to A$7.08, but that was largely thanks to interest in its gold assets. 

 Zinc companies were firmer, a continuation of a developing trend which might be a pointer to a better year for those with exposure to what’s become an almost forgotten metal. Perilya (PEM) added A7 cents to A58.5 cents. Kagara (KZL) gained A12 cents to A79 cents, and Blackthorn (BTR) closed A4 cents higher, at A73 cents. 

Minews. Coal and uranium next, please. 

Oz. It was a mixed bag for both coal and uranium. The best of the coals was Coal of Africa (CZA) which added A12 cents to A$1.50. Also stronger was Continental Coal (CCC), another of the Aussies exploring in Africa. Continental rose by A1.4 cents to A7.7 cents. Other coal movers included Whitehaven (WHC), up A6 cents to A$6.20, Aston (AZT), down A8 cents to A$5.82, and Bathurst (BTU), down A5 cents to A43 cents. 

It was similar story with the uranium companies. Extract (EXT) was the best performer, putting in a rise of A78 cents to A$6.90. Paladin (PDN) also attracted revived interest, to recover recently lost ground with a gain this week of A44 cents to A$4.10. After that it was less interesting.  Manhattan (MHC) slipped A7 cents lower to A67 cents, and Berkeley (BKY) added A13 cents to A$1.66. 

Minews. Let’s finish with the tin and lithium companies, and any specials please. 

Oz. The two tin leaders, Venture (VMS) and Kasbah (KAS), went separate ways. Venture slipped A1.5 cents lower to A57 cents, but Kasbah crept half a cent higher to A32.5 cents. It was the same with the lithium leaders. Galaxy (GXY) added A5 cents to A$1.40, but Reed Resources (RDR) slipped A2.5 cents lower to A54.5 cents. 

Minews. Thanks Oz. See you in London next week. 

Oz. Looking forward to it, especially with the Aussie dollar at 62 pence. It seems like yesterday that it was half that rate. 

Minews. I guess means it’s your buy at the pub.


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## drillinto

October 18, 2010

The Fed’s Policy On Inflation Will Lead To A Thirty Per Cent Erosion In The Spending Power Of Individuals
By Rob Davies
www.minesite.com/aus.html [Free Registration]

Inflation is like pregnancy. You either have it or you don’t. However, Ben Bernanke, Chairman of the US Federal Reserve, has formed the view that the US hasn’t got enough inflation - it still isn’t pregnant enough. So he has indicated that he will continue debasing the economy and the dollar, until he gets proper, full blown inflation with morning sickness to prove it. This time he has put a number on it: two per cent.

His mechanism for doing that is to declare an inflation target of two per cent and then buy US bonds to make sure that the target is hit. Bearing in mind that annual core inflation is currently only 0.8 per cent in the US he clearly has a job of work to do. In such an environment it is not surprising that the American peso dropped another one per cent last week, pushing gold to a record price of US$1,378 an ounce, and driving base metals up another 4.1 per cent, as measured by the LME Index. 

What is intriguing about commodities at the moment is that they are benefitting from the perfect storm, with three factors all acting together to drive prices up. One, a lack of investment over the last three decades has left the industry with no spare capacity; two, China has emerged as a totally new, and large, source of demand; and, three, investors are fleeing to hard assets as paper currencies, especially the dollar, are being actively devalued. 

Conventional economics tells us that higher prices should trigger higher supply but the fivefold increase in the gold price over the last decade has done nothing to increase output. Indeed, the industry struggles just to find enough gold to replace the 2,000 tonnes it mines every year. A related factor is that the currencies of many countries that host gold mines have risen against the dollar, so the local gold price has not risen as much. 

More generally, the slow pace at which exploration and development has been taking place means that there often is a long lag between prices rising and development decisions on new mines. Even when economic deposits are discovered, the ability to finance them has been seriously reduced by the financial crisis. It is easy for an established credit like BHP Billiton to raise funds to buy an existing business in the developed world like potash. But try asking for a few billion for a new mine in an emerging market and you get a sharp intake of breath. Even the innovation of a coupon linked to the price of zinc did not allow Zincox to raise funds for its Jabali project in Yemen. 

China’s rise and rise is doing more for base and industrial metals than it is for gold, but it provides a strong underpinning for all commodities, and there is no sign it is about to disappear. 

But the scariest factor of all is the official recognition that the Uncle Sam now has an official policy of debasing the dollar. It is true that on the face of it two per cent doesn’t sound much. But take that over the couple of decades that an individual might be saving towards a pension and it amounts to a 30 per cent erosion in spending power. 

In effect, last week’s statement from Bernanke has given gold a real interest rate of two per cent, even though its nominal interest rate is zero.  Investors should now factor that into their analysis when looking at competing asset classes. It is bad enough contemplating a yield of 2.55 per cent on 10 year Treasuries. It is even worse when you realise that it is only 0.55 per cent in real terms. 

Expressed in a different way the prevailing policy implies that in two decades time a gold price of over US$2,000 an ounce and a copper price of over US$12,000 a tonne are on the cards just to maintain valuations in real terms.  

Have bond holders really thought how they are going to finance the 21st birthday party for this inflationary child of our times? Because it doesn’t look as if holding bonds will do the trick.


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## drillinto

Great Power Politics and Energy Insecurity 
By Zachary Keck

Summary: China's growing needs for energy and natural resources will lead to some tension and strategic competition with the West, but that ultimately China's and the West's long-term interests are aligned.

To read the full article, please click the link below:
http://www.foreignaffairs.com/2010_Student_Essay_Contest_Winning_Entry

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## drillinto

Rare Earths Rush Could Cause Bubble

China's increasing reluctance to supply the rest of the world with rare earths has sparked a gold rush-like frenzy to find new producers of the elements, but the global push for alternative supplies could fuel a commodities bubble.

http://www.reuters.com/article/idUSTRE69Q1U420101027

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## drillinto

Rare Earths

In the New York Times, Paul Krugman says China's restriction of rare earths shows its government is "dangerously trigger-happy, willing to wage economic warfare on the slightest provocation."

Please click the link below to read to read the article:
http://www.nytimes.com/2010/10/18/opinion/18krugman.html?_r=1

The article has more than 300 comments from readers. To read them, just click in "Comments".

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## drillinto

Natural gas has two up days

To view "Natural Gas: Last Six Months", please click link below
http://www.bespokeinvest.com/thinkbig/2010/10/29/wow-natural-gas-has-two-up-days.html

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## drillinto

November 01, 2010

Beware the bond market
By Rob Davies
www.minesite.com/aus.html [Free Registration]


Bill Clinton famously said he would like to come back as the bond market because it was more powerful than any government. Yet in this financial crisis holders of fixed income securities could not be more accommodating to the desires of nations to borrow like drunken sailors and then, buy in the debt through their central banks to raise its price.

This legerdemain has been accepted by the populace and the capital markets but it has all the credibility of that short period of time between the road- runner going over the edge of the cliff and then plummeting earthwards. Bill Gross, Le Grand Fromage at Pimco, the world’s biggest bond investor says that this tussle between states and the debt market has never been larger.

Indeed, he goes as far as to describe it as a huge Ponzi scheme. What is odd is that at the moment the states are winning. It is though only a matter of time, he asserts, before the bond market reasserts its authority.

There is no doubt that when that happens there will be the mother and father of sell-off in the bond market that will mark the definitive end to the 30 year bull market that has been underway since Paul Volcker tightened monetary policy in the US at the end of the seventies.  

In the face of this impending tsunami why so many investors are still long bonds is a mystery to lots of people including Warren Buffet. Maybe bond holders reckon they can jump out of the way just before the wave of selling hits them. Possibly. More likely there will be disorderly queue to get out at any price resulting in prices gapping down in one big lurch.

This matters to other asset classes because it has huge implications for how much wealth will be destroyed in this process and how much will be left over to go into commodities and equities. Bonds represent the largest asset class in the world, followed by equities, property and commodities so its fortunes have enormous implications for the others.

These other asset classes benefit more from growth than bonds do. Recent data on this has been encouraging with surprisingly strong data from many countries including the US and the UK. Few governments have claimed ownership though as they know this recovery is not untypical after a sharp recession and much of the heavy lifting has been done by central banks keeping interest rates low and the injection of $1.75 trillion into the US economy from the first round of quantitative easing.

Like the First World War, when thousands of lives were lost to secure the advance of few hundred yards, this victory might be pyrrhic. There will come a point when the cost of success will simply be too high to be tolerated. That is when the challenge for other classes will arrive. 

Where will the money coming out of bonds go? Will it sit on deposit in a bank and earn no interest or will it go into risk assets that have already started to move up? Is gold at $1,349 an ounce or copper at $8,320 a tonne already too high?  In the Looking Glass of today’s economies that may not be the right question.  Perhaps more relevant is what would happen to theses assets if even a tiny fraction of the global bond market moved across.

Here there is a one difference between equities and commodities. As we saw in the tech boom a decade ago it is easy to create more shares in a company; either through an IPO or by using them as currency for acquisition.

It is a very different story for commodities. Even a fivefold increase in the price of gold over that period has not increased supply from the two and half thousand tonnes a year it was. Copper has had a better supply response. Even so, mine output has only doubled as prices quadrupled.

Knowing that someone cannot easily increase the supply of something you have just bought is what gives commodity investors a warm feeling in their portfolios. Something bond holders will never get.


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## drillinto

November 02, 2010

How To Make, Or Lose, A Fortune In Junior Exploration Stocks
By David Galland, Managing Director, Casey Research
Source >> www.minesite.com/aus.html [FREE REGISTRATION]

The first thing to know about junior resource exploration stocks is that they are volatile. You can make 50 per cent in a day, and you can lose 50 per cent in a day. 

This is due largely to the fact that they tend to be thinly traded. Thus, a whiff of good news, or bad, can overwhelm opposing trades. In the absence of a countervailing bid, the stock can move sharply until it reaches the point that someone is willing to step up and take the other side of the trade. If the news is bad and there’s no bid, things get ugly really quickly. Conversely, if the news is good – for example, the recent case of the AuEx buy-out – the volume of buyers rushing to get a hold of stock can blow the proverbial doors off.

Is volatility bad? Not hardly. If you play these stocks intelligently, that volatility can act like a portfolio rocket booster. The alternative: a widely followed stock has little chance of surprising the market on the upside and so can tie up your capital for a long period of time – plodding along while you remain exposed to general market risk with almost no hope of serious appreciation. 

By contrast, a junior exploration company punching holes into interesting geology is all about the potential for surprise. If the surprise is good, your stock is headed for the moon. But a poor drill hole is not necessarily a ticket to the basement – not if the company has not overinflated expectations by aggressive promotion and is following a methodical process in its exploration program. 

The topic of aggressive promotion brings me to the second thing to know about junior resource stocks – namely, that many of them are borderline frauds. Many of the companies involved in the junior resource sector are headed up by management teams that have no special expertise in finding or developing economic deposits. Rather, what they’re good at is telling a really good story based on the loosest of “facts” in order to get investors to pay their overhead and, hopefully, allow them to trade out of their free or low-cost shares at a big profit. 

While there are a number of signs you can look for that will give you some sense of the management’s abilities and ethics, one is that the bad apples will tend to shift their stated focus between breakfast and dinner, depending on the flavor of the day. One minute, they are a junior gold company, the next they are on to the world’s hottest lithium find – then sometime after lunch, they morph into being a uranium explorer. 

That’s not to say that there aren’t times when competent management teams are faced with the reality that their primary resource target is going to draw a blank, and move on – it happens all the time. The trick is to be able to discern the difference between a strategic retreat and an opportunistic bunny hop into another area where the management has no real expertise or value to bring to the game. 

The next thing to focus on is the size, and the general set-up, of the targeted resource. I saw an exploration company advertising on a major financial web site that was breathlessly talking about the 30,000 ounces of gold it had discovered. 

Building expensive advertising campaigns around 30,000 ounces of gold – a truly inconsequential amount – would indicate that management is hopelessly ignorant of the realities of the business. And the reality today is that, depending on a number of variables – location, geology, local politics, metallurgy, infrastructure, etc. – the minimum resource required for a company to have any chance at success is in excess of one million ounces of gold. But, really, you should only be focusing on companies with the very real potential to prove up two million or more ounces. 

In exploration plays, size counts. 

And don’t confuse gross metal value with anything remotely resembling reality. In fact, any company that would even mention the gross metal value of its resource is sending you a very strong signal that something fishy is afoot. For those of you new to the game, gross metal value is derived by doing the simple math of multiplying the companies’ ounces (or pounds, depending on the metal) in the ground by the current price of the commodity. 

Thus, a company with a market cap of, say, C$50 million and a resource in the ground of one million ounces of gold might tout a gross metal value, based on a gold price of US$1,250 per ounce, of $1.25 billion. The implication being that the market cap of the company will soon rocket in the direction of the gross metal value… wink, wink, get it while it’s hot and all that. 

Now, I don’t have time to list all the ways that the gross metal value gets hammered down to a net that is a fraction of the total… and, more likely than not, even to the point where the deposit is uneconomic. But I’ll give it a quick try anyway. 

For starters, there’s the cost of the infrastructure required to actually extract the mineral. While even the cost of building an open pit mine is huge, if the deposit is too deep for that, then you’re talking about going underground, which can be much, much more expensive. Depending on where the resource is located – and most new discoveries are very remote (Congo, anyone?) – and the depth and structure of the mineral resource, building out the mine infrastructure can cost in the hundreds of millions of dollars, and even billions. 

Then there are local politics. For instance, how much of the mine will the government want to keep for itself? How high will the taxes and royalties be? Is the area secure? There are projects I’m aware of that, in order to be built, will require essentially maintaining a private army to keep local revolutionaries and thugs at bay. 

How’s the metallurgy? Extracting metal from close to surface, oxidized deposits can be relatively easy and effective, with recoveries in the 90 per cent area. But if the target mineral is bound up with all sorts of detrimental minerals, the processing costs will soar and recoveries plummet… often to the point where the overall costs, and the challenges of disposing of the toxic waste, can torpedo even a very large project. 

Mining requires a huge amount of power… where’s it going to come from? Can you imagine the cost and hassle of having to build, say, 60 miles of power lines? How about if the deposit is located in a remote corner of the Yukon? 

I could go on and on… but you get the idea. There’s a reason that well over 90 per cent of even legitimate resource discoveries never become economic mines. That doesn’t mean you can’t make money off a discovery play – but if it has little chance of becoming a mine, then you need to be clear on why you own it and when it’s time to sell. 

So, how do you sort out the difference between the good guys and the bad? And the good projects and the doomed? 

First and foremost, you have to live and breathe the industry. Then you have to have a deep network to use as a sounding board for your analysis. 

The bottom line on how to make serious money as a speculator in anything – the junior resource exploration business merely provides a convenient example – is to identify a volatile, high-risk/high-return investment sector, and then get to know the sector intimately. By doing so, you can eliminate much of the risk… leaving you mostly with the huge upside. And what risk is left is very manageable. 

And don’t forget – I’m talking about investing only a relatively small part of your portfolio… 10 per cent to 20 per cent. You can tuck the balance of your portfolio into assets with a much lower risk profile. These days, that might include gold and, for the time being, cash.


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## hkinvestor

HK mining discussion on apacresources site at mining confy - gives an idea on where mining is going in HK/Shangers/Mongolia. It has got a few resource specialists on the panel covering questions fired by audience.

Q1: Chinese people love risks yet we see a little amount of mining activity. What needs to be changed to increase the mining activity for junior mining sector here in Hong Kong?
Q2: What is your view with respect to Shanghai Stock Exchange now having an international listing? Do you see a threat to the Hong Kong Stock Exchange, if not this or next year?
Q3: We’ve had a number of talks during the conference on how Hong Kong is not sophisticated in mining and we have also talked about how Hong Kong offers higher valuation than other markets. Are they linked? Where
do you think the arbitrage period is?
Q4: The perception is that mining is new to Hong Kong, there is no expertise in Hong Kong. Do you see a risk or concerns, if any? Or because Hong Kong sees that cash is king so this is not a problem?


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## drillinto

Silver gets no respect.

Silver has been the Rodney Dangerfield of commodities this year.  Even this week, gold has grabbed headlines with a rally of 4%, but silver is up more than double that at 9%.  As shown below*, silver is up 37.6% year to date, while gold is up 27%.  Recently, when gold has been rallying, silver has been rallying even more. 


*    http://www.bespokeinvest.com/thinkbig/2010/11/5/silver-gets-no-respect.html


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## drillinto

November 08, 2010

Commodities Are Risky, But Then So Are Governments
By Rob Davies
www.minesite.com/aus.html

As gold makes a new record high of US$1,389 an ounce, and copper, at US$8,521 a tonne, nears its previous high the financial media is at pains to point out how risky commodities are because they have gone up so much. But oddly enough few observers identify assets that have fallen as being low risk.

The fact is that all assets are risky and, as is neatly pointed out here, in an article entitled "Losing the Lender of Last Resort", from a blog which looks at the psychology of investing, there is no such thing as a risk free asset. 

Which seems to mean that classifying assets by risk is simply an exercise in choosing shades of grey. There is no black, and there is no white, in this world of gradational risk.  Of course, one reason commodities are deemed to be risky is that they do not generate any income. Fine, if you want income try some ten year Irish bonds at 7.7 per cent? Not good enough for you? - well how about the Greek version, they offer 11.6 per cent. In theory government debt is supposed to be risk free. Yet in reality, more governments have defaulted than not, usually at around the same time as one of the 120 bank crises that have happened in the last 210 years has hit.   

In fact the problem is even worse than that, because some countries that have technically never defaulted, like the US, have done things almost of equal proportion. In the case of the US it suspended convertibility during the Civil War, devalued against gold in 1933, and finally ended the gold link in the 1970s. It has a track record of default through inflation. 

Modern portfolio theory is built around the concept of a risk-free return as a base line from which to judge all other investments. Getting your head around the idea that there actually is something without risk is not easy. But without a frame of reference how can you measure anything? 

This stuff is all very interesting in theory, but what has it got to do with real life? Lots, if you happen to live in one of the periphery countries of the Eurozone. Last week the sovereign wealth funds of Norway and Russia quietly let it be known that they viewed the bonds issued by Ireland and Spain as too risky. 

The noises from German politicians about the need in some countries for bank bond holders to take some pain have also increased. Moreover, US financial policy is attracting withering Teutonic scorn as its currency fell 0.9 per cent against the euro. British politicians, though, kept quiet even as sterling rose 1.2 per cent against the dollar. 

And the professional pundits are now wading into this stew of scary news. The respected commentator Samuel Brittan of the Financial Times has called for the Euro to be broken up, and Martin Wolf of the same organ has applied his intellect to describing exactly why the world cannot go back to a gold standard in this article, here. 

In short it seems no one knows what is going on, and everything is risky. In many ways it looks as if the ingredients for another first class financial crisis are being assembled. It is rather odd then that the two asset classes most associated with risk - commodities and equities - both made good progress last week. 

Could it be that in today’s Alice in Wonderland world of finance, assets that were once deemed risky – those same equities and commodities - are now viewed more benignly than assets, like dollars, that used to be seen as safe. How that apparent trend will develop is anyone’s guess. But, in the absence of a true risk-free asset, gold looks like being a better bet than most, despite Mr Wolf’s views.


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## drillinto

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html  [The Registration Is Free]

Minews. Good morning Australia. It looks like you had a bit of flat week which turned sour on Friday. 

Oz. Not a bad description, and there’s perhaps worse to come on Monday, when Australian investors are able to factor in the big drop in the gold price which came largely after the ASX had closed. Currency markets provide a clue as to what we can expect, as the high-flying Aussie dollar landed with a thump on Friday, dropping the best part of US2 cents, which meant a fall through parity with its American cousin to around US98.4 cents.

Minews. The currency fall should be good news for your mineral exporters. 

Oz. True, but there’s a reason for the fall, and that is that most commodity prices had the gloss rubbed off them late last week. Copper, which had taken a peak over the US$4.00 per pound mark, retreated back to around US$3.88. Nickel lost the best part of a US$1.00 per pound to US$10.38, and zinc has retreated by US10 cents a pound to around US$1.06. 

Much of what happened was related to the thoroughly confusing G20 summit in Korea which the Financial Times in London accurately described as an example of how not to run the world. The view from Oz is that the FT is on the money in this instance, but also that the US promise of a continued flood of paper currency into the global financial system can only be a positive for hard commodities, as investors rush to take cover ahead of the inflation outbreak sometime in the future. 

Minews. That’s enough economics 101. Time for a look at the markets. 

Oz. Let’s start with the key indices, so readers know how we bobbed around and how fractured the Australian market has been in recent days. The best performing sector, despite the sharp price fall in the gold price late in the week, was the gold sector, which ended flat. The metals and mining index lost one per cent, with most of that coming on Friday, and the all ordinaries lost the best part of two per cent thanks to a hammering taken by bank shares, which have resumed their role as a government punching bag, because of their latest round of interest rate rises. 

Minews. Okay, let’s move on to a rundown of prices, starting for the first time in a long time with uranium, because that seems to be on the move after a few years on the sidelines. 

Oz. It certainly has, and there was quite a bit of uranium news around during the week. To set the broad context, the short term price of the metal jump by a surprising US$5.00 per pound to US$58.50 per pound, during a week when the Australian Government ratified a uranium export deal with Russia. Given that our government is dependent on support from the anti-uranium Green Party, that was an important political and business event. 

On the market it was up for most uranium stocks, although a few failed to perform as might have been expected. Pick of the sector was an old favourite, Uranex (UNX), which is undergoing a big management shake-up, and which announced the start of a drilling programme at its Bremer Basin project east of Kalgoorlie in Western Australia. Investors loved the idea of the re-awakening, running Uranex up by a very sharp A11.5 cents to A30 cents, a gain of 62 per cent, and without even incurring a speeding inquiry from the ASX. Toro (TOE) was another sharp upward uranium mover, adding A4 cents to A17.5 cents, while Energy and Minerals (EMA), which has a significant uranium resource in ground close to that being drilled by Uranex, added A4.5 cents to A26.5 cents. Other U-moves included Stonehenge (SHE), up A2.5 cents to A14.5 cents, Extract (EXT), up A34 cents to A$8.73, Bannerman (BMN), up A8.5 cents to A66 cents, Paladin (PDN), up A35 cents to A$4.83, and Manhattan (MHC), up A3 cents to A94 cents. 

Minews. Encouraging moves for followers of a sector which has been asleep for a while. 

Oz. Well, if we continue with the awakening theme it’s also worth noting that diamonds were back in the news down this way too, for the first time in several years. Two diamond companies stood out. Venus Metals (VMC) earned its first mention in this weekly wrap-up following a rise of A55 cents to A$1.88, a closing price on Friday which was fraction below its 12 month high of A$1.95 reached in earlier in the day. Driving Venus was a report from the company that it has outlined a five million carat resource at its Smoke Creek alluvial play, near the big Argyle mine. Interestingly, the management team at Venus is headed by young Matthew Hogan, who last got a mention when running United Mining, the small iron ore company acquired last year by BHP Billiton. The other diamond company in the news is also being run by men familiar to Minesite readers. Lonrho Mining (LOM), which makes no apology for borrowing a name familiar to investors who remember the late Tiny Rowland, is chaired by David Lenigas, with Miles Kennedy as chief executive. Last week Lonrho reported the recovery of a 12 carat gem from its Lulo project in Angola, news that drove the shares up by A1.7 cents, or 48 per cent, to A5.2 cents. 

Minews. Interesting news indeed. Perhaps we should continue with the news generators before our regular call of the card. 

Oz. Good suggestion, because apart from action in the iron ore sector the usual suspects were not that exciting. For example, one of the most noteworthy events last week was a strengthening of the mineral sands companies, following a very positive market briefing by the sector leader, Iluka Resources (ILU). On Friday, Iluka hit a 12 month high of A$8.16, before closing at A$8.06, up A95 cents. Gunson (GUN), which has a big titanium and zircon project ready to develop, added A4 cents to A19 cents, but touched a 12 month high of A20 cents on Thursday. 

Two other companies with a different story to tell were Bailey Minerals (BAA) and Platina Resources (PGM). Bailey is another company that gets its first Minesite mention this week, following its acquisition of a platinum prospect in Colombia. That news drove the company’s shares up by A11.5 cents to a closing price of A39.5 cents, down on the all-time high of A45 cents reached early on Friday. For its part, Platina traded up to A47.5 cents but ended the week up 5.5 cents at A41.5 cents, and was driven by news of the highest ever Australian assays for scandium, a metal so rare that the world only produce two tonnes a year. It’s used in only a limited number of exotic ways, including in metal alloys used in some golf clubs. 

Minews. How very exotic! Call of the card time, starting with iron ore where there seems to have been interesting developments. 

Oz. There certainly were. First off, we’ll start with the simultaneous bids from Hong Kong-listed Wah Nam Group for both Brockman (BRM) and FerrAus (FRS), two companies with ore in the ground but no rail or port solution yet. Brockman added A$1.22 to A$5.95, and FerrAus gained A28 cents to A$1.11. That bid, coupled with Xstrata’s success in securing control of Sphere (SPH), rubbed off on the rest of the sector. The best movers, after Brockman and FerrAus, included Giralia (GIR), up A25 cents to A$3.05, Iron Ore Holdings (IOH), up A8 cents to A$1.88, Territory (TTY), up A2 cents to A35.5 cents, and BC Iron (BCI), up A9 cents to A$2.51. 

Minews. Gold next, followed by base metals, please. 

Oz. As you would expect, the gold sector fell back sharply on Friday. Our old favourite Kingsgate (KCN) serves as a useful reference point. Kingsgate rose strongly early in the week to A$11.66, and then fell back to close the week at A$11.19, for a net gain of just A4 cents. Independence (IGO) performed a similar trick, shooting up to A$7.85 on news that the Tropicana goldmine will proceed to development, before falling back to close at A$7.25, a net gain of A6 cents. Among the other gold movers Kingsrose (KRM) rose A9 cents to A$1.17, a closing price which was well short of its midweek peak of A$1.30. Eleckra (EKM) added A4.5 cents to A39.5 cents, also well down on its peak of A55 cents. Perseus (PRU) lost A19 cents to A$3.16, but did trade as high as A$3.55, while Gryphon (GRY) defied the Friday sell-off, putting in a rise of A25 cents to A$1.68. It rose A8 cents on Friday alone. 

Base metals were hit by lower commodity prices. Only one copper company performed strongly, while most nickel companies fell. Zinc companies held up reaSonably well. CuDeco (CDU), the somewhat erratic Queensland copper company, added A48 cents to A$3.35, on fresh drill results from its Rocklands project. After that it was mostly negative. Equinox (EQN) fell A52 cents to A$5.82, as investors digested its bid for Citadel Resources (CGG). Other copper movers included Discovery (DML), down A14 cents to A$1.20, Rex (RXM), down A6 cents to A$2.50, Sandfire (SFR), down A1 cent to A$7.90. OZ (OZL) managed to buck the trend, and added A5 cents to A$1.78. 

Nickel movers included Mincor (MCR), down A10 cents to A$1.78, Western Areas (WSA), down A22 cents to A$6.22, and Panoramic (PAN), down by A13 cents to A$2.40. Zinc movers included Perilya (PEM), up A2 cents to A54.5 cents, Terramin (TZN), down half a cent to A46.5 cents, and Meridian (MII), up two cents to A13.5 cents. 

Minews. Coal and any other minor metals to close. 

Oz. Coal of Africa (CZA) rebounded after a tough couple of weeks, adding A11 cents to A$1.27. Riversdale (RIV) rose by A25 cents to A$12.40. Offsetting those rises were falls by Whitehaven (WHC) which lost A10 cents to A$6.89, and Stanmore (SMR) which lost a hefty A16 cents to A$1.14. 

[Note: To comply with length requirements I had to delete the last paragraph, on minor metals, of this article]

Minews. Thanks Oz.


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## drillinto

November 15, 2010

The Global Economy As A Balloon, As Inflated By US Monetary Policy
By Rob Davies
www.minesite.com/aus.html [The registration is free]

These are not normal times. Last week gold broke above US$1,400 an ounce for the first time ever, copper flirted with its previous high of nearly $9,000 a tonne, Robert Zoellick, President of the World Bank suggested using gold in some formalised way as a reference point for currencies, Ireland gave up and admitted it was bust and needed help, and the Chinese stock market fell 5.2 per cent on Friday. Oh, and a meeting of the G20 made it clear that that group hasn’t got a clue what to do either.

Some commentators feel that someone should be in charge to sort out the mess. Unfortunately global capitalism does not work like that. Global capitalism feels its way, and eventually works out when politicians are only saying the bare minimum in case what they say impacts their chances the next time they come up for election. Central bankers are usually part of the problem too - no one will act until markets give them no alternative. It was the sudden collapse in Irish bond prices that forced the Irish government to talk to the ECB, not intellectual theory about banking policy. 

In the same way Zoellick talking about using gold in a more formal way is a statement of the obvious. Gold has always been part of the tool box for central bankers, which is why it remains the only metal they still hold. And they still hold lots of it. 

That has all the more relevancy, now that the G20 summit has once again brought to the fore the conflict between the US desire for a cheaper dollar, and China’s reluctance to lose its competitive currency edge. 

At the heart of the issue is the non-convertibility of the renminbi - a mechanism China thinks will enable it to curtail appreciation of its currency. The problem is that capital markets have a way of finding alternative routes to their ultimate destination. Ever since former president of the US Federal Reserve Alan Greenspan reacted to the failure of Long Term Capital Management in 1998 by cutting interest rates the dollar has been weakened. 

Similar moves at the end of the dotcom boom and after the attacks of 2001 continued the trend, which has now reached its apogee under Greenspan’s successor Ben Bernanke. He has cut rates effectively to zero, and is attempting to cut longer term interest rates by buying bonds with dollars taken from thin air. 

Despite all official denials to the contrary, the US has been pursuing a policy of dollar weakness for decades, and that has been reflected in its steady devaluation against gold. As the US pumps air into the balloon of the global economy by printing dollars, that money finds its way to wherever it can get the best return. 

And note, that is not necessarily where it is most needed. First it was dotcom companies, and then it was property and private equity, and all in spite of the best efforts of the authorities to try and contain each new bulge of the balloon. 

Right now the next bulge should be in renminbi. But, because it is not easy to buy, investors are making the bet that, whatever happens, the dollar will fall against the Chinese currency. And the best way to anticipate a further fall in the dollar is to buy gold.  No wonder the Chinese have been steady buyers of the metal, and are encouraging domestic production. 

Gold is leading the charge for commodities. Even though others also have strong fundamentals, gold in particular looks unlikely to relinquish its prime position for some time yet. As long as the US keeps pumping air into the global balloon, traders just need to follow the latest bulge, irrespective of politician’s attempts to curtail each tumescence. We just have to hope they don’t burst the balloon in the process.


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## drillinto

November 20, 2010

That Was The Week That Was ... In Australia
By Our Man in Oz
Source: www.minesite.com/aus.html [FREE REGISTRATION]

Minews. Good morning Australia. How did your market perform last week? 

Oz. Good in parts, but lacklustre overall. The key indices all ended lower. Gold took the biggest hit following the sharp correction in the gold price last week. Other metals held up reasonably well, and the all ordinaries index was buoyed by the banks, which stood firm against a fresh bout of global financial collywobbles. Overall, the gold index dropped by 4.7 per cent. The metals and mining index slipped by 2.6 per cent, and the all ordinaries was down by 1.3 per cent.

Minews. Not a bad result, considering the flow of bad financial news out of Ireland and the rest of Europe. 

Oz. True, but we are pretty well isolated from all the goings on over in your backyard. Our big issue down this way remains China, and that’s likely to be the case for the next 20 years. Growth, and how to manage it, has got Australia’s central bankers as worried as they’ve been for some time. Labour shortages are emerging across the economy. Interest rate rises have failed to slow business investment, and the Chinese have bobbed up in a number of curious deals that have worried the government authorities. 

Minews. How so? 

Oz. Earlier this month week we saw a Chinese consortium snatch board control of Mt Gibson Iron (MGX), and last week we saw another Chinese syndicate file bids for Brockman Iron and FerrAus (FRS). While the inflow of capital is welcome, the worry is that Chinese iron ore consumers are buying access to raw materials without any care for the interests of the minority shareholders once they have control. 

Minews. Reminds me of the old saying about the importance of using a long spoon when supping with the devil? 

Oz. It is a bit like that. Certainly a case of learning to live with the devil you have to deal with. 
Minews. Right. Before switching to prices, let’s have a quick rundown of what made mining news down your way. 

Oz. Smaller iron ore companies seem to have made some progress in their quest to gain access to rail and port infrastructure. Atlas Iron (AGO) and BHP Billiton held advanced heart-to-heart discussions. Then BHP Billiton and Fortescue Metals (FMG) both announced fresh rounds of investment in their iron ore businesses. And the week was rounded off nicely when the Australian Government’s economic forecasting agency, ABARE, released a report showing that planned resources investment has hit an all-time record of A$133 billion, with 70 per cent of that earmarked for Western Australia’s petroleum and iron ore industries, and 20 per cent for the Queensland coal, copper and coal-seam gas industries. 

Minews. Impressive stuff, and now prices. 

Oz. Right. Let’s start with the stand-out performers across all sectors. Best of the gold companies were Westgold Resources (WGR), and Ausgold (AUC). Westgold reported bonanza drill hits at its Rover prospect in the Northern Territory, including six metres at 78.7 grams of gold a tonne, plus 1% copper, with a core of one metre of material at 375 grams per tonne. Ausgold, meanwhile, added A10 cents to A60 cents, with a couple of sales going through on Friday at a 12 month high of A65 cents. One Ausgold asset in particular is attracting the attention of investors - the Boddington South project in the southern half of Western Australia. This has so far been shown to contain a modest resource of 241,800 ounces of gold, but it has a geology similar to the 26 million ounce Boddington mine of Newmont. Elsewhere, one of our old favourites, Resolute Mining (RSG), also touched a 12 month high of A$1.49 during Friday trade, but promptly fell back to A$1.40, ending the week down A2 cents. 

The best among the iron ore companies was the well-connected Avonlea Minerals (AVZ), which, although it had nothing new to say on its iron ore, vanadium, and base metals exploration projects in Namibia, added A5 cents to A19.5 cents, copping an ASX speeding ticket on the way. Territory Iron (TTY) and Iron Ore Holdings (IOH) were the only other iron ore companies to rise. Territory added A6 cents to close at a 12 month high of A41.5 cents, while Iron Ore Holdings rose by A16 cents to A$2.04 after an upbeat annual meeting on Thursday. 

The other companies that caught the eyes of market watchers, mainly because they swam against the tide, included Jupiter Mines (JMS), the latest plaything of former BHP Billiton boss, Brian Gilbertson, and the slowly re-awakening (not that anyone knows why, yet) Bougainville Copper (BOC). Interest in Jupiter pushed the shares up by A8 cents to a 12 month high of A46 cents. That is a price which capitalises Jupiter at an impressive A$616 million, based entirely on the planned start of construction work on the big Tshipi manganese project in South Africa. The interest in Bougainville is as a pure exploration play around the mothballed copper mine of the same name that was once worked by Rio Tinto, until operations were halted by a small war. Last week Bougainville added A30.5 cents to close at A$1.70, just short of the 12 month high of A$1.74 reached on Friday. Officially, Rio Tinto says nothing is happening at the old mine, but if that’s the case Bougainville Copper’s market capitalisation means there is A$681 million worth of nothing going on, which is an awful lot of nothing. 

Minews. Curious, indeed. Now, let’s call the rest of the card, however grim, starting with gold. 

Oz. We’ll keep the call short and sweet, because most of the share-price movements were modest this week, apart from those we’ve already mentioned. Notable movers amongst the gold companies included Troy (TRY), which fell A7 cents to A$3.39, despite reporting first production from its Casposo project in Argentina. Also weaker was Kingsgate (KCN), which fell A61 cents to A$10.58, Silver Lake (SLR), down A16 cents to A$2.13, Perseus (PRU), down A2 cents to A$3.14, Avoca (AVO), down A36 cents to A$3.22, Gryphon (GRY), down A5 cents to A69 cents, and Kingsrose (KRM), down A3 cents to A$1.13. 

Iron ore companies also trended down as mentioned. Fortescue (FMG) lost A16 cents to A$6.70, despite announcing a major expansion of its operations. Atlas (AGO) fell A18 cents to A$2.79, in what was perhaps a statement of the market’s belief in the likelihood of BHP Billiton actually allowing third-party ore on its rail system. Other movers included Brockman (BRM), up A2 cents to A$5.97, Giralia (GIR), down A10 cents to A$2.95, and Murchison (MMX), down A9 cents to A$1.22. Mt Gibson (MGX) also fell, down A34 cents to A$1.95, following the Chinese takeover of its board. 

Minews. Uranium next, please, because the higher price for the metal should be helping explorers. 

Oz. You would think so, but only a handful of companies delivered solid upward moves. Among them was the South Australian exploration specialist, Marathon (MTE), which added A9.5 cents to A62 cents. Also better off was Forte Energy (FTE), which put on A2.9 cents to A11.5 cents on renewed optimism about progress on its exploration ground in Mauritania. Energia Minerals (EMX), a company we almost never hear from, added A1 cent to A29.5 cents, following positive exploration news from its Carley Bore prospect in Western Australia. After that it the sector was flat, or down. Manhattan (MHC) slipped A10 cents lower to A84 cents. Berkeley (BKY) lost A4 cents to A$1.83. Uranex (UNX) fell A4.5 cents to A25.5 cents, and Paladin (PDN), closed A19 cents lower at A$4.62. 

Minews. Base metals, then coal and minor metals to close. 

Oz. Nearly all copper, nickel and zinc companies lost ground. The one exception was the Queensland copper specialist, CuDeco (CDU) which added A56 cents to A$3.91. Why it stood out in such fashion is a mystery, though. Presumably one or two close followers of CuDeco might have an inkling. After that anomalous move it was one way traffic. Sandfire (SFR) fell A66 cents to A$7.24. OZ Minerals (OZL) fell A6 cents to A$1.62. Marengo (MGO) fell A3 cents to A25 cents. Metminco (MNC) fell A2.5 cents to A36.5 cents, and Rex (RXM) fell A23 cents to A$2.27. 

Nickel movers included Mincor (MCR), down A3 cents to A$1.75, Western Areas (WSA), down A17 cents to A$6.05, and Panoramic (PAN), down A6 cents to A$2.34. Zinc movers included Perilya (PEM), down A4 cents to A50 cents, Kagara (KZL), down A10.5 cents to A74.5 cents, and Ironbark (IBG), down A4 cents to A26.5 cents. 

The minor metals were also weaker. Tin companies fell. Venture (VMS) dropped A6.5 cents to A55 cents, and Kasbah (KAS) fell A6 cents to A36 cents. The two diamond companies we mentioned last week, Venus (VMC) and Lonrho (LOM), also fell. Venus dropped A15 cents to A$1.73, and Lonrho dropped A0.6 of a cent to A4.6 cents. 

Minews. Thanks Oz. Enjoy the start of the Ashes test series later in the week. 

Oz. Certainly will, though perhaps not with as much confidence as followers of the England team, which has been looking very sharp.


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## drillinto

November 22, 2010

When You Are In A Hole, Stop Digging, Unless You’re A Miner
By Rob Davies
www.minesite.com/aus.html [Free registration]

So, Ireland is to be rescued by the expedient of borrowing even more money, and the rest of the world moves on to ponder the next crisis. The real tension is between the US and China, but that looks too difficult to sort out in the short term, or maybe even in the medium term. China has taken steps to cool its economy, where inflation is 4.4 per cent, by raising the level of capital reserve its banks have to hold to 18.5 per, the highest level ever. That took the shine off metals prices and mining shares, and left the base metals index 6.4 per cent lower last week. The gold price, by contrast, fell by a somewhat more modest 2.4 per cent, a clear demonstration that concerns over threats to the Chinese economy are a bigger issue for base metals than the dollar is for gold.

No one really believes this is the end of the China story, though. More that it’s just a bit of slow down in the rate of growth.  Nor do investors feel that the US narrative has changed. Inflation, at 0.6 per cent, is at its lowest since records began in 1957 and as such appears to justify the Fed’s attempts at doing everything possible to kick start its moribund economy. 

But there’s no suggestion that US demand is about to pull base metals prices up. Which leaves investors wondering whether or not the attempts to slow down China’s rampant economy will be more successful than the efforts to kick start the sluggish US engine of growth. Looked at in those terms, it was no wonder they were selling last week. 

Whenever large forces are applied to even larger objects, anything on the periphery is likely to suffer collateral damage, as Ireland and the euro have discovered. While Germany is benefitting from exporting all kinds of machinery to China and emerging markets, irrespective of the euro exchange rate, Ireland has discovered that its massive investment in residential housing and other unwanted property developments has not made one iota of difference to its competitive position in global markets. 

Throwing more money at Ireland and its banks will not solve its problems any more than it helps to give a drowning man a bottle of water. It will just impose years, if not decades, of stagnant activity onto an agricultural economy. The same logic applies to other countries on the fringe of Europe. They don’t need more debt. What they need is a more competitive exchange rate. Unfortunately, that isn’t going to happen while the PIGS (Portugal, Ireland, Greece, Spain) are part of the euro. 

The world has been here before of course. In the 1930s, after the physical and economic devastation of the First World War, countries rejoined the gold standard only to find that they could not generate any economic growth. It was only when they left that economic straightjacket that their fortunes improved. Moreover, the countries that left first benefited the most while those, like France, that hung on for longest suffered disproportionately more. 

Politicians won’t take tough decisions along those lines until they are forced to, though, and despite the current turmoil, conditions are probably not quite bad enough just yet. But they’ll will be before too long.  

And when we get to that point, the scenario may develop whereby Germany leaves the euro and gets its beloved deutschmark back, instead of the PIGS leaving the euro one by one. Only when the fringe players in Europe have the right exchange rate will stability and growth be regained. That rate is undoubtedly a lot lower than the current euro rate that is set more by Germany than by the agrarian economies around the edge. No wonder Germany kept all its gold after the euro was formed. 

Exchange rates are important to investors, as South Africans have known for a long time.  Investing in commodities provides a great deal of protection to those with soft, or potentially soft, currencies. For that reason metals have a role to play, and precious metals more so than base metals, in balancing currency weakness. But on a global scale it will be the evolution of the Chinese economy that will ultimately determine metals prices. And on that argument it may be that base metals have the better long term prospects.


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## drillinto

December 06, 2010

Inventories Are Low, And Demand Is Holding Up: The Fundamentals For Metals And Mining Have Rarely Looked Better 
By Rob Davies
www.minesite.com/aus.html [FREE REGISTRATION]


Commodity investors have to keep two factors in mind when considering which asset class to buy into. One is the basic underlying demand and supply balance for the specific metal. The other is the over-arching geopolitical environment.

Over the last 18 months both factors have worked in a very favourable way as far as commodities prices are concerned. The uncertainty associated with various currencies has driven hot money into metals, both base and precious. Last week the euro wagon rolled a little closer to the brink, as the ECB relented and bought some more bonds from countries around the periphery. 

That response was forced on it after the market gave the thumbs down to the Irish bailout by selling bonds from other states viewed to be vulnerable. The vagueness of policy over a fiat currency encouraged a move into the solidity of hard assets, resulting in a four per cent rise in base metals overall. 

Gold, unsurprisingly, made better progress and rose 4.2 per cent. As a result of the weaker euro gold also hit a new record euro high of â‚¬1,071 an ounce. 

No one knows how the Eurozone crisis will evolve. In any event it seems certain to play as background mood music for many months, if not years, to come. Unlike businessmen, politicians always prefer to defer tough decisions. 

What is clear, though, is that the consensus view for the global economy is now very supportive for base metals. World growth for 2011 is expected to be around four per cent. More importantly China, with its above average per capita demand for metals, is expected to grow twice as fast, at about eight per cent.  

That is all well and good, and to be expected in a recovery from a severe recession. But it’s unusual at this stage of the economic cycle for inventories of metal and of undeveloped resources to be so low. 

Normally, recessions of this intensity decimate industrial production, causing a dramatic fall in metal demand and, because of delays in cutting mine output, an increase in metal stocks. In this recession, voracious demand from China has kept demand high all the way through and, aside from a few aluminium, nickel and ferrochrome plants, little capacity was ever taken out and mothballed. 

As an industry, mining is entering this upturn with astonishingly low levels of inventory.  There are only 352,425 tonnes of copper in LME warehouses. Given that the world is expected to chomp through 18.9 million tonnes next year that equates to just under a week’s worth of demand. Even for zinc, which at 633,875 tonnes in LME warehouses has one of the largest stockpiles, the inventory is only enough for three weeks of consumption.     

Whatever happens with the Eurozone it is likely to be positive for hard assets, and for commodities in particular. But that is really just the icing on the cake. Underlying it all the fundamentals for the metals and mining industry have hardly ever been better.


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## drillinto

Commodity Snapshot (10 charts)
http://www.bespokeinvest.com/thinkbig/2010/12/7/bespokes-commodity-snapshot.html


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## drillinto

Thursday, December 9, 2010 

Bullish scenario for copper: rising demand, tightening supply
By Palash R. Ghosh


Although it might lack the glamour of more heralded commodities like oil and gold, copper is a crucial component of industry and technology and its price typically reflects the health of the underlying global economy.

Copper has a multitude of uses -- everything from electrical wires to plumbing pipes to heating applications to automobiles to air conditioners. Thus, it is indispensable for any highly industrialized society.

Having just touched an all-time high in price, demand for the red metal is expected to be very strong in the coming years, driven primarily by China’s insatiable hunger for commodities of all kinds to support its relentless program of mass urbanization. Also, the anticipated emergence of a handful of copper-related exchange-traded funds (ETFs) will also push up demand.

Meanwhile, copper supplies are under pressure for a variety of reasons – including falling ore grades at the older copper mines, the likelihood of labor unrest at mining facilities and a paucity of new discoveries -- thereby creating a supply-demand profile that favors long-term price appreciation.

Indeed, on the New York Mercantile Exchange, copper futures for March delivery closed at $4.10 per pound on Wednesday, a new all-time settlement high (although this figure remains below the all-time highest traded price of $4.24 established on May 5, 2008).

Copper prices have jumped more than 20 percent year-to-date. Since the lows of early June, the spot price has spiked about 45 percent.

Copper has also benefited from the new tax-cut extensions in the U.S., a measure that is expected to add to American economic growth next year.

“The biggest single factor behind the rise in copper prices is China,” said Bart Melek, global commodity strategist at BMO Capital Markets in Toronto.

“China alone presently accounts about 40 percent of global copper consumption and we believe demand there will continue to be strong, further supporting a rise in copper prices. China has very little copper of its own.”

While some observers are concerned about China’s plans to cool down its economy by raising interest rates, among other measures, Melek doesn’t think this will hurt copper demand.

“Even if China’s economic growth moderates somewhat next year, that will not be significant enough to materially impact copper demand,” he stated.

“Moreover, much of the inflation witnessed recently in China has been caused by rising food prices."

Thus, since China is inexorably committed to urbanization/development, its demand for crucial commodities like copper is likely to continue unabated. For example, the country's ambitious plan to upgrade its electric power grid will require an enormous amount of copper.

"These are mandated expenditures that are immune to any changes in monetary policy," Melek noted.

Outside of China, a sustained recovery in other nations, as well as a rebound in copper-dependent industries like the automotive sector, will further pump up demand for the metal.

Melek is forecasting a 7.8 percent rise in copper demand this year, followed by another 6 percent gain in 2011.

Plus, as supply tightens, leading to what Melek characterizes as a "hefty deficit" in 2011, the pricing picture becomes even brighter.

Melek estimates that on an average annual basis, the price of copper will ascend to $3.90 per pound in 2011, up from $3.30 this year.

To underscore the concern that the markets have about copper scarcity, consider that last week the British newspaper Daily Telegraph reported that a "mystery buyer" had acquired more than $1 billion of physical copper, representing more than 50 percent of all the metal stored in official London warehouses. It was subsequently reported that the mysterious buyer was none other than U.S. banking giant J.P. Morgan Chase & Co. (NYSE: JPM).

While this action does not quite constitute "cornering the market," it suggests how a handful of major players taking aggressive positions in the copper market (as well as certain other commodities like nickel and aluminum alloy). The Wall Street Journal reported that J.P. Morgan said it purchased the copper mostly on behalf of clients.

Incidentally, the London Metal Exchange said that its warehouses currently hold about 350,000 tons of copper, down from 555,000 in February. Copper stockpiles have been in sharp decline all year, on schedule for the first annual drop since 2004.

Melek, who declined to specifically on JP Morgan, indicated that with a number of new ETFs coming on-stream, they will need to acquire a substantial amount of the physical metal in storage. (Indeed, JP Morgan is planning its own copper ETF for next year).

"They might pay a risk premium to guarantee deliver if they're worried about availability," he said.

Source >> http://www.ibtimes.com/articles/90621/20101209/copper-demand-supply-etf-price-china.htm


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## drillinto

December 13, 2010

While The US Is Still Scrambling For Growth At Any Cost, China Acts To Curb Inflation
By Rob Davies
www.minesite.com/aus.html  [Free Registration]

Among the many idiosyncrasies offered by the financial world to analysts and investors is the concept of the risk free rate. This is what you can expect to earn from the holding the safest security in any particular country, and is commonly used as a benchmark for assessing mining projects in far flung parts of the world. In finance, where everything fungible can be hedged back to dollars, the default benchmark, or risk free rate, is the yield on ten year US Treasuries.

Well, last week they didn’t look so safe, when they lost 14 per cent in two days. In the course of the last two months they have lost a third of their value. And by coincidence those highly speculative commodities, gold and copper, both hit new highs last week. Copper finally breached the US$9,000 a tonne level, and closed the week at US$9,041, while gold got to US$1,430 an ounce before settling at US$1,378. Overall, base metals as a group gained 1.5 per cent over the week, and that was a period when the dollar itself moved up 1.5 per cent too, so the gain in many other currencies was even higher. 

The trigger for these moves was a policy decision in the US. The Obama administration has caved in to the pressure for growth in the short term by agreeing to keep the tax cuts, instituted by Bush, in place for two more years. They had been due to end shortly. Like most politicians faced with a choice between doing what is right for the economy or what is best for his re-election prospects, Obama took the easy option. But to be fair to the President, the bond sell-off wasn’t confined to US fixed income, but included the selling of bonds from such fiscally rigorous countries as Germany as well. But because of its size and power, if the market in dollar debt goes one way, it is tough for the fringe players to go in a different direction. 

The message bond investors took from the moves on tax is that nothing will be allowed to impede the growth narrative for the Western world. If that means the risk of inflation is increased then it will simply be priced in. The move was perhaps more dramatic because bond prices had reached such elevated levels - a few months ago 10 year US Treasuries were only yielding 2.4 per cent. That was at a time when bond mutual funds were experiencing record breaking levels of new money inflows. This proves yet again that investors much prefer to buy expensive assets after they have gone up rather than cheap ones before they do.   

Rational economic logic would suggest that they should now sell and reinvest elsewhere. They won’t of course. Instead they will hang on for prices to recover until they finally give up and sell at the lows. After all, there’s probably someone out there who’s just got back to breakeven on their silver position at US$30 an ounce after thirty years? The rise in the silver price, along with other metals, demonstrates that fear of inflation rather than deflation is now becoming the prevailing sentiment for investors. 

Democratic issues don’t trouble the Chinese so much. China felt able to whack up reserve requirements for banks by another 50 basis points for the third time recently, to try and rein in its rampant economy. That increase might not sound much, but Bloomberg reckons it will take US$53 billion out of the economy. While that might be a significant hit, it seems unlikely to do much damage to the high single digit growth that China is experiencing and which is the fundamental driver for commodity demand. 

So, while the US seems to have given up on fiscal responsibility, China is doing its best to manage growth sensibly. In theory the renminbi ought therefore to become the global currency. However, its lack of convertibility prevents that. Instead, gold is becoming the default measure of value, even though it provides no income. So, does that mean the choice of risk free rates now is between a real return of zero from gold, or a nominal return of 3.3 per cent in US Treasuries?


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## drillinto

December 11, 2010 [Last week]

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free registration]


Minews. Good morning Australia. It looks like your market had a good week, in parts. 

Oz. That’s not a bad description for what you might call an upwardly patchy week. All of the key indices on the ASX rose, marginally. The all ordinaries was up one per cent. Metals and Mining 1.5 per cent, and gold crept 0.3 per cent higher, which wasn’t a bad effort considering the fall in the gold price and a rise in the value of the Aussie dollar. Interestingly, as with a few other recent weeks, there was more action among companies we rarely hear about than among the usual suspects.

Minews. Perhaps a sign that investors are looking for fresh meat? 

Oz. There is a bit of that, just as we seem to be seeing fairly rapid rotation of money through the sectors. Last week’s favourites were coal, copper and uranium, with a handful of small gold companies also doing well. But before we call the card a few comments about what’s really making news on this side of the planet. Tax remains a very thorny subject as, surprise, surprise, the Australian Government is now trying to renege on part of its pledge only to hit iron ore and coal with its new super-tax. 

The sticking point is over State royalties, which the national government thought could be washed away and replaced with the new tax. Unfortunately, not all the States agree and the big miners, BHP Billiton and Rio Tinto are crying foul. But it’s not all about tax. New floats are also in the news. The numbers lining up in the queue at the ASX have hit 60, with close to 40 of those in the resources space, a mix of new mining and oil stocks. The smart money says quite a few of those will not survive the fund raising process, especially after we had a few listing flops last week. 

Minews. Okay, time for prices, starting with the fresh meat, please. 

Oz. It is a grab bag of names and commodities, so let’s start with gold where one of the top performers was Manas Resources (MSR), the owner of the Shambesi gold project in Kyrgyzstan, and a company closely associated with Perseus Mining (PRU). Manas raised a fresh A$11.5 million last week with the support of Macquarie Bank and Lion Selection, and also managed to lift its share price by A5.5 cents to A24 cents. Also in the gold space, Nyota (NYO) was another well supported small gold company, up A8.5 cents to a 12 month high of A42 cents on the strength of encouraging assays from its Tulu Kapi project in Ethiopia. And Iron Mountain (IRM) and Red River (RVR) rose sharply after they reported high grade rock chip samples of up to 214 grams a tonne from the Miaree project in the north-west of Australia. Iron Mountain, which might have to consider a name change if the surface gold continues at depth, added A3.1 cents to A11 cents, while its partner at Miaree, Red River, rose by A2 cents to A12 cents. But the biggest percentage rise was delivered by Gondwana Resources (GDA) which rose by 60 per cent. Admittedly, it was still fairly small scale, given that that move was from up just from A1 cent to A1.6 cents, and still left the company with a market value of only A$8 million. 

Minews. Let’s finish with the new names and then move through the sectors. 

Oz. Two potash companies caught the attention of the market last week. Elemental Minerals (ELM), which is exploring the Kola project on the coast of Congo, added A29 cents to close at a 12 month high of A$1.16, and South Boulder (STB) which was mentioned last week kept on rising, adding another A24 cents to A$1.84. Over among the copper companies, Queensland Mining (QMN) reported excellent drill results from its Young Australia project near Cloncurry. These included a 40 metre hit at 2.31% copper, and the news was enough to drive the shares up by A4.6 cents to A13.5 cents. 

Minews. Sectors now please, starting with gold. 

Oz. It was a mixed picture. Thor (THR), which has been on a bit of a gallop recently, hit a 12 month high of A5.5 cents, up A2.3 cents. Beadell (BDR) added A10 cents to A71 cents after confirming the sale of an iron ore royalty to Anglo Pacific. After that it was a bit of a bore, really. Stocks that rose, just, included Adamus (ADU), up A1 cent to A75.5 cents, Silver Lake (SLR), up A3 cents to A$2.26, Kingsgate (KCN), up A13 cents to A$10.15, Kingsrose (KRM), up A5 cents to A$1.26, and Resolute (RSG), up A2 cents to A$1.29. Stocks that fell, just, included Medusa (MML), down A12 cents to A$6.45, Avoca (AVO), down A17 cents to A$3.13, and CGA (CGX), down A11 cents to A$3.23. 

Minews. Iron ore next, as that has been one of your hotter sectors for some time. 

Oz. It’s still warm, but there is a growing belief down this way that right now might be as good as it gets in iron ore. The price of the stuff is close to an all-time high, and might rise further in the first half of 2011, but production is now being cranked up at a fierce rate to catch the price. There was no significant news among the iron ore companies last week, though the price trend was mildly up. Among the risers were BC Iron (BCI), which rose A14 cents to A$2.48 amid interest in its first exports, and Iron Ore Holdings (IOH), which rose A3 cents to A$2.12. Mt Gibson (MGX) clawed back lost ground after a board spill, rising by A9 cents to A$2.19, and Aquila (AQA), which is shaping up as a perfect takeover target for any global miner keen to get into Australian iron ore, rose by A5 cents to A$10.01. Going the other way were companies like Giralia (GIR), which fell A11 cents to A$2.85, Atlas (AGO), which fell A13 cents to A$3, and Territory (TTY), which fell A2 cents to A37.5 cents. 

Minews. Base metals next, please. 

Oz. By that you can only mean copper, since a number of producers and explorers rose on the back of the record high copper price, though not as many as you might expect. There was also one stand-out loser. Bougainville Copper (BOC) which has been a speculator’s plaything in recent weeks, came crashing back with a fall of A22 cents to A$1.48 on no news. Given that there was no news when it went up either, the fall was hardly a huge surprise. But strong upward performances did come from a number of companies, including Hot Chili (HCH), which touched a 12 month high of A32 cents before closing at A31.5 cents. Sandfire (SFR) was on the move again, adding A43 cents to A$7.80. Equinox (EQN) rose by A24 cents to A$5.95. Exco (EXS) added A4 cents to A60.5 cents, and Rex (RXM) put on A4 cents to A$2.74. Moving in the other direction, Metminco (MNC) slipped A2 cents lower to A32 cents. Sabre (SBR) dropped A2 cents to A22 cents, and Discovery (DML) closed at A$1.28, down A11 cents. 

Nickel companies were relatively flat, with Western Areas (WSA) and Mirabela (MBN) leading the way up. Western Areas added A22 cents to A$6.19, and Mirabela rose by A20 cents to A$2.16. Mincor (MCR) managed a rise of A1 cent to A$1.80. Panoramic (PAN) closed up A4 cents at A$2.41, and Independence (IGO) added A6 cents at A$7.56. Zinc companies were even less interesting, though there was a continuation of the improving trend we’ve seen since mid-year. Bass Metals (BSM) added A1.5 cents to A39.5 cents. Ironbark (IBG) put on A2.5 cents to A28.5 cents, and Meridian (MII) close half-a-cent higher at A14 cents. Blackthorn (BTR) was the heaviest loser, dropping A5.5 cents to A64.5 cents. 

Minews. Uranium and coal, the fuel twins, next. 

Oz. Coal has been one of the stars of the Australian market for the past year, which I suspect that you, like me, find pretty amusing, in the context of (a) the great global warming debate, and (b) the apparent onset of the next ice age in the UK. But be all that as it may, coal asset prices are soaring as Asia demands more energy. Last week we saw a truly stunning coal deal when Nathan Tinkler, the 34 year-old behind Aston Resources sold a 15 per cent stake in the Maules Creek coal mine to the Japanese trading house Itochu for A$345 million, just 10 months after he paid a Rio Tinto coal subsidiary A$480 million for 100 per cent. In other words, that 15 per cent value values Maules Creek today at A$2.3 billion. 

Minews. Not bad for 10 months “work”. How about some coal and uranium company share prices? 

Oz. Aston, as you would expected, rose handsomely, hitting a 12 month high on Wednesday of A$8.79, before it eased to close the week at A$8.19 for an overall gain of A74 cents. A few months ago Aston was trading as low as A$5.49. Other coal company movers included Coalworks (CWK), up A11 cents to A81.5 cents, Bathurst (BTU), up A10 cents to A69 cents, and Coal of Africa (CZA), up A14 cents to A$1.35. Riversdale (RIV), which has become everybody’s takeover target, stacked on another A$2.10 to A$16.20 over the course of the week, although the closing price was down a fraction on its 12 month high of A$16.41 reached on Tuesday. 

Uranium companies were mixed, with one star. Manhattan Corporation (MHC) rocketed up by A31 cents to A$1.25 without any fresh news. However, Manhattan chief Allan Eggers has been on a roadshow in London, and presented at the Minesite Christmas forum on 7th December, so his famously upbeat presentations may have sparked some interest on your side of the globe. 

[Two paragraphs, uranium & minor metals, were deleted to comply with article length requirements by ASF]

Minews. Thanks Oz.


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## drillinto

December 18, 2010

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html [Membership is free]


Minews. Good morning Australia. How did your market perform last week? 

Oz. Patchy, but trending up, a bit like the Australian cricket team. It was impossible to detect any solid trend through the week, but all of the key indices ended in positive territory. The gold index did best, putting in two per cent gain, though some of the individual price movements were better than that. The copper sector also produced a few stars. Iron ore firmed, coal was mixed, and uranium eased. Overall, the Australian market added half a per cent, as measured by both the all ordinaries and the metals and mining index.

News flow was limited as miners started to head off for the Christmas break, but there were two items of interest. Firstly, the great Australian mining tax debate seems set to flare again, and the industry is said to be moving back to a war footing amid reports that the government is about to renege on a key part of the deal negotiated in July. Secondly, the flood of floats continues, and a number of the new companies to list last week did rather well, and certainly better than expected. 

Minews. It sounds like your year is ending in a good news, bad news, sort of way. 

Oz. The good undoubtedly outweighs the bad, though the tax issue is becoming somewhat of a farce, and indicates that the hung Parliament we got after the August election has led to a lame duck government. The Australian government seems finally to have realised that it made a promise it could never keep - to remove royalties on mineral production and replace it with the new mining tax. The problem was, and remains, that royalties are a State tax, and the biggest mining State of all, Western Australia, refuses to let go of its most important source of revenue, which is hardly surprising. As 2011 rolls around the tax issue will get hotter. 

The success of new floats, and the 31 miners still on the upcoming float list at the ASX, confirms the view that the year ahead is going to be a very good one for investors in the smaller end of the mining market. Last week we saw a coal float, Carabella Resources (CLR) open for trade on Friday at A75 cents, which in itself was close to a 100 per cent premium on its issue price of A40 cents. It then charged up to A97 cents, before easing to end its first day as a listed stock at A86 cents, better than double-your-money for initial subscribers. Middle Island Resources (MDI), a gold float with a focus on Burkina Faso, opened at A43.5 cents on Thursday, a handy 74 per cent premium to its A25 cents issue price, and ended the week at A50 cents, also a doubled money experience, though this time it took 48 hours. Two other floats are worth mentioning. Thomson Resources (TMZ) floated at A20 cents and closed on Friday at A25 cents, while Sentosa Mining (SEO) issued shares at A20 cents, and ended its first day at A28 cents. 

Minews. Pretty encouraging results for the next crop of floats. Time for prices, starting with gold. 

Oz. Top performer was Troy Resources (TRY) a company which a few people down this way reckon has been undervalued for some time, as it migrates production from mines in Australia to South America. It added A51 cents to close the week at A$4.00, but on Thursday sold up to a 12 month high of A$4.29, and copped a speeding ticket from the ASX as a result. Integra (IGR) was another gold producer to hit a fresh high as it considers expanding its newly-opened Randalls project. It added A11 cents to A73.5 cents. Other solid risers included Avoca (AVO), up A19 cents to A$3.30, Catalpa (CAH), up A16 cents to A$1.97, Kingsrose (KRM), up A13.5 cents to A$1.39, Perseus (PRU), up A18 cents to A$3.33 and Gryphon (GRY), up A9 cents to A$1.57. Crusader Resources (CAS) was also better off, up A8 cents to A$1.00 on the strength of good gold assays from its Borborema project in Brazil. Two of the stronger gold moves during the week came from companies we hear little about. Canyon Resources (CAY) added A11 cents to A56 cents as interest grows in its Burkina Faso projects. And Wild Acre Metals (WAC) jumped A13 cents to A28.5 cents on interest in its exploration ground in the Mt Ida and Yerilla locations, north of Kalgoorlie. It wasn’t one-way traffic among the gold companies, though. Among the fallers was Azumah (AZM), which lost A4.5 cents to A69.5 cents. Meanwhile, Thor (THR) ran out of puff after a few good weeks, losing A1 cent to A4.6 cents, and Gold Road (GOR) slipped A1.5 cents lower to A36.5 cents. 

Minews. Iron ore and base metals next please. 

Oz. Two iron ore companies stood out. Sundance Resources (SDL) has become a firm takeover tip. It is the company which lost most of its board in a plane crash in the Congo earlier in the year. Last week it added A5.5 cents to close at A47 cents, but did reach a 12 month high of A48 cents. Meanwhile, Avonlea (AVZ) reported an expanded resource at its Ondjou project in Namibia and hit a 12 month high of A32 cents before closing at A26 cents, a rise of A3.5 cents. Elsewhere, IMX (IXR) started shipments from its Cairn Hill mine, and added A10 cents to A68 cents. BC Iron (BCI), which is also getting close to shipping, rose by A17 cents to A$2.65. Fortescue (FMG) put on A24 cents to A$6.78 after reports that it is close to signing a transport deal with Brockman Iron (BRM). That was a development which did nothing for Brockman, however, as it fell by A31 cents to A$4.85. Also worse off was Territory (TTY), which lost A4 cents to A33.5 cents. And Mt Gibson (MGX) slipped A14 cents lower to A$2.05, while Iron ore Holdings (IOH) was also worse off, down A4 cents to A$2.08, although it is rumoured to be getting closer to monetising some of its assets. 

Copper was the pick of the base metals, and most copper companies were better off. Pick of the sector was Hot Chili (HCH), one of the small Aussies working in Chile. It added A8.5 cents to A40 cents. GBM Resources (GBZ), another of those rarely heard about companies, reported good copper and gold assays from its Milo prospect in Queensland, and rose by A6.5 cents to A14.5 cents. Queensland Mining (QMN) continued its upward run, putting on another A3.5 cents to A17 cents. Other copper movers included Sandfire (SFR), up A10 cents to A$7.90, OZ Minerals (OZL), up A6 cents to A$1.69, Rex Minerals (RXM), up A3 cents to A$2.77, Equinox (EQN), down A11 cents to A$5.84, and Marengo (MGO), down A1 cent to A29 cents. 

Nickel companies firmed, along with the price of nickel, which cleared the US$11.00 a pound mark. Mirabela (MBN) was the pick of the sector, adding A29 cents to A$2.45. Independence (IGO) also did well, with a rise of A57 cents to A$8.13, though perhaps more due to its gold interests. Mincor (MCR) added A5 cents to A$1.85. Panoramic (PAN) rose A10 cents to A$2.51, and Minara (MRE) closed at A83 cents for a gain of A5 cents. 

Zinc companies had a mixed week. Ironbark (IBG) added A4.5 cents to A32 cents. Perilya (PEM) put on A5 cents to A57.5 cents, but Meridian (MII) slipped A1 cent lower to A13 cents. 

Minews. The fuel twins next, coal and uranium please. 

Oz. Like the other sectors there was a mixed performance. The best of the coal companies was Riversdale (RIV) which closed at a 12 month high of A$16.42, up A22 cents. Coal of Africa (CZA) added A1 cent to A$1.36, but Continental Coal slipped A0.3 of a cent to A6.7 cents. Uranex (UNX) was the uranium star, putting in a very sharp rise of A10 cents to A41.5 cents, although at one stage it did trade up to a 12 month high of A46 cents. Greenland (GGG) wasn’t far behind, rising by A13 cents to A96.5 cents. Manhattan (MHC) added A5 cents to A$1.30. Berkeley (BKY) gained A2 cents to A$1.80. 

Minews. The minor metals, and any specials to close. 

Oz. Zircon and titanium companies continued to attract support. Gunson (GUN) gained another A3.5 cents to A26.5 cents, and Minerals Commodities (MRC) added A2.5 cents to A7.5 cents. Tin companies retreated. Venture (VMS) slipped by A3.5 cents to A48 cents. Rare earth companies were mixed. Arafura (ARU) added A3 cents to A$1.17, and Alkane (ALK) lost A1.5 cents to A83 cents. 

Minews. Thanks Oz.


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## drillinto

December 20, 2010

Risk has been rewarded, but why?
By Rob Davies
www.minesite.com/aus.html [Free Registration]

As the year draws to a frosty close one big feature stands out. The highest risk assets have given the best returns. Commodities, usually regarded as high risk investments, have done exceptionally well. Base metals are up 13%, which is fine as they are underpinned by strong industrial demand and low inventories. Yet this year gold has gained 24% so far and it has no industrial underpinning. It could be regarded as a riskier asset than base metals.

The same applies to equities. On the basis that smaller companies are riskier than large ones the 25% rise in the FTSE 250 compared to the 10% gain by the FTSE 100 suggests that here too the more risk you took the more you were rewarded. The asset usually regarded as the safest of all, US Treasuries, has been one of the dullest performers only gaining 6.9% according to the Financial Times.

This appetite for risk would be understandable if the financial world was a boring place. But it isn’t. Indeed the opposite is true. Many of the world’s largest banks are bust on any sensible interpretation of the rules that applied in previous decades. The only reason the survivors have survived is a result of bailouts from countries that are even more bust than the banks. 

Does this topsy turvy world represent a strange denial of reality or is there something else at work here. Could it be in this paradigm that what was once regarded as risky, like commodities, is now viewed as safer than assets, like US debt, that used to be viewed as the ultimate safe haven?

The corollary of that of course is that the opposite may well be true. Perhaps US Treasuries are a lot riskier than commodities. After all, the profile of the US budget deficit has more in common with Greece than Germany. Not that Germany looks that great because it is funding Greece. In this looking glass world it is hard to know where to turn. And that is precisely why simple economics is still working in favour of metals. 

Copper at $9,049 a tonne might look very expensive in historical terms. Fine, if that’s what you think go and find your own. First, you need to devote about ten years to finding a deposit. And it’s not much good finding one in a country that that doesn’t give you secure legal tenure. Once you have done that you need to spend capital equivalent to several thousand dollars a tonne to build a mine and the associated infrastructure. Assuming of course you can find a banks that will lend you the money on terms that will allow you to keep your right arm. Then you have to spend another few thousand dollars a tonne to actually mine the deposit. Finally, if you are lucky, you might make a few bucks in profit. 

In short no one is likely to dramatically increase the supply of copper, or any other metal, in a hurry. So the risk of owning copper does not include the threat of suddenly being swamped by a mass of new metal coming onto the market and depressing the price. 

Now it seems that the market is slowly beginning to realise that the big risk of owning nominal assets, like bonds and currencies, is the danger that anyone, well politicians and bankers, can make as much of the stuff as they want.  This year the risk lay in not understanding that.


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## drillinto

December 31, 2010

Another One For The Record Books
By Rob Davies
www.minesite.com/aus.html [FREE REGISTRATION]

Given the miserable state of the world economy in 2009, when it shrank by 0.6%, metal prices started 2010 in remarkably buoyant form. The LME Index, which encapsulates all the base metals traded on the LME, started the year at 3,400. Given that it had doubled over the course of 2009, despite the severe global economic contraction, it gave a clear sign that consumers were optimistic about the prospects for 2010. Indeed, it was easy to argue that they were over enthusiastic and there was a strong risk that second thoughts would trigger a correction.

In the event there was a mild setback. By June the index had dropped back to 2,800 as the real scale of the sovereign deceit by Greece became apparent. Despite that, and the related wobbles from Ireland later in the year, it is now apparent that the initial euphoria at the start of the year was justified. World economic growth for 2010 was recorded by the IMF at an impressive 4.8%. That this is higher than the 4.3% estimated for the OECD area is due to the 10.5% increase in the Chinese economy and the 9.7% rise in the size of Indian economic output. But these two countries never had a recession. The year before, when the West was suffering, they grew by 9.1% and 5.7% respectively. In many ways it was the sharp turnaround in the West that was dramatic after the contraction of 2.4% in 2009.

This strong growth, particularly from countries with high metal intensities like China and India, did wonders for metal demand. Moreover, the increased consumption could not be sourced from inventories as they were already far lower than would be expected at this stage of an economic cycle. With the exception of a few nickel mines and some aluminium smelters most facilities stayed open during the recession to maintain supplies because demand and prices remained high and inventories stayed modest.

Once it became clear that Western demand was picking up, while consumption from the East remained strong, metal prices started rallying in June and continued all the way through to the end of the year taking the LME Index to over 4,000. Would that all recessions could be so short and shallow. But never before has so much effort been put into reviving the Western economies through actions such as quantitative easing.

The net effect of this unique combination of strong demand from the East and reflationary measures from the West was to dramatically increase metal prices over the course of the year. Copper, the bellwether of the sector, will average $7,392 a tonne in 2010 an awesome increase of 43% over the previous year.  Aluminium is used in greater quantities and its rise was a more sedate 29% to $2,156 a tonne. Nickel is the most volatile of the group and it just beat copper with a 47% rise to $21,609 a tonne. The difference is that copper is at a new all-time high while nickel is still trading at half its previous best. Lead put in a good performance with a gain of 23% to $1,762 a tonne although it was pushed into last place by the 30% rise in zinc to $2,149 a tonne. Tin is the also ran of the base metals these days as it used so little. Nevertheless, its gain of 47% to $19,916 a tonne shows that it should not be ignored.

Over the course of the year there has been considerable volatility in exchange rates but the net effect for metals has been marginal as the US dollar edged up a little over the period. It did though come back from the highs it saw in June during the Greek crisis. More worrying is that exchange rates of the main metal producing countries have all strengthened during the year which effectively raises production costs. The Australian dollar has risen 12% from 90 cents to $1.01 and there seems little to prevent it going even higher. A less stable political situation in South Africa has limited the appreciation of that currency to 10% from 7.3 to the dollar to 6.6. Here the scope for further gains is more limited as the politics becomes more African.

While base metals have been good there is no doubt that bulk commodities still make up the largest contribution to profits for the mega-miners. Here too the story has been a good one in 2010, not least because the iron ore industry finally accepted reality and moved away from annual price negotiations to quarterly ones. In reality a great deal of business seems to have been executed on the basis of spot prices. The Bloomberg index of actual delivered prices for 62% Fe iron ore into Tianjin port shows a similar evolution to that of the base metals over the year. Prices moved up strongly from their low starting values of $110 per metric tonne in January to a peak of $185 in April before rapidly subsiding back to $120 in July. Since then there has been a steady increase up to $170 a tonne at the close of the year.

Coal prices have followed a similar trend to that of iron ore, although with less volatility. Starting the year at around $80 a tonne steam coal moved progressively upwards to end at close to $120 a tonne. Over the same period coking coal prices have risen from around $200 to $250 a tonne. Heavy rain in Queensland at the end of December has caused some miners to invoke force majeure and could lead to price spike to finish the year.

Underlying all these price movements is one key economic fact. In 2010 China overtook Japan to become the second largest economy in the world. That is what drove base metals and industrial commodities in 2010. Precious metals danced to a different tune as the US “invented” $1 trillion of new money through the process known as quantitative easing, but that’s a different story. It just so happens that they combined to make 2010 another record year for the mining industry.


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## drillinto

December 31, 2010

Happy New Year. Money Will Be Made In 2011, But Investors Should Think Very Carefully Before Signing Cheques.
By Charles Wyatt
Source: www.minesite.com/aus.html  [The registration is free] 


Happy New Year to everyone in mining, even the bankers. Most of the experts seem to think that 2011 will be another good year for metals and minerals, but investors will still have to be choosey and they must temper their decisions against the speed with which the geopolitical axis is swinging from West to East. It is worth remembering that China actually benefitted from the global financial crisis as it was able to stockpile commodities at low prices. This tactic differentiated it from the Western world which was reaping its due reward for an era of over-consumption and lack of saving.

Now we will be spectators as the industrial revolutions in both China and India continue to make the running. China has a communist government so the State has control of growth whereas India is a democracy so growth has to come from the private sector. For some time relations between the two have been far from friendly, but the recent visit by Chinese Premier Wen Jiabao has signalled a major change as he was promoting bilateral trade between the two countries. The last time he took such an initiative was back in 2005 when he targeted US$30 billion in annual combined Sino-Indian exports and imports for 2010. This has been left well behind and a new target of US$100 million has been set for 2015.

By 2020  China will be just about level pegging with the US in terms of gross domestic product and India will not be that far behind. This is growth of an order not seen for many years and investors will have to plan how best to benefit from it. At the moment China gets most of the publicity for its industrial achievements while India is hindered by its infrastructure and the bureaucracy it inherited from the British Raj. Mark Creasey, a very successful Australian gold prospector with investments in Indian gold projects put it like this. "Things may take time in India, but you know that if you are dealing with people who speak English, have a sense of humour and understand cricket, you will get there in the end."

The Governments and people of both these countries distrust  Western economic management and  the paper currencies that are being printed to cover the cracks. Their view on gold is also different from that of central banks, institutions and investors in the West and not nearly so fickle. They are building a solid base in bullion and have a combined population of 3.5 billion. If everyone in both countries - an interesting hypothesis - bought one gramme of gold in 2011 the demand for gold would rise by 3,400 tonnes. Compare this with current world production of around 2,400 tonnes  and there is little doubt where the price of gold could head.

Maybe the editor of the Financial Times should mull over these simple facts as he watches the New Year in. In his latest explanation for the complete ****-up the paper’s Lex column has made over the past seven years during which it has repeatedly urged readers to sell gold he explained that the FT was a ‘broad church’. Presumably this was meant to absolve himself of all blame on a par with the declaration by Pontius Pilate that he had no responsibility for the death of Jesus. The blame falls on whoever is leader at the time so some of it goes to Andrew Gowers who was editor before him. Gowers has since played a less than heroic role as PR advisor to BP during the Mexican pipeline disaster. The point, however, is that the ‘broad church’ must now rethink its attitude to gold in the light of the growing prosperity of these two huge countries and question its devotion to Western economic theories.

Back to practicalities. Two of the features of the mining sector in the last half of 2010 have been the increase in political risk and the plethora of companies claiming to have discovered rare earth deposits. There is no doubt that governments will want a larger slice of the income from metals and minerals being mined in their countries and  investors should avoid juniors run by directors who think it is claver to be greedy as they will get their comeuppance in due course.

Rare earth metals are a different matter altogether and should be treated with care as China and other countries such as South Korea see them as key to their future economic growth. Hitherto they have supplied the West  with cheap goods in big amounts and low margins. Their future lies in developing their own high tech equipment and this requires the use of these metals which live up their name by being scarce and difficult to process. China has a near monopoly thanks to the US closing its mines some years back and it is not likely to give up this position easily. In fact it is cutting exports and this has got up the nose of President Obama, but there is not much he can do about it despite his threat to complain to the World Trade Organisation.

As a result  Japan is in a tizzy as it takes 60 per cent of China’s exports and South Korea has agreed a deal with Myanmar to develop its resources of rare earth metals. Rare earths are therefore sure to stay in the headlines in 2011, but how much money can be made by investors is another question. There are no end- markets for any of them so offtake agreements with end users are vital. These end users will be huge companies such as motor manufacturers and they will not be generous. The other problem facing a Western company hoping to produce these metals is that China is also at the top of processing technology and will not be keen to share it. The Western share in a deposit is therefore likely to be diluted significantly and profit margins may be in the hands of others.

The good news for the mining sector, however, is that demand for metals and minerals looks like staying high and there will be plenty of takeovers as  deposits take so long to find and develop. This outlook is reflected in the spate of new issues in both Australia and Canada as entrepreneurs come to the conclusion that there is still money to be made. One  more word of caution, however. A number of these IPOs will be geese dressed as swans in order to maximize profits for the founders in the shortest possible time. Investors who avoid the geese; are wary of rare earths; and keep a lookout for political risk should make money in 2011. Happy New Year.


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## drillinto

Australia had a negative performance in 2010: -2.57%

http://www.bespokeinvest.com/thinkbig/2011/1/3/final-2010-global-market-performance.html


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## qe2infinity

us debt has just recently topped 14 trillion dollars, the best place IS commodities indeed!


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## drillinto

qe2infinity said:


> us debt has just recently topped 14 trillion dollars, the best place IS commodities indeed!




Look for 2010 Commodity Trends to Continue:
http://seekingalpha.com/article/244873-look-for-2010-commodity-trends-to-continue?source=yahoo


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## drillinto

January 04, 2011

A Review of 2010 In Australia And Outlook For 2011
By Our Man In Oz
www.minesite.com/aus.html [FREE REGISTRATION]

Minews. Good morning Australia, and happy new year. How did your market end 2010, and what’s the outlook for 2011? 

Oz. Happy new year to you, and thanks for a couple of interesting questions to get the ball rolling for this look back at the final two weeks on the ASX, plus an annual review, and if there is time a preview of 2011. First point to make is that not much happened over the Christmas break, apart from an interesting cricket match in Melbourne, about which the less said the better. On the market there was minimal movement. The all ordinaries index was essentially static over eight holiday-interrupted trading days, slipping lower by an infinitesimal 0.1 per cent. The metals and mining index added 0.7 per cent and the gold index added 0.2 per cent.

Minews. Rather boring, apart from the cricket.

Oz. Yes, well, moving quickly back to the market and 2010, as measured by the all ordinaries, was as flat as the last two weeks with that index closing the year down by 0.8 per cent, a result which seems out of kilter with the 13 per cent rise in New York and the 9 per cent rise in London. The explanation is that the Australian market sailed through the 2008 and 2009 downturn largely unscathed but was hit in 2010 by sharply rising interest rates and an equally sharp rise in the foreign exchange rate. Local industrial, retail and financial stocks copped the worst of the interest rate rises designed to cool a heated economy. Exporters were hit by the rising exchange rate. However, having said that the metals and mining index still managed a 13 per cent rise over 2010, and the gold index put on 36 per cent.

Minews. Let’s have a look at a few prices, and since the Christmas period was so flat why not focus on annual moves.

Oz. Good decision because most moves between December 17 when we last spoke and the final session on December 31 were insignificant. The annual moves were, however, much more interesting and probably provide a pointer to 2011 with some brokers tipping a bumper year for small resource stocks, and a continuing flood of new floats. Perhaps the best way of looking at movement in the resources sector is to break it into stocks of a some substance, say with a capitalisation of more than A$500 million, then the category once known as penny dreadfuls, where the percentage share-price movement can be exaggerated by the low starting point. 

Among the medium-sized resource stocks in the universe we follow the winner for 2011 was Aurora Oil (AUT), an Aussie shale-gas explorer with assets in the U.S. It opened 2010 at A27 cents and closed at A$2.24, a 730 per cent gain for some lucky punter. But, after that one-off oil win the rest of the top 10 stocks for the year were miners, some of them quite well known to Minesite regulars, and with four of them having gold as their primary focus.

Second on the 2010 performance list was the gold producer, Intrepid Mines (IAU) which opened at A28 and closed at A$2.01 (up 617 per cent). Then follow: Lynas Corporation (LYC), rare earths, A56 cents to A$2.06 (up 267 per cent). Regis Resources (RRL), gold, A67 cents to A$2.40 (258 per cent). Sundance Resources (SDL), iron ore, A16 cents to A57 cents (256 per cent). Iluka Resources (ILU), zircon, A$3.59 to A$9.14 (154 per cent). Riversdale (RIV), coal, A$7.18 to A$17 (136 per cent). Sandfire Resources (SFR), copper, A$3.68 to A$8.11 (120 per cent). OceanaGold (OGC), gold, A$1.85 to A$3.65 (97 per cent), and Avoca Resources (AVO), gold A$1.84 to A$3.52 (91 per cent).

Minews. And now for the penny dreadfuls.

Oz. Winner in this category was Equatorial Resources (EQX), one of the Aussies hunting iron ore in Africa. It opened the year at A17 cents and closed at A$3.45, a rise of around 1900 per cent. Second cab off the penny dreadful rank was Resource and Industry (RNI) a copper explorer run by one of Minesite’s old favourites, Miles Kennedy. RNI’s claim to fame is an exploration tenement adjacent to the Doolgunna discovery of Sandfire. During the year it rocketed up from A8 cents to A$1.16 (up 1350 per cent). Then came: Northern Star Resources (NST), gold, up from A2.9 cents to A39 cents (1244 per cent). Burey Gold (BYR), up from A3 cents to A40 cents (1233 per cent). South Boulder Mines (STB), potash, up from A24.5 cents to A$2.87 (1071 per cent). Papillon Resources (PIR), gold, up from A5.5 cents to A58 cents (954 per cent). Bathurst Resources (BTU), coal, up from A8.3 cents to A74.5 cents (797 per cent). Aspire Mining (AKM), coal, up from A5.6 cents to A48 cents (757 per cent). Carpentaria Exploration (CAP), iron ore, up from A11.5 cents to A82 cents (613 per cent), and Pelican Resources (PEL), nickel and iron ore, up from A2.2 cents to A15 cents (581 per cent).

Minews. A few eye-catching moves there. Can we expect more of the same in 2011?

Oz. Probably, is as optimistic as I can be, a view which reflects the ongoing optimism about the big issues driving the Australian market. China is the top of that list and while it is fashionable to question the sustainability of China’s high speed growth the truth is that from the perspective of a commodity exporting country such as Australia it really doesn’t matter if China grows as 10 per cent or 7 per cent because even at a slower rate we will struggle to meet its demand. Adding to the belief that 2011 will probably be a mirror image of 2010 is the rise-and-rise of India, and the recovery evident in the U.S. That leave only one “sick man” in the global economy, and that’s Europe.

Rare earths seem certain to be the hot sector for the first part of 2011 thanks to China imposing fresh export restrictions, and that means stocks such as Lynas, Arafura (ARU) and Alkane (ALK) will be worth watching. Lithium, with its growing market for advanced batteries, will also remain a market favourite and that will keep Orocobre (ORE), Reed (RDR) and Galaxy (GXY) on the radar screen, while zircon will stoke the fires under mineral sand miners such as Iluka and wanna-be miners such as Gunson (GUN) which has risen from A10.5 cents in early 2010 to a year-end close of A26.5 cents.

If there is a word of caution for 2011 it is volatility. Those price movements among the very junior stocks are both a delight and a warning. They’re a delight because it shows the potential capital gains available at the small end of town, and a warning because what goes up fast can sometimes come down even faster.

Minews. Apart from exotic commodities such as rare earths and lithium what’s the view in Australia of the conventional sectors?

Oz. Gold remains a firm favourite with an expectation that it will be testing US$1600 an ounce by next Christmas. For local producers the interesting question is whether continued strength in the Aussie dollar will absorb any future rise. Stocks to watch in the gold sector include Kingsrose (KRM) which has a few deals on the boil, CGA (CGX) which has its foot on a world-class copper/gold prospect in the Philippines via its control of the Canadian-listed Ratel Gold, and Troy Resources (TRY) which will make a full transition into a South American gold producer and catch the eye of North American investors.

Iron ore will remain strong in the first half, but there is a growing belief that supply is matching demand. Coal, especially metallurgical coal for steel making, will be in heavy demand, while copper will remain king of the base metals. Nickel does not look particularly exciting, but zinc seems to be moving steadily higher, largely because of concern about future supply shortfalls.

Takeover activity will certainly be worth watching, along with asset rationalisation moves in sectors such as iron ore. The Atlas-Giralia (AGO and GIR) merger is a taste of things to come with Brockman (BRM) and FerrAus (FRS) still in the sights of the curious Chinese bidder, Wah Nam. The next few months could also see resolution of the situation around Iron Ore Holdings (IOH) where a new chairman might be amenable to a deal with Rio Tinto or BHP Billiton.

Minews. Thanks Oz, good luck for 2011.


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## drillinto

Commodities predictions for 2011

http://money.cnn.com/2011/01/04/markets/commodities_gold_oil_predictions/index.htm

http://money.cnn.com/markets/storysupplement/investment_outlook/?iid=EL


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## drillinto

January 07, 2011

Too Much Of Some Things, Not Enough Of Others
By Rob Davies
www.minesite.com/aus.html (FREE REGISTRATION)

The New Year is an astronomical feature that is totally unrelated to capital markets. Indeed, it is not even the same moment in time across the world because of the earth’s rotation. Nevertheless, like a bench in the park opposite the duck pond, it provides a good opportunity to reflect on the forces at work in the economy and contemplate which ones might prevail.

In 2011 the same imbalances that dominated 2010 will still be there. Unlike the celebratory fireworks, debt in the Western World will not have disappeared in a puff of smoke.  Not only that but it is forecast to get worse. Even the IMF expects US debt, expressed as percentage of GDP, to rise to 73% in 2011. As a reference point it was only 47% in 2008. But that is not the scary part. By 2015 that institution is forecasting the figure to rise to 85%. And even that is not the end of the story because that figure just represents sovereign debt.  According to the website www.contraryinvestor.com US household debt as a percentage of GDP has risen at the end of each recession since 1961 from 40% to the current level of 100%.

That the US has too much debt is widely acknowledged. But it represents an attempt to maintain its living standards in a world that is seeing its economic centre of gravity shift eastwards. Quite what the implications of this debt burden are will keep economists chattering over their port for a very long time.   In simple terms it must mean that the US, still the world’s largest economy, must spend less and/or see its currency depreciate which will have the same net effect on demand. 

If the US, and much of the Western World, has too much debt the corollary is that someone else has else has an excess of savings. It is perhaps no surprise that China stands out as one of the world’s least indebted nations. Though to be fair it is hard to pin down a figure. The best estimates of its debt to GNP seem to be somewhere between 18 and 40%. Economist Nick Stamenkovic of RIA Capital thinks that is a reasonable range. Maybe if we knew the true figure the data for other countries would be less scary on the basis that if you don’t know how bad something is then it can’t frighten you, out of sight out of mind as the saying goes.  

What is known though is that China has a shortage of women because of its one child policy. According to Eduardo Porter in his book “The price of everything” by 2020 there will be 35% more men than women of marriageable age in China. To help their sons compete in this titanic battle of the sexes parents have pushed their savings rate up to 54% in a bid to make their offspring more attractive. That means Johnny Chinaman will be well placed to buy a car, flat and all the machinery that goes with them.  Nothing could be better for metal demand, and for some considerable time.

An unbalanced world is good for trade as those with funds buy goods and services from those without. That is one reason why China is forecast to grow by 9.6% in 2011 but the US by only 2.2% according to the IMF or 3.4% in the view of the OECD. In total the IMF expects world growth of 4.2% in 2011. While that is a little lower than the 4.8% estimated for 2010 it is still pretty healthy and will give commodities a good demand pull.  

World growth is vital to maintaining that demand for metals and, according to Eric Schmidt of Google, the key driver to economic activity is the spread of knowledge. In times past that came from books and in the Middle Ages towns that had printing presses grew 60% faster than those that didn’t. These days that information comes through the Internet and a measure of its desirability can be gained from the valuation of $50 billion put on Facebook at its most recent fund raising. By way of comparison that is just a tad more than the market cap of Xstrata. But that miner hasn’t got 500 million users. The problem is that Facebook is not popular in China and that could constrain growth in a country that is still essentially a command economy. While it is not a problem right now it could become a limiting factor in years to come. 

Until then the massive suction of demand from the East can only have a hugely positive impact on a mining industry that is already running at pretty much full capacity save for a few nickel and aluminium plants. Stockpiles remain at unprecedented low levels for this stage of a recovery and all the conditions are in place for a massive price squeeze.  Indeed, it is possible to argue to that even in the first week of the year the buying pressure is evident from copper trading at $9,600, aluminium at $2,460, lead at $2,650 and zinc at $2,414 a tonne.  Nickel is the only base metal not gaining in the first few trading days, but $24,800 a tonne is not a bad price for such a key component of stainless steel. 

Some experts, such as Goldman Sachs, predict copper could reach $11,000 a tonne and the consensus is that it will certainly breach $10,000. Price targets for other metals are not quite so aggressive but the tone is uniformly positive. There is of course a difference between reality and what makes the news. Mining companies are interested in the average price over the year because that determines their revenue. The press and investors tend to focus more on spot prices because they grab the headlines. The lack of easily visible spot prices for the bulk commodities like coal and iron ore is one reason why these commodities attract less attention. However, the sheer tonnage of these materials makes them the most important hard commodities by a long way.  

What the floods in Queensland, which has interrupted coal mining there, reminds us is that the whole industry is operating flat out. Like Heathrow airport there is just no fat in the system. Any hiccups, whether natural disasters or political instability such as in the Ivory Coast, will restrict supply and send prices even higher than those forecast by sensible people in comfortable offices in London.  

Underlying these forecasts are the basic imbalances in the world economy: There is too much debt in the West, lots of savings in the East and not enough mining capacity to supply the metal needed by these new consumers whose appetite for goods is fuelled by the Internet.


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## drillinto

January 08, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html  [Free registration]


Minews. Good morning Australia. How did your market start the year? 

Oz. It was patchy. There were a few stars, but most of the indices were down. Gold companies were hit hardest, after last week’s US$20 an ounce slide in the gold price. Coal companies held up remarkably well considering the negative publicity over the floods in Queensland’s coal country. Iron ore was mixed, base metals firmed modestly, and rare earths continued to attract plenty of hot money.

Minews. Let’s start the first call of the year with the stars, to brighten the day for our readers. 

Oz. Good decision, because the overall picture is not terribly exciting. The key market index, the all ordinaries, closed the week down a fraction under one per cent. The metals and mining index was down a shade under two per cent, and the gold index lost 4.6 per cent, even allowing after the fall in the gold price was cushioned by a corresponding retreat in the US dollar exchange rate, a fall which took the Aussie dollar back below parity. 

Within that gloomy picture in the background, it was possible to find solid performers in each sector, even in zinc which seems slowly to be waking. The best of the copper companies was the very well connected Red Metal (RDM), a business led by Joshua Pitt, who’s been a significant player in past Australian mining booms. Red’s share price jumped by A9 cents to A26 cents in surprisingly busy trade for a normally quiet company, especially as there was nothing fresh reported from its flagship Walford Creek project, located near Mt Isa in Queensland. Josh has always played his cards very close to his chest, so Red might be a company to watch in coming weeks. 

The other copper “star” of the week was that old favourite, Bougainville (BOC) which continues to attract speculative interest on rumours that a return to one of the world’s biggest mothballed copper mines might be on the cards, 22 years after the company was driven off the Papuan island of Bougainville. Last week, Bougainville added A23 cents to A$2.02, but did trade up to a 12 month high of A$2.20 on Tuesday, when its market capitalisation came within a whisker of A$900 million, a high value for a company with one abandoned copper mine that’s likely to cost billions of dollars to re-develop. 

Minews. Interesting moves. Now let’s look at the stars in the other sectors, before switching across to our normal call of the card. 

Oz. The best of the coal companies, perhaps as a beneficiary of Australia’s coalfield floods, was Coal of Africa (CZA) which added a sharp A31 cents to A$1.71. Best of the zinc companies was Meridian (MII), which is re-developing the mothballed Lennard Shelf mines in the north of Western Australia. Meridian added A3 cents to A14 cents. Rare earth companies that performed well included China Yunan (CYU) and Goldsearch (GSE). These two companies are in joint venture over the Mt Dorothy project near Mt Isa, and have just reported promising assays from drilling there. Shares in both companies doubled in price over the week. China Yunan added A18 cents to A35.5 cents, and Goldsearch rose by A3.6 cents to A6.1 cents. 

Gold, despite having an overall down week, had a few stars. Pick of the gold companies was Beadell Resources (BDR), which reported fresh drill hits from its Tropicana East project, including 19 metres at 12.1 grams a tonne from a depth of just 32 metres, and five metres at 39.7 grams a tonne from 41 metres. On the market, Beadell added A9 cents to A76 cents, but did reach a 12 month high of A79.5 cents on Thursday. Elsewhere, Crusader Resources (CAS) added A9 cents to A$1.27 thanks to continued encouraging drill results from its Borborema project in Brazil. 

Minews. Time for the sectors, and since gold got the last mention why not start there, even if it was a down week. 

Oz. Not pretty, with only a handful of companies joining Beadell and Crusader in the black. Medusa (MML) was one of those, putting in an eye-catching A24 cent rise to close at A$6.71. Adamus (ADU) added A4 cents to A85 cents, as construction steams ahead at its Nzema project in Ghana. Focus (FML) also managed to swim against the tide, just, with a rise of A0.1 of a cent to A5.4 cents. After that, it was all red ink. Fallers included Avoca (AVO), down A27 cents to A$3.25, Ampella (AMX), down A48 cents to A$2.85, Silver Lake (SLR), down A25 cents to A$2.12, Integra (IGR), down A8.5 cents to A63 cents, Gold Road (GOR), down A3.5 cents to A34.5 cents, Catalpa (CAH), down A12 cents to A$1.85, and CGA (CGX), down A25 cents to A$2.84. Also weaker was Troy (TRY), down a modest A3 cents to A$2.95, and Gryphon (GRY), down an even more modest A1 cent to A$1.79. 

Minews. Base metals next please, with a bit of extra coverage of the zinc companies, which seem to be attracting attention. 

Oz. Abra (AII) was the second best of the zincs after Meridian, briefly trading at a 12 month high of A28 cents before retreating back to A25 cents. The company has been asleep for so long, and on many days has attracted no sales whatsoever, that Friday’s rise was eye-catching indeed. Elsewhere, Perilya (PEM) continued its slow recovery, adding another A3.5 cents to A62.5 cents, which puts it back to where it was 12 months ago, but well ahead of its low of A36.5 cents reached in July. Other zinc moves were less interesting. Kagara (KZL) added half a cent to A81.5 cents, and Bass (BSM) and Terramin (TZN) slipped a few cents lower to A37 cents and A47.5 cents respectively. 

Minews. Not much to write home about there. Are you sure there’s a zinc revival underway? 

Oz. That’s the chatter among some brokers, though perhaps because they simply reckon a rebound is overdue. Meanwhile, copper remains the most active of the base metals, though most moves last week were modest either way. After Red and Bougainville the best of the copper companies was Equinox (EQN), up A9 cents to A$6.08. On the other side of the slate, Sandfire (SFR) dropped A22 cents to A$7.89, Rex (RXM) dropped A4 cents to A$2.89, OZ (OZL) dropped A3 cents to A$1.72, Marengo (MGO) dropped A1.5 cents to A38.5 cents, and Discovery (DML) dropped A4 cents to A$1.38. 

Nickel companies were equally mixed. Western Areas (WSA) led the way up with a rise of A26 cents to A$6.23. Panoramic (PAN) led the way down, with a fall of A18 cents to A$2.39. Other nickel movers included Mincor (MCR), down A2 cents to A$1.86, Mirabela (MBN), up A2 cents to A$2.30, and Minara (MRE), down A3 cents to A93 cents. Independence (IGO) posted a sharp fall of A42 cents to A$7.53, but that was almost certainly gold-related. 

Minews. Iron ore and coal next, please. 

Oz. There wasn’t much movement in either sector. Brockman Resources (BRM), one of the targets of the mysterious Hong Kong taxi-hire firm, Wah Nam International, did best, putting in a rise of A35 cents to A$5.25. FerrAus (FRS), which is also in Wah Nam’s sights, added A3 cents to A93 cents. Murchison Metals (MMX) rebounded after a few down weeks with a rise of A16 cents to A$1.42, while Atlas (AGO) added A8 cents to A$3.03 after reporting a strong cash balance from iron ore sales. Other movers included Iron Ore Holdings (IOH), up A5 cents to A$2.25, Gindalbie (GBG) down A3 cents to A$1.36, Fortescue (FMG), up A3 cents to A$6.57, and Sherwin (SHD), down A1 cent to A20 cents. 

The coal companies, as mentioned, held up well in the face of negative publicity over flood-caused export delays. Macarthur (MCC), added A42 cents to A$13.22. Aston (ATZ) rose by A12 cents to A$8.17, and Bathurst (BTU) put on A4 cents to A78.5 cents. On the negative side, Stanmore (SMR) slipped A1 cent lower to A$1.38, and Kangaroo (KRL) lost A1.5 cents to A18.5 cents. 

Minews. Uranium and minor metals to close. 

Oz. It was a mixed bag in the uranium sector, but most moves were in any case modest. Uranex (UNX) ran out of steam after a powerful pre-Christmas run, losing A12 cents to A69 cents. Manhattan (MHC) added A3 cents to A$1.39. Extract (EXT) slipped A9 cents lower to A$9.31, and Berkeley (BKY) closed the week at A$1.72, A1 cent lighter. 

Rare earths were the pick of the minor metals, as China Yunan and Goldsearch led the way up. On the flipside, Lynas (LYC) was sold down quite sharply, though, and dropped A14.5 cents to A$1.91. Alkane (ALK) was also weaker, down A1.5 cents to A98.5 cents. Tin and zircon companies also eased back. Venture (VMS) lost A2 cents to A50.5 cents, and Gunson (GUN) shed A4 cents to A25 cents. 

Minews. Thanks Oz. 

Oz. And thank you London for not mentioning the cricket.


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## drillinto

Commodities are not done yet

http://online.barrons.com/article/SB50001424052970204455304576073962453091194.html?mod=BOL_da_gt


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## GumbyLearner

*Why the world is teetering on the brink of agflation*
by Sarah Miloudi

The price of key agriculture commodities jumped in the second half of 2010, sparking fears of a repeat of the global food crisis that struck two years ago, triggering political and economic instability in a string of developing countries.

The catalyst of this sudden jump in prices is still up for debate, however the consequences are far from ambiguous: elevated soft commodity prices combined with the growth of the world’s population, climate change and a shift in bio fuel consumption will ultimately drive up food inflation, experts believe.
The price hikes have already begun

Jim Wood-Smith, head of research at stockbroker Williams de Broe, argues that food price inflation may already be with us.

http://citywire.co.uk/wealth-manager/why-the-world-is-teetering-on-the-brink-of-agflation/a462737


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## GumbyLearner

Don't go hard, go soft.

http://www.cattlenetwork.com/Food-I...est_News.aspx?oid=1299095&fid=CN-LATEST_NEWS_

Profitability always makes a business outlook brighter, and if you’re in the cattle or hog business today, your mood is probably brighter than it has been for a few years. Yet, there are plenty of concerns that may keep you awake several nights this year.

Better prices for cattle and hogs are directly related to smaller inventories. Hog producers, for instance, have reduced their inventories to 64.3 million, according to USDA’s quarterly Hogs and Pigs report released Dec. 27, 2010. That’s a decline of one percent from the previous year, and two percent from Sept., 1, 2010. The number of market hogs was also reported down one percent from 2009, and two percent from Sept. 1. The declining inventory has boosted prices, and producers expect modest profit in 2011.

The U.S. cattle herd has also shown signs of declining inventories. USDA will release its January 1, 2011, inventory numbers on the 28th of this month, but most industry analysts expect the numbers will be down another one percent from last year.

Oklahoma State University economist Derrell Peel told Drovers/Cattlenetwork this week he expects the beef cow herd to total about 31.1 million head, which would be the lowest beef cow inventory since 1963. The number of cows and operations both have seen decline for 35 years.

Fewer cows and fewer feeder cattle contributed to rising prices during the last half of 2010, and early 2011. And strong export demand has fueled a rally in fed cattle prices early this year. The declining inventory has meant better prices, yes, but the long-term effect of a significantly reduced cow herd has many analysts concerned. 

*India Will Buy Onions From Pakistan, Keep Lentil Export Ban to Slow Prices*

http://www.bloomberg.com/news/2011-...r-singh-bans-onion-exports-boosts-supply.html

India will import 1,000 metric tons of onions and keep a ban on exports of edible oils and lentils to slow inflation.

The benchmark wholesale-price index rose 8.43 percent in December from a year earlier after a 7.48 percent gain in November, according to a commerce ministry statement in New Delhi today. The median forecast of 30 economists in a Bloomberg News survey was for an 8.4 percent increase.

The arrival of onions, a key ingredient in local cuisine, from Pakistan will help check price gains, according to a statement from the Indian prime minister’s office yesterday. Reserve Bank of India Governor Duvvuri Subbarao may join counterparts in South Korea and Thailand in raising borrowing costs this month to curb inflation.

“Policy makers are firing on all cylinders to contain inflation,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. “The RBI may likely hike rates this month.”


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## GumbyLearner

Take that on the chin yanks.

http://news.theage.com.au/breaking-...-prices-up-05-in-december-20110115-19rj5.html

Ignore your family budget and what's left in your wallet? 

Just vote for change!


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## drillinto

January 15, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]


Minews. Good morning Australia. It seems as if your stock market has taken the Queensland floods in its stride. 

Oz. That’s an interesting point because while the human suffering has been high the reality is that the floods are a routine business phenomena, given that flooding occurs at regular intervals in that part of the world. The reaction of coal companies is the perfect example. While newspapers focussed on the force majeure declarations of some exporters the share prices of all the coal companies we follow rose during the week – thanks to the force majeure cuts which pushed the price of coal higher.

Minews. Tough world, isn’t it? 

Oz. It is, but that’s business. Overall, the Australian market had a fairly good week. The all ordinaries added two per cent. The minerals and metals index rose by 2.5 per cent, while the gold index was the weak link, creeping just 0.2 of a per cent higher following the fall in the gold price. Further share price falls for our gold companies can be expected on Monday, as the gold price dropped quite sharply after our Friday close. As has been the case in recent weeks we had a number of very strong companies, even in weak sectors, with the exception being zinc which just can’t develop any traction for a sustained recovery. 

Minews. Let’s start with gold, as that seems to be attracting the closest attention. 

Oz.  Most gold companies managed to gain ground, which raises a question over that very small rise in the gold index. The gold index was held back because Newcrest (NCM), easily the biggest Australian gold producer, slipped by around one per cent to A$38.29, a fall linked to its exposure to the troubles in Ivory Coast where it now runs the Bonikro mine. If you shift Newcrest to one side it’s arguable that the overall gold sector was up by the same percentage as the metals and mining index, around two per cent. 

Top of the gold heap last week was an old friend of Minesite, Medusa Mining (MML), which earned a speeding ticket from the ASX after an A81 cent rise to A$7.52. Along the way, on Thursday, it hit a 12 month high of A$7.71. Naturally, management knew of no reason for the price spike, but a move like that at a time when the gold price is a bit wobbly smells of corporate activity. 

Kingsrose (KRM), which has a similar appearance to the Medusa of a few years ago, in that its working a high-grade epithermal vein system in the tropics, also hit a 12 month high, adding A16 cents to A$1.54. Noble Mineral Resources (NMG), one of the new players in West Africa, also performed well, adding A13 cents to A71 cents, after briefly setting a new high of A73 cents, following an excellent  set of assays from its Bibiani project in Ghana. Elsewhere, Elemental (ELT) gained A7 cents to close at a fresh 12 month high of A39 cents as interest grows in its La Puerta discovery in Argentina. Dragon Mining (DRA) reported a solid resource upgrade at its Kuusamo project in Finland, adding A10 cents on the market to close at A$1.70. YTC (YTC), reported bonanza grade assays from its Hera project in New South Wales, rising by A4.5 cents to A57 cents, and PMI (PVM) made its first solid upward move after a lacklustre listing late last year, rising by A9 cents to A65 cents on the strength of good drill results from Ghana. 

Most other moves were modest either way. Gains were posted by Gryphon (GRY), up A9 cents to A$1.88, Avoca (AVO), up A10 cents to A$3.35, Resolute (RSG), up A9 cents to A$1.47, Catalpa (CAH), up A12 cents to A$1.97, Nyota (NYO), up A3 cents to A46.5 cents, and Ampella (AMX), up A8 cents to A$2.93. Losses were posted by Silver Lake (SLR), down A2 cents to A$2.10, Sirius (SIR), down A1 cent to A30 cents, Crusader Resources (CAS), down A10 cents to A$1.17, and Adamus (ADU) down A3.5 cents to A81.5 cents. Also weaker was Reed Resources (RDR), which fell A8.5 cents to A66.5 cents after taking the courageous step of buying the Meekatharra gold project which has broken the back of at least five previous owners, including the London-listed company formally known as Mercator Gold. 

Minews. You think Reed might be taking a step too far? 

Oz. The jury is out, but going back into gold when you seem to be doing well with a lithium project and a re-emerging vanadium project, might be a stretch for a small company. 

Minews. The fuel twins, coal and uranium next, please, as they seem to be heating up. 

Oz. Coal companies did well, following the flood-induced export cuts, while uranium companies benefited from a US$3.00 increase in the spot uranium price to around US$66 per pound. Aspire (AKM) was the best of the coal companies after it reported a fresh discovery in Mongolia. It rose A14 cents to a 12 month high of A61.5 cents. Bathurst (BTU), the New Zealand coking coal developer, rose A10 cents to A88.5 cents, but did hit a 12 month high of A91 cents during Friday trade. Other coal movers included Coalworks (CWK), up A12 cents to A90 cents, Carabela Resources (CLR), up A25 cents to A$1.39, Aston (AST), up A20 cents to A$8.39, Coal of Africa (CZA), up A8 cents to A$1.79, and Continental Coal (CCC), up A0.6 of a cent to A8.7 cents. Riversdale (RIV) was the only major coal company to lose ground, shedding A29 cents to A$16.48 as reports surfaced that Rio Tinto might drop its takeover bid. 

Most uranium companies rose, and those that didn’t were steady. Pick of the pack was Northern Uranium (NTU), which jumped A14 cents to a 12 month high of A53.5 cents, though interest was perhaps driven by its growing exposure to rare earths. The oddly-named U3O8 (UTO) also set a new high of A21 cents on Friday, before closing up A2.5 cents at A20 cents. Berkeley (BKY) shook off uncertainty about its deal with a Russian suitor, rising by A10 cents to A$1.82. Uranex (UNX) resumed its upward movement with a rise of A4.5 cents to A73.5 cents. Deep Yellow (DYL) also put on A4.5 cents to end the week at A36.5 cents, and Greenland Minerals (GGG) rose by A6 cents to A$1.28. 

Minews. Iron ore next, please. 

Oz. Like the other sectors, iron ore had a few stars that shone, amid a general upward trend. The stand-out performers, reaching new 12 month highs, were Northern Iron (NFE), the Norwegian magnetite exporter, which added A13 cents to A$1.91, and BC Iron (BCI), which is getting ready to make its first shipment of ore to Asian, and rose by A29 cents to A$3.15. African Iron (AKI) delivered a strong performance after re-listing with an old Cape Lambert asset as its centrepiece, and added A18 cents to A42 cents. Equatorial Resources (EQX), another of the Australians making waves in the African iron ore sector, delivered a sharp A60 cent rise to A$3.95, while and FerrAus (FRS), one of the takeover targets of the mysterious Wah Nam International (WNI) gained A11 cents to A$1.04. 

Wah Nam was also the focus of the news event of the week, copping a stop order from the Takeovers Panel in regard to its second target, Brockman Resources (BRM). A preliminary finding from the Panel found that companies associated with Wah Nam might have breached the Australian Takeovers Code. A full hearing is scheduled for the next week. On the market, Brockman added A5 cents to A$5.30. Other iron ore movers included Iron Ore Holdings (IOH), up A4 cents to A$2.29, Atlas (AGO), up A26 cents to A$3.29, Giralia (GIR) up A40 cents to A$4.88, and Fortescue (FMG), up A28 cents to A$6.85. 

Minews. Base metals and minor metals to finish. 

Oz. Base metal stocks were flat, but minor metals continued to generate excitement, especially the rare earths. Among the coppers there was one outperformer, Hot Chili (HCH), which shot up to a 12 month high of A58.5 cents on Friday before closing the week at A54 cents, for an overall gain of A3.5 cents. Other copper companies to rise included OZ Minerals (OZL), up A4 cents to A$1.73, Discovery Metals (DML), up A3 cents to A$1.41, and Resources and Investment (RNI), up A5 cents to A$1.12. Fallers included Altona (AOH), down A2 cents to A44 cents, Equinox (EQN), down A16 cents to A$5.92, Sandfire (SFR), down A10 cents to A$7.79, and Bougainville (BOC), down A3 cents to A$1.99. 

Nickel companies did slightly better. Western Areas (WSA) reported strong production numbers for 2010, and added A46 cents to A$6.69. Mincor (MCR) continued its slow recovery, putting in a rise of A5 cents to A$1.91. Panoramic (PAN) rose A10 cents to A$2.49, and Independence (IGO) gained A21 cents to A$7.74. 

Zinc went nowhere, as we’ve already mentioned. Most moves were a cent or two either way. Meridian (MII) lost A1 cent to A13 cents. Bass (BSM) rose half a cent to A37.5 cents, and Perilya (PEM) lost A2.5 cents to A60 cents. 

Arafura (ARU) was the top rare earth company after it reported on higher market prices for its cocktail of odd metals, adding A15 cents to A$1.56. Lynas (LYC) rose A12 cents to A$2.03, and Alkane (ALK) went back over the A$1.00 mark to end the week at A$1.06, up A8 cents. 

The handful of platinum companies listed on the ASX reacted positively as platinum rose through the US$1800 per ounce barrier. Platinum Australia (PLA) added a sharp A18.5 cents to A80 cents, and Zimplats (ZIM) put on A45 cents to A$15.20. 

Minews. Thanks Oz.


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## drillinto

January 17, 2011

Sell Copper, Buy Gold
By Rob Davies 
www.minesite.com/aus.html

Anyone who felt optimistic, after the year started with a good rally in commodity and equity markets, only needs two hours with the Cross Asset Research Team of SociÃ©tÃ© GÃ©nÃ©rale to feel quite different.

In a densely packed presentation the three man team, led by Albert Edwards, has detailed exactly how big the bubble of the Chinese economy is, and how bust Western Governments, and the banks they own, really are. 

They argue that all emerging markets are overvalued, but that the boom in China is of an order of magnitude different because of its sheer scale. As an example, they quote the 800 per cent increase in land prices in Beijing in the last seven years. A key reason for that price increase is that Chinese interest rates are a third of what they should be for an economy growing at 15 per cent. 

Instead the authorities in China are trying to soak up the massive increase in foreign exchange reserves, arising from its artificially depressed currency, by a massive infrastructure spending boom. At 60 per cent, that level of investment relative to GDP is unprecedented and unsustainable. In addition, bank lending is simply out of control.  

The whole economy is like a train speeding downhill with a wobbly wheel. You know a crash will happen, you just don’t know when. The consequences of such a crash will be dire for bulk commodities and base metals, especially copper, and will have a major impact on countries like Australia. 

But until then, despite a freak economy, it is about the only game in town - so hang on but be ready to jump. Oh, and one other thing. The demographic time bomb of a rapidly ageing population is far worse in China than it is in either the US and Japan. And they are horrific enough in those two countries. 

This increase in the average age of the populations of the world’s largest economies underlies SocGen’s positive view on gold. Although they didn’t actually come out and say buy the yellow metal. Everyone knows that sovereign debt has exploded in recent years, and that most countries have debt to GDP ratios of close to 100 per cent. 

What these economists have done is add in the other liabilities, such as healthcare and pensions. Then the figures look truly scary, as debt to GDP in many countries, including the US, shoots up to around 500 per cent. 

And everyone knows, too, that politicians will not honour these obligations, and the only option that will avoid triggering riots is to monetise the debt through inflation. As always, history is a great guide to what might happen. One fascinating graph the SocGen boys present charts the reduction in the silver content of Roman coins from over 90 per cent in the year AD 64 to about five per cent by the reign of Claudius II in 268. 

These days they call it Quantative Easing but the effect is the same. Governments defraud savers, as the value of savings is eroded and wealth is transferred from savers to borrowers who can’t afford to repay their obligations. In the modern world that means home owners and governments.  

Another telling slide makes the point that Japanese tax revenues do not even cover its non-discretionary expenditure like debt servicing, social security and education.  Inflation is the only way that Japan, and most of the other governments, will be able to bridge that gap. Someone described gold as a hedge against the stupidity of politicians. It looks as if that case has now been well and truly been proven. 

This rather depressing snapshot of the world may be too gloomy for some. Indeed, these problems many not come to a head for years, or even decades. But to ignore them altogether may not be very sensible. You have been warned.


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## drillinto

The latest commodity snapshot

http://www.bespokeinvest.com/thinkbig/2011/1/20/bespokes-commodity-snapshot.html


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## drillinto

January 22, 2011

That Was The Week That Was ... In Australia 
By Our Man in Oz
Source: www.minesite.com/aus.html [FREE REGISTRATION]


Minews. Good morning Australia. It looks like you had a tough week. 

Oz. It was certainly tough for most of the miners, but there was also the odd outbreak of optimism, just to show that the speculative spirit is alive. All of the major indices ended down. The gold index was hit hardest, and shed 4.4 per cent. The metals and mining index dropped by three per cent, and the all ordinaries held up rather well, losing just one per cent.

Minews. Apart from the gold price weakness, was there any other reason for the sell-off? 

Oz. China worries seem to be a factor across all sectors. Despite the strong growth figures still coming out of China, there is concern that the government over there will soon crack down on inflation by means of further interest rate rises and reduced bank lending. If that happens it might dim demand for Australian exports. The Queensland and Victorian floods also had a negative effect on sentiment, but the financial cost seems manageable, even if it leads to a one-off tax levy to raise A$20 billion, or so. 

Minews. Enough of the big picture, let’s have some prices. 

Oz. Right. Good news first, fallers later. That way our London readers will be starting out with a look at the smaller companies which caught the eye of traders down this way, and there was quite a selection. 

Minews. Good news is always welcome. Let’s hear it. 

Oz. The prize for biggest rise of the week went to Mt Isa Metals (MET) which at one stage came close to doubling as the shares ran up from A48 cents to a 12 month high of A80 cents during trading on Friday. Mt Isa eventually closed the week at A70 cents, a gain of A22 cents, a rise that following in the wake of a a suite of excellent assays from its Nabanga gold project in Burkina Faso. The best result, reported on Thursday, was eight metres at 14.01 grams a tonne from a depth of 26 metres, followed by three metres at 24.62 grams per tonne from 59 metres. Gold mineralisation of more than 0.5 grams per tonne has been noted over a 3,600 metre line of strike, with the average coming in at 4.6 metres grading 5.66 grams per tonne. 

Minews, Impressive results. Did they get much coverage in your news media? 

Oz. Barely a mention. Only a couple of trade publications picking up the story, which is interesting for a number of reasons. The company itself is approaching the A$100 million market capitalisation level, and it has skilled management led by John Bovard, an old hand who some of your readers might remember as the man in charge, in its early days, of the Kalgoorlie Superpit gold mine, and then later on, at Greenwich Resources. 

Minews. Indeed. What else is going on? 

Oz. Other stocks which do not often get a mention in the mainstream investment media, but which did well last week, included two coal explorers, Attila Resources (AYA) and Universal Coal (UNV). Atilla only listed late last year, with coal in Western Australia as a target, but this week it jumped A16 cents higher to A77 cents, and did get as high as A80 cents on Friday, double its opening day price on December 8th. Universal Coal, meanwhile, is the latest Australian explorer to try its luck in South Africa’s coalfields, and added A11.5 cents to A57 cents. 

The gold explorer which caught the eyes of traders, though we are yet to discover why, was Jaguar Minerals (JAG), which effectively doubled from A2.6 cents to A5 cents. Jaguar has projects across Australia, and at the moment its Mt Darlot joint venture with Barrick Gold looks the most promising. Among the other upward movers was Atomic Resources (ATQ), which is looking for gold and uranium in Tanzania. It added A4 cents to A57.5 cents. Also better off was Voyager Resources (VOR), which is exploring in Mongolia, and which rose by A3.5 cents to A55 cents, but did trade up to A66 cents on Friday. Elsewhere, Uramet (URM), which has switched its focus to gold in the South American country of Guyana, put on A1.5 cents to A17 cents, a 12 month high. Sovereign Gold (SOC) added A3.5 cents to A24.5 cents after completing its first drill hole in the historic Rocky River-Uralla goldfield in New South Wales, but with no assays to report yet. And one of Minesite’s old favourites, Scotgold (SGZ), shot up by A2.8 cents to A9.6 cents after reporting encouraging assays from its Auch project in Scotland which, fortunately, lies outside the national parks which stopped its flagship Cononish project last year. 

Minews. Thanks for that burst of good news, which probably took a bit of prospecting on your part. 

Oz. It did, but the results were worth it because they showed that hidden gems can always be found in the market if you look hard enough. A couple of other risers also merit a mention, because their share price movements, courtesy of speculators, could be pointers to future news. Prairie Downs (PDZ), one of the lost souls in the sickly zinc sector, attracted a bit of attention and put in a sudden upward move to a 12-month high of A25 cents on Friday. At the close it had slid back to A18.5 cents, for a gain over the week of A1.5 cents. Meanwhile, one of Minesite’s quieter members, Sabre Resources (SBR) recovered recently lost ground with a rise of A4 cents to A22 cents, but did trade as high as A24 cents on Friday, perhaps due to a revival of interest in its Namibian copper exploration project.. 

Minews. I think we’re now sufficiently softened for the bad news. Let’s start the call of the card, starting with gold. 

Oz. Apart from Scotgold’s revival there were only three other gold companies that finished in the black, alongside one interesting producer which held its ground. Ampella (AMX) managed a rise of A3 cents to A$3.00. Silver Lake (SLR) recovered recently lost ground, and delivered a rise of A8 cents to A$2.18. Thor (THR) also continued to recover, putting on A0.3 of a cent to A4.7 cents. Apex (AXM), which almost disappeared from view thanks to trouble at processing plants in Western Australia, held its ground at A2.6 cents after reporting increased resources at its Wiluna mine, production of 19,500 ounces of gold in the December quarter, and a 30 per cent fall in costs to A$890 an ounce. 

Now for the falls. Adamus (ADU) fell A6 cents to A75 cents, despite pouring first gold at Nzema. Kingsgate (KCN) fell A59 cents to A$10. Resolute (RSG) fell A3 cents to A$1.44. OceanaGold (OGC) fell a sharp A38 cents to A$2.88. Newcrest (NCM) fell A$1.58 to A$36.71, in the wake of problems at three of its mines. Gryphon (GRY) fell A23 cents to A$1.65. Perseus (PRU) fell A17 cents to A$2.95. Kingsrose (KRM) fell A9 cents to A$1.45, and Medusa (MML) fell A36 cents to A$7.19. 

Minews. Time’s short. Let’s move quickly now, with base metals next. 

Oz. Apart from the rise from Sabre, which we mentioned earlier, there were only two copper companies that gained ground. Rex Minerals (RXM) rose by A23 cents to A$2.97, but did get as high as A$3.12 on Wednesday. And Exco (EXS) added A1 cent to A52.5 cents. After that there was a long list of fallers, led by Sandfire (SFR), down A43 cents to A$7.36, Bougainville (BOC), down A22 cents to A$1.77, OZ Minerals (OZL), down A6 cents to A$1.67, Altona Mining (AOH), also down A6 cents to A38 cents, and Marengo (MGO), down A3 cents to A34.5 cents. 

All nickel companies fell. Mincor (MCR) fell A6 cents to A$1.85. Panoramic (PAN) fell A11 cents to A$2.37. Western Areas (WSA) fell A24 cents to A$6.45, and Independence (IGO) fell A71 cents to A$7.01. 

All zinc companies, apart from Prairie Downs, also lost ground, but not much, which is what you might call an interesting negative. Meridian (MII) was down A1.5 cents to A11.5 cents. Ironbark (IBG) fell by A2.5 cents to A27.5 cents, while Perilya (PEM) and Bass (BSM), both slipped half-a-cent lower to A59.5 cents and A37 cents respectively. 

Minews. Iron ore next, please. 

Oz. Mainly down, but with a few handy rises. Best performers were BC Iron (BCI) and Grange Resources (GRR). BC Iron accepted a takeover bid from Hong Kong’s Regent Pacific Group, and added A13 cents to A$3.28. Grange Resources reported strongly profitable production from its Savage River mine in Tasmania, and rose by A7.5 cents to A85 cents. The fallers were led by Fortescue (FMG), which fell A36 cents to A$6.69 following the exit from its share register of Singapore’s sovereign wealth fund, Temasek. Other movers included Iron Ore Holdings (IOH), down A4 cents to A$2.25, Mt Gibson (MGX), down A5 cents to A$2.14, and Brockman (BRM), down A30 cents to A$5.00. Moly Mines (MOL) also fell, down a sharp A26 cents to A$1.16, after it hit fund-raising problems 

Minews. Now for the fuel twins, coal and uranium. 

Oz. Coal remained popular with local investors, and uranium should have done better as the spot price is now up to US$68 a pound. Among the coal companies Aspire (AKM) continued to rise, adding A12 cents to A73.5 cents. Aston (ATZ) rose A16 cents to A$8.55. Carabella (CLR) shot up by A23 cents to A$1.62. Coalworks (CWK), added A3.5 cents to A94 cents, and Bathurst (BTU) put on A16 cents to A$1.04. The only significant decline came from Coal of Africa (CZA), which lost A19 cents to A$1.60. 

Uranium companies failed to respond to the higher spot market, though most falls were modest. Berkeley (BKY) slipped A3 cents lower to A$1.79. Manhattan (MHC) lost A4 cents to A$1.38. Uranex (UNX) was A4.5 cents weaker at A69 cents, and Paladin (PDN) did worst of all with a drop of A37 cents to A$5.04 after it reported an expected production shortfall. 

[To comply with ASF article length requirements, I have deleted five lines on minor metals]

Minews. Thanks Oz for finding a positive spin on a poor week.


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## GumbyLearner

2011- Year of the Rabbit

*Key China wheat growing province hit by drought*

(AP) – 2 hours ago

BEIJING (AP) — China's key wheat growing province of Shandong is facing its worst drought in at least 40 years, putting further pressure on politically sensitive food prices that have been surging for months.

Drought has hit more than half of the land in the province normally used to grow wheat — about 5 million acres (2 million hectares) — and that number is rising, according to a notice posted Monday on the provincial water bureau's website.

Many areas have seen no precipitation in four months, and 872,263 acres (353,000 hectares) of spring wheat has already dried up or is beginning to fail, it said. More than 240,000 people and 107,000 head of livestock already have lost access to drinking water and are forced to rely on deliveries from fire trucks.

Unusually dry conditions have spread across much of China's northeastern bread basket, including the provinces of Henan, Shanxi, Hebei, Jiangsu and Anhui. The capital Beijing has yet to receive snow this winter, although water supplies have not been affected.

Dry weather and higher-than-average temperatures are forecast well into spring. Scientists say it is a result of the La Nina effect that is also responsible for the harsh winter weather still gripping large parts of China's south.

Premier Wen Jiabao drew attention to the potential drought disaster with a weekend visit to Henan, where he called on local officials to make greater efforts to assist farmers.

Not only do hundreds of millions of Chinese rely on farming to make a living, but good harvests are crucial to keeping meat, grains and vegetables affordable for the vast majority of lower-class Chinese who spend one-third or more of their income on food.

Rising food prices sent the inflation rate to 4.6 percent in December after hitting a 28-month high of 5.1 percent the month before. That put inflation for the full year at 3.3 percent amid blockbuster 10.3 percent economic growth.


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## drillinto

January 24, 2011

A Tightening Of Reporting Standards Is Required To Help Investors Avoid The Geese That May Never Fly
Source >> www.minesite.com/aus.html

David Hall, executive director of Stratex, and non-executive chairman of Horizonte Minerals, argues in favour of a more rigorous application of reporting standards to help investors sort the geese from the swans.

At the end of last year, Charles Wyatt wrote, here on this website, that demand for metals and minerals should stay high in 2011, and that as a result, there would likely be a spate of takeovers and new listings. He sounded a word of warning, too, though. “A number of these IPOs will be geese dressed as swans in order to maximize profits for the founders in the shortest possible time. Investors who avoid the geese; are wary of rare earths; and keep a look-out for political risk should make money in 2011”. 

I believe there should be some fundamental changes in reporting to help investors with only a modicum of knowledge of the mining sector to work out which projects will truly fly as swans. The application of reporting standards does help, yet these for the inexperienced are hard to follow mainly because of the science/rationale behind them. 

In my view there are three ways to improve the situation, and to show the pitfalls that may arise for investors: outlawing the use of metal equivalents, providing greater clarity in results as to the relative breakdown of oxide, transition, and sulphide ore, and the restricting the application of economic studies to inferred resources. 

Assays released by companies as metal-equivalents are misleading and can imply a greater value than the true value. Using silver to make gold-equivalents and gold to make copper equivalents does not necessarily show true economic potential. Why?  Because metallurgical recoveries can vary dramatically from deposit to deposit. Quoting a gold-equivalent based on silver and gold can be misleading if gold recoveries are 90% but silver only 50%.  Likewise with copper-equivalents, whether it is a gold-copper-moly system or copper-gold only, the recoveries are highly unlikely to be the same. 

But for many projects at the exploration results stage, metallurgical recovery information may not be available. That’s why the JORC code states that “for many projects at the exploration results stage, reporting in terms of metal equivalents may not be appropriate”. My view is that it is not appropriate. 

Next to assist in the evaluation process is the breakdown of results into oxide versus sulphide. As we know in the industry, there can be a huge difference in the metallurgy, the recoveries and the costs depending on whether you are dealing with an oxide ore or a sulphide ore.  This is especially true of gold systems. 

Many sulphide gold ores are refractory, or at least considerably more costly. It is standard to log bottom of oxide, and top of sulphide when logging drill core, and given that this is a matter of material importance to the viability of any mineralised system, this should be reported.  The Pan-European Reserves And Resources Reporting Committee (PERC) code does state in reporting of exploration results that “should indicate the variability of each important mineral within the deposit”. Surprisingly, though, the reporting of oxide versus sulphide is not a categorical clear requirement under current reporting standards, although in practice most gold companies do differentiate when they are reporting. 

Lastly, there should be a far more rigorous approach to the application of scoping studies on inferred resources. Time after time we read of companies undertaking scoping studies using assumptions that would be far more appropriate for reserves, but applying them instead to inferred resources that may never even convert or at least only in part to indicated and measured resources, let alone reserves. Inferred resources are that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. 

The PERC Code states: “inferred mineral resources may only be included in mine design, mine planning and/or economic studies provided that there exists a mine plan and a statement of mineral reserves”. 

It goes on to state: “for avoidance of doubt, it is reiterated that caution should be exercised if this category [inferred] is considered in technical and economic studies. At the discretion of the Competent Person, a Company may include all or part of its Inferred Mineral Resource for the purpose of internal planning, scoping or strategic studies. Any such reliance on Inferred Resources should be made clear in the report. In such circumstances, the results are not considered to be sufficiently reliable to ensure that all of the Inferred Resource will eventually become a Mineral Reserve”. 

The JORC Code states, “confidence in the estimate of Inferred Mineral Resources is not usually sufficient to allow the results of the application of technical and economic parameters to be used for detailed planning.  For this reason, there is no direct link from an Inferred Resource to any category of Mineral Reserve. Caution should be exercised if this category is considered in technical and economic studies”. 

So the message here is: treat with extreme caution. But would it not be better just not to allow such studies? Even though the goose may be white and look like a swan there are many reasons why it may be the ugly duckling for ever. Unfortunately, even the use of Competent Persons Reports does not fully inform the market as to whether the project is a goose or a swan. 

They should do. But can anyone claim to have seen a negative CPR report or, for that matter, a negative 43-101?  No, because they can be equally geese disguised as swans as long as you pay the “fancy dress” fee. 

In conclusion there is still a lot the relevant authorities can do to protect the investor. Investors can also help themselves seriously looking at the directors and management and the company structure to see if the founders are setting it up to list and run, and leave some unwary shareholders holding a “dead duck”. 
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## drillinto

January 24, 2011

China Has A Speed Wobble, But There’s No Sign Yet That Growth Is On The Wane
By Rob Davies
www.minesite.com/aus.html [The registration is free]

It might seem counter-intuitive, but there is a very poor correlation between stock market returns and economic growth in the country that hosts the market. Last year the Chinese stock market fell 10 per cent, while the economy grew by 9.5 per cent. The performance of base metals has a much more direct correlation to growth.

Even so, the two per cent correction in the performance of the Shanghai stock market after the most recent data showed that China still grew at 9.8 per cent in the last quarter is a measure of the underlying concern that this speeding behemoth has to be brought under control. The Chinese authorities have already raised bank reserve requirements, and interest rates are being edged up. 

But at five per cent they are probably 10 per cent lower than they should be. 

The equities markets took the news of this continued growth badly. But the response of the base metals was more measured. After peaking at US$9,781 tonne on Wednesday copper fell back to US$9,484 to give a net decline over the week of 2.5 per cent. 

Overall, base metals, as measured by the LME Index, fell slightly more at 2.7 per cent. In other currencies the fall was more pronounced, as the dollar fell 1.6 per cent against the euro, although the change against the commodity currencies was minimal.   

In total this tells us little except that investors remain extremely nervous and are unsure which way they should jump. Do they protect themselves from inflation or deflation? Rising inflation is certainly a problem in some countries, as higher commodity prices drive up prices. And in some circles the argument goes that inflation is not a problem because once Chinese growth slows down the price pressure on raw materials will be reduced and the issue will resolve itself. 

That may be, but such an outcome would not be without pain. The IMF estimates that a one per cent reduction in Chinese GDP would knock half a per cent off world GDP. That might not sound too bad, but world growth falling from 2.5 per cent to two per cent is a much bigger change than a drop from 10 per cent to nine per cent. 

There is no doubt that China will slow down at some point, but it clearly won’t be just yet. Recent data from the World Steel Association showed that China remains the world’s biggest steel producer by a country mile. Output last year was a whopping 627 million tonnes. 

So, while the Chinese growth rate of 9.3 per cent looks pedestrian compared to the 38 per cent increase recorded by the US, the disparity simply arises because China didn’t suffer the collapse the previous year. It is the absolute size of the figures in China that are significant, rather than the percentage changes. 

Unsurprisingly this level of activity has a knock on effect. The 15 per cent growth in global steel production pushed iron ore prices to a new record of US$175 a tonne last week, and drove coking coal up to US$350 a tonne. 

Like all booms this one might be unsustainable, but it sure will be fun while it lasts. The wobble in growth assets this week might be an early warning of something nasty around the corner. But no one really knows how far away that corner is.  
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## drillinto

January 26, 2011

Export Cuts Will Be Almost As Influential As Rising Demand When It Comes To Asia And Commodity Prices
By Our Man in Oz   
www.minesite.com/aus.html  [Free Registration]

Auric Goldfinger, one of the unforgettable villains created by Ian Fleming for his James Bond books, is credited with the immortal lines: “Mr Bond, once is happenstance, twice coincidence, three times it’s enemy action”. While not exactly an investment thesis, there is a message in Goldfinger’s observation, and that is if you see something happen three times there is a real chance that it will happen a fourth, a fifth, and so on. Last year’s “happenstance” in world mineral markets was the cut in Chinese rare earth exports. The “coincidence” was India’s cut in iron ore exports, and the “enemy action” is China’s cut in antimony production.

Of those three, rare earths have been getting most of the headlines, thanks to a combination of strong industrial demand and China’s decision to keep more of its dysprosium, praseodymium and neodymium for its own industries. That’s made rare earths one of the best performing sectors on world stock markets, and it looks like the rare earth companies will continue to do well, until fresh projects in the US and Australia come on line. But in the wake of a decision by the Indian state of Karnataka to ban exports iron ore companies have also been star performers, as the short-term price of iron ore has soared to US$150 a tonne. And antimony producers, of which there are few, have been winners too, following a Chinese decision to close dirty and inefficient local mines, a top-down decision from Beijing which has doubled the price of the fire-retardant mineral to around US$13,000 a tonne. 

In those three cases the effect on price may be the same, but the action is the reverse of the price drivers we’ve seen in recent years – namely, Asia buying more minerals from Canadian, South African or Australian exporters. Value is being created as the Chinese and Indians withdraw material from the export market, thereby creating a shortage. Bingo, up goes the price. In the case of rare earths used in high-strength magnets and rocket guidance systems, the increase has been of the order of hundreds of per cent. Iron ore has effectively doubled because of reduced supply, and antimony, has also now doubled. 

From an investment perspective the way to play these supply line cuts is to view what’s happening as a variation on short-selling. You’re not buying companies that are riding strong Asian demand, you’re looking for commodities that government officials believe are important to domestic industries, and ought to have an export restriction slapped on them. Given that Chinese growth shows no sign of slowing, with India playing catch-up with gusto, the big questions are (a) what’s next, and (b) how do you profit from this “keep it at home” policy which seems to be emerging in the Asian economic giants. 

The answer to the second question will remain unknown until the first is answered, and, unfortunately, it is not possible to know the inner thoughts of the mandarins in Beijing or the Indian civil service. But, as a guide it is worth calling on the thoughts of a third party witness to this game, the US Geological Survey, which, without being precise, does keep track of what it is that China produces in abundance. This list offers a starting point for an inquiry as to what the country might next see fit to restrict. After all, there must be supply constraints somewhere, as China’s 9.8 per cent December quarter growth rate means heavy demand for all forms of minerals and metals. 

Antimony, for example, is listed by the USGS as a commodity dominated by China. Analysts in Washington note prophetically in their latest research: “Changes in the volume of China’s production and exports could affect prices of antimony in the world market”. Spot on, and written months before it happened. Now for the “what’s next” question, and a bit of guidance from the USGS. 

Any activity involving lead and zinc, a pair of closely-related metals, would potentially be a very big event. It’s perhaps a remote possibility that China will decide it needs everything it produces for home consumption, but the USGS noted in the same document in which it dealt with antimony that “China was the leading producer of lead in the world”. Precisely the same words were used for tin and rare earths, and we know what happened when export cuts hit the rare earth market. We haven’t seen the same thing happen with tin, yet. But the list of commodities dominated by China is extensive. Soda ash, “world’s biggest”, sulphur, “gradually become one of the leading sulphuric acid producers”, salt, “world’s biggest”. 

Interesting as it is to imagine some of the bigger commodities being hit by export cuts, it still seems unlikely. A more likely development is that some of the minor metals will be put on an embargo list to ensure local factories have plenty of raw material. Indium, for example, is an interesting case study because of its use as an alloy with tin, and more recently its use in the thin-films applied to liquid crystal displays (LCDs). The USGS has indium on a list of metals where China is “one of” the leading producers - along with barite, bismuth, coal, copper, fluorspar, gold, graphite, magnesium, manganese, molybdenum, silver, talc and zinc. 

No-one in their right mind would see that grouping of commodities as an investment shopping list. They would, however, see that list as a useful pointer to a possible trend, especially if China and India maintain their breakneck growth rates. Because, unlike the previous growth spurts from Asian economies, like Japan and Korea, the countries doing the growing today are also big commodity exporters. For now. If/when they decide that local raw materials should be kept for local consumption the worldwide knock-on effect could be dramatic. Food for thought?
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## drillinto

Commodities' warnings for stocks - An US opinion

http://online.barrons.com/article/SB50001424052970204331604576105141675981046.html?mod=BOL_hpp_dc


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## drillinto

January 31, 2011

The US Policy On The Dollar Has Much In Common With Its Policy Towards Egypt 
By Rob Davies
www.minesite.com/aus.html

Financier-turned philosopher Naseem Taleb coined the phrase “Black Swan Event” back in 2007 to describe something that’s totally unexpected and outside the normal expectations of daily life. But in the last couple of years events that have not been foreseen seem to have become quite common. The most recent is the ongoing instability in Egypt, which has the potential to destabilise the whole Arab world, with consequences for the oil price that can only be guessed at.

It is often the case that while the world focuses on lots of serious-looking and potentially game changing problems, the real issue that upsets the apple cart is something that no one was paying any attention to. In 1978 there was a stalled global economy, a high oil price, ongoing conflict in Cambodia, and a decision in China by one Deng Xiao-ping to reverse the old policy of Maoism in favour of a more market-based approach. But the real game-changer at that time was the revolution in Iran that followed, and which became unstoppable in the early months of 1979. That event had a monumental impact on the global economy. 

Fast forward thirty years, and there’s been heavy focus on the US deficit, the tensions in the Eurozone, ongoing war in Afghanistan, nuclear issues in Iran, and the bubble in China. It is conceivable, though, that the game changing event of our own time in terms of the investment horizon, will actually be the Egyptian insurrection. 

President Mubarak might be a dictator but as Eisenhower would have said, at least he was “our sonafabitch”. If he goes, as seems likely, the implications for other governments in the Middle East could be dire. In which case we could be contemplating changes in the oil price of hundreds of dollars, not just tens of dollars. Such a massive increase would cause a sharp reduction in economic growth and may well add to inflationary pressures. 

How investors prepare for such an outcome is the hardest call of all. Gold is an obvious solution, the two per cent fall in gold over the past week suggests that there’s little upward pressure at the moment. By contrast, base metals, as measured by the LME Index, edged up one per cent, with tin leading the way. Tin rose by 7.7 per cent to US$29,196 a tonne, making it the most expensive of all the base metals. 

More relevant to miners was the price move from copper, which edged up a couple of dollars to US$9,489 a tonne. The positive tone in the copper space came after better than expected US GDP numbers that showed that the US economy grew at an annualised rate of 3.2 per cent in the fourth quarter. That provides some comfort to Ben Bernanke, President of the US Federal Reserve, that the additional US$600 billion he is throwing at the economy in the form of the second round of Quantitative Easing is doing some good.  The US is now alone now in pursuing a policy of creating money to maintain economic growth. 

But, dare we say it? - the US’s approach to sustaining its economy has some similarities to the way it’s dealt with Egypt. In the short term it made sense for the US to support a corrupt and undemocratic regime, because the uncertainty and pain that was likely to surround a change seemed be too great. In the same way every US politician knows the policy of printing more dollars is unsustainable. Uncle Sam can only abuse the status of the dollar as the world’s reserve currency once. Yet who wants to be the one that stops that gravy train and makes life difficult for all those voters? 

When something can’t be sustained it won’t be sustained. Whether it becomes a Black Swan Event will then be a matter of professional and academic debate. But by then it’ll be far too late for investors. 

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## drillinto

February 05, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html  [FREE REGISTRATION]

Minews. Good morning Australia. Despite storms and floods, you seem to have had a good week on the market. 

Oz. Very much so. It was hard to find a company that lost ground last week, which presented a marked contrast to how the markets looked in the last couple of weeks of January. What’s more, the miners led the market, with gold doing best. The all ordinaries index added 1.7 per cent, not a bad result considering the negative publicity about cyclone Yasi in Queensland and continuing floods in Victoria. The metals and mining index put on more than double that, closing up 3.8 per cent, while the gold index was up by four per cent.

Minews. Not what might have been expected, given the likelihood of widespread storm damage. 

Oz. In hindsight the impact of the cyclones and floods hasn’t caused a great deal of long-term damage to industry. In many ways it’s been more of a media and a political event than an industrial catastrophe. That might sound a rather hard observation, and there’s no doubt a lot of people have suffered losses, and there have been a number of deaths. But most of the mines that closed because of flooding are working again, or soon will be. Insurance payouts are smaller than feared, and normal business is being resumed. Which is why investors brushed off the event as just another example of the weather at work. 

Minews. Enough philosophy, time for prices. 

Oz. Gold was the star sector, though one might argue that it was a relief rally an earlier decline triggered apprehension that the gold price might fall below US$1,300 an ounce. Troubles in the Middle East reminded investors that gold is far more than an alternative currency, and the bounce back to US$1,350 on safe-haven buying sent most gold companies higher. Copper also did well as the price passed through the US$10,000 a tonne mark, while rare earths, lithium, potash and phosphate companies led the way among the minor minerals. Iron ore also produced a few winners, but concerns about rising costs, and worries that the super-tax will become law sooner than later, is starting to take its toll. 

Minews. That super-tax of yours will not go away. 

Oz. It is a worry, and a serious one because the politics of the issue are changing. Last year the miners won public support when they were able to demonstrate the importance of the industry to the economy. Last week saw a curiously negative development when the latest version of Australia’s “rich list” named two iron ore players as the richest people in the country. Gina Rinehart, daughter of the late Lang Hancock, topped the bill at US$9 billion. Andrew Forrest, founder of Fortescue Metals, was second at U$6.9 billion. The problem for the iron ore sector is how to engineer a split in the public mind between those personal fortunes and a government demand that the industry share some of the spoils. It will all probably take another turn for the worse when the big miners start reporting in the week ahead, with Xstrata, BHP Billiton, and Rio Tinto, sure to post monster numbers thanks to the boom, thereby giving the government more firepower to ram through the super-tax. 

Minews. We’ll keep an eye on the tax issue. For now let’s focus on prices, starting with gold. 

Oz. No stand-out performers, just a solid set of risers, and very few fallers. The companies that did best included Perseus (PRU), up A24 cents to A$2.96, and Gold Road (GOR), up A6.5 cents to A35 cents. Avoca (AVO) rose A45 cents to A$3.30, and this will be its final price as its merger with Anatolia Mines has now passed all legal hurdles, and the newly-merged business will trade in future as Alacer Gold. Among the other gold risers were Kingsgate (KCN), up A46 cents to A$9.60, CGA (CGX), up A26 cents to A$2.93, Silver Lake (SLR), up A11 cents to A$1.98, Medusa (MML), up A69 cents to A$7,23. Beadell (BDR) was also better off, up A7 cents to A76 cents, as interest builds in its Brazilian gold project. 

Minews. We might take a look at that one shortly. Now, on to copper. 

Oz. Strong all over for copper. There were plenty of stars, so for a change we’ll start with a short survey of recent events at the smaller end. Voyager Resources (VOR), which is chasing a big copper porphyry system in Mongolia, rose by A3.9 cents to A13 cents, and fended off a fresh speeding inquiry from ASX regulators. Just two weeks ago Voyager was trading around A5 cents. Frontier Resources (FNT), another explorer hunting “elephants”, this time the island of New Britain, added A2.5 cents to A17.5 cents. In late December, Frontier was trading at less than A10 cents. And third example of a copper company that’s recently caught the interest speculators is TNG (TNG) which was once best known as a zinc explorer, but which has recently reported excellent copper assays from its Mount Peake project in the Northern Territory. Last week, shares in TNG more than doubled, with a run from A6 cents up to a 12-month high of A14.5 cents in early Friday trade. It finally ended the week at A12 cents. 

Among the better-known copper stocks companies Equinox (EQN) hit a new record price of A6.79 on Friday, before closing at A$6.65, up A69 cents for the week. Sandfire (SFR) added A42 cents to A$7.60. Rex (RXM), rose by A16 cents to A$3.09. Talisman (TLM) put on A15 cents to A88 cents. Exco (EXS) gained A5.5 cents to A58.5 cents. Hot Chili (HCH) added A7 cents to A53 cents. OZ Minerals (OZL) closed at A$1.71, for a gain of A7 cents. The only copper plays not caught in the upward trend were Marengo (MGO), which remained stuck at A35.5 cents, and Altona (AOH) which slipped A1.5 cents lower to A37.5 cents. 

Minews. Let’s finish with the base metals, and then across to iron ore and coal, please. 

Oz. Nickel and zinc companies put in a mixed performance, in spite of firmer nickel and zinc prices. Nickel is sitting comfortably above US$12 a pound, a price which would normally trigger a nickel boom in Australia. So far, there’s been a limited reaction to that price, though it’ll be interesting to see how long the nickel punters wait on the sidelines. Western Areas (WSA) was the best of the pure nickel companies, adding A11 cents to A$6.60. Independence (IGO) was the best of the nickels overall, allowing for the boost also provided by its gold assets. It rose by A43 cents to A$7.58. Other nickel movers included Mirabela (MBN), up A4 cents to A$2.29, and Panoramic (PAN), up A14 cents to A$2.47. Mincor (MCR) moved the other way, slipping A2 cents lower to A$1.74. 

Meridian (MII) was the best of the zinc companies, posting a rise of A2 cents to A13.5 cents. Perilya (PEM) added A3.5 cents to A59 cent. Terramin (TZN) lost A4 cents to A40.5 cents, perhaps because of exposure to assets in North Africa. Bass Metals (BSM) eased back by A1.5 cents to A36 cents, and Ironbark (IBG) slipped A1 cent lower to A25.5 cents. 

Iron ore companies were generally firmer, but most moves were modest. Pick of the sector was Atlas (AGO), which shot up by A67 cents to A$3.89. Its takeover target, Giralia (GIR), added A91 cents to A5.66. After those two it was less exciting. Aquila (AQA) added A17 cents to A$9.44. Fortescue (FMG) rose A6 cents to A$6.57. Iron Ore Holdings (IOH) was A2 cents stronger at A$2.07. Gindalbie (GBG) shed A2 cents to A$1.34, as worries grow about a big cost blow-out at its Karara mine. Territory (TTY) was off by half a cent at A32.5 cents. 

Coal companies were relatively flat after several very solid months. Most moves were small, either way. Xanadu Mines (XAN) was one that caught the eye of traders as it makes progress with its Mongolian assets. Xanadu was up by A8 cents to A70 cents on the week. Bathurst (BTU) added A5 cents to A$1.06. Aston (AZT) gained A20 cents to A$8.70. On the downside, Coal of Africa (CZA) lost A8 cents to A$1.59, and Continental Coal (CCC) eased by the smallest possible amount, A0.1 of a cent to A8.1 cents. 

Minews. Uranium and the minor metals to finish please. 

Oz. Uranium companies were stronger across the board as the spot price rose another US$3.00 a pound to US$73 per pound. The minor metals continued to attract speculators to a smorgasbord of potash, phosphate, lithium and rare earths. Among the best movers in uranium were Paladin (PDN), up A38 cents to A$5.21, Extract (EXT), up A47 cents to A$9.40, Uranex (UNX), up A13.5 cents to A77.5 cents, and Bannerman (BMN), up A6.5 cents to A82 cents. And some uranium companies we rarely hear about also delivered good moves, including White Canyon (WCU), which rose A2.5 cents to A20 cents, and Aura (AEE), which rose A6.5 cents to A45 cents. 

Minor metals produced a number of eye-catching moves and stock exchange filings. Altura Mining (AJM) joined the lithium bandwagon and rose A5 cents to A22 cents on news of promising drill results from a project in Western Australia. Tin companies performed well. Venture (VMS) added A4 cents to A55 cents, and Kasbah (KAS) rose A5 cents to A37 cents. Peak Resources (PEK) was both a newcomer and star performer among the rare earths, rising A23 cents to A76 cents after reporting excellent drill intersections. 

And we’ll sign off with a gem. Fortis Mining (FMJ) more than doubled with a rise of A38 cents to A69 cents, on news that it has entered into a strategic relationship with a Hong Kong company, Grand Concord Investments. There was no specific news about exploration, just the new friendship pact and a promise that Grand Concord’s principal owner, Madam Cheung (no first name), had “a substantial network of clients and mining-related relationships throughout Asia and Eastern Europe”. Minesite’s Man in Oz can hardly wait to see what Madam Cheung has to offer. 

Minews. Indeed. Thanks Oz.


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## drillinto

February 07, 2011

A Fairy Tale Market? Copper Hits $10,000 A Tonne
By Rob Davies
www.minesite.com/aus.html [Free Registration]

A combination of strong underlying demand and some dollar weakness was enough, finally, to push copper over the US$10,000 a tonne level last week. At that height some found the experience made them a little giddy and after some profit taking the red metal finally ended the week a touch lower at US$9,950 a tonne. But the excitement wasn’t confined to one metal only, as tin made further progress and closed at US$30,650 a tonne.

Seasoned observers of the base metals scene are resigned to the fact that they are living through a bubble. That it will end badly is not in doubt. The only question is when and how bad will it be. It is perhaps of limited comfort to know that great minds in the past have been sucked into bubbles and paid the price. 

John Maudlin in his letter http://www.investorsinsight.com/ last week included an article by Jeremy Grantham with a graph showing the trading Sir Isaac Newton did in shares of the South Sea Company.  In February 1720 the great philosopher bought some stock and sold out in the middle of the year for a healthy profit having tripled his money. Then, seeing his friends continuing to stay invested and make money hand over fist, he bought back in at about five times his original entry price. He sold in three tranches at the end of year having lost everything. 

Long time analysts of base metals, like Neil Buxton of GFMS, note that prices of most metals in this group are so far above the marginal cost of production that conventional analysis tells you little about the likely timing of any reversal. The issue is that these metals are trading at the full cost of production, not the marginal cash cost. 

To help put this in perspective Glen Jones of Intierra Resource Intelligence put together an excellent presentation last September to explain just how concentrated and limited new resource development is. It is sobering to see that 68 per cent of new copper projects are in just two countries - Australia and Canada. But that tells you more about the importance of politics than geology. 

The database used by Intierra records 7,185 copper projects around the world. It is not surprising that the largest single category, at 39 per cent, is grass roots exploration. The next category comprises those projects at the drilling stage, and this accounts for 32 per cent of the total. The dynamic behind these numbers is fairly straightforward: as the intensity of work, and funds required, increases, the number of projects starts to fall quite sharply. 

Which is why projects at the advanced exploration stage only makes up 14% per cent of the total number of copper projects in the world, while those in the pre-feasibility and feasibility stage make up four per cent each.  

The most sobering fact is that a tiny one per cent of the tally consists of mines under construction. That compares with the eight per cent, or, in raw numbers, 571, that are actually operating mines. On the evidence of this data it looks pretty obvious that this is an industry that is not sowing what it is reaping. And on that reckoning, it’s no wonder prices are running at the full cost of exploration, development and production. There is simply no fat left in the system. 

It will change of course - it always does. But trying to predict exactly when a behemoth like the Chinese economy collapses under its weight of bad debts and misguided capital allocation is impossible. Perhaps the only saving grace is that unlike the Irish property bubble, many of the participants in this particular space at least understand they are operating in a fairy-tale market. 
::::::::::::::::::::::::::::::::::


----------



## drillinto

"ISM Commodities Survey on the Rise" 
Monday, February 7, 2011  

In each month's Manufacturing Report on Business, ISM publishes the results of its monthly commodities survey where it asks respondents which commodities are rising in price and which are declining.  In this month's survey, the net number of commodities rising in price rose to 30, which is the highest level since May 2008.  Given the recent increase in this series (blue line), investors may want to brace for an uptick in inflation.  As shown in the chart below, the last time the commodities survey reached this level, it was accompanied by a rise to over 5% in the CPI (y/y basis), or more than three times the current level of 1.5%.

[To see the chart with results of the survey, please click the link below]
http://www.bespokeinvest.com/thinkbig/2011/2/7/ism-commodities-survey-on-the-rise.html
*****************************************************************


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## GumbyLearner

Feb 10, 2011

*Global Food Prices: Five Reasons to Buy Rice Futures* 
by Jack Barnes

The world is finally waking up to the fact that global grain prices are destined to head higher -- much higher.

Nasty weather in key agricultural markets around the world has savaged the global grain crop, meaning worldwide supplies can't help but be squeezed. Australia, for instance, is experiencing additional flooding in areas that were already battered by the torrential rains of November, December and January.

And as if the supply-related increase in agricultural commodities wasn't enough, there's also the U.S. dollar -- and the so-called "race to the bottom" -- to contend with. Make no mistake: The endless devaluations in the greenback are having a worldwide impact on agricultural commodity prices. Since commodities are priced in dollars, these devaluations translate into higher prices for grains and other food-related commodities.

Short supplies and rising prices are bad enough, but concerns about these first two realities are creating an additional catalyst that completes a trifecta for higher agricultural commodity prices.

And that third catalyst is panic buying -- especially with rice, which is a basic table staple in Asian markets. For instance, The Saudi Gazette last week reported that Bangladesh recently tripled its rice-import target and Indonesia just purchased 820,000 tons of Thai rice, nearly five times the volume initially sought.

"This is only the start of the panic buying," Ker Chung Yang, a commodities analyst at Singapore-based Phillip Futures, said in the report. "I expect we'll have more countries coming in and buying grain."

For global investors, there are five reasons why it's definitely time to buy rice futures.

*Five Keys to Higher Rice Prices*

Global food prices set an all-time record in January, reaching their highest level since the United Nations' Food and Agriculture Organization began to track them in 1990. They even topped the previous highs set during the global food prices scare of June 2008.

"The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come," said Abdolreza Abbassian, an economist for FAO, which is based in Rome.

Food-price inflation has become a major issue in the world's emerging economies -- particularly those in Asia. Those inflationary pressures are now threatening to ignite a rally in rice prices, even though bumper crops in Thailand and Vietnam should mean there will be ample supplies. Instead, the following five reasons almost assure us of increased rice prices by the end of this year:

    * The aforementioned huge early Asian crop is allowing U.S. farmers to shift to planting higher-margin grains.
    * Panic buying by consuming nations trying to fight food inflation will escalate the price of existing supplies.
    * The weather effects of La Nina are continuing to affect historical rain patterns.
    * We expect an actual imbalance between world supply and demand by the end of this year.
    * The United States is exporting inflation to the rest of the world, and will continue to do so for the rest of 2011.

Thailand's benchmark 100% "B" Grade white rice was offered at $540 per ton last week. That price is unchanged so far in 2011, after having fallen 13% last year. During the 2008 food crisis, rice prices exceeded $1,000 a ton -- a spike in food prices so severe that the head of the United Nation's World Food Program said it was causing a "silent tsunami" of hunger to sweep the globe.

While the Westernized nations continue to feel the effects of deflation and de-leveraging, emerging-market economies are having almost the exact opposite experience. And rice prices may be the ideal way to illustrate this economic disparity.

You see, rice is a staple food for half the world's population, particularly in Asia. And though there's a huge-and-growing middle class in Asia, there are still millions of households that exist at or near the poverty line. A big run-up in rice prices would squeeze their budgets and topple them into poverty, causing a wave of unrest that the governments of those countries would do almost anything to avoid.

Under normal circumstances, the inflationary effects we're seeing would not be as damaging to world food prices. But we are in a major global weather pattern shift that has changed the rain patterns around the world. La Nina is causing heavy rains to locations that normally experience little to no rain. This has caused flooding in such global breadbasket economies as Australia and Brazil. It has affected the monsoons of India and weather conditions on the U.S. East Coast.

Rice analysts have labeled price inflation as a "near-term" event, stating that an expected surge in rice supplies provided by a strong harvest would halt -- and ultimately reverse -- the current run-up in prices. But the supply increases won't be as large as these analysts expect.

*The U.S. Wild Card*

The price increases in grains have led the United States to shift its historical growing averages. In terms of the global pecking order among rice exporters, the United States typically ranks as the No. 3 or No. 4 largest exporter.

But not this year. In 2011, U.S. farmers are shifting to other crops, hoping to capitalize by boosting their output of soybeans over rice. In fact, Bloomberg has reported that U.S. farmers will plant the fewest acres of rice since 1989. And with good reason: Other grains have better profit margins than rice, especially since Asia's largest rice growers have a "bumper crop" coming to market this year.

"Why would you want to take that risk to plant rice, knowing that your income is going to be way down?" Terry Hatley, an Arkansas farmer who this year may not plant rice for the first time in three decades, told a Bloomberg reporter. "Farming is a business, and you've got to look at the economics of it. Now, the economics on rice are very dim."

Because the U.S. crop lags its Asian counterparts, such changes in planting plans by U.S. farmers will affect worldwide rice supplies in six to nine months.

*The "Egypt Effect"*

The uprising in Egypt has been directly linked to the cost of wheat, as Russia was the supplier of wheat to the Middle East region. This historical relationship was put into doubt when Russia cancelled its exports of grains last summer.

Egypt has started to go into the spot market to purchase more expensive wheat to feed its growing population. The uprising is going to play havoc with additional supplies arriving and being distributed to the hungry population. And Egypt is not the only nation that has had to make large bulk purchases of food to try to meet domestic demand.

Take Indonesia, which is the first of many nations to come to market in an attempt to make larger-than-normal purchases of a particular commodity. In large part because of runaway food prices, Indonesia is facing an inflation rate of better than 7%, in a year in which the inflation rate had been expected to decline.

Cheap rice has risen 22% in the past year. Cooking oil jumped 15% and various types of "chillies" zoomed between 90% and 314%, the newspaper The Australian reported.

Now the largest economy in Southeast Asia is importing rice in bulk for the first time since 2007. And Jakarta recently made an emergency decision to temporarily halt import duties on foreign supplies of rice, soybeans and wheat to ease food prices and take the sting out of inflation.

In fact, as a longtime observer of the global markets, I've found it interesting to observe the differing strategies that governments around the world have resorted to as they respond to the events in Tunisia and Egypt.

After the global food prices scare of 2008, authorities around the world were aware of the risks and better prepared to cope with rising food costs this time around, says Indonesia central bank spokesman Difi A. Johansyah. "We expect food prices can be controlled so they won't raise inflation expectations," he said.

Indonesia's President Susilo Bambang Yudhoyono said that possible steps to avoid a food crisis included waiving value-added taxes or import taxes for rice and cooking oil, maintaining sufficient stockpiles and preventing smuggling or hoarding.

Countries that operate under an autocratic government are announcing changes in their governments in an attempt to address the anger of a population that has no real say in deciding who will lead them. Shuffling the deck chairs on the Titanic has not fixed the problems before, and it won't make a difference today.

The people are experiencing the pain that accompanies big increases in staple food prices. In such situations, it's the price of the calories that drives the anger. And a fear of that anger will continue to induce governments to make the kind of hasty decisions that actually exacerbate the problem.

As investors in capitalist markets who will also feel some of that pocketbook pain, we have the ability to improve our lot by making investments that can offset the price increases. And we should make those moves now.

*Actions to Take*

It's time to look at rice futures. The breakout in rice prices, which follows several years of relatively narrow trading, is going to unfold over the course of this year. However, with a true "bumper" crop expected to reach market this spring, I would expect to see some serious attempts from all around the world to "talk down" the price of rice, and to temper inflationary expectations right about at harvest time.

*Expect governments to also talk down the risks of food inflation.* 

FOR MORE CLICK AND READ ON
http://seekingalpha.com/article/252...five-reasons-to-buy-rice-futures?source=yahoo


----------



## drillinto

February 19, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]

Minews. Good morning Australia. It looks like it was a solid week on the ASX, with gold leading the way. 

Oz. That’s a reasonable summary, though the 4.2 per cent rise in the gold index that we enjoyed this week was driven largely by one company, Newcrest (NCM). Because it is easily Australia’s biggest gold miner, Newcrest dominates the index. Last week’s five per cent rise to A$39.02 put the rest of the gold sector in the shade, and re-kindled speculation of a bid for Newcrest by one of the global gold majors. That talk has been aided by the sudden resignation earlier this month of Newcrest’s chief executive, Ian Smith, a departure which was not accompanied by a satisfactory explanation.

Minews.  Meaning there might be a boardroom struggle underway? 

Oz. It’s possible, and that makes Newcrest a company to watch closely over the next few weeks. As for the rest of the Australian market, it fell well short of gold. The all ordinaries rose a modest 1.1 per cent, and the broad metals and mining index rose a slightly less modest 1.4 per cent. 

Minews. Index rises which indicate minimal share price movements. 

Oz. That’s true if you look primarily at the market leaders and usual suspects. A different and more interesting picture emerges when you look behind the well-known names and follow the trail of the hot money on the ASX, something we’ve been doing in recent weeks to highlight some fresh names for our London readers. This week we’ll start with a company exploring for a mineral we don’t often hear about, graphite. Shares in Archer Exploration (AXE) doubled on Friday, putting in an upward run of A16 cents to A32 cents, before easing to close at A21 cents, for an overall a gain of A8.5 cents for the week. Interest in the project was sparked by an encouraging report on the company’s Sugarloaf project on the Eyre Peninsula of South Australia, which was a source of graphite in the 19th century. And interest in the material has been raised as supplies diminish. Graphite has uses as a lubricant and in lithium-ion batteries. 

Minews. Interesting. Let’s hear about a few more of the lesser-known companies before the call of the card. 

Oz. The next significant mover worth mentioning is named after a company which set the mining world alight almost 40 years ago, Poseidon (POS). Back in 1969 and 1970, the original Poseidon triggered a nickel boom with its discovery at Mt Windara in Western Australia. The new Poseidon is re-working the same mine, though perhaps more scientifically. Last week’s 43 per cent rise in Poseidon’s share price to A34.5 cents was driven after the company awarded a contract to refurbish the original underground mine at Mt Windara. 

Frontier Resources (FNT) was also generating plenty of interest, as its gold search in Papua New Guinea continues. Last week it added another A7.5 cents to A37.5 cents. And another explorer, Papillon Resources (PIR), a new Aussie player in the West African gold hunt, was the beneficiary of interest after a presentation at the Mining Indaba conference in Cape Town. It added A16.5 cents to A94.5 cents. Elsewhere, Cerro Resources (CJO), the old Kings Minerals, attracted interest in its Mexican silver exploration, adding A4 cents to A26 cents, while another silver stock, Cobar Consolidated (CCU) continued its upward run with a rise of A13 cents to A88 cents. 

Minews. Thanks for that brief survey of the bigger moves. Let’s move through the sectors now, continuing with gold. 

Oz. After Newcrest, the performance in the gold space was mixed, although the general trend was up. Ausgold (AUC) added A11 cents to A$1.65 after our report on its ambitious South Boddington exploration project. OceanaGold (OGC) recovered recently lost ground, with a rise of A31 cents to A$2.86, but did trade as high as A$3.03 on Friday. Ramelius (RMS) added A13 cents to A$1.20, and Tanami (TAM) continued its remarkable revival with a rise of A12 cents to A$1.05. Other gold companies that gained ground included Medusa (MML), up A29 cents to A$7.32, and Beadell (BDR), up A7 cents to A83.5 cents. Troy (TRY) was also better off, up A27 cents to A$3.82, as investors look past its commissioning setbacks at the new Casposo mine in Argentina. Offsetting the gains was a long list of companies that fell, including Gold Road (GOR), down A4 cents to A31.5 cents, Silver Lake (SLR), down A3 cents to A$1.89, Kingsrose (KRM), down A12 cents to A$1.33, Gryphon (GRY), down A3 cents to A$1.89, and Ampella (AMX), down A6 cents to A$2.69. 

Minews. Base metals next, as copper’ still hot and there seems to be growing optimism in the nickel and zinc market. 

Oz. There were a couple of copper stars, Hot Chili (HCH) and Sumatra Copper & Gold (SUM). Hot Chili, which we took a look at mid-week, added a sharp A13.5 cents to A63.5 cents, but did hit an all-time high of A70 cents on Thursday. Meanwhile, Sumatra is benefiting from its recent development decision on the Tembang gold project, and rose by A8.5 cents last week to A28 cents. The rest of the copper sector was more mixed. Companies on the rise included Discovery (DML), up A2 cents to A$1.37, Bougainville (BOC), up A7 cents to A$1.64, and Sabre (SBR), up A1.5 cents to A20 cents. Companies that fell included Equinox (ERN), down A7 cents to A$6.43, Sandfire (SFR), down A18 cents to A$7.26, and Rex (RXM), also down A18 cents to A$2.87. 

Nickel companies performed reasonably well, with Poseidon in the lead. Other movers included Minara (MRE), up A3.5 cents to A90 cents, Mirabela (MBN), up A7 cents to A$2.35, Western Areas (WSA), up A64 cents to a 12 month high of A$6.90, and Panoramic (PAN), up A5 cents to A$2.47. Mincor (MCR) was also a riser, up A1.5 cents to A$1.74, but that was mainly due to a copper discovery at its Tottenham project in New South Wales. 

Zinc companies also trended up, continuing a quiet recovery which has been evident for some weeks. Perilya (PEM) added A4 cents to A67 cents. Bass (BSM) rose an eye-catching A6.5 cents to A47 cents, and Prairie Downs (PDZ) put on A3.5 cents to A24.5 cents. 

Minews. Iron ore and coal next, please. 

Oz. There were signs of weariness in both iron ore and coal last week. Most moves were modest either way, although the overall trend in iron ore was up a little. The trend in coal was down a little. Among the leaders in iron ore, Fortescue (FMG) rose A16 cents to A$6.88 after a strong profit, maiden dividend, and a fresh legal setback for its dominant shareholder, Andrew Forrest. Brockman (BRM) added A15 cents to A$5.10, and Atlas (AGO) put on A21 cents to A$3.97. After that the moves were mainly down. Cape Lambert (CFE) lost A3.5 cents to A64.5 cents amid reports of irregular share dealing. BC Iron (BCI) fell A11 cents to A$3.11, and Iron Ore Holdings (IOH) lost A12 cents to A$1.80. Coal companies on the slide included Coal of Africa (CZA), down A4 cents to A$1.46, Macarthur (MCC), down A9 cents lower to A$12.36, and Bathurst (BTU), down A5 cents to A$1.06. 

Minews. Uranium and minor metals to close. 

Oz. It was mostly down among the uranium stocks. Manhattan (MHC) led the way with a fall of A15 cents to A$1.16. Paladin (PDN) lost A24 cents to A$5.08 after reporting a surprise annual loss. Berkeley (BKY) fell A7 cents to A$1.59, and Uranex (UNX) dropped by A6.5 cents to A55.5 cents. 

The minor metals were all over the shop. Rare earths did best. Lynas (LYC) rose A3 cents to A$1.93. Alkane (ALK) rose A13 cents to A$1.28. However, Arafura (ARU) slipped A2 cents to A$1.26. Tin companies were weaker, as were lithium companies. South Boulder (STB) was the best of the potash plays, adding A42 cents to close at A$4.60 after it hit an all-time high of A$4.82 in early Friday trade. Atlantic (ATI) added A3 cents to A$1.93 after announcing a big fundraising for its planned redevelopment of the ill-fated Windimurra vanadium project. 

Minews. Thanks Oz.
******


----------



## tothemax6

Hi All,

Posted this in the stocks forum, no one really wanted to talk about it there, so I figured I will drop it here too, in case someone misses it:

Spotted this IPO for Potash West. Appears to be a company that is going to engage in glauconite exploration, (glauconite being convertible into potash). Sounds interesting if you are one (like me) who sees there being increasing demand for food (and thus fertilizer).

http://potashwest.com.au/


----------



## GumbyLearner

tothemax6 said:


> Hi All,
> 
> Posted this in the stocks forum, no one really wanted to talk about it there, so I figured I will drop it here too, in case someone misses it:
> 
> Spotted this IPO for Potash West. Appears to be a company that is going to engage in glauconite exploration, (glauconite being convertible into potash). Sounds interesting if you are one (like me) who sees there being increasing demand for food (and thus fertilizer).
> 
> http://potashwest.com.au/




I wonder if they can obtain a JORC similar in size to that of MAK. Noticed that Griffin from NTU is on the board. Thanks for the heads up tothemax6.


----------



## GumbyLearner

*Agricultural Commodities Are Getting Smashed In The Face Today*
By Joe Weisenheimer

http://www.businessinsider.com/agricultural-commodities-february-22-2011-2

We mentioned Friday that signs were building up that the soft commodity bubble was popping.

Today it's vicious.

Corn, soybeans, wheat, and cotton are all getting smashed in the face today.

Here's a look at the Deutsche Bank Multi-Sector Agriculture Fund, which is down over 2.3%. It actually doesn't quite to justice to some of the moves.



******************************************************************************
THE WAY I SEE IT IS

Either 1) tonnes more food production/deflationary QE foodstuffs have come onto the market or 
 2) Oil is in play now. 

Here's an excerpt from an old silver screen classic as noted by a blogger on Joeys site

 

DYOR


----------



## GumbyLearner

GumbyLearner said:


> *Agricultural Commodities Are Getting Smashed In The Face Today*
> By Joe Weisenheimer
> 
> http://www.businessinsider.com/agricultural-commodities-february-22-2011-2
> 
> We mentioned Friday that signs were building up that the soft commodity bubble was popping.
> 
> Today it's vicious.
> 
> Corn, soybeans, wheat, and cotton are all getting smashed in the face today.
> 
> Here's a look at the Deutsche Bank Multi-Sector Agriculture Fund, which is down over 2.3%. It actually doesn't quite to justice to some of the moves.
> 
> View attachment 41550
> 
> ******************************************************************************
> THE WAY I SEE IT IS
> 
> Either 1) tonnes more food production/deflationary QE foodstuffs have come onto the market or
> 2) Oil is in play now.
> 
> Here's an excerpt from an old silver screen classic as noted by a blogger on Joeys site
> Lloyd trades the van for a 70 mile a gallon scooter. It's a gas of a movie.
> 
> 
> DYOR






The authors name is Joe Weisenthal not Weisenheimer.


----------



## drillinto

February 21, 2011

"The Pro-Democracy Movements In The Middle East Must Be Food For Thought For The Chinese"
By Rob Davies
www.minesite.com/aus.html  [Free Registration]

Stonking results from Anglo American and BHP Billiton last week can be seen as confirmation, if any were needed, of the strength of the commodity boom. A total of US$17 billion in net profits for the pair, over 12 and six months respectively is a handsome number. Some of it will be paid out as dividends, some used in share buybacks, and the rest will go towards the US$81 billion of investment in new projects the two companies are working on.

In the light of past experience, that’s an interesting number. One of the three root causes behind the current boom is the lack of investment in new capacity that took place over much of the previous two decades. The second, linked, root cause is that, over the same period, miners bought each other instead of developing new capacity. Gencor, the predecessor of BHP Billiton, was the prime mover in this development. And a consequence of this rationalisation was the consolidation of the industry, which aimed at removing uneconomic capacity and making profit, not volume, the key driver. It worked. 

These were key on the supply side, but it something else really lit the fire. The third root cause behind the current boom is the huge and sustained demand for raw materials that has come out of China over the last decade, giving the industry a huge new outlet for its commodities. 

The Chinese authorities have succeeded only too well in mobilising the innate capitalist instincts of 1.3 billion Chinese, in a drive to give them wealth and jobs. And in China the curious mixture of a command economy with free market forces has combined to create a charging juggernaut of an economy that seems, quite frankly, to be out of control. 

The timid steps that are being taken to restrain this economic leviathan are having little effect. Last week’s 0.5 per cent increase in the reserve requirements for Chinese banks is a case in point. It was the fifth such move in the last six months, and did cause metal prices on the LME to come off the boil. It brought copper down from US$10,900 a tonne to US$9,799, while the LME Index itself dropped 0.6 per cent to 4,372.1. So it is not as if these measures are not having an effect. They are - growth in Chinese car sales has dropped. It is only 16 per cent now. 

The problem the Chinese government has is that it knows this pace of growth is unsustainable, but that it also has to keep its vast population busy and gainfully employed. They, like the rest of us, must be looking at the Arab world and seeing what happens when unemployed and disenfranchised young people refuse to accept their lot. China needs to keep growing to keep its people employed, so that their lack of political power is not an issue. But there’s also an awareness that the country’s policy of unlimited and unregulated lending cannot continue, because inflation is rising. 

The point when an economy tips over is different in every country. But we have seen it happen everywhere, from Japan to Ireland. And it is then that the fundamental political structure of the country comes under pressure. Homogenous populations, like Japan and Ireland, seem able to survive this stress quite well. But it’s also noteworthy that the political systems in these two countries are both democracies. The electorate, if dissatisfied, can kick the bums out. That is not the case in the Arab world, or in China.  While there is no suggestion just yet that the Chinese locomotive is running out of steam, there is a limit to its endurance somewhere. 

For the time being the Chinese growth story is dragging commodities along nicely in its wake, and the mining companies are enjoying the ride - as we have seen from last week’s results. The question for them, and for the Chinese, is: what happens when the brakes do actually start to work? After the restructuring of the last few years the mining industry is leaner and meaner and well placed to cope with lower demand growth. But what happens in China if the populace starts to want a say in how the country is run is a much more open question. 

***************************************************


----------



## drillinto

"Oil Hits Most Overbought Level Since 1999" 
Friday, February 25, 2011  

Following its monster surge earlier in the week, the price of oil closed more than three standard deviations above its 50-day moving average on Wednesday.  This is a feat that hasn't been accomplished in more than ten years, and going back to 1983, it has only occurred in eight other periods.  In the table below, we highlight the first day in each period where this occurred as well as the commodity's performance over the next week and month.  In more than half of the prior periods, crude continued to rise, averaging gains of 1.07% over the next week and 4.03% over the next month.  These gains are somewhat skewed by the spike in August 1990, but even if we use median returns the results are still positive, albeit less so.


>>> To see the table, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/2/25/oil-hits-most-overbought-level-since-1999.html


----------



## drillinto

February 26, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [The registration is free]

Minews. Good morning Australia. You probably don’t have much good news to share after a bumpy week. 

Oz. Not a lot. Our market was about as exciting as watching Canada and Kenya play cricket in India, in a competition which some wag reckons ought to called the World Cup. I reckon the third eleven from my old school would give some of those teams a run for their money.

Minews. Doesn’t sound like there’s much of interest to report at all?

Oz. I wouldn’t say that. Three men and a dog watched the Canada-Kenya game in a stadium built to hold a crowd of 100,000, but the action on the ASX was at least well-followed by investors all round world, even if they weren’t exactly riveted by what the traders got up to. With that in mind, we’ll ferret out the more interesting movements in the Aussie market to brighten things up. But before we do that, let’s just set the scene. The all ordinaries index lost two per cent last week. The metals and minerals index lost 2.2 per cent, and the gold index eased by one per cent. One major event that affected the Australian market was, naturally, Libya’s growing civil war. But there was also concern about China’s continued tightening of its red-hot economy, and about yet another grand tax plan from the Australian Government. 

Minews. You’re not serious? Another new tax on top of the mining tax? 

Oz. Yep. The latest is a proposed carbon tax. Not a carbon trading scheme, just a flat tax, which we are told will become a trading scheme sometime in the future, maybe. Mining and oil will be hit hard by the new tax, which could harvest around A$3.5 billion a year. Perhaps unsurprisingly, it’s the creation of the Green Party, which is having an increasing say in how the country is being run. All of which means is that we’ve had three new taxes proposed in less than 12-months: the mining tax, a flood levy, and now the carbon tax. 

Minews. Sounds like the current government might have a death wish. 

Oz. No doubt about that, especially as the Prime Minister, Julia Gillard, said several times in the campaign before the August election that she would not introduce a carbon tax. Her exact words, on August 16th were: “There will be no carbon tax under the government I lead”. The critics have been merciless over that clear breaking of a promise, referring to her as “Ju-Liar” Gillard, a tag which seems to be catching. 

Minews. Enough of the background. Time for prices, starting with the exceptional performers, followed by a call of the card. 

Oz. Trawling through companies you’ve probably never heard of is always fun, and is often a way to discover or rediscover one or two fresh investment ideas. One bright light last week was Aguia Resources (AGR), which rose by A29 cents to A$1.20 in early Friday trade, as in interest in its plans for potash production in Brazil grew. The shares then eased somewhat to close at A$1.07, an overall gain for the week of A16 cents. Another company attracting interest was Alcyone (AYN), which rose A1.4 cents to A6.3 cents in response to the ongoing strength in the silver price.  Meanwhile, another silver player, Cobar Consolidated (CCU), continued to move up, adding A5 cents to A93 cents. And Corazon Mining (CZN) caught the eyes of a few traders, on the strength of its exposure to Colombian platinum, and because it’s the latest plaything of Ed Nealon, the man who helped create Aquarius Platinum. Corazon’s shares rose A1 cent to A11.5 cents. In percentage terms the best of the new names was Metaliko (MKO), which reported encouraging gold assays from its Anthill prospect in Western Australia. Among the best was 44 metres at 2.4 grams of gold a tonne from a depth of 56 metres. That result helped Metaliko add A7 cents to A21.5 cents, though the shares did get as high as A24 cents on Friday. 

Minews. Interesting. But now let’s switch across to the sectors, starting with gold. 

Oz. Good choice because gold was the only sector that produced more than a couple of risers, though even here most gains were modest. Among the notable performers, Allied (ALD) added A4.5 cents to A65 cents, Crusader (CAS) put on A5 cents to A$1.14, and Kingsrose (KRM) gained A4.5 cents to A$1.37. Silver Lake (SLR) was also better off, up A14 cents to A$2.05 after a positive presentation by its chief executive, Les Davis, at an explorer’s conference in Fremantle. After that it was all down. Among the fallers, Troy (TRY) fell A9 cents to A$3.73, Kingsgate (KCN) fell A31 cents to A$9.35, Mt Isa Metals (MET) fell A6 cents to A62 cents, Ausgold (AUC) fell A15 cents to A$1.40, and Resolute (RSG) fell A7 cents to A$1.32. 

Minews. Base metals next, please. 

Oz. There was weakness right across the copper, nickel and zinc sectors, barring a handful of minor upward moves. The best performances in copper came from Hot Chili (HCH) which put on A2.5 cents to A66 cents, and Sumatra Copper (SUM), which rose half a cent to A28.5 cents. Best of the zinc companies was Overland (OVR), which announced an expanded resource at its Darcy project in Canada. In response, shares in Overland rose by A1.5 cents to A26 cents, but did get as high as A30 cents on Friday. No nickel company rose. 

Elsewhere in the copper space, it was all down. Equinox (EQN) fell A21 cents to A$6.22. Exco (EXS) fell A5 cents to A58 cents. Marengo (MGO) fell A2.5 cents to A30 cents. Sandfire (SFR) fell A2 cents to A$7.24. OZ (OZL) fell A7 cents to A$1.64. Discovery (DML) fell A11 cents to A$1.26. In nickel, it was no better. Independence (IGO) fell A16 cents to A$6.82. Mincor (MCR) fell A5 cents to A$1.69. Panoramic (PAN) fell A20 cents to A$2.27. Finally, Western Areas (WSA) fell A22 cents to A$6.68. 

In zinc, Perilya (PEM) fell A5 cents to A62 cents, Prairie Downs (PDZ) fell A4 cents to A20.5 cents, and Terramin (TZN) fell A3 cents to A39.5 cents. 

Minews. Across to iron ore and coal. 

Oz. It was a similar picture in both iron ore and coal: most down, a few up. The only rise of real interest among the iron ore companies came from Brockman (BRM) which added A39 cents to A$5.49, as it continues to resist the curious takeover bid from Hong Kong’s Wah Nam taxi-hire firm. The only rise of interest among the coal companies came from the coking coal explorer, Carabella (CLR) which added a sharp A35 cents to A$2.25. 

Elsewhere in iron ore it was all down. BC Iron (BCI) fell A7 cents to A$3.04, even though it loaded its first shipload of ore this week. Fortescue (FMG) fell A38 cents to A$6.50, despite reporting a major new discovery. Also weaker were Atlas (AGO), down A7 cents to A$3.90, Gindalbie (GBG), down A4 cents to A$1.14, and Iron Ore Holdings (IOH), down A10 cents to A$1.70. 

In coal, Aston (AZT) fell A39 cents to A$8.82, Coal of Africa (CZA) fell A7 cents to A$1.39, Riversdale (RIV) fell A52 cents to A$15.18, and Stanmore (SMR) fell A3 cents to A$1.22. 

Minews. Uranium and the minor metals to close, please. 

Oz. Uranium companies were hammered by the sharp fall in the uranium price following reports that a Chinese utility was selling part of its stockpile. Manhattan (MHC) fell A18 cents to A98 cents. Berkeley (BKY) fell A10 cents to A$1.49. Bannerman (BMN) fell A5.5 cents to A76.5 cents. Extract (EXT) fell A41 cents to A$9.15, and Paladin (PDN) fell A16 cents to A$4.98. 

In potash, the best performer was South Boulder (STB), which managed to rise by A40 cents to a fresh all-time high of A$5.13, before easing to end the week at A$5.00. 

The minor metal companies were mostly weaker too. In tin, Venture (VMS) dropped A2 cents to A53 cents, and Kasbah (KAS) dropped A2 cents to A33.5 cents. The rare earth companies, Lynas (LYC), Arafura (ARU) and Alkane (ALK) lost ground too. Lynas fell A3 cents to A41.90, Arafura fell A4 cents to A$1.22, while Alkane fell A8 cents to A$1.16. Lithium companies were also weaker. Galaxy (GXY) lost A9 cents to A$1.44, and Orocobre (ORE) slipped A15 cents lower to A$3.05. Reed Resources (RDR) also fell, A5 cents weaker at A65 cents after it announced a big capital raising to pay for its acquisition of the Meekatharra gold assets of Mercator Gold. 

Minews. Thanks Oz.


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## drillinto

"If the Saudis revolt, the world’s in trouble"
The fate of the global recovery rests on events in Riyadh , says Jeremy Warner.
The Telegraph(UK), 24.02.2011

http://www.telegraph.co.uk/finance/...-the-Saudis-revolt-the-worlds-in-trouble.html

[The article has already more than 200 comments from readers]


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## drillinto

February 28, 2011

China’s Per Capita Use Of Copper Is Still Ten Years Behind That Of Its Asian Peers
By Rob Davies
www.minesite.com/aus.html    [FREE REGISTRATION]


Every year since 1956 Barclays Bank has released a report called The Equity Gilt Study which details the returns of the major asset classes - equities and bonds - and which has formed the backbone of many investment policies. Over time, the report has expanded to include other asset classes, and now includes commodities. This year’s report takes a long term view of the sector, and gives due consideration to the prediction made by Malthus back in 1798 that rising populations would lead to an exhaustion of natural resources and thus limit growth.

As he was writing at the dawn of the steam age, Malthus failed to appreciate the impact technology would have in discovering and exploiting new resources. Indeed, Barclays makes the point that technology has been a consistent deflationary force on commodities for most of the intervening 200 years. 

However, the last decade has seen the rise of a massive new source of consumption in China, and the potential for even more from places like India and, who knows, perhaps even in the Arabian world, after these new Jasmine Revolutions. 

There are genuine concerns among many experts that the Chinese economy is growing far too fast, fuelled by an easy money policy, and that it will all end in tears. The Chinese economy, the thinking goes, is currently behaving like an exuberant teenager on his first motorbike. Nevertheless, if it can survive its first crash, it should be set for a long and prosperous adult life. 

But, assuming that that’s true, and that the Chinese economy matures, what worries Barclays in this year’s report is that technological advance simply won’t be able to cope with the massive additional demand that is still to come from China, let alone from other countries. 

Barclays makes the point that China currently accounts for 40 per cent of global copper demand but that its per capita use is still ten years behind that of the average developed Asian economy. If you make the assumption that it will eventually get there, then Chinese copper consumption could rise from the current level of 7.3 million tonnes a year to 20 million tonnes. To put that into perspective, the current annual total worldwide production of copper is only 16 million tonnes. 

That’s a lot of copper to find, finance, develop and produce, every year. 

Not only is the scale of this task daunting, but the industry is starting on the back foot. The long period of depressed metal prices in the 1980s and 1990s reduced the attraction of finding and developing new deposits, and so the reserve base shrank. Even in the boom years, it’s taking a long time to catch up. The increase in recoverable reserves in the ten years to 2010 was half the increase in the previous decade. 

But now that demand has taken off, and production has increased, this lack of reserve can be seen in statistics that show much reduced global average mine lives. In 1980 global copper reserves were sufficient for 36 years. Today that figure is third less, at 24 years. 

Having said that, Barclays’ cogitations on the long term outlook didn’t distract metals markets last week overmuch. Base metals, as measured by the LME Index fell 2.1 per cent to 4,280.9, and copper led the way with a drop of 3.7 per cent to US$9,439 a tonne. Malthus might regard as that as a buying opportunity, for the next 200 years.


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## drillinto

Must read !

Fraser Institute(Canada)

Survey of Mining Companies: 2010-2011
http://www.fraserinstitute.org/uplo...arch/publications/mining-survey-2010-2011.pdf

[NOTE: This survey includes also Australia]


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## drillinto

March 02, 2011

"Equinox’s Offer For Lundin Keeps It One Step Ahead Of Its Predators"
By Our Man in Oz
www.minesite.com/aus.html [The registration is free]


In considering the US$9 billion takeover bid that Australia’s Equinox Minerals has made for Canada’s Lundin Mining it’s necessary to take a look at the bigger picture, which in this case might best be called “the copper pecking order”. A table of just such a pecking order was produced by Equinox when it set about attempting to prove to Lundin shareholders that its cash and share swap offer is superior to the also mooted merger of equals between Lundin and Inmet Mining. Equinox’s table shows how a combination of Equinox and Lundin will create, by 2016, the world’s eighth biggest copper company. It’s an attractive proposition, but such an entity would also make a tasty target for the seven bigger copper businesses, and some of the other companies being used in Equinox/Lundin game of leapfrog.

Ahead of Equinox/Lundin are five aggressively expansionist mining companies keen on copper. All five, Freeport McMoran, BHP Billiton, Xstrata, Anglo American, and Rio Tinto, will have been keeping a close eye on Equinox, with its world-class, stand-alone, Lumwana copper mine in Zambia. Rio Tinto and BHP Billiton are especially keen to boost their copper production. They are less likely to have been looking at Lundin which has a more diverse spread of interests – its best asset is a minority 24.75 per cent stake in the world-class Tenke Fungurume copper and cobalt mine in the Democratic Republic of Congo (DRC), a project controlled by Freeport. 

The big five are natural party spoilers in the race up the copper league table, but the same can also be said for some of the companies being left behind. Vale, the big Brazilian, is as keen on copper as everybody else, but will be a distant 15th on the copper league table if it does nothing during the current corporate feeding frenzy. Vedanta, Antofagasta and Teck will also be shoved down the list by a combination of Equinox and Lundin, unless they join the game. 

Equinox boss, Craig Williams, knows all of this, and he knows how closely he is being watched. He has probably lost count of the number of times a journalist or analyst has asked whether Equinox will “eat, or be eaten” as the China-driven commodity super-cycle steams ahead. Minesite’s Man in Oz has been one of those who popped that question to Craig, as recently as at a pre-Christmas drinks gathering, receiving in reply a pleasant smile and a comment along the lines of “business is business”. 

Two weeks before Equinox moved on Lundin, there were stirrings in Australia that unless Equinox moved quickly it would be a target itself. The local business newspaper, the Australian Financial Review, carried a story suggesting that Rio Tinto was ready to double-up on its African bets, adding Equinox to a bid it already has on the table for the Mozambique coking coal specialist, Riversdale Mining. Key to that February 14th story was a comment from Rio Tinto’s copper boss, Andrew Harding, who was quoted saying: “we are looking at the Copper Belt area, it is unbelievably prospective with what is in the ground”. 

That comment was picked up by one investment bank, RBS, which put two and two together to come up with Equinox as the answer, telling clients on the same day that: “Rio may bid for Equinox”. The firm then rattled off a list of reasons why Equinox was a good buy, including its growing copper production profile, and the recent acquisition of Citadel Mining with its attractive portfolio of assets in Saudi Arabia. RBS also highlighted that Equinox is “one of the few pure copper plays” and explained how it would fit with Rio Tinto’s small-to-medium acquisition criteria. “Further, grade declines across Rio Tinto’s existing operations suggest the company needs further projects in order to maintain production”, RBS wrote. 

Rather than being eaten, as RBS suggested, Equinox went back to the feeding trough little more than three months after its launched its friendly bid for Citadel, and exactly one month after the Citadel bid has wrapped up. To move so quickly onto the Lundin deal, while still digesting Citadel, is a sign either of extreme confidence at Equinox that the copper boom will continue for some time, or that the comments from Rio Tinto’s Andrew Harding, and RBS’s interpretation of those comments, were on the money. 

Whatever triggered Equinox’s second corporate deal in a matter of months, the market is less certain of the move on Lundin than it was about the Citadel acquisition. Since the Lundin bid was announced Equinox shares have fallen by seven per cent to A$5.78, and some investment analysts have expressed surprise at the aggressive timing of the proposed deal, upsetting Lundin’s merger with Inmet, and so soon after the Citadel acquisition. 

Cormark Securities is also now thinking along the same lines as RBS, telling clients on 1st March that perhaps it was a case of “eat, or be eaten”. UBS said the “last minute offer comes as a surprise”. RBC Capital Markets said it was not expecting a rival bid from Inmet, but noted that Equinox’s move was “not without risks, principally a US$3.2 billion bridging facility and increased risk in the DRC”. Clarus Securities was more positive, noting that Lundin brought underground expertise which Equinox will need at Citadel’s Saudi assets. Paradigm Capital told clients there was “no harm in thinking big”. 

But mixed reviews will not worry Craig who has spent more than decade building Lumwana, sometimes against stiff head winds. The market will now wait to see if he can get the Lundin acquisition across the table before he faces a move by Rio Tinto, or one of the other big boys in copper. Or whether other mining companies he proposes to leapfrog over snap him up after the deal is done. The big Brazilian, Vale, is in particular very keen to not drift too far behind its rivals in the copper club.

****************************************


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## GumbyLearner

*China wheat crops safe, may ease concerns of further price rise*
Published on: March 05, 2011 at 17:00

BEIJING *(Commodity Online)* : Subsequent to reports that China may face a winter wheat crop failure, the country’s top agricultural official has clarified that the crop situation may not be as bad as anticipated.

This declaration may ease concerns in the global market of a potential wheat price rise that would have occurred had China entered a shopping-spree-mode for wheat.

According to Chen Xiwen, director of the office for the Communist Party of China (CPC) Central Committee's Leading Group on Rural Work, the winter drought hit the crops when they were under hibernation and the subsequent rainfalls coupled with irrigation efforts has improved the crop scenario, reported china.org.cn.

But the official cautioned of a price rise with anti-drought measures raising the price bar of wheat.


READ MORE HERE -> http://www.commodityonline.com/news...concerns-of-further-price-rise-36975-3-1.html


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## GumbyLearner

Looks like the spec money from ag to oil had little effect

http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined

DYOR


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## Garpal Gumnut

GumbyLearner said:


> *China wheat crops safe, may ease concerns of further price rise*
> Published on: March 05, 2011 at 17:00
> 
> BEIJING *(Commodity Online)* : Subsequent to reports that China may face a winter wheat crop failure, the country’s top agricultural official has clarified that the crop situation may not be as bad as anticipated.
> 
> This declaration may ease concerns in the global market of a potential wheat price rise that would have occurred had China entered a shopping-spree-mode for wheat.
> 
> According to Chen Xiwen, director of the office for the Communist Party of China (CPC) Central Committee's Leading Group on Rural Work, the winter drought hit the crops when they were under hibernation and the subsequent rainfalls coupled with irrigation efforts has improved the crop scenario, reported china.org.cn.
> 
> But the official cautioned of a price rise with anti-drought measures raising the price bar of wheat.
> 
> 
> READ MORE HERE -> http://www.commodityonline.com/news...concerns-of-further-price-rise-36975-3-1.html




GL can you expand on the cyclical nature of commodities.

gg


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## drillinto

March 05, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html >> Free Registration


Minews. Good morning Australia. It looks like it was a somewhat better week on your market. 

Oz. It was, though most of the heavy lifting was done by the gold sector which reacted quickly to the higher gold price which we enjoyed for much of last week, but which will face stiff headwinds on Monday, in light of the sell-off that occurred after we had closed. When the final bell was rung on Friday at the ASX, the gold price was around US$1,434 an ounce. When the final bell was run at the pub later that night gold was back at around US$1,416 an ounce.

Minews. Are you saying that in the interests of the gold price it’s best to not go to the pub on Friday night? 

Oz. Now, that would be a tough choice for an Aussie. 

Minews. Indeed. Time to end the chit chat, and get back to the markets. 

Oz. Good idea. The big picture on the ASX last week involved strength in gold and other resource stocks, weakness in just about everything else. The gold index rose by 2.7 per cent, thanks in large part to a very strong performance by the sector leader, Newcrest (NCM) which rose A$1.39 to A$40.02 after some good discovery news. The metals and minerals index gained 2.2 per cent in the wake of solid rises by Rio Tinto and BHP Billiton, while the all ordinaries only managed a modest rise of 0.7 per cent. 

Minews. Let’s go straight to gold, and a break from tradition by looking at that Newcrest discovery news. 

Oz. ‘Bonanza’ is probably not too strong a word for the result that Newcrest reported on Friday morning, although the market has probably still not yet fully appreciated the potential size of what Newcrest has discovered in the Highlands of Papua New Guinea, at a project called Wafi-Golpu. The latest drill hole into the Golpu part of the discovery returned an assay of 883 metres at 2.23 grams of gold a tonne, plus 2.15% copper. Within that massive drill core was an enriched zone covering 628 metres at 3.06 grams gold and 2.82% copper. The exploration target there has now been lifted to 30 million ounces of gold and eight million tonnes of copper. A third porphyry-like structure called Miapilli yet to be included in any estimates. When the dust settles on what Newcrest has hit in the Highlands, and the results are combined with its Lihir, Telfer and Bonikro mines, it seems likely that Newcrest will be sitting on a gold and copper resource base bigger than that of Newmont, Goldcorp or AngloGold, the recognised global gold leaders. 

Minews. Sounds exciting, with the potential for rub off on other PNG miners. 

Oz. Perhaps in time, because the discovery underlines the enormous mineralised potential of the Pacific Islands, and companies already on the ground there, like Marengo Mining (MGO), which continues to add tonnes to its Yandera copper project. Last week’s development for Marengo was the appointment of Standard Bank as financial adviser to the Yandera development, a move which helped the shares rise A3 cents to A33 cents. 

Minews. Time to call the card, starting with gold, please. 

Oz. After Newcrest it was a mixed picture in the gold sector. PMI Gold (PVM), which is making good progress with its Obotan project in Ghana, added A15 cents to A83 cents after reporting further encouraging assays, including 80.08 metres at 7.49 grams per tonne of gold. Ausgold (AUC), the company we took a look at a couple of weeks ago because of interest in its grandly-named South Boddington project, added A10 cents to A$1.50. Then came long queues of modestly positive and modestly negative performances. Among them, Mt Isa Metals (MET) rose A5 cents to A67 cents, Silver Lake (SLR) rose A5 cents to A$2.10, Tanami (TAM) rose A3 cents to A97 cents, Beadell (BDR) rose A3.5 cents to A82.5 cents, Gold Road (GOR) rose A5 cents to A35 cents, Medusa (MML) rose A13 cents to A$7.22, and Norton Goldfields (NGF) rose A1.5 cents to A19.5 cents. On the other side of the coin, Troy (TRY) dropped A15 cents to A$3.58, and Kingsgate (KCN) slipped A17 cents lower to A$9.18. Meanwhile, A1 Minerals (AAM) dropped A1.3 cents to A6.6 cents after lodging one of the more interesting reports seen at the ASX, a complaint casting doubt on geological information about gold resources provided by the company’s former managing director. The board has called for an independent review to verify how much gold it really has at its Brightstar project. 

Minews. That sounds like a spot of fun. Let us know how it works out. 

Oz. It is interesting, and while painful for investors in A1, it’s a useful reminder that housekeeping matters can easily be overlooked in boom market conditions. Gold aside, the rest of the sectors were rather dreary, with iron ore, base metals, coal and uranium all marking time, or slipping lower. Best of the non-gold sectors was what might be called minor metals where rare earths, tin, vanadium, zircon, and potash all attracted interest. 

Minews. Okay, let’s cover the minor metals and save the dreary bits for last. 

Oz. Lynas (LYC) led the way up among the rare earth companies, adding A30 cents to A$2.20. It was followed by Alkane (ALK), which rose A12 cents to A$1.24, and Arafura (ARU), which rose A2 cents to A$1.20. Interest in the rare earths generally was sparked by news of a big Japanese and Korean investment in a Brazilian project. Potash companies were led higher by South Boulder (STB), which soared to a fresh all-time high of A$6.25 on Tuesday before easing to end the week at A$5.80, a gain of A80 cents. Atlantic (ATI) continues to attract interest, as it undertakes a third attempt at creating a successful operation at the Windimurra vanadium project, and added A22 cents to A$1.93. Mineral Commodities (MRC), a company we haven’t heard much from in a while, rose by A3.5 cents to A12 cents, amid signs that it might be making progress with its southern African ilmenite and zircon projects. 

Galaxy (GXY) was the best of the lithium companies, putting in a small rise of A2 cents to A$1.46. That may not look like much, but its rival, Orocobre (ORE), lost A21 cents to A$2.84. Stellar (SRZ) was the pick of the tin companies, and rose A5 cents to A22 cents after reporting high grade assays from its Heemskirk project in Tasmania. Kasbah (KAS) lost A2 cents to A31.5 cents, and Venture (VMS) slipped A1.5 cents lower to A51.5 cents, despite positive development news. Silver companies, which seem to be developing a life separate from gold, all rose. Cobar (CCU) put on A10 cents to A$1.03. Alcyone (AYN) added A1 cent to A7.3 cents, and Silver Mines (SVL) also gained A1 cent to A37.5 cents. 

Minews. Quite a mix there. Now for the regular sectors, starting with iron ore, please. 

Oz. Flat, as warned. Brockman (BRM) was the pick of the iron ore plays, adding A51 cents to A$6.00, while Iron Ore Holdings (IOH) gained A16 cents to A$1.86. After that it was flat or down. Aquila (AQA), which also has coal interests, added A12 cents to A$8.75. Atlas (AGO) slipped A3 cents lower to A$3.87. Murchison (MMX) was flat at A$1.39, Mt Gibson (MGX) was flat at A$2.02, and Sherwin (SHD) was flat at A19.5 cents. 

Minews. Base metals, coal and uranium to close, please. 

Oz. Same story. Not a lot of movement. Best of the copper companies was Rex (RXM), which added A12 cents to A$2.87, Sumatra (SUM) which gained A3 cents to A31.5 cents, and Hot Chili (HCH) which put on A4 cents to A70 cents. Equinox (EQN) fell a sharp A32 cents to A$5.82 as it made its move on Lundin Mining. Sandfire (SFR) failed to move at all, ending the week at A$7.24 despite confirming development plans for its Doolgunna project. Elsewhere, OZ Minerals (OZL) added A1 cent to A$1.65. 

Among the nickel companies, only Western Areas (WSA) gained any substantial ground, as it put in a rise of A28 cents to A$6.94. Panoramic (PAN) also rose, adding A2 cents to A$2.29, but Mincor (MCR) slipped A8 cents lower to A$1.61, and Independence (IGO) lost A14 cents to A$6.68. 

Most zinc companies were weaker, or unmoved. Overland (OVR) ended its recent upward run with a fall of A6.5 cents to A23.5 cents. Bass (BSM) lost A4 cents to A43.5 cents, and Prairie Downs (PDZ) shed A2 cents to A18.5 cents. Going against that trend was Perilya (PEM) which put on A7 cents to A69 cents. 

Coal companies were mixed, but the general trend was up. Aston (AZT) added A17 cents to A$8.99, while Coal of Africa (CZA) gained A4 cents to A$1.43. But Riversdale (RIV) slipped A7 cents lower to A$15.08, and Carabella (CLR) ended its strong upward run with a decline of A21 cents to A$2.04. 

Most uranium companies gained a little ground, helped along by the higher uranium price. Extract (EXT) added A31 cents to A$9.46. Paladin (PDN) added A10 cents to A$4.99, and Berkeley (BKY) was up by A1 cent to A$1.48. 

Minews. Thanks Oz, especially for not mentioning a certain cricket match against Ireland. 

Oz. It was tempting, but manners got the better of me. There has to be a first time for everything – in cricket and manners. 

*******************************************


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## GumbyLearner

Garpal Gumnut said:


> GL can you expand on the cyclical nature of commodities.
> 
> gg




Weather, Supply/Demand, Scarcity/Gluts etc....

In theory there a plenty of things to consider. The two predominant theories are that of Dewey and Dakin and also Kondratieff. With the former pronounced Dewey as in the system used in the library (refer to clip below) and Kondratieff which many are unwilling to believe even to this day for fear of being sent to the NyetScape (*Nyet* is no typo that's how its pronounced) Gulag for subversion. 



here's a link I just found on the theories.

http://www.safehaven.com/article/1755/are-there-cycles-in-commodity-prices


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## drillinto

March 07, 2011

"The Future Value Of The Dollar Is Becoming Harder To Predict Than The Future Value Of Metals"
By Rob Davies
www.minesite.com/aus.html

Many years ago this writer had a proper job working to extract tungsten, to sell to the Russians for use in Afghanistan. The mine was a fascinating geological and operational study, and sat under a large structural fault. It also extended out under the sea, and everyone therefore had a keen interest in ensuring that operations did nothing to disturb the surrounding rock, and allow the Bass Strait to flood the mine. To monitor the situation, the mine surveyors kept a close eye on small ground movements, and that offered them a fair intellectual challenge as they tried to work out what was moving relative to what. Underground, with no external frame of reference, everything is relative.

Metal prices can be viewed in the same way. Conventionally they are measured in the dominant currency of the day. It used to be sterling, but now it’s dollars. The currency is the fixed point of reference and it is the prices of goods and services that move around.  In reality of course the value of currencies move around as well, especially after the events of the last few years, making any real analysis of price changes even more complex. 

So, on a casual analysis, the 3.6 per cent rise in the LME index over the last week, to 4,436, looks like a powerful gain. In fact, the increase was less dramatic in other currencies, especially the euro, because the euro also rose, by 1.8 per cent over the week.  This week’s fall in the dollar was driven in part by a strong hint that the European Central Bank will raise interest rates in April, from their current level of one per cent to 1.25 per cent. Over and above that, though, there is continuing and rising concern over the status of the dollar per se. 

In the world of metals it is possible to get a handle, albeit not precise, about future supply from knowledge of existing mines and projects in development. Harder, but still possible, is to estimate what projected demand might look like. That involves some brave estimates of industrial capacity and utilisation rates. Out of the combination of the two comes a net figure of surplus or deficit, and some idea of scale. That then allows analysts to make a prediction on price, after allowing for inventory levels. 

All of which tells us what the fundamentals of metals are doing, or are likely to do. However, the unit of measurement, the dollar, is also subject to exactly the same forces of supply and demand. And, at the moment, it seems a lot easier to predict where metals might be going than where the dollar is going. The issue is not just the US$600 billion of new money that the US Federal Reserve is creating through its second round of quantitative easing. That alone adds about four per cent to US dollar money supply.  

But a more significant factor is the refinancing problem faced by Uncle Sam. Almost 50 per cent of the US’s US$1.65 trillion debt matures in the next three years. And the average cost of that debt is only 55 basis points. 

The size and speed of the recent growth in US debt is staggering. Three years ago the debt was ‘only’ US$1 trillion. At the current levels, and even at the outrageously low interest rates it is currently paying, the US is still spending US$190 billion, or 1.3 per cent of GDP, on debt servicing every year. 

Is that sustainable? Who knows. But it’s hard to envisage the US raising interest rates any time soon, while it’s carrying that sort of debt. In which case dollar weakness, and metal price strength, could be prolonged. 

Mine surveyors know you have to be sure of the ground you are standing on before you can make an accurate assessment of what’s around you. And maybe these days that is easier for metals than it is for the dollar.

*****************************************


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## GumbyLearner

Garpal Gumnut said:


> GL can you expand on the cyclical nature of commodities.
> 
> gg




Here is a well constructed blog piece from March 7, 2011 by Michael Ferrari and the slide he presented at the FAO.

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In a Bloomberg TV report from Thursday morning, the current food supply and price situation was aptly described as "Kitchen Table Economics." With uncertainty over the direction of food costs, underscored by a recent UN statement showing prices at new highs, where do we go from here?

In any given year, commodity researchers at Weather Trends spend a great deal time analyzing the global weather pattern in the context of a variety of commercial interests which span the agricultural and energy supply chain, from grower, to producer, to investor. While the general relationships between weather and food supply are obvious, our analyses go further than just projecting potential production and yield ranges, by discussing the supply implications in a holistic global macro perspective. This includes viewing global commodity balance sheets for the world’s major raw materials through the lens of anticipated production/consumption/export patterns, foreign exchange, and potential weather risk, while placing geography (and geopolitics) at the center of our discussion.

As the food supply chain has evolved into a truly global interconnected system, disruptions in one origin can trigger effects, both physical and financial, which ripple through the markets in real time. In 2007/08, a fairly rapid price spike caught many off guard, but the market seemingly "corrected" (it actually did not), and many prices were back to their previous range by the end of 2008. In contrast, the recent rise in food prices which commenced around the middle of 2010 is accompanied by a much higher level of uncertainty, as well as the increased risk for civil unrest. To be sure, there were plenty of food-related riots in 2008, however, they were largely short-lived and less violent. However, in recent months, nearly every demonstration from MENA to SE Asia, includes some component frustration and anger over the costs of domestic food staples, and If the recent UN note is a sign of what to expect, things will only get worse in the months to come.

The U.N. Food and Agriculture Organization (FAO) stated that food prices rose 2.2% in January. The FAO food price index is comprised of a basket 55 agricultural commodities, and the January index value demonstrated a gain for the eighth consecutive month, climbing to a value of 236, which is the index record since it was created two decades ago. To add to this, even though crude oil futures are down today after a series of session net-gains, most outlooks are supportive of higher oil prices, which will only add to the uncertainty on the agri side. Index gains were largely attributable to the rising cost of cereals, meat & dairy. They noted that sugar was the only monitored commodity that did not exhibit a monthly rise; however, the world is still suffering from a sugar high. According to FAO economist Abdolreza Abbassian, the chief causes of the price increases are tied to weather impacts and supply disruption. That is not to say that the seemingly insatiable demand for nearly all raw materials and high oil prices do not help support prices at these levels, but the primary causes of the rise are being blamed primarily on the supply side. Abbassian went on to say that the "only commodity" that is keeping the world out of a full blown food crisis is rice.

In a talk that I gave at the American Meteorological Society meeting last month, I showed the following slide. The mid year spike in wheat futures was the result of the market absorbing information surrounding the drought/export embargo from Russia. A dry La Nina influenced Argentina limited soybean yields. Lower than expected sugar numbers (India) coupled with flood related losses in Queensland has pushed, and is sustaining, sugar futures above the 30 cent barrier. And there are numerous others. With the well documented cotton shortage, do growers now plant more cotton collecting the cotton premium which is likely to be priced into that market for much of the year, or do they shift acreage to corn where demand from the food and fuel side remain strong. As the 2011 weather/crop relationship takes on heightened importance ahead of the Northern Hemisphere summer planting season, agriculture will likely remain among the largest drivers of global economic activity throughout 2011.




read more here 

http://seekingalpha.com/article/256...her-prices-in-agriculture-sector?source=yahoo


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## GumbyLearner

*Soaring commodity prices at mercy of demand – from speculators* 

Japan’s devastating earthquake and tsunami barely caused a ripple in North American equity markets. In fact, stocks rose in anticipation of all the lucrative reconstruction activity that will follow in the wake of the cleanup. But the same could not be said for grain prices.

Wheat ZW-FT, corn ZC-FT, soybean ZS-FT and rice ZR-FT futures all plunged, as the bad news from Japan piled on top of a revised forecast from the U.S. Department of Agriculture calling for bigger harvests and higher global stockpiles than previously expected. These and other soft commodities, as the market labels them, have been on a tear for months, fuelled by soaring consumption, a raft of weather-related woes and no small amount of investor demand. 

http://www.theglobeandmail.com/glob...cy-of-demand-from-speculators/article1940329/


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## GumbyLearner

Wheat, Corn, Soybeans Tumble as Japan Disaster Reduces Demand

March 15, 2011, 11:28 AM EDT

By Jeff Wilson and Whitney McFerron

March 15 (Bloomberg) -- Wheat fell to a four-month low, and corn and soybeans tumbled on concern that the earthquake and nuclear crisis in Japan will reduce raw-material demand.

Equities in Japan had the biggest two-day drop since the 1987 crash as the risk of radiation leaks north of Tokyo escalated. U.S. Treasuries surged. Japan is the world’s leading buyer of corn, the third-largest importer of soybeans and the fifth-biggest purchaser of wheat.

“Increasing levels of radiation have people dumping positions in stocks and commodities and piling assets into cash,” said Alan Brugler, the president of Brugler Marketing & Management LLC in Omaha, Nebraska. “There’s increased risk aversion until the situation stabilizes in Japan.”

http://www.businessweek.com/news/20...-tumble-as-japan-disaster-reduces-demand.html


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## drillinto

March 19, 2011

"That Was The Week That Was ... In Australia"
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. You seem to have emerged relatively unscathed from a tumultuous week. 

Oz. We have, though it was a week that brought to mind Melbourne’s famously fickle weather, where you get four seasons in a day. The ASX started horribly, as was expected after the triple-headed crisis in Japan, steadied, wobbled again, and then rebounded on Friday to finish roughly where it started. The indices tell the story of the week, but not of the day-to-day confusion. The all ordinaries closed on Friday down 0.4 per cent. The metals and minerals index closed up 0.9 per cent, and the gold index closed down one per cent.

Minews. In other words: all over the shop. 

Oz. Very much so, though you could also say we were saved by Friday, when the indices made up most of their lost ground. The all ordinaries added 1.7 per cent on Friday. Metals and mining added 2.6 per cent, and gold rose by 3.6 per cent. Victim of the week was undoubtedly the uranium sector which was slaughtered, with all companies down by between 20 and 35 per cent. A few brave chief executives raised their voices against the sell-off, only to be whacked by the popular press, which added insult to injury. The gold sector produced a surprising number of positive moves, even if the index did end lower. Copper was the best of the base metals. Iron ore was mixed, as were the minor metals. 

Minews. Let’s go straight to gold, and leave uranium for last because most investors up this way already understand what happened there. 

Oz. Kingsrose (KRM) was Friday’s star. It rose a sharp A20 cents to a 12 month high of A$1.55 in its second heaviest trading day of the past 12 months. Slightly more than three million shares were traded, almost matching the previous record of 3.5 million recorded late last year. Nothing was filed by the company at the ASX, and the exchange did not hit the company with a price and volume speeding ticket. Perhaps it’s in the mail. 

Another solid upward move in the gold space came from Ramelius (RMS). The shares rose A17 cents to A$1.27 after the company reported a resource upgrade at its Mt Magnet project in Western Australia. The new resource for the Galaxy area alone at Mt Magnet stands at just over one million ounces, comprised of 20.3 million tonnes grading 1.65 grams of gold a tonne. Troy Resources (TRY) also had a good week, recovering A28 cents of recently lost ground to close on Friday at A$3.70, thanks largely to the discovery of a high-grade gold vein at its Casposo project in Argentina. This could potentially add years to the mine’s life. Also on the move was Crusader (CAS), which continued to rise in the wake of fresh drill results from its Borborema project in Brazil. The best assay showed 19.65 metres at 5.33 grams per tonne, which included nine metres at 9.75 grams per tonne. The shares rose A13 cents to A$1.10. 

Two other gold companies which we follow closely also deserve special mention. Gold Road (GOR) reported that it has boosted the resource base at its Central Bore project in Western Australia beyond the one million ounce mark. In response Gold Road’s shares rose A2 cents to A42 cents. And Catalpa (CAH) enjoyed a decent rub-off from Bruce McFadzean’s talk at the 77th Minesite forum last week, rising by A16 cents to A$1.74. 

Minews. Which goes to show that London investors can still drive your market. 

Oz. Never doubted it. We’ll wrap up the developments in the gold space with a quick call of the card. Companies on the rise included Kingsgate (KCN), up A42 cents to A$8.50, Saracen (SAR), up A4.5 cents to A64.5 cents, Silver Lake (SLR), up A5 cents to A$2.09, Medusa (MML), up A27 cents to A$6.78, and Beadell (BDR), up A3 cents to A78 cents. Gold companies that fell included Ausgold (AUC), down A17 cents to A$1.10, Perseus (PRU), down A10 cents to A$2.80, OceanaGold (OGC), down A9 cents to A$2.40, Northern Star (NST), down A1.5 cents to A34.5 cents, and Scotgold (SGZ), down A0.3 of a cent to A7.2 cents. 

Minews. Base metals next, please. 

Oz. Copper did best. Nickel companies slipped a little, and zinc companies slipped a little more. Best of the emerging copper producers were Sandfire (SFR) and Rex (RXM). Sandfire rose A35 cents to A$6.78 and Rex rose A15 cents to A$2.75. Other copper companies on the rise included: OZ Minerals (OZL), up A7 cents to A$1.53, Equinox (EQN), up A16 cents to A$5.31, Marengo (MGO), up A1 cent to A28.5 cents, and PanAust (PNA), up A4.5 cents to A77 cents. Bougainville Copper (BOC) was also on the move as it continues to attract speculators ahead of a possible commitment to the re-development of its mothballed mine in Papua New Guinea. Bougainville rose A20 cents to A$1.50. 

Nickel movers included: Mincor (MCR), down A1.5 cents to A$1.41, Western Areas (WSA), down A26 cents to A$6.03, Panoramic (PAN), down A4 cents to A$2.05, and Poseidon (POS), down A1.5 cents to A25 cents. 

Zinc movers included: Perilya (PEM), down A7 cents to A55.5 cents, Terramin (TZN), down A2.5 cents to A35 cents, Ironbark (IBG), down A1.5 cents to A22.5 cents, and Prairie Downs (PDZ), down A3 cents to A15.5 cents. The one zinc company to rise was Bass (BSM), which closed up half a cent to A39 cents. 

Minews. Iron ore and coal next, please. 

Oz. The trend was modestly down, although there were also some risers, and one company that fell markedly. BC Iron (BCI) dropped A51 cents to A$2.44 after the surprise withdrawal of a takeover bid from Regent Pacific. We should hear more about that in the weeks ahead because the reason for the withdrawal, a claim that Ukrainian oligarch Gennadiy Bogolyubov, the owner of Consolidated Minerals, had not spelled out his intentions to accept or otherwise, has raised eyebrows. Other companies on the move included: Atlas (AGO), down A6 cents to A$3.32, Iron Ore Holdings (IOH), down A1.5 cents to A$1.62, Territory (TTY), down A1 cent to A27.5 cents, Brockman (BRM), up A14 cents to A$6.10, and Fortescue (FMG), up A6 cents to A$5.94. 

Coal companies had a mixed time of it, though there was one notable rise. Aspire (AKM) reported fresh assay results from its Ovoot coking coal project in Mongolia, and rose A7 cents to A75 cents. Other movers included: Coal of Africa (CZA), down A7 cents to A$1.24, Riversdale (RIV), up A19 cents to A$15.71, Hunnu (HUN), down A1 cent to A$1.33, Xanadu (XAM), down A5.5 cents to A50 cents, and Aston (AZT), up A28 cents to A$8.77. 

Minews. Minor metals, and then finish with the call of the rather ill uranium card. 

Oz. There was very little to report among the minor metals. Rare earth companies were weaker. Lynas (LYC) slipped A5 cents lower to A$1.92, and Alkane (ALK) lost the same amount, A5 cents, to A$1.35. The tin companies went in different directions. Venture (VMS) added A3.5 cents to A49 cents, while Kasbah (KAS) lost A1.5 cents to A26.5 cents. South Boulder (STB), the leading potash player, recovered a modest A4 cents to A$4.51. Nkwe Platinum (NKP) returned to trade after a period in suspension over uncertainty relating to its tenements in South Africa, and promptly dropped A9.5 cents to A35.5 cents. 

Minews. Uranium, and goodbye. 

Oz. As you might expect, there’s no good news to report. Just a list of share price falls. Mantra (MRU) dropped A$2.55 to A$5.29 after a Kazakh-based company dropped its proposed takeover bid. Paladin (PDN) fell A$1.13 to A$3.60, but did get as low as A$3.01 on Thursday, although there were some signs of a recovery on Friday. Extract (EXT) fell A$3.63 to A$7.00. Manhattan (MHC) fell A24 cents to A81 cents, but did touch A60 cents on Thursday. Berkeley (BKY) fell A52 cents to A90 cents, but did get as low as A74 cents on Tuesday. And Bannerman (BMN) fell A24.5 cents to A44.5 cents, but did get as low as A34.5 cents on Tuesday. 

Minews. Thanks Oz.
***********************************************************


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## drillinto

March 21, 2011

"On Recent Evidence, Living By The Sea Is More Dangerous Than Living Next To A Nuclear Power Station"
By Rob Davies
www.minesite.com/aus.html

No one really knows how many people died as a direct result of the Chernobyl nuclear disaster. It is known that 50 workers at the site were killed in, or shortly after the explosion. What is much less certain is the number of deaths that were caused among the 17 million people that were indirectly affected by the event. Estimates range from 5,000 to 220,000. A range which means that the standard deviation of the estimate is so high that the estimate itself is worthless.

What we do know, though, is how many people were killed at the nuclear meltdown at the Three Mile Island nuclear plant in the US. No one was killed there. And so far no one has been killed as a direct consequence of the problems at the Fukushima nuclear power station in Japan, even though it has had to endure an earthquake and a tsunami that were both in excess of its design parameters. 

But just because no-one has yet been killed as a direct result of the Fukushima incident is not to say nuclear power is safe. It clearly isn’t, but its safety record is excellent when compared to, say coal. Coal mining has killed hundreds of thousands of miners over the last few centuries. Or oil. Only a year ago BP’s Macondo rig blew up in the Gulf of Mexico killing many of its operators. And a few decades before that the explosion on the Piper Alpha platform in the North Sea killed hundreds of its crew. 

Yet the press and the chateratti would have you believe that the problems at the stricken Japanese plant mark the death knell of the nuclear power industry. This negative sentiment largely explains the recent 10 per cent fall in the spot price of uranium to US$60 a pound. A few months ago spot uranium was trading at US$75. But the long-term contract price still stands at US$155 a pound. And in such a febrile atmosphere, politicians don’t always help. Angela Merkel’s closure of geriatric nuclear power stations in Germany probably says more about her poll ratings than the technical status of the plants. 

The problem that the politicians have to address is that the world cannot live without nuclear power. Nuclear already supplies 13.5 per cent of the world’s electricity and despite the airy arguments of the Greens, there is no way that renewable energy will ever do anything other than supply a few per cent of the total electrical output. 

The correlation between increasing power consumption, and rising living standards and falling mortality is well established.  Our future prosperity and well being depend on us being able to consume electricity at the touch of a button. And nuclear power has to be a part of that equation. 

In the short term the media comment on nuclear power will undoubtedly be extremely negative. But it now seems the worst is over for the Fukushima plant and once a full account of the event is published it is likely that the episode will actually prove how safe the process is when faced with a situation outside the expectations of its designers. 

In fact it will demonstrate that living beside the sea is far more dangerous than living next to a nuclear power station. In time this could be seen as the biggest buy signal ever for uranium, which should act as some small comfort for those sitting on large losses in the wake of the recent sell-down in uranium shares. 

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## drillinto

"China Surpasses Japan in % of World Market Cap"
Australia is n ° 11 !

To see table and charts, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/3/23/china-surpasses-japan-in-of-world-market-cap.html


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## drillinto

March 25, 2011

""Atlas Iron Storms Into The ASX Top 100, As Iron Ore Production Rises""
By Our Man in Oz
www.minesite.com/aus.html  [Free Registration]

Little more than two years ago canny investors were loading up with Atlas Iron shares at A45 cents a pop. Today, they’re looking down the barrel of a 600 per cent gain, as a company which started life looking for gold instead carves out a place for itself as one of Australia’s most successful iron ore exporters. The upward share price movement from Atlas, from its late 2008 low to recent trades at around A$3.26 represents recognition that Atlas is now a world-class iron ore producer. Indeed that fact is now so well recognised that the company has snatched a place among the top 100 on the ASX. And there should be more good news to come, because Atlas is one of the few Australian iron ore miners that has mastered the industry’s three key challenges: to prove up iron ore in the ground, to gain access to a port, and to secure people able to join it all up, by means of logistics and deals.

The latest of those deals was the friendly merger with another iron ore player in the Pilbara region, Giralia Resources. Like Atlas, Giralia had found plenty of iron in the ground - in one case atop the same hill as Atlas. Unlike Atlas, Giralia was struggling to achieve the equally important “infrastructure solution” of road or rail access to a port. Bringing Atlas and Giralia together is a rare example of one plus one equalling three. The merged business today has two producing mines, a resource of 444 million tonnes of direct shipping ore, two high priority development targets and a pipeline of opportunities stretching a decade and more into the future. 

“The merger has gone very well,” Atlas chief executive David Flanagan told Minesite from his Perth office. “We now have the infrastructure in place, the ore reserves, and people, to execute our plans for multiple mines.” The first clear indication of what that will mean in money terms came late last month when Atlas reported a maiden half year profit of A$30.1 million from sales valued at A$201.8 million. “That was a significant milestone”, David said. “It was the culmination of the development of our first two mines, at Pardoo and Wodgina, and sets us up well for the full 2011 financial year.” 

Forecasts for the likely full year profit range between A$120 million and A$150 million. Goldman Sachs comes in at the low end, with a forecast A$125 million, and a few cautionary words about the outlook. Goldman’s twin issues with Atlas are its cost structure, and the long-term iron ore demand and pricing outlook. On costs, Goldman reckons Atlas is facing higher than expected costs relating to exploration, share-based payments, and shipping expenses. “We regard Atlas as a small, but relatively high cost producer when all costs are considered”, Goldman told clients. “In a strong market the company has leverage and we expect strong markets for at least two years. In weak markets, or in markets with cost inflation (oil-related and labour) we believe the stock would disproportionately suffer.” 

While not a welcome criticism, the thoughts of the research team at Goldman make it clear just exactly why Atlas has been running so hard to build its production profile, to secure corporate opportunities, and expand while opportunities abound. “We’re confident that we have costs well under control”, David said. “Cash costs for the current half are confirmed at between US$40 and US$43 a tonne, and we’re currently selling at around US$120 a tonne.” No need to be a Goldman analyst to appreciate that a margin on cash costs in the order of US$80 a tonne, or 200 per cent, is a something that most businesses dream about. 

Atlas plans to grow its current annualised rate of exports from six million tonnes to 12 million tonnes by the end of 2012. By the end of 2015 the target is 22 million tonnes a year, with material flowing from a number of mines by that time, including the Daltons and Mt Webber deposits. In the longer term, Atlas’s output could grow well beyond that 2015 target as additional deposits are drilled out and the current resource of 444 million tonnes of direct shipping ore expands towards a target of 638 million tonnes. After all, the company has a whopping 26,000 square kilometres of tenements to work off - almost precisely 10 times the area of Luxembourg. 

Challenges and opportunities will keep Atlas busy for years. The biggest opportunity is in maximising the profits available from access to a large resource of direct shipping ore, and excellent exposure to port capacity. With an entitlement of 15 million tonnes a year at Utah Point, part of Port Hedland, plus another 19.5 million tonnes at South West Creek, also in Port Hedland, and up to 10 million tonnes at the planned port of Anketel, Atlas has an unrivalled port profile among the smaller Pilbara miners. A secondary opportunity lies in potentially “monetising” deposits of magnetite ore which Chinese and Indian steel mills are keen to access, but which Australian miners find too capital-intensive because of the high level of upgrading that’s required to drive off impurities in the low-grade ore. 

The biggest challenge, David told Minesite, is no longer infrastructure or finding sufficient ore, it’s winning environmental approvals from an often slow-moving government process. Other issues that he faces include finding the right people to join his fast-growing business in a region of Australia where skilled professionals and blue-collar workers are in high demand, and living with Australia’s proposed new tax system which will hit iron ore and coal miners with a super tax, and then layer a carbon tax on top of that. 

Complex as the future looks, the key points about Atlas today is that cash flows are high, and still growing. The company is debt free and has A$230 million cash in the bank. Annual production will double from six million tonnes of direct shipping ore a year to 12 million tonnes by the end of 2012. New mines are planned, and magnetite deposits are a sleeper that could add further value. “We have the right combination of assets and people to continue growing rapidly”, David said. Which sums it up nicely.

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## drillinto

How to spot bubbles
http://www.project-syndicate.org/commentary/shiller76/English
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## drillinto

March 26, 2011

"That Was The Week That Was ... In Australia And Hong Kong"
By Our Man in Oz, in Hong Kong
www.minesite.com/aus.html  [[ Free Registration ]]


Minews. Good morning Australia. Or should be that be good morning Hong Kong? 

Oz. Bit of both really. Much of the past week was spent at the Mines & Money conference in Hong Kong while also keeping a watchful eye on the home market. The mood in both places was equally positive, and the 2,000 delegates who made it to the Hong Kong edition of Mines and Money certainly came away feeling pretty optimistic especially after being revved up by the like of Robert Friedland on the outlook for copper, Andrew Forrest on iron ore, Rob McEwen on gold and David Morgan on silver.

Minews. Not a bad team of keynote speakers, and certainly a big turn up compared with last year. 

Oz. Roughly triple the head count of the 650 who were at the 2010 conference, which isn’t a bad measure of the ultra-positive mood in this part of the world towards commodities. Morgan and McEwen in particular played to the audience, with Morgan tipping a future silver price of more than US$100 an ounce, and McEwen tipping gold to go to US$5,000 per ounce. Wild and hairy-chested as those forecasts look, both men have the credentials to make them. Morgan runs Silver-Investor.com and has forgotten more about his favourite metal than most people know. McEwen is the founder of the very successful Canadian gold company, Goldcorp. 

Minews. They picked a good week to spruik their wares with gold and silver continuing their relentless upward charge. Time’s short, let’s switch to the Australian market. 

Oz. It was an up week on the ASX. The all ordinaries index added 2.6 per cent. The metals and mining index was slightly behind, up 2.3 per cent, and the gold sector starred with a gain of 5.7 per cent. The rise in local gold shares was especially commendable as the Australian dollar also surged to fresh heights, closing the week at its highest since it was allowed to float freely in 1983, at US$1.02. 

Minews. Prices now, but perhaps keep it brief as you have a plane to catch. 

Oz. Thanks. Gold is the obvious starting point for a shortened market review. The challenge is to find any gold company that fell in such an up week. Among the top performers was the Brazilian focussed gold and iron ore explorer, Beadell Resources (BDR), which confirmed that it might produce both products, given the unique nature of its orebody. That news helped the shares add A12 cents to A90 cents. Several of the Aussies attending Mines and Money also did well. Gold Road (GOR) put on A5.5 cents to A47.5 cents. Cobar Consolidated (CCU), the silver specialist, added A11 cents to A97 cents. Kingsgate (KCN) gained A49 cents to A$8.99. Medusa (MML) rose by A43 cents to A$7.21. And Kingsrose (KRM) added A7 cents to A$1.62, but did hit an all-time high of A$.68 during Friday trade. Other movers included Troy (TRY), up A12 cents to A$3.82, Resolute (RSG), up A13 cents to A$1.25, Allied (ALD), up A4 cents to A66 cents, Adamus (ADU), up A6 cents to A77 cents, Perseus (PRU), up A30 cents to A$3.10, and Ausgold (AUC), up A7 cents to A$1.18. 

Minews. Uranium companies next, please, given the rebound which seems to have started. 

Oz. There was a solid recovery, although not back to the pre-Japan tsunami level. Mantra (MRU) was one of the best thanks to a revived, albeit lower, takeover offer. It added A$1.43 to A$6.72. Extract (EXT), another company in the middle of a corporate shuffle, was also better off, closing up A$1.43 at A$8.43. Other uranium movers included Berkeley (BKY), up A17 cents to A$1.07, Uranex (UNX), up A5 cents to A38 cents, Bannerman (BMN), up A3.5 cents to A48 cents, and Paladin (PDN), up A25 cents to A$3.85. Manhattan (MHC) was also stronger, up A19 cents to A$1.00, as its chief executive, Alan Eggers, took every opportunity in Hong Kong to spread the uranium story. 

Minews. Over to the base metals now, starting with copper to see whether Mr Friedland’s talk helped the market. 

Oz. He seems to have done his job, as the copper companies were up, as were, the zinc and nickel companies. One of the best copper moves came from Hot Chili (HCH) which caught the attention of Mines and Money delegates after a presentation by its chief executive, Christian Easterday. Hot Chili’s shares added A7 cents A75 cents. Rex (RXM) was another copper player making itself visible in Hong Kong, and it duly rose by A14 cents to A$2.89. Other copper movers included Marengo (MGO), up A3 cents to A31.5 cents, Sandfire (SFR), up A21 cents to A$6.99, and Equinox (EQN), up A6 cents to A$5.37. Metminco (MNC) was one of the few to fall last week, down A3 cents to A38 cents. 

Nickel companies attracted an increased level of interest, perhaps aided by a tip from a presenter at Mines and Money. Warren Gilman, deputy chairman of the Canadian investment bank CIBC, said nickel was set for an upward run in the next 12-to-18 months. Across the seas to the south, on the ASX, Panoramic (PAN) was the strongest of the nickel miners, adding A31 cents to A$2.31. Western Areas (WSA), another Aussie in Hong Kong, rose by A63 cents to A$6.66. Mincor (MCR) reversed a little of its recent slide with a rise of A2 cents to A$1.43. Independence (IGO) added A30 cents to A$6.56, and Minara (MRE) put on A6 cents to A78 cents. 

The zinc moves were generally modest, but there was evidence of a stronger overall upward trend, although that might well have been a rub-off from the strengthening price of lead. Blackthorn (BTR), a zinc player we used to hear a lot about, was the pick of the sector after it announced a fresh deal with Glencore regarding its Perkoa project in Africa. Blackthorn added A12 cents to A66 cents. Meridian (MII) rebounded after a painful slide, rising by A2.2 cents to A12 cents. Kagara (MZL) gained A6 cents to A63 cents, and Perilya (PEM) added A6.5 cents to A62 cents. 

Minews. Iron and coal next, please. 

Oz. Both coal and iron ore were mixed, but trending up. Pick of the better known coal companies were two Mines and Money attendees, Hunnu (HUN) and Xanadu (XAM). Both are busy in Mongolia. Hunnu added A15 cents last week to A$1.48 and Xanadu rose A7 cents to A57 cents. Coal of Africa (CZA) went against the trend with a fall of A11 cents to A$1.15, but Carabella (CLR) continued its strong upward run, rising by A70 cents to A$2.75. Good as all that looks, the star of the coal sector was a new player, Newland Resources (NRL), which reported promising coking coal assays from its tenements in the Bowen Basin of Queensland, and effectively doubled on the news to close at A15.5 cents. 

Iron ore companies were led higher by Fortescue (FMG) which added A30 cents to A$6.28 after an upbeat talk from Andrew Forrest in Hong Kong and a revised resource estimate of 10 billion tonnes of ore. Elsewhere, Atlas (AGO) added A20 cents to A$3.52. Iron Ore Holdings (IOH) attracted plenty of interest in Hong Kong as Ocean Equities analyst, Sam Spring, did a good job talking up the company. The shares gained A29 cents to A$1.91, but did pop up as high as A$2.04 earlier in the week. Other movers included Gindalbie (GBG), up A1.5 cents to A$1.06, and BC Iron (BCI), up A10 cents to A$2.54. However, Sundance (SDL) lost support after a big share shuffle which saw the estate of the late Ken Talbot exit the company. That knocked A3 cents off the price which ended at A46 cents. Elsewhere, Brockman (BRM) eased back by A20 cents to A$5.90, while Murchison (MMX) tumbled a sharp A17 cents to A$1.06 amid doubts about plans for a new port on the west coast. 

Minews. Minor metals and then off you go back to Oz. 

Oz. A mixed bag among the lesser metals. Tin companies were mixed. Venture (VMS) lost A1.5 cents to A47.5 cents. Kasbah (KAS) added A1.5 cents to A28 cents. Lithium was also a mixed bag. Galaxy (GXY) lost A9 cents to A$1.24, but Orocobre (ORE) added A27 cents to A$2.76. Iluka Resources (ILU), the biggest of the zircon miners, put in a star turn, rising by A98 cents to A$11.75. 

Minews. Thanks Oz. 
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## drillinto

March 28, 2011

"The Arab Spring May Be Bullish For Metals In The Long Term"
By Rob Davies
www.minesite.com/aus.html  (The registration is free)

“Buy or sell?” It’s the question investors continually ask themselves. There is, of course, no universal correct answer. It depends too much on an individual’s, or a corporation’s, specific circumstances. In theory everyone acknowledges the veracity and wisdom of buying when there is blood in the streets, or straw hats in winter. But in practice it is extremely difficult to do because everyone is concerned that bad things can get worse. And when the sun is shining no one can conceive of things being anything other than bright and shiny.

In part these attitudes can be put down to age. Once you’ve lived through a few crises another one just seems par for the course. Youngsters find each new drama unsettling which is one reason perhaps that contrarian investing is always so unpopular. Few people have the sagacity of Warren Buffet, who recommends investing in Japan now. But the reassuring factor about wars, insurrections, earthquakes and tsunamis is that they are not monetary. They were not caused by financial speculation. 

It might be fair to say that many insurrections in the Arab world were, ultimately, caused by the greed of their despotic rulers. And if that is the case, and if the era of the greedy despot is passing, then the changes that are now underway will have far reaching and deep rooted consequences. What every country needs before its economy can really take-off, as China’s and India’s have done, is a burgeoning middle class. 

Such a class was never allowed to develop in Tunisia, Egypt, Libya or Syria. The elite did not want to share their wealth with their countrymen. But if these revolutions succeed, and it is hard to envisage the populace being content with the old order now, it could mark the start of a massive surge of growth in countries that historically have had no significant economic footprint. Like the Indians and the Chinese, Arabs are famous for their trading and entrepreneurial skills. Ally that with oil resources, and the potential for creating wealth is phenomenal.  

This global uncertainty has unsurprisingly triggered a correction in some growth correlated asset classes, such as equities and commodities, in recent weeks. Base metals in contrast, as measured by the LME index, continue to make good progress. A gain of 2.9 per cent on the week takes the rise over the year to date to six per cent. It might not be dramatic, but it puts the asset class in a healthy situation relative to others.  

What is interesting is the rotation within the sector. Copper led the way initially and breached the US$10,000 a tonne barrier but has since drifted back and is essentially flat on the year at US$9,700. In contrast, aluminium has made steady progress over that period and is up 5.7 per cent at US$2,595 a tonne. Like copper, nickel has drifted back from its peak but unlike the red metal is still showing an eight per cent gain on the year. Lead has been a bit more subdued but is still 5.4 per cent to the good over the year. It is only zinc that has let the side down with its 2.4 per cent slide but a modest 20,000 tonne increase in LME inventories to 735,000 tonnes provides a reasonable explanation. 

It would be easy to us the current news flow as an excuse to sell out of growth assets like metals and mining shares. But if these changes in the Maghreb become embedded and allow the region properly to join the democratic capitalist world, then the scope for growth and increased metal demand must be positive. Even today the bulk of metal demand comes from a handful of countries like the USA, China, Germany and Japan. Anything that allows that list to grow is good news, even if it doesn’t feel like it at the time. 
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## drillinto

Stick to OZ !
::::::::::::::::::::

March 29, 2011

""Things Fall Apart For Zimbabwe’s Miners""
Tawanda Karombo in Harare
www.minesite.com/aus.html

Chinua Achebe is probably one of Africa’s most renowned and decorated literary figures. He has written more than half a dozen novels, most of them bordering on satire and caricature, some exploring corrupt tendencies and populist policies by African governments. His classic English novels Things Fall Apart and A Man of the People are regarded as his best. A Man of the People is a fictional account of the effects of a corrupt and populist government on the daily lives of its nation’s people.

There are two protagonists to the novel’s plot, Odili Samalu, an ordinary teacher who leaves his profession to pursue partisan politics. As the plot thickens, Chief Nanga, the other protagonist, disregards sound economic advice from his minister of finance because it is an election year and derides what he regards as westernized intellectuals. Achebe uses irony to portray a corrupt government through the eyes of Odili. And, although he does not bring out the theme of forced nationalization of mines in A Man of the People, Achebe clearly sets out some of the same problems that are dogging Zimbabwe at the moment. 

This week, President Robert Mugabe’s Zanu PF part of the inclusive government disregarded advice from concerned investors and educated economists by publishing the final provisions for the country’s controversial indegenisation law, first promulgated in 2007. Over the past few years, the law has been the subject of intense debate and concern, and was last year shelved pending a review of the provisions which initially set a 51 per cent mandatory shareholding in foreign companies to be held by local Zimbabweans. 

Since then, it has all been empty talk and hollow threats. But now the threats are beginning to sound somewhat serious. Last Friday, empowerment minister Saviour Kasukuwere, who has been described by local media as a “Super Minister”, said the government had passed the provisions of the oft-condemned law, and that these would be published before the end of this month. And indeed they have been. 

A government gazette dated March 28 2011 states that the new legislation applies to: "Every mining business, in respect of which 51 per centum of the shares or a controlling interest is not held by indigenous Zimbabweans, and whose net asset value is of or above one United States dollar (US$1)”. The provisions, it appears, are now targeted specifically at the mining sector. The significance of the US$1 threshold is that it catches small businesses that might have hoped to escape indigenization under the previous threshold of US$500,000. Some local businessmen had planned to split larger concerns into smaller operating units with a net asset value of less than US$500,000. The announcement also states that each non-indigenous mining company must submit an "indegenisation plan" within 45 days, and dispose of 51 per cent of its shares to a "designated entity" within six months, a period which can be extended by a period of no more than three months. There is none of the long-term strategic thinking which underlay the South African empowerment programme in evidence here. South African empowerment, for all its other problems, did at least give businesses plenty of time to adjust. 

There’s also uncertainty as to how the valuations of the stakes that look set to change hands will be calculated. Last Friday, a government notice that preceded Monday’s official gazetting of the new provisions said: “The value of the shares or other interests required to be disposed of to a designated entity … shall be calculated on a basis of valuation agreed to between the Minister and the non-indigenous mining business concerned, which shall take into account the State’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited by the non-indigenous mining business concerned”. 

President Mugabe, whose health has become the subject of increasing speculation, amidst unconfirmed reports that the army is now running the country, has also in the last two days reiterated his government’s desire to have other foreign companies surrender majority stakes to black Zimbabweans. He said locals should be “senior partners” in all business ventures in the country. 

“Companies”, said Mugabe, that “want to work in our mining sector, they are welcome to come and join us, but we must have our people as the major shareholders". He particularly singled out mining firms, Rio Tinto and Anglo American, whose Anglo Platinum subsidiary has significant platinum mining interests in the country. Prior to this singling out of the two majors, Mugabe has previously instructed empowerment minister, Saviour Kasukuwere to nationalize global foodstuffs concern, Nestle, and Impala Platinum’s Zimbabwe subsidiary, Zimplats. 

What has particularly worried mining sector stakeholders is the way the disposals of the majority shareholdings look likely to be made. These, it seems, will only go to state-controlled entities such as the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ). 

And unsurprisingly, these developments have adversely hit share prices. Aquarius, which has a joint venture platinum mining project in Zimbabwe, was the worst performing stock on Australia’s S&P/ASX 100 index on Monday after it said that it would strive to comply with the empowerment rules. Aquarius shares dropped by 6.87 per cent, to A$5.42 on Monday, and then drifted further on Tuesday to A$5.39. Shares in Zimplats Holding Ltd, which is reviewing the progress of a mine expansion in Zimbabwe, fell 8.32 per cent, to US$13.00. 

Meanwhile, New Dawn Mining Corporation, which has gold mining projects in Zimbabwe said on Monday that it was reviewing the potential impact of the gazetting of the provisions governing the implementation of the indigenization law. “New Dawn is reviewing these new regulations in order to understand their potential impact on the company's Zimbabwe-focused mining operations and business plans, and will report to shareholders as more information becomes available," the company said in a statement. 

Achebe’s other novel, Things Fall Apart, has a prologue equally relevant to what is happening in Zimbabwe’s mining sector at the moment. He quotes the Yeats poem, The Second Coming, which begins with the following lines:     

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world…
The best lack all conviction, While the worst 
Are full of passionate intensity


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## drillinto

By Andy Xie[economist] - 11.03.30 
"How Japan's Earthquake Will Shake the World"
The destructive event is stoking global inflation, threatening the yen's value and, we hope, burying nuclear power

Japan's 9.0 earthquake will increase global inflationary pressure through means such as the Bank of Japan's monetary expansion policy, disruptions for automobile and electronics industrial supply chains, and rising demand for fossil fuels.

To read the full article, please click the link below >>
http://english.caing.com/englishNews.jsp?id=100243128&time=2011-03-30&cl=111&page=all
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## drillinto

"Metals & Mining Analysts' Ratings & Estimates - Juniors"
Bill Matlack (USA), 28 March 2011

To view the tables, please click the link below:
http://www.kitco.com/ind/matlack/mar282011_juniors.html

[Note: Many OZ junior stocks are also rated]


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## drillinto

March 31, 2011

""Good Times For Gold, But Will It Last? The World Gold Council Is Cautiously Optimistic""
By Alastair Ford
Source >> www.minesite.com/aus.html (Free Registration)

“You’ve never had it so good.” With gold riding high at well over US$1,400 per ounce, most industry participants would acknowledge that times are good. Indeed, given that the price has been regularly smashing records, there’s an argument to be made that they’ve never been better. Silver has its adherents too, but the silver price is still some way short of the record hit back in the 1980s, when the Hunt brothers tried to corner the market. No-one’s ever been mad enough to try to corner the gold market, although the conspiracy theorists out there continue to argue that banks and other government agencies exert an undue malign influence. But the truth is that gold doesn’t need speculators like the Hunts, or hidden agendas to rise in value. All it needs is human frailty and uncertainty.

Still, now is a particularly good time for gold bugs, and the famous phrase “You’ve never had it so good” seems particularly apt. It was coined by the UK conservative politician Harold MacMillan in 1957, and helped him go on to win a general election in 1959. But then as now there were hidden tensions beneath the surface of the apparently rosy picture. MacMillan won the election, and indeed gained the epithet “Supermac” for the immense influence and success he had in British politics. JFK consulted him in times of uncertainty. Many Minesite readers will know him for his “Winds of Change” speech which was seismic in importance for Africa. 

But just ahead were rocky waters. In 1961 he was forced to institute a wage freeze, and he spent much of his foreign capital on fruitless attempts to join the EEC. Then there was the famous sex scandal involving Christine Keeler and one of Supermac’s ministers, and the great man decided to chuck in the towel not long after. 

Some things change, some things stay the same. In the gold space the idea of a wage freeze doesn’t look unattractive at the moment in the light of recent comments from Paul Burton, the managing director of the World Gold Council. Mr Burton addressed Australia’s Paydirt 2011 gold conference earlier this week and noted that while the strong gold price had created what he called a “lucky” environment, there was a continuing danger that increased costs would erode much of the gains. 

Indeed, the idea that one of the bull cases for gold is dollar weakness seems almost self defeating from the word go. Or to put it another way - tautological. Is it bullish for gold that the dollar is weak? Or is it simply a statement of the same fact, expressed in two different ways.  In a world where quantitative easing is seen as a cure-all, it takes more US dollars to buy oil, steel, copper, concrete, bulldozers, tyres, and, yes gold. No surprise there. But gold has an ability to keep ahead of the inflation spiral because, it also has attractions other than as a hedge against currency weakness. It’s also a safe haven in the event of political turmoil, as recent events in the Middle East have demonstrated. 

But it also takes time for costs to catch up. Over in Canada the chaps at Casey Research have noted that metal prices have been increasing much faster than mining costs. And that chimes with Mr Burton’s talk of a “lucky” environment. On data that ran to towards the end of 2010, Casey worked out that while the gold price had risen by 75.9 per cent and the silver price by over 60 per cent over the past three years, the corresponding rise in wages was only five per cent. The wage freeze is already on. And that’s partly why producers have been enjoying a real uplift since the dust from the financial crisis finally settled.  

But will it continue? Well, the other side of the gold coin is supply. In his address to the Paydirt conference, Mr Burton pointed out that recently the industry had been going through a lean period in terms of major finds. In the short-term, he reckoned, production will rise as a direct response to the strong price. Thereafter, though, it will decline, as there will be less supply available because new discoveries are just not being made. That’ll lead to more corporate activity, although Mr Burton noted that some valuations are already looking a bit toppy. As to the price, Mr Burton wouldn’t put a ceiling on it, but he did put a floor at US$900. Which, for those of us who remember US$250 gold, should at least be some comfort. 
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## GumbyLearner

*Going up: food prices set to soar*
Richard Webb
April 3, 2011

http://www.smh.com.au/business/going-up-food-prices-set-to-soar-20110402-1csgs.html

"Higher world prices for commodities such as wheat and sugar will place pressure on related food prices", says the Reserve Bank of Australia.

With global food prices at record highs, a supermarket war isn't enough to keep prices down.

DON'T kid yourself, the cost of food in Australia is rising, not falling. The recent supermarket price wars over milk, beer, wine, beef, chicken - you name it - may have caught the public attention, but the overall price of basic foodstuffs is on the up. Not anything like overseas, but heading higher nonetheless.

While food price inflation is still to emerge as a big issue in Australia, rising food prices are a major problem across many parts of the world right now.

Food price inflation is said to be a big factor behind the civil turmoil in the Middle East and North Africa that has led to leaders in Egypt and Tunisia being dumped. In Uganda it was behind an almost doubling in inflation to an annual 11.1 per cent in March.

AND another inconceivable article  

*For Fed's Dudley, iPad comment falls flat in Queens  

http://www.reuters.com/article/2011/03/11/usa-fed-dudley-ipad-idUSN1124415220110311

NEW YORK, March 11 (Reuters) - The president of the New York Federal Reserve Bank doesn't normally face a raucous crowd.

But in Queens, New York, on Friday, William Dudley was bombarded with questions about food inflation, and his attempt to put rising commodity prices into a broader economic context only made things worse.

"When was the last time, sir, that you went grocery shopping?" one audience member asked.

Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. The Fed looks at core inflation, which strips out volatile food and energy costs, to get a better sense of where inflation may actually be heading. :iamwithst

So, Dudley sought an everyday example of a price that is falling.

"Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said referring to Apple Inc's (AAPL.O) latest handheld tablet computer hitting stories on Friday.

"You have to look at the prices of all things," he said. :topic

This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment "tone deaf."

"I can't eat an iPad," another quipped. 

*


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## drillinto

Commodities morphing into an investment class - Murenbeeld 
By: Liezel Hill  - 5th April 2011  

TORONTO (miningweekly.com) – Dundee Wealth economist Martin Murenbeeld continues to believe that gold and other commodities are headed towards being a separate asset class, and expects to see increased levels of managed money being invested in commodities, he told an audience in Toronto on Monday.

Murenbeeld also commented that the gold market has come full circle, with the focus shifting away from jewellery demand and back to investment demand and central bank purchases of the precious metal.

Until the Bretton Woods system collapsed in around 1968, central bank buying and holdings of gold were the main source of gold demand, he pointed out.

When central bank purchases fell away, the natural result was that jewellery consumption became the dominant source of demand, until the establishment of gold exchange-traded funds meant that investors could put money directly into gold, often as a haven from riskier investments or during periods of economic uncertainty.

Investment demand actually exceeded jewellery manufacturing demand for gold in 2010 for the first time, according to market watchers at GFMS, and some analysts have suggested this puts the market in a precarious position, as prices could fall sharply if investor demand growth slows or reverses.

But Murenbeeld, who also dismisses the notion that gold is in a bubble as a "myth", said he is "quite positive" on investment demand for gold.

“Gold is coming back to its historical roots,” he said at an event hosted by the Toronto Chartered Financial Analysts society.

“This isn't a new type of demand for gold, this is the old demand for gold. Back in history, gold was kept for precautionary investment reasons, and we're going back to that time.”

Murenbeeld also commented that new supply of the metal will continue to be constrained and likely “relatively inelastic”.

“Today it can take well over ten years for gold production to react to higher gold prices,” he said.

He also suggested that gold prices and the levels of global liquidity are historically closely correlated, which implies higher gold prices if governments around the world continue to print money.

Gold, which reached a record $1 448,60/oz on March 24, was trading around $1 435/oz on Monday.

INVESTMENT CLASS

If it is true that commodities are “morphing” into a new asset class, it follows that money managers would want to have at least three percent of their portfolios in commodities, if not more, he commented.

Based on rough 2009 and 2010 numbers, that would equate to about $1,5-trillion going into commodities, about 3,5 times the current position, Murenbeeld said.

“I think over time we are going to go in that direction, [although] it's not going to be a straight line,” he said.
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## drillinto

April 02, 2011

""That Was The Week That Was ... In Australia""
By Our Man in Oz
www.minesite.com/aus.html  [ Free Registration ]


Minews. Good morning Australia. Your market seems to have continued its upward trend. 

Oz. It was another solid week of gains. Nothing spectacular, just a rock solid rise of 2.3 per cent from the metals and mining index. And that, interestingly, was the same percentage improvement as the index enjoyed the previous week. Gold slowed a little, as the gold index added 3.5 per cent compared with 5.7 per cent in the previous week, and the all ordinaries added 2.4 per cent as against 2.6 per cent previously.

Minews. Added up, you have had quite a strong market over the past two weeks. 

Oz. Surprisingly strong really. In just 10 trading days we’ve made up most of the ground lost because of the troubles in Libya and Japan. The metals index is now just one per cent short of its 2011 high, and the gold index is less than one per cent short. 

Minews. What drove your market last week? 

Oz. There were no dominant news events, apart from speculation about a rising tide of takeover activity. The big one, which has been about 20 years in the making, is a rumoured move from BHP Billiton on Woodside Petroleum, Australia’s top exporter of liquefied natural gas. If that occurs it would be easily the biggest ever Australian takeover, as Woodside is currently valued at A$37 billion, or US$36 billion on conversion to North American pesos. Yep, our currency has been on the rise too, and hit a new high last week of US$1.038. But some of the best rises came from the minor metals where interest continues to grow in commodities such as zircon and rare earths. 

Minews. Your currency comment is interesting because a high currency is hardly good for your exporters. 

Oz. Very much not. The high exchange rate is hurting all exporters, especially manufacturers, but including miners. And currency could become an even bigger factor next week, as investors digest the latest news on iron ore and coal prices. Thermal coal, as even your Financial Times reported yesterday, has hit an all-time high of US$130 a tonne in the wake of the Japanese nuclear problems. And spot iron ore has also been sneaking higher. On Friday Goldman Sachs noted that the seaborne price added 3.2 per cent last week to trade at US$175 a tonne. That latest iron ore price means that most producers, including companies we follow such as Atlas Iron (AGO), are now enjoying a profit per tonne of between US$120 and US$130. 

Minews. Are you inferring that last week’s commodity price movements are not yet reflected in share prices? 

Oz. Perhaps. It’s a fool who suggests the market is mispricing any asset, but it was interesting to see only minimal movement in most coal and iron ore companies last week. Coal in particular had a curious week, as most of the better-known companies were flat or lower, while a number of newcomers rose quite sharply. Iron ore showed a similar trend with a few good rises, but not what you might have expected with the iron ore price surging into record territory. 

Minews. That might be your dollar at work, or your threatened super-tax on coal and iron ore. But enough of the chit chat, time for prices, starting with coal and iron ore. 

Oz.  Most iron ore companies rose, but not by a lot. Best of the iron ore companies was a newcomer to the industry, Legacy Iron (LCY). It is exploring the Mt Bevan deposit near Leonora in Western Australia and released promising assay results in late March. Speculators discovered the shares on Friday, running it up by A2.3 cents, or 30 per cent, to A10 cents, which took the gain for the week to A3.7 cents. Small, but indicative of the percentage gains still available in iron ore. Atlas was another company that performed well, adding A18 cents to A$3.70. But after that most moves were modest. On the plus side of the ledger were: Fortescue Metals (FMG), up A19 cents to A$6.47, Mt Gibson (MGX), up A4 cents to A$2.01, and Brockman (BRM), up A9 cents to A$5.99. Gindalbie (GBG) was also better off, up A6 cents to A$1.12 after it announced its first shipment of high-grade ore. On the negative side were BC Iron (BCI), down A8 cents to A$2.46, and Grange (GRR), down A1.5 cents to A65 cents. Murchison Metals (MMX) was also a notable faller, down A9 cents to A97 cents, a 12 month low as a result of rising costs. 

Hunnu (HUN) was the pick of the coal sector, rising by A17 cents to a 12 month high of A$1.65, as interest grew in all the coal companies exploring in Mongolia. Guildford Coal (GUF), a new player in that space, attracted even more attention, putting in an A18 cent rise to close at A90 cents, also a 12-month high. Other Aussies in Mongolia that did well last week included Aspire (AKM), up A9 cents to A96 cents, and Xanadu (XAM), up A5.5 cents to A62.5 cents. Closer to home, perhaps because of the weight of the rising Australian dollar, most of the rest of the movement was down. Coalworks (CWK) slipped A4 cents lower to A80 cents. Carabella (CLR) lost A40 cents to A$2.55, and Aston (AZT) eased back by A5 cents to A$9.70. 

Minews. Gold next, please. 

Oz. Not a lot to get excited about in a gold sector that put in a mixed performance over the week. The best rise came from the Scandinavian specialist, Dragon Mining (DRA), which reported a strong rise in reserves. That translated into a A26 cent gain on the market for Dragon, which closed at A$1.68. Newcrest (NCM), the local sector leader and perennial takeover target, added a very strong A$1.44 to A$40.20. Meanwhile Kingsrose (KRM), one of our own favourites, put on A9 cents to close at A$1.73, but did trade A1 cent higher at a 12 month peak of A$1.74 earlier in the day. Other gold movers included Gryphon (GRY), up A8 cents to A$1.98, Perseus (PRU), up A4 cents to A$3.14, Silver Lake (SLR), up A9 cents to A$2.12, Ausgold (AUC), up A8 cents to A$1.26, Adamus (ADU), down A3 cents to A74 cents, Allied (ALD), down A1.5 cents to A64.5 cents, Kingsgate (KCN), down A15 cents to A$8.84, and Troy (TRY), down A2 cents to A$3.80. 

Minews. Base metals now please, starting with copper. 

Oz. It was a mixed picture in copper, too. The best performer was Equinox (EQN), which added A34 cents to A$5.71 following reports that it is making headway with its takeover bid for Lundin Mining. Other moves were less marked. Sandfire (SFR) added A10 cents to A$7.09. Rex (RXM) lost A4 cents to A$2.85. OZ Minerals (OZL), added A1.5 cents to A$1.59. PanAust (PNA) slipped A1 cent lower to A77.5 cents. 

Nickel companies fared worse, with more falls than rises, though once again the moves were small. Panoramic (PAN), which had been showing signs of a steady recovery, was hit with solid selling and slid A17 cents lower to A$2.19. Mincor (MCR) reported further encouraging news from its Tottenham copper-gold project in New South Wales, but failed to impress the market. Its shares dropped A8.5 cents to A$1.35. Elsewhere, Minara (MRE) eased back by A1 cents, while Western Areas (WSA) outperformed everyone else with a tiny rise of A4 cents to A$6.70. 

Zinc companies keep trying to break-out of a gloomy phase, but never seem to quite get there. Most zinc plays added a few cents last week but there were no star performances. Blackthorn (BTR) was the pick of the pack with a rise of A4 cents to A70 cents. Perilya (PEM) added A1.5 cents to A63.5 cents, and Prairie Downs (PDZ) gained A2 cents to A18.5 cents. Terramin (TZN) slipped half a cent lower to A36.5 cents, and Kagara (KZL) dropped A1 cent to A62 cents. Even so, Kagara is starting to attract fresh interest following the appointment of a new managing director. 

Minews. Uranium and minor metals to close, please. 

Oz. No rises to report among the uranium companies, which continue to be buffeted by stiff headwinds blowing off the leaking Japanese nuclear reactor. Falls were posted by Paladin (PDN), which fell A17 cents to A$3.68, Manhattan (MHC), down A20 cents to A80 cents, and Extract (EXT), down A57 cents to A$7.86. Also worse of was Berkeley (BKY), which fell A8 cents to A99 cents, Uranex (UNX), which fell A4 cents to A34 cents, and Bannerman (BMN), which fell A4 cents to A44 cents. 

Alkane (ALK) was the star of the minor metals, following a fresh burst of optimistic reports about its Dubbo zirconia and rare earths project. It shot up by A33 cents to A$1.95, and briefly touching A$2.00, a 12-month high which was enough to cop a speeding ticket from the ASX. Lynas (LYC), the leading rare earth play, added A13 cents to A$2.27 after it announced a loan and share placement deal with two Japanese companies. Arafura (ARU) rose by A8.5 cents to A$1.32. 

Potash companies were mixed. South Boulder (STB) announced a fresh discovery in Eritrea, but slipped A14 cents lower to A$4.26. Reward Minerals (RWD) announced a land access deal with Aboriginal groups at its Lake Disappointment discovery in Western Australia, and added a very sharp A38 cents to A$1.16. At one stage on Friday, though, it did get as high as A$1.40, a 12 month high. 

Zircon and titanium companies also attracted attention, following positive broker comment in the US on the sector leader, Iluka Resources (ILU). Iluka rose by A$1.46 to A$13.21, but did trade as high as A$13.39, a 12 month high. Gunson (GUN) went for a ride on Iluka’s coat-tails, rising by A4.5 cents to A28 cents, and Base Resources (BSE) put on A3.5 cents to A56.5 cents after reporting a funding deal for its Kwale mineral sands project in Kenya. 

Minews. Thanks Oz. 
*******************************


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## GumbyLearner

Wow. 1/2 a billion into exploring and developing. They should have a concentration plant and a processing plant up and running in at least 6 to 8 years. 

http://www.bloomberg.com/news/2011-...illion-investment-in-rare-earth-ventures.html


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## drillinto

April 04, 2011

The US Economy Is In A Hole, But Miners May Be Able To Help Dig It Out 
By Rob Davies
www.minesite.com/aus.html

There can be few times in recent history – call it the last half century - when the outlook for the next few decades is so fraught. But it’s not the recent headline-grabbing news which is creating the uncertainty. Events like the Sendai earthquake and its associated tsunami are tragic but just part of the hazards on living on planet earth. It doesn’t really impact on the way we live our lives or our plans for the future. In the short term there will be angst over the role over nuclear power but the sight of eco-warriors like George Monbiot advocating atomic energy on TV is probably the most positive development to come out of the tragedy.

Equally, events in the Maghreb and the Middle East could have dramatic long term geopolitical consequences, but at this early stage it is hard to predict if those consequences make for a better or a worse world. The 1979 revolution in Iran is a reminder that not all change is good. 

But what’s much more worrying is the dire position of the US economy. Commentator John Maudlin points out that real median incomes there have not grown for 14 years.  The only growth in the economy has come from government spending, which is why US debt now accounts for 380 per cent of the economy, up from the 140 per cent that was run up in the socialist Sixties.  That, though, is not the really scary part. 

US debt only accounts for US$9 trillion of the US$65 trillion of liabilities that are sitting on Uncle Sam’s balance sheet. The bulk is accounted for by unfunded Medicare, Medicaid and Social Security. It’s a big obligation, to say the least. And Bill Gross, chief executive of Pimco the world’s biggest bond fund manager, thinks there are only four exit routes, all unpalatable. 

The first option is straightforward default, which he thinks is impossible. The second option is inflation. The third is dollar depreciation, and the fourth is keeping interest rates below their true rate.  All the alternatives are unpleasant, and unpleasant not just for Americans. 

Faced with such a daunting prospect it would be easy to understand if major industries, like mining, simply sat back and waited for the world to end. Fortunately, miners are more forward thinking than that and, collectively, have committed themselves to probably the largest mining expansion programme in history. 

According to Bloomberg, the respected mining analyst Paul Galloway of Sanford Bernstein estimates that the industry has plans to spend US$135 billion on new projects in the coming years. He estimates that US$33 billion is coming from majors like Rio Tinto, BHP Billiton, Xstrata and Kazakhmys and that half will be spent in Australia. For its part, HSBC has recently estimated that Australia is the target for a total of US$777 billion worth of resource investment. That sum is equivalent to 60 per cent of Australia’s GDP. It is indeed the lucky country. 

The implications of this surge in investment, and eventually production, could be vast, although analysts will spend years crunching the numbers and still produce different results. On the face of it there could be an almighty train crash if increased supply meets a US economy that faces decades of retrenchment as it deals with its debt. 

Alternatively, maybe, just maybe, the optimism of the miners will encourage others to go out and make, buy and consume all the artefacts that will be made from the commodities which the miners will be mining. Let’s hope so. 
 ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤


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## drillinto

""Bespokes(USA) Commodity Snapshot""
5 April 2011

To view all charts, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/4/5/bespokes-commodity-snapshot.html

****************


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## drillinto

""Metals & Mining Analysts' Ratings & Estimates - Seniors""
Bill Matlack (USA) - 6 April 2011

To view the tables, please click the link below
http://www.kitco.com/ind/matlack/apr062011.html

[Note: Several major OZ mining companies are also rated]


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## drillinto

April 09, 2011

""That Was The Week That Was … In Australia""
By Our Man in Oz
www.minesite.com/aus.html  (The registration is free)

Minews. Good morning Australia. Another solid week? 

Oz. Very much so. The overall market, as measured by the all ordinaries index, closed on Friday at a seven week high, with metals leading the way, and gold topping everything, as you might have expected, given the record US dollar bullion price.

Minews. You sound like you have currency on your mind. 

Oz. It’s hard to avoid questioning what the real price of anything is when the yardstick keeps shrinking. Last week saw US dollar continued its slide as the US government staggered towards a budget and constitutional crisis. The big US dollar sell-off helped push the Australian currency up to a fresh 30 year high of US$1.05, a gain of US2 cents made in a matter of days. The effect on the Australian gold price, and on all other metals traded in US dollars, is significant, and is causing a fair degree of anxiety to the Australian Government which is finally waking up to the reality that the country is about to catch a dose of Dutch disease, that condition where a high currency pushes exporters out of the market. In the case of gold, the currency change cut the price rise in gold from US$41 an ounce to just A$13 an ounce for domestic producers. 

Minews. That’s what happens when you’re a central player in a commodity boom. 

Oz. It is, but there are industries in Australia that are being hurt quite severely. Manufacturing and tourism are high on the list of victims. And the flipside is that you’re going to see a lot more Aussies wandering around London in your summer, shopping with dollars that have doubled in value against the pound over the past few years. 

Minews. Oh dear! Thanks for the warning. Now back to the market. 

Oz. The key indices all gained. The all ordinaries added 1.6 per cent. Metals and Mining added 3.1 per cent, and gold gained five per cent. There were a number of sharp upward moves as far as gold equities were concerned, and a fistful hit fresh 12 month share price highs. Copper companies also moved up strongly, inspired by multiple takeover moves. Equinox (EQN) was at the centre of the action, playing a dual role as predator and prey. Nickel showed signs of life, led by discovery news from Mincor (MCR), and uranium companies showed signs of shaking off the worst of the Japanese triggered sell-down. 

Minews. Right. Where do you want to start? 

Oz. It might be fun to run a few new names past your readers, and to flag up one of the more interesting ways we do business down this way. 

Minews. Fire away. 

Oz. Amex Resources (AXZ) is not a company named after a credit card. It is a small iron ore explorer, shares in which added A11 cents to a 12 month high of A47 cents last week after it won a prime iron ore tenement in a raffle. Well, it’s not quite a raffle. It’s more bizarre than that. It was a ballot conducted by government regulators who had to settle multiple claims on the same piece of country, adjacent to Rio Tinto’s big Paraburdoo mine in the Pilbara region of Western Australia. The ballot, which is as simple as drawing names from hat, much like a pub game, saw Amex get the first, and only, prize. 

Minews. No doubt the pub was the next port of call for Amex management. Are there any more new names which moved on the market last week? 

Oz. Perhaps not new, but interesting. Kula Gold (KGD) caught the eye of a few investors with a report of a new style of gold mineralisation on its Woodlark Island project in Papua New Guinea. Kula rose A16 cents to A$1.81, and some trades went through as high as A$1.84 early on Friday, a 12 month high. Azimuth Resources (AZH) also set a new high of A31.5 cents as optimism grows at its gold projects in the South American country of Guyana. It closed the week at A30.5 cents, up A6.5 cents. Cerro Resources (CJO), the Mexican silver explorer once known as Kings Minerals, and still run by Norm Seckold, rose by A8.5 cents to A34.5 cents. 

Minews. Time to go through the sectors, with gold the obvious starting point. 

Oz. Most up, with a couple of small falls. Kingsrose (KRM), which we wrote about recently, and which is becoming more of a market darling by the week, closed at a fresh all-time high of A$1.77, though the actual rise on the week was a modest A4 cents. Perseus (PRU), which we also took a look at over the past week, added A25 cents to A$3.39. Better gains came from Silver Lake (SLR), up A22 cents to A$2.34, Resolute (RSG), up A9.5 cents to A$1.34, Integra (IGR), up A7.5 cents to A55 cents, Ausgold (AUC), up A19 cents to A$1.45, Gold Road (GOR), up A7 cents to A51 cents, Gryphon (GRY), up A10 cents to A$2.08, and Medusa (MML), which rose an eye-catching A95 cents to A$8, a fraction short of its all-time high of A$8.07. Azumah (AZM) was also A11.5 cents better off at A71 cents, after it reported bonanza gold assays from its Wa project in Ghana. Silver companies also performed well, as the silver price scaled the US$40 per ounce barrier. Alcyone (AYN) reached a fresh high of A11 cents, before closing at A10.5 cents, up A2.7 cents. Silver Mines (SVL) added A6.5 cents to A38 cents, and Cobar Consolidated (CCU) put on A6 cents to A98 cents. 

Minews. Uranium next, so we can see how strong the recovery has been. 

Oz. The easy answer is that it’s been quite strong. Some companies are almost back to their pre-crisis level. Energy and Metals (EMA) was the best percentage performer, putting in a rise of A5 cents to A23 cents after it reported on its latest legal win in a long-running dispute. Extract (EXT) rose by A69 cents to A$8.55, as a Chinese takeover bid for Kalahari Minerals got back on track. Uranex (UNX) was another strong performer, rising A10 cents to A44 cents. Greenland (GGG) put on A5.5 cents to A$1.01. Aura Energy (AEE) added A4 cents to A33.5 cents, and Berkeley (BKY) closed at A$1.03, also up A4 cents. There were a couple of falls, but nothing major. Toro (TOE) slipped A1 cent lower to A10 cents, and Bannerman (BMN) lost A2 cents to A42 cents. 

Minews. Across to the base metals, starting with copper, please. 

Oz. Equinox starred, naturally. It added A$1.73 to A$7.44, a price which says investors are expecting more shots to be fired in what’s become a complex game of bid and counter bid. The rest of the copper sector rose in sympathy, but not excessively so. Some of the better movers included Sandfire (SFR), up A21 cents to A$7.30, OZ Minerals (OZL), up A6 cents to A$1.65, Metminco (MNC), up A1.5 cents to A39.5 cents, Rex (RXM), up A11 cents to A$2.96, and Marengo (MGO), up A2.5 cents to A33.5 cents. Hot Chili (HCH) was also a strong riser, closing out the week up A6.5 cents to A80.5 cents after it briefly peaked at a new 12 month high of A85 cents during early Friday trade. 

Nickel companies were led by Mincor (MCR) which reported excellent assays from drilling at its Mariners mine, and added A13 cents to A$1.48. Western Areas (WSA) continues to impress with results from its Spotted Quoll project, and rose by A46 cents to A$7.16, although a few trades went through even higher, at a new all-time share price peak of A$7.21. Mirabela (MBN) added A10 cents to A$2.10 after completing a big capital raising. Panoramic rose A14 cents to A$2.33, and Minara (MRE) gained A6.5 cents to A83.5 cents. 

Zinc companies were flat, with no outstanding moves either way. Kagara (KZL) gained A1.5 cents to A63.5 cents. Perilya (PEM) added A2 cents to A65 cents, and Blackthorn (BTR) added A2 cents to close at A72 cents. 

Minews. Iron ore, coal and minor metals to close, please. 

Oz. All up, bar one among the iron ore companies. The odd man out was Iron Ore Holdings (IOH), which announced a fresh capital raising, and lost A6.5 cents to close at A$1.82. Then comes a long list of risers. Among the best were: Atlas (AGO), up A14 cents to A$3.84, Mt Gibson (MGX), up A20 cents to A$2.21, Murchison (MMX), up A20 cents to A$1.17, Grange (GRR), up A12 cents to A77 cents, and Fortescue (FMG), up A25 cents to A$6.72. BC Iron (BCI) was also a riser, up A38 cents to A$2.84 after it won a fresh legal round against its reluctant bidder, Regent Pacific. 

Coal companies had a mixed time of it. The trend was up, though, with Aussie explorers working in Mongolia leading the way. Guildford Coal (GUF) was the pick of that pack, putting in a rise of A16 cents to an all-time high of A$1.16. Aspire (AKM) added A9.5 cents to A$1.05. Hunnu (HUN) gained A5 cents to A$1.70, while Xanadu (XAM) went against the trend with a fall of A5 cents to A57.5 cents. Other movers included Coal of Africa (CZA), up A16 cents A$1.34, and Bathurst (BTU), down A5 cents to A$1.19. 

Rare earth companies dominated the minor metals. Alkane (ALK) hit a 12-month high of A$2.30 before easing to close at A$2.25 for a gain of A30 cents over the week. Lynas (LYC) did almost as well, rising A28 cents to A$2.55. Wolf Minerals (WLF), the company planning to redevelop the Hemerdon Ball tin and tungsten mine in Devon, added A3 cents to A41.5 cents. Shares in the lithium companies went in difference directions. Orocobre (ORE) lost A16 cents to A$2.63, but Galaxy (GCY) added A$10 cents to 
A$1.37. 

Minews. Thanks Oz. 
*************


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## explod

drillinto said:


> In the case of gold, the currency change cut the price rise in gold from US$41 an ounce to just A$13 an ounce for domestic producers.




We know the strengthening dollar its having some detrimental effects but the figures here seem a bit askew ?

At AU$13, tell me where to stand at the gate for some?


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## danbradster

explod said:


> We know the strengthening dollar its having some detrimental effects but the figures here seem a bit askew ?
> 
> At AU$13, tell me where to stand at the gate for some?




Not the price, "the price rise".


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## drillinto

April 11, 2011

""Can It Be Long Before The LME Starts Quoting Metals Prices In Renminbi ?""
By Rob Davies
www.minesite.com/aus.html [The registration is free]

Well over a decade ago a fund manager launched an Africa fund. It was at least ten years too early but one of his sales angles is now being proven correct. He based a large part of his investment thesis on the demand for resources that was likely to come from Asia, and Africa, with its wealth of commodities was a natural target for investment and supply. He summed the thesis up as “the giant sucking sound from Asia”.

As it’s turned out, the demand is less from Asia in general, and more from China in particular. China’s ambitions in the mining sector have been made very clear most recently by the unsolicited bid for Equinox Minerals by Minmetals, a state controlled miner based in Hong Kong. China wants to secure control over copper reserves in Central Africa, and cut out the middle man. But the Chinese are not the only ones playing that game. 

Mick Davis at Xstrata has perhaps the best record of strategic deal-making in the mining industry over the last two decades.  And a rise in the Anglo American share price last week was attributed to speculation that Xstrata was training his guns on this venerable old lady of mining. 

Despite the massive capital spending programme the mining industry is undertaking to meet demand, it’s clear that the Chinese-driven commodity boom is far from over. Indeed, the game now is to secure as big a piece of the pie as possible.  

It’s not all smiles and roses, though. There are concerns that the Chinese economy may eventually succumb to the increasing cost of money, as the authorities gradually raise interest rates. The rise that came through last week was the fourth since October, but there is little sign that such increases are having any effect as far as reducing demand for metals is concerned. More worrying, perhaps, is that China is the only game in town. 

The increasing strains in the US economy were graphically illustrated by the last minute settlement between the Republicans and Democrats to allow the country’s 2011 budget to go through. But no one is pretending that this latest fudge does anything to solve the real problems of massive deleveraging this once great economy will have to face over the next few decades. And Japan has a similar issue with its debt burden that will constrain its appetite for raw materials, other than coal, for some time. 

Elsewhere, Germany is the one bright spot in Europe, as its metal bashing economy continues to grow strongly.  The problem is that the 25 basis point increase in interest rates that the ECB announced last week will only exacerbate the strains in the euro. Although it is clear the single currency must split, the process of it doing so will be painful for everybody whenever it happens. 

This combination of higher rates in Europe and financial stress in the US acted to depress the dollar by 1.5 per cent, and helped boost base metals by 2.3 per cent as measured by the LME index.  Over the week, the corporate action around copper raised the profile of the red metal and pushed it up more than the others taking it 3.2 per cent higher, to US$9,696 a tonne. Lead was an even stronger performer, putting in a 5.8 per cent gain to YS$2,877 a tonne, and not far from US$3,000, something few would have predicted a handful of years ago. Tin continues in its unaccustomed role as price leader for the sector, and last week rose by three per cent to US$32,600.  Even zinc, labouring under its 700,000 tonne inventory, rose 5.3 per cent to US$2,440 a tonne. Aluminium brought up the rear with a 2.4 per cent jump to US$2,659 a tonne.  

Separating the underlying fundamentals for the individual metals is getting increasingly difficult, as the gyrations of international currencies make analysis of the asset class ever more complex. That said, the underlying trend is clear. Can it be long before the LME starts quoting metal prices in renminbi? 
::::::::::::::::::::::::::::::::::::


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## drillinto

""CRB Index Hits Another New High; Still Down Over 20% From Peak"" 
April 11, 2011 

Although it seems as though a day doesn't go by where at least one commodity is spiking to all-time highs, it may be surprising to some that the CRB [Commodity Research Bureau] Commodity Index is still down 22.3% from its all-time high in 2008.  After falling more than 57.7% from its peak, the CRB Index has rallied by 83.6%, which is actually a bit less than the S&P 500 which has rallied 96% and is currently down 15.2% from its all-time high.


To view the graphic, please click the link below:
http://www.bespokeinvest.com/thinkb...er-new-high-still-down-over-20-from-peak.html


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## drillinto

""The Gas Revolution""
Amazingly, an era of energy abundance is upon us, unless politicians and environmentalists get their way.
Apr 18, 2011, Vol. 16, No. 30 • By STEVEN F. HAYWARD
The Weekly Standard (USA & UK)

To read the article, please click the link below:
http://www.weeklystandard.com/articles/gas-revolution_557014.html?nopager=1


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## drillinto

"Glencore International AG is about to take over the world -- literally"
S. N. Kapadia - 14 April 2011

Please click below, to read the article:
http://www.businessinsider.com/10-things-you-need-to-know-about-glencores-ipo-2011-4


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## drillinto

Nassim Taleb, hedge fund manager, is also keen on commodities.

To read his interview, please click the link below:
http://knowledge.wharton.upenn.edu/printer_friendly.cfm?articleid=2755
***


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## drillinto

"The Granddaddy of All Bubbles ?"
World markets are frothing like shaken Champagne, and doomsayers argue that today's bubbles need to be deflated now before they get dangerously large.
By Peter Coy and Roben Farzad - Business Week - April 14, 2011

"... Not everyone is in the grip of bubble-phobia, least of all Fed Chairman Ben Bernanke. The [US]central bank remains committed to keeping rates ultralow until the economy shows more staying power. In an Apr. 11 speech in New York, Fed Vice-Chair Janet L. Yellen didn't say anything about bubbles. But she rejected the contention that Fed policy is responsible for commodity price inflation, blaming the runup in oil and food prices largely on "rising global demand and disruptions in global supply." She's right: Commodities aren't being hoarded, as they would be if investors were speculating on them. Inventories have fallen since last summer..."

Source > http://www.businessweek.com/magazine/content/11_17/b4225058281366.htm
******


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## drillinto

April 17, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html [ The registration is free ]


Minews. Good morning Australia. It looks like you had a tough week. 

Oz. We did, but it was hardly unexpected, what with concern growing that China is about to slam the brakes on its over-heating economy by means of a sharp increase in interest rates. The major indices all fell by around two per cent. Having said that, though, it’s also worth noting that there were plenty of positive movers among smaller gold companies, some of which might not have attracted close attention in London.

Minews. That sounds interesting. 

Oz. It is, because a call of the usual suspects produces a few interesting movers, but nothing spectacular. To find the companies that caught the eye of Australian speculators you need to dig a little deeper. And then you discover quite an assortment of gold, iron ore and rare earth companies that performed exceptionally well in a down week. 

Minews. Let’s start with the new names and good news before switching to a roll call of the fallen. 

Oz. Three new, or relatively new, iron ore explorers did well last week, all reaching fresh 12-month share price highs. Amex Resources (AXZ), which was mentioned last week as the company which won a West Australian iron ore tenement in a raffle, continued its upward run, adding another A14 cents to close the week at A71 cents, although it did hit a high of A73 cents during Friday trade. Indo Mines (IDO), which is exploring for iron sands in Indonesia, added A8 cents to A45 cents. And South American Iron (SAY), which is looking for the same sort of material in Chile and Ecuador, reached a fresh high of A14 cents during the week, finally closing out at A13.5 cents for a rise of A3 cents. 

The notable gold risers included some relatively new players. They were led by Bailey Minerals (BAA), which is perhaps more of a platinum story thanks to a deal recently completed in Colombia, but which also has gold assets in Australia. It rose to a fresh high of A$1.15, before closing at A$1.10 for a gain on the week of A21 cents. Worth recalling that the company was trading at a mere A40 cents as recently as February. Shares in Azimuth (AZH), which is exploring for gold in Guyana, rose A2.5 cents to a closing price of A34 cents, although that was well short of its new peak of A37 cents reached in early Friday trade. YTC Resources (YTC), which is exploring the Hera gold project discovered by CBH Resources some years ago, traded up to a new high of A79 cents, before closing at A75.5 cents for a gain on the week of A6.5 cents. Meanwhile, Gold Road (GOR), one of our long-term favourites rocketed up on Friday to a fresh peak of A81.5 cents before tumbling back to close at A68.5 cents, a closing price which still left it with a gain of A17.5 cents for the week. 

Outside of precious metals, Northern Minerals (NTU), the old Northern Uranium, was the pick of the rare earth companies after a well received presentation at an investment conference in Sydney. It added A21.5 cents to end the week at A$1.00, but did get as high as A$1.07 on Friday. Alkane (ALK) one of our long-term favourites also continued its rapid rise, hitting a fresh all-time high of A$2.73, before ending the week at A$2.63 for a week’s rise of A38 cents. In mid-March Alkane was trading around A$1.20, and a year ago it was A23 cents. 

Minews. Is that the end of the good news? 

Oz. Close, though it is worth mentioning the continued recovery among uranium companies. Among the interesting news this week, Callabona Uranium (CUU) reported visible secondary uranium mineralisation at its Oak River project in Queensland. Despite a uranium mining ban in Queensland, the shares traded up to a fresh high of A14 cents, double what it was a week earlier, before closing at A13.5 cents for a gain of A5 cents. Two other uranium exploration newcomers were Legacy Minerals (LML) and FYI Resources (FYI) which both attracted attention. Legacy rose 3.5 cents to A19 cents and FYI rose 3.4 cents to A11 cents, but both in very, very, light turnover. To spell out just how light, FYI added A1.8 cents on Friday thanks to a trade of 3,465 shares valued at A$362 which is probably less than the Friday night bar tab of the buyer. 

Minews. Thanks. A timely warning on the importance of volume for investors working in the ultra-small end of the market. Time now to call the card, starting with gold, please. 

Oz. Gold was mixed, trending down, although there were also a few solid risers. Among the best performers was Ausgold (AUC), which continues to impress with its Katanning project, and added another A17 cents to close at A$1.62. Northern Star (NST) also continues to attract attention in the wake of impressive production and discovery news from its Paulsens mine. The shares added A4.5 cents to A41 cents, and might perhaps be worth a closer look soon. A third strong company last week was the soon-to-be silver producer, Alcyone (AYN) which rose by A2.5 cents to A13 cents, but did reach a fresh 12 month high of A14.5 cents at one stage during the week. There was a more modest rise from Cortona (CRC), which awarded a contract for the mining of its Dargues Reef project in New South Wales. Cortona’s shares rise A1 cent to A18.5 cents. Shareholders in Alacer Gold (AQG), which incorporates the old Avoca, were also better off, as the shares rose by an impressive A$1.20 to A$10.43. 

After the good news comes the bad. Kingsgate (KCN) led the way down, with a heavy fall of A$1.44 to A$7.50 after it issued a production downgrade. Catalpa (CAH) reported something similar and was hit with a sell-off which knocked A16 cents off the shares to A$1.62. Other fallers included Perseus (PRU), down A14 cents to A$3.15, Allied Gold (ALD), down A6 cents to A63 cents, Beadell (BDR), down A3 cents to A87.5 cents, Troy (TRY), down A15 cents to A$3.79, and Medusa (MML) down A28 cents to A$7.72. Integra (IGR) was also weaker, down A5.5 cents to A49.5 cents, but is set to release what is expected to be a rather impressive quarterly early next week with costs said to be attractively low. 

Minews. Thanks to that Integra heads-up, we’ll keep an eye out. Moving on, let’s take a look at some of our regulars in the uranium sector. 

Oz. The regulars in uranium were less impressive than the stars we mentioned earlier. Paladin (PDN) continues to struggle with profitability, and dropped another A10 cents last week to A$3.64. Extract (EXT) slipped A8 cents lower to A$8.47. Berkeley (BKY) fell A4.5 cents to A98.5 cents. Manhattan (MHC) was A10 cents weaker at A70 cents, and Bannerman (BMN) lost half a cent to A41.5 cents. 

Minews. Iron ore and base metals next. 

Oz. It was mainly down among the iron ore companies, although there were one or two risers. BC Iron (BCI) has forced Regent Pacific to reinstate finance for its proposed takeover bid, and that news was enough to lift BC by A12 cents to A$2.96. Mindax (MDX) upgraded the resource at its Mt Forrest project, and its shares rose to A39 cents, up A3 cents as a result. Crusader (CAS) was also better off, up by A6 cents to A$1.27 as Crusader’s Rob Smakman toured London on an itinerary that included a well received presentation at our very own Minesite forum. After that, though, it was downhill. Fortescue (FMG) fell A16 cents to A$6.48. Brockman (BRM) fell A49 cents to A$5.55. Iron Ore Holdings (IOH) fell A6 cents to A$1.76. And Murchison fell A8 cents to A$1.09. 

There was an easing off in the base metal space too. Syndicated (SMD) and Sumatra were the two copper companies that gained ground, but only just. Syndicated added half a cent to close at A20 cents, and Sumatra added A1 cent to A31 cents. Falls came from OZ Minerals (OZL), down A12 cents to A$1.52, Sandfire (SFR), down A33 cents to A$6.97, Hot Chili (HCH), down A6 cents to A73.5 cents, and Rex (RXM), down A26 cents to A$2.70. 

Poseidon (POS) was the single nickel company that rose, posting a gain of A1 cent to A28 cents. Falls were recorded by Western Areas (WSA), down A8 cents to A$7.08, Mincor (MCR), down A17 cents to A$1.31, Panoramic (PAN), down A23 cents to A$2.10 and Mirabela (MBN), down A5 cents to A$2.05. 

It was more of the same in zinc - one rise and the rest down. Terramin (TZN) was the sole company to gain, adding half-a-cent to A37 cents. Then came the fallers: Kagara (KZL), down A1 cent to A62.5 cents, Blackthorn (BTR), down A7 cents to A65 cents, Perilya (PEM), down A1 cent to A64 cents, and Meridian (MII), down half a cent to A12.5 cents. 

Minews. Coal and minor metals to finish, please. 

Oz. There was one strong coal performer, and it was a newcomer as well. Metro Coal (MTE), an emerging thermal coal producer, added A10 cents to A41 cents. Then comes a long list of declines, including: Carabella (CLR), down A27 cents to A$2.29, Coalspur (CPL), down A14 cents to A$1.93, Hunnu (HUN), down A11 cents to A$1.66 and Coal of Africa (CZA), down A13 cents to 1.21. 

Rare earths were mixed despite the strong performances from Alkane and Northern. Lynas (LYC) lost A2 cents to A$2.53 and Arafura (ARU) was off by A3 cents to A$1.32. Titanium and zircon companies were mixed, although there was one stand out performer, and that was a newcomer too. Diatreme (DRX), one of the merging Eucla Basin zircon companies, added A2.7 cents to A11 cents. Tin companies eased, as did manganese and lithium explorers. 

Minews. Thanks Oz. 
******


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## drillinto

April 18, 2011

"Goldman Sachs Rains On Glencore’s Parade"
Rob Davies
www.minesite.com/aus.html [Free Registration]

The impending stock market flotation of the world’s largest commodity broker is a significant event for investors. After all, if the biggest and best broker in the game doesn’t know when to sell then who does? That said, companies choose to go public for all sorts of reasons and not just because they think external markets are placing a higher value on their business than they do internally.

And there are a couple of other factors which make this route, and the strategy, interesting. It is well known that Glencore has been contemplating reversing into Xstrata, its 34 per cent-owned publicly listed subsidiary. It seems the reason it didn’t go down that route was a difference of opinion over valuation. On the face of it Glencore would rather pay US $250 million in fees to get its own listing rather than accept a low ball bid from Mick Davis, chief executive of Xstrata. 

Those listing fees will be spread around just about every investment bank and broker in the business, except for one. Few would disagree that Goldman Sachs is the alpha firm in broking. So it is surprising that Goldman is not part of the underwriting syndicate. Even more telling perhaps, is that it chose last week to issue a note advising its clients that the top of the commodity market has been reached. While that will undoubtedly be contrary to what the brokers to the Glencore listing will be saying to potential investors, maybe the underlying positions of Glencore and Goldman Sachs are perhaps not that far apart. 

In the markets themselves dollar weakness was again a feature, as it dropped to a 16 month low against the basket of six other currencies by which it is usually measured. This weakness benefited gold more than base metals. The industrial metals collectively fell by 2.4 per cent, and that fall took the LME index down to 4,270. 

But gold was also in the news because of the release of the definitive annual survey by GFMS. Among the many gems in this latest presentation was data showing that gold held by ETFs now amounts to virtually the equivalent of a whole year’s worth of production. For an industry that only started in 2003 that is remarkable. According to the Financial Times the SPDR Gold ETF was worth a total of US$58 billion at the end of 2010. The FT also reported that there is US$202 billion worth of silver in silver ETFs as it reached US$42 an ounce. 

Maybe it is just coincidence, but the ongoing tragedy that is the Greek economy resulted in an outflow of US$40 billion from Greek banks in 2010. The outflow is still continuing, at the rate of US$4 billion a month. Even yields of nearly 14 per cent can’t persuade investors to lend to a government that is still, nominally, part of the euro zone. And Ireland was also struggling again, as its debt was downgraded to the very bottom of the investment grade table.  Despite the feeble protestation of politicians it is clear that the euro zone is breaking up before our very eyes, as investors vote with their wallets and shift money from IOU’s that only have tenuous backing to assets that have a physical underpinning. 

In a financial world that increasingly seems to be based on the shifting sand of large scale capital flows perhaps the biggest question raised by the Glencore listing is why London is the chosen location. Maybe any currency that is not the dollar or the euro looks relatively attractive these days. But perhaps what we really need is a currency that is fully backed by a gold, or a silver, ETF. A physically backed precious metal ETF bearer bond - how about that for a true international measure of value? 
******************


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## drillinto

April 2011

"The World’s Top Ten Gold Mines"
Bill Haynes 
www.minesite.com/aus.html (The registration is free)


Gold has long been one of mankind’s most prized possessions. Yet most people have little idea where gold comes from, other than from “gold mines.” Mining gold today often involves monumental undertakings, truly some of man’s greatest engineering feats. Imagine gold mining shafts nearly two and a half miles below the surface and it taking two hours for miners to get to their work stations. Imagine a pit so large that it can be seen from outer space. No reason to imagine, those are the realities in the mining of gold revealed in “The World’s 10 Most Prolific Gold Fields.”

1. Witwatersrand Basin (Johannesburg, South Africa). Located in South Africa, the Witwatersrand Basin represents the richest gold field ever discovered. It is estimated that 40% of all of the gold ever mined has come out of the Basin. In 1970, South Africa’s output accounted for 79% of the world’s gold production. By 2009, South Africa’s share of world gold production had dropped to less than 8%. Mining in the Witwatersrand Basin is accomplished by creating deep underground tunnels that are necessary to reach the plentiful reserves. The Tau Tona Mine features the deepest tunnel in the world extending a full 2.4 miles below the earth’s surface. A massive ventilation and air conditioning system is required to overcome the extreme working conditions throughout more than 500 miles of tunnels. At its deepest levels, the air temperature reaches 131 degrees farenheit and the rock face itself 140 farenheit. The mine is so extensive that it takes workers a full two hours to travel from the surface to the deepest sections of the mine where they must then contend with pockets of lethal gas, water and a continual barrage of small earthquakes. The discovery of gold in the Basin in 1886 by Australian miner George Walker set off one of the largest gold rushes in history. The surrounding area became the city of Johannesburg, and within ten years Johannesburg was the largest city in South Africa. 

2. Carlin Trend (Nevada, US). For over a hundred years, prospectors in the Western US completely missed one of the richest gold fields in the world, as it contained what is now popularly called ‘invisible gold.’ Historically, most gold fields were discovered by the presence of gold veins or deposits visible to the naked eye. Not so in the Carlin Trend located in northeast Nevada. Hot springs containing dissolved gold deposited the metal into the sediment in such fine particles that it is difficult to see even with a microscope and impossible to find using older conventional methods such as hand tools and panning. In 1961, John Livermore, a geologist for Newmont Mining, set out in search of this invisible gold based on some ideas in a paper published a year before by noted geologist Ralph Roberts. It didn’t take long before Livermore found what he was looking for in an area that is now known as the Carlin Trend. The deposit was the first major one of its kind discovered. Subsequent discoveries of similar type areas in China and Macedonia are referred to as Carlin Trend type deposits. Mining by Newmont began in 1965; the area has since become one of the richest gold fields in the world. Open pit mining dominates the Carlin Trend over its five by 40 mile area although some underground operations have been formed in higher grade areas. Gold production in the state of Nevada, which is dominated by the Carlin Trend, accounts for almost 80% of the gold mined in the United States. If Nevada were a country, it would rank #4 in the world in terms of total gold production. 

3. Irian Jaya (Indonesia). In one of the most inaccessible spots on the planet lie the single largest gold orebody and third largest copper orebody ever discovered. Located in the mountains of Irian Jaya, Indonesia, at an elevation of 14,010 ft, is the Grasberg Mine. Two miles away lies its predecessor, the Ertsberg Mine. The amazing feat of their construction by Freeport McMoRan is the subject of an episode of Discovery Channel’s Super Structures. Work on the original Ertsberg Mine began in 1967 with the construction of a dock and a 25 mile road through the surrounding jungle. Chainsaw-wielding workers were lowered from helicopters to cut their way clear to the jungle floor. Bulldozers were flown in where they often had to contend with 20 feet of soft marshland before reaching solid ground. The final section of mountain road was built atop a ridge so narrow that the first clearing pass had to be done with bulldozers no bigger than riding lawn mowers. Six subsequent iterations of air lifting increasingly larger bulldozers were used to complete the road. A tram system had to be built to surmount the final 2,000 foot cliff that separates the road from the mine site. Getting the mined ore off of the mountain is a much more efficient process: it is simply dropped 2,000 feet to the giant crushers below. The processed ore is mixed with water to create a gold and copper slurry which travels through 70 miles of pipe out to the shore. From there, the slurry is concentrated and the ore then transported to smelters around the world. The original Ertsberg Mine operated from 1972 until it was depleted in the mid 1980s. In 1988, Freeport McMoRan discovered the enormous neighboring ore body that is today operating as the Grasberg Mine. Gold production was 2.5 million ounces in 2009. Open pit operations will continue through 2015 at which point the gold will be mined by underground methods. 

4. The Super Pit (Kalgoorlie, Western Australia). The Super Pit, located in Kalgoorlie, Western Australia, is the largest open pit mine in the country. It covers an area of almost three square miles and is large enough to be seen from space. The excavation began after several underground mines were acquired by Kalgoorlie Consolidated Gold Mines. Even today, operations occasionally unearth old mining tunnels complete with abandoned mining equipment. The Super Pit covers an area known as the Golden Mile, a name that dates back to the original gold rush of the late 19th century. During this time, the field was considered to be the richest square mile in the world. The area has been continually mined for over 100 years, and the Super Pit is expected to remain in production through at least 2017. Once retired, the mine will be allowed to fill in with ground water, a process that could take 50 years. The city of Kalgoorlie was formed in 1893 right after Irishman Paddy Hannan filed a Reward Claim leading to an influx of hopeful prospectors. The subsequent gold rush saw the surrounding area boom over the next 10 years, temporarily reaching a population of almost 200,000. It was during this time that Kalgoorlie’s famous Hay Street brothels began. Much like the mine, they have also been in continuous operation for over a century and are now an accepted part of the community. Today, Kalgoorlie has a population of less than 30,000 with about one fourth of its jobs directly related to mining. 

5. Yanacocha (Peru). Located high in the Andes Mountains, with parts reaching elevations in excess of 13,000 feet, is the sprawling complex known as Yanacocha. Covering some 60 square miles, it is the largest gold mine in Latin America, possibly the second largest in the world, and is recognized as one of the most profitable in the world. Yanacocha is the largest facility operated by Newmont Mining and is the company’s crown jewel. With almost US$2 billion dollars invested in the mine, Newmont has received a return of over US$7 billion to date. In 1994, a legal battle for Yanacocha erupted between Newmont Mining and its French partner BRGM, after BRGM attempted to sell its stake to a Newmont rival. A controversial decision by the Peruvian high court allowed Newmont and its Peruvian partner Buenaventura to buy out BRGM’s stake. The aftermath was ugly with both sides accusing one another of engaging in improper conduct in attempting to influence the decision. Since its origins in 1993, Yanacocha has produced more than 26 million ounces of gold. 
[Note: The post had to be shortened to five mines because of ASF size requirements]

This article first appeared on Bill's Blog on The CMI Gold & Silver website.
******************************************


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## drillinto

""The truly remarkable run of silver""
21 April 2011

To view all charts and tables, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/4/21/the-truly-remarkable-run-of-silver.html
"""""""


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## drillinto

April 23, 2011

That Was The Week That Was … In Australia.
By Charles Wyatt
www.minesite.com/aus.html  [[[ Free registration ]]]


Minews. Good morning Australia, and Happy Easter. 

Oz. Thanks, and Happy Easter to all living in WillsKate land, or whatever the U.K. is called these days. I understand much of London and its surrounds is have a 10-day sleep-in but since the ASX had a modestly positive trading week before the Easter break it seemed worthwhile bringing Minesite readers up to speed on what’s happening down this way, especially our reaction to the astonishing gold and silver prices

Minews. That might be interesting because your dollar was probably a problem again.

Oz. Well spotted. The Australian currency is playing an increasingly important role as it continues a seemingly relentless upward march. Last week saw a gain of another US2 cents with the Aussie sitting at $US1.07 just before the Easter shutdown. That means we’re up (or the U.S. is down) by 16 per cent over the past 12-months, and a whopping 51 per cent over the past 24 months.

Minews. Which also means a considerably currency drag on export earnings.

Oz. It is becoming quite painful for farmers, miners, manufacturers and the service sector. But, since we’re into mining let’s look at what happened to share prices last week as the currency effect bit into higher U.S. dollar commodity prices. Gold and silver stocks, as you might expect, did best, but not excessively. Other miners did less well. The indices tell the overall story with the gold index up 2 per cent, the all ordinaries up 1 per cent and the metals a mining industry absolutely flat.

Minews. Let’s have a quick call of the card, starting with gold and silver, please.

Oz. Before prices a very stark example of what the currency change did to last week’s record upward surge in the gold price – it turned it into a fall on conversion to Australian dollars. When we spoke a week ago the U.S. dollar gold price was US$1476/oz, and exchange rate US$1.05 to produce an Australian gold price of A$1405/oz. This week the late Thursday gold price was US$1501/oz and the exchange rate US$1.07 to produce an Australian gold price of A$1402/oz, switching a US$25/oz rise into a A$3/oz fall. Enough of the big picture stuff. Let’s move swiftly through prices.

Medusa Mining (MML) was the pick of the gold stocks with a rise of A61 cents to A$8.33. Cobar Consolidated (CCU) was the pick of the silver stocks, adding A17 cents to A$1.13. Other good gold rises came from: Kingsgate (KCN), up A31 cents to A$7.81. Troy (TRY), up A4 cents to A$3.83. Olympus (OYM) up A2 cents to A41 cents. Gold One (GDO), up A6.5 cents to A50 cents, and Dampier Gold (DAU), a newcomer but one with its foot on the old Plutonic mines in Western Australia, up A1.5 cents to 58 cents. Losing ground: Catalpa (CAH), down A10 cents to A$1.52. Ausgold (AUC), down 3 cents to A$1.59 and Noble (NMG), down A5 cents to A67.5 cents.

Minews. Base metals and iron ore next.

Oz. Not a lot of action in the non-gold sectors. Best of the copper stocks were PanAust (PNA), up A5 cents to A80.5 cents. Sandfire (SFR), up A20 cents to A$7.17. Sumatra (SUM), up A5.5 cents to A36.5 cents, and Exco (EXS), up A5 cents to A67 cents, as it heads into an interesting time over an asset sale to Xstrata. Copper stocks to lose ground included: OZ Minerals (OZL), down A2 cents to A$1.50, and Bougainville (BOC), down A4 cents to A$1.57 despite optimistic comments in Papua New Guinea that a deal is close on reopening its mothballed Panguna mine.

Nickel and zinc stocks were mixed. Western Areas (WSA), the best of the pure nickels, up A13 cents to A$7.19. Mincor (MCR) led a handful to lose ground, down A3 cents to A$1.28. Kagara (KZL) was the best of the zinc miners, up a modest A1.5 cents to A64 cents. Meridian (MII), posted the heaviest decline, down A2 cents to A10.5 cents.

Most iron ore stocks marked time, or lost a few cents. Sherwin (SHD) slipped A1 cent lower to A20 cents, with Atlas (AGO) losing the same miniscule amount of A1 cent to A$3.64. Fortescue (FMG) added A1 cent to A$6.49, and Gindalbie (GBG) recovered A2 cents to A$1.06.

Minews. Coal, uranium and the minor metals and then you can have a hot cross bun.

Oz. A mixed bag in those areas with no discernible trend ahead of the Easter break, which for us combined this year with the annual April 25 Anzac Day holiday. Coal stock to rise included: Macarthur (MCC), up A25 cents to A$12.28. Continental Coal (CCC), up A0.6 of a cent to A6.1 cents, and Guildford Coal (GUF), up A3 cents to A$1.19. Going the other way were: Carabella (CLR), down A8 cents to A$2.21. Hunnu (HUN), down A6 cents to A$1.59, and Stanmore (SMR), down A11 cents to A$1.28.

Uranium stocks slipped, which was to be expected given the fresh slide in the short-term uranium price to US$57.25 a pound. Movements included: Berkeley (BKY), down A1.5 cents to A96 cents. Deep Yellow (DYL), down A2 cents to A22.5 cents, and Manhattan (MHC), down A1 cent to A69 cents. Takeover target Mantra (MRU), and leading producer, Paladin (PDN) went against the downward trend adding A16 cents and A2 cents to A$6.83 and A$3.66 respectively

Tin explorer, Kasbah (KAS) was the best performer among the minor metals, adding A3.5cents to A30 cents. MetalsX (MLX), which has offloaded a nickel project in central Australia, rose A2 cents to A31.5 cents. Rare earth stocks were down modestly. Alkane (ALK) lost A7 cents to A$2.54 and Lynas (LYC) shed A8 cents to A$2.45.

Minews. Thanks Oz. 
******


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## drillinto

April 26, 2011

""Cold Turkey Postponed, Again""
By Rob Davies
www.minesite.com/aus.html (The registration is free)

The statement by S & P that it was putting the US debt on negative credit watch surprised everyone and no one. Most people know that the US economy is one of a number of countries that has yet to address its budget deficit seriously. It is, though, the biggest and that makes the problem so large and so significant that no politician really wants to be the kamikaze pilot that takes it on. S & P did not change its view to inform the market. It did it to fire a warning shot across the bows of President Obama.

Big though it is, the US deficit is it not his biggest problem, nor is Libya, Afghanistan, Iran or North Korea. The most important thing on his mind is getting re-elected which is why markets only had a temporary wobble and 10 year US Treasury yields ended the week essentially unchanged at 3.38%. The dollar was different though. It fell to its lowest level since August 2008 and that was enough, together with S&P news, to take gold over the $1,500 mark and push base metals, as measured by the LME index, up 2.9 % to 4,393.

It is hard to know if any action will be taken to curb government spending in the US, the chances of tax increases to curb the deficit are even lower, but, if there is, the impact on growth would be negative in the short term and that is bad for industrial production and metal demand. What makes this stand-off so important is that China, the other big destination for metals, has already taken action to slow the growth of its charging economy. Fortunately, or maybe unfortunately, the combination of interest rate rises and restrictions on bank lending have yet to have any discernible impact on demand in the Middle Kingdom.

Even though base metal prices, albeit measured in depreciating dollars, show little concern about the possibility that attempts to limit state spending will succeed there are some indications that give cause for concern. Inventories, having been remarkably stable for a long time, are now starting to edge up a little. Zinc, which has the weakest fundamentals of all the base metals, now has over 800,000 tonnes in LME warehouses. That is 100,000 tonnes more than at the start of the year.  In dollar terms the price is essentially unchanged at $2,336 a tonne but in many producing countries the local price will be lower due to currency appreciation against the dollar.

Zinc might have the poorest demand and supply prospects but other metals are also seeing inventories creep up. Those for aluminium are 3% up for the year to date while copper, which has the best fundamentals, is up a staggering 21% to 456,275 tonnes. To be fair the abnormally low levels for copper do exaggerate the percentage changes.  However, that argument has less force in the case of lead. It has experienced a 25% increase in inventories taking the tonnage up to 304,625 in a very much smaller market. 

In the long term everyone knows that the US, and other governments, needs to reduce the difference between what they spend and what they raise through taxes.  They also know that implementing that will be painful for the economy and the voters and delaying tough action is the easiest, if cowardly, way out. Unless and until markets force the hand of the politicians Cold Turkey will be delayed, however much it is needed.

**********


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## drillinto

""The days of abundant resources and falling prices are over forever""
by Jeremy Grantham, GMO, Quartely Letter, April 2011

To read the article, please click the link below:
http://www.scribd.com/doc/53933845/GMO-Quarterly-Letter-1Q11

************************


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## cmigold

If you would like to view the article in its entirety, please visit the original source: 
The World’s 10 Most Prolific Gold Fields



drillinto said:


> April 2011
> 
> "The World’s Top Ten Gold Mines"
> Bill Haynes
> www.minesite.com/aus.html (The registration is free)
> 
> 
> Gold has long been one of mankind’s most prized possessions. Yet most people have little idea where gold comes from, other than from “gold mines.” Mining gold today often involves monumental undertakings, truly some of man’s greatest engineering feats. Imagine gold mining shafts nearly two and a half miles below the surface and it taking two hours for miners to get to their work stations. Imagine a pit so large that it can be seen from outer space. No reason to imagine, those are the realities in the mining of gold revealed in “The World’s 10 Most Prolific Gold Fields.”
> 
> 1. Witwatersrand Basin (Johannesburg, South Africa). Located in South Africa, the Witwatersrand Basin represents the richest gold field ever discovered. It is estimated that 40% of all of the gold ever mined has come out of the Basin. In 1970, South Africa’s output accounted for 79% of the world’s gold production. By 2009, South Africa’s share of world gold production had dropped to less than 8%. Mining in the Witwatersrand Basin is accomplished by creating deep underground tunnels that are necessary to reach the plentiful reserves. The Tau Tona Mine features the deepest tunnel in the world extending a full 2.4 miles below the earth’s surface. A massive ventilation and air conditioning system is required to overcome the extreme working conditions throughout more than 500 miles of tunnels. At its deepest levels, the air temperature reaches 131 degrees farenheit and the rock face itself 140 farenheit. The mine is so extensive that it takes workers a full two hours to travel from the surface to the deepest sections of the mine where they must then contend with pockets of lethal gas, water and a continual barrage of small earthquakes. The discovery of gold in the Basin in 1886 by Australian miner George Walker set off one of the largest gold rushes in history. The surrounding area became the city of Johannesburg, and within ten years Johannesburg was the largest city in South Africa.
> 
> 2. Carlin Trend (Nevada, US). For over a hundred years, prospectors in the Western US completely missed one of the richest gold fields in the world, as it contained what is now popularly called ‘invisible gold.’ Historically, most gold fields were discovered by the presence of gold veins or deposits visible to the naked eye. Not so in the Carlin Trend located in northeast Nevada. Hot springs containing dissolved gold deposited the metal into the sediment in such fine particles that it is difficult to see even with a microscope and impossible to find using older conventional methods such as hand tools and panning. In 1961, John Livermore, a geologist for Newmont Mining, set out in search of this invisible gold based on some ideas in a paper published a year before by noted geologist Ralph Roberts. It didn’t take long before Livermore found what he was looking for in an area that is now known as the Carlin Trend. The deposit was the first major one of its kind discovered. Subsequent discoveries of similar type areas in China and Macedonia are referred to as Carlin Trend type deposits. Mining by Newmont began in 1965; the area has since become one of the richest gold fields in the world. Open pit mining dominates the Carlin Trend over its five by 40 mile area although some underground operations have been formed in higher grade areas. Gold production in the state of Nevada, which is dominated by the Carlin Trend, accounts for almost 80% of the gold mined in the United States. If Nevada were a country, it would rank #4 in the world in terms of total gold production.
> 
> 3. Irian Jaya (Indonesia). In one of the most inaccessible spots on the planet lie the single largest gold orebody and third largest copper orebody ever discovered. Located in the mountains of Irian Jaya, Indonesia, at an elevation of 14,010 ft, is the Grasberg Mine. Two miles away lies its predecessor, the Ertsberg Mine. The amazing feat of their construction by Freeport McMoRan is the subject of an episode of Discovery Channel’s Super Structures. Work on the original Ertsberg Mine began in 1967 with the construction of a dock and a 25 mile road through the surrounding jungle. Chainsaw-wielding workers were lowered from helicopters to cut their way clear to the jungle floor. Bulldozers were flown in where they often had to contend with 20 feet of soft marshland before reaching solid ground. The final section of mountain road was built atop a ridge so narrow that the first clearing pass had to be done with bulldozers no bigger than riding lawn mowers. Six subsequent iterations of air lifting increasingly larger bulldozers were used to complete the road. A tram system had to be built to surmount the final 2,000 foot cliff that separates the road from the mine site. Getting the mined ore off of the mountain is a much more efficient process: it is simply dropped 2,000 feet to the giant crushers below. The processed ore is mixed with water to create a gold and copper slurry which travels through 70 miles of pipe out to the shore. From there, the slurry is concentrated and the ore then transported to smelters around the world. The original Ertsberg Mine operated from 1972 until it was depleted in the mid 1980s. In 1988, Freeport McMoRan discovered the enormous neighboring ore body that is today operating as the Grasberg Mine. Gold production was 2.5 million ounces in 2009. Open pit operations will continue through 2015 at which point the gold will be mined by underground methods.
> 
> 4. The Super Pit (Kalgoorlie, Western Australia). The Super Pit, located in Kalgoorlie, Western Australia, is the largest open pit mine in the country. It covers an area of almost three square miles and is large enough to be seen from space. The excavation began after several underground mines were acquired by Kalgoorlie Consolidated Gold Mines. Even today, operations occasionally unearth old mining tunnels complete with abandoned mining equipment. The Super Pit covers an area known as the Golden Mile, a name that dates back to the original gold rush of the late 19th century. During this time, the field was considered to be the richest square mile in the world. The area has been continually mined for over 100 years, and the Super Pit is expected to remain in production through at least 2017. Once retired, the mine will be allowed to fill in with ground water, a process that could take 50 years. The city of Kalgoorlie was formed in 1893 right after Irishman Paddy Hannan filed a Reward Claim leading to an influx of hopeful prospectors. The subsequent gold rush saw the surrounding area boom over the next 10 years, temporarily reaching a population of almost 200,000. It was during this time that Kalgoorlie’s famous Hay Street brothels began. Much like the mine, they have also been in continuous operation for over a century and are now an accepted part of the community. Today, Kalgoorlie has a population of less than 30,000 with about one fourth of its jobs directly related to mining.
> 
> 5. Yanacocha (Peru). Located high in the Andes Mountains, with parts reaching elevations in excess of 13,000 feet, is the sprawling complex known as Yanacocha. Covering some 60 square miles, it is the largest gold mine in Latin America, possibly the second largest in the world, and is recognized as one of the most profitable in the world. Yanacocha is the largest facility operated by Newmont Mining and is the company’s crown jewel. With almost US$2 billion dollars invested in the mine, Newmont has received a return of over US$7 billion to date. In 1994, a legal battle for Yanacocha erupted between Newmont Mining and its French partner BRGM, after BRGM attempted to sell its stake to a Newmont rival. A controversial decision by the Peruvian high court allowed Newmont and its Peruvian partner Buenaventura to buy out BRGM’s stake. The aftermath was ugly with both sides accusing one another of engaging in improper conduct in attempting to influence the decision. Since its origins in 1993, Yanacocha has produced more than 26 million ounces of gold.
> [Note: The post had to be shortened to five mines because of ASF size requirements]
> 
> This article first appeared on Bill's Blog on The CMI Gold & Silver website.
> ******************************************


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## drillinto

May 07, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]

Minews. Good morning Australia. How did your market cope with a few tough days? 

Oz. Surprisingly well, considering the extent of the mid-week commodities correction. Most companies lost ground, but not excessively. We even had a few solid rises in the wake of discovery and development news. We’ll get to those later, but first the big picture. Overall, the Australian market lost just 1.7 per cent as measured by the all ordinaries. The metals and mining index lost 2.7 per cent, and the gold index was down five per cent. One reason for the relatively modest declines in the indices was a US2 cent slide in the Australian dollar exchange rate. That took a little pressure off exporters, and eased the decline in gold stocks.

Minews. And was there anything going against the trend at all? 

Oz. Pick of that pack was Spitfire Resources (SPI) which has attracted great interest after reporting what looks to be a significant manganese discovery at its South Woodie Woodie project. It rose 39 per cent to close the week at a 12 month high of A25 cents. Also on the rise were Mt Gibson (MGX), which rose A12 cents to A$2.00, and FerrAus (FRS) which rose A10.5 cents respectively to A83.5 cents. Lynas (LYC) was the best of a relatively strong rare earths sector, adding A16 cents to A$2.25. Orocobre (ORE) also did well with a rise of A12 cents to A$2.55. Alkane (ALK) also swam against the negative sentiment with a gain of A5 cents to A$2.26. 

And a handful of precious metal stocks also ignored the overall trend. These were led by Kingsgate (KCN), which has resolved some of its mine expansion issues in Thailand, news which helped the stock add A14 cents to A$7.90. Troy (TRY) also defied the sell-off thanks to the acquisition of fresh tenements in South America, rising a modest A2 cents to A$3.61. Nyota (NYO) crept up by A1 cent. Alcyone (AYN), the silver company we took a look at a few days ago ended the week up a very modest half a cent at A13 cents, but that was well up on its mid-week low of A8.7 cents, a price registered during the silver-price panic. 

Minews. You say panic, but are investors in Australia seeing last week’s sell-down as anything more than a correction? 

Oz. As a matter of fact no. There’s no question that the market had got ahead of itself with a burst of irrational exuberance. But there’s equally no question that China and India disappeared overnight. India in particular is becoming an increasingly important commodity customer for Australia, and potential supplier of English-speaking labour for under-staffed and under-skilled resource projects in this country. Cricket has also made it a somewhat more civilised country than China which still has the unseemly habit of jailing people it doesn’t like. 

Minews. You’re getting off the theme of this little chat there, let’s get back to share prices and leave the deeper stuff for another day. 

Oz. Sorry, but there is a big story emerging somewhere in that little rant. Gold is the logical starting point for the market wrap, but there isn’t much else that’s positive to report after the moves we mentioned earlier. The list of the fallen which reads like this: Medusa (MML), down A18 cents to A$7.85, Catalpa (CAH) down A8 cents to A$1.37, Allied (ALD) down A3.5 cents to A51.5 cents, Gold Road (GOR), down A9 cents to A63 cents, Kingsrose (KRM) down A15 cents to A$1.46, Resolute (RSG) down A12 cents to A$1.05, Gryphon (GRY) down A4 cents to A$1.53, and Integra (IGR) down A1.5 cents to A45 cents. 

Minews. Nothing too painful there given that the gold price slid back below the US$1,500 per ounce mark. Base metals next, please. 

Oz. There is less good news in the copper, nickel and zinc sectors, where only a handful of rises offsetting the negative tone. The copper card reads like this: OZ Minerals (OZL) down A5.5 cents to A$1.39, PanAust (PNA) down A1.5 cents to A75.5 cents, Metminco (MNC) down A3 cents to A42.5 cents. Sandfire (SFR) down A56 cents to A$6.59, CuDeco (CDU) down A21 cents to A$3.22, and Hot Chili (HCH) down A3.5 cents to A66.5 cents. 

Nickel was in slightly better favour, and there were three interesting upward moves. Minara (MRE), the old Anaconda Nickel which is now controlled by Glencore, added A1 cent to A78 cents, perhaps in anticipation of a mopping up post the float of Glencore. Panoramic (PAN) was another nickel company to gain ground, putting in a surprise rise of A5 cents to A$2.11, and Mirabela (MBN) added A4 cents to A$2.01. All other nickel companies lost ground, including Western Areas (WSA) which fell A26 cents to A$6.45, Mincor (MCR), which fell A8.5 cents to A$1.11, and Independence (IGO), which fell A54 cents to A$6.07. 

Zinc companies were all down, but not a lot. Perilya (PEM) slipped A1.5 cents lower to A60.5 cents. Kagara (KZL) was down by A4.5 cents to A54.5 cents. Terramin (TZN) eased back by A1.5 cents to A35 cents, and Blackthorn (BTR) lost the minimum amount possible, half a cent to A61.5 cents. 

Minews. Iron ore and coal now, please. 

Oz. After the few iron ore companies that we mentioned earlier it was all negative, but not excessively so. Among the movers were Fortescue (FMG), down A3 cents to A$6.12, Atlas (AGO), down A15 cents to A$3.35, Brockman (BRM), down A26 cents to A$4.85, Iron Ore Holdings (IOH), down A3.5 cents to A$1.56, and Territory (TTY), down A3 cents to A23 cents. 

Coal stocks were all down, bar one. Riversdale (RIV) crept A8 cents higher to A$16.58 thanks to ongoing interest in Rio Tinto’s attempts to wrap up full control of the company. After that there was a long list of falls including: Macarthur (MCC), down A73 cents to A$10.83, Carabella (CLR), down A5 cents to A$2.14, Stanmore (SMR), down A15.5 cents to A$1.08, and Coal of Africa (CZA), down A2 cents to A$1.18. 

Minews. Uranium and minor metals to close. 

Oz. There was surprising strength in the uranium market, perhaps thanks to the rebound after the Fukushima sell down. Mantra (MRU) continues to attract interest in its African projects, adding A10 cents last week to A$6.84. Extract (EXT) made progress towards a Chinese takeover despite a technical delay to allow it to comply with British takeover laws for its parent, Kalahari Minerals. Extract added A82 cents to A$7.50. Also on the rise was Manhattan (MHC), which clawed back recently lost ground with a rise of A4 cents to A69 cents. Among the fallers were Bannerman (BMN), which slipped A2 cents to A32 cents, and Paladin (PDN), which shed A2 cents to close the week at A3.28. 

Venture (VMS) was the pick of the tin companies, putting in a modest rise of half a cent to A42 cents in the wake of steady progress on its Mt Lindsay project in Tasmania. Wolf Minerals (WLF), the Devon tin and tungsten explorer, slipped A2 cents lower to A43.5 cents. 

Minews. Thanks Oz. 
******


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## drillinto

May 09, 2011

Commodities Hit Turbulence, But Gold Still Offers The Smoothest Ride
By Rob Davies
www.minesite.com/aus.html (Free registration)

Changes to the balance of demand and supply for commodities usually come slowly and are often not apparent until some time afterwards. Prices, on the other hand, can move a lot and quite quickly. That was apparent last week. Silver lead the metals down, dropping 30 per cent to US$36 an ounce. The proximate reason was an increase in margin requirements from US$11,745 to US$21,600 per contract on Comex. A secondary reason was a bounce in the dollar on further concerns over the situation in Greece. Then word went round the market that George Soros had bailed out of his positions in both silver and gold. And more generally there are still worries that the US economy is not growing fast enough, despite a good jobs report on Friday.

Another underlying concern relates to China. China has recently raised rates and increased the level of reserve its banks must hold, and the thinking is that these efforts to slow the economy there might actually start to work soon. If the Chinese economy does start to slow, there’s likely to be a corresponding reduction in demand for commodities. 

And if that wasn’t enough bearish sentiment to be going on with, there’s a widely held view in the market that the impending listing of Glencore, the world’s largest commodity trader, sends a pretty powerful message that some of the best connected people in the business think the market is closer to the top than the bottom. 

Although silver recorded the biggest fall, all metals with terminal pricing suffered. Gold fell 4.75 per cent to US$1,495 an ounce. The base metals as a group dropped six per cent to 4023.7 as measured by the LME Index. And a 2.3 per cent fall in the Shanghai stock market emphasised the Sino-centric nature of the change in the mood music. 

No one would argue that the fundamentals of commodities remain anything other than robust at the current time. However, sentiment can change a lot faster than large capital intensive projects can. You can’t easily suddenly stop construction of a new mine when banks want their finance repaid and suppliers have already delivered kit and want paid for it. In that regard base metals are probably more vulnerable than precious metals, because the mines that supply them tend to be bigger than those producing precious metals. 

Maybe it is this inflexibility that contributed to the larger 6.2 per cent fall in copper to US$8,790 a tonne and to the 6.2 per cent drop in nickel taking it to US$24,970 a tonne. But the biggest decline was recorded by tin, which slumped by 9.8 per cent to US$29,100 a tonne. The magnitude of the fall was perhaps exacerbated by the narrow nature of its market.  By contrast, aluminium, with the largest tonnage of all the base metals, was the least affected. It only fell by 3.3 per cent to US$2,680 a tonne. Lead was marked down by six per cent to US$2,378, while zinc dropped 4.3 per cent to US$2,125 a tonne. 

To some extent these sharp moves reflect a quick venting of gas from some commodities that had ballooned very rapidly. Silver is the obvious case in point. No one knows yet if the Chinese authorities will be successful in slowing their economy. The experience of Japan over the last two decades offers a nearby example of how a bubble economy can take a long, long time to recover when it does go wrong. 

On the other hand nothing in the recent news flow has done anything to change the prospects for the gold market. Despite some military success, the US is still living way beyond its current and forecast means, and seems intent on using monetisation of its debt through inflation as its escape route. Since the supply of gold is dependent on the viability of lots and lots of new small mines, it is impossible to envisage a huge upsurge in new metal coming to the market. In such an environment the outlook for gold looks better than for base metals, at least for the short to medium term. 
*****


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## drillinto

"Commodity Prices vs Recent Lows"
May 11, 2011  

By the looks of today's trading, it does not look like the two day rebound in commodity prices will have any staying power.  After some sharp rebounds off of last week's lows, some of the major commodities are beginning to come within close range of last week's lows.  In fact, in the case of copper last week's lows would be an improvement compared to current prices.

To view the table, please click the link below
http://www.bespokeinvest.com/thinkbig/2011/5/11/commodity-prices-vs-recent-lows.html


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## drillinto

May 14, 2011

"That Was The Week That Was … In Australia"
By Our Man in Oz
Source >> www.minesite.com/aus.html ((( Free Registration )))

Minews. Good morning Australia. How was your week? 

Oz. A mixed bag. The market was flat, trending down. The politics were hot, heating up. On the ASX the overall picture was one of a gentle decline, as measured by the 0.6 per cent fall on the all ordinaries index. The mining index was off by a little less at 0.4 per cent, while the gold index slid 2.1 per cent lower, a fall caused largely by a decline in one share price, that of the sector leader, Newcrest (NCM), which fell by A$1.08 to A$38.30.

Minews. Before we run through the prices, did you mention politics because the mining tax is back in the news? 

Oz. Not directly, but it got an airing again when the government delivered its budget for the year ahead. There wasn’t anything terribly exciting in it, except for the continued evidence that Australia’s future is very dependent on China. There seems no doubt that if China catches a cold we’ll get the flu. But, separate to that rather obvious view of the way the world works was a very optimistic assessment of the future demand for minerals from the normally conservative Treasury boffins. They’re confident about prices staying high and that in turn has sparked a fresh debate about whether mining should be whacked with heavier taxes. 

Minews.  All very predictable given the state of government finances around the world. Let’s move across to prices now, please, continuing with gold. 

Oz. Good decision, because despite the slide in the index there were a surprising number of gold companies that posted modest rises, and there was also a spot of proposed merger activity. The deal which made the headlines was a proposed merger between St Barbara Mines (SBM) and Catalpa Resources (CAH). Investors reacted to an unsolicited offer from St Barbara by marking down the bidder and marking up the target. St Barbara lost A25 cents to A$1.87 and Catalpa rose by A32 cents to A$1.69. 

Minews. We might take a closer look at that situation next week because Catalpa does appear to be one of the more interesting Aussie gold companies. 

Oz. That can be done. Meanwhile, it’s worth noting that on a head count basis, more gold companies rose last week than fell, and that it was Newcrest which almost single-handedly pulled the index down. Among the other companies that had reasonable week was Beadell Resources (BDR), which is making solid progress with its combined gold and iron ore mine in Brazil. It added A6.5 cents to A80 cents last week. Elsewhere, Nyota (NYO) put on A2.5 cents to A26.5 cents. Gryphon (GRY) rose by A2 cents to A1.55. Troy (TRY) gained A4 cents to A$3.65. Adamus (ADU) added A2 cents to A67.5 cents. Gold Road (GOR) crept A1 cent higher to A64 cents. Ausgold put on A5 cents to A$1.47. And Gold One (GDO) added A1.5 cents to A43 cents. After that comes list of fallers, though none were severe. These included Resolute (RSG), down A3.5 cents to A$1.02, OceanaGold (OGC), down A20 cents to A$2.28, and Kingsgate (KCN), down A2 cents to A$7.88. 

Two of the locally-listed silver companies, Cerro (CJO) and Silver Mines (SVL), regained recently lost ground. Cerro added A1.5 cents to A27 cents, and Silver Mines put on A2.5 cents to A31 cents. Two other silver companies lost ground. Alcyone (AYN) slipped A1.5 cents lower to A11.5 cents, and Cobar Consolidated (CCU), lost A8 cents to A84 cents 

Minews. Iron ore next, as there also seem to have been a few encouraging rises there. 

Oz. There were. Atlas Iron (AGO) lead the way with a rise of A27 cents to A$3.62. And it was followed closely by Territory (TTY), which regained lost ground, with a rise of A4 cents to A27 cents. Other positive moves came from Fortescue (FMG), up A16 cents to A$6.28, Murchison (MMX), up A5 cents to A$1.07, and BC Iron (BCI), up A5 cents to A$2.90. Falls were posted by Gindalbie (GBG), down A2 cents to A95.5 cents, Sundance Resources (SDL), down A1.5 cents to A36 cents, Sherwin (SHD), down A2 cents to A14 cents, and Mt Gibson (MGX), down A1 cent to A$1.99. Also worse off was Brockman (BRM), which appears close to losing its takeover struggle with Hong Kong’s Wah Nam International. Brockman’s shares fell by A43 cents to A$4.48. 

Minews. Base metals now, please. 

Oz. Nickel showed signs of life. Copper was flat, and zinc was flatter. Among the nickel miners that were better off was Mincor (MCR), which reversed several weeks of decline with a gain of A2 cents to A$1.13. Mirabela (MBN) added A5 cents to A$2.06, and Independence (IGO) gained A13 cents to A$6.20. On the way down, Western Areas (WSA) slipped A13 cents lower to A$6.32, and Panoramic (PAN) eased back by A8 cents to A$2.03. 

Best of the copper companies were OZ Minerals (OZL), which added A4 cents to A$1.43, and Rex (RXM), which rose A3 cents to A$2.54. Falls came from Metminco (MHC), down A1.5 cents to A41 cents, Sandfire (SFR), down A17 cents to A$6.42, Hot Chili (HCH), down A1.5 cents to A65 cents, and PanAust (PNA), down A1 cent to A74.5 cents. 

Zinc companies were generally worse off. Blackthorn (BTR) had the biggest fall, dropping A6.5 cents to A55 cents. Terramin (TZN) lost A4.5 cents to A30.5 cents, and Kagara (KZL) closed at A53 cents for a loss over the week of A1.5 cents. 

Minews. Uranium and coal next. 

Oz. There were a few good rises in each of those sectors, but with long tails of shares which lost ground. Among the uranium explorers Bannerman (BMN) had the best week, putting in a rise of A3 cents to A35 cents. Energy and Metals (EMA) recovered a little of its recent losses with a rise of A2 cents to A18 cents. Mantra (MRU) crept A2 cents high to A$6.86. Extract (EXT) slipped A1 cent lower to A$7.49 as a proposed bid for its parent, Kalahari Minerals, drags on. Berkeley (BKY) lost A1 cent to close at A84 cents. 

There were two solid risers among the coal companies. Stanmore (SMR) added an eye-catching A20 cents to A$1.28, and Macarthur Coal (MCC) put on A59 cents to A$11.42. Elsewhere, Coal of Africa (CZA) chimed in with a A3 cent rise to A$1.21, but after that it was downhill. Losses were posted by Bathurst (BTU), down A2 cents to A$1.07, Coalworks (CWK), down A3 cents to A74 cents, and Continental Coal (CCC) down by the smallest amount possible, a loss of A0.1 of a cent to A5.6 cents. 

Minews. And minor metals to close, please. 

Oz. There were two stand out upward moves among the multitude of minor metal plays. Wolf Minerals (WLF), the Devon tin and tungsten play, added A9 cents to A54.5 cents. And South Boulder Mines (STB), the potash explorer, rose by A26 cents to A$3.63. Offsetting those gains was a sell-off among the rare earth companies. Alkane (ALK) fell a sharp A36.5 cents to A$1.90. Arafura (ARU) dropped by A9 cents to A$1.09, and Lynas (LYC), which has dumped a controversial plan to sell assets to a company associated with its chairman, lost A11 cents to A$2.14. 

Minews. Thanks Oz. 
********************


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## drillinto

Andy Xie /// 05.06.2011 
Chimerica's Slippery Slope to Stagflation
Watch for more Fed quantitative easing, slower growth and policy traps in the coming quarters

To read the article by the economist Andy Xie, please click the link below:
http://english.caing.com/2011-05-06/100256416.html
*******************


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## tothemax6

drillinto said:


> Andy Xie /// 05.06.2011
> Chimerica's Slippery Slope to Stagflation
> Watch for more Fed quantitative easing, slower growth and policy traps in the coming quarters
> 
> To read the article by the economist Andy Xie, please click the link below:
> http://english.caing.com/2011-05-06/100256416.html
> *******************



Big fan of Xie, he is one of the few economists who actually 'get' monetary economics.


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## drillinto

May 15, 2011

Cracks In Europe, Monetary Tightening In China
By Rob Davies
www.minesite.com/aus.html (free registration)

This week the financial press seems to be delighting in the continued weakness of commodities. It is certainly true that they have been sold off. Base metals, as measured by the LME index fell, 0.5 per cent to 4004.3 over the last week, although gold is a touch higher at US$1,503 an ounce and silver has stabilised at US$35 an ounce.

The main reason for the negative sentiment towards commodities has been a sharp rise in the dollar. In the last seven days the dollar has risen by 0.8 per cent against the euro, despite some robust growth figures from Germany and France.  And a strong dollar usually pushes commodity prices down. 

The problem is that a resurgence of economic activity in the north of the eurozone reminds people how bad things are at the fringe, especially in Greece. One year on from the Greek refinancing and it is clear that the underlying problems have not been resolved. A second rescue will be needed shortly. But should the ECB decide that further interest rate rises are needed for the euro to moderate inflation in the north, it will only add further misery to those in the south of the zone. 

It is becoming increasingly obvious to even the most electorally sensitive euro-politician that the one size fits nobody interest rate policy across the zone simply doesn’t work.  No one seems to have a clue, or is admitting publicly, how a European financial divorce might work, but hot money is not hanging around to find out. It is going into the dollar, and that has pushed yields on 10 year US treasuries down to 3.2 per cent.  

Normally, such a low rate would signify very low risk. Unfortunately, the US economy has problems that are, if anything, worse than those pertaining in the Eurozone.  Bill Miller, renowned fund manager at Legg Mason, refers to the efforts to fix these US problems as the DDT: the Dollar Destruction Trade.  He seems to think US financial policy is as poisonous as pesticide. At the moment the international currencies seem to behaving like a bunch of rabbits caught in the open and finding all their potential escape routes blocked. 

What hot money really wants to buy is the renminbi. But the Chinese currency is not convertible. Money is getting tighter in China, and that would drive up the renminbi if markets were allowed free rein. Last week Chinese regulators raised bank reserve ratios for the fifth time this year, taking them to 21 per cent and removing 370 billion renminbi from the economy in an effort to limit growth and restrain inflation. And this inability to buy renminbi is pushing investors into gold as a proxy for the Chinese currency. 

Despite the efforts of its rulers China continues to grow and import metals, and there are no real signs that demand for base metals is likely to fall below current levels of supply. But what is encouraging now is that rising demand in Germany could help to offset slower growth in China, even if the scale of consumption is less. Inventories of metals may have risen a tad, but essentially they are still very low, so the fundamentals remain sound. 

So while the politicians pontificate on what they would like to see happen, the underlying forces of economics are making their pronouncements ever less relevant. As they try and evade reality, investors continue to express their lack of faith in their proposals by sticking with things like commodities that cannot be debased. 

 ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤


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## drillinto

"Glencore IPO to Raise $10 Billion"

Glencore International Plc will start trading in London today after selling $10billion of stock in an initial public offering that coincided with the worst rout in commodities in two years. 

http://www.bloomberg.com/news/2011-...10-billion-as-investors-defy-market-rout.html

**************


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## drillinto

"The recent decline in global commodity prices is thus good news 
for the Indian economy" (17.05.2011)
Source: www.livemint.com 

India imports nearly three-fourths of its crude oil requirements. Oil accounts for about one-third of our import bill. No wonder higher global oil prices are considered a big negative for Indian share prices.

The recent decline in global commodity prices is thus good news for the Indian economy. But Nymex crude futures continue to trade way above their 200-day moving average (DMA), a key parameter used by technical analysts to assess the strength of a market. Gold futures””a proxy for commodity action””are also trading above their 200 DMA. Meanwhile, the Nifty share index is below its 200 DMA.

This is neither a plea to buy or sell shares nor a view on what will happen on Dalal Street in the next few weeks. That we leave to the brokerages. Our limited observation: the fall in commodity prices is still modest compared with the steep rise we have seen over the past year.


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## drillinto

On Strategy
"Breakdown: Commodities Tumble... For Good ?"
Liz Ann Sonders - Charles Schwab & Co - 16.05.2011

To read please click the link below
http://www.schwab.com/public/schwab...&lvl1=research_strategies&lvl2=market_insight


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## drillinto

May 21, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Registration is free)

Minews. Good morning Australia. Another flat week? 

Oz. Remarkably flat really. Mining stocks on the ASX posted two days of rises prices and three of falls prices to end up almost exactly where they started. To get an idea how flat we were the metals and mining index fell three points, which is a decline of less than one-tenth of one per cent. It was a similar picture in the gold sector which rose by less than one-tenth of one per cent. However, the all ordinaries “boomed” with a rise of 0.4 per cent.

Minews. That sounds awfully boring. 

Oz. It was, and it wasn’t. In terms of overall price movements there’s no argument that there was a lot of “sell in May and go away” in the air. But in terms of individual action there was still plenty to catch the eye. The big news down this way was all about tax, again. And this time the question of how to tax miners triggered a war of words between the national government and the state government in Western Australia. 

Without boring your readers with too much Western Australia has announced a plan to increase royalties paid by iron ore miners. Royalties are a state tax in Australia, but the national government was furious because it has promised to allow miners to offset royalties against its new mining resource rent tax, which means the net result is lower future national tax payments. 

Minews. Presumably setting off a form of civil war between different layers of government, with mining caught in the middle. 

Oz. Precisely. It is a classic example of government seeking new ways to milk the mining cow, and ending up in a fight behind the barn - while the miners look on with a mix of dismay and amusement. 

Minews. Time for prices, perhaps starting with the more interesting movers before calling the card of what sounds like might be dull affair. 

Oz. Good decision because there were some interesting movers, both up and down. Among the companies which posted rises that caught the eye were a few which have not been mentioned before, such as Celamin (CNL). Shares in Celamin rocketed up by 66 per cent to A70 cents on Friday thanks to interest in its Tunisian and Algerian phosphate projects. Until a recent change of focus, and name, Celamin was known as Victorian Gold Mines. 

Also moving upwards nicely was Cabral Resources (CBS) which is exploring for iron ore in Brazil. Shares in Cabral popped 32 per cent higher on Friday alone, putting in a rise of A3.5 cents to A14.5 cents, taking the gain for the week to A5.5 cents, or 61 per cent. Elsewhere, Indo Mines (IDO), an Indonesian-focussed iron ore and coal miner, added A15 cents to A69.5 cents. Kagara (KZL), the zinc and copper producer, returned to favour after a few years in the sin bin, rising by A9.5 cents to A62.5 cents. Minemakers (MAK), a local potash player, was back on the radar of speculators, and rose A11 cents to A48 cents. Once-famous Bougainville Copper (BOC) produced one of its curious star turns, rising A25 cents to A$1.54, without any fresh news on when or whether Rio Tinto will move on its plans to re-develop the Panguna copper mine on Bougainville Island. And Mintails (MLI) a gold-dump re-processor, was in the news thanks to a rise of A3.5 cents in its share price to A22.5 cents. Mintails was also the subject of an appeal to the Australian Takeovers Panel by the man trying to buy the business, London investor Rex Harbour. He has a bid of A15 cents on the table, which is what might be called a country mile behind the market. 

Minews. Interesting moves, but presumably there are some equally interesting falls. 

Oz. Well spotted. Another failed corporate deal delivering the biggest slide of the week. Whitehaven Coal (WHC) lost A53 cents to A$5.90 after dropping an attempt to sell itself to interested Chinese and Indian suitors. Apparently the bids were just not high enough. Wolf Minerals (WLF), the Devon tin and tungsten project developer, upset supporters by announcing what seemed to be a go-slow on its Hemerdon Ball project, and promptly dropped by A15 cents to A39.5 cents. Navigator Resources (NAV) upset supporters by further downgrading production forecasts for its Bronzewing gold mine, shedding A3 cents to A15.5 cents. Finally, Chalice Gold (CHN) lost A6 cents to A34.5 cents after announcing a private placement which will raise A$9.6 million at A30 cents a share. 

Minews. Time to call the card, starting as usual with gold, please. 

Oz. There wasn’t a great deal else going on in gold. In the black were companies like Medusa (MML), which was up A10 cents to A$7.90, Newcrest (NCM), which rose A17 cents to A$34.47, and Adamus (ADU), which was up half-a-cent to A68 cents. Also better off were Resolute (RSG), up A4 cents to A$1.06, Integra (IGR), up A2 cents to A44.5 cents, and Perseus (PRU), up A13 cents to A$2.72. Catalpa (CAH) rose A3 cents to A$1.72 as investors tried to fathom the merger proposal submitted by St Barbara Mines (SBM), itself a faller, down A6 cents to A$1.81. Other companies that weakened included Silver Lake (SLR), down A5 cents to A$1.88, PMI (PVM), down A3 cents to A45 cents, Allied Gold (ALD), down A7 cents to A46 cents, Gold Road (GOR), down A4.5 cents to A59.5 cents, Kingsrose (KRM), down A7 cents to A$1.37, and Troy (TRY), down A5 cents to A$3.60. 

Minews. Base metals next, please. 

Oz. Even less to report in that sector. Copper companies held up best. Nickel and zinc trended down. Pick of the copper explorers and producers were Sandfire (SFR), up A32 cents to A$6.74, Exco (EXS), up A3 cents to A63 cents, Marengo (MGO) up A2.5 cents to A31 cents, PanAust (PNA) up A4 cents to A78.5 cents, and Rex (RXM) up A5 cents to A$2.59. OZ Minerals (OZL) slipped A4 cents lower to A$1.39. Hot Chili (HCH) shed A4 cents to A61 cents, and Metminco (MNC) closed at A38 cents, down A3 cents. 

Mirabela (MBN) was the best of the nickel companies, but only because it opened and closed at the same price, A$2.06. All other nickels lost ground. Mincor (MCR) dipped A5 cents to A$1.08. Panoramic (PAN), slid by A3 cents to A$2.00, and Minara (MRE), eased back by A1 cent to A77 cents. 

Prairie Downs (PDZ) was the sole zinc company to rise, putting in a gain of A2 cents to A17 cents. After that it was weaker across the sector. Blackthorn (BTR) fell A1.5 cents to A54.5 cents. Terramin (TZN) fell half-a-cent to A30 cents. Ironbark (IBG) fell A1 cent to A27 cents, and Perilya (PEM) fell A1 cent to A58 cents. 

Minews. Over to iron ore and coal. 

Oz. One up, one down, with the tone among iron ore plays positive, and the coal tone negative. One of the iron ore companies that fell was Brockman (BRM) which is now controlled by Hong Kong’s Wah Nam following a hotly-disputed takeover raid. Brockman lost A7 cents to A$4.41. Meanwhile another Wah Nam target, FerrAus (FRS), added A3 cents to A78 cents. Other iron ore movers included Fortescue (FMG), up A16 cents to A$6.44, Sundance (SDL), up A1 cent to A37 cents, Atlas (AGO), up A10 cents to A$3.72, Gindalbie (GBG), up A2.5 cents to A98 cents, Mt Gibson (MGX), down A6 cents to A$1.93, and Grange (GRR), down A4 cents to A62 cents. 

Whitehaven was the biggest loser among the coal companies, but there was a long list of followers. Coal of Africa (CZA), slipped A3 cents lower to A$1.18. Carabella (CLR) was A18 cents weaker at A$1.98, and Stanmore (SMR) lost A4 cents to A$1.22. Among the interesting upward moves was a gain of A65 cents by Riversdale (RIV) to A$17.17. That rise seems to indicate that a few hold-out investors might be seeking to extract a little bit more from Rio Tinto, which has now taken board control of Riversdale. 

Minews. Uranium and minor metals to close, thanks. 

Oz. Generally weaker in both sectors. The only uranium companies to rise were Mantra (MRU), up A7 cents to A$6.93, and Deep Yellow (DYL), up half a cent to A18 cents. Manhattan (MHC) lost A1 cent to A60 cents. Extract (EXT) slipped A11 cents lower to A$7.38, and Aura (AEE), fell by A6 cents to A24 cents. 

Lynas (LYC) was the newsmaker among the rare earth companies as first ore entered its Mt Weld processing plant, a development which was greeted by a rise in the company’s shares of A15 cents to A$2.29. Other rare earth plays lost ground. Alkane (ALK) was down A8 cents to A$1.82, and Territory Uranium (TUC), mentioned last week, was off A2 cents at A21 cents. Kimberley Rare Earths (KRE) made a modest splash when listing on Thursday with its A20 cent shares ending the week at A21.5 cents. 

Minews. Thanks Oz.
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## drillinto

On strategy
Once bullish, Jim Grant likes cash now

To read interview, please click the link below 
http://www.washingtonpost.com/natio...vice-hold-cash/2011/05/20/AFCRop7G_print.html


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## drillinto

June 04, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Free Registration)


Minews. Good morning Australia. It looks like another tough week down your way. 

Oz. It was, although some sectors were hit harder than others. Nickel companies suffered more than most, and a quick glance at a five-year nickel-price graph reveals some deep-seated reasons why. Back in mid 2006 nickel was selling for a shade under US$10 a pound. Today, it’s a shade over US$10 per pound. The price, however, is only part of the problem for Australian nickel miners. They have also been hit by the higher costs being felt across the mining industry, and by the rising exchange rate.

Minews. With a real squeeze on profits. 

Oz. A very nasty squeeze actually, which can be measured using the exchange rate alone. Back in June, 2006, the Aussie dollar exchange rate against its US cousin was US74 cents. Today, it’s US$1.06. To put it another way, the Australian dollar price of nickel five years ago was around A$13.50 per pound. Today, it is A$9.40, a real decline of around 30 per cent for a miner with costs in Australian dollars, and perhaps a lot more after cost inflation is factored in. 

Minews. Well, thanks for that piece of news - it’s just what we didn’t need to hear. 

Oz. Sorry for bearing bad tidings, but that background explains why a number of nickel companies hit 12 month share price lows last week. Mincor (MCR) dropped to A98.5 cents on Friday, before closing the week at A99 cents for a loss of A10 cents. At this time last year Mincor was trading above A$2.00. Panoramic (PAN) lost A9 cents to close the week at a new low of A$1.83. Last October it traded as high as A$2.97. 

Minews. Before running through more prices, perhaps a big picture snapshot. 

Oz. Overall, both the base metals and the gold markets weakened by around 1.5 per cent. That was a better performance, moderately, than that delivered by the all ordinaries index on the ASX, which lost two per cent. And for our superstitious readers we have a few numbers which might send a chill through their spines. The all ordinaries index closed on Friday at 4666.6, which is the Devil’s triple 6, plus an extra 6 for good measure. And, if that doesn’t catch your eye the official exchange rate on Friday, as published by the country’s central bank, the Reserve Bank of Australia, was 1.0666. 

Minews. Let’s leave all that sort of stuff for someone else to worry about, and focus on share prices. 

Oz. Certainly, but you must admit it was an interesting coincidence. Still, moving on, and given that the trend was down across most sectors, it might lighten our readers’ days to hear first about companies which did not fall. There were a few interesting upward moves too that are worth talking about, thanks largely to discovery and production news. 

Top of the list was Navarre Minerals (NML), a company not mentioned here before. The company seems to have drilled through a few gold nuggets at its Bendigo North project in Victoria, sending the gold bugs in its home state into a frenzy. The official rise over the week was a gain of A20 cents to A31.5 cents, which translates to a rise of 173 per cent, though that tells only part of the story. On Friday alone, after a management requested trading suspension, Navarre rose by A17.5 cents, or 125 per cent on the day, with 17 million shares exchanged out of an issued capital of 25 million shares. Put another way, 68 per cent of the shares in issue were swapped in a trading flurry on a single day. 

Even so, and interesting as those market numbers are, it is worth pointing out that at its Friday closing price Navarre is still only capitalised at A$7.9 million, and while the top assay of 161.2 grams a tonne looks fabulous, the historic Bendigo goldfield is rich in nuggets, which will make it hard to ever prove a resource that satisfies modern banking or reporting requirements. 

Minews. That really is a rather silly state of affairs, isn’t it? 

Oz. Could not agree more. The gold is obviously there, but it’s in nuggets which do not fit comfortably into the code constructed by the Joint Ore Reserves Committee (JORC). 

There were some other eye-catching moves in gold too. Northern Star (NST), a company we will be hearing more about at our June 23rd forum, closed A10 cents higher at A50 cents, a 12 month high. Gold Road (GOR), which we took a closer look at last week, rose by A4 cents to A64 cents, but did get as high as A71 cents early in the week. And Kingsrose (KRM) recovered recently lost ground by adding A5 cents to A$1.43. Resolute (RSG) put on A6 cents to A$1.11. 

Best of the copper companies was Sandfire (SFR) which released a very positive feasibility study, adding A11 cents A$7.20. Metro Coal (MTE) was the strongest among the coal companies, putting in a rise of A12.5 cents to A63 cents. Alkane (ALK) led the way among the rare earth stocks with a gain of A21 cents to A$2.05. 

Minews. Time to call the card, starting with gold, and then roam across the other sectors, as you please. 

Oz. Notwithstanding the risers in gold that we’ve already mentioned, the trend was weaker. Among the handful of other companies that rose was Gryphon, up A4 cents to A$1.61, and Troy (TRY), up A1 cent higher to A$3.47. The fallers included Medusa (MML), down A17 cents to A$8.07, Integra (IGR), down A2.5 cents to A42.5 cents, Focus (FML), down A0.6 of a cent to A6.7 cents, Silver Lake (SLR), down A16 cents to A$1.71, and Kingsgate (KCN), down A27 cents to A$7.67. Beadell (BDR) was also weaker, down A4.5 cents to A78.5 cents, despite announcing a decision to mine its Tucano project in Brazil. 

After Sandfire, the best of the copper companies was OZ Minerals (OZLDA), which rose by A6 cents to A$13.61. Incidentally, the new code is a result of its recent one-for-10 share consolidation. Metminco (MNC) climbed a modest A1 cent to A36.5 cents, and Hot Chili (HCH) also managed a rise of A1 cent to A60 cents. Then came a long list of small fallers. Among them were Marengo (MGO), down half a cent to A29.5 cents, Horseshoe Metals (HOR), down half a cent to A24 cents, and Rex (RXM), down by A1 cent to A$2.66. 

Nickel companies were weaker across the board, as we’ve said. Only Mirabela (MBN) managed to rise, adding A4 cents to A$2.05. It was a mixed picture in the zinc space. Perilya (PEM) rose A5.5 cents to A64.5 cents. And Terramin (TZN) rose by A3.5 cents to A33.5 cents on news of a boardroom spill and speculation that former Normandy Mining boss, Rob de Crespigny, might be mixed up in the fracas. 

Minews. Iron and coal next, please. 

OZ. It was generally down in both of those areas. BC Iron (BCI) was the best of the iron ore companies, putting in a rise of A14 cents to A$3.00. Fortescue Metals (FMG) added A6 cents to A$6.46 after its founder, Andrew Forrest, shuffled the deck chairs and swapped the chief executive’s office for the chairman’s suite, in what most observers down this way see as a spot of window dressing ahead of a final legal decision on his future as a director. Among the fallers were Atlas (AGO), down A2 cents to A$3.58, Mt Gibson (MGX), down A7 cents to A$1.78, and Murchison (MMX), down A4 cents to A95 cents. 

In coal, Metro was the star, as we’ve said, but also on the rise were Carabella (CLR) and Aston (AZT). Carabella rose A6 cents to A$2.04 and Aston rose A10 cents A$10.00. Fallers included Macarthur (MCC), down A41 cents to A$11.25, Coal of Africa (CZA), down A1 cent to A$1.17, and Stanmore (SMR), down A13 cents to A$1.14. 

Minews, Uranium and minor metals to close. 

Oz. It takes a lot of finding, but there was one uranium company in the black. Extract (EXT) added A4 cents to A$7.76, even as it awaits the next instalment of its takeover travails. Berkeley (BKY) continued its slide, losing another A9.5 cents to A39 cents. Manhattan (MHC) dropped A15 cents lower to A42 cents, and Paladin (PDN) shed A18 cents to A$3.03. 

In potash, Potash West (PWN) caught the attention of a few punters after it put out a positive report on its west coast exploration program. Its shares hit a 12 month high of A31 cents, before closing the week at A25.5 cents, an overall gain of A6.5 cents. 

In minor metals, Metallica (MLM) released a positive report on its nickel, cobalt and scandium project, and also traded up to a A38 cents 12 month high, before closing at A37 cents for a rise on the week of A6.5 cents. Tin companies were weaker. Among the fallers was Venture (VMS), down A3.5 cents to A40.5 cents. Lithium companies also fell. Galaxy (GXY) slipped half a cent lower to A85.5 cents, and Orocobre (ORE) lost A1 cent to A2.15. 

Minews. Thanks Oz.
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## drillinto

June 06, 2011

It’s Only A Matter Of Time Before The Chinese Monkey Usurps The American Organ Grinder
By Rob Davies
www.minesite.com/aus.html (The registration is free)

Over the last century there has been little doubt which country has been the dominant force in the world economy. If there was any uncertainty in 1914, then the economic annihilation of the European economies in the First World War ensured that by 1918 the USA was supreme. It took another world war for it to consolidated its position, of course, and then the Russians put up a good show of providing serious rivalry. But it’s been China that’s ended up providing what looks like the most sustainable challenge. And since global financial crisis that began in 2008, the Chinese monkey has been able to chip further away at the authority of the American organ grinder.

Data released on Friday showed that the US economy is not creating the jobs in this recovery that it needs to. Unemployment now stands at 9.1 per cent, and despite a US$600 billion injection from the Fed in the form of QEI and QE2, the economy is limping along at an annualised growth rate of just 1.8 per cent. Consumers feel poorer because house prices are 33 per cent below their peak. But in truth the US has been struggling for decades to maintain its economic leadership. For a long period its competitive weakness was hidden by increasing debt. Then the crash of 2008 swept away the pretence that more borrowing had no downside. 

And the impact of this recession on the US has been made worse by the changing shape of the world economy. When the US was the single major force in the global economy a recession there had a direct and quick impact on the demand for commodities. Falling consumption pretty rapidly resulted in lower prices, which then stimulated demand and domestic recovery followed in short order. 

But that mechanism has not worked this time because commodities - and especially petrol to which the American consumer has an unbreakable addiction - have continued to rise during the recession.   And money spent on petrol cannot be spent on anything else now that the US credit binge is over. 

The reason this dynamic no longer works is because Chinese appetite for commodities is keeping demand high and prices up. No longer can the US enjoy the unhindered benefits of the self-correcting forces of the market economy.  It now plays second fiddle to China. 

A case in point comes from the most recent analysis published by the International Lead and Zinc study Group. It estimates that total lead consumption will rise by 5.5 per cent this year to 10.04 million tonnes. That level of growth does not come from the anaemic activity in the US but is driven by the likelihood that Chinese growth will run at around 10 per cent, and that there will be a boom in the manufacturing of fleets of electric bicycles, all using lead acid batteries.  That is the main reason lead is trading at US$2,484 a tonne, up by more than 25 per cent on the year. 

This level of activity is keeping commodity prices high, and is not allowing the natural price cycles of boom and bust to give the US economy a helping hand by putting pricing power back into the pocket of consumers. To make matters worse, the impact of high commodity prices is more severe in the US than elsewhere because of the weak dollar. 

Since metals are priced in dollars the US buyers have to take the full increase on the chin whereas consumers in other parts of the world find that higher prices are ameliorated by the rise of their currencies so they don’t suffer quite so much. This is yet another dynamic working in the favour of China and the emerging economies and against the US. And if we continue in this vein, it can only be a matter of time before the monkey ends up replacing the organ grinder. 
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## drillinto

Disaster Not Averted
The latest jobs numbers and the very real chance of another Great Depression. 
Dean Baker (USA)
June 6, 2011 

When the financial system was on the edge of melting down back in the fall of 2008, there was much talk in the punditocracy of a second Great Depression. The story was that we risked repeating the mistake at the onset of the first Great Depression: allowing a cascade of bank failures that both destroyed much of the country’s wealth and left the financial system badly crippled. Instead, however, we acted, and these days the accepted wisdom is that the TARP and other special lending facilities created by the Federal Reserve Board prevented a similar collapse that saved us from a second Great Depression. But this view badly misunderstands the nature of the first Great Depression””and may, in fact, result in the country suffering the second Great Depression that the pundits claim we have averted. 

To read the full article, please click the link below:
www.tnr.com/article/politics/89460/jobs-may-umemployment-second-great-depression


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## drillinto

China Holds the World Hostage in Rare Earth Metals
June 06, 2011  •  Tanuj Khosla 

Not many people in the world, especially in the West realize the crisis that is confronting all the countries, with the exception of China, due to rare earth metals that, despite their name, are fairly abundant in the Earth's crust. However, due to their geochemical properties rare earth minerals are typically dispersed and not often found in concentrated in economically exploitable forms. These minerals contain one or more rare earth elements as major metal constituents. 

To read the full article, please click the link below:
http://www.institutionalinvestor.co...rth-Metals.html?ArticleId=2843334&single=true
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## tothemax6

drillinto said:


> To read the full article, please click the link below:
> www.tnr.com/article/politics/89460/jobs-may-umemployment-second-great-depression



Ugh, reading that level of economic illiteracy leaves a bad taste in ones mouth.
Please, drillinto, I enjoy you commodities news posts much more .


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## drillinto

June 11, 2011

That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free registration)

Minews. Good morning Australia. It looks like the price correction continues?
Oz. Yes, but not dramatically so. The slide in share prices we’ve seen over May and June has been more like a slow melting process, as each week has produced slightly lower numbers. The outlook for next week is not much better, given that the Dow Jones index on Wall Street closed below 12,000 points for the first time since March.

All of the key indices on the ASX lost ground last week, but not substantially. The all ordinaries index had four modestly down days and one up, to shed a relatively painless 0.7 per cent overall. The metals and mining index did even better, losing just 0.5 per cent, while the gold index suffered the biggest decline, at 2.3 per cent, though that didn’t tell the whole story because a reasonable number of gold companies also rose. 

Minews. Shall we start with gold, then? Because while the world worries, gold often performs at its best.

Oz. There two things that are more certain than gold: death and taxes, and the issue of taxes was again in the news this week. The Australian Government seems to have two tax surprises in store. The resource rent, or super-tax, has reached the draft legislation phase with the release of a review which, surprise-surprise, further complicates an already complex proposal. What the government wants to do is force miners to value individual mining leases inside their projects. Naturally, some of those leases will be of lesser value because they contain less ore. The upshot is expected to be a decline in allowable depreciation and an increase in tax.

Minews. How horribly convoluted.

Oz. Couldn’t agree more, but it’s an indication of the determination of the government to tax anything that moves, or burns, because the new carbon tax is also moving down the legislation runway, speeding up to catch the coal miners. Until now, the coal companies thought they would get a reprieve for being exporters. Not so. So from next year, or the year after, coal companies will have two new taxes to contend with, the resources super tax and a carbon tax.

Minews. Enough boring tax talk. Let’s have some prices.

Oz. We’ll start with gold, but also toss in a few of the outperformers in other sectors to provide our readers with a few fresh names. Best of the gold explorers was one we’ve never heard of before, Alloy Resources (AYR). It doubled in price last week, rising from A3.2 cents to a peak on Thursday of A7.6 cents in massive turnover. More than 113 million shares changed hands on the day, out of an issued capital of 146 million shares. Sanity returned on Friday and Alloy closed at A5.9 cents for a gain over the week of A2.7 cents, or 84 per cent. Driving the shares was a fresh gold discovery called Warmblood at the company’s Horsewell project in Western Australia. Best intersection was 32 metres at 3.9 grams a tonne from the surface, and 8 metres at 4.4 grams per tonne from 12metres.

Minews. Nor particularly high grades, but presumably they link up with earlier drill results.

Oz. That seems to be the theory. By the way, Alloy’s chairman is a well-known mining character down this way, Peter Harold, chief executive of the nickel miner, Panoramic.

Minews. Let’s keep going with prices please.

Oz. Also up in a down week was Troy Resources (TRY) which is showing the benefits of a management marketing tour of North America. It added A21 cents to A$3.68. Azumah (AZM), one of the Aussie gold companies busy in West Africa which we took a look at last week, added A3.5 cents to A56 cents. Allied Gold (ALD) continued to recover lost ground, putting in a rise of A4 cents to A55 cents. Kingsgate (KCN) released an optimistic production forecast and was rewarded with a share price rise of A57 cents to A$8.20. Ausgold (AUC), the company which thinks it is on to something big near the wheat-belt town of Katanning in WA, rose by A10 cents to A$1.48, and might be worth a site visit soon.

Among the other gold movers was Beadell (BDR), up 1.5 cents to A80 cents. St Barbara (SBM) rose A3 cents to A$1.85, while its takeover target, Catalpa (CAH) was steady at A$1.72. Perseus (PRU) posted one of the biggest falls of the week, shedding A21 cents to A$2.36. Crusader (CAS) was also sold off quite heavily, losing A20 cents to A$1.00. After that most falls were modest. Kingsrose (KRM) lost A6 cents to A$1.37. Silver Lake (SLR) slipped A4 cents lower to A$1.67, and Adamus (ADU) eased back by A3 cents to A60 cents.

Minews. Iron ore next, because there seems to have been a bit of action there.

Oz. Territory (TTY) was the star of the week as its long-term trading partner, Noble Group from Hong Kong, weighed in with an all cash A50 cent-a-share bid to try and knock South Africa’s Exarro out of contention. On the market, Territory added A5.5 cents to A52 cents, a price which indicates that some investors expect Exarro to counter bid. Elsewhere, Atlas (AGO) rose by A7 cents to A$3.65. Haranga (HAR), a company we rarely hear anything about, attracted interest with a rise of A4 cents to A30 cents as its makes progress at its Mongolian iron ore exploration projects. After that most moves were minor. Fortescue Metals (FMG) slipped A14 cents lower to A$6.32. Mt Gibson (MGX) shed A2 cents to A$1.76. Gindalbie (GBG) lost A4.5 cents to A89 cents, and Sherwin (SHD) was A1 cent lighter at A14 cents.

Minews. The base metals next, starting with copper, please.

Oz. A mixed bag, but without any significant moves up, or down. Sandfire (SFR), which is worth a closer look next week, added A16 cents to A$7.17, as investors continue to digest its very positive feasibility study into the DeGrussa project. OZ Minerals (OZL), Sandfire’s biggest shareholder, added A7 cents to A$13.70. Anvil (AVM) was one of the only other copper companies to rise, putting on A5 cents to A$5.67. After that came a list of declines. PanAust (PNA) lost A4 cents to A$3.77. Rex (RXM) was down A14 cents to A$2.52. Metminco (MNC) dropped a fairly sharp A6.5 cents to A30 cents, and Hot Chili (HCH) was A2 cents weaker at A58 cents.

All nickel companies lost ground. Most zinc companies rose, marginally. Among the nickels Mincor (MCR) fell by A10 cents to A89 cents. Panoramic (PAN) was A4 cents weaker at A$1.79, and Western Areas (WSA) fell by the same amount, A4 cents, to A$5.99. Best of the zinc companies was Perilya (PEM) which rose by A1.5 cents to A66 cents. Blackthorn (BTR) gained A1 cent to A53 cents, and Ironbark (IBG) firmed by A2 cents to A29 cents.

Minews. Coal and uranium next.

Oz. There were only a few risers, but lots of fallers. Whitehaven (WHC) was the lone coal company to rise, just. It added A8 cents to A$5.59. Falls were posted by Aquila (AQA), down A42 cents to A$7.75 as it continues to have joint venture problems, Coal of Africa (CZA), down A1 cent to A$1.16, Carabella (CLR), down A8 cents to A$1.96, and Coalworks (CWK), down A6.5 cents to A65 cents.

The three uranium companies rise were Extract (EXT) which added A3 cents to A$7.79, Berkeley (BKY) which rose by A5 cents to A44 cents, and Forte (FTE), perhaps thanks to our midweek report, which managed a rise of A0.4 of a cent to A7.2 cents. Then come the falls, led by Paladin (PDN) which was hit by rumours about funding issues, and which dropped A24 cents to A$2.79 on the week, but did get as low as A$2.68 at one stage on Thursday. Bannerman (BMN) lost A1 cent to A29.5 cents. Toro (TOE), sold down to A7.6 cents, off by A0.7 of a cent, and Energy and Minerals (EMA) fell by A2 cents to A13.5 cents after reporting fresh legal problems.

Minews. Minor metals to close, please.

Oz. Much like the rest of the market. A handful of rises and plenty of small falls. Alkane (ALK) was the pick of the rare earth companies, putting in a rise of A30 cents to A$2.35. Iluka (ILU) was in demand thanks to sky-high zircon prices. It added A$1.64 to A$17.49. Lithium stocks firmed. Galaxy (GXY) put on A1.5 cents to A86 cents, and Orocobre (ORE) added A3 cents to A$2.18. Potash stocks weakened. South Boulder (STB) fell A2 cents to A$3.13 and Minemakers (MAK) was off by A1 cent to A45 cents. Biggest fall of the week was freshly listed Kimberley Rare Earths (KRE) which dropped A4.5 cents to A16.5 cents after being stopped from completing a related party asset purchase ASX regulators.

Minews. Thanks Oz
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## drillinto

The Gas Is Greener
Robert Bryce, New York Times, 06-07-11

In April, Gov. Jerry Brown made headlines by signing into law an ambitious mandate that requires California to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020.

Please click the link below to read the full article
http://www.nytimes.com/2011/06/08/opinion/08bryce.html?_r=3
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## drillinto

June 13, 2011

Metals Don’t Offer Income, But Holding Them Is A Far More Attractive Option Than Holding IOUs From Politicians
By Rob Davies
www.minesite.com/aus.html (Free registration)

You don’t have to read much financial commentary to realise that the degree of uncertainty in global financial markets is probably as big now as it has ever been. The looming iceberg that is the impending Greek default, or whatever name it’s given, is the first obstacle the markets have to clear. Unfortunately right behind that are the even bigger hurdles of Ireland, Portugal and Spain. And what is really scary is that all these are just the warm-up act to the catastrophe that is the US economy.

The powers that be are in a pickle and no elected politician wants to take the tough decisions that are needed for the long-term, when they have to face their electorates in a matter of months or even a few years. Businessman, by contrast, usually do all they can as soon as they can to resolve a problem, rather than kicking it into the long grass as our elected representatives do.

Knowing that defaulting on their obligations to capitalists has some pretty harsh penalties many governments, and particularly the US, are defaulting by stealth, using inflation as their tool. Last week the yield on the US 10 year Treasury bond dropped below three per cent to 2.9 per cent. Since this is 0.3 per cent below the April inflation figure investors are clearly being robbed. Why are they allowing themselves to be fleeced like this?

But the truth is that the only sizeable buyer of new US debt is the US Government in the form of QE 1 and 2. And as the deadline for the end of that programme nears, and the euro crisis worsens, there are real fears about what happens when it does. While the bond markets seem to be reacting like The Road Runner going over a cliff and ignoring gravity, equity markets have been slipping gently down for several weeks. 

But commodity markets are not quite sure which what to make of the terrors that lie ahead.  Last week commodities traders ignored the fears spooking equities, and base metals, as measured by the LME index, rose by 1.9 per cent to 4086.2. Copper, though, declined to join the rally and dropped back below US$9,000 to US$8,950 a tonne. In fact lead was the only base metal to make forward progress but its 3.5 per cent gain was enough to override the losses from others in the group.

Even though you get no income from holding metal, being long of it is fine if the alternative is holding an IOU from a politician, since the politician is likely to print a lot more of them over the next few years. But although it is true that no one can suddenly dramatically increase the supply of metal it is also true that industrial demand for them could slow quite abruptly if one of the impending crises erupts.

Having said that, base metals markets are still tight, as evidenced by amazingly low inventory levels.  Low interest rates, in real and nominal terms, also mean that it doesn’t cost much to hold metal just in case things do improve. So, while governments carry on picking the pockets of the savers who voted them in, owning metal is not a bad insurance policy.  

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## drillinto

Crude Oil: Brent-WTI spread blows out to record levels

To read the comment please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/13/brent-wti-spread-blows-out-to-record-levels.html

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## drillinto

June 17, 2011
"High-frequency trade sparks flash fires in commodities"
David Sheppard And Jonathan Spicer

NEW YORK (Reuters) - When natural gas prices dropped by 8 percent in a matter of seconds in the early hours of Asian trade last week, one New York-based hedge fund manager said he didn't have to think twice.

"The moment I heard, I ran, literally ran, to my computer and started buying," he said. "It was clear it was an HFT algo gone bad and I could profit on the rebound off the lows."

He wouldn't have been the only one.

Since the infamous "flash crash" in equity markets in May 2010, that was exacerbated by high-frequency trading (HFT), seasoned traders say that violent, often inexplicable price moves are becoming more common, and allow those who are fast enough to book a quick profit as prices bounce straight back up.

In commodity markets, which have been hit by a series of mini flash crashes over the last 18 months, experts say there could now be an influx of more high-speed computer-based traders that have honed their techniques in the cut-throat equities markets -- the fastest and most electronic on earth.

Though such firms have traded commodities for years, some traders and experts say they are now applying new and more aggressive strategies that have stunned traditional players.

Such high-frequency trading -- in which rapid-fire machines place thousands of very short-term bets, making markets and profiting on tiny price imbalances -- could double from around 15 percent in two to three years, leaving commodity exchanges and regulators running to catch up.

Jeffrey Sprecher, CEO of commodity futures powerhouse IntercontinentalExchange Inc &lt;ICE.N&gt;, told reporters last week exchanges are working on ways to target "unintended" price spikes, without losing the benefits -- and volumes -- HFT firms bring.

"I think it's incumbent on the exchanges to solve this. I think customers are going to lose faith in us if we don't."

HFT AND THE MAY 5 OIL CRASH

Commodity traders are increasingly blaming computer-driven activity for a series of anomalous price movements ranging from quick blips in natural gas and cocoa to deeper, longer-lasting jolts like the one that shook oil on May 5.

On that day, traders were shocked by the speed and violence of a record $13 intraday plunge, as sell-stop after sell-stop was triggered, despite the absence of a major news event.

"I think there are some new algorithms in commodities that we've seen in currency markets before that are designed to sniff out the stops," said Paul Rowady, a senior analyst at TABB Group, a firm that specializes in capital markets research.

"Whenever there is an event that causes prices to move they try to sniff out the stops in both directions. The market can suddenly shoot up, and then back down again after an event and it leaves traders disoriented, wondering what happened."

High-frequency traders are frustrated by the criticism and what they call mischaracterizations. Several told Reuters they reduce volatility by quickly bringing prices back in line after larger, long-term players place their bets.

"May 5 was a price discovery process influenced by real fundamental changes in people's views on the oil market. It wasn't a liquidity blip," said an oil-market high-frequency trader who requested anonymity.

And yet some of the world's biggest oil hedge funds appeared to have been victims of the slide, not catalysts.

SEEKING NEW PASTURES

All signs point to continued growth of HFT in commodities.

It is partly in response to increased competition and narrowing profit margins in U.S. equities, where high-frequency trade is estimated to have declined from a year ago, along with lower volumes and volatility. It is still, however, thought to be involved in more than half of all trading in the market.

Additionally, for HFT, there is an allure in playing in markets where heightened volatility is becoming the norm.

"Whenever there are spikes in markets, high-frequency traders gather data on it," said Louis Liu, founder of Matrix Trading Technologies LLC, a New York-based high-frequency trading technology firm. The May 5 oil crash "could encourage them to enter" energy futures trading, he said.

William McNeill, managing director of trading at HTG Capital Partners, a Chicago-based proprietary HFT firm echoed that view: "I think you'll definitely see an increase in people market-making in the oil product set. If there's moderate volatility ... there's probably ample opportunity to take risk."

Rowady at TABB Group said he wouldn't be surprised to see HFT volumes double in energy markets in the next two to three years, saying oil and natural gas "fit the bill" for HFT firms.

But the growth of HFT, while undoubtedly bringing some benefits to the wider market like lower trading fees, won't be without risk.

"When you have highly complicated automated systems operating in highly complex markets then there is the risk that the permutations of what can occur are beyond what you're able to model," Rowady said. "Sometimes the only way to find that problem is to stumble over it."

HFT firms in commodity markets have found themselves under intense scrutiny before.

In 2009, the U.S. Commodity Futures Trading Commission charged traders in the Chicago office of Netherlands-based HFT firm Optiver with attempting to move oil prices to their advantage with a rapid-fire trading tool they nicknamed the "Hammer."

And in 2010, HFT firm Infinium Capital Management found itself under investigation after its newest trading algorithm ran amok, sparking a brief surge in oil prices that racked the firm with a million dollar loss as the program sent up to 3,000 buy orders a second.

While experienced high-frequency traders agree that causing sudden movement in prices is not in their collective interest, the Optiver case is a reminder that HFT firms can shift prices either by practice or design.

GETTING FASTER

CME Group Inc &lt;CME.O&gt;, which runs the New York Mercantile Exchange (NYMEX), home of the world's most actively traded crude oil contract and the natural gas contract where last week's 8 percent crash occurred, said automated trading, including both HFT and slower computer-generated trades, accounted for almost a third of energy futures volume in the fourth quarter of 2010, in a report published on its website.

The Aite Group consultancy estimates that specifically high-frequency trade in energy futures already accounts for around 15 percent of all volume.

But illustrating the controversial nature of growing HFT trade, CME Group told Reuters it had decided not to make its first-quarter report available to the public.

Regulators are desperately trying to keep up with the fleet-footed traders that always seem one step ahead, but so far haven't indicated any major plans to restrict their practices. Short of a major change in stance from regulators and exchanges, traditional traders may just need to learn to adapt.

"Ultimately what they're doing is within the rules," said Tim Quast at ModernIR, which advises many S&amp;P 500 companies on the impact speculation, HFT and fund flows can have on their stock price. "They're just faster and better at operating within the rules than others."

(Reporting by David Sheppard and Jonathan Spicer; additional reporting by Janet McGurty in New York; editing by Jonathan Leff, Marguerita Choy and Lisa Shumaker)

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## drillinto

June 18, 2011

That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free Registration)

Minews. Good morning Australia. It seems that the slow meltdown of the markets continues, or can you see a light on the hill?

Oz. There are glimmers, though that might only be Greeks fleeing Athens. On a more serious note, there were hints last week that some investors remain confident of better times ahead once Europe owns up to the fact that it’s a failed experiment, and China emerges from its latest, government-ordered, slowdown. There were a number of positive share price moves in the section of the Australian market we follow, even if these were drowned out by the headlines of an inevitable Greek default, and the running commentary of the flailing about of other members of the European Union, as they either seek to avert trouble in their own back yards, or call for an end to the pointless bail-outs of chronically failed member states.

Minews. You’ve been predicting a European crisis for some time. Perhaps it’s finally arrived?

Oz. It has been frustrating to sit at the other end of the world and watch the positive changes that are underway in Asia, compare to a continued insistence in Europe that it can continue with its old ways of comfortable pension schemes for people who don’t work while others produce stuff that can’t compete with Chinese imports.

Minews. And while Australia sells the raw materials to both sides.

Oz. Precisely. That’s why a surprisingly large number of small companies rose last week despite an overall downward trend displayed by the ASX indices. The major index, the all ordinaries, lost 1.8 per cent, which is a relatively modest decline. Even when the all ordinaries is tracked back to the start of May, when this current correction started, the decline totals just seven per cent. Not what you would call a major event. It’s the same story with the metals and mining index. Down three per cent last week, taking the total six week slide since early May to eight per cent.

The big surprise is the gold index - and these numbers might provide food for investors to digest. Last week the ASX gold index lost two per cent, taking the fall since early May to 10 per cent. But over the same time period the gold price barely moved, when measured in US dollars, hit an all-time high when measured in a range of non-US currencies, and even rose in Australian dollars. What we are now looking at is the ASX gold index down by 10 per cent over the past six weeks, and the Australian dollar gold price up by 3.6 per cent, a fascinating disconnection between the physical metal and man-made paper.

Minews. Surely some of that value gap is being reflected on the Australian stock market?

Oz. It could be, but you have to dig beyond the bare statistics. In fact during this week just gone, half the gold companies on our market did rise in price, while half fell. But the index decline was almost entirely attributable to an A88 cent fall from the dominant local gold miner, Newcrest (NCM) which closed the week at A$36.57, despite its involvement in a three-way deal involving Catalpa (CAH) and Conquest (CQT).

And that deal, which seems to knock St Barbara (SBM) out of the running, produced some interesting share price moves, none of them particularly positive. In fact, St Barbara was the only player to rise, as it added a modest A2 cents to A$1.87. Catalpa fell back to around where it was before St Barbara launched its bid, dropping by A19 cents to A$1.53, and Conquest was flat at A44 cents.

Elsewhere, there were much better performances. Ausgold (AUC) was one that stood out, as the company which reckons it’s onto a major discovery in the south-west of Western Australia. It hit an all-time high of A$1.78 on Friday, before closing at A$1.75 for a week’s gain of A27 cents. Beadell (BDR), another developing gold story, also hit an all-time high on Friday of A99.5 cents, before closing the week at A91 cents, for a gain of A11 cents.

Minews. They are impressive moves, which seem to underline the point that the index is not really reflecting the mood of the market. More gold prices now, please, before moving through the other sectors.

Oz. Gryphon (GRY) led the way among the Aussies in Africa with a rise of A19 cents to A$1.80. Crusader (CAS) was the best of the Aussies in South America, also posting a rise of A19 cents to A$1.19. Other gold companies on the rise included Castle Minerals (CDT), up A4 cents to A34 cents, Noble (NMG), up A1.5 cents to A60 cents, Perseus (PRU), up A12 cents to A$2.48, Adamus (ADU), up A2.5 cents to A62.5 cents, and Resolute (RSG), up A2 cents to A$1.11.

Offsetting those rises were an equal number of falls. Among the fallers were Gold Road (GOR), down A14 cents to A47 cents, Medusa (MML), down A79 cents to A$7.16, Troy (TRY), down A19 cents to A$3.49, Allied (ALD), down A5.5 cents to A49.5 cents, and Kingsrose (KRM), down A17 cents to A$1.20.


Minews. Right. Let’s start the rest of the price call with iron ore, because that seems to be a sector encountering interesting times.

Oz. You could call it that, if you are talking in the sense of the famous old curse. The perils of being a magnetite miner hit home again this week, and several miners were hit. For non-geologists, magnetite is a lower-grade of iron ore which requires processing before it can be used to make steel. That makes it a more expensive than its traditional rival, haematite, and other direct shipping ores, which conform more to the classic model of dig and deliver. Last week we saw three magnetite hopefuls hit new 12 month share price lows as China wobbled and investors ducked for cover. Gindalbie (GBG) sold down to A82.5 cents on Friday before recovering slightly to close at A83.5 cents for a loss of A5.5 cents. Murchison Metals (MMX) dropped to A71 cents, before ending the week at A72 cents, for a loss of A15.5 cents. And Grange Resources (GRR) touched a low of A46.5 cents, before closing at A47.5 cents for a loss of A4.5 cents.

Other iron ore moves were more modest, with one other exception. Cape Lambert (CFE), one of our more controversial companies, fell an interesting A7 cents to A38.5 cents. After that the card looked like this: Atlas (AGO) down A12 cents to A$3.53, Fortescue (FMG) down A26 cents to A$6.06, and BC Iron (BCI) down A5 cents 
to A$2.80. 

Iron Ore Holdings (IOH) fell a sharp A16 cents to A$1.27. Brockman (BRM) was also weaker, down A2 cents to A$3.93, after Hong Kong’s Wah Nam formally took control of the company. 

Minews. Base metals next, please.

Oz. All weaker, with one stand-out loser. Mirabela (MBN) led the way down in the nickel sector. Last week it shed A23 cents to A$1.67, in what was perhaps a delayed catch-up with its nickel cousins. Mincor (MCR) touched a 12 month low last week of A83 cents before edging up to close at A87 cents, a fall on the week of A2 cents. Panoramic (PAN) lost A6 cents to A$1.73 and Western Areas (WSA) fell A28 cents to A$5.71.

Copper companies weakened, although there were also a handful of risers. Exco (EXS) added half a cent to A66 cents, and CuDeco (CDU) put on A1 cent to A$3.23. Falls were posted by Sandfire (SFR), down A4 cents to A$7.13, OZ Minerals (OZL), down A71 cents to A$12.99, Hot Chili (HCH), down A1 cent to A57 cents, Syndicated (SMD), down half-a-cent to A16 cents, and Metminco (MNC), down A1 cent to A29 cents.

It was a similar story in zinc. There was one rise and a fistful of small falls. Prairie Downs (PDZ) added A1 cent to A19 cents, while Perilya (PEM) lost A6 cents to A60 cents. Blackthorn (BTR) shed A3 cents to A50.5 cents, and Ironbark (IBG) was A1 cent weaker at A26 cents.

Minews. Coal, uranium and minor metals to wrap things up.

Oz. More of the same, with no redeeming rises for the coal and uranium sectors. There was one among the minor metals, though, so we might cover your final request in reverse order. Alkane (ALK) was the minor metal winner, rising by A5 cents to A$2.40 thanks to growing interest in its Dubbo rare earths project. Lynas (LYC), the rare earth leader, fell by A21 cents to A$1.84, and Arafura (ARU) lost A11.5 cents to A91.5 cents. 

In tin, Venture (VMS) fell A5 cents to A34 cents. In potash, South Boulder (STB) was A33 cents weaker at A$2.80.

Among the coal movers were Macarthur (MCC), down A47 cents to A$10.75, Coal of Africa (CZA), down A8 cents to A$1.08, Bathurst (BTU), down A18 cents to A$1.02, and Carabella (CLR), down A16 cents to A$1.80.

Uranium companies continued their retreat in the face of a lower metal price. Paladin (PDN), the local leader, fell another A37 cents to A$2.42, but did touch a 12 month low of A$2.34 on Thursday. Bannerman (BMN) dropped by A6 cents to A23.5 cents. Berkeley (BKY) shed A4.5 cents to A39.5 cents. Manhattan (MHC) was A3 cents weaker at A39 cents, and Energy and Minerals (EMA) lost A1.5 cents, to A12 cents, and its long-serving chief executive, Chris Davis, departed, abruptly, on Friday.

Minews. Thanks Oz.

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## drillinto

June 20, 2011

There’s No Exit Route Out Of The Eurozone, But That Only Means It’ll Be Much, Much Messier When Greece Leaves 
By Rob Davies
www.minesite.com/aus.html  (The registration is free)

Anyone who has ever entered into a business deal knows that you pay far more attention to how to get out of it if you need to than you do to all the starry benefits of going into the relationship in the first place. Unfortunately, the men and women who created the eurozone were politicians not businessmen and they are not conditioned to accept the possibility that things might not work out as planned. So when they drew up the agreement for joining the euro they never bothered to add clauses to explain the procedure for getting out. No one ever considered that might happen so they didn’t plan for it. Maybe they thought that that not planning for it would ensure it didn’t happen. 

Unfortunately it now looks highly likely that Greece will be forced out of the euro but, with no procedure to follow, the process is likely to be messy and to have unexpected consequences. In some ways this could be the sovereign equivalent of the Lehman collapse which was rapidly followed by the sale of Merrill Lynch and the implosion of AIG, to name but a few of the corporate casualties. 



It might be reasonable to ask what this has to do with commodity prices. The answer is a lot. 



After Lehman folded interest rates were cut to zero in the US and that was followed by a massive injection of liquidity in order to restore confidence in capital markets. These moves worked and revitalised commodity prices, even though industrial demand in the west was very weak. China was the only growth market for the next few years. 



The problem is that if Greece does fold there are precious few levers left for the authorities to pull in order to recover the situation. Interest rates are already low and the ECB is on record as saying it does not favour a form of quantitative easing, or printing money.



So what will happen when the Greek crisis finally breaks? No one knows, of course, which is why risk markets like equities and industrial commodities have been selling off. Base metals, as measured by the LME index fell two per cent last week. Nickel led the way with a 3.6 per cent drop to US$21,700 a tonne, but was closely followed tin, which slid by 3.5 per cent to US$21,740. With so much uncertainty around it is perhaps not surprising that pro-growth assets like commodities have gone down. 



What is perhaps more surprising is where this money is going. US Treasury bonds are once more in favour, as the yield on the 10 year has come down again, this time to 2.95 per cent. Yet look at the following little list, and then try to look for the connection: Greece, Ireland, Japan and the USA. Not obvious? The common thread is that Jose Vinals, the Director of Monetary and Capital Markets at the IMF puts these four countries in the same group when he said that they were not taking enough action to address their budget deficits. So selling metals to buy US bonds looks like jumping out of the euro frying pan into Uncle Sam’s fire. Maybe it is simply the least bad alternative. The IMF has trimmed its growth forecasts for 2011 by 0.1 per cent to 4.3 per cent, and it’s worth noting that the reductions related to likely activity in the US and Japan that use a lot of metal. 



It did upgrade growth for Germany, which also has a high metal intensity. This country has benefitted from the relative weakness of the euro caused by is profligate southern neighbours. However, If the profligate southern neighbours were to leave it would result in the formation of a new “core euro” made up of Germany and its satellites. This would be a much stronger currency and that would have an immediate, and negative, impact on German-made products which would reduce German growth and hence metal demand.



Arch pessimistic economist Nouriel Roubini gives the euro five years in its current form and accepts that the logic for the breakup of the euro is inescapable. The lack of a procedure for execution won’t stop it happening, it will just make it messier and more complicated.  Those hoping for safety in the US may be over-optimistic and the actual ramifications of the event are probably too hard for anyone to forecast.  How metals will fare in the aftermath is, quite frankly, anyone’s guess.  

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## drillinto

"Gold gets hit with the ugly stick"

To view the chart, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/23/gold-gets-hit-with-the-ugly-stick.html

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## drillinto

June 24, 2011

"The Chinese Are Increasingly Being Drawn To New Iron Ore Frontiers in West Africa"
By Geoff Woade of ProspectingJournal.com
Source >> www.minesite.com/aus.html (FREE REGISTRATION)

Last week, Andrew Forrest, the billionaire chief executive of Fortescue Metals, the big Australian iron ore company, threatened to sue the Australian Government after it slapped a 30 per cent tax on the profits of local iron ore companies. BHP Billiton Rio Tinto and Xstrata also fought a proposed 40 per cent tax on the mining profits of internationals operating in Australia.

And it’s not just the federal government eyeballing the mining industry for revenue. Last week Western Australian Premier Colin Barnett blindsided mining companies with an additional A$2 billion in announced royalties. The Chinese are watching this very closely as China produces about half of the world’s steel, but only 14 per cent of the world’s iron ore.

According to Zhu Jimin, the chairman of the China Iron and Steel Association, “Sixty per cent of total Chinese domestic iron ore consumption is accounted for by imports.” The bulk of these imports are coming from Australia. In the first quarter of 2011, China spent US$13.2 billion more on iron ore imports than it did during Q1 2010. The average price of US$157.6 per tonne was up 55 per cent on a year-on-year basis.



Australian taxation schemes are not the only thing worrying the Chinese. The average wage of an Australian miner has skyrocketed in recent years to A$109,000. Not surprisingly, the Chinese are scouring the globe for high-grade iron ore projects with lower production costs. Some analysts expect the Chinese to spend US$25 billion in the next five years in this sector.



With increased Chinese investment in Africa, educated speculation suggests that a lot of this spending will be done in West Africa. The region fits many of China’s needs, with large scale high grade iron ore deposits, an improving business climate and competitive miners’ wages. “China plans an aggressive expansion of its iron-ore holdings,” confirms Luo Binsheng, Vice Chairman of the China Iron & Steel Association. 



“Guinea, Sierra Leone, Liberia, Cameroon, Gabon, Ivory Coast, they all have potential,” said John Jorgenson, iron ore specialist at the United States Geological Survey in a recent interview with Reuters. “The reserves are a pretty good size, a quarter of a billion to half a billion tonnes, and some of the grade is 65% iron, which fits in the range of Australian and Brazilian deposits.”  According to the Reuters article, the big players, such as BHP, Rio Tinto, Vale and Chinalco will spend around US$10 billion in total on projects in West Africa.



The biggest obstacle to most of West Africa’s iron ore plays, as with most bulk mineral projects, is the cost of transportation. For purposes of  comparison, Fortescue Metals spent A$2.5 billion constructing a 280 kilometre rail line from its Cloudbreak Mine in the Pilbara to  the Fortescue Herb Elliott facility at Port Hedland in Western Australia.



Bearing all this in mind, the Canadian-listed junior West African Iron Ore is an early stage iron ore project in Guinea that is likely to be on the Chinese radar. WAI’s lead asset is so close to the deep sea port of Benty that a conveyor belt could be built to deliver iron ore directly to the ocean freighters. The company holds two iron ore permits in Guinea, ForÃ©cariah and the Kerouane. Potential resources of between 2.9 billion and 5.1 billion tonnes have been estimated for the two largest targets, Kalyadi and Sambalama. An average grade of 36% iron was calculated on 186 surface samples within mineralized units in the ForÃ©cariah project, while an average grade of 39% iron was obtained on 78 surface samples from the Kalyadi and Sambalama targets.



WAI has also been granted exploration rights for a three-year period over iron deposits in an area covering 500 square kilometres in the prefecture of Kerouane. The company plans to spend approximately US$3.4 million initiating a Phase I exploration programme on the territory covered by the ForÃ©cariah permits. Compare this with the US$80 billion China spends on importing iron ore every year. Guy Deport, the chief executive of WAI speaks fluent Chinese and has a long history of deal-making with the Asian market. If that doesn’t say something about the future of West African Iron Ore it is difficult to know what will, as its market capitalization is still only C$45 million.

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## drillinto

June 25, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html


Minews. Good morning Australia. Your warnings about rising costs for project developers appear to have come true. And it looked like you had another flat trading week on the ASX.

Oz. It was a torrid time for a number of the smaller iron ore companies, especially those exposed to mining and processing low-grade magnetite ore. Worst affected was Murchison Metals (MMX) which is a major shareholder in both mine developments and a new port and rail system which is designed to service emerging iron ore mines in the Midwest region of Western Australia. Murchison was dealt a savage blow when one of the miners seen as major future user of the port shut its doors, throwing everything into doubt.


Minews. It sounds complicated, so just the quick version please as I gather you’re on the road again this week.

Oz. I am, and aiming to have a chat to the company behind a potential South Australia magnetite mine. More on that later, but the west coast problems started when Sino Midwest Corporation, a Chinese controlled miner, closed its small direct shipping ore (DSO) mine and mothballed the much bigger Weld Range magnetite project, apparently because the capital costs for the port had doubled to around A$7 billion, meaning that rail haulage rates for potential users would become prohibitively expensive. Trading in Murchison was halted before the Midwest bombshell was dropped so the shares ended the week up a few cents, but are unlikely to stay there when trading resumes and the company explains its future.

Among the other magnetite companies caught in the sell down was Grange Resources (GRR) which dipped to a fresh 12 month low of A44.5 cents on Thursday, but managed to add A1 cent to A45.5 cents by the close on Friday. Gindalbie (GBG) performed a similar trick, touching a fresh low of A78.5 cents, before bouncing back to close up the week at A84.5 cents, a rise of A1 cent over the week, which at least shows that someone believes in the future of the magnetite producers. Centrex (CXM), one of the South Australian hopefuls, lost A3 cents to A32 cents over the week, but did touch a fresh low of A26 cents on Thursday.

Minews. We might as well continue with the iron ore sector before we look at the rest of the market.

Oz. Good idea, though a quick glance at the overall picture reveals very flat trading, perhaps because we’re in the final days of the financial year. The all ordinaries index on the ASX rose by less than half a per cent. The metals and gold indices fell by less than one per cent.

Finishing with the iron ore companies, the really big loser was Brockman Resources (BRM), the company which has seen control pass to that mystery Hong Kong taxi hire firm, Wah Nam International (WNI). Last week, the wheels finally fell off Brockman, as it dived by A73 cents to A$3.20, a price close to half the A$6.25 level at which it was trading just three months ago. FerrAus (FRS), the other Wah Nam target slipped A1 cent lower to A64 cents, while Wah Nam itself officially became a penny dreadful, falling though the A10 cent barrier to end the week at A9.7 cents.

Elsewhere among the iron ore companies Atlas (AGO) slipped A10 cents lower to A$3.43, Fortescue Metals (FMG) added A11 cents to A$6.17, Iron Ore Holdings (IOH) eased back by half-a-cent to A$1.27, and Sherwin (SHD) added A1 cent to A14 cents. Territory (TTY), meanwhile, lost A1.5 cents to A50 cents when South Africa’s Exxaro said it would pull out of a bidding duel with commodities trader, Noble Group. 

Minews. Over to the gold sector now, please.

Oz. Mixed is the one-word description of the Aussie gold space last week. There were a couple of strong rises, offset by a long tail of declines. Among the best performers was Gold Road (GOR), up A11 cents to A58 cents, perhaps reflecting new-found London interest after a presentation at the Minesite Forum this week. Silver Lake (SLR) shook off several weeks of lacklustre trading to come back with a rise of A17.5 cents to A$1.80. Kingsrose (KRM) performed a similar trick with a rise of A13 cents to A$1.33, and OceanaGold (OGC) added A10 cents to A$2.47. Other movers included Medusa (MML), down A64 cents to A$6.52, Integra (IGR), up A3.5 cents to A43.5 cents, Perseus (PRU), up A22 cents to A$2.66, and Gryphon (GRY), up A12 cents to A$1.80.

Also in the gold sector we have two interesting takeover bids unfolding. Catalpa (CAH) is planning to merge with Conquest (CQT) in a deal led by Newcrest (NCM), and which freezes out a rival move by St Barbara (SBM). And Focus (FML) is bidding for Crescent (CRE). On the market, most of the players in these complex deals lost ground as investors tried to work out the likely winners and losers. Catalpa fell by A13 cents to A$1.40. Conquest lost A2 cents. Newcrest was A5 cents lighter at A$36.52. St Barbara slipped A4 cents lower to A$1.83. Focus lost A0.6 of a cent to A7.1 cents, while Crescent was the one winner, putting in a rise of A0.6 of a cent to A5.6 cents.

Minews. Your gold sector does seem to be undergoing quite a shake out, so keep an eye on how those deals work out. Meanwhile, let’s speed up and move across to base metals.

Oz. There were two interesting base metal moves, one relating to a discovery and one relating to corporate news. Discovery news came from recently-floated Kidman Resources (KDR), which shot by A16.5 cents to A49.5 cents after reporting excellent assays from its Blind Calf project in New South Wales, including 23 metres at 7.07% copper plus 8.87 grams of silver. The corporate move was from nickel miner, Mincor (MCR) which launched an on-market share buyback, signalling that it has plenty of spare cash, and helping the shares rise by A3.5 cents to A90.5 cents. 

Across the base metal sectors most moves were down. Copper first, where fallers included Sandfire (SFR), down A29 cents to A$6.84, OZ Minerals (OZL), down A24 cents to A$12.75, Rex (RXM), down A17 cents to A$2.35, Metminco (MNC), down A1.5 cents to A27.5 cents, Exco (EXS), down A2.5 cents to A63.5 cents, and Hot Chili (HCH), down A5.5 cents to A51.5 cents.

Nickel companies performed marginally better with Mincor’s buyback acting as a reminder that profits remain strong. Mirabela (MBN) added A7 cents to A$1.74, and Western Areas (WSA) gained A3 cents to A$5.74. Offsetting those small rises were equally small falls from Albidon (ALB), down A1 cent to A10 cents, and Panoramic (PAN), down A7 cents to A1.66.

Zinc produced one winner, and a long tail of declines. Perilya (PEM) gained A2 cents to A62 cents. But Terramin (TZN) lost A1.5 cents to A30.5 cents, Blackthorn (BTR) fell A6.5 cents to A44 cents, and Meridian (MII) was weaker by the smallest amount possible, one-tenth of a cent, dropping to A9.5 cents.

Minews. Let’s wrap it up with coal, uranium and minor metals, please.

Oz. Coal was no different to the rest of the market. There were a few modest rises, offset by a general malaise in the rest of the space. Pick of the pack was Coal of Africa (CZA), which added A1.5 cents to A$1.10. Next best was Bathurst (BTU), up by the minimum amount of half a cent to A$1.02. Aquila (AQA), which is locked in a nasty dispute with Brazil’s Vale, dropped A24 cents to A$7.07. Macarthur (MCC) was down A22 cents to A$10.55, and Stanmore (SMR), shed A9 cents to A$1.01.

Uranium produced two winners, as far as can be seen. Paladin (PDN), after an awful month of falls clawed back A14 cents to A$2.56, perhaps on takeover chatter. Berkeley (BKY) added A1 cent to A40.5 cents. Falls were recorded by Manhattan (MHC), down A2 cents to A37 cents, Aura (AEE), down A1 cent to A20.5 cents, and Energy and Minerals (EMA), down A2 cents to A10 cents.

The trend in the diverse family of minor metals was also weaker pattern, with one stand-out fall. Arafura (ARU), one of the rare earth plays, surprised investors with a feasibility study slowdown at its Nolans project, and paid a hefty penalty of a share price decline of A14.5 cents to A77 cents. Alkane (ALK), another rare earth favourite, was also hit by a sell-off, shedding A26 cents to A$2.14, while the sector leader, Lynas (LYC) added A20 cents to A$2.04. Tin companies were weaker. In phosphate, South Boulder (STB) was  hit with a fall of A62 cents to A$2.80.

Minews. Thanks Oz, you can enjoy Adelaide now.

Oz. More like McLaren Vale where the wine producers need a helping hand. Someone has to set an example, so why not Minesite’s ever generous Man in Oz?

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## drillinto

"Silver at multi-month closing low"

To view the chart, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/27/silver-at-multi-month-closing-low.html

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## drillinto

"Metals & Mining Analysts' Ratings & Estimates - Juniors"
 By Bill Matlack(USA), Jun 28 2011 

Junior Producers, Development/Advanced Exploration Stage

Iron Ore, Base Metals, Gold, Silver, Pt-Group Metals, Specialty Metals, Uranium, Coal, Fertilizers 

To view the tables, with many OZ miners, please click the link below:
http://www.kitco.com/ind/matlack/jun282011_juniors.html

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## drillinto

July 02, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
Source >> www.minesite.com/aus.html >> Free Registration


Minews. Good morning Australia. You seem to have had a strong end to the week, and the financial year.



Oz. And there might be more to come next week as we seem religiously to follow New York, and New York posted another sold rise after we closed on Friday. All the major ASX indices gained ground on both a weekly and an annual basis. Metals and mining added three per cent last week, taking the gain over the past 12 months to a rather impressive 20 per cent. Gold gained 2.5 per cent last week, taking its annual rise to 12.7 per cent, and the all ordinaries put on two per cent to be nine per cent ahead of this time last year.


Minews. Solid rises, which should help wash away some of losses of the past two months.



Oz. They do, though some of the news flow down this way still has a negative edge to it. Greece, and the other sick members of Europe’s Club Med weigh on our market as much as yours, because of the debt-contagion concern. And on top of that we have our never-ending tax debate as the left side of politics continues to seek ways to skin the mining industry. Last week’s headline grabber was Green Party leader, Bob Brown, wanting to shut completely the coal industry, Australia’s second biggest export income earner, limit iron ore production, and kick foreign investors out of the country.



Minews. Is he being taken seriously?



Oz. He has to be, because from July 1st his party has the swinging vote in the Senate, our upper house, splitting the major right and left parties, but always siding with the left, and constantly egging them on to be more radical. What the political numbers mean is that the mining super-tax debate will not go away, and minerals other than iron ore and coal remain on the left’s “must tax” list while the new carbon tax could come in at a painfully high rate.



Minews. At least you’ve still got China wanting to buy all you can produce. Time for prices, please.



Oz. Gold is always a good starting point, and last week produced a number of strong performers, though next week could be a bit tougher given the fall in the price of the metal below US$1,500 an ounce after our Friday close. Among the strongest risers was Resolute (RSG), which forecast a 24 per cent increase in gold production and a 19 per cent fall in costs for the year ahead. That news saw Resolute rise by A11 cents to A$1.18. Silver Lake (SLR) also staged a strong recovery after a few down weeks, adding A14 cents to A$1.94, perhaps aided by chief executive Les Davis giving an upbeat presentation at a mining conference. Troy (TRY) joined the positive trend with a rise of A17 cents to A$3.59. Other companies on the rise included PVI (PVM), up A5 cents to A48 cents, Gryphon (GRY), up A11 cents to A$1.79, St Barbara (SBM), up A9 cents to A$1.92, and Northern Star (NST), up A4 cents to A46.5 cents. Gold companies that were worse off included: Adamus (ADU), down A3 cents to A58 cents, Medusa (MML), down A4 cents to A$6.48, and Navigator (NAV) down a very sharp A3.1 cents to A2.8 cents after it slashed the price on a big capital raising. Catalpa (CAH) eased back another A3 cents to A$1.37 as it struggles to gain traction for its merger with Conquest (CQT), which itself lost A2 cents to A40 cents.



Minews. We might take a closer look at that Catalpa deal next week because the company’s chief executive, Bruce McFadzean, will be doing the rounds in London over the next few days.



Oz. Okay, I’m sure we can arrange an update to fit in with Bruce’s schedule. In the meantime we’ll continue the call of the card. Iron ore next, as the deal flow there seems to be accelerating. Last week saw Atlas (AGO) move on FerrAus (FRS). Atlas added A34 cents to A$3.77 and FerrAus shot up by A28 cents to A92 cents. The planned merger pushes Hong Kong’s taxi hire company, Wah Nam (WNI) out of the race for FerrAus, though Wah Nam also managed to post a modest rise for the week, up A0.3 of a cent to A10 cents. Biggest loser from this shuffle of interests was Wah Nam’s captive, Brockman Resources (BRM) which plunged another A35 cents to A$2.85, taking its fall in just three months to A$3.40, or 54 per cent.



Minews. Keep an eye on that Brockman, Wah Nam situation because it has an odd look to it.



Oz. Will do. Finishing with iron ore prices it’s worth noting that the trend for conventional miners and explorers was positive, while companies on the lookout for the more unconventional magnetite posted a more mixed performance. Gindalbie (GBG), the leader in the magnetite business, slipped another A3 cents lower to A81.5 cents after it reported a fresh cost blow-out at its Karara project, and warned that a capital raising could be on the cards. The two other leading magnetite companies, Grange (GRR) and Murchison (MMX), performed differently. Grange recovered recently lost ground by adding A6.5 cents to A52 cents, but Murchison did not trade because management is working on a plan to keep alive its complex mine, rail and port plans. Other iron ore movers included: Iron Ore Holdings (IOH), up A7 cents to A$1.36, Fortescue (FMG), up A22 cents to A$6.39, Mt Gibson (MGX), up A14 cents to A$1.88, and Cape Lambert (CFE), up A2 cents to A46 cents.



Minews. Base metals next, please.



Oz. Copper and nickel companies firmed. Zinc was flat. Best of the coppers was Hot Chili (HCH), which added A10.5 cents to A62 cents. PanAust (PNA) added A23 cents to A$3.93, and Sandfire (SFR) put on A30 cents to A$7.14. Other movers included Discovery (DML), up A8 cents to A$1.23, Metminco (MNC), up A4 cents to A31.5 cents, and Oz Minerals (OZL), up A59 cents to A$13.34.



Best of the nickel companies was Panoramic (PAN), which ended weeks of decline with a rise of A16 cents to A$1.82. Mincor (MCR) also recouped some lost ground with a rise of A2.5 cents to A93 cents. Mirabela (MBN) rose A8 cents to A$1.82, while Poseidon (POS) slipped A1 cent lower to A18.5 cents. Western Areas (WSA) was steady at A$5.74.



Zinc companies barely moved. Terramin (TZN) caught the eye as it hit a 12 month low of A25 cents on Thursday, before closing the week at A27 cents, a loss of A3.5 cents. Perilya (PEM) added A1.5 cents to A63.5 cents, and Blackthorn rose by A1 cent to A45 cents.



Minews. Coal, uranium and minor metals to close, please.



Oz. Most coal companies firmed, in line with the higher oil price, as did uranium companies, which had one of their better weeks since the Fukushima nuclear incident in Japan. Among the coal companies, solid rises came from Whitehaven (WHC), up A31 cents to A$5.80, Aquila (AQA), up A23 cents to A$7.30, and Metro Coal (MTE), up A4.5 cents to A58 cents. New Hope (NHC) gained A14 cents to A$5.14, and Macarthur (MCC) added A42 cents to A$10.97.



The uranium space was much more interesting, as a number received solid buying support. Bannerman (BMN), after a long session in the dog house, rebounded with a rise of A5 cents to A28.5 cents. Extract (EXT) returned to life with a rise of A19 cents to A$7.96. Aura Energy (AEE) did best of all on a percentage basis, putting in a rise of A4 cents to A24.5 cents. Manhattan (MHC) did not join the rising trend, slipping A1 cent to A36 cents, while Berkeley (BKY) was down A1.5 cents to A39 cents.



Tin was the pick of the minor metals last week, ending a torrid period of sustained selling. Kasbah (KAS) shot up by A6 cents to A22.5 cents, and Venture (VMS) gained A5 cents to A35 cents. 



Phosphate stocks strengthened. South Boulder (STB) added A19 cents to A$2.39 and Minemakers (MAK) rose by A5 cents to A44 cents. 



Rare earth stocks were mixed. Alkane (ALK) added A4 cents to A$2.18, while Arafura (ARU) continued to slide, putting in a loss of A2.5 cents to A74.5 cents. The sector leader, Lynas (LYC) was marked down heavily on news of tougher environmental rules at its proposed Malaysia smelter. Lynas ended the week at A1.75, down A29 cents, its lowest in four months.


Minews. Thanks Oz.
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## drillinto

July 03, 2011

"That Was The Week That Was … In London"
By Martin Li

Anglo American boss Cynthia Carroll gave the main speech at the Melbourne Mining Club dinner at Lord’s cricket ground on Thursday. In what proved to be a good week for commodities and mining equities, Ms Carroll emphasised that there are many reasons for the mining industry to remain optimistic. In particular, she said, the world remains “much closer to the beginning than the end of the developing world growth story”. Ms Carroll added that China, which has accounted for so much of global growth in recent years, is still only now where Japan was in 1950, just before its living standards really began to catch up with those in the US. On this basis, India has even further to travel. 

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## drillinto

World Trade Organization(WTO) condemns China's commodity policy 

To read the full story, please click the link below:
http://economicsnewspaper.com/polic...o-condemns-chinas-commodity-policy-41376.html


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## drillinto

ISM Commodity Survey(June 2011)

Please click the link below to read it:
http://www.bespokeinvest.com/thinkbig/2011/7/5/ism-commodity-survey.html

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## drillinto

"With more evidence that China's economy might face a hard landing, much of the momentum for commodities is starting to subside" (by A. Gary Shilling)

To read more, please click the link below:
http://www.csmonitor.com/Business/2011/0705/The-commodities-bubble-is-about-to-burst
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## drillinto

July 09, 2011

"That Was The Week That Was … In Australia"
By Our Man in Oz
Source >> www.minesite.com/aus.html (The registration is free)


Minews. Good morning Australia, your stock market seems to have had a better week, though politics keeps getting in the way.



Oz. We are passing through confusing times. There was an upward trend in share prices late last week, with better expected next week in the wake of the sharp jump in the gold price after we had closed on Friday. But, as you suggest, before we start trading on Monday we’ll have to absorb the next instalment in our never-ending tax debate. Because Sunday is the day the government unveils the details of its proposed carbon tax.


Minews. A tax which might target the mining sector.



Oz. Little doubt about that. The major worry for miners is a likely increase in the price of diesel, which the industry uses heavily in mobile fleets and remote area power generation, though we’ll have until what’s been termed “Carbon” Sunday for the detail. At that point the bean-counters will get to work, to tell us what it all means, and how it fits in with that other new tax, the super-tax on mining profits.



The other big news last week was confirmation that the resources sector in this country is being stretched to breaking point, and beyond. Troubles at Murchison Metals (MMX), one of the west coast companies planning to mine, process, rail and ship low-grade magnetite ore, was a timely reminder that cost inflation is accelerating, that infrastructure is not being developed in a timely fashion to handle Asian demand for commodities, and that workers of every sort, from skilled to unskilled, are in alarmingly short supply.



Minews. You’re concerned that the Murchison crisis could spill over into other projects?



Oz. I don’t see how it can’t, because everyone is in the same boat when it comes to finding people and equipment. Murchison discovered that a project expected to cost around A$4 billion would probably cost more than A$10 billion, which is an impossible undertaking for a company valued on the ASX at A$300 million. Little wonder its share price has crashed from around A$3.00 last year to a closing price on Friday of A69 cents.



But with all that said it was an up week. Overall, the Australian market as measured by the all ordinaries index, rose 1.4 per cent last week, with most of the gain coming on Friday. The metals and mining index did better, putting in a rise of 3.3 per cent, while gold went a step better with a gain of 3.6 per cent.



Minews. Right. Let’s move on to prices, starting with the strongest sector, gold.



Oz. As mentioned earlier, there were several strong risers among the gold companies. Gryphon Minerals (GRY) was rewarded with a rise of A24 cents to A$2.03 after it reported excellent assays from its Nogbele prospect in Burkina Faso. Best drill hits included eight metres at 38.75 grams of gold a tonne from a depth of 68 metres, and five metres at 17.41 grams per tonne. Mt Isa Metals (MET) joined in with its own discovery news, also in Burkina, reporting on intercepts of four metres at 7.45 grams per tonne, with a core of two metres in that hit grading 14.08 grams per tonne. On the market, the Mt Isa added A8 cents to A39 cents. Ramelius (RMS) was a third significant winner from good gold news, this time on the production side. The company went through the 100,000 ounce a year mark, an event which moved the shares up A12 cents to A$1.37.



Most movement among the rest of the gold companies was up, although there were a handful of declines. Crusader (CAS) rose A9 cents to A$1.27. Tanami (TAM) rose A9 cents to A97 cents. Ampella (AMX) rose A22 cents to A$2.07. OceanaGold (OGC) rose A24 cents to A$2.76. Medusa (MML) rose A63 cents to A$7.11. Integra (IGR) rose A7.5 cents to A50 cents. Silver Lake (SLR) rose A22 cents to A$2.16. And Kingsgate (KCN) rose A51 cents to A$8.44. Companies that were worse off included: Troy (TRY), down A7 cents to A$3.52, AusGold (AUC), down A10 cents to A$1.46, and Reed (RDR), down A3.5 cents to A46.5 cents.



Minews. Over to the iron ore sector now please.



Oz. Conventional iron ore producers and explorers performed well, though not as well as the gold companies. The unconventional iron ore companies, those focussing on magnetite, did less well, in the face of a potential double hit from the super-profits and carbon taxes. Iron Ore Holdings (IOH) benefited from news that its overall resource had swollen to more than one billion tonnes, helping lift the shares by A5 cents to A$1.41. Amex (XZ) continued its remarkable run by adding another A9 cents to A$1.35 on news that it has received the results of a positive prefeasibility study on its Mba Delta iron sands project in Fiji. Fortescue (FMG) was another mover of note, up A14 cents to A$6.53 as interest grows in its expansion plans. Atlas (AGO) added A13 cents to A$3.90. Iron Road (IRD) put on A4.5 cents to A90 cents, while among the leading magnetite stocks Gindalbie (GBG) crept A1 higher to A82.5 cents, and Grange (GRR) recouped some of its recently lost ground with a rise of A4.5 cents to A56.5 cents.



Minews. Base metals next, please, starting with copper.



Oz. Strength in the price of copper was only partially reflected in the copper company share prices. Sandfire (SFR) led the way with a rise of A34 cents to A$7.48. Rex (RXM) wasn’t far behind, rising A13 cents to A$2.48. Other companies on the rise included: OZ Minerals (OZL), up A36 cents to A$13.71, PanAust (PNA), up A13 cents to A$4.06, and Anvil (AVM), up A70 cents to A$6.60. Losses were posted by Hot Chili (HCH), down A3.5 cents to A58.5 cents, Resource and Investment (RNI), down A6 cents to A$1.21, and Metminco (MNC), down a fractional half a cent to A30 cents.



Nickel companies continued to firm after a few bad months. Mincor (MCR) recovered another A4.5 cents to A97.5 cents, up considerably on the A82.5 cents price of three weeks ago. Western Areas (WSA) added A31 cents to A$6.05. Independence (IGO) put on A 26 cents to A$5.84. Mirabela (MBN) firmed by A10 cents to A$1.92. Even Minara (MRE) managed a rise of A2 cents to A75 cents, despite an equipment failure at its Murrin Murrin mine which is likely to cut annual nickel output.



Zinc companies also shrugged off a long spell of negative sentiment. Kagara (KZL) gained A6.5 cents to A64.5 cents. Perilya (PEM) put on A2.5 cents to A66 cents. Blackthorn (BTR) rose by A6.5 cents to A51.5 cents. Terramin (TZN) closed the week at A29 cents for a gain of A2 cents, but did trade up to A31.5 cents on Wednesday. Meridian (MII) added A1.9 cents to A11 cents.



Minews. The energy stocks next, coal and uranium, please.



Oz. All up, in sympathy with the oil price. Best of the coal companies was Coal of Africa (CZA), which rose A18 cents to A$1.29 after it delivered some good news on a South African project. 



Minews. Yes, we’ll be hearing more on that from John Wallington, the chief executive, on Minesite next week.



Oz. Look forward to it. Also on the move in coal was Whitehaven (WHC), up A28 cents to A$6.08. Metro Coal (MTE) rose A12 cents to A70 cents. Carabella (CLR) rose A19 cents to A$1.99, and Bathurst (BTU) rose A9 cents to A$1.11.



Minews. Those coal rises would appear to indicate that the carbon tax isn’t seen as too much of a worry?



Oz. Or that investors are looking through the tax and seeing a change of government, caused to some extent by the introduction of these unpopular taxes. Whatever the reason, the market has redeveloped a taste for energy companies. That was evident too in the continued rebound among the uranium explorers. Bannerman (BMN) was the star in the uranium space last week, adding A10 cents (35 per cent) to A38.5 cents. Forte (FTE) gained A1.6 cents to A7.6 cents. Berkeley (BKY) rose by A5 cents to A44 cents. Deep Yellow (DYL) had its best week for some time, with a gain of A3 cents to A19 cents, and Aura (AEE) gained A2.5 cents to A27 cents.



Minews. Minor metals to close, please.



Oz. Rare earths led the way among the more exotic mineral commodities. Lynas (LYC) announced a joint venture with Germany’s Siemens to produce high-strength magnets and its shares moved strongly as a result, closing A26 cents higher at A$2.01. Alkane (ALK) added A10 cents to A$2.28, and Arafura (ARU) put on A5.5 cents to A80 cents. 



Potash companies rose marginally. South Boulder (STB) rose A12 cents to A$2.49, and Minemakers (MAK) added A3 cents to A47 cents. 



Lithium companies weakened. Galaxy (GXY) fell A3 cents to A75 cents, and Orocobre (ORE) by A1 cent to A$2.08 cents.



Minews. Thanks Oz. Have fun on Carbon Sunday.

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## drillinto

July 23, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz 
www.minesite.com/aus.html >> Free registration

Minews. Good morning Australia, after what has been a difficult week here in London with the death of our founder.



Oz. I don't doubt it, because the influence of Charles Wyatt was also felt throughout the Australian mining industry. His was always a voice of reason, cutting through bombast and going to the heart of the story. He had a nose for value in a mineral discovery, often being first to alert readers about companies to watch, and companies to avoid. There is also no doubt, shown in the way he left us without a murmur of complaint, that he would want the show to go on, which is what we will do now.

Minews. Thanks for those thoughts, and let’s keep the preamble to a minimum because there is a lot to think about at the moment.



Oz. Understood. The big issue on our market last week was the gold price, and what it reflected - continued uncertainty about the financial stability of Europe and the US. As we’re speaking, on Saturday morning, down this way gold is back over US$1,600 an ounce, perhaps because the US debt talks appear to have broken down again, or perhaps because investors don’t believe that Greece can be saved by the latest EU intervention. Whatever the reason, gold is performing brilliantly as the canary in a cave full of financial problems. Having said that, the gold price did not push all Australian gold companies higher, perhaps because the Aussie dollar also rose, steaming up to US$1.08. Our rising currency eats away at mining profits, driven in turn by China’s continued high level of demand for resources, and by wary investors who are shifting cash back into commodity-linked assets.



Minews. Sounds like a complex set of factors at work in your market.



Oz. It is a bit messy, and the picture is further clouded by the remarkable collapse in the popularity of the government, as shown in the latest set of opinion polls. Concern about rising taxes, including the proposed carbon and mining taxes, and plans to re-regulate the labour market, is being reflected in a collapse in Australian retail. Aussies are worried, which is ironic given that we’re in the middle of a resources boom. We have the best-ever terms of trade, but we also have a government fiddling with social engineering issues, which was perhaps inevitable, given the bizarre red/green alliance that’s held the levers of power ever since our indecisive election last August.



On the market, all of the major indices moved marginally higher thanks to continued strength in commodity prices, especially gold, copper and iron ore. The all ordinaries added 1.8 per cent, the minerals and metals index rose by 2.3 per cent, but the gold index, and this is the surprise of the week, did worst of all with a rise of just 1.3 per cent. That relative weakness was almost certainly a result of the sector leader, Newcrest (NCM), falling by A25 cents to A$40.02. That’s a small decline but the company has a big effect on the index.



Minews. That is an odd result. Gold price at a record high and the biggest gold miner loses ground.



Oz. The only plausible explanation is that some investors took profits, given that Newcrest was trading as low as A$35.60 a month ago. But it’s worth continuing with the gold sector, because there were some reasonable rises to offset Newcrest’s decline. One such came from Troy (TRY), which added A22 cents to A$3.86 following positive discovery news at its Casposo mine in Argentina. Catalpa (CAH) finally got some traction from its complex merger proposal, rising by A19 cents to A$1.58. Kingsrose (KRM) rebounded after a few down weeks, putting in a gain of A18 cents to A$1.56. And Mt Isa Metals (MET) added A5.5 cents to A48 cents. Other reasonable rises came from Reed Resources (RDR), up A7 cents to A47.5 cents, Integra (IGR), up A5 cents to A53 cents, Kingsgate (KCN), up A60 cents to A$9.20, Gold Road (GOR), up A5.5 cents to A68 cents, Tanami (TAM), up A12 cents to A$1.10, and CGA (CGX), up A9 cents to A$2.74.



Minews. Iron ore next, please, as you mentioned you’re making a trip up to the mines on Sunday.



Oz. Just a flying visit to the operations of Fortescue Metals (FMG), but should be able to file a report on what I see, which I suspect will be frantic activity as we play catch up with China’s demand. On the market last week, Fortescue added A23 cents to A$6.64. Atlas (AGO), which is leading the latest burst of sector-wide consolidation, put on A31 cents to A$4.22, while Brockman (BRM) continued its recovery from the bruising raid by Hong Kong’s Wah Nam, rising by A32 cents to A$3.49.



And interest in the iron ore Aussies in Africa rose strongly after Hanlong’s takeover bid for Sundance (SDL). Africa Iron (AKI) added A9 cents to A35 cents. Cape Lambert (CFE) rose by A15 cents to A59 cents, and Sundance itself put on A13.5 cents to A53.5 cents, to close at above the A50 cent level of the Hanlong bid. Among the other movers was Iron Ore Holdings (IOH), up A2 cents to A$1.34, Gindalbie (GBG), up A3.5 cents to A79 cents despite announcing a fresh capital raising, and Murchison Metals (MMX), up A6.5 cents to A72.5 cents.



Minews. Over to the base metals now, please.



Oz. It was stronger in all sectors, with copper leading the way. Pick of the copper producers was OZ Minerals (OZL), up A $1.28 to A$14.17. Other copper companies that performed well included Sandfire (SFR), up A17 cents to A$7.40, Rex (RXM), up A17 cents to A$2.68, Hot Chili (HCH), up A18 cents to A70 cents, PanAust (PNA), up A29 cents to A$4.29, Resource and Investment (RNI), up A19 cents to A$1.20, and Anvil (AVM), up A42 cents to A$6.70.



Nickel companies had their best week for a long time as nickel moved up to a shade under US$11 a pound. Western Areas (WSA) added A52 cents to A$6.04. Panoramic (PAN) rose by A20 cents to A$1.90, with the caveat that its new-found interest in gold might have also been bringing buyers in. Mincor (MCR) gained A2 cents to A93.5 cents. Minara (MRE) rose by A3.5 cents to A71.5 cents, and Mirabela (MBN) put on A12 cents to A$2.02.



Zinc companies firmed, but modestly. Perilya (PEM) rose by A6 cents to A69 cents. Kagara (KZL) put on A7 cents to A69 cents as the market continued to digest recent solid production numbers. Blackthorn (BTR) gained A9 cents to A59 cents, and Terramin (TZN) added A1.5 cents to A30 cents.



Minews. Coal and uranium, with minor metals to close, please.



Oz. We had a handful of stars in the coal sector, but not much to get excited about among the uranium companies. There were two stand-out performers in coal. Carabella (CLR) rose a very sharp A38 cents to A$2.23, and Aston (AZT) added an equally impressive A$1.78 to A$10.91. Other movers included Bathurst (BTU), which rose A13 cents to A$1.17, and Whitehaven (WHC), which rose A26 cents to A$6.61.



Toro (TOE) led the uranium sector for the first time in years, putting in a rise of A2 cents to A9.8 cents on news that its Wiluna project in Western Australia has reached the public review phase of the approval process. Most other moves were modest. Paladin (PDN) added A18 cents to A$2.69. Berkeley (BKY) shed half a cent to A39.5 cents. Manhattan (MHC) added A3.5 cents to A33.5 cents, and Energy and Metals (EMA) fell A3.5 cents to A10.5 cents.



Titanium and zircon companies led the minor metals. Iluka (ILU) rose A$1.01 to A$18.90, and Image (IMA) rose A4 cents to A48 cents. Tin companies also gained ground. Venture (VMS) added A2.5 cents to A36.5 cents, and Kasbah (KAS) rose by A3 cents to A23.5 cents. Rare earths were mixed. Lynas (LYC) added A8 cents to A$1.99 but Alkane (ALK) lost A4 cents to A$2.06. South Boulder (STB) was the best of the potash players, putting in a rise of A19 cents to A$2.30.



Minews. Thanks Oz.



Oz. Best of British for the week ahead, and have a beer for me when you farewell Charles.

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## drillinto

July 25, 2011

"The Germans Blinked And The Greeks Smiled, But Watch Out For Copper Shortages Down The Tracks"
Rob Davies
www.minesite.com/aus.html


The QE2 rally took risk assets like commodities and equities on a powerful run between March 2009 and January 2011. Base metals, as measured by the LMEX index rose 141 per cent in that period, from a starting level of 1,700. But since January, the index has risen a measly 3.7 per cent, and last week closed at 4,252. Now, the markets are looking at the authorities and asking what comes next. Without any further stimulus there is a real risk of stagnation, or worse.  Weak figures from Caterpillar on Friday, regarded as a bellwether for the US economy, reinforced that worry.

Unfortunately the powers that be are too worried about the pressing problems of the US debt ceiling and the situation in Greece to be focussing on growth. Last week’s euro deal was the sixth in eighteen months, and like all the others, it was declared definitive. But all it really proved is that the Greece discovered it had a lot more clout than its creditors. Other debtors, like Ireland and Portugal, will presumably have learnt a lot from the exercise. 



Meanwhile, the US situation has deteriorated again after both sides stopped talking to each other. The difference there is that the debtors and creditors are mostly in the same country – well, apart from China - so they have more incentive to cut a good deal. 



The net effect of all the jaw-jaw was a rise in the euro and a fall in the dollar that helped base metals gain 0.9 per cent over the week. However, there’s little conviction in the markets that the eurozone is fixed now.  A 20% rally in some bank shares would suggest that bond holders’ worries are over, but it would be a brave man who said there would be no more dramas in the eurozone. 



A gold price over US$1,600 an ounce also indicates that these concerns are widely shared. According to Bloomberg 2,121 tonnes of gold are now held by investors through exchange traded products. That is a US$109 billion insurance premium against matters getting worse.



The good news is that these high metal prices are fuelling a lot of exploration activity. According to Metals Exploration Group of Canada the industry spent US$12 billion on exploration in 2010, US$1.4 billion of which was in Africa. Given the glamour of gold it is perhaps unsurprising that 59 per cent of the total spend went on looking for more of the yellow metal, even though, as the data shows, there is no shortage of it. There is a genuine shortage of copper and only US$4.5 billion worth in warehouses, but even so, copper exploration only attracted 21 per cent of the total African spend,  and most of that was in the Congo.



At a push the modern world could survive a genuine shortage of gold, although the price would obviously go sky high. On the other hand our modern electrified economies would not last long if no one could source copper to make new gadgets, generate power or reticulate water. 



That tells us that the market is more worried about a financial meltdown and slower growth than any scenario in which higher growth leads to a shortage of industrial commodities. And the market may well be right. However, there is always the temptation to bet the other way and actually be bullish among so much gloom. 



After all, if the explorers find gold and copper in the same ratio as their exploration budgets suggest they will, then there really will be a shortage of copper. However, there is one slight hitch. The stagnant capital markets have dramatically reduced the amount of new money being raised in the both the senior and junior equity markets. In the short term that is painful for the brokers that are being laid off. Over the next year or so it won’t be good news for exploration crews either. However, once the dust settles and German voters realise they have been stiffed by Greek civil servants, who knows what will happen in capital markets?

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## drillinto

"Metals & Mining Analysts' Ratings & Estimates - Seniors"
By Bill Matlack         
Jul 26, 2011 

Please click the link below to view the lists of senior producers:
http://www.kitco.com/ind/matlack/jul262011.html


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## drillinto

July 30, 2011

""That Was The Week That Was ... In Australia""
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]

Minews. Good morning Australia. It looks like you had another tough week.

Oz. It was. We certainly didn’t escape the worldwide concern about excess debt in the financial system, public and private. Even the gold sector was sold down despite the record high price, though the latest peak of around US$1,632 an ounce occurred after we had all gone to the pub on Friday night. Next week will be the big test because that’s when we see whether the US Congress is really prepared to plunge the country into bankruptcy, and at that point all bets will be off.


Minews. We really are living in interesting times.

Oz. We are, and we’re also learning why living in interesting times is a Chinese curse. The other, slightly more immediate interesting time that’s happening down this way is the annual Diggers & Dealers forum, which is taking place in Australia’s gold capital, Kalgoorlie. As you might expect there is a record crowd heading to the region we know as the Eastern Goldfields, for three days of mingling with miners, bankers and assorted support staff.

About half the official speakers have gold connections, so they should be well followed, and even the unusual keynote speaker should pack the hall at the Arts Centre where the event is held. Todd Buchholz is not a name many mining types are familiar with, and when he was nominated as guest speaker a few months ago it produced blank looks everywhere. However, it seems that Todd might be the man for the moment. He was director of economic policy during the first Bush administration in the US, managed a big hedge fund before that, and has won awards for his economics teaching at Harvard University.



Minews. Maybe he’s the man who can explain what’s happening in the US?

Oz. Possibly, though I suspect that might be asking too much. Two other big name speakers will be the founder of Fortescue Metals, Andrew Forrest, and the enigmatic founder of the Ivanhoe group, Robert Friedland, who will probably perform his usual trick of jetting in, and out on the same morning. No-one is expecting much from the speakers because all the action will be on the markets, and at times like this Kalgoorlie is a long way from the action. It won’t be a surprise if most delegates spend a lot of their time on their mobile phones checking out what’s happening in the rest of the world.

But Kalgoorlie can wait. Let’s have a look at what happened on the ASX last week, starting with the indices which, not surprisingly, were all down. The all ordinaries fell 3.7 per cent. Metals and Mining lost 3.3 per cent, and the gold index was down 2.6 per cent. Very few share prices rose, so much of this week’s report will be a grim affair. To lighten the load for Minesite’s readers it seems like a good idea to do the positive movers first, and then look at the negative news.



Minews. Positive news is always welcome, just so long as you’re not hiding anything.

Oz. Wouldn’t dream of it. Gold first, because that sector produced the biggest collection of shares that rose in a down week. Pick of the gold companies was one of our old favourites, Troy (TRY), which delivered a sparkling report for the June quarter. This included a 17 per cent rise in gold production, and more discovery news. On the market, Troy rose by A21 cents to A$4.05, but did get as high as A$4.18 on Wednesday. Ausgold (AUC), another stock we follow quite closely, added A8 cents to A$1.73, while Alacer (AQG), the company which emerged from the merger of Australia’s Avoca and Canada’s Anatolia, put on A39 cents to A$8.90. Most other upward gold moves were modest. Norton Goldfields (NGF) added A1 cent to A17.5 cents, and Gold Road (GOR) closed half a cent higher at A68.5 cents.

Gold companies that lost ground included Gryphon (GRY), down A13 cents to A$1.87, Perseus (PRU), down A17 cents to A$3.10, Kingsgate (KCN), down A32 cents to A$8.88, Kingsrose (KRM), down A12 cents to A$1.44, Silver Lake (SLR), down A14 cents to A$2.03, and St Barbara (SBM), down A20 cents to A$1.83. Also worse off was OceanaGold (OGC), down A46 cents to A$2.37, after it filed a June quarter report which confirmed high operating costs at A$921 an ounce.



Minews. Base metals next, please.

Oz. Two copper companies and one zinc producer went against the downward trend. Sandfire (SFR), which will host a big pre-Diggers media tour on Sunday, led the copper contingent with a rise of A40 cents to A$7.80, but did get as high as A$8.08 on Wednesday. Exco (EXS) was the other copper company on the rise, putting in a gain of A2.5 cents to A66.5 cents. The solitary zinc company to rise was Perilya (PEM), up A2.5 cents to A71.5 cents.

The rest of the base metal sector was in negative territory. Among the copper stocks OZ Minerals (OZL), lost A54 cents to A$13.63, Hot Chili (HCH) slipped A1 cent lower to A69 cents, Metminco (MNC) lost A3 cents to A30 cents, and Rex (RXM) shed A40 cents to A$2.28.

All nickel companies lost ground as the pincer effect of the rising Australian dollar and the stagnant nickel price did its work. Western Areas (WSA) fell A17 cents to A$5.87. Mirabela (MBN) lost A12 cents to A$1.90. Panoramic (PAN) fell by A12 cents to A$1.78, and Mincor (MCR) was down A4 cents to A89.5 cents.

In zinc, aside from Perilya, it was all down. Fallers included Kagara (KZL), down A7.5 cents to A61 cents, Blackthorn (BTR), down A4 cents to A55 cents, and Terramin (TZN), down A1.5 cents to A28.5 cents.



Minews. Iron ore and coal now, please.

Oz. It was more of the same in iron ore and coal. Most companies were worse off, although a handful did rise. Murchison (MMX) was the best of the iron ore explorers, adding A5 cents to A77.5 cents, a rise which makes up a small fraction of the ground recently lost by the company. Metro Coal (MTE) was the pick of the coal sector, putting in a rise of A16 cents to A96 cents. Other iron ore movers included Fortescue (FMG), down A33 cents to A$6.31, Atlas (AGOI), down A17 cents to A$4.05, and Mt Gibson (MGX), down A20 cents to A$1.80. Three iron ore companies did well holding their ground. Cape Lambert (CFE) was steady at A59 cents, Gindalbie (GBG) at 79 cents, and Iron Ore Holdings (IOH) at A$1.34. Aside from Metro, other coal movers included Coal of Africa (CZA), down A9 cents to A$1.08, Bathurst (BTU), down A12 cents to A$1.05, Carabella (CLR), down A16 cents to A$2.07, and Whitehaven (WHC), down A3 cents to A$6.58



Minews. Uranium, and minor metals to close, please.

Oz. There were a few encouraging rises in both of these sectors. Best of the uranium companies was Manhattan (MHC), up A7 cents to A40.5 cents. Also doing well was Berkeley (BKY), which rose A5.5 cents to A45 cents. Deep Yellow (DYL) also managed to post a modest half a cent rise to A17 cents. Hardest hit, following a disagreement with the South Australian government, was Marathon (MTN), which plunged 39 per cent to A15 cents. Extract (EXT) was 16 cents weaker at A$7.82, and Paladin (PDN) slipped A7 cents lower to A$2.62.

Among the others, tin explorer Venture Minerals (VMS), reported more encouraging news from its Tasmanian exploration project, adding A9 cents to A47.5 cents. South Boulder (STB) led the way among the potash companies, putting in a rise of A19 cents to A$2.49. Lynas (LYC) was the pick of the rare earth companies, up A16 cents to A$2.15. After that it was all down. Alkane (ALK) lost A7 cents to A$1.99, and Platinum Australia (PLA) continues to struggle in South Africa, shedding another A6 cents to A30.5 cents, which is less than half the level it was trading at in mid-January.


Minews. Thanks Oz. Enjoy Diggers and Dealers.
=========================


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## drillinto

Must read !
Review of global trends in the mining industry(2011)

Please click below to read it
http://www.pwc.com/en_GX/gx/mining/pdf/mine-2011-game-has-changed.pdf


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## drillinto

August 01, 2011

""Diary Of A Private Investor At Diggers And Dealers: First Impressions On A Tour Of Perth""
By Susie Boeckmann
www.minesite.com/aus.html (((The registration is free)))

Whilst the world is struggling with debt and political issues it is a pleasure to arrive in this thriving city and hear good news for a change. Prices are high, though. Yesterday it cost A$47 to park for an hour at the Hilton Hotel, and most ‘mains’ in average restaurants seem to come out at over A$50. You can buy an iron for just under A$10, the same as you pay for a good hamburger. The TV news is pretty cheerful too, at least relatively speaking: Whacky the red kangaroo is attacking a family whenever the family members come out of the house; a woman has bumped into a metre-and-a-half crocodile outside her drive; and there are protests in Melbourne against beauty pageants for toddlers.

Onto mining: The day kicked off with a meeting with Richard Mehan, the recently appointed managing director of Jupiter Mines. Jupiter has several projects, in Australia, as well as the Tshipi Borwa manganese project in South Africa. This latter has the potential to make a world-class manganese mine as an open pit, low cost operation producing fine and lumpy material at a rate of 2.4 million tonnes per year. The projected mine life is over 60 years. Infrastructure is good and there are several port options for eventual exports. It’s on track for first production in the second half of 2013. The company’s other major projects are in the Central Yilgarn region of Western Australia. Among these is Mount Ida, which has an inferred JORC resource of 530 million tonnes grading 31.9% iron, and is set to become a 25 million tonnes per year mining operation producing 10 million tonnes per year of magnetite concentrate grading 68%-plus iron. Nearby, Jupiter has also committed to a feasibility study on Mount Mason. This has the potential to become a A$40 million hematite project.



Jupiter is backed and funded by Brian Gilbertson and his Pallinghurst group, which owns 16.5 per cent. Also on the register are Posco, a consistent Gilbertson partner, and Investec and AMCI. The free float stands at around 25 per cent of the shares, and the company has a market capitalisation of A$290 million. With the very experienced Richard Mehan at the helm, this company looks well set to make good and rapid progress towards production. London-based readers should also note that Andrew Bell’s Red Rock Resources has a stake in Jupiter, and owns a royalty on Mount Ida.



Next up on the merry-go-round was Avalon Minerals. Avalon operates in Sweden, 1,200 kilometres north of Stockholm in a well-developed mining district which hosts operations run by several majors. Avalon’s managing director, Andrew Monkton, explained that the company’s main project, the Viscaria project, has delivered significant mineralised intersections of both copper and iron ore. Avalon has now deferred its bankable feasibility study until 2012, following a successful drilling campaign which will continue in the September quarter of 2011. The company has delineated a global resource of 66.2 million tonnes of ore containing 601,000 tons of copper and 2.4 million tonnes of iron. The current plan is for first ore delivery to take place in the first quarter of 2013. Avalon has announced a A$10 million share placement which is mainly supported by the company’s largest shareholder, a non executive director.



Moving onto silver, Alcyone Resources is one of the only pure silver companies in Australia, and has just announced production from its Texas mine in Queensland of over 100,000 ounces of silver. Andrew King, the managing director, told us that his company has been completely reorganised and the operations refurbished. There’s now a new crushing circuit on site, and quicker methods of leaching the silver out of the ore have been devised. Grid power will be provided soon and this will bring costs down considerably.



As a result of all that, Alcyone is now ramping up to produce between 1.5 million and two million ounces of silver per year, on a projected five year mine life. One that’s mined out, the plan is to move on to various satellite mines. The company also has 200,000 tons of stockpile with 180,000 at the bottom of the current pit which has been pre-stripped so it should be pretty easy to get to the ore. A 5,000 metre drill programme is planned, and the company is also investigating polymetallic targets. The processing can be adapted for other metals.



It is an exciting time for silver and this company has a strong team who should be able to take advantage of the current conditions. With increasing concern about fly-in/fly-out labour in mines across Australia, it is interesting to note that Alcyone is employing local labour to reduce this effect and is making every effort to contribute and involve the local community.



Andrew King is also non executive chairman of Base Resources which is developing the world-class Kwale Mineral Sands Project in Kenya, East Africa. This is a project well supported by the Kenyan Government, and lies just 50 kilometre from Mombasa, Kenya’s principal port, so it’s well-serviced by existing physical infrastructure. Base Resources has just announced credit approvals for US$170 million in syndicated project debt finance facilities and is planning to announce off-take arrangements shortly. The plan is to put Kwale Project into production in 2013. The company is currently in a trading halt, but with mineral sand prices, should be well worth watching when it comes back to market.



With jetlag kicking in, it was a pleasure to meet up for a glass of wine and a catch up with Peter Buck, the non-executive chairman of PMI Gold, which has gold projects on the Ashanti goldbelt in Ghana. The flagship project, Obotan, boasts a resource of 1.2 million ounces, and may yet yield more, as drilling conducted by Ausdrill will shortly get underway. The company is also bring the Kubi project rapidly along, too. Kubi is located 65 kilometres east of Obotan, along strike of AngloGold Ashanti’s 60 million ounce Obuasi mine, which is the largest underground gold mine in West Africa and boasts 113 years of continuous mining history.



Peter may be a non-executive, but he’s actually very hands on. PMI has lately been completely reorganised and now has new management, including several well-connected Ghanaians, and Collin Ellison as managing director. Collin was formerly with Goldbelt Resources, and was responsible for the development of the Inata gold mine in Burkina Faso. And, in spite of a tricky start when reserves were downgraded three days before its TSX listing went live late last year, PMI now has a market capitalisation of around A$95 million, supported by a tidy A$28 million cash in the bank. 



All good stuff for a first pass ahead of the main event, but it is a strange feeling running around Perth, and then on to Kalgoorlie, to know one is “treasure hunting” without the guiding hand of Charles Wyatt, the man who was responsible for developing and encouraging my enthusiasm for researching and investing in mining companies. His knowledge was deep and uncompromising. He never suffered fools or liars, but he supported closely those he respected. The least that we can do is to try and continue the tradition that he nurtured at Minesite, of independent and honest reporting.  
**********************************************


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## drillinto

Strategy
USA Commodity ETF Flows: Investors Continue to Flock to GLD

Please click the link below to view the relevant tables:
http://seekingalpha.com/article/283...ontinue-to-flock-to-gld-dump-xle?source=yahoo


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## drillinto

August 02, 2011

Diary Of A Private Investor At Diggers And Dealers, Day One: Gold Takes Centre Stage
By Susie Boeckmann
Source >> www.minesite.com/aus.html [Free Registration]

Most of the important resource companies are rushing around still setting up their wares and pitch. The day started, as most of the important companies were still rushing around setting up their wares and pitch, with the chairman of Diggers, Barry Eldridge, highlighting the serious uncertainties facing the Australian mining industry in the context of resource taxes, the carbon tax, and an indecisive government. Following his introduction, Todd Buchholz, a former White House director of economic policy and apparently well known as a commentator from the US, gave an enthusiastic speech that covered every subject under the sun but wasn’t particularly relevant to mining or Australia. That left the press room a little flummoxed as to how to report him.  

But as to mining, that’s clear enough. Gold companies are obviously the flavour of the month at the moment and the mining presentations started with Newcrest, Australia’s largest gold producer and, with a market capitalisation of A$30 billion, the third largest gold company in the world. Looking ahead, Newcrest is very confident, supported as it is by low-cost, long-life operating mines. The company is currently producing around three million ounces of gold and 80,000 tonnes of copper per year, and boasts a strong pipeline of expansion opportunities.



Newcrest was followed by Alacer Gold. This company was created in February 2011 as a result of the merger of ASX-listed Avoca Resources and TSX-listed Anatolia Minerals. This deal was initially greeted by the market rather badly. But that’s all changing now, following first production from the company’s CÃ¶pler gold mine in Turkey in December 2011. The total for the second quarter rang in at 41,122 ounces of gold mined at a cash operating cost of US$381 per ounce. Alacer has now demonstrated that CÃ¶pler 4.6 million ounces, and there is talk of more to come.  Alacer means “fast and courageous” in Latin, which fits the profile of the company as the second largest gold company on the ASX with a market capitalisation of A$2.7 billion. Production is up at Alacer’s South Kalgoorlie operations too. 



On then, to a few smaller companies that will be well-known to Minesite readers. Campbell Baird from Focus Minerals gave a confident presentation highlighting that his company now has three operating mines supported by a 2.3 million ounce resource. The company also has its 1.3 million tonnes per year mill. Focus plans to increase its production to 130,000 ounces or more in 2012. Campbell also produced 10 ounce gold nugget that one of the artisanal miners had brought to him over the weekend from the company’s latest mine at Tindals. And as far as recent newsflow is concerned, the grades continue to look excellent at the company’s Treasure Island exploration project. The company has also bid for Crescent Gold but there is talk of someone taking a blocking stake in this company. 



Following on from Focus was an excellent presentation from Chris Cairns on Integra Mining. Integra seems to be shaping up as one of the lowest cost Australian producers. The company’s flagship Randalls project, 60 kilometres east of Kalgoorlie, commenced production in September 2010, and is targeting an annual production of 100,000 ounces per year. It is interesting to note that although the mines of Focus and Integra are relatively close, the cash costs of Integra are half of Focus’ costs. Integra is a well run company with a strong board, well funded, with plenty of potential for increased exploration both from open pit and underground mining. One of their exploration projects is called ‘French Kiss’ – where do they get their names from?!



Taking a break from the presentations to go round the stands, and Beadell Resources’ chief financial officer Greg Barrett loomed large, keen to talk about the company’s Brazilian projects. The Tucano Gold Project is a 4.3 million ounce resource, with a 1.23 million ounce interim reserve. Mining commenced in mid June 2011 and the idea is to get production up to 180,000 ounces of gold per year. The company’s Tapereba AB Resource is interesting, as it has shallow high-grade gold deposits and also iron ore, a combination that has been the cause of much speculation as to the appropriate next steps. Anglo American and Cliffs Natural Resources have a jointly-owned iron ore production plant next door to Beadell’s property, which would be a natural fit, although it’s not clear how far negotiations have progressed. Beadell has A$50 million cash in the bank, and one or two other irons in the fire too, including a gold discovery in Western Australia at Tropicana East. This discovery is 60 kilometres along strike from the AngloGold Ashanti/Independence five million ounce Tropicana gold deposit.



Quite a lot of talk then led on to an investigation of an exciting story involving Regis Resources. Managing director Mark Clark spoke of the huge progress made by the company in the last 24 months. Regis has made two major gold finds at Garden Wall and Moolart Well, has another seven satellite projects beyond, and has now started mining. The company has also increased its resource base to three million ounces, but there could be more as Garden Wall has mineralogy confirmed to depth of 270-plus metres and is still open. The plan is to get production up to 100,000 ounces by 2012-13. This is a company worth looking at in depth, and has generated a lot of interest from the locals.



Time for a glass of wine and then on to the Atlas dinner where David Flanagan will be a very good and enthusiastic speaker.
********************


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## drillinto

ISM Commodity Survey[USA] Drops For Third Straight Month 

http://www.bespokeinvest.com/thinkb...ty-survey-drops-for-third-straight-month.html
***


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## drillinto

August 04, 2011

"Diary Of A Private Investor At Diggers And Dealers, Day Two: Speed Dating In Mining" 
Susie Boeckmann
www.minesite.com/aus.html

The second day of Diggers and Dealers is always frenetically busy, as it’s a case of trying to keep up with all 16 companies presenting and going round the stands. And not just the stands. This year there are over 2,200 delegates, including among their number many representatives of interesting companies cruising around and networking too.

Nickel and gold specialist Independence Group gave a robust presentation, in which progress at various projects was outlined. Among the company’s interests is a 30 per cent stake in the Tropicana gold project. This continues to grow under Anglo’s management, as modern exploration methods reveal high grade mineralisation beneath the salt/sand cover which it was not possible to discover in the past. Independence has also recently completed the acquisition of Jabiru Metals, adding copper, zinc and silver to its production profile.  Independence pays a regular dividend, and delivered profits of A$29 million this year. The current market capitalisation stands at around A$700 million. 



Kingsgate Consolidated, a gold producer with a market capitalisation of A$1.1billion, presented a new angle to investors, putting an emphasis on silver as well on its Chatree gold mine in Thailand. The company has just bought the Bowdens silver project in New South Wales from Canada's Silver Standard for A$75 million. But that's not the only recent acquisition, Also new is the Challenger underground gold mine in West Australia. And Kingsgate also has an interesting project at Arqueros in Chile which it hopes to bring into production in 2013. Three years ago the gold resource in Kingsgate stood at three million ounces. Today the company boasts over 10 million ounces, with plenty of scope for increasing that through continuing exploration and development. Kingsgate has strong cash flow from Chatree, which puts it in a strong position when it comes to considering acquisitions. The company delivered profits of A$73.1 million this year, has around A$50 million in cash, and debt facilities in place for another A$50 million. It has also built a track record as a regular payer of dividends. 



And for anyone out there who believes in the wisdom that people are almost as important as projects, it’s worth noting that the chairman of Kingsgate, Ross Smythe-Kirk, has recently gone on the board of the reconstructed silver company Argent Minerals which has assets in New South Wales. Argent has a current resource of 30 million ounces of silver on an estimated cut off grade of 40 grams per tonne.



Staying on silver, Cobar Consolidated Resource was keen to tell the story of its Wonawinta silver project, also in New South Wales. This has an inferred and indicated resource of 51 million ounces of silver, including a probable reserve of 14 million ounces. The company expects silver production to commence in December 2011. Following a A$28 million equity raising and with terms agreed for a A$22 million project finance facility, Wonawinta is fully funded. Cobar has a market capitalisation of A$178 million.



Ian Gordon of Ramelius Resources gave a robust presentation about the rapid progress of his company has made lately. Ramelius has just announced a pre-tax profit of A$90 million for the year to 30th June, up from the A$28 million delivered in 2010. The company started mining at the high grade Watts Dam gold mine near Kambalda, back in 2006, and will look to increase output fairly soon if this gold price continues. Ramelius also has Mount Magnet, which it expects to start mining this month, targeting production in January 2012. Ramelius has A$100 million in cash in the bank and gold on hand, so plenty of money to put towards its other exploration projects are in North Queensland and Nevada, US. 



Elsewhere, Anglo Gold Ashanti caused enormous interest with a spectacular collection of bespoke gold jewellery. Some of the pieces weighed up to half a kilo of gold, and models were walking around the exhibition hall leaving people marvelling. Anyone after an insight as to what was on offer, www.goldauditions.com is worth a look. 



In terms of the market, Anglo emphasised the growth of buying from China and India and that the company has been revitalised since a new team came on board in 2008. Tropicana was obviously a major topic of conversation.



For lunch it was off to the Palace Hotel to see Northern Star Resources, already familiar from a recent Minesite presentation. The company confirmed ongoing success with the Paulsen’s Gold Mine, and reiterated its production target of 75,000 ounces per year. Northern Star recouped the A$40 million acquisition cost of Paulsens through cashflow after just seven months of production and is now unhedged and debt free. The company has several highly prospective exploration assets too.



Another ongoing success story this year has been the numerous gold discoveries delivered by Gold Road Resources. The current tally is five in 15 months. The company has managed, so far to work up two gold resources, and in exceptional circumstances the grades have run as high as 1,000 grams per tonne. Even so, less than one per cent of the company’s land position at Yamarna has been explored so far. Not a bad proposition to think about, with gold heading towards US$1,700.



Still, that’s enough for today, although there’ll be plenty more soon. Minesite has three invitations for dinner and will report in due course.   


The writer may hold shares in some of the companies mentioned
::::::::::::::::::::::::::::::::::::::::::::::::::::


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## drillinto

August 05, 2011

Diary Of A Private Investor At Diggers And Dealers: Final Day, And The Speed Dating Continues
Susie Boeckmann
www.minesite.com/aus.html (The registration is free)

And so, the frenetic activity at Diggers continued. Alacer Gold made some surprising headlines today, as Edward Dowling, the chief executive, raised concerns about safety issues at the 49 per cent-owned Frog’s Leg project, in which Alacer has a 49 per cent stake. Edward is concerned that La Mancha, which holds the other 51 per cent, is progressing too quickly, and in a highly unusual comment he suggested that an inspection would be in order. Too much development and not enough stoping. Not surprisingly, people were left wondering where these comments would lead.

Inside the event, Panoramic Resources was giving private presentations in which managing director Peter Harold explained how the company was able successfully to bring the Savannah nickel project into production and to restart the Lanfranchi nickel operation after it was acquired from WMC. Production from these two projects means that Panoramic now produces 10 per cent of Australia’s nickel output. 



Talking of nickel, both Peter Harold and Julian Hanna of Western Areas are of the opinion that nickel prices will improve over the next few years as the supply chain, especially in China, is tightening. But Panoramic has interests in other areas too. Its latest venture is the Gidgee gold project, which was purchased from Apex Resources in February 2011 for A$15.5 million in cash. Gidgee has produced over a million ounces of gold historically. The current resource rings in at a modest 310,000 ounces of gold, but the area is very under explored. Panoramic believes that the reserves can be increased to 500,000 ounces gold in two years, and that the project will cost around A$40 million to put into production, at a likely rate of 100,000 ounces per year. Panoramic has A$100 million in the bank and keeps A$50 million at all times for unexpected contingencies. Strong institutional support comes from M&G, which holds 20 per cent, AMP Capital, which holds 7.4 per cent, and Eley Griffiths, which holds seven per cent. The company pays regular dividends, but is also out looking for grass roots and early projects. 



Staying on the nickel theme, Western Areas continues to be the cheapest producer of nickel in Australia. The main asset is the 100 per cent-owned Forrestania Nickel project, 400 kilometres east of Perth. Western Areas is Australia’s third largest nickel miner, and produces approximately 32,222 tonnes of nickel per year from the Flying Fox and Spotted Quoll mines on Forrestania. Cash cost stand at around US$2.50 per pound of nickel produced, so the company is making healthy profits given the current nickel price of over US$11.00. Financial strength-in-depth comes from A$209 million in A$15 million in receivables. Western Areas is actively exploring in Western Australia, Canada and Finland, and has off-take agreements in place with BHP Billiton and Jinchuan, and a short term contract with Minara to treat oxide ore from the Tim King Pit. 



Grange Resources had good interest at its stand and its presentation went down well too. Grange is Australia’s largest integrated iron ore mining and pellet producer. Grange owns and operates the Savage River magnetite mine in northwest Tasmania. This mine has a life of over 25 years and supplies Grange’s pellet plant and port facility at Port Latta, on Tasmania’s north coast. The overall output runs at between two million and 2.5 million tonnes of premium quality iron ore pellets per year. The company receives a premium price, with costs running at US$170 CFO China. Last quarter, though, Grange received US$220 FOB Tasmania, with operating costs at US$120. Grange is also developing a world class magnetite project at Southdown, near Albany in Western Australia. Project commissioning is expected in 2014. Southdown will be near a town so can employ locally, and avoid the issues of fly-in/fly-out. The company has A$100 million in free cash, and a A$600 million market capitalisation.



Nick Mather was very busy at D’Aguilar Gold’s stand. This company has key investments in resource companies, including stakes in Mt Isa Metals, Solomon Gold, AusNiCo, and Navaho Gold. D’Aguilar also holds stakes in three unlisted companies that are exploring for gas, iron and titanium ores and copper-gold-molybdenum systems, as well as other metals. Nick Mather, who will chiefly be known to Minesite readers and attendees of our forums through Solomon Gold, says that D’Aguilar intends to hold stakes in 20 listed companies within the next two years. Several journalists and brokers were chivvying around each other to get the best insights into this rapidly developing story.



Later, Reed Resources’ managing director, Christopher Reed, enthusiastically presented his latest company’s purchase to investors. The 2.5 million ounce Meekatharra gold project was acquired in January 2011, after the previous operator Mercator Gold got into difficulties. Reed also owns the Barrambie vanadium project which is Australia’s highest grading vanadium reserve, and for which the company is currently seeking construction finance. Another asset is the Mt Marion lithium project, which should start producing in late 2011. Reed is a three-generation Kalgoorlie family and they know every twist and turn in the histories of the mining projects in WA. Chairman father David Reed has been responsible for many local events and has created the Mining Museum, the Racecourse, with museum, and has owned many businesses in the area. 



Set off with the chairman of Ausdrill, Brain Mann, and the chief executive Ron Sayer, to attend dinner (or 3) at the Palace Hotel. On arrival the venue was heaving with people and noise. BHP Billiton, Silver Lake Resources and Argonaut were entertaining with vigour. The decision was then taken to leave and go to the Miner’s Rest, which is owned by Ausdrill, there to sit down to a good bottle of wine with steak and chips.



Ausdrill does not present but has a hospitable booth which is busy all the time, given that the company continues to expand all over Africa and Australia. Many companies mention that they use Ausdrill’s equipment and drilling services. Ausdrill has been an excellent performer for shareholders, and has grown to a market capitalisation of around A$950 million, and provides a dividend yield of 3.6 per cent. The company recently undertook a substantial capital raising. One standout announcement among a recent run of many related to a contract with Fortescue Metals worth $75 million over three years. Ausdrill has never bothered with investor relations but is now becoming a force and we should be hearing a lot more from this company soon. 

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August 06, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html     {Free registration}

Minews. Good morning Australia. That was certainly a week to forget!

Oz. There’s no doubt we packed a lot of events into five trading days. It started on Monday with American politicians making fools of themselves, and their country. Australian bankers and miners did much the same thing at the annual Diggers & Dealers bash in Kalgoorlie. European politicians and bankers then chimed in with a communal headless chicken display as Rome burned in the background, and by Saturday morning our time the US was back in the news as Standard & Poor’s downgraded US debt. That development should make for some interesting moments, when the first markets to open, in Japanese and Australia, pass judgement on that momentous event.


Minews. Good morning Australia. That was certainly a week to forget!

Oz. There’s no doubt we packed a lot of events into five trading days. It started on Monday with American politicians making fools of themselves, and their country. Australian bankers and miners did much the same thing at the annual Diggers & Dealers bash in Kalgoorlie. European politicians and bankers then chimed in with a communal headless chicken display as Rome burned in the background, and by Saturday morning our time the US was back in the news as Standard & Poor’s downgraded US debt. That development should make for some interesting moments, when the first markets to open, in Japanese and Australia, pass judgement on that momentous event.



Minews. The downgrade should serve as a wake-up call for politicians, and might not be at all bad for gold.

Oz. Yes, it’s not all been bad for gold, as a handful of Australian gold producers swam against the negative tide, aided somewhat by a very strong Australian dollar gold price. Last week was actually a double header for Aussie gold miners, as US dollar price for gold rose while the Aussie dollar fell. The net result was a rise of more than A$100 an ounce in our gold price.


Minews. Is that your attempt to put a positive spin on bad news?

Oz. Up to a point, but it was the gold sector which performed better than anywhere else, and which even produced a few share price rises. They weren’t large, and there weren’t many of them, but in a week when everything else is plunging by up to 10 per cent ,an upward price movement stands out like a dunny in the desert.

Pick of the gold pack was Silver Lake (SLR) which benefited from the gold price, a resource upgrade, and a strong presentation from its chief executive, Les Davis, at Diggers. By the close of business on Friday, Silver Lake was up A22 cents to A$2.25 in reasonably heavy turnover.



Minews. We’ll continue with the gold sector soon, but first a snapshot of how the Australian market faired overall.

Oz. As you might expect the broadest measure of the ASX, the all ordinaries index, dropped sharply. By the end of the week it was down a hefty 7.4 per cent. Meanwhile, the metals and minerals index, which is in some ways a bellwether for Chinese demand for hard commodities, lost 8.1 per cent. Gold, however, held up best. The gold index fell by 2.6 per cent, which in itself was an interesting measure of the uncertainty that’s around, given that the gold price was up about two per cent in US dollar terms, and seven per cent in Australian dollars.

Including Silver Lake, there were three gold companies which posted rises, just, and a fair number which suffered only modest falls. Alacer Gold (AQG) was another which benefited from a positive presentation at Diggers, and rose by A11 cents to A$9.01 across the week, although it did get as high as A$9.26 on Thursday. Medusa Mining (MML) was the other rise, up A13 cents to A$7.16. Northern Star (NST) held its ground over the course of the week at A46 cents, but did trade up to A51 cents on Thursday. That pattern of a strong price on Thursday followed by weakness on Friday, was a general feature of our market. There was a bit of rush for the exit down this way following the carnage on Wall Street on Friday, in case something really nasty happened over the weekend.

Among the other gold movers Gold Road (GOR) fell A11.5 cents to A57 cents, Beadell (BDR) fell A5.5 cents to A79 cents, Troy (TRY) fell A9 cents to A$3.96, Resolute (RSG), fell A11 cents to A$1.23, Perseus (PRU) fell A7 cents to A$3.03, Adamus (ADU) fell A7 cents to A63 cents, Ausgold (AUC) fell A18 cents to A$1.55, Gryphon (GRY) fell A24 cents to A$1.63, Kingsrose (KRM) fell A16 cents to A$1.28, and Kingsgate (KCN) fell A$1.11 to A$7.87.


Minews. Let’s move quickly through the sectors because it’s probably just a long list of lower prices anyway.

Oz. Almost correct. One copper company managed a small rise, as did one iron ore company. Copper first. Anvil (AVM) posted a gain of A11 cents to A$6.45 after announcing a strategic review, which could amount to anything from an asset sale to a merger. Everything else was weaker. Marengo (MGO) fell A3.5 cents to A18.5 cents. Rex (RXM) fell A36 cents to A$1.92. Hot Chili (HCH) fell A7 cents to A62 cents. OZ Minerals (OZL) fell A$1.55 to A$12.08. Metminco (MNC) fell A4 cents to A26 cents. And Sandfire (SFR) fell A60 cents to A$7.20.

Nickel companies were all weaker, though it is worth noting that the drift into gold by the nickel companies gathering pace. Panoramic (PAN) is the latest to unveil a gold-project investment plan, though that news was not enough to save the shares from falling A29 cents to A$1.49. Mincor (MCR) which is also chasing gold while plugging ahead with its nickel assets, fell A14 cents to A75 cents, and Independence (IGO) the most advanced of the nickel companies that are migrating into gold, lost A29 cents to A$5.56. Elsewhere, Minara (MRE) was off A4 cents to A63 cents, and Mirabela (MBN) shed A16 cents to A$1.74.

Zinc companies were sold off quite heavily, as zinc is likely to be a heavy loser if global growth slows sharply, especially Chinese growth. Perilya (PEM) fell A9.5 cents to A62 cents. Kagara (KZL) dropped A7 cents to A54 cents. Blackthorn (BTR) was off by A9 cents at A46 cents, and Terramin (TZN) lost A3.5 cents to end the week at a 12 month low of A25 cents.


Minews. Iron ore and coal next, please.

Oz. The one iron ore company to rise was Cazaly Resources (CAZ) which crept up by half a cent to A35 cents following a deal to sell its Parker Range project for a possible A$180 million. Among the notable fallers were Fortescue (FMG), down A57 cents to A$5.74, Atlas (AGO), down A30 cents to A$3.75, Iron Ore Holdings (IOH), down A19 cents to A$1.15, Mt Gibson (MGX), down A30 cents to A$1.50, Gindalbie (GBG), down A8.5 cents to A70.5 cents, and Murchison (MMX), down A15.5 cents to A62 cents.

No coal company stayed in the black, unlike the stuff they produce. Whitehaven (WHC) lost A69 cents to A$5.89. Coal of Africa (CZA) fell A11 cents to A97 cents. Metro Coal (MTE) lost A22 cents to A74 cents. Aston (AZT) was A96 cents weaker at A$9.84, and Continental Coal (CCC) fell by A0.6 of a cent to A3.1 cents.



Minews. Uranium and minor metals, to end a dreadful week.

Oz. Nothing went up in the uranium sector, though one company tried awfully hard. Manhattan (MHC) dropped by the minimum amount of half a cent to A40 cents. At one stage it was well ahead at A48 cents. Extract (EXT) fell A63 cents to A$7.19, as the proposed Kalahari takeover drags on. Berkeley (BKY) shed A3.5 cents to A41.5 cents. Paladin (PDN) dropped A40 cents to A$2.22, but did get as low as A$2.16 on Friday, a 12-month low. Bannerman (BMN) ended the week at A35 cents, down A8.5 cents.

All companies in the minor metals space lost ground as would be expected during a period of such uncertainty. Lynas (LYC) celebrated the official opening of its Mt Weld rare earths mine by dropping A29 cents to A$1.86. Alkane (ALK), another sector leader, lost A30 cents to A$1.69, and Arafura (ARU) fell by A14 cents to A59.5 cents.

Tin companies weakened sharply. Venture (VMS) was off by A11.5 cents to A37 cents, and Kasbah (KAS) fell A3 cents to A20 cents.

South Boulder (STB) led the way down among the potash players, falling A39 cents to A$2.10, and Iluka (ILU) did the same in the zircon and titanium minerals sector, falling a very sharp A$2.12 to A$15.64.


Minews. Thanks Oz. Enjoy the opening trading on Monday when we’ll see how the world treats that U.S. debt downgrade.

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August 08, 2011

""Diary Of A Private Investor At Diggers And Dealers, Final Day: Friedland And Forrest, And A Host Of Others""
Susie Boeckmann >> www.minesite.com/aus.html

The last day of Diggers and Dealers started with an early mine visit to the Bullant gold project owned by the Kalgoorlie Mining Company, which is situated 45 kilometres north of Kalgoorlie. This small, high grade mine, formerly owned by Barrick, looks to be a neat operation. The company is in the process of building a processing plant at Bullant which should be in operation by this time next year. On arrival visitors were kitted out in overalls, rubber boots (always too large for this reporter), safety glasses, hard hat, and a belt with a head light and emergency breathing kit, which is very heavy. Well equipped, we drove to a pit, one of two 50 metres apart and then started underground, down tunnels the majority of which had been dug by Barrick. 

Ahead of the completion of the new processing plant the company will use other mills to process a stockpile of ore which grades at between 4.8 grams per tonne and 5.9 grams per tonne. However, when mining is resumed later this year, the anticipated grades should run at nine grams per tonne.



We drove down to a depth of about 400 metres, relatively dry, to watch an ‘airlegger’ jack hammer rock drill which was strengthening the walls and the ceiling by putting in two-metre metal posts. Geologists were testing samples on the way down and we saw visible gold in the quartz rock running down the mainly basalt rock. One 10 ton truck was working, hauling ore, shortly to be joined by a second. 



Back at the Conference Les Davis, the managing director of Silver Lake Resources had just finished his presentation, which included an announcement of another upgrade in gold resources. This emerging mid-tier gold company is very popular locally, partly because the management team are mostly ex-Western Mining. The company has just completed a A$5 million ventilation shaft, which should allow underground production from its Daisy Milano and Daisy East operations on the Mt Monger goldfield to increase to 400,000 tonnes per year by 2012. Meanwhile, over on the Murchison goldfield a feasibility study to investigate the viability of a 100,000 ounce per year operation with an eight-to-10 year mine life is now complete. This company continues to grow and now is in the ASX 300 with a market capitalisation of around A$370 million. It’s unhedged, has A$28 million in cash and no debt.     



Then it was time for Andrew Forrest to present Fortescue. Fortescue continues to grow, but in a way the story speaks for itself, as Our Man in Oz found out when he wrote a report for Minesite on a visit to Fortescue’s operations in the Pilbara recently. So Andrew instead concentrated on blasting the government for the new taxes on mining and carbon that are now being introduced. He described the taxes as a creeping cancer and managed to hold a pretty sympathetic audience for long spells as he vented his fury at the lack of clarity and thought that has gone into the new legislation. 



But Andrew Forrest was by no means a voice crying in the wilderness. He was joined by David Flanagan of Atlas Iron, Les Davis, Mike Young of BC Iron and Jonathan Shellabear, former managing director of Dominion Mining, who all vigorously attacked the proposed minerals resource rent tax. This has been a consistent theme throughout the conference and there is a lot of passionate anger that the new tax will eventually be applied to other metals.  



Robert Friedland, founder of Ivanhoe Mines, then gave an update on progress on the company’s massive projects in Mongolia. Ivanhoe’s assets include the Oyu Tolgoi copper project which also hosts gold and molybdenum and which is projected to produce 1.7 billion tons of copper in 2015. The 2011 budgeted spend is US$2.3 billion, but the project is currently running under budget and ahead of schedule. Meanwhile, Ivanhoe’s 57 per cent-owned coal miner SouthGobi Resources is due to bring its Ovoot Tolgoi project into production in 2013. This, says Friedland, is the biggest construction project in the world. By way of a comparison, he claimed that the construction of the World Trade Centre in New York took 300 workers, but that this coal project is using 14,000 workers. He also reminded listeners that General Motors is selling more vehicles in China now than it is in the US. Ivanhoe Australia is developing according to plan, too, and first copper and gold production from the Osborne Mine in northwestern Queensland is due in 2012. That’ll be followed by first ore from the nearby Merlin molybdenum-rhenium mine by 2013. 



A much smaller company is recently-floated Sihayo Gold. The chairman, Peter Bille, who is also chairman of Independence Group, gave Minesite the lowdown on Sihayo’s recent progress with its definitive feasibility study into the viability of a potential mine at its Sihayo Pungkut gold project in Sumatra. The indicated resource at the Sihayo deposit as at March 2011 tallied at 13.2 million tonnes grading 2.8 grams per tonne gold for 1,195,600 ounces of gold, with additional inferred ouces totalling 106,500 ounces of gold. That gives a projected mine life of over seven years, although further exploration could well push that further out. The capital costs for development are estimated at US$80 million, plus a 10 per cent contingency allowance. 



Not far away, in the Bismarck Sea off the coast of Papua New Guinea (PNG), Nautilus Minerals is working away at its Solwara 1 seafloor massive sulphide project. The company was granted a mining lease by the PNG government in January, and indeed the government itself is so keen on the project that it’s contributing capital to acquire a 30 per cent interest. Minesite chatted to the company’s board and got the latest on the construction of the production support vessel, which is being managed by German shipbuilding company Harren & Partner.



The day went only too quickly and then it was time for the Gala Dinner. Ahead of this event the hall is emptied of stands in double quick time and is then transformed into an elegant dining venue for 2,000 people at tables for 10. This is the biggest event for networking at Diggers, and smart dress is required. After the entertainment the Diggers and Dealers Awards are given out, and first up was the Media Award which went to Peter Klinger. Peter started his professional career at the Kalgoorlie Miner, spent a period with The Times in London, where he became well known and widely respected, and is now Deputy Business Editor for the West Australian newspaper. 



Next was the Digger Award, which recognises a company that has had lots of success, is well managed and innovative. Chris Bonwick accepted this award on behalf of Independence Group. Next was the award for Best Emerging Company, which went to an old Minesite favourite, Gold Road Resources. This award goes to companies with a market capitalisation of under A$250 million, and which have a strong and sustainable future.



Dealmaker Award was given to Ivanhoe Capital Corporation. Robert Friedland has been a frequent visitor to Diggers and Dealers over the years. The GJ Stokes Award was given to George Jones for recognition of his positive contribution to the development of the resource industry. He was especially commended for his leadership in taking the reins of Sundance Resources after the entire board was lost in a plane crash last year.



That was the end of Diggers and Dealers for another year. The standout impression was of the increasing anger at Julia Gillard’s government. Many companies are looking for assets in other parts of the world to mitigate the impact of the Gillard government’s policies. But even so, many companies, especially in the gold and silver spaces, are making good profits in spite of increasing costs and a strong Australian dollar.  

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## drillinto

STRATEGY

Looking for Market Bottom ? 

Please check here >> http://www.cnbc.com/id/44061398

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## drillinto

Commodity Snapshot

To view the charts of ten major commodities, please click the link below

http://www.bespokeinvest.com/thinkbig/2011/8/9/bespokes-commodity-snapshot.html


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## drillinto

Strategy

Rosenberg: How to prepare for the coming recession


"We are believers that gold and gold mining stocks will prove to be profitable investments as the economic downturn inevitably prompts more money printing, not just out of the Fed, but other major central banks as well.

Commodities in general, energy and raw food in particular, should be a core position, as they are behaving less cyclically and more as a secular growth theme linked to the rapidly rising incomes in the emerging market economies."

Source >> http://business.financialpost.com/2011/08/09/how-to-prepare-for-the-coming-recession-rosenberg/

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## drillinto

Gold Now Costs More Than Platinum

To see the chart, please click the link below
http://www.bespokeinvest.com/thinkbig/2011/8/10/gold-now-costs-more-than-platinum.html


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## drillinto

August 13, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz >> www.minesite.com/aus.html

Minews. Good morning Australia. How did your market manage a choppy week?


Oz. It ended in the black, but that’s the most positive thing that can be said. Like every other market in the world we seemed to be up one minute and down the next. Gold was the most consistent winner of the week, though it ended on a down note. Admittedly though, the softness in the gold price came after it had scaled another mountain, this time the once unthinkable height of US$1,800 an ounce. In Australian dollar terms we also came close to that price because our dollar briefly fell below parity with its US cousin and then recovered to close the week around the US$1.03 mark.

Minews. How did the key indices on the ASX perform?



Oz. All up, but with a big hole in the middle. The all ordinaries added 1.6 per cent over the week. But, if measured from the mid-week low point which occurred around 11am on Tuesday to the close on Friday there was actually a rise of 10.6 per cent. It was a similar story with the metals and mining index which ended with an overall gain of 0.7 per cent. The gold index added 4.3 per cent for the week, but came off sharply on Friday afternoon, shedding 1.4 per cent as the gold price retreated from its all-time peak price of US$1,817.60 per ounce, which was reached on Thursday.



Like London, the news event driving our market was the European debt crisis. In the case of Australia, the impact was softened slightly by our proximity to Asia, which of all the regions of the world seems to be the one riding out this current economic storm with the least discomfort. Chinese demand for bulk commodities is now expected to slide somewhat, but not like it did in 2008 when a genuine banking crisis brought global trade to its knees. This time around the bulk carriers are still sailing, and the Baltic Dry Index, which measures ship hire costs, has only registered a modest decline recently. Further evidence that demand for bulks is likely to remain relatively strong can be seen in the higher share prices for most Australian iron ore and coal stocks.



Minews. With that good news, it’s time for prices, starting with gold.



Oz. Trending up is the best that can be said about ASX-listed gold companies. There were no stand-out winners, and even a few falls this week, which was perhaps a sign that investors are wary of the volatility factor in equities. Chalice Gold (CHN), which we took a look at on Thursday, was among the better performers on Friday when it added A2.5 cents. That took its rise for the week to A5 cents and a closing price of A33.5 cents. Troy (TRY), which we also looked at last week, was another solid performer, as the market continues to digest its steady flow of exploration and financial news. Troy’s shares closed up A20 cents to A$4.16 on the week, although they did go higher, hitting a 12 month high of A$4.42 on Wednesday. St Barbara (SBM) was another company that caught investor’s attention. St Barbara’s shares rose A18 cents to A$1.96, partly because it has ensured ongoing production from its high-cost Southern Cross operations by locking in a high-priced forward selling program.



Minews. Is there much evidence of other gold miners locking in the gold price with renewed hedging?



Oz. Not yet, but it must be tempting with the Aussie gold price at around A$1,680 per ounce. Other share price movers last week included Resolute (RSG), up A11 cents to A$1.34, Kingsgate (KCN), up A63 cents to A$8.60, Kingsrose (KRM), up A11 cents to A$1.39, Perseus (PRU), up A21 cents to A$3.24, Ramelius (RMS), up A14 cents to A$1.48, Allied (ALD), up A39 cents to A$2.80, OceanaGold (OGC), up A14 cents to A$2.09, and Silver Lake (SLR), up A8 cents to A$2.33. Offsetting those rises were a surprising number of falls - mostly modest - but falls nonetheless in a week when the gold price rocketed higher. Medusa (MML) slipped A2 cents lower to A$7.14, although it did trade as high as A$7.43 on Friday, indicating some pretty heavy selling as the market came to a close. Azumah (AZM) lost A4.5 cents to A49.5 cents, and Ausgold (AUC) fell A10 cents to A$1.45.



Silver companies all weakened as the silver price refused to follow gold. Cobar (CCU) lost A2.5 cents to A83 cents. Cerro (CJO) slipped A1 cent lower to A18 cents, and Alcyone (AYN) closed at A9.6 cents, down A0.4 of a cent.



Minews. Iron ore and coal next, so we can see how that comment on bulk commodities and the shipping index translates into actual prices.



Oz. The best of the iron ore companies was Brockman (BRM), which seems to be learning how to work with its Hong Kong masters, and which rose A32 cents to A$3.20. Mt Gibson (MGX) pleased the market with a maiden dividend, a payout which helped lift the shares by A10.5 cents to A$1.60. Fortescue (FMG) recovered from a bout of weakness earlier in the month, and rose last week by A20 cents to A$5.94. Iron Ore Holdings (IOH) added A11 cents to A$1.26, and BC Iron (BCI) rose A7 cents to A$2.47. There were two interesting areas of weakness in the iron ore sector. The magnetite hopefuls continued to slide lower. Gindalbie (GBG), lost A4 cents to A66.5 cents, and Grange (GRR) was down A1.5 cents to A47 cents. The other point worth noting is that Sundance (SDL), which says it has a bid of A50 cents a share on the table from a Chinese company, continued to trade below the suggested bid price at A46.5 cents, perhaps an arbitrage situation if you believe that the Chinese A50 cent bid will ever materialise.



Most coal companies rose, although a handful falling. Strongest performer was perennial takeover target Whitehaven (WHC), which added A34 cents to A$6.23. Aston (AZT) put on A59 cents to A$10.35. Bathurst (BTU) gained A4.5 cents to A99.5 cents, and Carabella (CLR) rose A20 cents to A$2.05. Coal companies that traded against the trend included Metro (MTE), down A7.5 cents to A67 cents, Continental (CCC), down A0.2 of a cent to A2.9 cents, and Coalspur (CPL), down A1 cent to A$1.44.



Minews. Base metals next, please.



Oz. The base metals companies didn’t trade quite as robustly as the bulk commodities companies. There was a mixed trend evident among copper, nickel and zinc companies. Best of the copper stocks included Sandfire (SFR), which we wrote about on Thursday, and which rose A50 cents to A$7.70 over the week. Another Minesite favourite, Marengo (MGO), was also better off, rising A1.5 cents to A20 cents. CuDeco (CDU) was also stronger, up A14 cents to A$3.22. Among the fallers were Hot Chili (HCH), down A3.5 cents to A58.5 cents, Metminco (MNC), down A3.5 to A22.5 cents, and OZ Minerals (OZL), down A30 cents to A$11.86.



Mincor (MCR) was the best of the nickel companies, rising by A8 cents to A83 cents. Minara (MRE) added A5 cents to A68 cents, but Western Areas (WSA) slipped A6 cents lower to A$5.37. Independence (IGO) closed at A$5.54, down A6 cents.



Zinc companies were equally mixed. Kagara (KZL) added A4 cents to A58 cents. Perilya (PEM) fell A3.5 cents to A59.5 cents, and Blackthorn (BTR) lost A2 cents to A44 cents.



Minews. Uranium and minor metals to close, please.



Oz. There was one reasonable rise among the uranium companies, but nothing to write home about among the minor metals. Extract (EXT), which will move back onto the takeover list if the Chinese re-launch their proposed offer for its major shareholder, London-listed Kalahari, added A17 cents to A$7.36. Bannerman (BMN) was the only other uranium company to rise, just. It put on half a cent to A35.5 cents. Berkeley (BKY) fell A3.5 cents to A38 cents. Deep Yellow (DYC) lost A1.5 cents to A14.5 cents. Manhattan (MHC) shed a sharp A9 cents to A31 cents.



Lynas (LYC) led the way among the rare earth companies, putting on A12 cents to A$1.98. But the other players in the space barely moved. Arafura (ARU) lost A1 cent to A58.5 cents while Alkane (ALK) was steady at A$1.69. South Boulder (STB), the potash leader, added A2 cents to A$2.12.



Minews. Thanks Oz.

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## drillinto

August 15, 2011

"Uncertainty Is Likely To Trump The Prospects For Growth And Base Metals In The Near Term"
By Rob Davies >> www.minesite.com/aus.html (((Free Registration)))

In the last three weeks base metal prices, as measured by the LME index, have fallen 8.5 per cent. Over the same period the price of gold has risen by 8.4 per cent. Does this apparent symmetry tell us anything other than that the short base metal and long precious metal trade that was suggested at the beginning of the year has been vindicated?  Indeed, over 2011 to date base metals are down 5.6 per cent, while gold is up a net 29 per cent. 

In marked contrast to the stability enjoyed by capital markets for most of the first half of the year, the past few weeks have been especially volatile. To some extent it must be true that the earlier calm period lulled investors into a fall sense of security and persuaded some that all was well in the world, in spite the many voices pointing out the rising dangers. 



One such was Bill Gross of Pimco. His concerns, and that of others, have been proved correct by the unprecedented downgrading of US debt by Standard & Poor’s and by the continuing farce that passes for European financial governance. It is frightening that US politicians can make even European elected representatives look good.



The events of the last few weeks have at last brought to the surface some of the issues that hitherto have been too embarrassing to discuss in polite company. Unfortunately, that does not make resolution of the problems any more likely. More probable is that the situation will fester for the next few months before some kind of denouement in the autumn, the traditional time for proper crises. In August, after all, everyone is on the beach. And how can you panic when you don’t have Wi-Fi?



The world’s biggest financial problem is the inability of the US to meet its US$66 trillion of unfunded - but walking and voting - liabilities, if growth averages less than three per cent a year. It’s the biggest problem because the dollar is still the world’s reserve currency. However, the proximate issue is that of Europe.



Capital markets are already moving in to discount an “Irish” solution to the problems of Spain, Italy, and France, namely that these countries will become full or partial shareholders of their major banks. And so traders’ counterparty risk moves from Soc Gen to President Sarkozy. Or from Unicredit to Mr Berlusconi. That is in the price of the relevant shares and bonds, or it soon will be.



What is not yet priced in is the realisation that German debt is simply a AAA wrapper for a lot of sub-investment grade debt. This debt, issued by Greece, Ireland, Portugal and now Spain and Italy has been bought by the ECB to underwrite a per cent yield cap on European sovereign debt. Since Germany is main source of funds for the ECB it is only  matter of time before  the markets realise that Germany’s long stop position as the ultimate financer for all of Europe is unsustainable. 



There is also the small matter of German voters agreeing to the largesse being shown by the ECB and Mrs Merkel on their behalf. True enough, the ECB and the chancellor were bounced into a course of action they didn’t want to take. But that unpleasant truth won’t make it any easier to sell to the electorate. The test will be on September 23rd when the Bundestag votes on the bailout measures adopted by Mrs Merkel.   



If the US is any guide, German lawmakers won’t take tough decisions until forced to by the markets. So, while the coming few months could be a fun ride for all asset classes the chances are events will still favour precious metals, as uncertainty trumps the prospects for growth and base metals. 

*****************


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## drillinto

Strategy

"Gold's climb is perfectly rational"


http://finance.fortune.cnn.com/2011/08/16/golds-climb-is-perfectly-rational/


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## drillinto

"Metals & Mining Analysts' Rating & Estimates - Juniors"
Bill Matlack

To view the tables, please click the link below
http://www.kitco.com/ind/matlack/aug162011_juniors.html

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## drillinto

Strategy

Keep an eye on the gold bull market

http://www.bespokeinvest.com/thinkbig/2011/8/18/gold-bull-market-crosses-the-1000-day-mark.html


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## drillinto

August 19, 2011

Gold At $1,800: Central Banks Remain The Major Buyers, And Key To Setting The Price
By Our Man in Oz >> www.minesite.com/aus.html   ""Free Registration""

So many factors influence the price of gold, from interest rates to economic instability, that sometimes investors forget to ask the most important question of all – what are central banks, the biggest owners of the metal, doing? But that’s not something that Mark Creasy, arguably Australia’s most important player in the gold market, has ever forgotten. And if investors had acted on the assessment of the gold market Mark delivered a little over two years ago they would be considerably richer today.

Back in May, 2009, when the gold price was around US$950 an ounce, Mark laid out a scenario which has unfolded to the letter. “Gold is a bit like a company which has a dominant shareholder”, he said. “If everyone believes the dominant shareholder is selling, the price drops like you wouldn’t believe. A major influence is how people see the biggest shareholders handling their gold. The best way to look at gold is not on the peripheral - say the scrap market or even mine supply. It’s to ask what are the big shareholders doing. In the past we’re seen big holders such as the Bank of England and the Swiss National Bank selling, and people think we’re out of this. When they see a big new buyer, people want in.”



The big new buyer emerging in the gold market back then was China, with India not far behind. Starting from a relatively small amount of gold as a proportion of its estimated US$2 trillion in reserves, China has since then been a steady buyer of gold, and is sitting today on an estimated 1054.1 tonnes of the metal. That’s a stack that ranks China as the world’s sixth biggest owner of gold. Having said that, and perhaps much more significantly, gold still represents just 1.6 per cent of China’s reserves.



But if China is serious about diversifying its reserves away from an excess reliance on the shrinking US dollar, it has a lot of gold still to buy. That is if it wants to match other countries, at any rate. Japan’s 765.2 tonnes of gold represents 3.3 per cent of its reserves. To match that percentage, China needs to acquire at least another 1000 tonnes.



A Brit by birth, Mark has been a gold bug most of his working life. He took his Royal School of Mines degree in mining engineering to Australia, but quickly dumped any thoughts of a corporate life, preferring the simple life of gold prospecting. His big pay day came in 1991 when he sold two gold discoveries for a tax-free A$120 million, using a depression-era tax break extended to prospectors by the Australian Tax Office, but originally intended for small prospectors. After he had banked his cheque, the tax man closed that 60 year-old loophole, but by then Mark was launched, using his windfall to amass a fortune now estimated at more than A$300 million. 



Looking back, his 2009 assessment that gold would behave like a company with a dominant shareholder has proved remarkably accurate. Over the past 12-months, as the gold price has risen to record levels, the world’s central banks have been the biggest buyers, matched only by newly-emerged exchange-traded funds. But the funds, with their estimated 2,244 tonnes, hold just a fraction of the amount of gold held in central banks. To be precise, the ETF holding of gold amounts to just 7.3 per cent of the 30,700 tonnes (and growing) that central banks are sitting on.



It is stretching Creasy’s point a little, but even if world ETFs were suddenly swamped with sell orders that would be unlikely to break the resolve of the central banks which are reported to have soaked up around 450 tonnes of gold in each of the past two years. ETFs have been buying at an estimated rate of 325 tonnes per year.



The past six months, as gold has risen from around US$1,388 per ounce to over US$1,800, has been especially useful in demonstrating the central bank “gold shareholder” rule. That’s because the recent US$400 price rise occurred as central banks bought 219.6 tonnes of gold and sold just 12.1 tonnes. The biggest buyers, according to data collated by the World Gold Council, were Mexico, which acquired 99 tonnes, South Korea, which acquired 25 tonnes, Russia, which acquired 48 tonnes, and Thailand, which acquired 28 tonnes.



Central bank sellers were thin on the ground. What was significant was the non-appearance central banks which are signatories to CBGA3 – the third phase of the Central Bank Gold Agreement, part of a five-year plan to permit orderly gold sales which do not destabilise the market, as Britain’s high profile sales did in the mid-1990s.



Under CBGA3 a total of 11 countries, plus the European Central Bank and the International Monetary Fund, can sell up to 400 tonnes of gold a year between them. Last year, the first of CBGA3, the signatories sold 136.2 tonnes, meaning that they hung on to 263.8 tonnes of their notional 400 tonnes. So far this year, which runs to September 26th, the signatories have sold 53.3 tonnes, with a notional 346.7 tonnes of gold sales still possible in the next six weeks. Possible, but highly unlikely.



Lack of selling by CBGA signatories, plus fresh buying by a variety of central banks sits comfortably inside Mark’s theory that the most important players in the gold market are the world’s central banks, and that these are buying gold at a faster rate than the new players in the game, ETFs.



As for the future, well a look back shows that Mark’s views of May 2009, are as pertinent today as they were then. On quantitative easing (printing money) he said: “I don’t think the world has ever seen a worse situation. The reaction of governments in the 1970s oil crises was to splatter money all over the place. This time around, you can add a nought to the number.”



And on the outlook, again comparing it with the 1970s, he said this: “We had a recovery in 1976, and everything looked okay for about a year. Then along came the second oil shock, and along came massive inflation. That’s when people realised it hadn’t been sorted and that’swhen the gold price went berserk.”

 ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤


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## drillinto

August 20, 2011

"That Was The Week That Was ... In Australia"
By Our Man in Oz
>> www.minesite.com/aus.html  ((The registration is free))


Minews. Good morning Australia. Have you any good news to report, because we’re somewhat tired of bad news.



Oz. There was a bit to cheer about on the ASX last week, and not surprisingly it came from the gold sector where we a number of companies hit 12 month share price highs. But before we get too excited about that fistful of winners it’s also worth noting that a surprising number of gold companies fell too, which was perhaps the oddest thing of all as the gold price headed for the stratosphere.


Minews. Now that is interesting, and might perhaps call for a spot of bargain hunting if the metal price keeps rising.



Oz. Best leave that to investors to figure out as life’s not always straightforward in the sector. For example, as the gold price rose by six per cent in US dollar terms to around US$1,850 an ounce, and by five per cent in Australian dollar terms, Australia’s biggest gold producer, Newcrest (NCM) fell by three per cent. A lazy answer to questions about that disconnection is that Newcrest has risen a long way over the past year, and that’s an explanation that’s been used by local stockbrokers. But it’s not one that holds up under close scrutiny, as Newcrest’s closing price of A$39.54 on Friday was only 10.5 per cent higher than it was 12 months ago, while the gold price has risen by 50 per cent.



More on prices later. First a snapshot of the overall Australian market where all major indices ended the week in the red, even gold. The all ordinaries fell 1.5 per cent, thanks mainly to a 3.4 per cent drop on Friday. The metals and mining index fell 2.5 per cent, with Friday delivering a 3.7 per cent drop, and the gold index fell 1.6 per cent, despite a 1.3 per cent rise on Friday.



Minews. Enough of the big picture, time for prices. And that means back to the gold sector and those companies which set fresh share price highs.



Oz. Troy Resources (TRY) led the record-breakers when it traded up to A$4.63 on Thursday, at which point it was up A47 cents, or 11 per cent, on the week. Late selling on Friday trimmed the rise to A42 cents, and the shares closed at A$4.58. Northern Star Resources (NST) performed a similar trick, rising to a 12 month high of A58.5 cents during Friday trade, but weakening towards the close to end the week at A57.5 cents for an overall gain of A4.5 cents. Ramelius (RMS) also peaked and slid, briefly touching a fresh high of A$1.66 on Friday, but closing at A$1.61 for a gain of A13 cents.



Other solid risers among the gold companies came from Silver Lake (SLR), up A19 cents to A$2.52, Kingsgate (KCN), up A53 cents to A$9.03, Medusa (MML), up A15 cents to A$7.29, Norseman (NGX), up A3.5 cents to A34 cents, Alacer (AQG), up A50 cents to A$9.95, and Integra (IGR), up A3.5 cents to A52.5 cents.



Fallers, however, were as widespread as rises among the gold companies, The biggest concentration was to be found among the Australian gold companies working in Africa - a sign that cash was being repatriated rapidly in the face of global uncertainties. But it wasn’t only the Africans. Among the gold companies that lost ground in a week of record-high gold prices were Perseus (PRU), down A7 cents to A$3.17, Gryphon (GRY), down A7 cents to A$1.56, Mt Isa Metals (MET), down A3.5 cents to A35 cents, PMI (PVM), down A2 cents to A47 cents, Castle (CDT), down A1.5 cents to A33 cents, Gold Road (GOR), down A4 cents to A53 cents, and Kingsrose (KRM), down A5 cents to A$1.34.



Minews. Across to the base metals now, starting with copper.



Oz. There was very little movement in any of the base metal sectors last week, which is probably not bad news. One copper company, Marengo (MGO), managed to rise, adding A2.5 cents to A22.5 cents. That was an interesting move in itself, as there are rumblings in Papua New Guinea, where Marengo has its best assets, that control of all mines will be passed to traditional landowners. But after the rise from Marengo it was all down, or flat. Sandfire (SFR) lost A40 cents to A$7.30. OZ (OZL) fell A65 cents to A$11.21. Rex (RXM) was A15 cents weaker at A$1.79. Metminco (MNC) slipped A2.5 cents lower to A20 cents, and Talisman (TLM) ended the week at A47 cents, down A6 cents. Unchanged were Sabre (SBR) at A10.5 cents, Hot Chili (HCH) at A58.5 cents, and Syndicated at A12 cents.



All nickel companies weakened, as did all zinc companies, bar one. The zinc explorer that moved up was Meridian (MII), which added A2.5 cents to A13 cents solely because it received a takeover bid from a Chinese company at A14 cents. And that A1 cent gap between the closing market price and the proposed bid price tells a story in itself. Other zinc moves included Terramin (TZN), down A1.5 cents to a fresh 12 month low of A21 cents, Kagara (KZL), down half a cent to A57.5 cents, and Perilya (PEM), down half a cent to A59 cents. Nickel movers included Mincor (MCR), down A1 cent to A82 cents, Mirabela (MBN), down A15 cents to A$1.56, Western Areas (WSA) down A9 cents to A$5.28, and Minara (MRE) down A3.5 cents to A64.5 cents.



Minews. Iron ore and coal next, please.



Oz. There was one rise among the iron ore companies and four among the coals. After that, it was all down. The only iron ore company to rise was one we hear very little about, Red Hill Iron (RHI). It rose by A5 cents to A$2.25 amid a flurry of publicity about legal action related to its push to become part of a new port development. But Red Hill is run by two veterans of booms past, Neil Tompkinson and Joshua Pitt, and might be worth keeping an eye on. Elsewhere, Fortescue (FMG) fell A19 cents to A$5.75 despite reporting a record profit. Iron Ore Holdings (IOH) fell A10 cents to A$1.16. Murchison (MMX) fell A3.5 cents to A61.5 cents, and Mt Gibson (MGX) fell A11 cents to A$1.49. Unchanged, but worth noting, were Brockman (BRM) at A$3.20 and Gindalbie (GBG) at A66.5 cents.



The four coal companies to rise were: Continental (CCC), Metro (MTE), Coalspur (CPL), and Macarthur (MCC). Continental is making headway with its Penumbra project in South Africa, and will list on London’s Aim market next month, news that lifted the shares by A0.4 of a cent to A3.3 cents. Elsewhere, Metro Coal rose by A6.5 cents to A73.5 cents, Coalspur added A1 cent to A$1.45, and takeover target Macarthur gained A8 cents to A$15.32. Heading down were Bandana (BND), which shed a sharp A28 cents to A96 cents after announcing a big capital raising, and Aston (AZT), down A29 cents to A$10.06.



Minews. Uranium and minor metals to close, please.



Oz. It was mainly up among the uranium companies, mainly down among the minor metals. Interest in the uranium sector was surprisingly strong, given the continued slide in the short-term uranium price to around US$50.50 a pound. But that decline was shrugged off by Extract (EXT) which added A46 cents to A$7.82, following the return of takeover speculation. Meanwhile, Toro (TOE) rose by A1 cent to A8.1 cents after an optimistic report on its Wiluna project in Western Australia. Bannerman (BMN) put on A1.5 cents to A37 cents. Paladin (PDN) was the heaviest uranium loser, putting in a fall of A25 cents to A$1.97, which is just A1 cent above its 12 month low.



Rare earth companies weakened. Lynas (LYC) fell A24 cents to A$1.74, and Alkane (ALK), fell A4 cents to A$1.65. Tin companies also lost ground, with Venture (VMS) down A1.5 cents to A35.5 cents, and Kasbah (KAS), down A1.5 cents to A16.5 cents. Some of the potash companies moved against the downward trend. South Boulder (STB) added A3 cents to A$2.15, and Minemakers (MAK) rose by A1 cent to A34.5 cents.



Minews. Thanks Oz.

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## drillinto

August 22, 2011

Crisis? What Crisis? The Future Still Looks Bright For Base Metals
By Rob Davies >> www.minesite.com/aus.html >> free registration

Last week the levels of anguish in commentaries relating to the financial markets reached new heights. To listen to or read some of the opinions you could be forgiven for thinking the world was about to end. It can be a little deflating to ruin an argument with data, especially when it does not paint such a catastrophic picture. But, hey, the world hasn’t ended.

It is true that most major equity markets have experienced significant falls over the last few weeks – to the tune of 15 per cent or so. But over one year equity markets are virtually unchanged. Base metals have fared much better. The 1.8 per cent fall in base metals last week was much less dramatic than the five per cent fall that occurred in the equities space. And the divergence over the space of the past year is even more marked. In contrast to share prices, base metals, as measured by the LME index, are up by 16 per cent. True, that rise has been completely outshone by the 54 per cent rise in the gold price over that period. But even so, boring old base metals have not done badly.



But just because base metals didn’t fall as much as some other assets over the past week doesn’t mean the unfolding economic crisis is any the less grave. However, what that relative strength does demonstrate is that alternative assets do have a role in a situation where no one knows which institution or state to trust. While the state of the US economy is not good, the country’s sovereign debt problem would be easy to solve if the political will could be found to raise taxes and cut spending. The country certainly has the ability to raise more tax revenue, if the political system can make the case for doing so. Warren Buffett has had a try. But so far the lack of political leadership on this has been disappointing, if not unexpected. 



In Europe the situation is wholly different. The only similarity is the lack of political leadership. If it’s possible to summarise the US position as “won’t pay”, then the European problem is very definitely“can’t pay”. No amount of reform and financial black magic will ever enable a country like Greece, the economy of which is contracting at five per cent, to repay, or even service its debt load, which is equivalent to 140 per cent of GDP.



No one knows how to resolve the problem of over-indebtedness in Europe. What is clear, though, is that like any company that has generated growth by expanding its balance sheet the subsequent period of debt repayment means lower growth. Whatever Europe does, whether it be debt write-off or debt repayment, growth in future years will be lower than when debt accretion helped generate rising wealth. 



Low growth is bad for base metals. What is unclear is whether it will just be Europe that suffers from this slowdown or if other regions, like North America, will join it. Since these two together constitute over 60 per cent of global metal demand the outcome is pretty fundamental to commodity prices. 



And given that scenario the obvious question then might be why haven’t base metals fallen further?  Simply put the answer to that lies in continuing robust demand from China, and inventory levels that are still amazingly low. Some asset classes might be in mid-crisis, but base metals are certainly not.

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## drillinto

Baltic Dry Index is up 16% in a week !

http://www.bespokeinvest.com/thinkbig/2011/8/22/baltic-dry-index-up-16-in-a-week.html

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## drillinto

August 27, 2011

That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html ((Free registration))


Minews. Good morning Australia. How did your market manage in another interesting week?

Oz. Quite well, all things considered. We rode through the sharp mid-week gold sell-off comfortably, and all the key indices on the ASX closed higher. Record profits posted by two of the big boys of mining, BHP Billiton and Glencore, reinforced the positive mood and takeover action in several sectors showed that there is still a strong belief that demand for commodities will continue to grow in Asia, despite the financial and political problems of Europe.


On the market the all ordinaries index recovered some recently lost ground and added 2.4 per cent. The metals and mining index rose by about the same amount, 2.2 per cent, and the gold index added 0.5 per cent, despite a 4.5 per cent decline in the gold price.



Minews. How are the valuation differences between physical gold and gold shares being explained in Oz?

Oz. It seems there are two distinct types of gold investor. The risk-averse who buy gold as financial protection against governments doing something really silly, such as inflating away their debt problems; and those with a higher risk tolerance, who want the leverage offered by shares in a gold mining company, plus the added kick which comes with any discovery. Last week provided a fascinating insight into the two-tier nature of the gold market, as the physical price fell during our trading time, but most gold company shares rose.



Also making the news down this way was the iron ore price. This hit a three-month high of US$190 a tonne as Chinese demand continues strong and bottlenecks continue to impede supply. There was also a mopping up takeover bid in the nickel sector which added a small amount of spice to a fairly depressed part of the market.



Minews. Start with gold, but hold that thought about the iron ore price. 

Oz. The gold index rise of 0.5 per cent did not really reflect what was a reasonably strong week for gold companies. The ratio of rises to falls was around two-to-one and while most rises were modest, so were the falls. The start of business next week should be interesting because the gold price was around US$1,770 an ounce when we went to the pub on Friday night. But by Saturday morning our time it was back up to $1,827 an ounce.



Among the best gold performers were Alacer (AQG), which includes the old Avoca, and which rose A51 cents to A$10.46, Perseus (PRU), which rose A28 cents to A$3.45, Resolute (RSG), which rose A13 cents to A$1.50, Norton (NGF), which rose A3.5 cents to A20 cents, Azumah (AZM), which rose A5.5 cents to A49.5 cents, OceanaGold (OGC), which rose A21 cents to A$2.20, Gryphon (GRY), which rose A8 cents to A$1.64, and Kingsgate (KCN), which rose A18 cents to A$9.21. Among the fallers were Ausgold (AUC), down A8 cents to A$1.45, Ramelius (RMS), down A7 cents to A$1.54, and Chalice (CHN), down A1.5 cents to A30.5 cents. Troy (TRY) was also down, as it suffered from profit taking after a couple of strong weeks, closing A22 cents lower at A$4.36.



Minews. Over to iron ore because that US$190 per tonne price appears to be out of step with how we’re seeing the world in London.

Oz. It is interesting, and perhaps Europe’s woes will flow into Asia at some stage, but we’re not there yet. As you would expect, most iron ore companies were better off, although admittedly not by much. Atlas (AGO) confirmed its status as a rising star of the Australian resources sector by delivering a record profit and a maiden dividend, news which lifted the shares by A21 cents to A$3.75. Iron Ore Holdings (IOH) added A3 cents to A$1.19. Latin (LRS), one of the newcomers to the sector, recovered A2 cents of the loss it incurred in the previous week to close at A20 cents. Mt Gibson (MGX) added A3 cents to A$1.52. Other moves, all small, came from Sundance (SDL), up A1 cent to A46 cents, Gindalbie (GBG), also up A1 cent to A67.5 cents, and Grange (GRR), up A1.5 cents to A45. Brockman (BRM), suffered the biggest fall of the week, down A15 cents to A$2.95. African Iron (AKI) lost A1 cent to A29 cents, and Red Hill Iron (RHI) shed A10 cents to A$2.15.



Minews. Base metals next, starting with nickel, where you mentioned some takeover action.

Oz. There was, with a touch of bitter history attached. Glencore finally moved to mop up minorities in Minara (MRE), the old Anaconda Nickel. Anaconda caused a lot of investors a lot of pain in the 1990s when it struggled to get the Murrin Murrin nickel processing plant to perform as advertised. Late last week Glencore lobbed a bid pitched at A87 cents a share for the 27 per cent of Minara it doesn’t already own. On the market, Minara added A23 cents to close at A87.5 cents, a fairly good sign that the price is right. And other nickel companies reacted moderately well to the vote of confidence in nickel by Glencore. Western Areas (WSA) added A34 cents to A$5.62. Independence (IGO) added A33 cents to A$5.50, and Poseidon (POS) put on A1 cent to A17 cents. But Mincor (MCR) slipped half a cent lower to A81.5 cents, and Mirabela (MBN) continued to lose ground, shedding A6 cents to A$1.50.



Copper companies were mixed, but generally trended weaker. Best of the copper producers was Discovery (DML), which added A12 cents to A$1.35, after positive exploration news from its Boseto mine in Botswana. Elsewhere, Resource and Investment (RNI) rose by A3 cents to A88 cents, and OZ (OZL) rose by A23 cents to A$11.46. Among the fallers were Sandfire (SFR), down A9 cents to A$7.21, Rex (RXM), down A2 cents to A$1.77, and Hot Chili (HCH), down A1.5 cents to A56 cents. 



Zinc companies were also generally weaker, although there was a handful of rises. Terramin (TZN) rose A2 cents to A23 cents, but Ironbark (IBG) slipped A1 cent lower to A22 cents, Perilya (PEM) lost half a cent to A58.5 cents, and Kagara eased back by A1.5 cents to A56 cents, despite the start of a public relations push to revive interest in the stock.



Minews. Coal and uranium next, please.

Oz. There were reasonable gains in both spaces. Aston (AZT) was the pick of the coal companies, as it traded up to a 12 month high of A$11.58 during Friday, before closing at A$11.40 for a gain over the week of a very impressive A$1.34. Macarthur Coal (MCC) moved above the A$15.66 offer price from Peabody of the US to close at A$15.80, a gain of A48 cents driven by speculation that it will attract a rival bid from Anglo American. Coal of Africa (CZA) rose by A8.5 cents to A$1.01. Carabella (CLR) crept A2 cents higher to A$1.91, and New Hope (NHC) added A18 cents to A$5.12.



Extract (EXT) attracted most interest among the uranium companies, as tension built ahead of a possible revival of a takeover bid from China. Potentially in play are both Extract, and its British-listed majority shareholder, Kalahari. On the ASX, Extract added A20 cents to A$8.02. Meanwhile, Energy Resources (ERA), Rio Tinto’s Australian uranium subsidiary, rose by A42 cents to A$3.98 as speculation grew that it would receive a mopping up takeover from its parent company. Elsewhere, Uranex (UNX) continued its rise with a A2 cent gain to A42 cents, and Berkeley (BKY) rose by the same amount, A2 cents, to A40 cents.



Minews. Minor metals to close, please.

Oz. Rare earth companies were flat. Alkane (ALK) added A1 cent to A$1.66. Lynas (LYC) slipped A3 cents lower to A$1.70. Potash plays firmed modestly with South Boulder (STB) up A2 cents to A$2.17 and Minemakers (MKR) up A2.5 cents to A36.5 cents. Tin companies gained a little ground, with Venture (VMS) and Kasbah (KAS) up half a cent each. Venture closed at A36 cents and Kasbah at A17 cents.


Minews. Thanks Oz. 

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## drillinto

August 30, 2011

Creative Destruction In The Global Economy May Be Good For Metals In The Long Term
By Rob Davies
www.minesite.com/aus.html  ((( The registration is free )))

The world seems to have decided that the US is going to have a double dip recession and that the appropriate response is to sell everything cyclical. Mining stocks are regarded as deeply cyclical so they were in the front line last week and took a six per cent hit as measured by the FT Mining index.  Bizarrely though, the UK equity market actually rose 1.8 per cent over that period and - get this - so did base metal prices. 

As measured by the LME base metals index, prices gained two per cent over the five days. Even more significant was that the gains were made in the face of a rising dollar, and that normally depresses metal prices. To be fair, gold did come off by 1.3 per cent.



But Ben Bernanke’s speech at Jackson Hole seemed to confirm some fairly widely-held opinions that he and his fellow Central Bankers can do little of significant to change the course of economic activity in the short term. Bernanke passed the buck nicely, though. He said it was now up to politicians. No wonder the market was depressed.  Consensus opinion now assumes that US economic activity will slow and, historically, that means the whole world slows. 



Still, this time things are a little different. For a start, the US has had an exceptionally weak recovery from the 2008/9 recession. There really isn’t a lot to lose if things are only ticking over in the first place. So perhaps it is less a double dip, and more just a very long combination of recession and low growth. 



Another big difference this time is that although many fund managers have expected metals prices to go down as economic growth eases back, those price movements have resolutely refused conform to expectations. 



Exceptionally low inventory levels simply frighten fabricators into buying whatever they can get hold of. If nothing else, the Japanese earthquake demonstrated the risk many global manufacturers faced by relying too much on a “just-in-time” supply line for components. As an increasing amount of metals, and most especially copper, are now sourced from politically unstable parts of the world, the danger of being left without raw material is far higher than the cost of holding stock. Besides, with interest rates so low everywhere, well except Greece, the financing costs are not too onerous. 



It is possible that the bears who outline scenarios of economic stasis will be proved right. But in some ways that would be good. It would clear out a lot of the walking wounded and leave the survivors in a much healthier position. Competition would be sharply reduced. That would then engender its own profit-led recovery and in turn rekindle demand for metals. 



Alas, that brutal inclination of capitalism to destroy in order to refresh the economy, as first propounded by Joseph Schumpeter, will be fought by politicians everywhere. While most of them seem happy to be free market-orientated when times are good, it is disappointing, if predictable, to see so many become socialist when times get tough. Unfortunately, to enjoy the good times you have to endure the bad times. That’s the hard part.

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## drillinto

September 01, 2011

The Africa Down Under Conference Kicks Off With A Bang In Perth
By Our Man in Oz
www.minesite.com/aus.html (Free registration)

If anyone in London dares tell you that the resources boom is running out of puff, tell them to jump aboard a jumbo and jet their way immediately to Perth, on Australia’s west coast, where they might catch the tail end of the world’s most interesting mining conference. Africa Down Under, as the name says, is all about African mining and investment opportunities. Even so, it’s being held in the wrong country: Australia. Despite its mislocation more than 2,000 delegates, some wearing traditional African robes, are currently wandering the halls of two adjoining hotels, peering at 170 exhibitions and company booths or listening, in an over-crowded auditorium, to presentations from a line-up which includes many of the most active explorers and miners in Africa, plus 11 senior African government ministers. It is, to Minesite’s Man in Oz, bizarre and fascinating at the same time.

The man who kicked off proceedings at the three-day event, and the person who came closest to explaining why so many Africans have made the long march to Perth to market their homeland, was one of Australia’s canniest politicians, and perhaps a Prime Minister in waiting, Gary Gray. Once a senior executive with the oil and gas producer, Woodside Petroleum, Gray noted that Africa is “the continent most off-track in reaching its Millennium Development Goal targets”. For anyone who’s forgotten, the Millennium Development targets are a grab bag of worthy objectives to which 193 countries have signed up, including the elimination of extreme poverty, fighting disease, and reducing child mortality. And that blunt talk from Gray was a breath of fresh air when compared to the nonsense contained in a speech delivered on behalf of South Africa’s controversial Mines Minister, Susan Shabangu, a last minute drop-out because of problems at home - where nationalisation of the mining industry remains a burning topic. Not that the nationalisation issue got much of public airing at the Perth conference.



For Australians, who rarely welcome politicians at mining conferences (once famously banning any of that species from the annual Diggers & Dealers forum in Kalgoorlie), the high profile treatment of the pollies is an amusing sideshow, albeit one that’s quickly forgotten. Much more interesting was the whiff of deal flow on the floors of the Pan Pacific and Novotel, where company bosses mingled with investment bankers. Prominent among the crowd were people such as Peter Landau from Continental Coal, who was dashing between appointments, Tim Goyder from Chalice Gold who was beaming as delegates gathered around his booth, and John Borshoff from Paladin Energy, who was holding court in the media room after delivering one of the early talks. 



In that speech Borshoff spoke of the third-stage of expansion of his company’s Langer Heinrich uranium mine in Namibia, and of the need for an overhaul in the way uranium is sold. Whether he’s right about uranium marketing or not, his talk was a classic example of what Africa Down Under is all about. Here was a career Aussie explorer, who did it tough for 30 years with his unsuccessful attempts to mine uranium in Australia, before he struck it lucky and mad his overdue fortune in Namibia and Malawi where uranium mining is legal, and welcome. Borshoff’s beef about uranium marketing is that electricity utilities have too much say in the pricing. “They haven’t got a clue about mining and they say we think US$50 a pound is enough”, he said. “In all other commodities, the end user never talks to the miner in terms of the price. A car manufacturer doesn’t go to BHP Billiton and say I think steel should be US$70 a tonne. The uranium market has to separate from both the supplier and the consumer.”



Despite Borshoff’s annoyance about the low spot-market price for uranium, his talk did serve as a reminder that most commodity prices, if not mining company share prices, remain remarkably robust. Gold explorers were certainly in the spotlight with the gold price holding above US$1,830 an ounce. Four of the best presentations of the first day came from gold explorers. Steve Parsons from Gryphon talked about the recently-finalised engineering study at his company’s Banfora project in Burkina Faso. Here the target is 180,000 ounces of gold a year at a cash cost of US$430 an ounce. Paul Kitto talked up the Batie West project of Ampella Mining, which is heading towards a three million ounce resource. Mark Calderwood from Perseus Mining reported on a fresh set of high-quality drill hits at his Sissingue project, including 78 metres at 4.7 grams a tonne gold. And Rick Yeates from Middle Island Resources reported new drill hits at his Reo project in Burkina Faso, including four metres at 16.2 grams a tonne.



Other minerals were not ignored either, and brought back to mind the wisdom contained in Rob Davies’ contribution to Minesite a couple of days ago, in which he noted that even though the world economy appears to be double dipping, or just bouncing along the bottom, metal prices are staying high. Why this is so is a bit of mystery, as Rob discussed. But some of the strange factors at work include Japan’s shake-up, which brought into question the wisdom of just-in-time manufacturing in the context of a transport break down, and that a lot of the world’s raw materials now come from “politically unstable parts of the world”.



Political instability, and failure to achieve millennium development goals are two of the reasons why Africans have travelled to Australia to encourage investment back home. Offsetting the negatives of political risk and economic backwardness - politely ignored so as to not embarrass the visitors - is the marvellous geology of Africa which Europeans have been plundering for centuries. Australians, on the other hand, are not burdened with Europe’s baggage, or scarred by South Africa’s era of apartheid. They are in it for the simplest of reasons, making a quid, and having fun at the same time.



As if to underline this point, Gary Gray pointed out in his opening talk that seven out of the top 10 growth companies in Perth over the past decade have assets in Africa. In effect, Perth has now become the stepping-off point for Aussies heading for Africa as much as a bolt-hole for South Africans fleeing their homeland. Gray said that 230 Australian companies now have mining and energy assets in Africa, covering 650 projects in 42 countries. Since the start of the year, 20 companies and 100 projects have been added to the list, facts that Gray delivered flatly without appearing to realise the irony in what he was saying - that some of the Australian companies heading for Africa are doing so because the Australian Government’s high-tax policies risk making his country a financial no-go zone.

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## drillinto

September 02, 2011

Africa Down Under, Day Two: Consolidating The Australian Beachhead In Africa
By Our Man in Oz
>> www.minesite.com/aus.html

Mining is rarely seen as a friend of government, but on day two of Africa Down Under, the mis-located conference about African resource development being held in Australia, it was kiss and make-up time for some traditional enemies. Bill Turner, former chief executive of Congo-focussed copper miner, Anvil Mining, told the conference that Australian mining companies could play a role in assisting the Australian Government expand its role in Africa. Describing mining investment so far as “a beachhead”, Bill said Australia had a “first mover” advantage in a number of technical and corporate areas which could see the Australian mining companies work closely with government to form private-public partnerships.

Far-fetched as that sounds - and readers with long memories might suspect that they’re reading a script from the television comedy classic, Yes Minister - Bill’s suggestion went down well with his audience. Whether anything comes of it will be another thing entirely, but the positive reaction was a reflection of the prevailing mood, at an event which seems to have captured the early stages of an emerging relationship with the Indian Ocean at its centre. Although it’s unlikely to ever rival the 20th century’s focus on trade around the Atlantic, nor the focus on the Pacific in the early years of the 21st century, there is unquestionably something emerging around the Indian Ocean, what with a fast-growing mega economy to the north in the shape of India, and two resource-supply specialists at different stages of development, to the east and the west.



Growing something significant out of the link-ups around the Indian Ocean has kept academics at the University of Western Australia busy over the past 20 years, as they’ve organised seminars and tried to encourage industry to pick up the ball. And this week in Perth it has been the mining industry which has emerged as the catalyst for change, with Australian mining companies filling technical and commercial service roles that ought to have fallen into the lap of South African industry. Perhaps history has a lot to do with why that has never happened, but whatever the reason for past failure, there was certainly a sea-change evident at Africa Down Under - a sea-change which investors would be wise to note. Australian listed mining companies are becoming proxies for African investment.



According to Bill Turner there are more than 220 ASX-listed Australian companies active in mineral exploration in Africa. Australians operate 17 mines, and have an interest in a total of 28 mines. That established track record prompted Moses Asaga, chairman of Ghana’s Parliamentary committee on Mines and Energy, and head of the delegation from Ghana to the conference, to ask for Australian companies to assist in the “scaling up” of an estimated 600 small mines in his country. He said local mining companies lack the capital and expertise to handle expansion: “We would welcome a higher level of involvement in this development opportunity”, Mr Asaga said. “We are the second largest gold producer in Africa and the eight largest in the world, but we can also offer Australian investors exposure to large scale diamond, manganese and bauxite opportunities.”



With government creeping into the conference, this will be the final report on the event from Minesite’s Man in Oz who prefers the analysis of less murky corporate matters. On that score, though, there were a few items of interest on the second day. The Adamus/Endeavour merger was the lead-off talk of substance, with Mark Connelly keen to market the creation of a new mid-tier goldminer which is targeting annual output of 250,000 ounces a year from 2013. “The larger company de-risks our operations as standalone companies, delivers production at between US$575 an ounce and US$625 per ounce this year, and allows full repayment of a US$60 million project dent on Adamus’s Nzema mine”, Mark said. He added that documentation on the deal was moving swiftly and could be wrapped up as early as November.



Other presentations of interest included that from Lindsay Reed of emerging Botswana coal miner, Aviva Corporation. Lindsay said studies into the company’s Mmamantswe thermal coal project should be finalised early in 2012, with the aim being to develop a mine producing 10 million tonnes of coal a year. “Mmamantswe already has a defined water resource and a JORC-code resource of 895 million tonnes of coal, and is on a main infrastructure corridor,” Lindsay said. Chalice Gold, Resolute Mining, Sundance Resources, Legend Mining, Discovery Metals, Kasbah Resources and Azumah Mining were also on the day two agenda.



If there was one flat spot on the day it was delivered by Rio Tinto. David Joyce, managing director of Rio Tinto Iron Ore Expansion Projects, gave a reading from the official rule book on iron ore, and then declined to answer media questions. Now, why would that be so? Perhaps it has something to do with Rio Tinto’s troubles in Guinea where the mining giant thought it had majority control of the giant Simandou deposit, only to find a Chinese partner inserted into the deal, amid lurid reports of cash-stuffed brown paper bags and bouncing cheques. Surely he didn’t expect cheeky media hacks to inquire about that?



With that slightly sour note delivered, courtesy of the silent man from Rio, it’s time to sign off from Africa Down Under with a few observations for next year. Firstly, the organisers must book a bigger conference centre, because dashing between two hotels, across a busy road, is not just tiresome, it’s dangerous. Secondly, ease up on the government chaps. They are killing Mining Indaba in Cape Town as a must-attend event, and it would be a shame to see same thing happen with such a special conference as Africa Down Under.

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## drillinto

September 03, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html ((( Free Registration )))


Minews. Good morning Australia. It looks like Friday’s sell-down took the gloss off your market.



Oz. It did, though the gold price was certainly becoming a factor as we headed into the weekend. On Monday most gold companies should get a significant boost. When the ASX closed on Friday gold was priced at US$1,829 an ounce. But after the latest disappointing employment news from the US, gold shot up to around US$1,883 per ounce, a price which should add to interest in all forms of gold next week.


But overall, as you suggested, Friday brought the undoing of what had been a reasonably good week up to then. Before the sell-off the all ordinaries index was up by 2.5 per cent, the metals and minerals index up by 3.3 per cent, and the gold index up by 1.3 per cent. By the time we downed tools on Friday the gains had been reduced to 1.1 per cent for the overall market, 1.6 per cent for mining and 0.5 per cent for gold.



Minews. Okay, down to the detail. 



Oz. First, three items of good news to brighten the day for readers. Firstly, the iron ore market was boosted by reports that the spot price is back into record territory, and that some trades have been booked at up to US$190 a tonne. That’s a level which confounds critics who have been predicting a price slide. The slight caveat is that the issue with iron ore has been supply disappointments rather than rampant demand. The second item of good news was the success of the Africa Down Under conference, which we reported on during the week. It gave the small end of the mining sector a boost. Third, there was a burst of discovery news which caused a number of companies to rise sharply.



Minews. There’s nothing like discovery news, so let’s go there first.



Oz. Two copper companies have been capturing the headlines with drilling success near historic copper workings about 70 kilometres east of Sandfire’s rich Doolgunna mine in Western Australia. Ventnor (VRX) starred last week, putting in a 164 per cent rise to A59.5 cents. Also on the march was and Sipa (SRI), which took its rise over two weeks of trading to 151 per cent, or A10 cents, closing on Friday at A16.5 cents. Ventnor’s best drill hits so far include five metres at 4.21% copper. Sipa’s best include 3.7% copper over eight metres by Sipa. What’s not widely understood is that proximity to both operations of historic copper workings. Ventnor is drilling under and around the old Thaduna and Green Dragon copper mines, so its discoveries are effectively a brownfield extension of a known copper deposit. And Sipa has made a greenfield discovery at its Enigma anomaly a few kilometres north of Thaduna. Both are worth watching, and both add substance to the theory that the Doolgunna region will throw up more than one new copper mine.



Another discovery company which caught the eyes of local investors this week was Investigator Resources (IVR), which reported encouraging silver intersections at its Paris project in South Australia. The best drill intercept was four metres at 913 grams a tonne from a depth of 72 metres. On the market Investigator rose 125 per cent to A18 cents. Elsewhere, Coventry Resources (CVY) reported high-grade gold results from its Cameron project in Canada. Best hit was 3.4 metres at 58.73 grams a tonne from a shallow depth of 5.4 metres. Coventry added A5.5 cents to A22 cents as a result. Azimuth Resources (AZH) also caught the eye of speculators after publishing an updated report on its gold exploration projects in South America. Azimuth rose by 25 per cent to A46.5 cents.



Minews. Now for prices from the gold sector, please.



Oz. Most gold companies gained ground, but a handful slipped. Among the better risers were CGA Mining (CGX), up A50 cents to A$2.81 after reporting a 307 per cent profit increase, and Dragon Mining (DRA), up A24 cents to A$1.58 after reporting a spectacular drill it at its Kuusamo gold project in Finland, with a best hit of 45.67 grams over 31.9 metres. Perseus (PRU) rose strongly after a well received presentation at the Africa conference, closing up A16 cents to A$3.61, a fresh 12-month high. Other movers included: Kingsrose (KRM), up A9 cents to A$1.45, Resolute (RSG), up A6 cents to A$1.56, Troy (TRY), up A9 cents to A$4.45, and Medusa (MML), up 43 cents to A$7.92. Kingsgate (KCN), however, fell A46 cents to A$8.75 after a disappointing profit result.



Minews. Base metals next please, to see if those copper drill results lifted the sector.



Oz.  Not really. There was a modestly firmer tone among the copper, nickel and zinc companies. The better copper movers included: Metminco (MNC) up A4 cents to A25.5 cents, Hot Chili (HCH), up A7 cents to A63 cents, Discovery (DML), up A7 cents to A$1.42, and Marengo (MGO), up A2 cents to A24.5 cents. Talisman (TLM) rose A5.5 cents to A53 cents as it picked up support from being close to Ventnor and Sipa. Sandfire (SFR), however, the original player in that district, could only manage a rise of A2 cents to A$7.23.



Nickel companies were mixed. Mincor (MCR) did best, putting in a rise of A11.5 cents to A93 cents, its best rise for months. Mirabela (MBN) also recovered some recently lost ground with a rise of A20 cents to A$1.70. Offsetting those rises were falls from Western Areas (WSA), down A12 cents to A$5.50, and Independence (IGO), down A29 cents to A$5.21.



Ironbark (IBG) was the pick of the zinc companies, putting in a strong rise of A5.5 cents to A27.5 cents after it announced a construction deal with a Chinese company relating to development of the Citronen project in Greenland. A bit of that news rubbed off on other zinc companies. Perilya (PEM) added A1 cent to A59.5 cents. Kagara (KZL) rose A3 cents to A59 cents, and Terramin (TZN) gained A1 cent to A24 cents.



Minews. Iron ore, to test what those higher iron ore prices did to the market,



Oz. There were a few handy individual rises, although the strength didn’t run across the board. The best upward move came from Fortescue Metals (FMG), which added A37 cents to A$6.12. Mt Gibson (MGX) put on A9 cents to A$1.61. Iron Ore Holdings (IOH) was A6 cents stronger at A$1.25. Atlas (AGO) rose by A4 cents to A$3.79. Sundance (SDL) gained A1.5 cents to A47.5 cents, and Grange (GRR) shook off the losses of several bad weeks with a rise of A11.5 cents to A56 cents.



Minews. Coal, uranium and minor metals to close, please.



Oz. Coal was mixed. Uranium was down, and most of the minor metals gained ground. Best of the coal companies was Carabella (CLR), which rose A14 cents to A$2.05 on news that Australia’s richest person, the iron ore heiress, Gina Rinehart, had snapped up a stake in the company after the surprise resignation of founding chief executive, Mitch Jakeman. Other coal movers included: Metro (MTE), up A7.5 cents to A82 cents, Bathurst (BTU), down A9.5 cents to A91.5 cents, New Hope (NHC), up A3 cents to A$5.15, and Coal of Africa (CZA), up A3 cents to A$1.03.



A lower uranium spot price took the gloss of that sector, though most falls were small. Extract (EXT) slipped A12 cents lower to A$7.90. Paladin (PDN) lost A6 cents to A$2.00, and Berkeley (BKY) was A3.5 cents weaker at A36.5 cents. Rises came from Manhattan (MHC), up A6.5 cents to A40 cents in very thin trade, Uranex (UNX), which crept half a cent higher to A42.5 cents, and Toro (TOE), which rose A0.2 of a cent to A8.3 cents.



Rare earth companies led the minor metals higher. Alkane (ALK) added A22 cents to A$1.88. Lynas (LYC) followed with a rise of A6 cents to A$1.76. Titanium mineral companies were led up by Base Resources (BSE), which rose A4 cents to A54 cents. South Boulder (STB) was the best of the potash companies, up A24 cents to A$2.41, and Venture (VMS) was the best of the tin companies, up A6 cents to A42 cents.

Minews. Thanks Oz.
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## drillinto

S&P 500: Sector and Other Asset Class Trading Ranges
Materials sector is oversold 
Gold and silver are overbought

To view the charts, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/9/2/sector-and-other-asset-class-trading-ranges.html


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## drillinto

September 05, 2011

Miners Continue To Deliver Big Profits, Even Though Only One Of The Four Engines Of The Global Economy Is Really Firing Properly
By Rob Davies
www.minesite.com/aus.html  -- The registration is free --

Reading the financial press, it is easy to get the impression that the world is about to fall off an economic cliff. Sure, the US economy is stuck in a long and deep recession, but that is not news.  Still, it’s turned out that anyone who was expecting a sudden recovery was being overly optimistic about the inclination of consumers to take on more debt and the ability of banks to provide more credit. Banks operating in the US will be looking at the US$169 billion they are being sued for by the Federal Housing Finance Agency (FHFA) and will probably decide that now is not the right time to expand the balance sheet. That will constrain growth from the consumer.

In the same way, the US administration is very constrained in its actions, caught as it is in a three way tussle between ratings agencies, an impending election and an opposition in the thrall of some characters that have been described as “nutters”. In that context, it is not about to start opening its chequebook to stimulate the economy.



Japan, with an eye-popping debt to GDP ratio of 200 per cent has eye-catchingly been described as a bug in search of a windshield, and is unlikely to help out and make much of a positive contribute to global growth. And then there is Europe. The 26 per cent decline in the DAX equity index since the recent peak in July tells us that whatever solution is adopted, it looks as though it will be bad for Germany. Either Hans pays more tax to guarantee Theo’s pension in Athens, or a relative revaluation of the German currency relative to the Latin states destroys the competitive position of the metal bashers in the Mittlestand. The depressed cost base Germany has enjoyed as part of its membership of the euro is coming to an end. The bill for the euro party that was so beneficial for Germany is now being delivered.



China, of course, remains the beacon of hope. But it is already growing at the best part of 10 per cent, funded by a banking system that probably would not survive close scrutiny. It is unrealistic to expect it to grow any faster. The best we can hope for is that is carries on growing. 



In this context, you could be forgiven for thinking that capital values had vaporised. That, though, is not the case. Metal prices, as measured by the LME base metals index, rose 2.2 per cent over the week, mostly driven by a surge in copper to US$9,100 a tonne, which came in the wake of concerns about supply from Chile. That price rise serves as a potent reminder, if one is needed, of how tight supply is even in these dire economic conditions. Mining and commodity companies, such as BHP Billiton, Xstrata and Glencore continue to report stonking results, even after three years of the “new normal” economy of much slower growth than the world was previously used to.



If these companies can deliver good earnings when only one of the four engines of the global economy is running properly, it makes you wonder what might happen if the other three finally get their acts together. However bad things are in the US, Japan and Europe - and they aren’t good - there remains a huge resource of entrepreneurs, managers and consumers who are determined to improve the lot of their businesses and their lives. 



This human ingenuity will drive growth, and that will take demand for metals from current levels to new heights. We just don’t know when. But what we do know is that most companies, apart from banks, are delivering good profits. Maybe that means the recovery will eventually be driven by good old profits growth and not by grandiose schemes dreamed up by politicians and central bankers. In fact, all the businessmen need to do is get out of the way and let businessmen get on with the job.

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## drillinto

"Popping the gold bubble theory"
Bill Fleckenstein

What the gold bears don't seem to realize is that, despite its big gains, the gold market can't be a bubble when almost everyone seems to think it’s overpriced.

http://money.msn.com/exchange-traded-fund/popping-the-gold-bubble-theory-fleckenstein.aspx

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## drillinto

Commodity prices still resilient
By M. Chakravarty

While the global economy has been slowing and equity markets have reflected that, commodity markets have remained remarkably resilient. 

http://www.livemint.com/2011/09/07212845/Commodity-prices-still-resilie.html

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## drillinto

September 10, 2011

"That Was The Week That Was … In Australia"
By Our Man in Oz >> www.minesite.com/aus.html (FREE REGISTRATION)


Minews. Good morning Australia. It looks like the gold sector on the ASX has finally responded to the price of gold.



Oz. That is an interesting observation, and largely correct. A significant number of gold companies rose quite pleasingly last week, although the rest of the market drifted lower. What sparked the revival in gold equities is anybody’s guess, but it was probably a result of investors discovering the value gap which has opened between the price of bullion and gold shares.


Overall, the gold index on the ASX rose 3.3 per cent, during a week when the gold price opened and closed during our trading hours at around US$1,875 an ounce, and the Australian dollar was steady at around US$1.06. Gold, after we closed, slipped back to around US$1,855 per ounce, but the Aussie dollar went with it, sliding to US$1.04, a dip which negates that small US dollar gold price decline.



We’ll get to prices in a tick but first let’s finish painting the big picture. It was a topsy-turvy market last week, up one day, down the next, and overall the ASX all ordinaries shed a relatively painless one per cent. One reason for the overall weakness was news that Australia’s economy, as measured by the latest GDP numbers, grew by 1.2 per cent in the June quarter – that looks like an annualised 4.8 per cent to five per cent, but in fact largely reflects recovery from the Queensland floods in March. The metals and mining index lost 1.3 per cent as investors shunned the base metals sector.



Minews. Over to prices, starting with the good news from gold.



Oz. Star of the week was a Minesite regular, Perseus Mining (PRU) which we covered in some depth on Wednesday. It added A29 cents to close the week at A$4.00, but did trade up to a 12 month high of A$4.03 during Friday trade. Silver Lake (SLR), another Minesite member, performed almost as well, putting in a rise of A20 cents to close at A$2.79 after hitting a 12 month high of A$2.85 on Wednesday and Thursday. A third Minesite regular, Resolute Resources (RSG), set a new high of A$1.79, but closed out the week at A$1.77, up A22 cents. Regis Resources (RRL), which operates the Duketon goldmine in Western Australia, also reached a fresh peak, adding A16 cents to close at A$3.00, after a new high of A$3.05 was reached during early Friday trade.



Red 5 (RED), which is developing the Siana mine in the Philippines, was another company to hit a 12 month high. It added A3.5 cents to close the week at A23.5 cents, slightly down from a peak price of A24 cents. Azimuth Resources (AZH), which has hot exploration targets in the South American country of Guyana, added A2 cents to close at a peak price of A48.5 cents. ABM Resources (ABU), which is exploring in the Northern Territory, also did well, hitting a peak of A6.5 cents on Friday, before closing at A6.3 cents, up A0.9 of a cent. And Alacer Gold (AQG), which incorporated the old Avoca Resources, hit a peak price of A$11.28 on Friday, but closed at A$11.25 for a gain of A89 cents.



Minews. Solid rises, indeed! Perhaps a few more gold prices before calling the card of the other sectors?



Oz. In no particular order, the movers included Adamus (ADU), up A13 cents to A80 cents, Gryphon (GRY), up A12 cents to A$1.76, Medusa (MML), up A46 cents to A$8.35, Troy (TRY), up A18 cents to A$4.65, Chalice (CHN), up A4 cents to A39 cents, Allied (ALD), up A20 cents to A$2.80, Kingsrose (KRM), up A3 cents to A$1.50, St Barbara (SBM), up A18 cents to A$2.33, and Beadell (BDR), up A3.5 cents to A86.5 cents.



Minews. After so much good news, time for a wake-up call and a look at base metals.



Oz. There were a handful of rises but it was mainly down in the copper and nickel sectors. Zinc did a little better. Discovery (DML) rose A3 cents to A$1.45, and Talisman (TLM) rose A2 cents to A55 cents, two of the better-known copper regulars to rise. And there were two other interesting copper-related companies that gained ground. Dart Mining (DML) said it was getting close to a maiden resource estimate on its Unicorn project in Victoria, news which lifted shares in this small and thinly-traded company to a 12-month high of A15 cents, although they later settled lower at A12.5 cents, up A4.5 cents on the week. And Kentor Gold (KGL) attracted interest in drill results from its Jervois project in the Northern Territory, rising A1.2 cents to A11 cents. The best drill hit was 72 metres at 3.27% copper, plus 51.33 grams of silver and 1.16 grams per tonne gold, but from deep down, at 414 metres. Among the fallers in the copper space were Hot Chili (HCH), down A6.5 cents to A56.5 cents, OZ Minerals (OZL), down A27 cents to A$11.61, Sandfire (SFR), down A18 cents to A$7.05, Rex (RXM), down A5.5 cents to A$1.71, and PanAust (PNA), down A23 cents to A$3.37.



Investors stayed away from nickel companies in general, amidst gloom about over-supply. Western Areas (WSA) was the sole nickel company to rise, adding A7 cents to A$5.62. Mincor (MCR) slipped back to A89.5 cents, with a fall of A4.5 cents. Independence (IGO) lost A11 cents to A$5.09. Mirabela (MBN) slipped A7 cents lower to A$1.63, and Poseidon (POS) shed half a cent to A19 cents.



Perilya (PEM) was the best of the zinc companies, adding A2.5 cents to A62 cents. Ironbark (IBG) wasn’t too far behind, putting in a rise of A1.5 cents to A29 cents. Modest as these rises are, the zinc sector does appear to finally be attracting some investor attention. Terramin (TZN) and Meridian (MII) were steady, at A24 cents and A12.5 cents respectively.



Minews. Iron ore and coal next, please.



Oz. The picture was mixed in both sectors, but trending down. Among the better performers in iron ore were Brockman (BRM), up A13 cents to A$2.98, and Latin Resources (LRS), up A4 cents to A26 cents. South American Ferro Metals (SFZ) also did well, up A4.5 cents to A23 cents, on news that its Ponto Verde project in Brazil has reached nameplate capacity of 1.5 million tonnes a year. Falls were posted by Atlas (AGO), down A12 cents to A$3.69, Sundance (SDL), down A2 cents to A45.5 cents, Mt Gibson (MGX), down A7 cents to A$1.54, Murchison (MMX), down A1.5 cents to A58 cents, and Grange (GRR), down A2 cents to A54 cents.



Risers among the coal companies were equally rare. Bathurst (BTU) added A2 cents to A93 cents, Coal of Africa (CZA) rose by A1 cent to A$1.04, and newly-floated Tigers Realm (TIG) crept half a cent higher to A43.5 cents. Falls were posted by Whitehaven (WHC), down A10 cents to A$5.89, Carabella (CLR), down A10 cents to A$1.96, Coalspur (CPL) down A1 cent to A$1.57, and Continental (CCC), down A1.5 cents to A28 cents.



Minews. Uranium and minor metals to close.



Oz. There were some interesting upward moves in both of those areas. Havilah (HAV) had its best week in more than a year, after it announced an exploration funding deal with a Chinese partner. That lifted the South Australian-based company’s shares by A8.5 cents to a closing price of A63.5 cents, after a mid-week high of A76 cents. Extract (EXT) continued to draw in speculators waiting for a fresh Chinese takeover bid, rising by A37 cents to A$8.25. Berkeley (BKY) added A1 cent to A36.5 cents. However, falls from Paladin (PDN), down A17 cents to A$1.82, and Bannerman (BMN), down A2 cents to A$1.82, offset the rises.



Among the minor metals there were two new names atop of the list of the risers. Hastings Rare Metals (HAS) reported a resource upgrade at its Hastings project in Western Australia, adding A3.5 cents to A22 cents. And Planet Platinum (PPN) rose by A8 cents to A27 cents, but in ridiculously thin trading in which just 10,000 shares traded across the week, and even then on a single day, Friday. Other rare earth companies were mixed. Lynas (LYC) slipped A2 cents lower to A$1.73. Alkane (ALK) added A8 cents to A$1.96. Lithium leader, Galaxy (GXY) rose A10 cents to A87 cents. Potash leader, South Boulder (STB) added A9 cents to A$2.50. Tin companies barely moved. Venture (VMS) and Kasbah (KAS) were both down half a cent, to A41.5 cents and A18.5 cents respectively.



Minews. Thanks Oz.

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## drillinto

Science

"Meteorites delivered gold to Earth"
By Leila Battison

Scientists have shown that the Earth's surface became enriched with precious metals by impacting meteorites. 

http://www.bbc.co.uk/news/science-environment-14827624

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## LostMyShirt

Haha - Gold was delivered from the Heavens!


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## drillinto

September 12, 2011

"What Impact Will The Impending Collapse Of The Euro Have On Metals Prices ?"
By Rob Davies
www.minesite.com/aus.html

There is a strong sense pervading the markets that 60 years of economic make-believe in Europe will reach its denouement in the next few months, or even weeks. While the ultimate economic form of the new Europe is becoming clearer the route it will take to get there is still as unclear as ever. And what concerns the capital markets is the collateral damage that will be incurred in the process. So far the markets have been fairly insouciant but that seems unlikely to continue given recent events.

Late on Friday 9th, Jűrgen Stark, a German board member of the ECB, resigned from the European Central Bank, citing personal reasons. However his unease at the recent policy of the ECB in buying bonds of the Latin countries to support them was well known. His move follows the departure in February of Axel Webber, the Bundesbank president. These moves demonstrate the governance of the ECB is becoming more Latin and less Teutonic.



Unfortunately, that conflicts with the funding which remains largely German. It’s a state of affairs that cannot continue and it surely is only a matter of time before the euro breaks up - when the Germans say to the Latins either we leave or you leave.   



The break up itself will doubtless be traumatic. But the uncertainty that precedes it could be even worse as countries twist and turn to do everything possible to maintain the fiction that one interest rate is applicable to so many different economies. The effects can already be seen in an overvalued Swiss Franc, a high price for gold and, last week, a 3.4 per cent drop in the euro against the dollar. Such a gain for the US currency might normally be bad news for metal prices but the 0.4 per cent fall in base metal prices, as measured by the LME index, to 3,975, is clear testimony as to the underlying strength in this section of the commodity markets. 



Among the other distortions caused by the current economic crisis are the low level of interest rates and the flatness of the yield curve. This is just another way of saying that long term interest rates are not much higher than those for the short term. A demonstration of that fact is the 1.96 per cent yield now offered by 10 year US Treasuries. And a major reason for the flat curve is the quantitative easing programme in the US which reduced long term interest rates because the buying of bond was what the new money was spent on. 



Reducing interest rates is a good idea in circumstances such as these. But it also has the perverse effect of making life more difficult for the banks that typically fund long-term loans with short-terms deposit. As there’s so little difference between long-term and short-term rates, banks find it hard to make a return on traditional lending. So they have cut back on lending, and the consequent lack of bank finance is another factor working to constrain growth. 



Low interest rates, for the short term and long term, also has an impact on metals prices by reducing the contango - the premium of future prices to current prices - to very low levels.  At the moment, only aluminium and zinc offer anything reasonable in terms of higher forward prices, at five per cent and four per cent respectively for 15 month metal. Copper, lead and nickel prices that far out are only quoted at between 0.2 per cent and 0.7 per cent higher than spot prices. This is partly a function of the tightness of these markets, as well as of the current macro-economic conditions, but it does also demonstrate just how interconnected modern capital markets are. Exactly how commodity markets will react to the death throes of the euro will be a vital factor in determining metal prices in the weeks and months ahead.

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## drillinto

September 12, 2011

"Resolute Mining Heads For The Big Time, At Last"
By Our Man in Oz >> www.minesite.com/aus.html

Anyone who bumps into Resolute Mining[ASX-RSG] chief Peter Sullivan any time soon shouldn’t be surprised if he is humming a tune from an old Australian beer advertisement. The television commercial for Swan Lager ran in the 1980s and 90s and was based on Australia winning the America’s Cup, a trophy then considered the ultimate prize in yacht racing. The lyrics to the ad start with the words: “they said you’d never make, we’ve seen you guys before. No-one’s ever gonna take it, it stays bolted to the floor.” Peter’s win has not attracted the same attention as the defeat of an American 12-metre yacht off the coast of Newport, Rhode Island did in 1983, but his success at the Syama gold mine in the land-locked African country of Mali is the mining world’s equivalent of winning the America’s Cup.

Acquired in early 2003, Syama was regarded by a series of owners, including BHP Billiton and Randgold Resources, as a mine which could not be tamed. Complex metallurgy made Syama’s ore difficult to treat, as it required expensive roasting to overcome high levels of sulphur. No prizes for guessing that roasting ore using diesel for fuel in the middle of Africa is an expensive business. But then, that’s why Resolute was able to buy the mine and its surrounding exploration tenements at a discounted price. 



Resolute wanted to get its hands on Syama to see if it could apply a metallurgical theory that would flip the sulphur from being a liability into an asset. Rather than a full roast, the plan was to produce a concentrate. Eight years later, and after a tortuous process of trial and error, Resolute has cracked the Syama code, turning a once unloved gold deposit into a profitable gold mine, and entitling Peter to break into a rendition of the Swan Lager “they said you’d never make it” tune anytime he likes. Because he really has made it.



Investors, perhaps after waiting the best part of a decade for good news from Syama, have been slow to recognise the change in Resolute. Having said that, they have now started, boosting Resolute’s shares price to a 12 month high of A$1.79 in the last few weeks, close to double where it was a year ago. The high gold price certainly helps but what’s really been driving the shares is a series of good newsflow, which started in February with the closure of the company’s hedge book, and a culminated with a presentation by Peter at the Africa Down Under conference in Perth. That presentation involved Peter ticking off six good reasons to buy the company’s shares. Resolute is, he said: “Australia’s second biggest listed gold miner, producing 330,000 ounces of gold a year, and rising to 400,000 ounces, has 5.2 million ounces in reserves to back more than 10 years of mine life, is 100 per cent unhedged, has been paying down debt, and expects to be debt free by the end of 2011, and is looking at capital management initiatives, including share buybacks and/or the payment of dividends”.



Just before the Africa Down Under presentation, Resolute had quietly slipped into the market an update on its financial operations which attracted little mainstream media interest in Australia, but which can now be seen as company’s “eureka moment”. Not only did it contain news that Resolute had turned a 2010 loss of A$37.2 million into a profit of A$61.4 million, but it confirmed that production was rising, costs falling, and reserves growing. Forecast gold production for the group for the year to June 30th 2012 is now 410,000 ounces, up from 330,859 ounces during the year to June 2011. Cash costs should drop next year too, to approximately A$730 an ounce, against the A$908 per ounce reported in the year just gone. Peter said that cash flow would significantly strengthen the company’s balance sheet. “In the early part of the year this will involve the aggressive pay down of secured debt. Depending on market conditions, further de-gearing of the balance sheet could occur through the early redemption/conversion of convertible notes representing approximately A$68 million of unsecured debt.”



Much of what is being achieved at Resolute is a result of its mastering of Syama, although a useful contribution also comes from the company’s other African mine, Golden Pride in Tanzania, and from Ravenswood in the Australian state of Queensland, which has been processing stockpiled ore since 2009. Looking forward, there will be expansion across the company’s portfolio. Syama is being expanded via an additional cutback to the open pit which will extend mine life from six to 13 years. That will delay the transition to underground mining, but the switch underground that will eventually take place has been aided by recent drilling success below the planned deeper pit, including drill hits of 140 metres at 3.43 grams of gold a tonne, and 105 metres at 3.65 grams per tonne. An oxide ore-processing circuit might further boost Syama gold production, and a switch from diesel to grid electricity could lower production costs, given that the diesel bill currently represents about a third of Syama’s costs.



Exploration, a factor few investors consider, is also becoming a key ingredient in the Resolute mix, and the annual budget has now been boosted to A$20 million a year, mainly on near-mine targets. A hint that the Ravenswood mine could make a return as a major profit generator can be found in the latest drilling results, as the Welcome Breccia prospect has returned a spectacular 113 metres at 7.7 grams per tonne from a depth of 316 metres, and a more recent seven metres at 7.84 grams per tonne from 76 metres. “Welcome Breccia is the first of five Mt Wright-style targets to be tested in the district”, Peter told Africa Down Under.



Separate from Resolute’s news of rising gold production and reserves, falling costs and the closure of the hedge book, there is also the story of the “three tables”, contained in Peter’s latest presentation. The tables in question show gold production across the Resolute peer group, gold reserves across the same, and relative market capitalisation. In terms of production, Resolute is Australia’s top mid-tier miner. It’s second in terms of reserves, after Alacer, but only eighth in terms of market capitalisation. That lowly No.8 ranking is unlikely to stick, though, as investors digest the changing picture, and rising share price, of Resolute.



They said you’d never make it, Peter, and they were wrong.

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## drillinto

September 14, 2011

"Continental Coal Is Now Just Days Away From An AIM Listing"
By Our Man in Oz
www.minesite.com/aus.html

Anyone who has experienced electricity cuts in southern Africa will appreciate the business plan of Continental Coal [ASX-CCC], an ambitious South African coal producer with both domestic and export operations. The simple proposition of selling coal to a power-hungry region is one of the company’s greatest strengths, especially as it also has a long pipeline of development projects and plans to export from one of the world’s great coalfields. But, if it was as simple as digging and delivering, Continental’s share price would be a lot higher than it is today.

South Africa is never simple, especially when it comes to mining, the country’s most important industry, and the one subjected to the greatest level of political interference. Repeated references to the worst of all investment words - “nationalisation” - don’t help. As the Financial Times said in a headline last week, South Africa suffers from “undermined potential”, and that dynamic has been no help to Continental at all. If the company could simply get on with the business of mining it would not be trading at a lowly A27.5 cents on its home stock exchange in Australia, where deep, and understandable doubts, are entrenched about the investment credentials of Africa.



Next week, however, could see a change of fortune for Continental as it achieves a long-planned objective of listing in London. With the delightful London stock market code of COOL, Continental will open for trading on the Aim market on Monday September 19th, providing British investors with a closer look at a business which has been posting some useful numbers since making the transition from explorer to producer, and which now has plans to grow quickly. Continental’s chief executive Don Turvey and executive director Jason Brewer are currently in London to spread the word about their business. What they will be saying is essentially the same as what Don said at the annual Africa Down Under conference in Perth two weeks ago, when Minesite’s Man in Oz had a chance to listen and dissect his message.



Continental is currently a two-mine business. Both mines are small, although there’s a third under construction, also small. In the pipeline are at least seven new mines, which will also be relatively small, but with the potential to grow. The mines in production are Vlakvarfontein and Ferreira. The new mine is Penumbra. All are located on the coalfields to the east of Johannesburg, and all are close to excellent rail and port infrastructure, and coal-hungry power stations.



For some reason, though, South African mining executives like to wrap a good story in unnecessary packaging, clouding what’s happening on the ground with what might, or might not, happen in the future. In the case of Continental, the opacity creeps in in relation to the possible futures around mines at Vaalbank, Project X, De Wittekrans, Knapdaar, Wesselton, and Leiden. Those projects might, one day, be important sources of coal for Continental, but while it is understandable that Don wants to display his pipeline, today his company is simply a two-mine business producing two million tonnes of thermal coal. Continental might well be, as Don said, a company that has ambitions to become “a major mid-tier southern African-focused thermal coal mining business”, but even that point is strangely convoluted. You are either major, or you are mid-tier.



So investors need to shift Continental’s blue-sky hyperbole to one side, and concentrate on what’s in hand. And what’s in hand is a business operating the Vlakvarkfontein mine, about 100 kilometres east of Johannesburg, and the Ferreira mine, about 200 kilometres south-east of Jo’burg. Both mines, as well as the company’s future potential developments, are in the heart of South Africa’s coalfields and in amongst an impressive array of coal-fired power stations, and in the neighbourhood of the famous Sasol coal to liquids plant.  



Vlakvarfontein is ticking over at a rate of around 100,000 tonnes of coal a month from a conventional open cut operating. Sales are being booked at between US$20 and US$22 a tonne, leaving a margin of between US$5.00 and US$7.00 after total costs of around US$15 per tonne. Two coal seams, each about five metres thick, are being mined, in close proximity to potential customers at the nearby Kendal power station.



Ferreira is a similar business, but with a shorter life expectancy of just three years. It is producing small quantities (40,000 tonnes a month) of export-quality coal, and 15,000 tonnes a month for domestic power production. Coming up quickly, is the third relatively small mine, Penumbra, located three kilometres from Ferreira, and which is expected to produce its first coal within the next nine to 12 months.



If all goes to plan, Continental will then be on track to become a producer of seven million tonnes of coal a year from a series of mines. Most production will be consumed in domestic power production, but there will also be a small but growing export operation. By 2015, production could rise as far as 10 million tonnes a year, from a resource base which could grow to 500 million tonnes of coal. There’s also the possibility of future production from exploration projects underway in neighbouring Botswana.



Continental is pleased with progress over the past 12-months, and Don has a solid check list of achievements, which he ticked off in Perth. “We’ve managed to get to full production at Vlakvarkfontein, and we’ve completed the acquisition of an unlisted South African coal company”, he said. “Our Ferreira mine is operating at improved levels. We’ve started export sales from Richards Bay. We’ve seen successive quarterly increases in production, and announced JORC-compliant reserves and resources.” For the next 18 months Don is optimistic that Continental can deliver more growth. “We’re confident of a continued strong performance at Vlakvarkfontein and Ferreira”, he said. “We’ll see the start of production at Penumbra and a development decision in the next months on De Wittekrans. We’ll get the pre-feasibility underway on Vaalbank and Vlakplaats. We should be in that time period getting production up to around five million tonnes with export sales up to 1.5 million tonnes.”



Continental is a company with great potential. It is producing a simple product from a world-class mineral field. It has strong domestic demand, and excellent export potential. But, it is also a company with South African roots. For investors who understand what that means, and the risks thus encapsulated, Continental is a company to watch. And it will be much easier to watch it in London from Monday.

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## drillinto

September 17, 2011

""That Was The Week That Was … In Australia""
By Our Man in Oz >> www.minesite.com/aus.html (( Free Registration ))


Minews. Good morning Australia. Another confused week?



Oz. You could call it that - up one day, down the next. If it goes on like this we’ll soon know how a yo-yo feels. Last week, the metals and mining index on the ASX had three up days, and two down, and finished in the red with a decline of 1.2 per cent. It was the same with the all ordinaries index, down 1.1 per cent overall. Gold was hit hardest, four days down, one up, with the an overall result being a 3.8 per cent fall in the index, largely because when we closed on Friday the gold price had slipped to around US$1,765 an ounce. By Saturday morning Australian time gold was back up to around US$1,812 an ounce, as it, too, gave a yo-yo impersonation.


Minews. Were the any outstanding share-price moves, either way?



Oz. One on the upside, thanks to an interesting takeover bid. Nothing dramatic on the downside, but the overall tone was negative, as we’ll see when we go through the prices. The best performing company was Hunnu Coal, a Mongolian-focussed explorer which has only been listed on the ASX for 20 months. It added A32 cents to A$1.70 last week after management recommended a takeover offer from Banpu Minerals of Thailand. The deal looks fairly straight forward, but has three interesting points to it.



Firstly, Hunnu’s float price in February last year was A20 cents, which means anyone selling into the market at A$1.70 will book a 750 per cent gain in less than two years. Secondly, that A$1.70 is A10 cents less than the recommended Banpu all-cash offer of A$1.80, meaning either that no-one expects a counter bid, or that investors are wary that the full A$1.80 might not be paid quickly. Thirdly, and it’s a more general point, the Hunnu situation reflects the growing strength of the coal-sector on the ASX.



Minews. So now you have a coal boom?



Oz. It’s not a true boom, yet, but the portents are there. Investment banks, such as Citigroup, have produced reports naming thermal coal as their preferred mineral exposure over the next few years, based on an assessment of the likely electricity demand in China and India tied in with a fresh spell in the sin bin for nuclear power. A second clue to the growing interest in coal is contained in the latest Australian exploration expenditure data. Coal is the fastest-growing sector, as the spend was up 85 per cent in the June quarter, to A$202.7 million, putting it just behind the hunt for iron ore, which sucked in A$214.7 million.



Minews. It seems a bit ironic that coal exploration is booming at the same time the Australian government gets ready to introduce a carbon tax.



Oz. That point is not lost on anyone in the mining game.



Minews. Okay, time for prices. We’ll start with gold. Even if the trend is down it remains the metal of choice in this part of the world.



Oz. Only one of the gold-sector leaders managed to end the week in the black. Gryphon Minerals (GRY) reported a fresh discovery at its flagship Banfora project in Burkina Faso, and closed the week up A3 cents at A$1.79 after touching A$1.85 on Wednesday. The downbeat mood was better reflected in the movement of shares in another company, Resolute Mining (RSG). It traded on Monday at a 12 month high of A$1.79, but then drifted as low as A$1.58 on Friday before rebounding to close at A$1.67, down A10 cents for the week, but up A5.5 per cent on Friday.



Other notable movers included: Kingsgate (KCN), down A70 cents to A$8.05, Kingsrose (KRM), down A13 cents to A$1.37, Silver Lake (SLR), down A29 cents to A$2.50, Medusa (MML), down A29 cents to A$8.06, Ampella (AMX), down A4 cents to A50 cents, Adamus (ADU), down A4 cents to A76 cents, and Alacer (AQG), down A45 cents to A$10.80. Perseus (PRU) was also weaker, down A30 cents to A$3.70, despite touching a 12 month high of A$4.05 on Monday.



Minews. Let’s do something different this week and cover the coal sector next. It might be useful to mention a few names if a coal boom is really gathering pace.



Oz. Names is about as good as it gets at this particular point, because barring the rise from Hunnu the rest of the sector drifted lower, bar one. Whitehaven (WHC), which is also a regular on takeover tip lists, closed the week steady at A$5.89, but did trade quite heavily. On Friday alone 7.7 million shares went through the market, producing a rise on the day of A20 cents. Other notable coal movers included: Carabella (CLR), down A15 cents to A$1.81, Stanmore (SMR), down A7 cents to A82 cents, Aston (AZT), down A53 cents to A$11.10, Metro (MTE), down A9.5 cents to A73 cents, Bathurst (BTU), down A4 cents to A89 cents, Continental (CCC), down A3 cents to A25 cents, and Coal of Africa (CZA), down A12 cents to A92 cents.



Minews, Iron ore next, and then over to the base metals, please



Oz. The iron companies did a little better than gold the gold ones, not that anything rose by much. Sundance (SDL) was the company which attracted most interest thanks to allegations of insider trading by an executive of a Chinese company which has launched a takeover bid. On the market, Sundance dropped as low as A35.5 cents on Tuesday, a country mile below the A50 cents on offer from Hanlong Mining. But by the end of the week the shares had recovered to A46 cents, a rise on the week overall of half a cent. South American Ferro Metals (SFZ) was the only other iron ore company to rise, by half a cent to A23.5 cents. A few companies held their ground, such as Gindalbie (GBG), which opened and closed at A66 cents. But after that comes a long list of fallers, including: Fortescue (FMG), down A28 cents to A$6.09, Murchison (MMX), down A2 cents to A56 cents, and Grange (GRR), down A3 cents to A51 cents. Iron Ore Holdings (IOH) was also weaker, down A1.5 cents to A$1.16, despite announcing an expanded resource position.



Over among the base metals it was a mixed bag, but there was a distinctly weaker tone. Among the notable copper movers Anvil (AVM) stood out, up A26 cents to A$6.30 on speculation of a takeover. Also on the move was Sandfire (SFR), up A10 cents to A$7.15, and Exco (EXS), up A1 cent to A64 cents. After that, it was all down. Ivanhoe (IVA) fell A10 cents to A$1.49. Metminco (MNC) fell A4 cents to A21.5 cents. Rex (RXM) fell A15 cents to A$1.56, and Talisman (TLM) fell A5 cents to A50 cents.



Nickel had one up and the rest down. Mirabela (MBN) crept A2 cents higher to A$1.65. Among the fallers, Mincor (MCR) lost A10.5 cents to A79 cents, Western Areas (WSA) fell A32 cents to A$5.30, and Poseidon (POS) slipped A1 cent lower to A18 cents. Independence (IGO) shed A8 cents to A$5.01, but would have ended the week much lower but for a A25 cent, or 5.3 per cent, rise in heavy trade on Friday.



Zinc companies did little. Ironbark (IBG) added A2 cents to A31 cents. After that, it was all down, or flat. Perilya (PEM) lost A3 cents to A59 cents. Terramin (TZN) was A1 cent weaker at A23 cents. Meridian (MII) and Blackthorn (BTR) were steady at A12.5 cents and A48 cents respectively.



Minews. Uranium and minor metals to close, please.



Oz. More of the same, really. One up, the rest down, or flat. Greenland Minerals (GGG), which is as much a rare earth as a uranium company, added A10 cents to A72 cents in heavy trade on Friday. On the day, eight million shares changed hands, the heaviest trading the company has seen in the past 12-months. Extract (EXT) and Manhattan (MHC) held their ground at A$8.25 and A37 cents respectively. Toro (TOE) held steady at A8.6 cents. After that, all weaker. Paladin (PDN) made a comeback on Friday, but it wasn’t enough to wipe out a mid-week fall, and the shares closed down A17.5 cents at A$1.65. At one stage on Thursday, Paladin was at a 12 month low of A$1.53. Bannerman (BMN), which might get caught up in the Hanlong situation, fell A3.5 cents to A32.5 cents. Berkeley (BKY) slid A4 cents lower to A32.5 cents.



Lithium companies weakened. Galaxy (GXY) fell by A10 cents to A77 cents, and Orocobre (ORE) lost A27 cents to A$2.50. Potash companies rose. South Boulder (STB) put on A28 cents to A$2.78, and Potash West (PWN) gained A1.5 cents to A19.5 cents. Rare earth companies, Greenland Minerals aside, lost ground. Alkane (ALK) was A16 cents weaker at A$1.80, and Lynas (LYC) lost A15 cents to A$1.58. Tin companies were mixed. Venture (VMS) was down A2 cents to A39.5 cents. Kasbah (KAS) was up A2 cents at A20.5 cents.



Minews. Thanks Oz.

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## drillinto

September 19, 2011

Contrary To What Certain Analysts Believe, Gold Is A Currency, Not A Commodity
By Rob Davies
www.minesite.com/aus.html  ((Free registration))

Commodity analysts follow the gold market because it is mined in much the same way as the base metals are. Once such is Nick Moore, the ebullient Head of Commodity Research at RBS, who spoke to Minesite following of the publication of the Thomson Reuters GFMS Gold Survey Update 1 last week. 

Nick argues that gold is overpriced because it is way above the marginal cost of production and is expensive in relation to other commodities, like platinum. As RBS and GFMS both point out, investment demand now accounts for half the demand for gold and both think this makes gold vulnerable to correction. Yet both organisations point to the importance of ETFs now in the gold market. The amount of gold tied up in ETF now amounts to 2,200 tonnes. That might not sound a lot, but it represents about 1.4 per cent of the total amount of gold ever mined. Contrast that with the 3,000 tonnes that sits in copper ETFs. The copper ETF market has simply has not taken off.



The reason for the difference was succinctly summarized by the response Ben Bernanke, Chairman of the US Federal Response, gave when he was asked by US Congressman Ron Paul why the Fed holds so much gold when Mr Bernanke had declared that gold was not money. Bernanke replied by saying: “it’s tradition”.



Despite the advent of modern economics central banks have displayed an endearing affection for gold. Indeed, the official sector is now a net buyer, having added 200 tonnes in the first half of 2011 according to GFMS. Like individuals, central banks seem to prefer buying when others do.  



Traditional commodity analysis tells us that when prices increase a response from the supply side is triggered until the marginal cost of production rises to the prevailing price. That partly explains the 4.9 per cent increase in gold production during the first half of this year. But the story over the longer term is very different. Since its low in 2001 the gold price has risen seven fold, yet production remains hardly changed at 2,200 tonnes. The reasons for this dismal response to the rising demand can be summarised quite simply. 



The price of gold is still not high enough to cover the full cost of exploration, development and production. Many commentators still focus on cash costs of production to make the point that margins are high. Yet this totally misses the most expensive part of the process which is finding more gold to replace what is mined each year. Unless a mine can find enough gold to keep a steady inventory it is like a widget maker that is selling widgets from inventory and not making any more. No wonder miners are profitable on that basis.



This lack of supply means the gold market remains small in global terms. This fact was highlighted by Neil Meader from GFMS when he was asked if gold could play a bigger role in the global financial system. The gold market, he says, simply isn’t large enough. 



But this is to confuse volume with price. No one asked if there were enough gilts or US Treasuries to bail out the banks three years ago when the global financial crash burst on the scene. Bond prices rose to meet the demand. The same will ultimately apply to the gold market - its size will expand by price rather than volume. 



The irony of the gold market being analysed by employees of RBS, a bank that was bailed out by a government that deliberately engaged on a policy of printing money to inflate its way out of the crisis, is not lost on RBS’s Nick Moore. He announced on Facebook that he had downgraded his airline ticket from Business to Economy when he travelled to a precious metals conference in Montreal, to save taxpayer’s money. Well done Nick, let’s hope others follow your example. But not your gold price forecast. Gold is a currency, not a commodity. 

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## drillinto

September 20, 2011

How Much Is Atlas Iron Really Worth?
By Our Man in Oz
www.minesite.com/aus.html  (( Free registration ))

Atlas Iron’s chief executive, David Flanagan, has never been lacking in confidence, though even his best friends might have been surprised at his most recent outbreak of optimism. Speaking at a mining conference last week David predicted that the rise of Atlas had just begun. “We reckon we’re a A$30 stock”, he was quoted as saying by the Bloomberg news service. Given that Atlas was trading on the Australian stock market at around A$3.50 at the time David’s comment indicates a value gap amounting to about 8.5 times the current share price. Time is, of course, the missing factor in the predicted 750 per cent rise in the Atlas share price. But before we dismiss David’s forecast as an exercise in balloon-flying, it’s worth looking at what Atlas has managed to achieve in less than seven years on the ASX.

Back in late 2004 Atlas started life as Atlas Gold, hence its ASX code of AGO, which, David confessed in a chat which took place outside the Port Hedland airport, should have been changed when iron ore entered the picture and the name switch was made. Back in the early days, six months into its life, an investor could have snapped up a pile of Atlas shares for around A19 cents. Just over a year later, as the iron ore boom gathered pace, Atlas cracked the A$1.00 mark, and a year after that, in mid 2008, it was a A$4.00 company, meaning it had risen by 2,000 per cent in less than four years. In that context David’s seemingly excessive claim that Atlas is a A$30 company suddenly doesn’t seem so outlandish.



If the first six years were interesting for Atlas, then the past year has been extraordinary, in every sense of the word. The company has completed a blizzard to corporate deals, including a merger with Giralia Resources, the takeover of Warwick Resources and Aurox. Most recently it’s undertaken the now nearly-complete acquisition of FerrAus, and has bought a 20 per cent stake in Brazilian-focussed iron ore explorer, Centaurus. Complementing the furious pace of the corporate deal making has been the admission of Atlas into the ASX’s list of 100 biggest companies - 63rd at last reckoning - and the reporting of a spectacular rise in the operational and financial performance of the business. Along with a seven-fold increase in revenue has come a flip from loss to profit and the declaration of a maiden dividend.



“The record result highlights the strength of the company’s achievements in what has been a relatively short time”, David said in a management commentary attached to the results for the year to June 30th. “The rapid transition from a small ASX listing in 2004 to our position as one of Australia’s top 100 public companies is a tribute to the company’s staff, contractors and shareholders. Despite this success, the Atlas story is just beginning. We now have the foundations on which to build a significant mining company. This will involve further substantial expansion in the Pilbara, ultimately taking iron ore production over 40 million tonnes a year.”



So, how good was the latest result, and what does the future look like? In dollar terms, Atlas achieved a A$210 million turnaround, converting a loss in 2010 of A$41 million into a profit of A$169 million. Out of that, shareholders will get their maiden A3 cents a share payout, and a management commitment to maintaining “stable and growing dividends”. In production terms, and this is where the Atlas story gets rather interesting, the company exported 4.6 million tonnes of iron ore, thereby generating revenue of A$585 million, which indicates an average selling price of A$127 a tonne.



This year, Atlas expects exports to total six million tonnes, which, if it gets the same price, will generate revenue of around A$760 million. By the end of next year, David expects sales to have reached an annualised 12 million tonnes, taking the notional revenue up to A$1.5 billion. There are plenty of assumptions built into those dollar estimates, to be sure, though surprisingly some of them are actually on the prudent side, given that investment banks such as Citigroup are forecasting a strong iron ore price for several years. And Citigroup isn’t an unbridled bull. In fact it’s only bullish on three minerals: iron ore, thermal coal and palladium.



Now for a bit of crystal ball gazing from Minesite’s Man in Oz with a view to adding even more meat to David’s A$30 price tip. If Atlas is to become a 40 million tonne a year iron ore exporter, and if Citigroup’s long-term price forecast of US$135 a tonne is correct, and if Atlas maintains its cash cost per tonne somewhere between A$40 and A$43 then revenue might well amount to US$5.4 billion, gross profits to US$3.8 billion, and earnings per share to US$4.40. It’s not appropriate for Minesite’s Man to go any further with that back-of-the-envelope ball-park best-guess, but it does lead a simple-minded scribbler down a pathway which suggests that Atlas at A$30 a share might not be quite as silly as it first sounds.

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## drillinto

Commodities face slowdown. In a turnaround from just weeks ago, the commodities market appears poised for a slowdown. Rio Tinto (RIO) CEO Tom Albanese said markets are "somewhat weaker" and some customers are asking to delay shipments of metals as uncertainty elicits a wait-and-see approach. The IMF echoed Albanese's sentiment, downgrading its outlook for commodity prices from earlier this year. [20.09.2011]


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## drillinto

Non-Dollar Currencies Tank

http://www.bespokeinvest.com/thinkbig/2011/9/22/non-dollar-currencies-tank.html

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## drillinto

September 24, 2011

"That Was The Week That Was ... In Australia" 
By Our Man in Oz 
www.minesite.com/aus.html >> Free Registration



Minews. Good morning Australia. Should we talk about the market or switch immediately to sport?



Oz. An interesting suggestion, but considering the way Australia has been playing at the rugby world cup in New Zealand it might be safer to stick with financial markets. Last week - not that any of our readers need reminding - was horrible. All sectors of the Australian market were clobbered, stretchered off, and dumped in the intensive care ward. The market indices tell the story, along with sharply lower metal prices. The all ordinaries on the ASX lost six per cent over the week. The gold index was down 6.6 per cent, and the metals and mining index was hammered lower by a whopping 10.7 per cent, a reflection of concern about the outlook for China’s economy. In response, market participants are now asking: is this as low as it can go? And is now the time to look for bargains? Or is this entirely a political event and will investors be on the sidelines until governments make the hard decisions they have been putting off for three years?


Minews. The great intangibles. Let’s stick to markets where we do at least know where we are from one week to the next.



Oz. Agreed. And worth noting at the outset that there were some shares which managed to post modest gains. Three gold companies added a few cents, along with one copper, one coal, one uranium, one zinc, and one of the minor metal players.



Minews. Any good news is gratefully received, so let’s start the call of the card with the handful of rises before switching to the fallers.



Oz. Good decision. The gold risers were led by Silver Lake (SLR), which rose A4 cents to A$2.54, though that’s allowing for a heavy sell-off on Friday when the shares fell A16 cents. To put Silver Lake in perspective, on Wednesday it traded up to a 12 month high of A$2.89, before succumbing to selling pressure. Ampella (AMX), one the Aussies in Africa, managed a rise of A5 cents to A$1.90. Crusader (CAS) added A3 cents to A$1.19.



Berkeley (BKY) was the sole uranium company that rose, up A1.5 cents to A34 cents, and perhaps reflecting a surprise improvement in the uranium price. Ventnor (VRX), one of the more aggressive copper explorers in the Doolgunna area of Western Australia, crept A1 cent higher to A47 cents. New Hope (NHC) was the only coal miner to rise, adding A13 cents to A$5.18 after an excellent profit report. Atlantic (ATI) was the minor metal company that rose, and Prairie Downs (PDZ) the solitary zinc, but we’ll get to them later.



Minews. Thanks for the glimmer of good news, now for the list of companies that lost ground, starting in the gold space.



Oz. After the three that swam against the tide, the list looks like this: Resolute (RSG), down A15 cents to A$1.52, Perseus (PRU), down A39 cents to A$3.31, Adamus (ADU, down A7 cents to A69 cents, Kingsgate (KCN), down A56 cents to A$7.50, Medusa (MML), down A57 cents to A$7.54, Newcrest (NCM) down A$2.10 to A$36.01, PVI (PVM), down A6 cents to A49 cents, and St Barbara (SBM), down A11 cents to A$2.09.



Minews. Next, over to iron ore, because that seems to have been where a lot of the damage was done last week.



Oz. It was, largely because it is the sector tied directly into the Chinese steel industry. Fortescue (FMG), the most ambitious of the new generation of iron ore miners, was flattened by a wave of sell orders, closing the week at A$4.95, down A$1.14. It could have been worse. At one stage on Friday Fortescue shares touched A$4.87, a 12 month low. Those focussed on magnetite – a lower grade of iron ore - were also hit hard. Gindalbie (GBG) dropped A15.5 cents to a close at a fresh 12 month low of A$50.5 cents. Grange (GRR) sold down to A40.5 cents, before adding A1.5 cents late on Friday to trim its loss for the week to A9 cents. Murchison Metals (MMX) collapsed by a painful A15 cents to A41 cents, and after having hit a 12 month low on Friday of A39 cents. After that, the movers included Atlas (AGO), down A74 cents to A$3.04, Iron Ore Holdings (IOH), down A9.5 cents to A96.5 cents, and Brockman (BRM), down A48 cents to A$2.30. Takeover target Sundance Resources (SRL) lost A5.5 cents to A40.5 cents, despite having a bid of A50 cents on the table.



Minews. Base metals next, please.



Oz. Apart from Ventnor there were no other risers in the copper or nickel sectors. There was the one zinc riser. Copper fallers included: PanAust (PNA) down A75 cents to A$2.48, Marengo (MGO), down A3 cents to A18.5 cents, Sandfire (SFR), down A$1.22 to A$5.93, Rex (RXM), down A31 cents to A$1.25, Hot Chili (HCH), down A3 cents to A50 cents, and Sumatra Copper &amp; Gold, down just half a cent to A15.5 cents.



Nickel companies were led lower by Western Areas (WSA), which shed A85 cents to A4.45. Mincor (MCR) fell A8 cents to A71 cents despite reporting continued strong cash flow from its small but high-grade mines. Mirabela (MBN) lost A17 cents to A$1.42, and Independence (IGO) fell by A59 cents to A$4.26.



Prairie Downs, a zinc hopeful that we rarely hear from, was the solitary zinc company to rise, just. It added half a cent to A15 cents. Falls were posted by Perilya (PEM), down A9.5 cents to A49.5 cents, and Terramin (TZN), down A4 cents to A19 cents. Kagara (KZL) lost A16.5 cents to A42.5 cents, despite the announcement of plans to sell a nickel project, and the launch of a fresh marketing campaign to showcase its new chief executive.



Minews. Unfortunate timing, to say the least, for the new man at Kagara. Let’s get a move on, because the final sectors don’t look much better. Time for coal, uranium and minor metals, before closing.



Oz. It was all red in the coal sector, apart from New Hope. Among the more notable movers were Tigers Realm (TIG), down A4 cents to A35 cents, Carabella (CLR), down A19 cents to A$1.62, Aston (AZT), down A$1.10 to A$10, Stanmore (SMR), down A3.5 cents to A81 cents, and Coal of Africa (CZA), down A8.5 cents to A84 cents.



After Berkeley it was a similar story among the uranium companies. Paladin (PDN) was down A21.5 cents to A$1.43, Extract (EXT) fell by A59 cents to A$7.66, Manhattan (MHC) lost A3 cents to A34 cents, and Bannerman (BMN) fell by A6.5 cents to A26 cents.



Atlantic was the only company among the minor metals to rise, adding A8 cents to A$1.68, despite announcing a delay in the re-start of the famous Windimurra vanadium plant. Rare earth companies came back to earth with a bump after negative reports on the sector in the US. Lynas (LYC) fell A53 cents to A$1.05, but did trade down to a 12 month low of A$1.02 on Friday. Alkane (ALK) lost A63 cents to A$1.17, and Arafura (ARU) shed A13 cents to A55 cents. All lithium companies fell. Galaxy (GXY) was off A11.5 cents to A66 cents. Orocobre (ORE) fell by A30 cents to A$1.20. Tin companies joined in the selloff. Venture (VMS) fell A5.5 cents to A34 cents, and Kasbah (KAS) lost A2.5 cents to A17 cents.



Minews. Thanks Oz. Enjoy the rugby, and keep your fingers crossed for next week’s market.

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## drillinto

Bespoke's Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2011/9/24/bespokes-commodity-snapshot.html

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## drillinto

September 26, 2011

"The Market’s Message To Politicians: Get A Grip"
Rob Davies >> www.minesite.com/aus.html

The turmoil in capital markets finally reached base metals last week. As measured by the LME index, base metals dropped 10.8 per cent to 3,424.2. But some experienced steeper falls. Tin dropped 14.8 per cent.  Copper, as the bellwether of the sector, attracted most attention as it dropped 10.6 per cent, to close below US$8,000 a tonne at US$7,790. Zinc, although it fell proportionately less, also attracted attention, as its 8.3 per cent drop to US$1,981 made it the only one of the group to trade below US$2,000 a tonne. 

In a week dominated by the high drama of international monetary diplomacy, and with the apparent lack of progress in negotiations continuing to inject real fear into capital markets, any positive news was going to struggle to make itself heard. Yet there are underlying forces at work that are constructive for the sector. Although the IMF attracted much attention after it reduced its forecasts for global growth, the actual numbers themselves are in fact quite robust. The cut is not large and still leaves the global economy with an expected growth rate of four per cent this year and next. That is not bad in anyone’s language and, depending where it comes from, should translate into an additional two or three per cent demand in metal consumption. Far from being a recession or a depression this is growth, and not bad growth at that. 



That is not to say of course that there is nothing to worry about. On the contrary. Even aside from the shambles that is Europe and the euro, there is plenty of evidence that overcapacity in some areas is depressing prices. One example is tanker rates. According to Bloomberg, some tanker rates have dropped to US$1,000 a day, a price level that is forcing some ship owners to put newly built ships straight onto care and maintenance, as that works out considerably cheaper than the US$10,645 a day running costs. With breakeven costs running at US$55,000 a day there, is some way to go before this market gets back into balance. The cause for this glut lies in the rates of up to US$229,000 a day that were achieved in 2007. Unsurprisingly this encouraged lots of new capacity to be ordered, and that capacity is now arriving on the waterfront. It is a classic capital market price cycle. High prices trigger new capacity that then depresses prices when it arrives.  



The same logic applies to new mine development - except that the time scale for new mines is decades not years. Moreover, mines cannot be moved like ships. That is why the news last week that Michael Sata was elected President of Zambia is significant. He is on record as saying he wants to nationalise mines in his resource-rich country. And statements like that certainly do not encourage the construction of new capacity in any of the regions under his jurisdiction.



Despite these favourable signs for metals, all eyes remain on the global financial crises and on Europe in particular. A simple way of measuring the scale of the problem is the increase in the rates customers pay for Credit Default Swap (CDS) on the bonds of major European banks. This is a basic indication of riskiness, and those for Societe General now stand at 413 basis points, Credit Agricole at 322 and even the mighty Deutsche Bank at 225 basis points.  The concern is exactly how much of the â‚¬353 billion of outstanding Greek debt these banks actually own. A write-down or, even a partial write-down, of that debt would deal a huge blow to many European financial institutions. As it is, the amount is an order of magnitude higher than the US$40 billion Russian default in that occurred 1998 and seven times that of Argentina’s when it defaulted. 



Politicians and central bankers cannot create growth. That is for businessman and entrepreneurs to do. But what they can do is sort out the affairs of nations so that wealth creators know what the rules are, and are able easily to see how healthy, or otherwise an investment environment really is. It is time for the besuited bigwigs to get a grip and tell us what the new structures are.

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## drillinto

Whither China 

http://www.bespokeinvest.com/thinkbig/2011/9/30/wither-china.html

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## Wysiwyg

So commodities are not the place to be now?


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## drillinto

Wysiwyg said:


> So commodities are not the place to be now?




Commodities is the place to be long-term.


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## drillinto

Mining Analysts' Ratings and Estimates - Juniors
Bill Matlack / September 28, 2011

To view the tables, please click the link below:
http://www.kitco.com/ind/matlack/sep282011_juniors.html
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## drillinto

October 02, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Free registration)



Minews. Good morning Australia, your market doesn’t seem to have been quite as nasty this week. 



Oz. That’s one way of putting it. The dramatic declines of previous weeks slowed, and parts even rose. The biggest worry down this way is that China has run out of puff. From an Australian perspective that’s a much bigger story than your Greek tragedy and you Euro political/banking fiasco. Sliding base metal prices are a reflection of concern about Chinese demand for copper, zinc, and the rest of the gang in that sector. There’s concern especially around nickel, which went below US$8 a pound after we had closed on Friday. Gold has been more resilient, and edged up over the course of the week, and Australian producer enjoyed a double benefit because the Aussie dollar declined against its US cousin.



Minews. It sounds as if you believe the worst of the current correction is behind us.



Oz. I wouldn’t go that far, but we do seem to be forming a bottom. Friday’s sell off can partly be explained as an end of quarter balancing by investment funds. The view seems to be that copper will probably have a tough December quarter before rising again early next year. The fundamental case for copper, the bellwether of the metals, is that demand from industrialising Asia will continue to outstrip supply. Chinese companies certainly seem to have that view, as we saw with the latest takeover bids to make the headlines down this way: a A$1.3 billion offer for Anvil Mining (AVM), and a A$297 million deal relating to a small coal mine in Western Australia.



Minews. It is interesting to watch the Chinese buying assets as the rest of the world sells.



Oz. Isn’t that the key to everything? China is buying because it can, and because it is confident of continuing growth.



Minews. Enough of the philosophical stuff, time for prices.



Oz. The all ordinaries, surprisingly, added a respectable 2.3 per cent in a topsy-turvy week. Metals and mining lost a shade under one per cent. Gold was the weakest, putting in a decline of five per cent, but with most of that damage done by the sector leader, Newcrest (NCM), which fell a sharp 5.6 per cent to A$34.08



Most other gold companies performed better than Newcrest, and some even posted interesting rises. Troy Resources (TRY) staged a strong rebound after recent heavy selling. At one stage on Friday it rose to a peak of A$4.18, a gain of A34 cents, before easing at the close to end at A$4.12, up A28 cents. Northern Star (NST) rose by A4 cents to A50 cents after reporting a strong profit, fresh drilling results, and plans to more than double its output. Gold Road (GOR) also attracted interest with its latest exploration presentation, recovering A4.5 cents of recently lost ground to close at A39.5 cents, although it did trade as high as A47 cents on Wednesday. Elsewhere, PVI (PVM) put on A5 cents to A54 cents, following an upbeat presentation given by management at an investment conference on the Gold Coast. And Silver Lake (SLR) added A3 cents to A$2.57, also after getting a good response at a rival investment conference in Melbourne.



Notable among the fallers were Gryphon (GRY), down A8 cents to A$1.30, Kingsgate (KCN), down A32 cents to A$7.18, Kingsrose (KRM), down A3 cents to A$1.22, Sumatra (SUM), down A1.5 cents to A15 cents, St Barbara (SBM), down A4 cents to A$2.05, Resolute (RSG), down A1 cent, and Integra (IGR), down half a cent to A47 cents.



Minews. Nothing too painful there. Over to the base metals now, please.



Oz. It was curiously mixed in the copper space. In a week when you might have expected a wholesale slide to match the fall in the physical price of the metal, a surprising number of companies rose, perhaps reflecting the view that this downward correction will not last long into next year. The best performer was Anvil, thanks to the takeover bid from China Minmetals. It added A$1.87 to end the week at A$7.65, well short of the offer price in Canadian dollars of C$8.00 (roughly the same on conversion to Aussie dollars), and a sign that no-one is expecting a counter bid. Sandfire (SFR) recovered a bit of lost ground, adding A12 cents to A$6.05, and PanAust (PNA) crept up by A6 cents to A$2.54. Other movers included: Marengo (MGO), up A1 cent to A19.5 cents, Hot Chili (HCH), down A1 cent to A49 cents, Altona (AOH), up half a cent to A22 cents, OZ Minerals (OZL), down A1 cent to A$9.42 and Metminco (MNC), up half a cent to A19 cents.



Nickel companies put in an equally mixed performance, which was also curious, given the fall in the nickel price. Western Areas (WSA) lost A13 cents to A$4.32, and Mincor (MCR) was A1.5 cents weaker at A69.5 cents. But Poseidon (POS), managed a rise of half a cent to A16.5 cents, and Independence (IGO) added A6 cents to A$4.32.



Zinc companies were also surprisingly resilient, which may be another sign that we’re close to the bottom in the market correction. Perilya (PEM) lost A2.5 cents to A47 cents, but Terramin (TZN) managed a half cent rise to A19.5 cents. Meridian (MII) also added half a cent to A13 cents, while Blackthorn (BTR) lost A2 cents to A28.5 cents. Kagara (KZL) dropped A2 cents to A40 cents.



Minews. The bulks next, starting with iron ore, please.



Oz. Most iron ore companies lost ground. The most significant iron ore faller was Fortescue Metals (FMG), which dropped A53 cents to close the week at a 12 month low of A$4.42. Market chatter, denied by the company, is that some of its customers are declining to take deliveries, at a time when Fortescue is trying to expand its output. Aquila (AQA) was another company with iron ore operations in the planning stage that was sold down. The company’s shares dropped A22 cents to A$4.98. The troubled magnetite iron ore companies all struggled. Murchison (MMX) slipped to a 12 month low of A32 cents on Wednesday, before closing the week at A33.5 cents, for a fall overall of A7.5 cents. Gindalbie (GBG) and Grange (GRR) performed in a similar manner, both touching 12-month lows during the week, but recovering slightly by the close. Gindalbie fell to as low as A46 cents on Thursday, but its recovery to A48 cents represented a decline over the week of A1.5 cents. Grange fell to A38 cents on Monday, but its eventual close of A40 cents represented a decline over the week of A2 cents. Other movers included: Iron Ore Holdings (IOH), up A3.5 cents to A$1.00, Brockman (BRM), down A34 cents to A$1.98, Northern Iron (NFE), up A6 cents to A$1.40, Mt Gibson (MGX), up A4 cents to A$1.34, and Atlas (AGO), down A19 cents to A$2.85.



New Hope (NHC) was the best of the coal companies, putting in a rise of A24 cents to A$5.39. Carabella (CLR) was the worst, falling A12 cents to A$1.49. No discernible trend could be identified from movements among the other coal companies. Continental (CCC) rose A2 cents to A$20.5 cents, Coalspur (CPL) fell A7 cents to A$1.38, Bathurst (BTU) fell A4.5 cents to A63.5 cents, Stanmore (SMR) fell A6.5 cents to A74.5 cents, and Bandanna (BND) fell 6.5 cents to A66 cents.



Minews. Uranium and minor metals to close, please.



Oz. It was mostly down in both areas, although two uranium companies, and two rare earth companies gained a bit of ground. Bannerman (BMN) was the pick of the uranium companies, as investors bought in, perhaps in the hope of a Chinese takeover bid. Bannerman added A5.5 cents to A31.5 cents. Havilah (HAV) rose by A2 cents to A52 cents. After that it was all down. Manhattan (MHC) shed A1 cent to A33 cents. Deep Yellow (DYL) dropped A1 cent to close at A12.5 cents. Berkeley (BKY) eased back by half a cent to A33.5 cents. Paladin (PDN) fell a sharp A22 cents to A$1.21, but did fall as far as $1.13 on Thursday, a 12 month low. Once the star of the sector, Paladin has now fallen by 78 per cent since it peaked at A$5.61 in mid-January.



Arafura (ARU) and Lynas (LYC) were the two companies that rose among the minor metals. Arafura added A2 cents to A57 cents, while Lynas added A4 cents to A$1.09. Alkane (ALK), the other principal player in the rare earth business, slipped A3 cents lower to A$1.14. Potash companies fell, with South Boulder (STB) leading the way, as it dropped by A27 cents to A$2.22. Lithium companies repeated the trick. Galaxy (GXY) fell A5.5 cents to A60.5 cents, and Orocobre (ORE) fell A9 cents to A$1.11. Tin companies were also weaker. Kasbah (KAS) fell by A1 cent to A16.5 cents, and Venture (VMS) fell by A1 cent to A33.5 cents.



Minews. Thanks Oz.
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## drillinto

October 03, 2011

It’s Payback Time: Metals Suffer As The World Begins To Withdraw From A Decades-Old Addiction To Debt 
By Rob Davies
www.minesite.com/aus.html (The registration is free)

Economists, like their close cousins, metals analysts, are brilliant at explaining what has just happened. Usually they then project that analysis back into the future and use it as a base for their forecasts. The best explanation Minesite has heard for the current crisis is known in economist speak as “secular deleveraging”. In plain English it just means paying back the debts that have been accumulated over decades, and not just the borrowing incurred as a result of the recession. 

In the US, where the data is best, this debt, measured relative to GDP, has been rising for over fifty years. Unwinding this position is going to take a lot more than one presidential term, and that explains why this recovery is the worst on record. A good illustration of this difficult truth is that US capacity utilisation rates have only risen to 77 per cent from a recessionary low of 66 per cent. A more normal recovery would have seen the figure 10 percentage points higher.



Debt-fuelled growth has driven commodity demand for decades, and especially during the most recent decade. What has foxed the non-specialist commentators, though, has been the strength of commodity prices in the face of this “deleveraging”. So their glee last week when metals continued to slide was perhaps to be expected. 



Yet prices, as measured by the LME index, which fell to 3309.5, were only down 3.3 per cent, roughly the same as the 3.4 per cent fall in the gold price to US$1619 an ounce. Copper attracted a lot of the attention, as usual, because of its high profile, and also because it fell more than the wider group, by 10.5 per cent to US$6,975 a tonne.  



Analysts, perhaps with an eye on the upcoming LME week, have taken the opportunity offered by the sell-off to trim their forecasts. One analyst shaved 20 per cent off his prediction for next year’s price, knocking it down to US$6,500 per tonne. But that is only slightly below the current price, which goes to show that forecasts for next year would not generally have been as high as the recent highs of US$8,000 or US$9,000 anyway. 



And this in turn suggests that the impact of the recent price falls on the earnings forecasts for the miners will not be quite as dramatic as some might expect. Moreover the continued strengthening of the dollar, which rose 0.5 per cent last week, will mitigate the impact on miners that have costs in other currencies. Last week the Aussie dollar fell 0.9 per cent, which will be a big relief for miners in the Lucky Country.



So, while sentiment has turned down, it is worth remembering that metal markets are still finely balanced. In the case of copper, one investment bank is projecting a shortfall of 140,000 tonnes this year and a surplus of only 120,000 tonnes next year. But what the bank doesn’t tell us is the standard deviation around those forecasts. The chances are that the range of likely outcomes is higher than the projected imbalance. Like many forecasts in economics, the actual figure is crucially dependent on the small difference between two large numbers, both of which are themselves forecasts.



In any case, the semantics of specific price forecasts are mostly irrelevant when it comes to deciding on long-term macro asset allocation strategies. What matters more is whether the economic world is expanding or contracting, through the addition of debt or the reduction of debt. Outside China it is still contracting as debt is paid down, and that’s what is depressing the outlook for metal prices. 



“Deleveraging” is fine when the concerned parties have the resources to pay back what they borrowed.  What are problematic, though, are borrowers, like Greece, that do not have the capacity to repay their obligations. The creditors of such borrowers can either force the debtor to repay every last centime, thereby bankrupting the country in question. Or they can accept that they will never get all their money back and write off the debt. But it is all still deleveraging and, unfortunately, the end result of lower economic growth is the same. 

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## drillinto

Goldman Sachs lowers oil and copper price targets, but still sees upside

A slower than expected global economy will weigh on prices for oil and copper, but Goldman Sachs still sees an upside for commodities with emerging markets on track for growth.

The Wall Street firm said Tuesday that barring a global financial crisis, the turmoil in Europe will only flatten the growth in commodity prices, not push them lower as emerging market demand is expected to remain strong.

"We view the European turmoil as a headwind to global growth, which we expect will only take away some of the upside to commodity prices, not reverse it," the firm said in a report.

Source: http://www.canadianbusiness.com/art...nd-copper-price-targets-but-still-sees-upside

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## drillinto

Bespoke's Commodity Snapshot
Copper, Platinum, Silver and Wheat Were Hit Hard, During the Last Couple of Weeks

http://www.bespokeinvest.com/thinkbig/2011/10/6/bespokes-commodity-snapshot.html

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## drillinto

October 08, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia, your market seems to have enjoyed quite a rebound last week.



Oz. It did, but it was just making up lost ground. The metals and mining index added an eye-catching seven per cent, but actually only got back to where it was in mid-September. It has to rise by another 20 per cent to get back to its mid-year high.

Minews. That’s a sobering thought. But let’s stick to last week where most of the sectors wee followed seemed to be in recovery mode.



Oz. They were, and there were some quite handsome rises, interspersed with the odd patch of weakness, especially among the base metal stocks. The major issues affecting the Australian mining market are the same as those that are affecting in London, with one addition, tax. As if the European debt mess and worries about Chinese growth weren’t already worrying enough, last week there was a tax summit held in Canberra. One of the major topics was whether the proposed new mining tax is high enough. Another was how best to spend the proceeds. It was a rather depressing event because the people talking tax have no understanding of mining, they simply see an opportunity to siphon cash out of a highly-profitable part of the economy and to redistribute it as social welfare hand-outs, or in propping up failing industries in non-mining parts of the economy.



Minews. No plan for boosting national savings, or investing in better rail and port systems?



Oz. A little, but not much. The mining tax, and its cousin, a tax on carbon emissions are caught in the short-term political cycle which is getting more interesting by the day, as the incumbent Prime Minister, Julia Gillard, is widely reported to be facing a challenge from the man she deposed, the former PM, Kevin Rudd.



Minews. We’ll let you enjoy your domestic political games, but keep us informed if they start to have an effect on the mining industry. Now let’s finish off on the key indices, before moving on to the equities market.



Oz. The all ordinaries rose by about half as much as the miners, adding 3.8 per cent, while the gold index added 4.4 per cent. Gold companies in Australia failed fully to capitalise on renewed strength in the gold market because the Australian dollar was on the rise as well, meaning that the local gold price barely moved.



Minews. That comment means gold is a good place to start calling the card.



Oz. There were widespread rises across the gold sector, and a handful of falls, which we’ll cover as we go. Some of the strongest performers were the Aussie gold companies active in West Africa. Resolute (RSG) led the way, adding A13.5 cents to A$1.65. It was followed by Gryphon (GRY), up by A15 cents to A$1.45, Perseus (PRU), up A30 cents to A$3.35, and Adamus (ADU), up A4 cents to A69 cents. Ampella (AMX) swam against the incoming tide, shedding A10 cents to A$1.80. But Troy Resources (TRY) continued to attract strong interest as it expands the Casposo project in Argentina. It added A42 cents to A$4.54, and is now not far short of its 12 month high of A$4.84. Another strong performer was Kingsrose (KRM), which added A25 cents to A$1.47, largely on reports that it is close to developing a second mine in Indonesia.



Minews. We might take a closer look at Kingsrose next week.



Oz. Good idea. Also on the move were Silver Lake (SLR), up A16 cents to A$2.73, Integra (IGR), up A4 cents to A51 cents, Kingsgate (KCN), up A57 cents to A$7.75, Northern Star (NST), up A4 cents to A54 cents, Medusa (MML), up A27 cents to A$7.12, and PVI (PVM), up A6 cents to A60 cents. Heading the other way, Gold Road (GOR) shed A2 cents to A37.5 cents after it unveiled a fresh capital raising. Allied Gold (ALD) fell by A34 cents to A$2.48 after it reported lower than expected gold production from its Simberi mine. And Beadell (BDR) slipped A1.5 cents lower to A70 cents.



Minews. Iron ore next, as that sector seems to be closest to the China factor in the market.



Oz. It is. People in the industry are watching the pace of Chinese steel production very carefully to see if we are heading into a slowdown. For now, though, prices in the iron ore sector last week seem to indicate that demand for iron ore remains strong. Fortescue (FMG), which had been sold down heavily over September because it is in the middle of a major expansion, rebounded by A48 cents to A$4.90. Atlas (AGO) also recovered much of its lost ground, adding A36 cents to A$3.21. Gindalbie (GBG) put on A7.5 cents to A55.5 cents. Other movers included: Mt Gibson (MGX), up A7 cents to A$1.51, Iron ore Holdings (IOH), up A5 cents to A$1.05, and Grange (GRR), up A5.5 cents to A45.5 cents. Iron ore companies that lost ground included: Brockman (BRM), down A11 cents to A$1.83, and Northern Iron (NFE), down A3 cents to A$1.37. Also worse off was Murchison (MMX), which ended the week down A5.5 cents at A28 cents, but did get to an all-time low of A23.5 cents on Wednesday.



Minews. Base metals next, please.



Oz. Nickel, surprisingly, was the best performer in the base metals complex, not that prices rose far. Copper was mixed, trending up, and zinc trended down. Best of the nickel companies was Western Areas (WSA), which reported a fresh discovery beneath its flagship Flying Fox mine. That news drove the shares up by A98 cents to A$5.30. Mincor (MCR), after a horrid time for most of the past six months, also shared in the favourable nickel environment, adding A10 cents to A79 cents, while Mirabela (MBN), rose A10 cents to close at A$1.45.



Best of the copper companies was Sandfire (SFR) which had been hit hard by selling pressure during September. It rebounded with a strong gain of A97 cents to A$7.02. PanAust (PNA) wasn’t far behind, putting in a rise of A36 cents to A$2.90. Ivanhoe (IVA) added A12 cents to A$1.08, and Rex (RXM) rose by A9 cents to A$1.30. Other movers included: Metminco (MNC), up A1.5 cents to A19.5 cents, Sabre (SBR), up A2.5 cents to A13 cents, Altona (AOH), up A3 cents to A25 cents, Hot Chili (HCH), down A5 cents to A44 cents, and Exco (EXS), up A3.5 cents to A67 cents.



Most zinc companies lost ground, but not by much. Perilya (PEM) was a rare riser, up A2 cents to A49 cents. Ironbark (IBG) shed A1 cent to A27.5 cents. Terramin (TZN) lost A1.5 cents to A18 cents, and Blackthorn (BTR) fell by the same amount, A1.5 cents, to A41 cents.



Minews. The two energy sectors, coal and uranium, next, followed by minor metals to close, please.



Oz. Coal companies performed well, thanks largely to a fresh burst of takeover interest. New Hope (NHC), a miner controlled by the Millner family of Sydney, added A86 cents to A$6.25 after it reported that it had received unsolicited bids and had decided in response to throw its books open to all comers. Aston (AZT) was also named as a takeover target, and added A84 cents to A$10.90. Meanwhile, Carabella (CLR), which has been suffering a bout of boardroom instability, rose by 16 cents to A$1.65. Other coal movers included: Coalspur (CPL), up A14 cents to A$1.52, Stanmore (SMR), up A15.5 cents to A90 cents, and Whitehaven (WHC), up A40 cents to A$5.73.



Paladin (PDN) was the pick of the uranium companies, regaining A34 cents lost during a heavy September sell-off, to close at A$1.55. Extract (EXT) attracted fresh takeover talk, rising by A31 cents to A$8.04. Other movers included: Bannerman (BMN), up A2.5 cents to A33 cents, Manhattan (MHC), up A5.5 cents to A38.5 cents, and Greenland (GGG), down A1.5 cents to A48.5 cents.



The minor metals moved least last week. Rare earth companies firmed. Lynas (LYC) rose A9 cents to A$1.18 and Alkane (ALK) rose A2 cents to A$1.16. Potash plays performed the same way. South Boulder (STB) rose A10 cents to A$2.32 and Potash West (PWN) rose A2.5 cents to A21 cents. Lithium companies were in greater demand. Orocobre (ORE) rose A9 cents to A$1.20, and Galaxy (GXY) rose A7.5 cents to A68 cents. Tin companies barely moved.



Minews. Thanks Oz.

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## drillinto

The anti-peak case for commodities

Future Rx: Optimism, preparation, acceptance of risk
L. M. Cathles
Cornell University, Ithaca, USA
[Abstract of a paper presented recently at Fermor 2011 / UK Geological Society]

The world population, presently at 7 billion, will rise to 10.5 billion in the next century, and all 10.5 billion will rightly expect at least a European living standard. Our great challenge is to provide the energy and mineral resources needed to meet this expectation. Can we? I believe we unquestionably can, provided we have optimism, preparation, and acceptance of risk. 
Considering the oceans, the world is a planet awash in energy and mineral resources. Raising energy consumption to the European level of 7 kW/p for the current population would require tripling our present total energy production from 15 TW to 45 TW, and accommodating a population growth to 10.5 bn would require 72 TWe. Growing from 15 to 72 TW over 100 years represents a modest compound growth rate of 1.6%/yr. With breeder technology, the 4.6x109 tonnes of U dissolved in the oceans (not to mention Th which is a better nuclear fuel) can sustain a 72 TW production for 78 centuries. 
My estimated seafloor Cu and Zn resources can sustain humanity for 50 and 140 centuries, respectively. Three percent of the Li dissolved in the oceans could provide  ¼ of a hybrid car per person for 10.5 bn. Deep-sea muds contain a resource of the rare earth elements that is at least as abundant as that on land. The deep ocean could sustain the phosphate needs of world agriculture for 33 centuries. Thus if we tap the oceans, humanity has the resources needed for a sustainable future. Furthermore, the oceans offer more equitable access to these resources, and the mobility of the ocean mining infrastructure means these resources can be surgically mined and recovered with less environmental damage and greater safety than is possible on land. Risk remains, but we need to accept it with the confidence that we can fix any problems that arise and thereby become ever better at mitigating it. This approach is far less risky than trying to avoid all risk. 
To move forward we need to accelerate laying the knowledge foundation for recovering ocean resources in the most environmentally and ecologically acceptable way possible, and impress the next generation, not with the immensity of future pain, but the immensity of future gain: sustaining everyone at a European standard indefinitely with the huge increases in the scientific understanding of natural systems that meeting this challenge will provide.

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## drillinto

October 10, 2011

The Uncertainty Surrounding The European Debt Crisis Continues To Distort Metals Markets
By Rob Davies
www.minesite.com/aus.html

As LME week rolled on, got underway last Monday, the signs on the markets were not propitious for producers: copper hit a 14 month low of US$6,635 a tonne. But if their counterparties were smiling early on in the week, it was a different story by Friday. By then a sharp rally had taken the copper price back up to US$7,265 a tonne, once again giving producers a lovely warm, wet feeling. 

The net result of that roller coaster week was tiny drop of 0.2 per cent in the LME index, to 3,303.  Since that was achieved in the face of a 0.8 per cent increase in the dollar against the euro, the net impact was slightly positive for all but US-based traders.



Overall, the trend was encouraging as traders sensed that demand from China will be maintained. China’s dominant 40 per cent share of copper consumption means that looms over the industry like the proverbial 800 pound gorilla. That said, the overall sentiment in capital markets is becoming ever more focussed on the evolution of the European debt crisis. If it lurches from severe to catastrophic the impact on commodities as well as equities and bonds could be horrendous.



And it is because the negative consequences are so painful that the bulls are convinced there will be a satisfactory resolution. As ever the resolutions revolve around refinancing the banks. At the moment the French banks are under the spotlight, but credit defaults spreads on German banks are edging up. 



Suspicious investors seem to be moving to the view that whatever happens in Europe, German banks will be left holding a lot of low quality debt. Indeed, one of the curiosities of the current crisis is the continuation of the safe-haven status of German sovereign debt.



German 10 year bonds only offer a yield of two per cent, yet the bill for any recapitalising of the European Financial Stability Facility and the ECB, which will be needed if the Latin states are to be bailed out, will ultimately come through Germany’s letterbox. As Germany is the biggest metal basher in Europe, miners have a strong interest in seeing that the German economy stays healthy.



It is, of course, the desire of Germany to maintain the financial strength of its fellow Europeans and thereby markets for its export-driven industry, that is behind its interest in maintaining the integrity of the eurozone. How long it can maintain this stance in the face of domestic political opposition and increasing unease in capital markets is the great unknown.  
And that unknown is distorting markets. Whereas the focus in the metal markets should be on the balance between demand and supply, a recent survey by investment bank Macquarie showed that a collapse of the European economy is the biggest worry for half the respondents polled. 



Without the certainty that European banks can survive this crisis the normal news flow that dominates the metals market gets relegated to trading noise. Whether the better-than-expected data on US jobs triggered the end of week rally is hard to know. But it is a good reminder that the fundamentals for many base metals remain sound, even though lead fell three per cent to US$1,943 per tonne and zinc fell 1.4 per cent to US$1,843 during the previous week. 



Tight markets and dangerous politics will certainly keep metal traders on their toes over the remainder of the year as the festivities of LME week fade into history. 

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## drillinto

Bill Matlack: Metals & Mining Analysts' Ratings - Juniors
October 14, 2011

http://www.kitco.com/ind/matlack/oct142011_juniors.html
[The sector with the most "Buy" ratings is Uranium, in 8 out of 14 companies]


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## drillinto

October 15, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. Your market seems to have gone nowhere last week.



Oz. “Flat” is the one-word description for a week which had three up days, two down, and finished virtually where it started. Technically, the metals and mining index finished up half a per cent, the all ordinaries rose by up one per cent, and gold was absolutely flat. The big news down this way was that Parliament passed laws to introduce a tax on carbon emissions. And that development was followed by a warning from the Opposition that companies should not purchase any carbon emission certificates because if elected in less than two years time it will repeal the law.


Minews. That would seem to make running a business which emits carbon, as most miners do, rather difficult.



Oz. Impossible, I would have thought, especially since the government is a country mile behind in the public opinion polls and a change of government is as close to a certainty as is possible in politics. What can be said with confidence is that the carbon tax, and the proposed mining tax which will be introduced in Parliament later this year, have clearly polarised the left and right of Australian politics.



Minews. Enough of the idle chatter, time for prices.



Oz. Good idea, because while the indices went nowhere, and a surprising number of companies ended the week where they started, there were some strong individual performances. Top of the list was PMI Gold (PVM), the company planning to redevelop the Obotan mine in Ghana. It rocketed by 73 per cent to an all-time high on Friday of A$1.04 after reporting a 270 per cent increase in its gold resource. Obotan now boasts a resource of 4.5 million ounces, with 3.22 million ounces in the higher quality measured and indicated category and 1.29 million ounces in the inferred category. Those numbers will be incorporated into a pre-feasibility study set for completion by the end of the year.



Three other solid performers are worth singling out, two in the copper sector and one in the iron ore business. Tasman Resources (TAS) starred in copper, bursting into the headlines after years on the sidelines by announcing an exploration joint venture with Rio Tinto on a tenement close to BHP Billiton’s giant Olympic Dam copper/uranium mine. Rio has agreed to invest up to A$92 million in a series of staggered payments, which could see it end up with 80 per cent of the Vulcan iron ore-copper-gold (IOCG) prospect located 30 kilometres north of Olympic Dam. The timing of that news was no accident. Last week Olympic Dam received government approval last week for a major expansion. On the market, Tasman rose 170 per cent to A16.5 cents, but did trade up to a 12 month high of A21 cents on Wednesday.



Rex Minerals (RXM) was the other copper company that performed strongly, adding A30 cents to A$1.61 after it announced plans to double planned production at its Hillside project in South Australia where feasibility studies are ongoing. It is now aiming for annual production of 100,000 tonnes of copper equivalent a year, over a minimum 10 year mine life.



Over in the iron ore sector the best performer was Iron Ore Holdings (IOH) which announced a second sale of exploration assets in little more than a week. The latest involved the offloading of tenements to Mineral Resources for A$42 million. The first was a A$32 million sale of tenements to Rio Tinto. On the market, IOH added A30 cents to A$1.35, though the real significance lies in the decision the company has made to sell its exploration ground rather than try to develop it.



Minews. Perhaps a comment on how IOH sees the future price of iron ore?



Oz. It might be that, but it could also be that the company has recognised the cost and difficulty of developing remote pods of iron ore without a transport solution, such as access to a railway and port.



Minews. Time to call the card, starting with gold, please.



Oz. After PMI it was a dull affair, largely because the recovery in the US dollar gold price was cancelled out by an equally solid revival in the value of the Australian dollar, meaning that the local gold price fell by around A$50 an ounce. Troy Resources (TRY) was one of the stronger performers, adding A9 cents to A$4.63. Northern Star (NST) put on A4 cents to A58 cents. Crusader (CAS) also rose by A4 cents to A$1.11. Other movers included: Kingsgate (KCN), down A20 cents to A$7.55, Azumah (AZM), up A4 cents to A44.5 cents, Resolute (RSG), up A4 cents to A$1.69, Newcrest (NCM), up A74 cents to A$36.50, Ausgold (AUC), down A2 cents to A$1.35, and Silver Lake (SLR), up A2 cents to A$2.75. Companies that opened and closed at the same price included: Integra (IGR) at A51 cents, Kingsrose (KRM) as A$1.47, and Gold Road (GOR) at A38.5 cents. Perseus (PRU) was sold down by A15 cents to A$3.20 after announcing a A$90 million capital raising.



Minews. Iron ore next please, as there seems to have been a bit of action there.



Oz. Iron Ore Holdings was the pick of the sector, though Brockman (BRM) was the real news generator. It added A6 cents to A$1.89, but made the news after its chairman, Peter Luk, was asked by the Hong Kong fraud squad to assist with enquiries. No news on what those enquiries are, but Brockman is the third Australian company in the past month to be caught up in an investigation by the corporate cops. Iron ore explorer Sundance (SDL) and uranium explorer Bannerman (BMN) are the other two. Sundance crept half a cent higher last week to A44.5 cents, but remains well below the A50 cent level promised by a Chinese takeover bid. Bannerman (BMN) slipped A3 cents lower to A35 cents. Other iron ore movers included: Atlas (AGO), up A9 cents to A$3.30, Gindalbie (GBG), up A4.5 cents to A60 cents, Murchison (MMX), up A1.5 cents to A29.5 cents, Mt Gibson (MGX), up A3 cents to A$1.54, and Northern Iron (NFE), down A5 cents to A$1.32.



Minews. Over to the rest of the base metals now, starting with the rest of the copper sector.



Oz. After Rex and Tasman there wasn’t much to report. PanAust (PNA) rose A10 cents to A$3.00. Hot Chili (HCH) rose A6 cents to A50 cents. Sandfire (SFR) fell A23 cents to A$6.79. OZ Minerals (OZL) fell A76 cents to A$10.98. Exco (EXS) fell A2.5 cents to A69.5 cents, and Ivanhoe (IVA) fell A14 cents to A94.5 cents.



Nickel and zinc companies improved, a little. Best of the nickels was Western Areas (WSA), up A16 cents to A$5.46. Independence (IGO) added A24 cents to A$5.03, but probably more because of its gold and copper assets. Mincor (MCR) continued its revival, up A1.5 cents to A81 cents.



Ironbark (IBG) was the pick of the zinc companies, up A2 cents to A29.5 cents after it announced a funding and off-take agreement with Glencore. Kagara (KZL) added A1 cent to A43 cents despite hitting a snag in selling its nickel assets. Perilya (PEM) rose by A1 cent to A50 cents, but Blackthorn (BTR) slipped half a cent lower to A40.5 cents.



Minews. Coal and uranium next, please, and minor metals to close.



Oz. Minimal movement among the coal companies, but we might see more on Monday if BHP Billiton bids for US metallurgical coal producer Walter Energy, as speculated. Whitehaven (WHC) added A17 cents to A$5.90, thanks to its status as the takeover most likely to happen. New Hope (NHC) firmed by another A21 cents to A$6.46, as it conducted its beauty parade of potential suitors. Bathurst (BTU) rose by A5 cents to A77.5 cents. Coalspur (CPL) gained A4 cents to A$1.56, and Carabella (CLR) put on A2.5 cents to A$1.67 after announcing a new chief executive.



Extract (EXT) was the best of the uranium companies, rising by A46 cents to A$8.50 on fresh rumours of a revised Chinese takeover bid. Paladin (PDN) continued to recover after a couple of torrid weeks, adding A8.5 cents to A$1.63. Berkeley (BKY) gained A6 cents to A39.5 cents. Greenland (GGG) continued to attract interest, adding A7 cents to A55 cents. Manhattan (MHC) posted a rise of A1 cent to A39.5 cents.



Orocobre (ORE) was the best of the minor metals companies, as it benefited from increased interested in its lithium project. It added A18 cents to A$1.38. Galaxy (GXY), another lithium player, slipped A4 cents lower to A64 cents. Lynas (LYC) led a revival in rare earth companies, rising by A6 cents to A$1.24. Alkane (ALK) added A5 cents to A$1.21, and Arafura (ARU) gained A6 cents to A65.5 cents. 



In tin, Venture (VMS) and Kasbah (KAS) both rose by A2 cents, to A34.5 cents and A18.5 cents respectively.



Minews. Thanks Oz. Enjoy the weekend rugby semi-finals. Shame England can’t join you.



Oz. In which case you’ll have to cheer for Wales!
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## drillinto

October 17, 2011

Communist China May Turn Out To Be Less Socialist Than Europe, With Corresponding Benefits For Metals Prices
By Rob Davies >> www.minesite.com/aus.html (The registration is free)

When the trading environment is wall-to-wall horrific, it only takes the realisation that things are only bad, not terminal, to bring relief. On the face of it there seems little other explanation for the rally that took place across a number of markets last week. 

Be that as it may, the relief didn’t appear get through to the base metals, as the LME index fell by 24 points or 0.7 per cent over the week. But, as ever in finance, nothing is quite what it seems and a 2.5 per cent fall in the dollar over the period actually left metals prices higher in many currencies.



Although there was plenty of news circulating, there was nothing really substantial enough to pin the equity rally on, or the recovery in the euro. Even the news that China is probably sitting on the better part of a few million tonnes of copper inventory was not enough to halt the 1.1 per cent rise in the copper price to US$7,327 a tonne. 



Compared to the LME warehouse inventories of 453,000 tonnes those Chinese stocks are massive, but most market participants suspected the figure was pretty high anyway, so what’s the big surprise? In the same way, the disclosure the other week that the value of copper in the British Telecom phone network exceeds the company’s market capitalisation is not price sensitive. No one is expecting BT to create even more road works by digging up all its cables. 



Europe remains the primary concern of most traders. Even though the news is not getting any better there is a growing realisation that the relevant authorities are prepared to do what is needed to keep the Eurozone functioning, even if in the extreme case of Slovakia it took a new government to get funding for the European Financial Stability Facility approved. 



The most recent data for Europe is actually positive. Eurozone industrial production rose 1.2 per cent in August, for example. But there are still worrisome signs. Carrefour, the French retailer issued its fifth profit warning last week. In Sweden, Scandia, the truck maker, announced it will cut production by between 10 per cent and 15 per cent from November. There’s not much that is more cyclical than truck sales, so that development does not bode well. 



But even if that news from Scandia does presage a further slowdown, there are, in any case, already signs of rising distress in Europe. The bailout of Dexia, the Franco-Belgian bank, is probably just the start of the second wave of bank bailouts. Because it is clear that no European bank, however badly run, will be allowed to fail in a way that that compromises the political edifice that is the single currency. 



Other banks are taking the less painful option of shrinking their business to stay solvent. Citi, formerly the biggest bank in the world, has shrunk its asset base from US$2,200 billion to US$1,400 billion. No wonder credit is hard to get, even if money is cheap.



And then there’s the China factor. Despite certain select areas of strength, such as Burberry’s booming sales to Chinese tourists, commodity investors will be more concerned by the increasing signs of distress in Chinese property developers. How that situation will develop is anyone’s guess.



Much will depend on whether the Chinese end up taking a more free market approach to business failures than the Europeans. It may yet turn out that the Europeans are more socialist than the Chinese communists.   



While everyone knows Europe is in a mess, and the data verifies that, commodity prices seem to be anticipating a worse situation in China than the one that actually prevails. If China does slow down dramatically, then the prices of two weeks ago will be vindicated.



But last week’s rally, the biggest in six months, shows what can happen when sentiment gets too detached from reality.

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## drillinto

Bill Matlack: Metals and Mining Analysts' Ratings - Seniors

http://www.kitco.com/ind/matlack/oct142011.html
[Among the seniors the "buy" ratings are scarce indeed]

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## drillinto

Which Gold Miners Have Largest Upside ?

http://www.kitco.com/ind/Holmes/holmes_oct182011.html
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## Wysiwyg

drillinto said:


> Commodities is the place to be long-term.



Ummm, nice copy and paste promotions but nothing lasts forever. There are hundreds and hundreds of resource explorers/producers share prices that have been decimated. If you promote they are going to make long term gains then you are blatantly lying. Repeat, nothing lasts forever but there "could" be some, repeat some, resource companies that will go the "long-term". 

Long term buyers research.


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## drillinto

Are commodities in a bubble ?

http://seekingalpha.com/article/301062-so-are-commodities-really-in-a-bubble?source=yahoo

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## drillinto

Bespoke's Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2011/10/20/bespokes-commodity-snapshot.html

***


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## drillinto

October 22, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. Apart from your team finishing third in the Rugby World Cup there probably isn’t much to talk about this week.



Oz. Third was probably what we deserved. The cup itself was always out of reach. At least watching the rugby, and getting ready for our big horse race down this way, the Melbourne Cup, has stopped most people from talking about the flat stock market.

Minews. Understandable - there doesn’t seem to have been much happening on the ASX over the past week.



Oz. Most prices fell, but as with previous weeks there wasn’t a rout, more a continuation of the correction which started mid-year. No sector gained ground. Gold stocks were hit hardest as the gold price slipped to around US$1,620 an ounce during our trading hours. The price-bounce back above US$1,640 per ounce occurred after we had closed, as did the 2.3 per cent rise on the New York market, and the 1.9 per cent rise in London.



On the ASX last week the all ordinaries slipped lower by a relatively painless 1.6 per cent. The metals and mining index lost a more significant 5.2 per cent, a weakness attributable largely to falls among iron ore companies. And the gold index led the way down with a fall of 6.7 per cent, a plunge that was spearheaded by Newcrest Mining (NCM), the sector leader, which reported a 16 per cent fall in gold production for the September quarter and then watched its share price tumble by 8.7 per cent.



Minews. Like the rest of the world, your market seems to be captive to events in Europe and China.



Oz. Very much so, we’re in the same boat as the UK - waiting for Europe to acknowledge that a cafe lifestyle is not an industry which actually generates wealth and jobs. The Prime Minister of tiny Luxembourg, Jean-Claude Juncker, is one of the few leaders who seems to be telling the truth in that regard. “We all know what to do”, he said. “We don’t know how to get re-elected once we have done it”.



Minews. How often does the truth come from the mouths of babes? Enough philosophy, time for prices, starting with iron ore because there seems to be something significant going on in that sector.



Oz. That something is declining global steel production, an event closely related to Europe’s woes and declining rates of growth in China. All iron ore companies fell last week, as the iron ore price fell by around 15 per cent, and as industry watchers predicted a continued slide in the price next year. Fortescue Metals (FMG), which has most to lose as it is in the middle of an expansion program, dropped by A64 cents to A$4.25. Atlas Iron (AGO), another producer with big expansion plans, lost A30 cents to A$3.05. Among the other movers in iron ore was Mt Gibson (MGX), down A10 cents to A$1.45, Grange (GRR), down A1 cent to A43.5 cents, Gindalbie (GBG), down A5 cents to A55 cents, and Murchison Metals (MMX), down A4 cents to A25.5 cents. Brockman (BRM) fell A24 cents to A$1.65, but did touch a fresh 12 month share price low of A$1.60 in early Friday trade. Also weaker was Sundance (SDL), which feel A1 cent to A43.5 cents, despite the promise of a takeover bid priced at A50 cents from a Chinese suitor.



Minews. Not a pretty picture. Let’s try the gold sector next.



Oz. Not much better, though at least it wasn’t all red ink as a handful of companies added a few cents. What’s more, most of the falls were relatively modest in comparison to Newcrest’s substantial decline. Among the companies that rose, just, were Silver Lake (SLR), up A2 cents to A$2.77, Scotgold (SGZ), up one-tenth of a cent to A9 cents, and Mt Isa Metals (MET), which burst back into life after a quiet period, putting in an eye-catching rise of A5.5 cents to A32 cents on no fresh news. Among the fallers were Adamus (ADU), down A2.5 cents to A65.5 cents, Perseus (PRU), down A20 cents to A$3.00, Kingsgate (KCN), down A23 cents to A$7.32, Kingsrose (KRM), down A6 cents to A$1.41, Medusa (MML), down A32 cents to A$6.79, Integra (IGR), down A3 cents to A48 cents, Allied (ALD), down A30 cents to A$2.30, and Troy (TRY), down A38 cents to A$4.25.



Minews. Over to base metals, starting with copper, please.



Oz. It was more of the same across the base metals spectrum. Two copper companies rose, plus one nickel explorer and two zinc companies, but by the barest possible margins. The copper companies that gained ground were Talisman (TLM), up A 1.5 cents to A41.5 cents, and Exco (EXS), up A1.5 cents to A71 cents. Other copper movers included Rex (RXM), down A12 cents to A$1.49, Sandfire (SFR), down A15 cents to A$6.64, OZ Minerals (OZL), down A20 cents to A$10.78, Hot Chili (HCH), down A2 cents to A48 cents, Altona (AOH), down A2 cents to A24.5 cents, and PanAust (PNA), down A16 cents to A$2.84.



The nickel company that rose was Poseidon (POS), which announced fresh drilling results at its Cerberus orebody, near the historic Mt Windarra mine. Among the best drill hits was 4.07 metres at 3% nickel, and 2.83 metres at 3.24% nickel. On the market, those results plus news of the steady dewatering of the Windarra mine helped Poseidon add A3 cents to A19 cents. After Poseidon it was all down. Western Areas (WSA) lost A18 cents to A$5.28. Mincor (MCR) shed A5.5 cents to A75.5 cents. Mirabela (MBN) slipped A17 cents lower to A$1.30, and Panoramic (PAN) was A10 cents weaker at A$1.27.



Ironbark (IBG) and Meridian (MII) were the two zinc companies that rose. Ironbark rose by half a cent to A30, and Meridian by half a cent to A13.5 cents. Other movers in zinc included Perilya (PEM), down A2.5 cents to A47.5 cents, Kagara (KZL), down A 3.5 cents to A39.5 cents, Terramin (TZN), down A 3 cents to A14.5 cents, and Blackthorn (BTR), down A1 cent to A39.5 cents.



Minews. Coal and uranium, with minor metals to close, please.



Oz. There was one big winner in the coal sector, and two modest winners. Coal of Africa (CZA), which has been sold down in recent months because of problems with the government approvals process, finally won the right to proceed with mining at its Vele property after the suspension of a water-use licence was lifted. That news sent the shares up by an initial A24 cents to A90 cents. Later selling then trimmed the week’s gain to A13 cents and the shares closed at A83.5 cents. Metro Coal (MTE) and Carabella (CLR) were the other coal companies that rose. Metro added A5 cents to A72 cents, and Carabella rose by A7 cents to A$1.74. Other movers included New Hope (NHC), down A38 cents to A$5.93, Aston (AZT), down A17 cents to A$10.17, Whitehaven (WHC), down A18 cents to A$5.72, and Stanmore (SMR), down A4 cents to A71.5 cents.



Uranium companies were flat, with one significant fall. Extract (EXT), which has been waiting for a revised Chinese takeover bid, fell by A55 cents to A$7.95 after Rio Tinto made a takeover move on a Canadian miner, potentially taking it out of the race for control of Extract and its London-listed associate, Kalahari Minerals. Other uranium movers included Manhattan, down A6.5 cents to A33 cents, Berkeley (BKY), down A4.5 cents to A25 cents, Bannerman (BMN), down A3 cents to A32 cents, and Greenland (GGG), down A1.5 cents to A53.5 cents.



Minews. Minor metals, and then off to watch the rugby final.



Oz. The eye-catching move among the minor metals was a spectacular A6.1 cent rise by Indonesian-focussed explorer Western Manganese (WMN), which climbed to A14.5 cents. There was no fresh news from the company, and the significance of the rise can be discounted somewhat because it was on thin volume, and the shares have only traded on three of the last 24 days. Spitfire (SPI) attracted revised interest as it re-starts drilling at its South Woodie Woodie project, and added A1 cent to A13.5 cents. Rare earth companies weakened. Alkane (ALK) shed A11 cents to A$1.10, and Lynas (LYC), lost A15 cents to A$1.09. Lithium, tin and phosphate companies also lost ground.



Minews. Thanks Oz.
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## drillinto

Commodities - Mega profits at the world's biggest trading houses

http://www.reuters.com/article/2011/10/21/us-commodities-houses-idUSTRE79K49320111021
***


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## drillinto

October 24, 2011

Base Metals Fall As Europe Flounders And Chinese Buyers Pay Less For Iron Ore 
By Rob Davies
www.minesite.com/aus.html (Free Registration)

Like a soap opera, each stage of the European financial crisis leaves viewers desperate to see what will happen next. Equally, just like a soap opera, we know that nothing really changes. The French don’t like the Germans, and vice versa, and no one trusts the Greeks. And even more important than the internal divisions, is the need to remain united in order not the give the Anglo Saxons the opportunity to gloat and say we told you so. 

As the situation in Greece deteriorates the size of the haircut needed to make the numbers work increases. At the end of week Bloomberg reported that a 60 per cent cut in the value of Greek debt is needed to get its debt to GDP ratio down to 110 per cent. While that is still horrific, it’s probably tolerable. 



But as an indication of how far there is to go, French banks are still dragging their feet about taking the 21 per cent write-down agreed in July. As these banks are some of the largest financiers of commodity traders, that directly impacts liquidity and hence metal prices.



Meanwhile credit markets are taking an increasingly dim view of French and German sovereign debt. While the ratings agencies are behind the curve as usual, money managers have pushed credit default swaps up to 191 from 108 for France and up to 93 from 59 for Germany. It may be a soap opera, but this drama is being played out in slow motion. 



Given this backdrop it’s perhaps not surprising that base metals fell 6.9 per cent last week, as measured by the LME index. The reality, though, is that this fall was less about Europe and more about China. 



After all, nothing concrete had been decided in Europe. Instead, commodity traders focussed on the news that Vale, the Brazilian miner, had dropped its prices for the iron ore that it sells to China. Although some viewed this move as effort on the part of Vale to take market share from the Australians, others took it as a more bearish assessment of the Chinese economy. 



But while it’s true that the latest growth figures for China have dropped, at 9.1 per cent for the quarter, down from 9.5 per cent and 9.7 per cent in the previous two, it is not really a train crash.   



Even factoring in the efforts by the Chinese government to reduce the growth rate to eight per cent steel experts are still predicting the country will produce 750 million tonnes of steel in 2012. Steel production is a key component of industrial production and is good a guide to base metal consumption. You can’t have one without the other. 



It is fair to say that concerns over the bubble in the Chinese property market are rising. There is also some anecdotal evidence that some investors might be seeking to lock in capital gains made in China by diversifying overseas. 



Nevertheless, China remains the only game in town for commodities. Until Europe and the USA, to a lesser extent, get their financial houses in order, these regions will continue to provide more entertainment than growth. But with the added frisson that Europe could erupt into a spectacular pyrotechnic display at any moment. Now that’s a soap opera worth watching. 

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## drillinto

October 29, 2011

That Was The Week That Was ... In Australia
By Our Man in Oz
www.minesite.com/aus.html (FREE REGISTRATION)


Minews. Good morning Australia. You seem to have enjoyed a strong trading week.



Oz. It was, with excellent gains across all sectors. However, to put one up-week into perspective we’re really only back to where we were six weeks ago, and there’s a lot further to travel if we’re going to get back to the high point we reached earlier in the year. The metals and mining index, despite a very impressive 8.5 per cent rise last week is still more than 20 per cent below its peak for 2011. The gold index is also around 20 per cent below its peak, despite a four per cent gain last week.


Minews. That sounds like a surprisingly small move as far as gold is concerned.



Oz. It does, but the index is slightly misleading, for two reasons. Firstly, there is the dominant position held by a single company in the gold index, Newcrest. Secondly, the rosier outlook that came with Europe’s big band-aid on its debt crisis helped the Australian dollar add the better part of US5 cents, which meant it ended the week at US$1.07, and that took a lot of the gloss off our domestic gold price. The net effect of Newcrest’s modest 2.7 per cent rise and the modest A$23 rise in the local gold price, as against US$100 per ounce on the international market, was a subdued gold index. But that in turn obscured a number of strong price rises from smaller gold companies.



Minews. And your tax debate is rumbling on too, I see? 



Oz. Yep. Debate on the tax is slowly making its way through Parliament, and a fresh twist has now emerged, as some mining companies have started briefing lawyers for a constitutional challenge. If that happens the tax could be delayed for years, or killed outright, if the miners have a win in the High Court.



A second interesting event has been the arrival in Perth, the centre of Australia’s mining industry, of a few big-name Brits. The biggest is H.M. herself, as the Queen has spent a few days in town as part of the Commonwealth Heads of Government Meeting. But the second is actually more interesting, as BAE Systems, the UK’s major defence company, seems to be exploring the business opportunities in mining. A spokesman for the company, which is better known for building parts for fighter jets, said it was on the hunt for opportunities in mining to offset a decline in defence work.



Minews. A point you raise because you’ve been asking for years why are British firms so conspicuous by their absence?



Oz. Precisely. For some strange reason you put all your eggs in an obviously rotten European basket and forgot that Australia remains a very attractive, and comfortable place for British investors. Perhaps events of the past few months will cause other British industries to have a look at the opportunities BAE can see.



Minews. Enough of the big picture. Time for prices, starting with gold.



Oz. Most gold companies rose by more than the four per cent the index posted. There were only a few fallers, and only one of those was in eye-catching territory. Troy Resources (TRY) fell sharply after Argentina announced potential changes in its foreign exchange rules, an event which could affect the economics at Troy’s flagship Casposo mine. From a mid-week peak of A$4.58 on Wednesday the shares fell by A72 cents to close on Friday at A$3.86, down A39 cents over the full week.



The rest of the gold sector was much stronger. Among the better risers was OceanaGold (OGC) which added A27 cents to A$2.41 after reporting a sharp rise in September quarter earnings. Silver Lake (SLR) was another big winner, but with no fresh news. It rose by A51 cents to A$3.28, a 12-month high which could be signalling some sort of unfolding corporate activity. Perseus (PRU) recovered recently lost ground with a rise of A22 cents to A$3.22, and Ampella Mining (AMX) gained A29 cents to A$1.90. Other movers included: Adamus (ADU), up A4.5 cents to A70 cents, St Barbara (SBM), up A18 cents to A$2.23, Resolute (RSG), up A13 cents to A$1.73, Kingsgate (KCN), up A46 cents to A$7.78, Kingsrose (KRM), up A6 cents to A$1.51, Noble (NMG), up A5.5 cents to A61.5 cents, and Intrepid (IAU), up A23 cents to A$1.23.



Minews. Iron ore next, please, as there seems to have been a few strong performers.



Oz. It was a much better week for the iron ore companies. Fortescue Metals (FMG) led the way, shooting up A75 cents to A$5.00 after announcing a successful debt raising to fund expansion. Atlas (AGO) also recovered lost ground, putting in a rise of A9 cents to A$3.16. Mt Gibson (MGX) put on a sharp A16 cents to A1.61. Other notable movers included Gindalbie (GBG), up A3 cents to A58 cents, Grange (GRR), up A2 cents to A45.5 cents, Cape Lambert (CFE), up A4.5 cents to A43 cents, and Brockman (BRM), up A4 cents to A$1.69. Also on the move was Aquila (AQA), which is as much a coal story as it is iron ore, and which rose a lively A$1.00 to A$6.18.



Minews. Base metals next, please.



Oz. It was strong across the sector, and in particular there were a few interesting moves among the nickel companies - a neglected species for much of the past year. Best nickel performer was Mirabela (MBN) which attracted solid support and rose A38 cents to A$1.68. Mincor (MCR) wasn’t far behind in percentage terms, putting in a rise of A14.5 cents to A90 cents. Western Areas (WSA) added A68 cents to A$5.96, and Independence (IGO) closed the week at A$5.37 for a rise of A56 cents.



Copper companies did well, but not as well as nickel. Ivanhoe (IVA), which is developing a molybdenum and rhenium project as well as a copper mine, shot up by A30 cents to A$1.11. Sandfire (SFR) clawed back A47 cents of lost ground to close at A$7.11, and Rex (RXM) rose by A18 cents to A$1.67. Other copper movers included: Talisman (TLM), up A7 cents to A48.5 cents, Hot Chili (HCH), up A4 cents to A52 cents, PanAust (PNA), up A61 cents to A$3.45, and OZ Minerals (OZL), up A$1.18 to A$11.96. Exco (EXS) went against the trend, slipping A1.5 cents lower to A69.5 cents.



Zinc had a better week, though the strongest rise in the space came largely as a result of the copper exploration news filed by Blackthorn (BTR). It added A11.5 cents to A51 cents after reporting excellent assays from its Mumbwa project in Zambia, where a best intersection showed 282.7 metres at 1.05% copper. Kagara (KZL) added A2 cents to A41.5 cents. Perilya (PEM) gained A1.5 cents to A45.5 cents, and Terramin (TZN) crept half-a-cent higher to A15 cents.



Minews. Coal and uranium next, please.



Minews. After a few good weeks, coal companies performed modestly, perhaps in anticipation of a slowdown in Chinese demand. Uranium companies were even flatter. Best of the coal stocks was Coalspur (CPL), which is making progress with its Canadian mine development plans, and added A19 cents to A$1.89 last week. Elsewhere, Carabella (CLR) continued to attract interest as a takeover target, rising by A7 cents to A$1.81. And Bathurst (BTU) put on A6.5 cents to A80 cents, but after that most moves were modest. Continental Coal (CCC) gained A1 cent to A19.5 cents, and New Hope (NHC) added A4 cents to A$5.97. Going against the firmer trend was Coal of Africa (CZA) which slipped A2 cents lower to A81.5 cents after a strong week last week.



In uranium, Paladin (PDN) rose by A1 cent to A$1.56. Berkeley (BKY) lost A2 cents to A33 cents. Extract (EXT) fell by A10 cents to A$7.85. Bannerman (BMN) lost the most on a percentage basis, falling by A3.5 cents to A28.5 cents after a possible deal with a Chinese suitor collapsed.



Minews. Minor metals to close, please.



Oz. Higher across the board, led by rare earth companies which staged a recovery after a few down weeks. Lynas (LYC) rose by A20.5 cents to A$1.30. Alkane (ALK) added A9.5 cents to A$1.19. Lithium companies were mixed. Orocobre (ORE) dropped A6 cents to A$1.22, but Galaxy (GXY) added A8 cents to A68.5 cents. Phosphate and potash companies crept higher. South Boulder (STB) added A4 cents to A$2.22, and Minemakers (MAK) gained A3 cents to A36.5 cents. Tin companies also firmed. Kasbah (KAS) rose by A1 cent to A20 cents, and Venture (VMS) by A3 cents to A36 cents.



Minews. Thanks Oz.
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## drillinto

October 31, 2011

In Spite Of The Recent Deal On Debt, It'll Be A Long Time Before The Eurozone Is Again A Driving Force In Metals Demand
By Rob Davies
www.minesite.com/aus.html  >> The registration is free !

It was hard to escape the news blizzard about the European debt crisis last week. If the short term reaction of the markets is any guide it appears that the member countries of the eurozone have escaped the jaws of death in a single bound. 

The FTSE Eurofirst 300 Index rose by four per cent, a gain that was matched in the UK and the US. But base metals outpaced them all. Using the LME index as a guide, this group gained 10.3 per cent on the week. Copper led the way with a 10 per cent jump to US$8,039 a tonne. 



The rise in risk markets like equities and commodities suggests that the deal is viewed as good for growth. However, the six per cent rise in gold and four per cent fall in US Treasuries also indicate that investors appreciate that the deal has its risks. As always, the devil is in the detail.



The market liked the part of the deal where the banks’ haircut was described as voluntary. This has positive implications for the credit default swaps market in bank debt. And because the ECB is not taking a cut on its Greek debt, sovereign bonds look better, which the market also liked. Be that as it may, German bond prices still drifted down, because the prevalent view now is that whatever happens, the Germans will be paying for it.



Another negative was the continuing slide in iron ore spot prices. These fell 19 per cent over the week, as the Chinese took a step back from the market. Any European expecting the Chinese to bail out their social security recipients needs to be aware that the economy of the Middle Kingdom is not without its own challenges.



On the bright side, the news that US GDP rose by 2.5 per cent in the third quarter was certainly a contributory factor in pushing metal prices back up. Of course, that GDP number served as a salient reminder that economic activity in most of the west is at very low levels - it doesn’t need much of an increase to deliver sharp price rises on the wider markets.



Credit booms - such as the one inspired by the cheap debt that went on offer following the adoption of the euro - bring growth forward from the future to the present. And the most visible sign of that was the construction binge in Europe.



Spain now has a million empty homes in a country of only 16.5 million families. These were built during the period of cheap financing when all euros were equal, and cheap. The situation in Ireland is worse in a relative sense although its overall size is smaller. And these empty buildings were, of course, financed by the European banks that are now being asked to raise their capital ratios. It will take a long time for that inventory of unwanted housing to clear.



More worryingly, those banks are still assuming those property loans have the same value today as when they were made. That’s not a tenable position, but for the immediate term it is at least likely to inhibit banks from making any similar loans.



So the problem in Europe is twofold. First, there is a large inventory of unused housing that will hold back new construction for many years. Secondly, even if there was demand for new construction there is no money to finance it. And these two factors will depress construction activity in Europe for some time to come.



And since construction and infrastructure account for about a third of copper demand and Europe represents about a third of the world economy, it is clear that the mining industry can expect no help from this sector in the immediate future.



Just as well then that copper supply does not meet copper demand. Because by the time it does, in a few years, Europe may have got its house in order. 

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## drillinto

Gold Price Forecast: Record High in March 2012

http://www.bloomberg.com/news/print...-rallying-to-record-by-march-commodities.html


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## drillinto

Please visit  www.Agrimoney.com  for comment and analysis on soft commodities, agriculture companies and farm investment.


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## drillinto

November 05, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html


Minews. Good morning Australia. You seem to have finished the week with a flourish.

Oz. We did, but even a 4.2 per cent jump in the ASX metals and mining index on Friday couldn’t make up for the declines of the first four days. The mining sector officially ended down 1.4 per cent, which was roughly in line with the 1.5 per cent fall in the all ordinaries index. Gold was the odd man out, adding 3.3 per cent on Friday as investors turned to the relative safety of the metal during the latest chapter of the never-ending Greek financial tragedy. That rise helped the gold index end the week as a whole up 1.9 per cent.


Minews. It is interesting that the problems in Europe are being felt on the other side of the world.



Oz. We’re being hit because of the potential effect on China. The market fears an economic slowdown, but it is also wary that Europe is trying to rope China and Australia into its financial rescue plan. That might make sense in Europe, but it’s not playing well down this way. When the Australian Prime Minister, Julia Gillard, told the G20 meeting in Cannes during the week that she would chip in with a few billion dollars to replenish the depleted coffers of the International Monetary Fund to allow it to help out in Europe, there were groans across the country. They were summed up by this particularly accurate barb from Opposition leader, Tony Abbott: “why should Australia send money to Greece if the Greeks can continue to retire at 50?”



Minews. A question a few people in the UK would like answered too. But investors here are also interested in your own moment of madness – the mining tax. What’s the latest on that?



Oz. The great mining tax debate moved a few paces further forward in the national Parliament this week, as deliberations on the associated bills got underway. In theory, that means we will cop the tax sometime next year, or the year after. However, as the law makers waffled away the miners hit back. One of the country’s richest men, Fortescue Metals founder, Andrew Forrest, said he would bankroll a High Court challenge to any law that is passed. Given the slow moving nature of the courts, and that the Australian Government has lost a number of legal challenges recently, the cash from Forrest could add years to the timetable for the introduction of the tax, if it ever gets that far.



Minews. Over to prices now, please.



Oz. The custom at this point has been to start with a dash of good news. Unfortunately, this week most of the moves were relatively modest, so it might be informative to start the call of the card with four news-grabbing share-price moves, all of them down, which should illustrate why investors remain skittish.



The first bad news story relates to Venus Metals (VMC), a well-connected gold explorer, which rocketed up by A23 cents to A97 cents on Monday after it reported spectacular drill hits of up to 82 metres at 4.12 grams gold per tonne from its Yalgoo prospect in Western Australia. Sadly for investors who bought on that official news, the assay was faulty. A re-assay found negligible gold, and Venus’s share price collapsed back to A56 cents, before closing on Friday at A67 cents, for a fall over the week of A7 cents.



Minews. What an awful mistake to make.



Oz. The next bad news story was the long-delayed collapse in the price of Wah Nam (WNI), the Hong Kong taxi operator which snatched control of iron ore hopeful Brockman Resources (BRM) earlier in the year. After weeks of no trading a single investor lost faith in Wah Nam, selling a tiny parcel of 10,230 shares at A6.1 cents, a deal which knocked A3.5 cents, or 36.5 per cent off Wah Nam’s price in a transaction that had a cash value of just A$624. Brockman, on the other hand, added A23 cents to A$1.92. The nonsense of the Wah Nam listing on the ASX is that it has an astonishing 5.35 billion shares on issue, but a single sale of 10,230 shares is capable of knocking the shares down by 36.5 per cent.



Minews. The Brockman and Wah Nam situation gets more interesting as it unfolds. Let’s hear about the other two bad news examples.



Oz. Lynas Corporation (LYC), the rare earth leader down this way, fell by A13 cents to A$1.17 after reporting a further delay in the construction of its Malaysian processing plant. First rare earth products are now not expected until the “first half of 2012”. And finally, Paladin Energy (PDN) upset its supporters by reporting lower than expected uranium production in the September quarter, a result which cut the shares back by A17 cents to A$1.39 even though its chief executive, John Borshoff, voluntarily took a 25 per cent pay cut to help save money.



Minews. An interesting move by a chief executive which can be taken two ways by the market: good news that he’s accepting the blame, bad news if the company is that hard up a cut in the CEO’s pay is needed. Over to the full price check now, starting with gold.



Oz. We’ll keep the price call short because as you will quickly discover not a lot changed week-on-week. The four down days were largely corrected by the Friday recovery with a number of companies ending up exactly where they had started. Among the gold movers were: Kingsgate (KCN), down A81 cents A$6.97, Kingsrose (KRM), down A6 cents to A$1.45, Alacer (AQG), up A15 cents to A$11.39, Adamus (ADU) down A1 cent to A69 cents, Medusa (MML), up A23 cents to A$7.00, Gryphon (GRY), up A9 cents to A$1.55, Silver Lake (SLR), up A6 cents to A$3.34, and Ausgold (AUC), down A9 cents to A$1.20. Perseus (PRU) rose A5 cents to A$3.27 after announcing a big capital raising. And Troy (TRY) rose A29 cents to A$4.15, but that was largely a recovery after last week’s scare about changes to foreign exchange laws in Argentina.



Minews. Base metals next, please.



Oz. It was mainly down in base metals although there were some strong rises on Friday among the copper companies. PanAust (PNA) was the star Friday performer, adding more than 10 per cent, but even with that rise the shares still ended the week down A7 cents at A$3.38. Other copper movers included: Sandfire (SFR), down A34 cents to A$6.67, Rex (RXM), down A6 cents to A$1.61, OZ Minerals (OZL), up A1 cent to A$10.97, Hot Chili (HCH), down half a cent to A51.5 cents, and Ivanhoe (IVA), down A8 cents to A$1.02.



It was a similar story in nickel. Poseidon (POS) added A1 cent to A22 cents. Western Areas (WSA) fell A17 cents to A$5.79. Mincor (MCR) slipped A7.5 cents lower to A82.5 cents, and Mirabela (MBN) closed at A$1.64, down A4 cents.



And it was all down among the zinc and lead companies. Perilya (PEM) lost A2.5 cents to A43 cents. Kagara (KZL) fell by A3 cents to A38.5 cents. Blackthorn (BTR) was A4 cents weaker at A47 cents, and Ironbark (IBG) dropped by A3 cents to A27 cents.



Minews. Iron ore next.



Oz. Mixed, in a word. Brockman, mentioned earlier, posted the strongest rise. Other movers included: Atlas (AGO), up A5 cents to A$3.21, Gindalbie (GBG), down A3.5 cents to A54.5 cents, Fortescue (FMG), up A8 cents to A$5.08, Iron Ore Holdings (IOH), down A1 cent to A$2.08, Mt Gibson (MGX), down A8 cents to A$1.53, and Aquila (AQA), down A7 cents to A$6.11.



Minews. Over to the fuel twins, coal and uranium, please.



Oz. It was mixed, but trending down in both sectors. Among the better performing coal companies were Coal of Africa (CZA), up A11 cents to A92.5 cents, and Stanmore (SMR), up A3.5 cents to A81 cents. Losing ground were Carabella (CLR), down A4.5 cents to A$1.77, Whitehaven (WHC), down A25 cents to A$5.71, and Coalspur (CPL), down A7 cents to A$1.82.



After Paladin’s fall other uranium movers included: Extract (EXT), down A29 cents to A$7.56, Berkeley (BKY), down A1 cent to A32 cents, Greenland (GGG), up A4.5 cents to A58.5 cents, Deep Yellow (DYL), up half-a-cent to A13 cents, Manhattan (MHC), up half-a-cent to A33 cents, and Bannerman (BMN), down A1.5 cents to A27 cents.



Minews. Minor metals to close, thanks.



Oz. Lynas led the way, as mentioned, among the rare earth companies. Alkane (ALK) also slipped lower, putting in a fall of A5 cents to A$1.14. Lithium companies also weakened, most notably Galaxy (GXY), which fell A3.5 cents to A65 cents. Titanium and zircon companies firmed. Iluka (ILU) added A34 cents to A$17.08, and Base Resources (BSE) added A7.5 cents to A54 cents.



Minews. Thanks Oz.
************


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## drillinto

November 07, 2011

Volatility May Be The Order Of The Day, But Deals Are Still Getting Done In The Mining Sector

By Rob Davies >> www.minesite.com >> free registration


Volatility is the dominant theme in capital markets these days. While it might not be fun for investors, it certainly keeps traders busy, if not always profitable. Last week base metal prices, as measured by the LME Index, fell 3.3 per cent to 3,458, US Treasury bonds rose almost 11 per cent while most equity markets fell about three per cent.     


In other words a Risk Off, low growth mindset was the dominant feature. But the casual observer might think this erratic behaviour is a signal that the movers and shakers are not really sure what’s happening, nor what the future holds. And they are probably right.



Europe has dominated the headlines again this week, much to the annoyance of the Americans and the Chinese. They clearly resent being sidelined by a group of selfish squabbling politicians and bridle at the suggestion that they should be the ones to pick up the tab for the financial black hole the Europeans have spent themselves into.



On balance, capitalists decided that the outlook for growth got moderately worse over the week. Even so, metals are still at attractive prices for miners and the modest decline in sentiment certainly did not affect two major deals in the mining sector.



In the Congo shareholders in the massive Tenke copper deposit committed to the phase two expansion that will take output up to 195,000 tonnes of copper cathode and 15,000 tonnes of cobalt a year. Whatever else is going on, the copper market is still desperately short of new capacity and it will be central Africa that will be the source of the new metal that will close the supply gap.



The other big deal was the sale by the Oppenheimer family of its 40 per cent stake in De Beers to Anglo American for US$5.1 billion. No industry tried harder to take price volatility out of its business than De Beers. In the end, though, it discovered you can either control price or volume but not both. 



One thing this family’s long tenure, and dominance, of one commodity demonstrated was that maintaining prices at too high a level does much more damage to a commodity than letting prices fall to market clearing levels.



High diamond price certainly helped the De Beers mines during their heyday but the cost to its balance sheet was ultimately too high. When De Beers controlled 90 per cent of the diamond business it wasn’t too painful, but it simply encouraged other miners to carry on producing knowing that De Beers was the buyer of last resort.



That gradually reduced its market share to 30 per cent and the business model became unsustainable. Worse, it choked off demand and what everyone businessman wants is to shift more product. And that applies to diamonds as much as cornflakes. 



The problem that De Beers/Anglo American have is unique for a mining company but common for other luxury goods suppliers. How do you sell more of something without devaluing it? That is in marked contrast to other commodities where there is very little focus on marketing. All that matters is keeping production costs below prevailing prices.  



How Anglo American will be able to run both business models will be the key not only to its success but also to that of the whole diamond industry.
------------------------------------


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## drillinto

November 12, 2011

That Was The Week That Was … In Australia

By Our Man in Oz
Source >> www.minesite.com



Minews. Good morning Australia, it looks you had another yo-yo week: up one day down the next.



Oz. That sums it up quite neatly. The end result, as we’ve seen in previous weeks, was a market which ended broadly where it started. But this time round the gold sector was the exception, thanks to a handful of stand-out rises. The performances of the ASX all ordinaries index and the metals index show just how flat the week was. The all ordinaries rose by 0.3 per cent while the metals index was up a slightly more punchy 0.4 per cent. Having said that, a strong Friday was the only reason the market finished in the black. The gold index, however, rose by an impressive four per cent as the sector leader, Newcrest (NCM), rose strongly, the gold price headed higher, and the Australian dollar headed lower.



Minews. It sounds like a lot happened for very little result.



Oz. That’s one way of describing the overall market, though there were star performers. Ampella (AMX) for example, pleased gold investors when it reported an increase in the gold resource at its Batie West project in Burkina Faso to three million ounces, an announcement which precipitated a A27 cent rise in the share price to A$2.05. Northern Star (NST) was another strong gold performer, adding A7.5 cents to A67.5 cents after it reported a resource upgrade at its flagship Paulsens project in the Pilbara region of Western Australia. That upgrade statement from Northern Star came in conjunction with a stockbrokers’ tour of Paulsens, so there might be a flurry of investment upgrades heading for the market over the next few days.



Minews. And how’s the political situation? 



Oz. Still slightly crazy. Last week Australian business digested implications of the new laws which have been passed which will impose a tax on carbon emissions from next year. There was also a blizzard of claims and counter claims about the new mining tax aimed at iron ore and coal producers. The fact that the carbon tax made its way into law does not necessarily mean the mining tax will, as the balance of power in the national Parliament remains finely balanced, and anti-tax advertisements from the mining industry have now begun to re-appear. Whatever the outcome, though, investors should be conscious of higher cost regimes in Australian mining, and that will affect profit results in future years.



Minews. Thanks for that warning. Prices now, and back to gold for the starting point.



Oz. The big influence on the index, and the major reason for that four per cent rise, was Newcrest putting on A$1.90 to A$36.90. But aside from Ampella and Northern Star, there were some other noteworthy risers among the juniors. Silver Lake (SLR) rose A20 cents to A$3.54 following a high-grade copper discovery at Hollandaire, near its emerging Murchison gold project. It seems likely that the copper will be processed with gold, adding a useful by-product to cash flow. Perseus (PRU) rose by A25 cents to A$3.52 as it moves into the final stages of building its Edikan project in Ghana. Troy (TRY) continued its recovery after a sovereign-risk scare in Argentina, adding A23 cents to A$4.38, and St Barbara (SBM) continued its steady improvement, putting in a rise of A17 cents to A$2.50. Other gold movers, including a reasonable number of fallers included: Adamus (ADU), up A4.5 cents to A73.5 cents, Ausgold (AUC), down A4 cents to A$1.16, Kingsgate (KCN), down A24 cents to A$6.73, Evolution (EVN), up A2 cents to A$1.72, and Ramelius (RMS), down A13 cents to A$1.17.



Minews. Iron ore next, as there seem to have been some interesting developments there.



Oz. Brockman (BRM) was the big mover last week, up A32 cents to A$2.24 amid reports that a fresh deal is being hatched with its strange Hong Kong controlling interest, Wah Nam International. The ASX queried the rise, but the only reply was along the lines of: talks being held which could result in a corporate transaction. The theory down this way is that Wah Nam wants 100 per cent control of Brockman, which might be a way of drawing to an end to what’s been a very unsightly affair.



The other big iron ore news was that the wholly-Chinese owned Sino Iron project has been sacking workers, ahead of its first shipments of processed magnetite ore. The A$6 billion project has caused its fair share of headaches since construction started, with the capital cost double the original estimate and first exports two years late. Sino is not listed, but the bad publicity has hit other magnetite developers, such as Grange (GRR) which last week reversed weeks of losses with a rise of A5.5 cents to A49.5 cents. The other magnetite processor in the construction phase, Gindalbie (GBG) crept half-a-cent higher to A55 cents.



Other iron ore movers included: Atlas (AGO), up A2 cents to A$3.23, Fortescue (FMG), down A26 cents to A$4.82, and Iron Ore Holdings (IOH), down A5.5 cents to A$1.22. Aquila (AQA), which is also a coal-project developer, added an eye-catching A57 cents to A$6.68 after releasing fresh plans for a new port.



Minews. The fuel companies next, coal and uranium, as there also seems to have been some news there.



Oz. It was quite interesting in both coal and uranium last week. Coal, because there were a number of significant share price moves - up and down. Uranium, because of an expectation that the keenly-awaited Chinese bid for Extract (EXT), and its associate, Kalahari Minerals, might not be far away. In the coal sector, a company we don’t hear much about, White Industries (WEC) was hammered when its Indonesian partner walked away from a coal-processing development. The A78.5 cent fall to A72.5 cents was a reminder of what can happy in a tricky country such as Indonesia. 



Other coal movers included Continental Coal (CCC), which staged a long overdue bounce, rising by A9 cent to A29 cents. Stanmore (SMR) was also in demand, adding A16.5 cents to A29.5 cents. Coal of Africa (CZA) slipped A3 cents lower to A89.5 cents. Bathurst (BTU) lost A3.5 cents to A71 cents, and Carabella (CLR) was A4 cents weaker at A$1.73.



Pick of the uranium companies was Extract which added A34 cents to A$7.90 as talk of that revised Chinese bid gathered pace. Interest in that situation seems to have rubbed off on Berkeley (BKY), which added a very sharp A8.5 cents to A40.5 cents, and Paladin (PDN) which shook off some of the negative sentiment which has gripped it for much of the year to rise by A10 cents to A$1.49. Other uranium movers included: Uranex (UNX), down A2 cents to A33 cents, Manhattan (MHC), down A2 cents to A30.5 cents, and Bannerman (BMN), down A3 cents to A24 cents. Meanwhile, Marathon (MTN), which has been caught in a legal brawl with the government of South Australia, said it was launching a court challenge against the government. That move pleased investors who lifted the shares by A2 cents to A10 cents.



Minews. Base metals next, please.



Oz. There was no discernible trend in any of the base metals, though the tone was weaker. Among the better performing copper companies was Sandfire (SFR) which added A13 cents to A$6.80 as construction reached the halfway mark for first copper from the DeGrussa project. Anvil (AVM) recovered A18 cents to A$7.08 after last week’s sell off when a mooted takeover bid seemed to hit government trouble in the Congo. Hot Chili (HCH) added A1.5 cents to A53 cents, and OZ Minerals (OZL) crept up by A13 cents to A$11.10. Fallers included Rex (RXM), down a sharp A14 cents to A$1.47, Hillgrove (HGO), down A2 cents to A20 cents, and Talisman (TLM), down A4 cents to A38 cents.



Nickel companies were modestly firmer. Mincor (MCR) added A2.5 cents to A85 cents. Western Areas (WSA) rose by A6 cents to A$5.87. Mirabela (MBN) gained A3 cents to A$1.67, and Panoramic (PAN) rose A10 cents to A$1.45. Offsetting those rises was a fall of A19 cents by Independence (IGO) to A$4.97.



Zinc companies were generally weaker. Perilya (PEM) fell A1 cent to A42 cents. Kagara (KZL) slipped half-a-cent lower to A38 cents. Blackthorn (BTR) eased back by A2 cents to A45 cents, while Terramin (TZN) posted a rise of half-a-cent to A15 cents.



Minews. Minor metals to close, please.



Oz. It was much like the rest of the market with no discernible trend. Lynas (LYC) was the best of the rare earth companies, putting in a rise of A3.5 cents to A$1.20. Alkane (ALK) went the other way with a fall of A1.5 cents to A$1.12. 



Venture (VMS) and Kasbah (KAS), the tin twins, were both weaker. Venture fell by A1.5 cents to A34 cents while Kasbah fell by A1 cent to A18 cents. South Boulder (STB) headed a weaker phosphate sector, slipping A10 cents lower to A$2.02.



Minews. Thanks Oz.
+++++++++++++++++++++++++


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## drillinto

November 14, 2011

The European Debt Crisis Is The Result Of Decades Of Cumulative Capital Mis-Allocation

By Rob Davies
Source: www.minesite.com


US Treasury Secretary Tim Geithner said last week: “The crisis in Europe remains the central challenge to global growth. It is crucial that Europe moves quickly to put in place a strong plan to restore financial stability”.


Tim, it won’t happen. 



And if, against all the evidence Mr Geithner thinks it will, then he’s either being naively optimistic, or else it just proves how little Americans know about other countries and cultures. 
 But the US Government is not the only one seeking a quick end to this crisis. Even UK Prime Minister David Cameron has called for a big bazooka to solve the problem. 



But there won’t be sudden resolution to this crisis because there can’t be. As in the US and Japan, this crisis is the culmination of decades of capital mis-allocation - either private money going into unproductive property, or public money going into state subsidies, or simply frittered away on unaffordable benefits. 



Jin Liqun, supervising Chairman of China’s sovereign wealth fund, put it well when he referred to what he called: “the accumulated troubles of the worn out welfare society” He continued: “I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack”. 



So he won’t be bailing out Europe. 



In terms of the metals markets, Germany is the powerhouse in Europe and whichever way the crisis evolves, German growth will be impacted. If the euro breaks up, the currency in the rump that contains Germany will go up and will make it uncompetitive. Alternatively, Germany stays in but has to bail out all its European neighbours by raising taxes and printing money. 



Given those two unpalatable choices it is no wonder that Mrs Merkel is procrastinating. Neither one is good for German metal demand.



In reality banks will have to write off bad debts, to sovereigns as well as to individuals and corporate. And that development will simply crystallise the destruction of wealth that low share prices for banks already recognise. 



The process of recapitalising European institutions will likely take as many decades as it took to desTroy them. But that won’t stop the markets oscillating between euphoria and despair as they try and react to every twist and turn of the political landscape. 



Last week was no exception to this generality. Base metal prices fell 4.6 per cent as measured by the LME index. Equity markets rose slightly and bond markets responded to national politics, often violently. Those countries that benefited from rising bond prices were only partly being rewarded for financial probity. Some of the gain was recognition that next year will be another one of anaemic growth in the west.  



China remains the beacon of hope in a lethargic world. However, the news that its inflation has fallen to 5.5 per cent may signify that even its record breaking growth rates are easing.   That may be good news for Chinese policy makers, but it is less good news for commodity markets. 



Whether that influenced Anglo American’s decision to sell a portion of its Chilean copper interests for US$5.39 billion is hard to say. It’s outmanoeuvred Codelco, but initiated a legal battle that could go on for years and years. Perhaps it just needed the cash to pay for its increased stake in De Beers.



Miners, Xstrata aside, rarely make good macro-economic commodity calls, so perhaps this sale should not be analysed too deeply. After all it still retains 75 per cent of the assets so it is not obvious why the Chileans are so upset.  



Unfortunately, decisions in European politics are not made so quickly. While the markets may not like it, they will just have to live with the uncertainty of not knowing what happens next. And that is, in any case, one reason why markets exist. 

-----------------------------------------------


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## noirua

When I look at the Aussie commodity markets I see that stocks in general are in a pickle.
Before company's directors concern themselves with running their organisation they have to be defensive concerning the strength of the Aussie$, government taxation and foreign cash not coming in and being withdrawn because of it, weather, Europe and America and general commodity speculation.
Yes, a company can do everything right but miss one or two tricks that seem outside their control.


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## drillinto

November 19, 2011

That Was The Week That Was … In Australia

Our Man in Oz >> www.minesite.com (free registration)


Minews. Good morning Australia, you seem to have had an interesting week with a few star performers in the gold and copper sectors.



Oz.  There was strong investor support for gold producer, Northern Star (NST), and copper explorer, Ventnor Resources (VRX), after they released excellent assay results, but we also had a long-overdue flash of interest in a zinc stock, Blackthorn Resources (BTR). Those three stood out in what was an overall down market, thanks largely to the spread of Europe’s debt troubles, but aided by a bit of self-inflicted corporate damage in the iron ore and coal sectors.


First, the big picture because we had a number of interesting developments as the all ordinaries index on the ASX was losing 2.6 per cent over the week, the metals index was down 4.4 per cent, and the gold index lost 2.8 per cent. Against that dreary backdrop BHP Billiton trundled out another US$1.4 billion expansion of its iron ore business in Western Australia, a vote of confidence in the future direction of that commodity, and the Australian Government started a discussion on lifting a ban on uranium exports to India, which could prove to be a boost for small uranium explorers.



Minews. Why on earth do you sell uranium to China but not India?



Oz. An interesting question which goes to the heart of a 30 year debate in this country over uranium but essentially revolves around India not being a signatory to the nuclear non-proliferation treaty. What happened last week is that the U.S., during a visit down this way by President Obama, urged Australia to loosen its attitude towards India as part of a much bigger push to make room for fresh U.S. involvement in the Asia Pacific. Essentially, the U.S. is turning its back on Europe, having decided it faces a lost decade, and is piling its economic (and military) eggs into Australia’s backyard.



Minews. Isn’t it possible that your closer ties to the U.S. will damage your relationship with China?



Oz. Perhaps, but that’s where the closer ties with India become important, starting with the lifting of the uranium export ban, and seeing how things grow from there, a bit of playing one commodity-customer off against the other.



Minews. Prices now please, starting with the good news, then a roll call of the fallen.



Oz. Northern Star, as Minesite reported during the week, lived up to its name with a rise of A23.5 (35 per cent) to A91 cents, a closing price which was a fraction below the all-time high of A93.5 cents set in early Friday trade. Brokers down this way are all over the stock after its report of a 12,178 gram-a-tonne intersection, which equates to 391 ounces to the tonne, or 12.2 kilograms to the tonne, or an equally impressive 1.2 per cent gold, and it’s not often you see gold measured as a percentage of its ore.



Ventnor, the copper star, pleased its followers with a 142 metre drill intersection, including 97 metres of chalcopyrite, a high-grade ore of copper, at its Thaduna project, which is located just 40 kilometres from the DeGrussa copper project of Sandfire Resources (SFR). No assays have been released yet from what is essentially a drilling program under an old open pit last worked decades ago, but that didn’t stop speculators piling into Ventnor which added A29 cents (72.5 per cent) to end the week at A69 cents, its all-time high.



Blackthorn, which has been travelling a bumpy road for the past few years, finally had some good news to report in the form of imminent production of first ore from its joint venture Perkoa mine in Burkina Faso, and plans for a quick expansion at the urging of its partner, the commodity-trading house, Glencore. On the market, Blackthorn added A9 cents (20 per cent) to close at A54 cents, its highest since mid year.



Minews. Three good news stories, what about the self-inflicted damage.



Oz. Mt Gibson (MGX) was the iron ore stock which shot itself in the foot. Aston (AZT) performed the same trick in the coal sector, and White Energy (WEC) continued to pay a price for trusting an Indonesian partner in a coal-processing project in that country. The Mt Gibson fiasco, which saw the stock tumble A25 cents to A$1.28 involved a boardroom bust-up the day after the annual meeting on Wednesday. Smiling faces at the meeting disappeared as soon as minority shareholders left the room so they missed the sudden resignation of long-serving chief executive, Luke Tonkin, and news that a powerful Australian Government agency, the Foreign Investment Review Board, had served notice on Chinese-controlled Mt Gibson that it would not be allowed to acquire any additional assets until it appointment more independent directors.



Aston, which is yet to produce any coal but is a darling of speculators, was hammered after its biggest shareholder, and one of the biggest men in Australian mining, the alarmingly large Nathan Tinkler, kicked his chief executive, Todd Hannigan, out the door, plus a couple of other directors. The boardroom coup saw the stock lose A$2.25 to A$8.75, with investment analysts issuing hurried sell notes to clients.



Minews. Enough of the exciting stuff, let’s call the price card, starting with gold.



Oz. After Northern Star the only stocks to deliver an eye-catching rises were MOD Resources (MOD), and the recently formed Evolution Mining (EVN) which brought Conquest Mining and Catalpa Resources under the one roof. MOD, which Minesite took a look at early in the week thanks to its plans to revitalise the Sams Creek discovery in New Zealand, added A4.5 cents to A19 cents. Evolution, which has been slow to win support, finally saw a flurry of interest which delivered a price rise of A13 cents to A$1.80. After that comes a long list of relatively modest falls including: Kingsgate (KCN), down A20 cents to A$6.53. Troy (TRY), down A13 cents to A$4.25. Silver Lake (SLR), down A2 cents to A$3.52. Ausgold (AUC), down A6 cents to A$1.10. Adamus (ADU), down A4.5 cents to A69 cents. Gryphon (GRY), down A5 cents to A$1.50, and St Barbara (SBM), down A10 cents to A$2.40.



Minews. Base metals next, please.



Oz. After Ventnor, the best performer was Hot Chili (HCH) which added A7 cents to A60 cents after an upbeat annual meeting on Friday. Rex Minerals (REX) was heaviest loser with a fall of A19 cents to A$1.28. Other copper moves included: Sandfire (SFR), down A25 cents to A$6.55. Ivanhoe (IVA), up A16 cents to A$1.14. OZ Minerals (OZL), down A20 cents to A$10.90. Metminco (MNC), down A2 cents to A17 cents, and PanAust (PNA), down A7 cents to A$3.30.



All nickel stocks weakened as the price of the metal took a worrying peak below the US$8 a pound level. Western Areas (WSA) lost A36 cents to A$5.51. Mincor (MCR) slipped A3.5 cents to A81.5 cents. Panoramic (PAN) eased back A5 cents to A$1.40, and Mirabela (MBN) shed A14 cents to A$1.53.



Blackthorn was the only star in another lacklustre week for zinc stocks. After its A9 cent rise it was one-way, downhill, traffic. Kagara (KZL) lost A3 cents to A35 cents. Perilya (PEM) was A1 cent weaker and A41 cents, while Terramin (TZN) and Meridian (MII) both slipped half-a-cent lower to A13 cents and A14.5 cents respectively.



Minews. Iron ore next, please.



Oz. Mt Gibson was the star, for the wrong reason, with most other moves modest, either way. Moves included: Atlas (AGO), down A17 cents to A$3.06. Fortescue (FMG), up A3 cents to A$4.85. Gindalbie (GBG), down A2.5 cents to A52.5 cents. Brockman (BRM), down A6 cents to A$2.18. Iron Ore Holdings (IOH), down A7 cents to A$1.15. Flinders (FMS), up half-a-cent to A16 cents, and BC Iron (BCI), down A8 cents to A$2.25.



Minews. The fuel twins, coal and uranium, next please.



Oz. After Aston’s fall from grace White Energy (WEC) was the most closely watched coal stock thanks to its Indonesian mess. Over the week, White slipped another A13 cents lower to A59.5 cents, taking its loss since mid-October to A1.24. Ouch! Other coal moves in a generally weaker market, included: Coal of Africa (CZA), down A9.5 cents to A80 cents. Carabella (CLR), down A4 cents to A$1.69. Whitehaven (WHC), down A27 cents to A$5.42. Bathurst (BTU), down A9 cents to A62 cents, and New Hope (NHC), up A8 cents to A$6.05 on speculation of an Indian takeover offer.



Uranium stocks, despite talk of a lift in the Indian export ban, were generally weaker, with one notable exception – though for the wrong reason. Deep Yellow (DYL) added A3 cents to A15.5 cents, but largely because of a report that it has high hopes for an iron ore deposit in Namibia. After that, modestly mixed. Moves included: Paladin (PDN), up A1 cents to A$1.50. Extract (EXT), down A23 cents to A$7.67. Berkeley (BKY), down a sharp A6.5 cents to A34 cents. Marathon (MTN), up half-a-cent to A8.5 cents and Manhattan (MHC), down A2 cents to A28.5 cents.



Minews. Minor metals to close, please.



Oz. Two big falls marked the minors. Iluka (ILU), top dog in the zircon market, crashed back by A$1.78 to A$15.74, and Platinum Australia (PLA) fell A5.5 cents to A11.5 cents after announcing a discounted share issue. Rare earth stocks held their ground. Lynas (LYC) added A1 cent to A$1.21, as did Alkane (ALK) to A$1.13.



Minews. Thanks Oz.
-------------------


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## drillinto

November 21, 2011

Walking With A Nail In Your Foot
Rob Davies 
Source >> www.minesite.com/aus.html

The world is still in crisis but life goes on.   In contrast to forty years ago when the developed world faced nuclear annihilation in four minutes our biggest worry now is whether the Greeks and Italians will repay our loans. Twas ever thus. 

Worries about the future of the euro and its constituents dominated the news and pushed it down 1.8 per cent against the dollar.  Normally a strong dollar is bad for metal prices but this week base metals rose 0.3 per cent as measured by the LME base metals index.  Despite that strength, some low metal prices are proving too painful for producers.  Rio Tinto announced the closure of its Lynemouth aluminium smelter forty years after it opened. 



Aluminium, like lead and zinc, has been trading around the US$2,000 a tonne mark for some time now and those levels are not viable for many operations.  Lead and zinc mines have the benefit of producing substantial amounts of silver as a by-product.  At US$32 an ounce that is a significant cash boost to mines.  Aluminium has no such additional credits to offset its production costs. Worse, its major cost input is electricity and the UK is no place to be consuming that. 



It is really only copper and the bulk commodities that are still at elevated levels and delivering super profits to the miners.  It cannot be long before other plants face cut backs or closures in the face of uneconomic commodity prices. 



Rio Tinto may be reducing it exposure to aluminium but it is increasing its footprint in uranium through its proposed acquisition of Hathor Exploration, a Canadian uranium explorer.  It looks like making energy is going to be more profitable than consuming it. 



And here is the delicious irony of European politics. Angela Merkel, now given the appellation of Prime Minister of Europe, decided in the wake of the Fukashima tsunami not to extend the life of Germany’s nuclear power stations. She needed the Green Party vote.  On the face of it, demand for nuclear power in Germany will be reduced because of this.  Well, not quite because Germany will have to import nuclear powered electricity from France.  A country of course that is likely to lose it AAA credit rating in the next six months making it even more dependent on the generosity of the Germans.



Now, the Europeans don’t like economics.  It gets in the way of their politics.  And, it is said that in any battle between politics and economics politics wins.



Then economics get its revenge. 



Germany will, eventually, have to reverse its stance on nuclear power which is why Rio Tinto is buying uranium explorers.  Germany will also have to change its mind about supporting its profligate neighbours.  Until then the economics and politics of Europe just remains a mess.  Much as its leaders’ want a simple solution there isn’t one.  The world is an uncertain and painful place. As a redundant stockbroker expressed it this week, you just get used to walking with a nail in your foot. 
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<


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## drillinto

Strategy

Farm commodities 'better bet than gold or shares'
Source >> www.agrimoney.com (NOV 18, 2011)

Commodities, and in particular agricultural ones, may prove one of the best for investors in 2012 – better than bonds or shares - helped by demand from emerging markets, UBS said.
Investors should not expect strong returns in any markets, with safer assets, such as US bonds, already looking expensive, and uncertainties surrounding factors such as the eurozone debt crisis, besides US elections, likely to curtail gains in riskier assets.
"Elevated cyclical and sovereign risk premiums will cap risk asset performance and keep markets volatile and unusually correlated," the bank's chief economist, Larry Hathaway, said.
"Tactical reallocation" of funds to sectors appearing oversold "will remain a necessity" if investors are to outperform.

'Best return prospects'
However, commodities at least looked set to improve on this year's performance, when they had – bar precious metals, the top performer of any asset class – shown a small decline, performing worse than bonds, but ahead of global equities.
"The commodity complex may offer better return prospects in 2012 versus 2011," Mr Hathaway said.
And farm commodities looked particularly promising thanks to their exposure to themes of growth in world population and emerging market wealth.
"Agricultural commodities, a secular play on the commodity super-cycle in food… are likely to offer the best return prospects next year and should represent better value than precious metals," which had already enjoyed such significant gains.
UBS rated farm commodities, with high-yield credit and hard-currency emerging market debt, as the asset classes in which it recommended an "overweight" rating.
The likes of property and shares were attributed a "neutral" recommendation, with UBS recommending "underweight" positions in most government bonds.

'Decisive' factor
The bank preference for farm commodities tied in with a thesis that a key difference for 2012 will be the higher profile of emerging economies on the world stage, with a slowdown in inflation allowing easier monetary policy.
"Inflation has peaked. Only a handful of emerging countries, among them India, are still tightening. Some, like Brazil, Turkey or Indonesia have trimmed policy rates," Mr Hathaway said.
While emerging market economic growth rate will slow in 2012, by 0.5 points to 5.5%, it will remain well above the 1.6% seen in advanced economies, on UBS estimates.
"Might emerging [market monetary] policy easing and the prospect for a better emerging business cycle later next year prove decisive for the 2012 investment outlook?
"We believe the answer is 'yes'," with emerging market improvement coupled with a firm US performance potentially capable of neutralising the setback to financial markets of a likely return by the eurozone to recession.
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## drillinto

November 26, 2011

That Was The Week That Was … In Australia
Our Man in Oz
Source >> www.minesite.com/aus.html (The registration is free)


Minews. Good morning Australia, it seems to have been a pretty dreadful week all round, have you got any good news?



Oz. Not a lot, though there was a bit of fun in the iron ore sector. We’ll get to that later but first a comment on the position in which Australia finds itself. Despite being on the other side of the world we are being infected by the slow disintegration of Europe. Falling metal prices and fear that growth in China will slow sharply has sent a shudder through investors, and bankers. Last week we heard one of the country’s top bankers warn that credit markets were closing around the world which, for miners means that if you haven’t got your finances in order today then you’re going to have a major problem tomorrow.

Minews. How is that being reflected in mining company share price?



Oz. Badly, as you would imagine. Only a handful of stocks managed to rise, and then largely for takeover or other corporate reasons. The underlying mood was grim with key indices on the ASX falling by around 6 per cent. The metals and mining index was down by 6.5 per cent, and the gold index down by 6 per cent despite the gold price in Australian dollars actually rising by A$2 an ounce thanks to a fall in the exchange rate against the U.S. dollar. Over the past few weeks the Aussie dollar has dropped from US$1.06 to around US97 cents, with 3 cents lost last week alone.



Minews. It seems that we’re all in a leaky European boat together, hoping that someone will plug the holes.



Oz. Not a bad description, but as you’re seeing in Europe the greatest damage is being done at the periphery. In your case it’s Eastern Europe and Club Med which is being hammered as money retreats to safer havens, wherever they might be. The same effect is being felt in Australia with the owners of money locking it up tight in a vault somewhere, or hiding it under a pillow. Launching new mines will become devilishly difficult next year, with the effective failure of a one-time iron ore darling, Murchison Metals (MMX) a case study of a company biting off more than it could chew. Ironically, Murchison’s sale of its best assets to Japan’s Mitsubishi late last week turned it into one of the best performing stock on the ASX.



Minews. A bitter-sweet experience for Murchison shareholders no doubt.



Oz. Very much so. What happened is that Mitsubishi, in order to save a troubled mine, rail and port project agreed to buy out Murchison at a price of A$325 million. That transaction saw Murchison’s share price rise by A13 cents (47 per cent) to A40.5 cents, and while that might sound good we are talking about a stock which traded as high as A$6 in late 2007 so it might also be argued that last week’s closing price represents a fall of 93 per cent.



Minews. Enough big picture stuff, time for more prices, even if they do make for bleak reading.



Oz. They will, so let’s lighten up a bit and consider the few stocks to rise last week, and then indulge in a reading of the fallen. After Murchison’s miraculous revival there were three other iron ore stocks to resist the downward pressure, all thanks to corporate activity of one sort or another. Flinders Mines (FMS) shot up by A11 cents to A27 cents after announcing it would accept a A$554 million takeover from Russia’s Magnitogorsk Iron and Steel, a deal which signals an interesting return of the Russians to Australia’s resources sector. Iron ore Holdings (IOH) was soon linked as the next possible target, adding A14.5 cents on Friday to end the week at A$1.20, which is actually only a gain of A5 cents, but that Friday activity was significant. The other iron stocks to rise, admittedly by a small margin, were Sundance Resources (SDL) which made some progress with a proposed Chinese takeover. It added half-a-cent to A42.5 cents, and Amex Resources (AXZ) which benefited from a well-received presentation at its annual meeting on its Mba Delta iron sands project in Fiji, adding A5 cents on Friday to close the week up by A1 cent at A$1.02.



Minews. Interesting corporate moves, but presumably the rest of the iron ore sector was down.



Oz. It was, in line with the overall market. Other iron ore moves included: Fortescue (FMG), down A34 cents to A$4.51. Mt Gibson (MGX), down A8 cents to A$1.20. Gindalbie (GBG), down A4 cents to A48.5 cents. BC Iron (BCI), down A10 cents to A$2.25. Brockman (BRM), down A26 cents to A$1.92, and Atlas (AGO), down A20 cents to A$2.86.



Minews. Over to gold now. Was there any good news there?



Oz. Not really, unless you include stocks which opened and closed the week at the same price. It was one of those times when simply standing still represented a success. Focus (FML), which you took a look at mid-week, was one of those with an unchanged price of A5.7 cents. Troy (TRY), which pleased investors at its upbeat annual meeting held on to A$4.25. Norseman (NGX) performed a similar trick at A10 cents, while Chalice (CHN) almost did it, but ended down half-a-cent at A26.5 cents. After that it was one-way traffic, though that 6 per cent index fall was dominated by a hefty drop of A$2.22 to A$33.42 by sector leader Newcrest (NCM). Other moves included: Silver Lake (SLR), down A7 cents to A$3.45. Kingsgate (KCN), down A30 cents to A$6.23. Kingsrose (KRM), down A8 cents to A$1.32. Adamus (ADU), down A2 cents to A67 cents. St Barbara (SBM), down A13 cents to A$2.17, and Evolution (EVN), down A14 cents to A$1.66.



Minews. Over to the base metals please.



Oz. Where it was a similar story, with one or two stocks rising, and the rest in decline. Best of the copper stocks was Anvil (AVM) which is waiting on a formal takeover offer from a Chinese company. It added A3 cents to A$7. Best of the nickel stocks was Metals X (MLX), up half-a-cent to A26 cents on news of a possible deal with Korea’s Samsung over its remote Wingellina project in Western Australia. Best of the zinc stocks, though largely because of good copper exploration news, was Blackthorn (BTR), up A1 cent to A55 cents. At another time, Blackthorn’s report of a 272.6 metre intersection at 0.72 per cent copper at its Mumbwa in Zambia project would have done much more than lift a stock by A1 cent.



Other copper moves included: OZ Minerals (OZL), down A$1.20 to A$9.78. Sandfire (SFR), down A45 cents to A$6.10. Rex (RXM), down A3 cents to A$1.25. Hot Chili (HCH), down A5 cents to A55 cents. Metminco (MNC), down A2.5 cents to A14.5 cents. Ventnor (VRX), down A14.5 cents to A54.5 cents. Syndicated (SMD), down A1.5 cents to A9 cents, and Exco (EXS), down a modest half-a-cent to A69.5 cents.



Other nickel moves included: Western Areas (WSA), down A17 cents to A$5.34. Mincor (MCR), down A7.5 cents to A74 cents. Independence (IGO), down A48 cents to A$4.20. Panoramic (PAN), down A10 cents to A$1.30 and Poseidon (POS), down A1 cent to A19.5 cents.



Other zinc moves included: Kagara (KZL), down A3 cents to A32 cents. Perilya (PEM), down A5.5 cents to A35.5 cents. Terramin (TZN), down A half-a-cent to A14 cents, and Ironbark (IBG), down A1 cent to A25 cents.



Minews. Uranium and coal next please.



Oz. One uranium stock up, and one coal held its ground. Berkeley (BKY) was the sole uranium to swim against an outgoing tide with a rise of A3 cents to A37 cents with no fresh news to explain the move. After that it was red ink all the way with moves including Paladin (PDN) down A9 cents to A$1.41. Bannerman (BMN), down A1.5 cents to A25 cents. Uranex (UNX), down A3 cents to A31 cents. Greenland (GGG), down A6.5 cents to A52.5 cents, and Extract (EXT), down just A2 cents to A$7.65 as it also waits on a Chinese takeover bid.



Aston (AZT) was the lone coal stock to retain its opening price, A$8.75. After that, moves included: Coal of Africa (CZA), down A2 cents to A78 cents. Continental Coal (CCC), down A4 cents to A20 cents. Stanmore (SMR), down A3 cents to A91 cents. Coalspur (SPL), down A23 cents to A$1.57. Whitehaven (WHC), down A26 cents to A$5.16, and Carabella (CLR), down A23 cents to A$1.46.



Minews. Minor metals to close, please.



Oz. One reasonable rise among the minors, coming from zircon project developer Gunson (GUN) which added A2.5 cents to A16.5 cents as it gets closer to securing a partner for its Coburn project. Iluka (ILU), the zircon leader, went the other way with a fall of A$1.21 to A$14.53. Lynas (LYC) led a rare earth retreat, shedding A11 cents to A$1.10, while Alkane (ALK) lost A19 cents to A94 cents.



Minews. Thanks Oz.
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## drillinto

November 28, 2011

Some Euros Are More Equal Than Others
By Rob Davies^
www.minesite.com/aus.html >> free registration

One time-served gold mining analyst frequently used to observe that not all ounces were equal. His comment was actually quite subversive because it challenged one of the key tenets of gold equity valuations. This tenet held that you could assess the value of gold mines by the price a market cap valuation placed on the disclosed reserves of a miner. 

The fact that something seemingly immutable like gold in fact is valued differently in different locations on earth clearly has resonance in relation to the never-ending crisis in Europe. It is clear from the range of valuations for various European sovereign bonds that the markets do not regard all euro debt in the same way. 



While they are content with a yield of 2.26 per cent for 10 year German euro debt they want 3.66 per cent for 10 year French euro debt and the 7.23 per cent for the Italian equivalent.



That tells us the euro has failed. 



However, most Europeans don’t follow the bond markets. They think that because a euro taken from an ATM machine in Italy can be spent in Germany the single currency still works. It doesn’t. 



And what terrifies politicians and central bankers is that the one day the public will realise this and extract all the euros they can from Latin banks and deposit them in Teutonic banks. 



If that were to happen the subsequent bank run would eclipse anything ever seen in financial markets. But as long Europeans don’t realise their banks are bust the illusion may possibly be maintained while the authorities try and create some sort of a fudge. 



In such an atmosphere it is no wonder capital markets are treading on eggshells. Base metal prices, as measured by the LME index, fell by 0.7 per cent last week, and registered most of that decline on Friday. 



This was a creditable performance in the face of 1.7 per cent gain in the dollar over the same period. A simple measure of the risk-off trade was the 2.6 per cent gain in 10 year US Treasuries that took place over the same period. 



The problem these days is that it is getting harder and harder to determine exactly which assets are risky and which are not. After all, MF Global went to the wall because it was holding too much risk-free European sovereign debt.



In these febrile conditions base metals, and other commodities, are small fry in a much bigger game. Positive indicators, like the projection by Barclays of a 536,000 tonne deficit in the copper market this year, get lost in the swirling macro-economic picture. 



And how does it fit in with the stories from China that 80 per cent of Chinese construction firms say developers are behind on payments? The building trade the world over is famous, or infamous, for being late payers, so unless we know how this has changed it is hard to interpret. 



More informative, perhaps, is the news that land purchases are down 42 per cent as a consequence. What is clear is that low prices for some base metals are putting pressure on producers. 



Aluminium is the most vulnerable, as shown by its drift down 3.9 per cent to $2,002 a tonne over the week. Its high exposure to construction leaves it vulnerable to a slowing Chinese economy and its use in drinks cans means it also suffers from falling consumer spending.



Nick Moore of RBS estimates that half the world’s aluminium producers are losing money at these prices. He says something has to give and it is only a matter of time before more high cost production closes down. Aluminium from a high cost smelter is exactly the same as that from a low cost one. Anyone can take delivery of LME grade metal and know exactly what they are getting. Alas, the same cannot be said of eurozone debt, nor indeed, the euro.  

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## drillinto

Cattle, grains 'better bets than soft commodities'
Source >> www.agrimoney.com - 30/NOV/2011 

Historical performance and supply constraints suggest that cattle, corn and soybeans will be top bets in the commodities complex in 2012 – albeit a year unlikely to prove vintage for raw material prices, Morgan Stanley said.
The potential for commodity price rises is "likely limited" given the "fragile state" of developed economies, the bank said, warning also over a further recovery in the safe haven of the dollar, encouraged by "risk aversion, deleveraging and global liquidity".
The bank said that "2012 will be the year of the dollar", which will appreciate more than 10% against the euro, the pound and the Australian dollar by next autumn, making dollar-denominated assets, including leading commodities, less affordable.
However, live cattle and feeder cattle futures look likely to do better than most commodities, boasting a historical record of outperformance in tough economic times, besides support from tight US supplies.
"Continued strength in US beef export demand, coupled with high feed costs and contracting feeder cattle supply all bode well for US cattle supply," Morgan Stanley's head of commodity strategy, Hussein Allidina, said in the latest of a series of 2012 outlooks, following on from Societe Generale and UBS.

'Upside to prices' 

And corn and soybeans look even better bets, with prospects for the former looking best early in the year, before supplies from improved South American harvest, and a 2012 US harvest seen rebounding 10.7% to 13.6bn bushels, kick in.
"Tight US and global fundamentals leave us constructive on corn at least through the beginning of 2012 as larger livestock herds suggest higher US feed demand than is currently modelled by the US Department of Agriculture," Mr Allidina said.
Soybean prices will be supported by the need to retain acreage in the face of elevated corn values, besides by demand spurred by growing use in making biodiesel, in Argentina, and in the US where consumption by biofuel plants will near-triple.
"We see upside to deferred soybean prices - November 2012 contract and beyond - on the need to preserve US acreage against still-strong corn and cotton values."
The bank forecast an average Chicago soybean price of \$13.50 a bushel next year, well above the \$11.34 a bushel the market is currently factoring in.
Russia supply squeeze?
Morgan Stanley saw some upside to wheat too, pegging the average 2012 Chicago price at \$7.00 a bushel, up from \$6.58 a bushel currently, making the grain a relatively good bet.
But price prospects are better among higher quality wheats, which remain in relatively short supply after a disappointing US hard red winter wheat harvest this year and talk of Black Sea stocks running low.
"Sources indicate that Russia's high-protein wheat supply has begun to dwindle, owing to high early-season volumes shipped to milling customers such as Egypt," Mr Allidina said.
"If these reports prove true, this would be positive for US high-protein wheat in the second half of the marketing year and may lead to some additional widening in the Minneapolis–Chicago wheat spread, which has widened to nearly \$2.50 a bushel."
Minneapolis trades hard red spring wheat which has a far higher protein level than the soft red winter wheat dealt in Chicago.

'Supply outlook is bearish'

And even wheat looked a considerably better prospect than soft commodities, for which sugar looked a particularly poor bet.
With Brazil's output proving less dismal than some had suggested, the impact of flooding on Thai production "limited" and bumper beet output in Russia, "now expect the 2011-12 global surplus to reach 6.5m tonnes", Mr Allidina said.
For coffee, growing supplies from Brazil and Vietnam, "the impending supply outlook is bearish, particularly with slowing global growth weighing on trade-up demand for arabicas out of the emerging markets".
Cotton prices are set to dip as a buying spree by China winds down from March.
"As Chinese purchases tail off we expect further weakness in world cotton prices, and perhaps even a stream of US export cancellations, as China's cotton traders seek cheaper regional alternatives."

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## drillinto

Goldman Sachs commodity returns forecasts for next 12 months, to DEC 2012.

Industrial metals: +26.4%

Energy: +18.9%

Livestock: +10.5%

Precious metals: +5.0%

Agriculture: -5.1%


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## drillinto

Bespoke's Commodity Snapshot (Dec 2, 2011)

To view the charts for 10 major commodities, please click the link below

http://www.bespokeinvest.com/thinkbig/2011/12/2/bespokes-commodity-snapshot.html

*****


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## drillinto

December 03, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html ((The registration is free))


Minews. Good morning Australia. There must be a sense of relief down your way about last week’s recovery.



Oz. Up to a point. Like other stock markets Australia enjoyed a significant bounce. Most indices rose by an eye-catching eight per cent, wiping out the heavy losses of previous weeks. The problem with such a rapid revival working out exactly what it means. Is it is anything more than a relief rally, or worse, just a dead-cat bounce, to borrow a delightful American expression.


Minews. You don’t believe that we’re watching a long-term recovery?



Oz. It’s hard to say that we’re out of the woods until Europe comes up with a believable survival plan. As it now stands all we’ve seen is a band-aid on a chronic overload of debt. So far the best that can be said is that the debt has been shuffled from one hand to the other. As far as a simple Aussie can see no-one in Europe is actually creating fresh wealth to service the existing debt.



Minews. A point that a few people in the UK have also been making. Time’s short this week as you’re on the road so let’s move along to prices.



Oz. I am moving about a bit but have kept a close eye on events back home. The key indices, gold and other metals, both rose by eight per cent. The all ordinaries, which incorporates our troubled manufacturing and retail sectors, rose by 7.1 per cent.



Rises among the mining companies were evenly spread, although there were a few stand-out performances. The copper sector provided two of the best. Ventnor Resources (VRX) continued its powerful upward run, adding another A26.5 cents to A81 cents as interest grows in its Green Dragon discovery at the old Thaduna copper mine in Western Australia. In August, Ventnor was trading at A15 cents. And Ivanhoe Australia (IVA), the local arm of Robert Friedland’s empire, also captured the attention of investors after reporting excellent copper and gold assays from its Mt Dore project near Cloncurry in Queensland. Best intersection was 6.6 metres at 5.35 per cent copper from a depth of 197 metres. On the market, Ivanhoe added A45 cents to A$1.57.



Minews. Since you’ve started with base metals you might as well continue, and then shift across to gold, because there’s a lot of interest in how gold companies are reacting to Europe’s troubles.



Oz. Copper was certainly the pick of the base metals, as the price moved back above US$3.50 a pound. Nickel companies recovered, but remain under pressure thanks to a glut of the metal in China. Zinc is still stuck in the doldrums. 



In copper, Sandfire (SFR) rose A63 cents to A$6.73. OZ Minerals (OZL) rose A$1.26 to A$11.04, and PanAust (PNA) rose A44 cents to A$3.39. Most other moves were modest. Rex (RXM) added A9 cents to A$1.34, while Altona (AOH) put on A1.5 cents to A24.5 cents. Hot Chili (HCH) swam against the tide, shedding A4 cents to A51 cents. Exco (EXS) fell a sharp A12 cents to A23 cents, though largely because this was the week it returned capital to shareholders after the sale of its Cloncurry project to Xstrata.



Most nickel companies rose, but the low nickel price of around US$7.65 per pound is dragging on earnings. Western Areas (WSA) did best, putting in a rise of A37 cents to A$5.71. Mincor (MCR) managed to add A5 cents to A79 cents. Independence (IGO) gained A56 cents to A$4.76, but that was largely because it reported an expanded gold resource at the Tropicana project.



Zinc companies continue to lack sustained support with the price of zinc stuck below US$1.00 per pound. Perilya (PEM) did best last week, putting in a rise of A6 cents to A41.5 cents. Blackthorn (BTR) went the other way, despite confirming expansion of its Perkoa project. It slipped A5 cents lower to A50 cents. Ironbark (IBG) was unchanged at A25 cents, and Terramin (TZN) was steady A14 cents.



Minews. Over to gold, please.



Oz. It was a good week, as you might expect with the price back above US$1,740 per ounce, and the Australian dollar rising just a modest US2 cents to US$1.02. Major movers included: Kingsgate (KCN), up A87 cents to A$7.10; Perseus (PRU), up A41 cents to A$3.13; St Barbara (SBM), up A19 cents to A$2.36; Alacer (AQG), up A$1.30 to A$11.66; Ausgold (AUC), up A20 cents to A$1.20; Troy (TRY), up A22 cents to A$4.47; Silver Lake (SLR), up A27 cents to A$3.72; and Azumah (AZM), up A9.5 cents to A51 cents. A handful of companies drifted lower, including Chalice (CHN) which slipped half a cent lower to A25.5 cents, and Scotgold (SGZ) which dropped the same amount to close the week at A7 cents.



Minews. Iron ore and coal next, please.



Oz. The tone was generally stronger. Among the iron ore companies, Latin Resources (LRS) was one of the better performers as it announced that a Chinese company had taken a significant stake. On the market, Latin added A5 cents to A23.5 cents. Aquila (AQA) was another strong performer thanks to interest in its combination of iron ore and coal assets, rising by A$1.41 to A$7. Other iron ore movers included: Atlas (AGO) up A20 cents to A$3.06; Fortescue (FMG), up A35 cents to A$4.86; Mt Gibson (MGX), up A13 cents to A$1.33; and Brockman (BRM), up A12 cents to A$2.04. Northern Iron (NFE) went against the trend, shedding A2.5 cents to A68.5 cents. Murchison (MMX) was also weaker. It’s now looking for a new project after selling its flagship assets to Mitsubishi, and eased back by A1.5 cents to A39 cents.



Pick of the coal companies was Coalspur (CPL) which clawed back A19 cents to A$1.78 after a period of heavy selling. Aston (AZT) continues to generate solid news flow thanks to its larger-than-life chairman, Nathan Tinkler. It added A36 cents to A$9.11. Whitehaven (WHC) was back in demand, rising by A48 cents to A$5.64. Carabella (CLR) eased back by A6 cents to A$1.40. Stanmore (SMR) was A8.5 cents weaker at A83.5 cents, and Metrocoal (MTE) lost A1.5 cents at A58.5 cents.



Minews. Uranium and minor metals to close.



Oz. Extract (EXT) was the pick of the uranium patch as interest builds ahead of a possible revised takeover bid from a Chinese suitor. On the market, Extract added A50 cents to A$8.15. Paladin (PDN) continued to recover from a bout of selling, putting in a rise  of A26 cents to A$1.67. Other moves were less exciting. Manhattan (MHC) recovered A4 cents to A28 cents. Bannerman (BMN) added A1 cent to A26 cents, and Greenland (GGG) was A6 cents stronger at A58.5 cents. Uranex (UNX) went the other way with a slide of A1.5 cents to A29.5 cents. Deep Yellow (DYL) dropped half a cent to A14.5 cents. Havilah (HAV) fell half a cent to A50.5 cents.



Rare earth companies led the way up among the minor metals. Lynas (LYC) added A17 cents to A$1.27, and Alkane (ALK) gained A8 cents to A$1.02. Zircon companies also firmed, led by Iluka (ILU) which rose by A$1.53 to A$16.06. Base Resources (BSE) gained A1 cent to A47 cents, and Gunson (GUN) was steady at A16.5 cents. Manganese companies lost ground. OM (OMH) shed A3.5 cents to A37 cents, and Spitfire slipped A1.5 cents lower to A10.5 cents. Tin companies were mixed. Venture (VMS) lost A2 cents to A32 cents, but Kasbah (KAS) added half a cent to A17 cents.



Minews. Thanks Oz. Safe travels.

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## drillinto

December 05, 2011

Once The Euro Finally Cracks Apart, There Could Be Major Rallies On Commodities And Equities Markets 
Rob Davies  
www.minesite.com/aus.html ((( The registration is free )))

We already know that the bond market does not regard the euro as a single currency. Last week’s intervention by the central banks to reduce the cost of dollars lent to European banks shows us that banks in the eurozone are not trusted by other counterparties. 


If this was a Hollywood movie we are now at the stage where John Wayne, or Matt Damon for younger readers, is hanging on by his fingertips waiting for the US Cavalry, or Apache helicopter, to come to the rescue.  



Except that there is no rescuer out there big enough, or willing, to do what is needed.



Europe is in a mess but so is the US and Japan. Britain is too, but it hardly counts. China has already declared its hand and doesn’t want to play. Its problems are only just beginning but are likely to dwarf everyone’s when they do erupt.



Rio Tinto might be predicting that Chinese demand for iron ore will double from 2008 to 2020 but it is also reporting that some of its customers are experiencing credit difficulties. However bad western banking is Chinese banking is probably a whole lot worse. It’s just that we don’t know it.



Mrs Merkel has ambitious plans for a multi-decade plan to impose German order on its neighbours. But the markets won’t wait for twenty years for that to solve the problem. Long before that investors will abandon the euro to its fate, whether that be oblivion, or perhaps as some Teutonic rump currency. Its Latin members will be left to fend for themselves, and that is exactly what they need. 



On some estimates there are 40 million unemployed young people in the eurozone. That is an astonishing amount of spare capacity that is not being utilised, and is costing those that are employed a huge amount of money in support through taxes.  Europe is a region of massive economic activity and alone normally accounts for 19 per cent of global copper consumption. 



Once market forces, those invisible demons that are really each and every one of us acting in our own best interest, decide they no longer want to hold any euros, Mrs Merkel’s grand plans for the future will be ditched. Even she knows that the mighty German economy cannot carry the whole of Europe on its back. 



And if she doesn’t know now, she will learn this through the bond market, which has already shown its nervousness about German debt. When she finally says goodbye to Mr Sarkozy and his pals they will be distraught, but the markets will be euphoric - once they have figured out how to settle trades in construction and engineering companies. 



At a single bound these countries will be free to manage their economies in a way that suits their voters, not German bureaucrats. Sure, France will lose its AAA credit rating, but that will happen anyway. And some bond investors will take a bath on their portfolios of eurozone debt. Lending to Latin countries has always been risky - plus Ã§a change. 



All that, though, will be compensated for by a massive rally in growth assets like equities and commodities, as growth returns to Europe. Well, all except Germany. It will preserve its AAA rating and the currency, but its market for goods and services will have vaporised as they will have suddenly become far too expensive for anyone outside Germany to buy.



And Germany will, of course, need its strong sovereign balance sheet to bail out its now insolvent banks. Their portfolios of bonds from other European states will be deep underwater.  



Even better, this rally in risk assets should be a big benefit to equity markets outside Europe as well. And that will be welcome news to any mining entrepreneurs seeking to raise money to take advantage of those higher metal prices that breaking up of the euro will bring. 

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## drillinto

>> What Happened to Gold ?

http://www.bespokeinvest.com/thinkbig/2011/12/6/what-happened-to-gold.html

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## drillinto

Strategy

"Economy [US] improving, stocks cheap"
Brian Wesbury, Chief economist, First Trust
5 DEC 2011
********

Remember the big fat “zero” jobs reports back in August? The Pouting Pundits of Pessimism reported it as the end of the world. The US was supposedly teetering on the brink of another recession, or maybe depression. Democrats wanted more government spending “stimulus.” Republicans said President Obama was the equivalent of a “zero.” With all this negative sentiment, the Dow fell 250 points that day.
But something happened on the way to the bank. One month later, that big fat zero was revised up to a +57,000, the next month it was revised up again to +104,000. All that recession talk in early September was highly misleading.
Private payrolls are up 157,000 per month in the past year and that’s happening even though the “labor-intensive” construction industry is still in the doldrums.
Unemployment is now 8.6%, way down from 9.8% last November. Many are saying that the lower unemployment rate was caused by a 315,000 drop in the labor force (people looking for work). These pessimists say, “everyone is discouraged, so falling unemployment rates are actually a bad thing.” But this is a Chicken Little view of the world.
In the past four months, civilian employment (calculated by canvassing households), has jumped by 1.28 million – an average of 321,000 new jobs each month. During the same four months, the labor force has expanded by an average of 164,000 new entrants per month. In other words, the labor market is getting better, on all fronts, not worse. We may see unemployment tick up next month, but this would be a correction for an exaggerated one month drop.
Meanwhile, reports on consumer spending and manufacturing production keep signaling growth. Auto sales – big-ticket items people shy away from when they anticipate recession – hit 13.6 million in November, the best pace since early 2008 (except for “cash for clunkers,” when the government was cutting checks of $4,000 each to buy a vehicle). Industrial production is up 4.5% from a year ago.
Even the housing market is starting the long path back to normalcy. So far this year, multi-family builders have started 45% more homes than they did in the same time frame in 2010. And permits to build single-family homes are up 5% from a year ago.

And yet the stock market is more undervalued today than it was at the very bottom of the panic in March 2009.

We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.1%), but corporate profits are at a record high. As a result, the model says fair value for the Dow is currently 45,000.

But this result is largely due to artificially low interest rates. If we use a more realistic discount rate of 5% for the Treasury, we get a fair value of 19,500 on the Dow and 1,980 for the S&P 500.

As we’ve said before, there are many moving parts to this model. Interest rates could go higher than 5%, profits could fall or both could happen. Profits, for example, are now 13% of GDP, the highest in measured history (back to 1947) except for one quarter in 1950.

So what does our model say if profits revert to the historical mean of about 9.5% of GDP? Even in that scenario, and assuming a 5% yield on the 10-year Treasury, fair value is 14,200 for the Dow and 1450 for the S&P 500.

Back at the peak of the stock market in 2000, an ounce of gold could get an investor fewer than 4 shares of Intel (INTC). Today it is trading for about 70 shares. Meanwhile, Intel yields around 3.4% and gold yields zilch. Stocks are dirt cheap, relative to bonds and relative to gold.

Of course, it would be great to know the exact moment that all the bad news from Europe finally at long last blows over. But no one knows. Investors have a simple choice. Do they want to own stocks when they are dirt cheap, or will they wait and pay more when the fear disappears?


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## drillinto

December 10, 2011

That Was The Week That Was … In Australia
Mining News Australia Junior
Source >> www.minesite.com/aus.html  (( Free registration ))


Minews. Good morning Australia, how did your market react to Europe’s week of great decisions?



Oz. With an increasing degree of disbelief, verging on disinterest. Asia and the U.S. are squarely in our sights, with Europe seen as an important, albeit increasingly irrelevant sideshow. Monday will be the real test of our reaction to what happened in Brussels on Friday night because the fireworks which followed Britain using its veto on changes to the European treaty came after we had closed another topsy-turvy week which saw all of the key indices on the ASX lose ground. The metals and mining index shed 2.8 per cent. The all ordinaries did slightly better with a 1.9 per cent decline, while the gold index suffered the biggest fall, with a loss of 5.8 per cent.

Minews. Looking north to Asia certainly seems to be in your best interest.



Oz. There’s no doubt about that, because all of the major Asian countries have policies focussed on growth rather than austerity. That’s not to so that Europe’s woes will not affect us, especially when it comes to the provision of project development capital, though it seems fairly obvious that a Chinese or Japanese bank is more likely to provide funds for new mines in Australia than struggling factories in Germany or France.



Minews. Time for a few prices, preferably starting with some good news.



Oz. Before switching to prices it will be interesting to see whether the break-down in relations between the U.K. and the E.U. leads to a revival of interest in the rest of the world by British investors. It remains a mystery to a lot of people in Australia why the U.K. took its eye off the opportunities in Asia in preference for closer ties to slow-growth Europe. Last week’s break-down in relations could be the spark which revitalises interest in opportunities in countries such as Australia and Canada which are plugged directly into parts of the global economy which are growing quite rapidly.



Minews. Those special relationships of the past could prove to be very useful in London’s future. Enough of the chit-chat, over to prices now, starting with gold.



Oz. It was a difficult week for gold, as shown in the fall of the ASX gold index, and the decline in the underlying price of the metal. However, the major cause of that big drop in the index was a hefty decline by the local sector leader, Newcrest (NCM), which lost A$2.90 to A$33.05. That single move masked a number of useful rises, including Intrepid (IAU) which added A18 cents to A$1.41 thanks to a resource increase at its Tumpangpitu copper/gold project in Indonesia. Kingsrose (KRM), another Indonesian-focussed stock, did almost as well with a rise of A14 cents to A$1.52 after upbeat presentations to investors in London.



Other gold stocks to defy the decline in the index included Silver Lake (SLR) which added a modest A3 cents to A$3.75. Regis Resources (RRL), also up A3 cents to A$3.53. Gold Road (GOR), up A1.5 cents to A34 cents. Northern Star (NST), up A2.5 cents to A93 cents. Castle (CDT), up A2.5 cents to A25 cents, and Troy (TRY), up A10 cents to A$4.57 after its chief executive, Paul Benson, delivered a well-received talk at Mines & Money in London.



Most of those upward moved were small, but significant nevertheless in a down week. The list of gold stocks to lose ground is significantly longer, but there were not any seriously damaging declines. Stocks to fall included: St Barbara (SBM), down A9 cents to A$2.27. Perseus (PRU), down A23 cents to A$2.90. Gryphon (GRY), down A8 cents to A$1.29. Azumah (AZM), down A8 cents to A43 cents. Kingsgate (KCN), down A22 cents to A$6.88, and Evolution (EVN), down A8 cents to A$1.74.



Minews. Base metals next, please.



Oz. Copper stocks were mixed. Nickel and zinc stocks were down. Best of the copper companies was one we hear little about, Horseshoe Metals (HOR) which joined the copper rush in Western Australia after reporting high-grade assays from drilling at its Kumarina project. The stock added A6 cents to A30.5 cents over the week, but did trade as high as A41 cents on Wednesday. Ivanhoe (IVA) continued its upward run with the addition of another A6 cents to A$1.63, and Sandfire (SFR) recovered a little of recently lost ground with a rise of A2 cents to A$6.75, but did rebound to a mid-week peak of A$6.97 before the whole Australian market headed south ahead of the European show-down. Other copper moves included: OZ Minerals (OZL), down A16 cents to A$10.88. Rex (RXM), down A1 cent to A$1.33. Sumatra (SUM), up A1 cent to A16.5 cents, and PanAust (PNA), down A7 cents to A$3.32.



Nickel stocks continued to suffer from the low price for their metal, though we might see a reversal of that trend thanks to Friday’s encouraging rise in the nickel price to around US$8.43 a pound. That recovery came too late for Independence (IGO) which warned of a loss in the current half-year, a management comment which helped knock A31 cents off the stock which ended the week at A$4.35. Western Areas (WSA) was also weaker despite resolution of a long-running legal dispute, shedding A18 cents to A$5.53. Mincor (MCR) slipped A5.5 cents lower to A73.5 cents, and Panoramic (PAN) lost A9.5 cents to A$1.38.



Most zinc losses were minor, which meant that Blackthorn’s (BTR) ability to open and close at A50 cents was the “winner” for the week. Kagara (KZL) eased back by A1.5 cents to A34 cents. Perilya (PEM) shed the same amount to close at A38 cents, and Ironbark (IBG) fell by A2.5 cents to A22.5 cents.



Minews. Over to the bulk commodities, iron ore and coal, please.



Oz. Mainly down in both sectors, but with a handful of interesting rises. Pick of the coal stocks was Aston (AZT) which added A65 cents to A$9.76 as interest grows in its multiple corporate deals that could lead to the creation of a major, new, independent Australian coal producer. Whitehaven (WHC), which is discussing a “merger of equals” with Aston, added A18 cents to A$5.82, but after that it was all downhill. Moves included: Stanmore (SMR), down A7.5 cents to A76 cents. Coalspur (CPL), down A12 cents to A$1.66. Carabella (CLR), down A9.5 cents to A$1.30, and Bathurst (BTU), down A4 cents to A66 cents.



Brockman (BRM) was the best of the iron ore stocks with a rise of A22 cents to A$2.26, though most investors remain wary of the stock and its close connections to Hong Kong investors. Iron Ore Holdings (IOH) was one of the handful of other stocks to gain ground with a rise of A3 cents to A$1.25. Grange (GRR) gained A1.5 cents to A49 cents, and BC Iron (BCI), added A8 cents to A$2.44. Losses were posted by Fortescue (FMG), down A14 cents to A$4.72. Atlas (AGO), down A8 cents to A$2.98. Cape Lambert (CFE), down A4.5 cents to A43.5 cents, and Mt Gibson (MGX), down A8 cents to A$1.25 after the early departure of its chief executive, Luke Tonkin.



Minews. Uranium and minor metals to close, please.



Oz. Extract (EXT) was the story of the uranium sector after the latest Chinese bid for its close associate, and London-listed, Kalahari Minerals. More than seven million Extract shares changed hands on Friday, a record for the stock as it rose by A32 cents to A$8.47. Toro (TOE), was also in the news after a series of deals and a stock exchange “speeding” inquiry thanks to a run up from A8.1 cents to a mid-week high of A12 cents. Slower Friday trade saw Toro retreat to close at A10.5 cents. Other moves were mixed. Paladin (PDN) shed A5 cents to A$1.62. Bannerman (BMN) added A2 cents to A28 cents, and Manhattan (MHC) fell A6 cents to A22 cents.



Titanium and zircon stocks led the way up among the minor metals. Iluka (ILU) added A79 cents to A$16.85 after a report of a big uplift in the titanium price. Gunson (GUN) put on 1.5 cents to A18 cents, and Base (BSE) gained A1 cent to A48 cents. Rare Earth stocks also rose, Lynas (LYC) by A3 cents to A$1.30, and Alkane (ALK) by A7 cents to A$1.09. Tin stocks were steady and lithium stocks weakened, led by Galaxy (GXY) which lost A7 cents to A88 cents.



Minews. Thanks Oz.
""""""""""""""""""


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## drillinto

Bill Matlack: "Metals and Mining Analysts' Ratings and Estimates - Juniors"
8 DEC 2011

http://www.kitco.com/ind/matlack/dec082011_juniors.html
[Bargains can be found in the uranium sector, at present]


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## drillinto

December 12, 2011

"Debt Fuelled Growth Is Over, What Comes Next ?"
Rob Davies
Source >> www.minesite.com/aus.html (( Free Registration ))

Europe has successfully identified that its house is on fire.  Rather than putting the fire out it has decided to build a new one where no one will be allowed to use matches thus making it safer than the existing one.  The fact that the no-smoking rules in the old dwelling were broken by pretty much everybody will be ignored. 

In economic terms the conflagration in Europe is bad and nothing that has been achieved over the last week suggests that there is any imminent prospect of it changing.  What makes the prospects even worse is that the rules on Europe 1.1 will act to restrict growth by preventing governments from running deficits in excess of 3 per cent.  This proposed fiscal tightening, if followed, will do nothing to restore growth to Europe and is one reason why the OECD is forecasting a paltry expansion of just 0.2 per cent in Europe. 



To be fair it is not expecting much more from the United States or Japan and its overall growth forecast for member countries is an anaemic 1.6 per cent in 2012.  All is not lost though for the outlook for metal consumption because non-OECD countries are expected to grow by over 4 per cent taking world growth to over 5 per cent.  Whatever happens in Europe, and it won’t be much, the global outlook remains positive, which is probably why base metal prices, as measured by the LME index only fell 0.9 per cent over the week to 3371.



That is not to say investors should be complacent.  The weakness in European banks, especially German and French ones, has the potential to destabilise world trade far beyond the borders of Europe.  More significant than the travails of European member states is the downgrading of the banks.  Commmerzbank, the second largest in Germany, has fallen to e1.3 a share capitalising it at just e6.8 billion.  This weakness at the core of the system will inhibit growth until a long term solution is put in place.  Simply borrowing from the ECB at 1 per cent to lend to Italy at 6 per cent does nothing to lubricate the commercial world other than keep Italy afloat.



What worries observers, and the OECD, is that if things go badly wrong there is a lot of downside in Europe.  It estimates the economy could contract by 2 per cent in each of the next two years if things go wrong.  The downside in China is growth slowing from 8 per cent to 7 per cent and that would have a bigger impact on metal demand.  On the other hand if things go well in Europe the upside is only 1 per cent growth in 2012 and 3 per cent in 2013.



Although Europe is gradually becoming a smaller part of the global economy, and even less important in terms of metal consumption, its key role in so many activities still gives it a leading part.  Unfortunately, the measures proposed this week are unlikely to reverse its relative decline.  On the other hand the imminent inclusion of Polymetals and Evraz into the FTSE Indices shows that London has been able to adapt to a fast changing world and remains a key player in raising money for the mining industry.

************************


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## drillinto

Key ETF Commodities [US] Performance Matrix

http://www.bespokeinvest.com/thinkbig/2011/12/11/key-etf-performance-matrix.html

*****


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## drillinto

"Gold Remains in Downtrend"

http://www.bespokeinvest.com/thinkbig/2011/12/12/gold-remains-in-downtrend.html

***


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## drillinto

Strategy

Metals & Mining Analysts' Ratings & Estimates(SENIORS)
Bill Matlack, 12 DEC 2011

http://www.kitco.com/ind/matlack/dec122011.html
[There are no bargains, not even in the uranium sector]


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## hardrunner

I tend to agree, the best place to be is in commodities, with all this global money printing going on all commodities are going to hit the roof.

Glad I found a stock like AXT with a basket of commodities such as gold, iron ore, uranium and copper.


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## drillinto

Jim Rogers is a legend in the investment world, and if there is one person to listen to, it is him. So what has Rogers been doing?

Rogers remains broadly bullish on commodities for the long term, he told CNBC/US (Dec 2011):

"I'm long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money; if the world economy doesn't get better, I'd rather own commodities because they're going to print money."

***


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## drillinto

December 17, 2011

That Was The Week That Was … In Australia
By Our Man in Oz 
>> www.minesite.com/aus.html

Minews. Good morning Australia, you seem to have survived another tough week?



Oz. Just, though it did feel a bit like living on the edge of a cyclone which could suddenly turn your way and blow the house down. In this case the cyclone is called Europe, but the winds coming off that part of the world remind people in Australia of the seasonal damage inflicted every Christmas as tropical storms brew in northern waters, with the most infamous being cyclone Tracy which flattened Darwin on Christmas Day in 1974.

Minews. An interesting comparison, but is there really such a sense of foreboding in Australia?



Oz. Perhaps. There is certainly a feeling that the Europeans, with the possible exception of you Brits who are only pretend Europeans, have completely lost their way and risk inflicting a global downturn on everyone, even China. It’s cold comfort for London but there was a round of applause down this way when the U.K. vetoed the proposed changes to the E.U. treaty and you said you would sail your own race. Not being locked into a common currency, and able to make decisions which suit Britain and not Berlin, puts you in a similar position to Australia and the U.S. where the equity, currency and bond markets can adjust without political interference.



Minews. Interesting to hear that Australia welcome that veto decision though it does sound a little like the pupil applauding the teacher.



Oz. As I’ve said many times, the sooner the U.K. realises what it left behind when it swapped its historic ties to Canada, Australia and the rest of the countries it helped create, for a false friendship with European countries that it dislikes, the better for everyone. It would, however, be appreciated if you stopped playing cricket quite so well.



Minews. Enough philosophy. Time to look at the market, and a call of prices.



Oz. If you insist, though as you might expect it took a bit of digging to extract any good news. Overall, the Australian market as measured by the all ordinaries index fell a relatively modest 1 per cent thanks to the banks holding up quite well. Unlike Europe our banks remain well capitalised though the Reserve Bank, our central bank, last week ordered a stringent stress test using these parameters; a contraction in gross domestic product (recession), a more than doubling of the unemployment rate from 5-to-12 per cent, a 30 per cent decline in the residential property market, and a 40 per cent fall in commercial property values.



Minews. Tough test, indeed. But let’s stick to our part of the market.



Oz. The metals and mining index, as might be expected, fell further than the all ordinaries, shedding 2.8 per cent, and the gold index doubled-up on that with a fall of 5.7 per cent as the gold price contracted sharply, and the Australian dollar managed to stick close to parity with its U.S. cousin.



Base and minor metals were the weakest sector of the mining market thanks to worries about Chinese commodity demand. Uranium stocks, on a pro-rata basis, did best thanks to a modest rise in the price of uranium, while the other sectors produced a handful of rises, in an otherwise dreary week.



Minews. Start with gold because it is the hot news in the metals space and once the Europeans finish selling the family silver, so to speak, it ought to be back in favour.



Oz. Agreed, in fact you could see a bit of that after we had closed on Friday with the price moving back close to the US$1600 an ounce mark. Among gold equities, as would be expected with a 5.7 per cent fall in index, rises were rare, but there were some. Evolution (EVN), which you took a look at mid-week, managed a rise of A4 cents to close at a week’s high A$1.78. Chalice (CHN), which is considering the sale of its Koka project in Eritrea, also added A4 cents to A30 cents. Azumah (AZM) crept A1 cent higher to A44 cents, and Gold Anomaly (GOA), a stock we rarely hear from, excited speculators when it reported the discovery of what could be a big copper/gold porphyry system in Papua New Guinea. That announcement about the Crater Mountain project sent the stock up from A1.8 cents to a high of A3.4 cents on Thursday, before it closed at A2.9 cents.



After the rises, there is a long list of gold stocks in the red. A sample looks like this. Troy (TRY), down A9 cents to A$4.48, a modest loss by what remains one of our market’s better-placed producers. Newcrest (NCM), the sector leader, down a sharp A$1.45 to A$31.60. Resolute (RSG), down A15 cents to A$1.79. Silver Lake (SLR), down A58 cents to A$3.17 after a big capital raising. Kingsgate (KCN), down A81 cents to A$6.09. Kingsrose (KRM), down A17 cents to A$1.35, and Perseus (PRU), down A33 cents to A$2.57.



Minews. Base metals next, as we might as well get the bad news out early in this chat.



Oz. Three copper stocks, one nickel and one zinc stocks rose last week. Ventnor (VRX) led the copper sector with a rise of A10 cents to A84 cents. Talisman (TLM) was second best, adding A2 cents to A39 cents. Horseshoe Metals (HOR) scratched out a gain of half-a-cent to A31 cents. Poseidon (POS) was the sole nickel stock in the black, just, with the addition of half-a-cent to A19.5 cents. Terramin (TZN) was the only zinc stock to gain ground, also up by the smallest margin, half-a-cent to A13.5 cents.



After that the base metals look like this, starting with copper. Sandfire (SFR), down A5 cents to A$6.70. OZ Minerals (OZL), down A33 cents to A$10.55. PanAust (PNA), down A12 cents to A$3.20. Ivanhoe (IVA), down A14 cents to A$1.49, and Rex (RXM), down A7 cents to A$1.26.



Western Areas (WSA) led the way down among the pure nickel stocks, shedding A35 cents to A$5.18. Mincor (MCR), lost A3.5 cents to A70 cents. Panoramic (PAN) fell A16 cents to A$1.22, and Mirabela (MBN) dropped A22 cents to A$1.29. Independence (IGO) was off a sharp A46 cents to A$3.89, but that was largely thanks to a big capital raising to help meet its share of the development costs of the Tropicana gold mine.



Zinc remained a flat as ever, with little hope of a recovery while global industrial production contracts. Kagara (KZL) lost A5 cents to A29 cents after a capital raising which caused more questions to be asked about its future. Perilya (PEM), slipped A2 cents lower to A36 cents. Blackthorn (BTR) held up well, shedding just half-a-cent to A49.5 cents, and Ironbark (IBG) did ever better by holding steady at A22.5 cents.



Minews. Iron ore and coal next, please.



Oz. Surprising strength in both of those sector given the bad news flowing out of Europe, and concern about contagion in Asia. Iron Ore Holdings (IOH) was the pick of the iron ore stocks thanks to a proposed 10 per cent share buy-back which helped the stock add A13 cents to A$1.38. Brockman (BRM) rose A5 cents to A$2.31 after its new Hong Kong masters unveiled a mopping up takeover bid. BC Iron (BCI) and Latin Resources (LRS) added A1 cent each to A$2.45 and A24 cents respectively. Going the other way were Fortescue Metals (FMG), down A12 cents to A$4.60. Atlas (AGO), also down A12 cents to A$2.86, and Mt Gibson (MGX), down A8 cents A$1.17. Cape Lambert (CFE) was an unusual “iron ore” mover, adding A3.5 cents to A47 cents, but largely because of the sale of a gold asset in Greece.



Coal stocks remained in the grip of takeover interest as Whitehaven (WHC), Aston (AZT) and Coalworks (CWK) moved closer to the creation of a new mid-tier sector leader. On the market, the three stocks went in different directions. Whitehaven fell A10 cents to A$5.62. Aston added A4 cents to A$9.80, and Coalworks did best with a rise of A8 cents to A65 cents. Other coal moves included Zyl (ZYL), one of the Aussies in South Africa, which announced a possible takeover deal, jumping A7 cents to A19 cents. Coal of Africa (CZA) added A5 cents to A85 cents. Carabella (CLR) lost A11 cents to A$1.19, and Coalspur (CPL) slipped A2 cents lower to A$1.64.



Minews. Uranium and minor metals to close, which should give you one up, one down.



Oz. It does, to make a neat finish. Uranium stocks did well thanks to both a modest price rise in the metal, and ongoing takeover interest as the fate of Extract (EXT) and its London-listed associate, Kalahari, moves into its final phase. On the market, Extract added A3 cents to A$8.50. Manhattan (MHC) staged an overdue recovery, rising by A4 cents to A22 cents. Havilah (HAV) caught to eye of local speculators with a gain of A10 cents to A60 cents and Uranex (UNX) clawed back half-a-cent from its recent losses to close at A29.5 cents. Paladin (PDN) lost ground with a fall of A10 cents to A$1.52, and Berkeley (BKY) slipped A1.5 cents lower to A41.5 cents.



Very few of the minor metal stocks gained ground, which is to be expected in a risk averse market. The rare earth leaders, Lynas (LYC) and Alkane (ALK) lost A13 cents and A14 cents respectively to A$1.17 and A95 cents. Titanium and zircon stocks eased back. Base (BSE) was down A3.5 cents to A44.5 cents, and Gunson (GUN), down A1 cent to A17 cents. Phosphate stocks were weaker. South Boulder (STB) shed A12 cents to A$1.15, while Minemakers (MAK) lost the minimum, half-a-cent, to 28 cents. Lithium and tin stocks all weakened.



Minews. Thanks Oz.
******************************


----------



## drillinto

December 19, 2011

A Slow Motion Train Crash
Rob Davies
>> www.minesite.com/aus.html  (( Free registration ))

Train crashes are, thankfully, rare. Slow motion ones even more so. Yet there is one happening in Europe right now that has the whole world transfixed.  It seems as if every other form of business activity is in suspended animation until the European train finally hits the buffers.  In true Hollywood style the 25 of the 27 passengers on the train have started squabbling among themselves as to whose fault it is and who will end up being hurt the most.   While it adds to the drama it doesn’t solve the problem. 

Although most Europeans would reject the idea, market forces will eventually impose a solution on the problem. But the process will probably not be allowed to start until the traditional right of the disenfranchised to riot is exercised. That will be the only signal that the unelected bureaucrats now running Europe will recognise. But don’t expect that to happen until the weather gets warm enough for street level insurrection.  The Prague Spring, the Arab Spring all have a common seasonality to them.  The European Spring of 2012 will just have to wait its turn. 



In the meantime capital markets remains trendless, the only exception perhaps being the slow decline of the euro. Good for Germany, but not nearly enough to help the rest of industrial Europe.  A stronger dollar had the predictable effect on metal prices and pushed finally aluminium below the US$2,000 a tonne mark to US$1,890 a tonne.   It now joins lead and zinc in this price band as they trade at US$1,990 and US$1,864 a tonne respectively.  How long will it be before lead and zinc producers join their peers in aluminium and start reducing capacity?



Nickel too has continued its slow decline and this week fell to US$17,825 a tonne. Not that anyone really cares about tin but its premium to nickel is shrinking rapidly and it now trades at US$18,650 a tonne. 



It is really only copper that is sustaining the base metal market with its elevated price of US$7,285 a tonne. As one veteran mining analyst explained over a pizza last week it looks as if this year and next the metal gurus will calculate a substantial shortfall between demand and supply for the red metal. 



Precious metals have not escaped the sell-off either, although the dollar correlation here is higher.  Even so, anyone who thinks that gold is selling at US$1,591 an ounce because all the economic problems in the US have been solved is a real optimist. 



So far bulk commodities have fared surprisingly well and it looks as if Chinese steel production in 2011 is going to be about 750 million tonnes, up from 700 million tonnes last year. That though, has not stopped Rio and Kobe agreeing an 18 per cent price cut to US$235 a tonne in coking coal for the next quarter. 



As the slow trading period of Christmas approaches, with associated low volumes, all professional operators will be hoping that the Great European Train Crash will evolve even more slowly over the next few weeks.  If, on the other hand, some trader, somewhere, anywhere in the world, sometime in the next few weeks says he wants any currency except euros from a European bank in settlement for the bargain he has just executed in might just finally precipitate the last act of the drachma drama.

**********************


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## drillinto

Amazing ripoff in the overseas uranium sector

http://business.financialpost.com/2011/12/12/uramin-assets-a-nearly-2-billion-drag-on-areva/


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## drillinto

Bill Matlack
Metals and Mining Analysts' Ratings & Estimates(Seniors)

http://www.kitco.com/ind/matlack/dec212011.html
***


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## drillinto

December 25, 2011
"That Was The Week That Was … In Australia"
By Our Man in Oz
>>> www.minesite.com/aus.html


Minews. Good morning Australia, as Christmas is upon us perhaps just a short run down of last week’s market will do the job today.

Oz. That shouldn’t be too difficult because though it was a busy four-and-a-half days on the ASX we basically finished up where we had started with three down days neatly matched by two up days. The short trading on Friday saw most of the key indices add 1 per cent, or more. Gold led the way with a 2.6 per cent rise on Friday alone. However, even after that strong finish the net result was one of modest overall decline.
Minews. Better news from the Eurozone should have helped sentiment down your way.

Oz. It did, but no-one in Australia believes that Europe has fixed its problems of excess debt by creating more debt. It seems from the other side of the world that Europe’s banks and governments are locked in a very unpleasant downward spiral with one side creating debt to lend to the other, without anyone creating the fresh wealth to service the debt.

Minews. That is a subject we could discuss endlessly, but we’re here to talk about prices on the ASX so let’s get on with it.

Oz. Most share-price moves were modest, either way. So, as a Christmas treat for our readers we’ll start this abbreviated report with the handful of stars, some of which a speculator might note for future reference. Biggest move of the week was an ultra-small gold explorer, Rubianna Resources (RRE) which bolted up an eye-catching A8 cents on Friday with sales at A17 cents, and a closing spread of buyers offering A17 cents and sellers asking A22 cents. It sounds good, and appears to have been driven by encouraging drilling results from the company’s Bloodstone project near the old Peak Hill mine in the Murchison district of Western Australia, though trading volumes were incredibly thin. Friday’s 89 per cent rise was accomplished on a handful of trades totalling 58,214 shares worth a grand total of A$7030 which is roughly a round of drinks at one of your posh London clubs.

Minews. Where the drill results worth the excitement?

Oz. Best appears to have been a 4 metre slice at 16.4 grams of gold a tonne, with a 1 metre core at 61.5 grams per tonne. Good enough to put Rubianna in the black book for future reference and a watch on future drilling. Most other gold stocks were mixed, and while the gold index ended down 1 per cent for the week much of that was caused by a handful of bigger miners losing ground. After Rubianna’s solo run the bulk of the stocks to rise did so by a few cents. Perseus (PRU) reported an extra one million ounces of gold at its Edikan project in Ghana which added A8 cents to the stock on Friday, though the full week’s result was a rise of A1 cent to A$2.58. Vector Resources (VEC) announced an expanded resource at its Gwendolyn project in Western Australia, adding A1.2 cents to A7.5 cents. Silver Lake (SLR) recovered some of its recently lost ground with a rise of A10 cents to A$3.27, and Alacer (AQG) regained favour with a rise of A63 cents to A$10.73.

Other gold-stock moves included: Troy (TRY), down A14 cents to A$4.34. Kingsrose (KRM), up A3 cents to A$1.38. Northern Star (NST), down A3 cents to A84 cents. Evolution (EVN), down A18 cents to A$1.60, and Kingsgate (KCN), up A2 cents to A$6.11.

Minews, Iron ore and coal next, please, as the bulk commodities still seem to be attracting interest.

Oz. Takeover activity is driving coal. Iron ore activity seems to be the result of the price holding up better than expected. Gloucester (GCL) was the star in the coal sector last week after announcing a merger with China’s Yanzhou Coal, adding A$1.48 to A8.55. That deal cut into the other proposed merger of Whitehaven (WHC) and Aston (AZT) which both lost ground last week. Whitehaven fell A26 cents to A$5.36 and Aston was A35 cents weaker at A$8.45. Other coal moves included: Coal of Africa (CZA) up A1 cent toA86 cents. Stanmore (SMR), down A1 cent to A74 cents. Bathurst (BTU), up A3 cents to A63.5 cents, and New Hope (NHC), down A20 cents to A$5.64.

South America was the hot address for Australian iron ores stocks last week. Leading the way was South American Ferro Metals (SFZ) which reported a maiden 230 million tonne resource at its Ponto Verde project in Brazil good enough to lift the stock by A6.5 cents to A21 cents. Latin Resources (LRS) was also in favour after our mid-week report on developments at its iron sands project in Peru. It added A4 cents to A28 cents. Closer to home, IronClad Mining (IFE) said it was making progress with government approvals for its Wilcherry Hill mine in South Australia, news which boosted the stock by A10.5 cents to A63 cents. Most other iron ore moves were down, with Mt Gibson (MGX) slipping A2 cents to A$1.15 despite announcing the start of production at its third mine. Atlas (AGO) shed A3 cents to A$2.83. Fortescue (FMG) lost A11 cents to A$4.49 and Iron Road (IRD) fell a sharp A12 cents to A57 cents.

Minews. Base metals next, please.

Oz. Generally weaker, but all moves were minor. Among the copper stocks Rex (RXM) added A4 cents to A$1.38. Hot Chili (HCH) lost A6 cents to A57 cents. PanAust (PNA) rose A4 cents to A$3.24, but Finders (FND) fell A2 cents to A35 cents despite announcing a funding deal on its Wetar copper project in Indonesia. Other copper moves included: Sandfire (SFR) up A1 cent to A$6.71. OZ Minerals (OZL), down A16 cents to A$10.39, and Talisman (TLM) down a sharp A7 cents to A32 cents.

Nickel stocks barely moved. Mincor (MCR) lost A1 cent to A69 cents. Panoramic (PAN) fell by the same amount, A1 cent, to A$1.21. Western Areas (WSA), added A11 cents to A$5.29, and Independence (IGO) slipped A9 cents lower to A$3.80.

Zinc was a similar story, small moves either way, with KBL Mining (KBL) doing best after reporting an expanded resource at its Sorby Hills project, news which lift the stock by A1.5 cents to A24.5 cents. Blackthorn (BTR) also attracted some support, rising by A1.5 cents to A51 cents. Perilya (PEM) fell A3.5 cents to A33.5 cents. Kagara (KZL) lost another A1 cent to close at A28 cents, and Ironbark (IBG) shed A3 cents to A19.5 cents.

Minews. Uranium and minor metals to close, please.

Oz. Very little news from either sector. Paladin (PDN) led the way down among the uranium stocks with a fall of A8 cents to A$1.40. Uranex (UNX) went to other way with a rise of A2.5 cents to A32 cents. Other moves included: Extract (EXT), down A1 cent to A$8.49. Manhattan (MHC) also down A1 cent to A25 cents, and Berkeley (BKY), down A2 cents to A39 cents.

Rare earth stocks eased. Alkane (ALK) slipped A2 cents lower to A93.5 cents, and Lynas (LYC) was A1 cent weaker at A$1.16. Venture (VMS) led the way down among the tin stocks, shedding A3.5 cents to A27.5 cents. Wolf (WLF) attracted support for its Hemerdon tungsten project, adding A4 cents to A28 cents. Atlantic (ATI) gained A10 cents to A$1.20 as it nears completion with the redevelopment of the Windimurra vanadium mine, and South Boulder (STB) was heavily sold off as it seeks to raise fresh capital for the next phase of studies into its Colluli potash project in sanction-hit Eritrea, losing A26 cents to A89 cents.

Minews. Thanks Oz, and Merry Christmas.
*********************


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## drillinto

"Year in Review: Long-Term Uranium Stock Prospects Trend Higher"
Source >> The Energy Report Editors  

http://www.theenergyreport.com/pub/na/1209

*****************


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## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
by Bill Matlack

http://www.kitco.com/ind/matlack/dec212011_juniors.htm
         (Many "buy" ratings in the uranium sector)


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## drillinto

December 2011 - Bespoke's Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2011/12/29/bespokes-commodity-snapshot.html

**********************


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## drillinto

One thing is for sure. Commodities in the new year will continue to offer investors the opportunities they long for. 

Myra Saefong (MarketWatch - USA; 30 DEC 2011)


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## Garpal Gumnut

drillinto said:


> One thing is for sure. Commodities in the new year will continue to offer investors the opportunities they long for.
> 
> Myra Saefong (MarketWatch - USA; 30 DEC 2011)




A brave call but probably correct.

gg


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## drillinto

The ratio platinum/gold

http://www.bespokeinvest.com/thinkbig/2011/12/29/platinumgold-ratio-remains-below-one.html

*****


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## drillinto

December 31, 2011
That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Free Registration)

Minews. Good morning Australia, your market seems to have been suitably flat in a short trading week.

Oz. Not much can be expected in two-and-a-half days of business on the ASX, especially with the beach, and a few cold beers calling. But, having said that, there were a few interesting moves which could be the start of a trend for 2012, with iron ore stocks staging a rally, of sorts, thanks to China’s continued strong demand for steel. A handful of gold stocks also swam against an outgoing tide, and a copper deal with a China investor caused a flurry of activity in one small stock.
Overall, however, there was no denying the subdued level of interest in equities caused by the ongoing global economic uncertainty. Gold staged a late recovery after we had closed on Friday, and it’s worth noting that at US$1,565 an ounce it is US$10/oz more than a week ago. The base metals all slipped a few cents. At the close, the all ordinaries index was down by 1.9 per cent, the metals and mining index lost 3 per cent, and the gold index slumped by 5.2 per cent.

Minews. Given the short week perhaps a short run-down of prices, starting with iron ore as that seems to have attracted most support.

Oz. Pick of the iron ore stocks was Ironclad Mining (IFE) which won government approval for its Wilcherry Hill project, news that initially saw the stock add A17 cents to A80 cents, its highest since May. That sharp rise sparked a spot of profit taking with Ironclad closing at A72 cents for a week’s gain of A9 cents. Sundance (SDL), which is still waiting for a promised takeover bid from Chinese investors to materialise, recovered recently lost ground with a rise of A4 cents to A39.5 cents. BC Iron (BCI) rose A20 cents to A$2.65, and two of the emerging magnetite-ore processing hopefuls, Grange (GRR) and Gindalbie (GBG) attracted fresh interest. Grange popped A6.5 cents higher to A56 cents, and Gindalbie added A1 cent to A52.5 cents. Cape Lambert (CRFE) added A1.5 cents to A47.5 cents, and Latin (LRS) put on A1 cent to A29 cents. Most other iron ore moves were down, but not significantly. Moves included: Fortescue (FMG) down A22 cents to A$4.27. Atlas (AGO) down A13 cents to A$2.70. Mt Gibson (MGX) down A3 cents to A$1.12, and Brockman (BRM), down A15 cents to A$2.04.

Minews. Over to the gold sector, where any good news would be appreciated.

Oz. There was a bit, but not much over a few days when everyone seemed busy talking gold down and calling it a victim of the European financial crisis and related asset sell-off. Two stocks to survive the widespread decline were Kingsrose (KRM) which added A3.5 cents to A$1.41, thanks to its ultra-low cost operations in Indonesia, and CGA (CGX) which added A8 cents to A$1.99 on news of an early re-start of gold production at its Masbate mine in the Philippines. After those two it was a case of widespread declines, but nothing too alarming. Moves included: Silver Lake (SLR), down A26 cents to A$3.01. Perseus (PRU), down A18 cents to A$2.40. Medusa (MML), down A42 cents to A$4.45. Troy (TRY), down A8 cents to A$4.26. Northern Star (NST), down A5.5 cents to A78.5 cents, and Chalice (CHN) down A3.5 cents to A26.5 cents after announcing the sale of its Koka project in Eritrea.

Minews. The base metals next, please.

Oz. Mainly down, with a handful of rises in the copper sector which held up quite well. KBL Mining (KBL), the old Kimberley Mining, added A2.5 cents to A27 cents after announcing the sale of a 25 per cent stake in its Mineral Hill copper project to a Chinese investor for a handsome A$80 million. Talisman (TLM) rose by A1.5 cents to A33.5 cents. Ventnor (VRX) and Rex (RXM) put on A2 cents and A1 cent to A52 cents and A$1.38 respectively. Other copper moves included: OZ Minerals (OZL), down A38 cents to A$10.01. Sandfire (SFR), down A13 cents to A$6.58, and Ivanhoe (IVA), down A10 cents to A$1.42.

All nickel stocks lost ground. Western Areas (WSA) was A20 cents weaker and A$5.09. Mincor (MCR) lost A1.5 cents to A67.5 cents, and Panoramic (PAN) shed A5 cents to A$1.16. Zinc stocks did a little better, but all moves were marginal. Ironbark (IBG) and Terramin (TZN) added half-a-cent each to A20 cents and A13.5 cents respectively. Perilya (PEM) slipped by the same amount, half-a-cent, to A33 cents, while Kagara (KZL) lost A2.5 cents to A25.5 cents.

Minews. Coal and uranium next, please.

Oz. More of the same really. Marginal moves either way. Among the coal stocks, two posted the absolute minimum rise. Zyl (ZYL) and Continental (CCC) added half-a-cent to A16.5 cents and A17 cents respectively. Losing ground were stocks such as Whitehaven (WHC), down A7 cents to A$5.29. Coalspur (CPL), down A9 cents to A$1.53, and Aston (AZT), down A35 cents to A$9.10.

Greenland Minerals (GGG) was the only uranium stock to rise, up half-a-cent to A45.5 cents. Other moves included: Paladin (PDN), down A3.5 cents to A$1.37. Berkeley (BKY), down A3.5 cents to A36 cents, and Manhattan (MHC), down A6 cents to A19 cents.

Minews. Minor metals, and then we can sign off, thanks.

Oz. The tone was a little better among some of the speciality metals, but moves were modest. Phosphate stocks gained a little ground, with South Boulder (SYB) regaining A4 cents to A86 cents after a heavy earlier sell-off, and Minemakers (MAK) added A1.5 cents to A27.5 cents. Tin stocks were steady. Platinum stocks continued to weaken, and rare earth developers lost a little ground with Lynas (LYC), down A12 cents to A$1.04, and Alkane (ALK), down A3 cents to A90.5 cents.

Minews. Thanks Oz.
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## Garpal Gumnut

Thanks drillinto,

This may be less than useful information mate, available from The Australian, AFR or the Townsville Bulletin, for anyone with a highlighter.

Commentators look back, and the silly bastards get paid between $40 and $50k a year for their copy.

The only one I remember who expanded from such claptrap was Christopher Skase, and he ended up sucking on oxygen in Spain, which must have been as close to hell as one can get.

Commodities are the place to be in, timing is the nuts, as a mate of mine at the AFR tells me.

gg


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## drillinto

December 28, 2011
"Manganese Miners Adjust To A New World Of Stagnating Prices"
By John Helmer in Moscow
>> www.minesite.com/aus.html

BHP Billiton (BHP), the world’s dominant producer of manganese, recently slashed the price of manganese for delivery to China, the world’s dominant consumer, by 14 per cent, arousing the suspicion that the Big Australian is aiming to drive rival producers from the business, and when Chinese steelmaking is expected to revive next year, corner a larger share of the market. Ironically, the price action may also accelerate the exit of the Australian independent Consolidated Minerals from Australia, where costs are now close to the break-even level, towards African operations. The writing on the wall for manganese mining has been bad news for weeks. Chinese imports peaked in May and then again in September at almost 1.3 million tonnes per month. But Chinese steelmills, which require manganese to harden steel products, have cut their production in recent weeks. 

Imports of manganese held steady at one million tonnes per month until Chinese steelmakers and traders began to lose their nerve. Inventories of manganese at ports, principally in the Qinzhou and Tianjin areas, climbed between  September 2010 and May 2011, tailed off a little during the summer, and are now rising again. Even if forecast Chinese steel production goes back up above 700 million tonnes per year by February, there is enough inventory in China and enough supply of manganese ore in global reserve to hold down a recovery in the manganese price, and thus in manganese mininc company earnings and profits. 

There is good news, but not much. As the price of manganese has been falling on dwindling Chinese demand, the cost of shipping to deliver the metal from Australia and Africa has also gone down. BHP is the largest producer of manganese in the market turning out just over two million tonnes in the September quarter. That was up 13 per cent on the previous quarter, but down five per cent on the year earlier. Most of the manganese comes from mining in South Africa, with a hefty contribution from a mine in Groote Eylandt in northern Australia. According to BHP’s annual report for the financial year ending June 2011, manganese sales generated US$2.4 billion. That was just three per cent of the company’s total sales figure. Earnings before interest and tax from manganese for the year came to US$712 million, four per cent of BHP’s consolidated total. 

The largest of the independent manganese miners globally are Consolidated Minerals (Consmin) and OM Holdings (OMH). Both have ties to African manganese reserves, though for the time being it is Consmin which is already operational in Africa. OMH is a minority stakeholder in Tshipi, a South African mining project which has yet to materialize. Around 55 per cent of Consmin’s total output comes from the Nsuta mine in Ghana, while 45 per cent comes from the Woodie Woodie mine in Australia. For Consmin, total manganese resources in Africa comprise 56 per cent of the company’s total of 68.3 million tonnes. Consmin reports that in the third quarter it managed to lift ore output to 825,000 tonnes. That’s up 23 per cent over same period in the corresponding period a year earlier. Meanwhile, sales doubled to 941,000 tonnes.

Overall, Consmin produced 2.4 million tonnes of manganese ore in the nine months to September 30, an increase of 18 per cent. Sales grew even faster, and despite a shrinking manganese price, revenue for the nine month period came in at US$536.4 million, up 14 per cent. Earnings, however, slipped on the rising Australian dollar and on expanding inventories. Cost data are not available, but it is believed the cash cost of mining in Ghana is well below that of Australia, as are the shipping costs. Consmin was acquired in 2007 in an open bidding contest for shares on the Australian Stock Exchange, by Ukrainian metals magnate Gennady Bogolyubov. It was then delisted, although it continues to issue regular audited financial and production reports. Consmin is now being reorganized to streamline the Australian management and reduce costs. In that process, the Ghanaian operations and projects under consideration elsewhere in Africa, have a cost-effectiveness and profitability lead over the Australian operations.

For its part, OM Holdings (OMH) is listed on the Australian Stock Exchange, but is controlled by investors based in China. Bogolyubov is also an investor, though not a happy one. He recently lost an Australian court bid to sanction the company for attempting to list on the Hong Kong exchange, and also failed to muster enough votes to appoint new independent directors to the OMH board. 

OMH has some diversity in its portfolio, which reduces its reliance on manganese. The company has stakes in iron ore projects in Norway, Sweden and Australia, via investments in Northern Iron, in Scandinavian Resources, and in Shaw River. OMH is smaller than Consmin, and may start to come under pressure if the manganese price continues to stagnate. According to a recent report from Macquarie Bank, “OMH's upstream margins will be negative at current cost and January price levels”. It’ll be interesting to see what next year has in store. 

*******************


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## drillinto

January 02, 2012
"Our Man In Oz Bids Good Riddance To A Truly Awful Year"
by Our Man in Oz
Free registration >> www.minesite.com/aus.html

Stinker! In a word, that was 2011 on the Australian stock market, a year when picking winners has never been harder, when 70 per cent of new floats sank, all the major indices ended in the red, one metal gained ground, gold, and the Australian dollar closed where it had started the year, $US1.01. Ironically, the $200 an ounce rise posted by gold (in either currency) was not reflected in the price of most goldmining stocks with falls significantly outnumbering rises even as the price of their underlying commodity went up.

Fear of a sudden slowdown in China, the driving force in the Australian mining industry, was what affected most investors, especially as the European financial/political crisis gathered pace, potentially triggering a global recession. But, a close second in the negative-influence stakes, was Australia’s nifty demonstration of shooting itself in both feet thanks to the passing of laws which will impose a super-profits tax on iron ore and coal, and a carbon-emissions tax which will hit every taxpayer. 

Cash was king for most of 2011 with spare money being parked in a robust domestic banking system that has weathered the worst of the troubles since the 2008 sub-prime mortgage crisis in the U.S. started a wave of bank collapses, and near-collapses. For Australia, a banking system that has not required wholesale government support rivals the resources sector as the country’s primary economic asset, a situation which has evolved more by good luck than thoughtful planning. Unlike some other countries, Australia’s banks were banned from entrepreneurial lending by an old-fashioned team of central bankers who enforced strict rules on their commercial cousins.

That’s why when you look back at 2011 it is the domestic banks which have performed best, even if modest losses can be regarded as best, a variation on the old saying about the one-eyed man being king in the land of the blind. While sector leaders such as BHP Billiton and Rio Tinto fell by 22 per cent and 27 per cent respectively, the top two banks, National Australia and Commonwealth, fell by 1 per cent and 3 per cent respectively. For a country where the stock market has been dominated by mining and oil stocks for the past 60 years that “banks beat the miners” result was a sobering reminder that the world has become a very risk-averse place.

Three years ago, in the happy days before the U.S. investment banks Bear Stearns and Lehmann Brothers pulled the rug from under the financial world, Australian banks ranked third, fourth, sixth and seventh in the ASX’s top 10 by market value. Today, only BHP Billiton outranks the four leading banks with Rio Tinto plunging from second to ninth. Two miners in the top 10 is the lowest number since records were kept. In 1948 there were four (BHP, North Broken Hill, Mt Isa Mines and New Broken Hill). In 1968 there were seven in the top 10.

The big mining-related issues in Australia over the past 12 months were a combination of tax, takeovers (especially in the coal sector), fear of China catching an economic cold, and the emerging boom in natural gas production which is driving domestic costs sharply higher. Higher taxes have been labelled by the miners as a measure of increased sovereign risk for foreign investors in Australia, a claim which is only partly true. The real impact is on profits, because while the government is taking a bigger share of profits the risk of losing an asset to a man in a jeep waving a Kalashnikov has not increased – and that’s what sovereign risk really means.

The China factor is an extension of the Europe factor with the jury out on whether internal consumption and construction can offset slower exports. The next three-to-six months will answer that question. Cost inflation is more certain, with miners being hit hard by a stampede to develop liquefied natural gas (LNG) projects around the coast, largely to satisfy Asian demand for a relatively clean-burning fuel, with the LNG rush aided by Japan’s nuclear accident which has set back the uranium industry. Six LNG mega projects are under construction in the north-west and north-east of the country, each with a price tag of between US$20 billion and US$40 billion – and with owners prepared to offer whatever wages are required to attract skilled labour. The end result is truck drivers being paid A$150,000 a year, and shortages emerging for essential construction material such as cement and stainless steel.

Overall, the Australian stock market declined by 14 per cent during 2011, if you use the all ordinaries index as your measuring stick, a result propped up by the relative outperformance by the banks. If you use the metals and mining index as a guide the decline was 25 per cent, while the gold index was down 21 per cent even as the price of gold rose by 14 per cent. As an uncouth American might be say about the gold result: “go figure!” Much of the gold index decline can be sheeted home to Newcrest (NCM), the stock which dominates gold in Australia. It fell by 22.5 per cent, dragging the index down, and masking the performance of three gold stars; Silver Lake (SLR), Regis (RRL) and Northern Star (NST). Silver Lake rose by 42 per cent. Regis rose by 52 per cent, and Northern Star lived up to its name with a 127 per cent increase – with all outperforming the pack thanks to high-grade, low-cost, gold production.

New floats, an almost guaranteed way to make money in the first flush of the resources boom between 2003 and 2008 became an almost guaranteed way to lose money in 2011. Of the 81 new mining floats (yes, on average, more than one a week – a variation on P.T. Barnum’s famous remark about a sucker being born every minute) 57 ended the year at a price less than what initial subscribers paid – a 71 per cent failure rate. Two floats out of the 81 did very well. Copper explorer Ventnor Resources (VRX) saw its A20 cent shares hit a high of A$1.02 in mid-December, before falling off a cliff to a last trade at A50 cents, which is still a very respectable gain of 150 per cent. Western Manganese (WNB) also turned in a 150 per cent performance, rising from a float price of A20 cents to a final price of A50 cents. After those two outstanding performances (less the 3 per cent of the stocks offered) there were a handful of strong results. County Coal (CCJ) returned a 58 per cent gain to early investors, and International Coal (ICX) is up 47 per cent on its original price. Centius Gold (CNS) won the wooden spoon for worst float of the year with its A20 cent share ending at A4.8 cents, a 76 per cent fall since listing on January 28.

On balance, the less said about 2011 the better. The stock market was awful. The Australian Government worse, the foreign financial news grim, and the Australian cricket team appalling. The only good news is that the year is all but over, and we can look forward to 2012, though it would be wise to wish anybody Happy New Year with fingers (and toes) crossed.
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## drillinto

January 02, 2012
"2011 Base Metals Review: A Slow And Gentle Decline"
Rob Davies
Source >> www.minesite.com/aus.html

There was lots of excitement in 2011 in the realms of politics and economics, but it would be hard to discern that from the Evolution of base metal prices during the year.   Metal prices, as captured by the LME index started the year at 4,000 and gradually declined to 3,290 by year end.  That 18 per cent fall would have been a lot more severe if it hadn’t been for the resilient performance of copper.  Although it too fell, from US$9,500 a tonne in January to US$7,500 by December, its 21 per cent fall was less than many of its peers. Even with that drop, the price of copper is still way ahead of production costs which cannot be said of many of its fellow base metals. 

Given the bleakness of the economic background the resilience of base metals is somewhat surprising. In fact, it is a testimony to the strength of the fundamentals underlying the industry.  Most obvious are the low inventories of all metals with the possible exception of aluminium. 

In addition to the grinding secular deleveraging of the western economies the metal markets had to cope with the dramatic impact of the Japanese tsunami in March. This knockout blow to the world’s third largest economy resulted in a contraction of that economy of 0.7 per cent in its first quarter and continued shrinkage of 0.3 per cent in the second quarter. That had a severe impact on metal consumption, and not just in Japan because of the integrated nature of the modern world economy.   Even though Japan grew by 1.5 per cent in the third quarter compared to the second quarter the economy was still 0.2 per cent smaller than a year previously. 

In many ways it is the strength of the world economy in 2011 that is striking rather than its weakness. Overall, the countries in the OECD were 1.8 per cent larger in the third quarter than in the same period of 2010. On top of that China and other emergent nations contributed their additional demand.  

Even so the outlook for the world economy was a lot brighter at the beginning of 2011 than at the end.  Leaving aside the exceptional events in Japan forecasts for world growth gradually shrank as the year progressed. This was partly due to the continued US housing crisis and its associated debt mountain.  However, the bulk of the negative sentiment was caused by the gathering crisis in the eurozone.  Despite repeated summits and conferences politicians and central bankers have consistently deferred tackling the problem head on and have preferred to announce short-term fixes. While these sometimes have the desired effect of mollifying the markets for a while the underlying problems continue to eat away at confidence. 

A good example of the decline can be seen in the fall in aluminium prices. For the first quarter it averaged US$2,499 a tonne but it only averaged US$2,073 a tonne in November. The average for the year is going to be close to US$2,400 a tonne which is still a healthy premium to the US$2,172 achieved in 2010.  So far producers have not made any significant production cuts, but they can’t be far away if demand remains weak.

Copper had a good start to the year and averaged US$9,650 a tonne in the first quarter.  However, even its strong fundamentals could not stop it drifting down to average US$8,925 in May.  A small rally to US$9,618 in July because of supply interruptions was too optimistic and the drift continued over the remainder of the year. By November the average price was down to US$7,551 and the average for 2011 will be US$8,810.  Like aluminium this is higher than the 2010 average, which was US$7,537 a tonne. Unlike aluminium, miners are still furiously trying to add capacity. 

Nickel will have an average price of close to US$22,900 a tonne in 2011. While this is above the US$21,813 achieved in 2010 it is below the optimistic levels at the start of the year.  In February it averaged US$28,246 a tonne but gradually dropped back as the year progressed to average just US$17,877 in November, over US$10,000 a tonne less. So far the nickel industry has remained sanguine and almost all producers will be profitable at these levels, albeit with lower margins. 

Lead and zinc are usually mined together but their final markets are very different. Zinc’s use in galvanised steel makes it very sensitive to the construction industry and its price over the year reflected the waning fortunes of that industry.  After averaging US$2,158 a tonne in 2010 it started the year with an average of US$2,370 in January and rose to US$2,464 in February.  That was the high point though and it lost ground over the year and eventually breached the US$2,000 barrier in the autumn to average US$1,858 in October. Over the year as a whole the price will actually be a respectable US$2,190 a tonne, but the current spot price of US$1,862 will be what producers are focussed on.

Lead has followed a similar trajectory but peaked at US$2,740 a tonne over April. That was a healthy increase to the US$2,146 averaged in 2010. Since then though it has slid back and is on track to average just under US$2,400 for the year.  The automotive market has not regained its vigour of a few years ago, even though it has recovered somewhat. Lead’s fortunes are inextricably linked to this business and a smaller global car fleet, with its concomitant reduction in replacement batteries, is not something this metal can escape from.   

For much of 2011 base metals formed part of the binary risk-on risk off trade even though its beguiling simplicity hid a multitude of complications.  Most obvious was that the traditional safe haven of US debt suffered the ignominy being downgraded from its historic AAA status by the ratings agencies.  Perversely, that had no price effect at all on the bonds and left 10 year Treasuries yielding 1.95 per cent at the year end. It is hard to believe they yielded as much as 3.4 per cent in January. 

Despite the fact that is has never been cheaper to hold inventory metal prices are now reflecting the all pervading gloom in the marketplace. It is unfortunate that is the memory we have of 2011 when in fact metal prices, and miners, actually had a rather good year.

;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;


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## drillinto

January 04, 2012
2012 Base Metal Outlook: Waiting for Angela
Rob Davies
www.minesite.com/aus.html


Although it only represents about one third of the world economy Europe accounts for far more than that in column inches of financial commentary.  About the only thing we can say with certainty for 2012 is that the amount of noise about Europe, and the euro in particular, is going to increase.  While that will dominate the headlines, it will be slightly less important than what happens in Asia and North America.   Even so it will have a major impact on economic sentiment. 

Among all the analysis that has been generated about the problem in the eurozone one fact dominates all others. Since the euro was formed ten years ago, German competitiveness has declined by about 5 per cent while the other countries in the eurozone have seen competitiveness fall by between 20 and 40 per cent.  Germany has been the largest beneficiary of the euro by a country mile as it has effectively driven its neighbours out of business.  That gives Germany a massive incentive to maintain the status quo and why it will fight to maintain the union. The battle in Europe will be between leaders of other European countries, trying to accommodate German demands for austerity, and their voters who are suffering unemployment and benefit cuts.  As with the Arab Spring whenever the wishes of the population cannot be expressed through the ballot box they will surface in the form of civil disorder and riots.  Only in that way will the voice of the masses be heard, though whether it has any effect is another matter. 

There is no doubt that a break-up of the euro, or even a partial dismantling, would be a huge boost for growth for every country except Germany.  In net terms that would probably be a positive for metal demand in Europe, but the process could be deeply unsettling and likely to be more beneficial for precious metals than base metals in the short term.

The last time the IMF looked at its dried chicken bones to discern the future it reduced its forecast for global growth in 2012 by 0.5 per cent to 4 per cent.  In contrast to the all the doom and gloom that actually is not a bad number and is the same as the expected outturn for 2011.  It will surprise few though that the distribution of growth is far from equal. Developed economies are expected to grow at 1.9 per cent, and the eurozone at only 1.1 per cent, while emerging economies are forecast to expand by 6.1 per cent. Within that China again takes the top spot at 9 per cent. 

This bias towards emerging markets should be positive for base metal and bulk commodity demand as they benefit more from rising industrial production in developing economies than service activity in developed markets.    On that basis all metals should experience higher levels of demand in 2012 than in 2011.  Nickel has the highest sensitivity because two thirds of it is consumed in stainless steel production and that alloy has the fastest long term growth rate of any metal. Although nickel starts the year at just under US$19,000 a tonne it is actually well placed to perform well from this base. 

Not only is demand expected to grow by 3 per cent the low price is putting pressure on nickel pig iron producers that have been so  vital in increasing supply over the last few years.  Industry experts estimate that these marginal suppliers need prices of US$19,000 to US$20,000 a tonne to break even.  At these price levels these nickel pig iron suppliers face that classic prisoner’s dilemma, do they shut up shop now or continue making small losses and hope their competitors close down and drive up prices to benefit them?  How these miners react will be the key to whether nickel’s supply side tightens up and takes prices back over US$20,000 a tonne. 

Aluminium has a growth rate almost as high as nickel’s and it too relies primarily on Chinese demand.  Unlike nickel though China is also a large producer of aluminium, in fact it is the largest.  While there has been some small scale closures of capacity the market won’t tighten up until Chinese capacity is further reduced.  That is unlikely to happen until the renminbi is revalued against the dollar, and that could be some way off.  On that basis the outlook for aluminium is probably not very exciting.

Copper though is a different story.   Despite large green and brown field expansions copper production is unlikely to keep up with growing demand in 2012. If so it will be the third year in a row that the market is in deficit.   Not bad considering the gloomy economic environment.  Demand growth maybe not spectacular but even an additional 2 per cent is the equivalent of one large new mine coming on stream every year.  The persistent deficit is partly due to problems and delay in bringing on new capacity but is also a function of strikes, weather conditions and operational problems at existing mines. One of these factors is the slightly perverse effect that high prices incentivise mines to extract lower grade ore to maximise the net present value of the ore body. While that suits the mine owner it has the effect of actually reducing output unless the mine is able to increase throughput.  That is not something that can be easily done while suppliers still have order backlogs. 

Lead and zinc, as is often the case, bring up the rear of the group. While demand prospects are lacklustre, consumption typically grows at a small fraction of economic growth in developed economies; the good news is that price weakness in the fourth quarter of 2011 has already brought quotes down to less than US$2,000 a tonne for both metals.  That is already putting pressure on producers and may induce some cutbacks.  In addition lead, because of its high level of recycling, will find that the secondary market will be slightly less vigorous in supplying scrap.

Overall, the fundamental outlook for base metals in 2012 is probably sound if not exciting. The problem is that the noise of Mrs Merkel fighting the bulk of the European electorate could be a very large distraction for capital markets.

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## drillinto

January 07, 2012
That Was The Week That Was ... In Australia(GOLD)
By Our Man in Oz
www.minesite.com/aus.html (free registration)



Minews. Prices now, starting with gold, please.

Oz. There were no surprise movements, either way, among the gold companies, but the trend was positive on three of the four trading days. An interesting new name for your readers is Elementos (ELT), a company which has attracted attention thanks to its Argentinean gold prospects. It rose a handsome A3.5 cents to A13.5 cents last week, but it was also interesting that at the close on Friday the spread stretched from buyers offering A10.5 cents and sellers wanting A18 cents, perhaps a hint of more to come.

Among the better-known gold companies there was a generally solid upward trend, and a few surprises too. Among the more interesting positive movers were: Silver Lake (SLR), up A25 cents to A$3.26, Evolution (EVN), up A15 cents to A$1.65, Medusa (MML), up A41 cents to A$4.86, Troy (TRY), up A17 cents to A$4.43, Perseus (PRU), up A16 cents to A$2.56. Kingsgate (KCN), up A24 cents to A$5.94, and Allied (ALD), up A11 cents to A$2.27. Going against the upward trend were falls from Ausgold (AUC), down A3 cents to A87 cents, Kingsrose (KRM), down A6 cents to A$1.35, and CGA (CGX), down A8 cents to A$1.91. Arc Exploration (ARX) lost another A0.1 of a cent to A0.8 cents after it was caught up in an Indonesian army blunder in which protestors near one of its exploration sites were killed in a shooting spree.

***********************************


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## drillinto

Aluminium
Alcoa, the first company on the Dow to report earnings, climbed 2.4 percent to $9.65 in early New York trading after Chief Executive Officer Klaus Kleinfeld said global aluminum demand will grow 7 percent this year. That expansion, combined with production cuts, will lead to a market deficit of 600,000 tons in 2012, Alcoa said.(10 JAN, Bloomberg)


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## drillinto

January 10, 2012
It’ll Be A Stock-Picker’s Market In Australia This Year, But Visibility Is At Least Better Than It Is Elsewhere In The World
By Our Man in Oz
Source >> www.minesite.com/aus.html

Discovery and takeovers will be the positive factors influencing the small to mid-tier components of the Australian mining industry in 2012. The other potential drivers are largely negative. For one thing, commodity prices, perhaps apart from gold, are unlikely to come to the rescue of investors as China’s growth slows, the U.S. stutters, and Europe throws the gear lever into reverse. 

And this outlook means that the days of easy gains, those lazy days of a “rising commodity tide” lifting all boats, are over, at least for now. The wholesale flopping of new listings in 2011 was a taste of things to come, and picking winners will undoubtedly get harder. The year ahead will be one where it will pay to back companies with quality management, quality projects, and with that other critical ingredient, cash in the bank. Because 2012 will certainly not be one of those years of stiff breezes that help even turkeys to fly.

Warnings aside - if anyone needed them after last year’s precipitous plunge, when the ASX metals and mining index lost 25 per cent, double the rate of the 14 per cent loss posted by the all ordinaries - there is already a mood of caution evident among Australian investors. Since the trading year started a few days ago the ASX trend has been evenly split: up 50 per cent of the time, down 50 per cent. It is almost as if the animal spirits which underpin all markets are waiting for a sign, or an event, to demonstrate a definite trend. Whether that trend was up, or down, probably wouldn’t matter just so long as market participants knew where they were going. Right now, it’s a case of flat-lining, and the only time a hospital patient flat-lines is when he is dead.

It is the uncertainty of the outlook in China and Europe which has led to the nervous start to the year on the ASX, and which is pointing to a period when investors need to make their own luck. That means hunting out companies which will outperform thanks to discovery news, or through merger and acquisition activity. Northern Star (NST), one of the top ASX performers of 2011 with a share price that rose from A28 cents to A$1.00, and which has traded recently at around A92 cents, is an example of a company determined to make its own luck, either through exploration or acquisition. Not only did it beat its own forecasts by generating A$46 million in cash from its Paulsens mine in Western Australia in 2011, but it has extended its exploration footprint to a second likely mine development. It’s also said it is planning to use its growing balance sheet firepower to buy gold assets being offered by companies confronting cash shortfalls.

Newsflow from the field will be important in the first six months of 2012, which means that it will be necessary to understand exactly what a company is up to when masking its statements in the mumbo-jumbo of a geologist’s report. An example is the latest report from Syndicated Metals (SMD), a Queensland copper explorer which some investors might be tempted to think from its vast tenement package has bitten off more than it can chew. Last week, however, its first drill hole into the Andy’s Hill prospect returned a core of intensely altered copper sulphide (chalcopyrite) down to a depth of 494 metres with initial assays of 1.3% copper, 0.5 grams of gold a tonne, and a surprise assay of 0.21 per cent lanthanum, one of the rare earths. Investor reaction was barely measurable with the shares stuck at A7 cents despite making what appears to be a significant iron oxide, copper-gold (IOCG) discovery in the world-class Mt Isa copper belt. It’ll be interesting to see how long it’ll be before the market wakes up to the news.

Meanwhile, Perseus Mining’s shares were also trading in what was effectively a holding pattern until skittish investors were able to see precisely what it is capable of delivering at its newly-completed Edikan goldmine in Ghana. This week, Perseus made a formal declaration of commercial production, following on from a big resource upgrade just before Christmas, and significant drill intercepts from its Tengrela project in neighbouring Ivory Coast a few days before that. On a stock market heavily influenced by events in Europe, and on the edgy gold market, the Perseus share price sagged in an “equal-but-opposite” trend. From A$3.09 on the day of the Tengrela results, which included 37 metres at 5.5 grams of gold a tonne, the shares then sagged to A$2.33 in the final days of 2011. But over the past few days they have once again popped higher, adding A22 cents, or 8.6 per cent, to A$2.77 on January 10th as sleepy investors suddenly realised there was a red-hot production and exploration success story starring them in the face.

Expect a slow realisation of more missed opportunities in the early months of 2012 as the ASX reacts sluggishly to good news, and instantaneously to bad news. Apart from macro-events happening far from Australia, especially the Euro-crisis, there will be a long list of other factors weighing on the market. Resource nationalism, traditionally an Africa and South American phenomena, has raised its head in Oz through the double-tax slug being introduced via the super-tax on iron ore and coal profits, and via a carbon tax on everything. A chronic skills shortage is also making it hard to design and complete projects, and costs have exploded across the resources sector, as the activities of the iron ore mega-miners (BHP Billiton and Rio Tinto) have bumped head-first into the natural gas mega-producers launching their multi-billion dollar projects.

And money, whether in its paper or gold form, will re-assert its position on the throne in 2012, as investors keep a close eye on cash balances held by small explorers, and the capital requirement of would-be developers. Late last year a warning bell rang in the development space when a series of would-be projects were shelved, and cost blow-outs became the order of the day. Moly Mines was forced to postpone work on its Spinifex Ridge copper and molybdenum development for a second time when a Chinese bank got cold feet. Sino Iron, the first of a series of planned magnetite iron ore processing developments, added another six months to its completion schedule, which is already two years overdue and A$3 billion over an initial A$3 billion budget – yes, it has doubled in cost since work started.

For most international investors Australia is a place far from home, a factor at work in the wholesale sell-off of Australian equities by shell-shocked European fund managers who have been ordered to retreat to their head office castles and prepare for trouble. The irony, from the perspective of someone outside the walls of the castle, is that economic conditions are much more pleasant here than for those stuck inside. 

Australia remains one of just 14 countries with a triple-A credit rating, and will keep it given that government debt stands at 20 per cent of gross domestic product, the second best in the world. The consensus view of economists is that the local economy will grow at 3.2 per cent this financial year, and 3.35 per cent next year. Unemployment will remain around five per cent, and less in the resource-rich states, and the ASX will creep higher, perhaps by around seven per cent over the next six months.

By the standards of the boom years of 2003 to 2008 the trends are not what could be called exhilarating. But, compared with much of the rest of the world they’re not bad. Perhaps a good example that in the land of the blind, the one-eyed man is king.
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## drillinto

Natural Gas

http://www.bespokeinvest.com/thinkbig/2012/1/11/the-bottom-continues-to-fall-out-of-natural-gas.html

*****


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## drillinto

Australia: top exporter of liquefied gas

January 15, 2012
That Was The Week That Was … In Australia
By Our Man in Oz  >> www.minesite.com/aus.html

Minews. Good morning Australia. You seem to have had quite a good week, with the double-header of a rising market and an improving cricket team.

Oz. Neither was a particularly notable event though, given that both had sunk rather low. The question now is whether the improvement can continue - and while the cricket team probably will, there’s less confidence in the stock market.

Minews. It probably depends on the opposition, and India doesn’t seem to be offering much on the pitch.

Oz. Good point, because it could be the same in the market, where we’ve seen a flow of money back into oversold equities by locals who had been on the sidelines over Christmas, and international investors who have weighed up Australia’s attractions versus other markets. The verdict seems to have been that with Europe stuck in a debt rut there are greater gains to be made through exposure to an economy closely linked to Asian growth. The downgrading of French and Austrian debt came after we had closed for the week, but confirmed the view down this way that the Euro-storm is far from over. Ironically, the French debt downgrade came a few hours after the oil company, Total, made the biggest ever investment by a French business in Australia, by agreeing to partner in the US$34 billion Ichthys liquefied natural gas project which got its formal go ahead on Friday.

Minews. You seem to be having quite a gas boom down your way.

Oz. Gas is certainly the flavour of the decade given problems with nuclear power, a dislike for coal, and the Iranians playing silly buggers in the Persian Gulf. The Ichthys deal takes the value of new LNG developments approved over the past two years to US$175 billion, with Australia on track to overtake Qatar as the world’s biggest exporter of liquefied gas within the next five-to-10 years.

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## drillinto

January 16, 2012
Metals May Benefit From A Recovery In The US Car Industry This Year, But As Ever, It Will Be China That Really Determines The Direction Of Markets
By Rob Davies
Source >> www.minesite.com/aus.html (free registration)

The first few weeks of January tend to be slow in the capital markets. Many people are away and those that are at their desks don’t really want to do anything too dramatic at the start of the year. Consequently, volumes are low and liquidity is limited, and no one wants to put on a big trade unless they have too. It is also a time for taking stock and trying to gauge what the year will bring. 

That’s not easy in these uncertain times. But one or two things seem clear enough. This year will be, initially at least, dominated by the stress in the eurozone. Recent bond auctions for Italian and Spanish debt successfully raised â‚¬26 billion, and at lower costs than had been expected.  

That, though, is a mere drop in the ocean. There is another â‚¬675 billion to be refinanced by March. And in that context, while the downgrading over the weekend of sovereign debt for six countries by S&P was no surprise, it doesn’t help.

But of more direct interest to the metal markets are the early signs of revival in the US car market. According to the Financial Times the average age of a US motor car has risen from eight to eleven years since 1995. That gives hope that car sales in the US could get back to the 16 million level hit in 2007 rather than the dismal 12.6 billion recorded last year. 

It may well be that this optimistic tone dominates sentiment in 2012, possibly helped by the election of a business friendly President. Certainly, in the limited trading there has been so far this year, base metals have reflected this more upbeat view. 

Overall the complex, as measured by the LME index, has risen from 3385 to 3498 to record a 3.3 per cent improvement over the first week and a bit. Leading the charge was aluminium, which put in a sharp gain of 7.9 per cent to US$2,157 a tonne. 

In part this was inspired by upbeat comments made by Alcoa when it reported its fourth quarter and 2011 results. And as the first metals company to announce its profits it gives a good early guide to the industry. Despite recording its first quarterly loss since 2009 in the fourth quarter, overall Alcoa made twice as much money in 2011 as it did the year before.  

Alcoa expects aluminium demand to rise by seven per cent in 2012 and for there to be a shortfall in supply, although it must be conceded that it helped create this positive environment by closing 531,000 tonnes of production capacity as a result of low prices. 

Although that demand growth looks good, it is actually lower than the 10 per cent increase in demand that was enjoyed by the industry in 2011. And that in turn was less than the 13 per cent increase recorded for 2010.  

As was to be expected, it was China that was the dominant factor in 2011. China’s 44 per cent share of demand grew by 15 per cent. In 2012 Alcoa expects China to account for 45 per cent of its off-take, as consumption rises another 12 per cent to 21.3 million tonnes. To put that into perspective Europe, the next biggest market, is forecast to use just 7.7 million tonnes.

China is not only the biggest consumer of aluminium, but also the largest producer. Unfortunately, analysts estimate that a third of its smelters are unprofitable at current prices.

And what it decides it do with those facilities is probably more important than what European finance ministers argue about at the perpetual series of crisis summits that is likely to take place over the coming year.  

****************


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## sunnysyd

Is it just me or is the URL in your 'source' part of your posts returning 404 error's for others as well? Cannot seem to locate your website.


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## drillinto

sunnysyd said:


> Is it just me or is the URL in your 'source' part of your posts returning 404 error's for others as well? Cannot seem to locate your website.




Please try www.minesite.com and then click on the Australian edition


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## drillinto

January 17, 2012
Shares In Atlas Iron Are Much In Demand As It Clears The Decks For Further Growth
By Our Man in Oz
Source >> www.minesite.com >> Free registration

Clearing the decks can be a time consuming business, especially when there are a lot of extra decks to clear. But that’s the process currently underway at Australia’s fast-growing iron ore miner, Atlas Iron, as it mops up after a series of takeovers which have opened multiple expansion options, but also prompted asset disposals ahead of the next big growth spurt. Investors who closely follow Atlas appear to have sensed the game-changing nature of what’s been happening at the company over the past few weeks, and have boosted the company’s share price by 12 per cent since the start of the year, which is more than double the overall improvement of the metals and mining index on the ASX.


But before Atlas reveals the details of its next big expansion, more cleaning up of the sort which saw two iron ore projects sold in the weeks before Christmas can be expected. On December 16th, Atlas offloaded its Balla Balla magnetite iron ore and vanadium project to Forge Resources for A$40 million. Balla Balla was an asset acquired with the takeover of Aurox in 2010. A week after that deal, Atlas said it would sell the Yerecoin magnetite project to the US miners, Cliffs, for A$18 million. Yerecoin was an asset acquired with the takeover of Giralia Resources last year.

Interestingly, both assets involved an ore type, magnetite, which requires processing to upgrade its relatively low iron content, a sign that Atlas is only interested in higher margin direct-shipping ores (DSOs) such as haematite - classic dig and deliver material. If that assumption on the part of Minesite’s Man in Oz is correct that it would be fair to assume that a third magnetite project, Ridley, will be the next deposit disposed of, if talks being held with potential buyers, or partners, are successful.

Other assets could also go the way of the magnetite projects as Atlas re-invents itself as company focussed primarily on DSO and other steel-industry materials like manganese. It doesn’t take a masters degree in business to suspect that a 15 per cent stake in uranium explorer U308 (an old Giralia asset) is available to the highest bidder, or that 10.8 per cent of copper and gold explorer, Zenith Minerals, could go quickly. Not to mention 9.1 per cent of Carpentaria Exploration, six per cent of Lawson Gold and 3.5 per cent of Gascoyne Resources.

The key point about the assets sales that have already been completed, as well as the asset sales likely to come, is that they’re not about the cash, given that Atlas had a spare A$390 million in the bank as at October 21st, just before it filed its most recent quarterly report for the three months to September 30th. It was in that document, perhaps more so than any recent full-blown presentations, that Atlas chief executive, David Flanagan, spelled out the ambitious growth plans he’s hatching inside Atlas, and the hurdles he needs to clear.

Marketed as a “three horizon” program, Atlas is essentially seeking to arrange all of its assets in an orderly fashion to maximise profits. That’s not an easy task when you’re still juggling three major takeovers in less than a year – Giralia, Aurox, and FerrAus – and you’re in a part of Australia that’s suffering from an acute skilled-labour shortage and sharply-rising prices.

But in his recent outings in front of investors and the news media David Flanagan has been hinting at the need for a very careful look at what’s next for the company. One clue that he will not be rushing was a comment he made in an interview with local media in Perth this week when he said Atlas would need an extra 1,000 workers achieve its goal of more than doubling iron ore production from six million tonnes a year to 15 million tonnes over the next three years. And while David is confident that the immediate goal is achievable, the real challenge is to drive Atlas to its stretch target of 46 million tonnes a year by 2017. To do that he will need to find a railway solution to supersede road haulage, and to secure additional port access at existing and new ports.

David’s explanation of the “three horizons” future for Atlas runs as follows. Horizon One will be an expansion of the existing annual output of six million tonnes of iron ore a year to 12 million tonnes during the 2013 financial year, and then up to 15 million tonnes. Related changes to the mine, transport and port operations of the company will include expanding the Wodgina mine with a crushing hub to handle Wodgina ore and material from the new Abydos mine, development of the Mt Dove and Mt Webber mines, and development of an off highway private haul road.

Horizon Two is the expansion from 15 million tonnes a year to 46 million tonnes a year through the expansion of the company’s North Pilbara hub and the development of resources in south east Pilbara. However, the biggest steps in H2 will be finding a railway solution, a step which has dogged all iron ore producers in Australia, and finding additional port capacity. Horizon Three is the true stretch target for Atlas, though, because it involves possibly stepping outside Australia in search of iron ore mining opportunities, and the addition of other steel-making commodities to the inventory. An early example of H3 in action can be found in the 19.85 per cent stake that Atlas acquired last year in Brazilian iron ore hopeful, Centaurus, and in the 45.4 per cent stake it holds in manganese explorer Shaw River Resources.

But to shift Atlas through its three horizons and to maximise profits, David has recognised the benefits of not rushing, especially after last year’s flurry of corporate activity. That’s why the company is in a deck-clearing phase, and why expansion plans are moving slower than originally reported. A September deadline for engineering studies has stretched out, as management studies a North Pilbara rail network, and to allow it “to further define rail solutions”. That could be code either for negotiating access to an unused BHP Billiton railway that runs between Port Hedland and the mothballed Goldsworthy mines, or for gaining possible access to other railways in the area, or for Atlas building a railway of its own.

Whatever the outcome of the many studies underway inside Atlas, it is a company which has reached an interesting phase in its Evolution. High-speed corporate deal-making appears to have ended for now. An asset sales phase is underway to help focus management and get rid of surplus projects. After that comes the mechanics of the plan to make the important bits acquired in last year’s takeovers perform as a single entity. And if Atlas can do that it should have a clear run at delivering on David’s optimistic promise âœto double the value of the business every 12 months”.
**********************************


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## drillinto

Baltic Dry Index

http://www.bespokeinvest.com/thinkbig/2012/1/15/baltic-dry-index-collapses.html
*****


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## drillinto

Natural Gas

http://www.bespokeinvest.com/thinkbig/2012/1/19/natural-gas-continues-its-epic-fail.html
************************


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## drillinto

BP Energy Outlook 2030

http://www.bp.com/liveassets/bp_int...nloads/O/2012_2030_energy_outlook_booklet.pdf

*******


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## drillinto

January 21, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to be enjoying a modest mining rally.

Oz. It certainly looks that way. Iron ore shares in particular are performing strongly, supported by a belief that China is heading for a soft economic landing. Last week there were wholesale rises among the iron ore companies, a more subdued bounce in base metals, and a relatively flat gold sector. Overall, the metals and mining index on the ASX rose a respectable four per cent. The gold index crept up by 0.6 per cent, and the overall market as measured by the all ordinaries managed a rise of 1.1 per cent.
Minews. Are you disconnecting from the old world of Europe and the US and getting even closer to Asia?

Oz. That seems to be the case. And we had a couple of examples of that drift during the week, one positive and the other negative. On the positive side there was a report from HSBC which said that growth is verging on the “unstoppable” because most of the big mining and energy projects are “baked in”, meaning they take years to build and are designed to operate for decades. “While we think it is hard to say anything is truly unstoppable, we think the mining investment boom comes pretty close”, HSBC said.
...

((Source >> Minesite.com))
*********************


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## drillinto

Country trading charts

Australia is at the top of its trading range

http://www.bespokeinvest.com/thinkbig/2012/1/23/country-trading-range-charts.html

***


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## drillinto

Gold Breaks Downtrend

http://www.bespokeinvest.com/thinkbig/2012/1/26/gold-breaks-downtrend.html
***


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## drillinto

January 28, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your gold stocks should have spent last week revelling in the sharply higher bullion price.

Oz. You would think so, but that’s not quite what happened in a reasonably good four-day week on the ASX, during which a day was lost for a public holiday on Thursday. Interest among share traders certainly switched back to gold from iron ore, base metals and coal, but as fast as they did the gloss was being rubbed off on the currency markets, as the Australian dollar rose by US2 cents to US$1.06. 

The net result was that a 4.8 per cent rise in the US dollar gold price became only a 1.1 per cent rise in Australian dollar terms, reducing the overall gold sector performance to the level of the all ordinaries, which was up one per cent, and the metals and mining index, up 1.2 per cent.

Minews. Those are interesting calculations, and seem to show how important currencies are in the global economy. 

Oz. Never a truer comment was made, especially at a time when the rich and powerful are indulging in their annual frolic in the snow at the World Economic Forum in Switzerland. But what really caught the attention of investors down this way was the forecast from the International Monetary Fund that commodity prices should weaken further this year, and the unveiling of a plan by BHP Billiton to build a monster iron ore port on the north coast of Western Australia.

Minews. Your point being that the IMF is looking 12 months ahead, and BHP Billiton is looking 20 years ahead?

Oz. Precisely. The difference in outlook is quite important for investors, and when you wrap the BHP Billiton long-view around those strong December quarter economic growth figures from the US it might go part way to explain the burst of optimism we’ve seen since the start of 2012 on commodity and equity markets. BHP Billiton’s plan for what is called the Outer Harbour development involves a US$40 billion investment to build a facility that will eventually be capable of handling a whopping 240 million tonnes of ore a year, double the company’s existing capacity at the port. And it’s not about to undertake that sort of investment based on a Euro-style economy. Rather, what it’s doing is all about the Asian industrial revolution, and the US revival.
...

Source >> www.minesite.com


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## drillinto

January 30, 2012
Tom Albanese Strikes An Optimistic Note At An Otherwise Gloomy Davos
By Rob Davies

Tom Albanese, the chief executive of Rio Tinto[RIO], struck a discordantly upbeat tone at the annual gloomfest at Davos. He declared that his company is selling everything it can produce. It does help that its major market is China, now the second largest economy in the world and an economy that grew at a handsome 8.9 per cent over the last quarter. 
...
Source >> www.minesite.com


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## drillinto

ETF[USA] Performance

The silver ETF (SLV) has been the best performer of all in 2012 with a gain of 20.56%.  And even though it has made somewhat of a comeback in recent weeks, the natural gas ETF (UNG) is down the most with a decline of 10.37%.


http://www.bespokeinvest.com/thinkbig/2012/1/30/key-etf-performance.html


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## drillinto

ISM commodities survey  

http://www.bespokeinvest.com/thinkb...ative-territory-for-fourth-straight-mont.html

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## drillinto

February 04, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like you had another week when prices took one step forward and one step back.

Oz. That’s not a bad description. All of the major indices on the ASX slipped, but only marginally - just one-tenth of a percentage point in the case of the metals and mining index, and three-tenths of a percentage point in the case of the gold index. The all-ordinaries also ended down by the merest sliver, perhaps because the big news for investors down this way not the movement in the market, it was movement on the political stage.
Deep divisions have again opened at the top level of the Labor Party, which leads Australia’s minority government. There is widespread speculation that the Prime Minister, Julia Gillard, is about to be dumped, an event which would almost certainly trigger a fresh election. This is important for mining because the conservative Opposition is rated a certainty to win whenever the next election is called, and it is opposed to both new super-tax on iron ore and coal profits, and the carbon tax, both of which are scheduled to start this year.

Minews. Removing the threat of those taxes will interest the market, but the instability ahead of an election will sideline investors.

Oz. You’re right, but it would be a smart idea to keep an eye on Australian politics over the next few weeks because a change of government would be very positive for business, especially mining. ...

Source >> www.minesite.com
*****


----------



## drillinto

Key ETF Performance
The Silver ETF (SLV) is up the second most at 21.34%.  Unsurprisingly, natural gas (UNG) is down the most YTD at -17.49%. EWA (Australia) is doing well: it gained +12.03% in 2012.

http://www.bespokeinvest.com/thinkbig/2012/2/3/key-etf-performance.html
***


----------



## drillinto

February 06, 2012
Size Matters, Now More Than Ever, According To Xstrata And Glencore
By Rob Davies

Capital markets have had a rollicking good start to the year, even if bonds and commodities did fail to keep pace with equities last week. Base metals, as measured by the LME index, dropped 3.3 per cent to 3,651, while major equity markets went up by a similar amount.

Rising dividends underpinned equities, but the London market was also given a boost by the news of the proposed amalgamation of Glencore and Xstrata. 

Arguments about relative valuation were less relevant to the share price rises put in by both companies than the heavy-duty index weighting the new entity will likely have, a weighting which will allow the true economic weight of Glencore to be reflected for the first time. At the moment Glencore’s weighting is curtailed by 50 per cent to reflect the limited free float. This will ultimately mean that mining stocks will have an even larger representation in the UK index.  

On top of that the combined company will be more efficient and generate even more cash flow and, hopefully, dividends.  In the end that is what drives equity returns.

Equities were also buoyed by a good jobs report from the US, although the metals markets were unfazed by this news because the US has a lower metal intensity than emerging markets. The service sector, which now predominates in the US economy, doesn’t use much metal. 

Be that as it may, the strong growth that a 243,000 rise in employment signifies is in stark contrast to the weakness being experienced in Europe and other major economies, with the exception of China.

The reason the US is still expanding is that it is one of the few countries that has yet to introduce an austerity programmes to reign in its ballooning state expenditure. Consequently government spending is adding to growth and not subtracting from it as in Europe where debt reduction is shrinking economies. Few people think the US stance is sustainable, but no one is going to tell the voters that in an election year.

Fortunately, the strength of commodity markets does not rely solely on rising demand. The supply side is still a major factor in keeping markets tight, and an example of this was provided last week by Norilsk, the Russian miner. Norilsk said it was going to be spending US$1.1 billion by 2016 to add 62,000 tonnes of copper production in eastern Siberia. 

At the equivalent of US$17,740 for each tonne of annual capacity it is clearly an expensive business to add to output. And it is that cost that is one of the reasons curtailing production growth.

It is perhaps odd that capital costs are constraining expansion at a time when interest rates have never been lower. But the pursuit of supposedly risk-free returns in sovereign debt has driven down interest costs at the same time that banks are struggling to rebuild their balance sheets by shrinking their loan books. Right now it is not the cost of debt that is a constraint, but its availability and volume. 

Glencore and Xstrata both know that the bigger you are the easier it is to raise finance for large projects. That underlying driver is the logic of this deal, and will benefit shareholders as well.

Source: www.minesite.com
*****


----------



## drillinto

Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/2/9/bespokes-commodity-snapshot.html
***


----------



## drillinto

Platinum to Gold Ratio

http://www.bespokeinvest.com/thinkbig/2012/2/9/platinum-to-gold-ratio-pushing-up-towards-one.html
*****


----------



## drillinto

February 11, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
...
Minews. Let’s finish the copper sector and other base metals before moving along.

Oz. Good decision. Copper was certainly on investor radar screens last week, perhaps in the hope of more good economic news from China and the US. Other copper companies to rise included: Talisman (TLM), up A5 cents to A45.5 cents, PanAust (PNA), up A19 cents to A$3.77, Hot Chili (HCH), up A3.5 cents to A72 cents, Ventnor (VRX), up A3.5 cents to A65.5 cents, Avanco (AVB), up A0.4 of a cent to A9.9 cents, and Discovery Metals (DML), up A4 cents to A$1.65. Copper companies that weakened included Marengo (MGO), down A2 cents to A21 cents, Metminco (MNC), down half-a-cent to A17.5 cents, and Ivanhoe (IVA), down A1 cent to A$1.89.

Nickel companies barely moved, bar one. Emu Nickel (EMU), which we rarely hear from, jumped by A3.5 cents to A11.5 cents, but not because of nickel news. It caught the eye of investors because it plans to buy the Hillgrove antimony mine in New South Wales from Straits Resources. Mirabela (MBN) did best of the genuine nickel companies, rising A5 cents to A98 cents. Western Areas (WSA) added A14 cents to A$5.74. Mincor (MCR) lost A3.5 cents to A72 cents, and Panoramic (PAN) rose by A1 cent to A$1.27. 

Zinc companies were also flat. Perilya (PEM) did best with a rise of A3.5 cents to A45 cents. Ironbark (IBG) slipped A1 cent lower to A25 cents, and Kagara (KZL) was half-a-cent weaker at A33 cents.
...

Source >> www.minesite.com


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## drillinto

Sector Snapshot
"Materials" is extremely overbought

http://www.bespokeinvest.com/thinkbig/2012/2/9/bespokes-sector-snapshot.html
***


----------



## drillinto

February 13, 2012
More Acquisitions And Less Organic Growth: The Majors Up Their Dividends And Start To Plan Ahead
By Rob Davies

You wouldn’t know it from the general tone of the press at the moment, but capital markets are enjoying a raucous start to the year. Base metals, as measured by the LME Index, gained another 4.6 per cent last week, taking it to 3,820. 

You wouldn’t know it from the general tone of the press at the moment, but capital markets are enjoying a raucous start to the year. Base metals, as measured by the LME Index, gained another 4.6 per cent last week, taking it to 3,820. 

That’s a 12.7 per cent rise since the first trading day of 2012.

Western economies are still pretty much stagnant, which was one reason the Bank of England spirited another £50 billion out of thin air to inject into the UK economy. Cheap money also prevails in the US, Europe and Japan, so if you can get finance, the returns look pretty good against the alternatives. 

And anyone wondering why the stock market has been so vigorous of late doesn’t have to look much further than the big miners that reported results last week.  
Rio Tinto increased its dividend by 34 per cent, BHP Billiton by 20 per cent, and Xstrata by 60 per cent. So, whatever anyone thinks of the future prospects for metals it’s clear that the current conditions are pretty favourable. 

While earnings for companies, especially miners, can bob up and down as a function metal prices, dividends are paid at the discretion of the board. And one thing boards do not like doing is cutting dividends. 

In many ways dividends can be regarded as a kind of smoothed earnings per share, and if that’s the case, these bumper increases suggest that the executives at the top of the industry feel confident that the good times are not about to disappear.  

The results were not without hiccups. Rio took an impairment charge of US$8.9 billion over its mistimed Alcan acquisition, and attributable profits at BHP Billiton actually fell five per cent. 
What’s more, the Glencore merger with Xstrata will create a formidable fourth contender in an industry that has undergone a massive consolidation in the last decade.  

The good news is that a more competitive industry can be more effective at reducing capacity at times of weakness, which will help reduce price volatility.

The bad news is that organic growth is going to get much more difficult, as the sheer scale of the companies means small projects are simply not worth considering. 

Instead, mergers and acquisitions are going to be the way forward. These of course carry the risk that the bidder overpays, as Rio did with Alcan. On the other hand if the terms are too mean, as many consider the terms Glencore is offering for Xstrata to be, there is a risk that they fail. 

But one thing that is unlikely is a return to the producer pricing power as we had long ago in nickel and aluminium. China aside, low rates of growth will mean that producers will fight very hard for market share in any commodity. 

However, shareholders will not tolerate unprofitable trading just to maintain their market share. Although Rio’s acquisition was badly timed, it was at least a valiant effort to increase the size of the business on a worthwhile scale. And fortunately, it was bailed out by the massive profits from iron ore mining. 

Few other commodities offer the scale to generate so much cash. It is no wonder that Rio and BHP Billiton are going to invest more money in the Pilbara to expand their operations. Precious metals and base metals, other than copper, are just not big enough markets.

Source >> www.minesite.com
*****


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## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
Bill Matlack

http://www.kitco.com/ind/matlack/feb142012_juniors.html

***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
By Bill Matlack

http://www.kitco.com/ind/matlack/feb142012.html

[Among the seniors I can't find many attractive buys]

************************


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## drillinto

February 18, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like you had a handful of stars in an otherwise flat week.

Oz. More like a thimbleful of stars, because this was a week when domestic politics and an outbreak of concern about soaring costs in the resources sector sent a shudder through markets. The big issue down this way is the instability that’s being caused by the possible dumping of the Prime Minister, Julia Gillard, by her own party.

That has led to the development of a policy and activity vacuum at a national level, plus an exchange of nasty comments at 10-paces which is hardly the stuff to encourage confidence. One of the sideshows last week was government criticism of major banks for putting through a modest rise in home-mortgage interest rates. That’s standard politics in any country, except this time the bank chief executives hit back, telling the government to get its leadership problems off the front pages.

Minews. Interesting, but your opening remark about costs seems of more consequence to investors in mining companies. 

Oz. Undoubtedly. Even so, the political games are playing a role in creating an air of instability at a time when Australia has probably never had it so good. That, certainly, is the view of senior financial civil servant Treasury Secretary Martin Parkinson who said the gloomy mood of the country was disconnected from the underlying economic strength. But while Parkinson was having his say the cost explosion was also on display in the half-year results of the iron ore miner Fortescue Metals Group (FMG), which revealed a A$200 million blow-out in costs, an accommodation shortage for workers, and doubts about its ability to deliver a major expansion of production inside an existing US$8.4 billion budget. To cap off the cost issue, a survey revealed that five Australian cities are now in the top 20 of the world’s costliest places to live. Perth is now more expensive than London or New York. 

Minews. News that seems to have shunted investors off to the sidelines.

Oz. Concern about rising costs and the continued uncertainty flowing out of Europe were the major factors behind the 3.3 per cent fall in the metals a mining index on the ASX. The gold index declined 1.5 per cent, while the all ordinaries fell 1.1 per cent.
...

Source >> www.minesite.com


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## drillinto

February 20, 2012
Markets Pause For Breath, But The Big Miners Continue To Generate Plenty Of Cash
By Rob Davies

Some capital markets paused to take a breath last week after a vigorous start to the year. Base metals, as measured by the LME index, fell back by six per cent as all the constituents of the group gave up some of the gains made this year. 

Nevertheless, it is still worth recalling that base metals overall are still up by six per cent since the start of 2012. Bond markets were a bit weaker last week, although equities delivered good returns, partly driven by good results from the miners in the UK.

The cause for the pause was again Greece, where negotiations have deteriorated to name-calling. Mind you, the Greeks must have experienced some schadenfreude at the resignation of the German President, Christian Wulff, because of financial misconduct.  It seems not even the Germans are perfect. 

The next agreement has been pushed back again but even if reached there is now a deep level of distrust that the Greeks will be willing, or even able, to implement the additional austerity measures that are being asked of it. 

Apart from the posturing, there must be a real fear in Germany that if Greece is forced out of the euro and does well from its departure, then questions will be raised in other countries as to whether the pain of staying in the euro is worth it. 

But what European capital markets are worried about is where the growth is going to come from. Because there is little evidence that current policies will produce any. In the US, by contrast, there are some real signs that economic expansion is returning. 

Maybe that is to be expected in an election year, but in the longer term there are real worries that Japan and the US have yet to construct believable debt reduction plans. 

While China is still a reliable consumer of hard commodities it cannot be relied on as the sole engine of global industrial production growth. No, if metal demand is to be sustained, it needs to be based on consumption from Europe and the US as well as China. 

And metals prices are telling us that there is no consensus that that will happen. What we do know is that the supply side remains tight. Recent evidence of that comes from Xstrata’s decision to take down one of it ferrochrome furnaces in South Africa because of continuing power shortages.

Three years ago the world faced a similar challenge, and central banks responded by a massive programme of quantitative easing which triggered a huge rally in risk assets. In recent weeks the authorities have repeated this approach, but on a smaller scale. 

So far the effects have been less dramatic. In part that is because equities and metals, both base and precious, are already at elevated levels. How much higher can they go before triggering even higher inflation?

This is the key dilemma for central banks and investors. If quantitative easing works, precious metals are the place to be. If not, then quantitative easing will only partly ameliorate the decline in base metals and industrial commodities. 

No wonder commodity and bond prices are consolidating. They are all looking for a signal on where to go next. In the absence of a star in the east the best bet is to follow the cash flow. And right now there are few more cash generative businesses than mining - as Anglo American proved again last week when it declared a big jump in profits.  

Source >> www.minesite.com
*****


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## drillinto

Bill Matlack's ratings (Junior miners)

http://www.kitco.com/ind/matlack/feb222012_juniors.html
 [Uranium: bargain galore]


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## drillinto

February 25, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your forecast last week of Prime Minister Julia Gillard possibly losing her job proved remarkably perceptive. But more importantly, has it helped your market?

Oz. We did enjoy a bit of a rally last week, and it is possible that some investors started buying when the politics in the ruling Labor Party turned nasty. All of the major indices gained ground. The all ordinaries added 2.7 per cent. Metals and Mining rose by 3.4 per cent, and gold gained 2.7 per cent. However, if the higher prices were driven partly by political factors it wasn’t the replacement of Gillard with former foreign minister Kevin Rudd that was the key, it was more that the Labor infighting effectively ensures a win for the conservative parties at the next election, which is scheduled to be held in about 18 months.

Minews. How will mining benefit if there is a reversion back to the conservative Liberal and National parties?

Oz. Potentially, the benefits could be substantial. The controversial mining tax will be watered down, or removed if possible. The even more controversial carbon tax will also be scaled back, or eliminated. From having a government which relies on the support of the anti-mining Green Party, Australia could find itself with a very pro-mining government by the middle of next year.

Minews. Which could see the bounce continue next week?

Oz. Possibly. First step in the process will be the Labor Party election of a leader on Monday. Gillard is expected to beat Rudd in the internal Labor beauty contest, but that is very much not what the wider electorate wants, which means Australia will be stuck, for now, with a very unpopular Prime Minister.
 ...

Source >> www.minesite.com


----------



## drillinto

February 27, 2012
Miners Are Leading The Way In Investing In New Capacity Even Though The Rest Of The World Remains Risk-Averse
By Rob Davies

In the topsy-turvy world of modern economics, governments and central banks are doing all they can to encourage consumers and corporates to take risks. This is being done by printing money, though it goes under official-sounding names like Quantitative Easing and Long Term Refinancing Operations. 

The Bank of England announced more QE a few weeks ago and the markets are now expecting the European Central Bank to conduct another LTRO exercise shortly.  

But after the stimulus delivered by these activities last year there is now concern that, like a sugar fix, their effects are wearing off and another one is required. 

Equity markets have certainly lost some of the zing they started the year with and base metals are now advancing at a slower rate. Last week the LME Base Metal index gained a respectable 2.3 per cent, although since the beginning of the year the total advance is a more substantial 8.4 per cent. 

It seems to be harder now for the risk assets to make much progress. Yet the authorities are desperate to point to some positive results from all their activity. Presumably the logic is that if you keep doing it then it will work eventually.

The problem with printing money is that it gradually reduces public confidence in the economy. If savers are being fleeced by interest rates that are below inflation rates are they going to spend what little they have left, or try and save some more? The evidence to date is that low interest rates are not encouraging spending. Consumers, it seems, are on strike. 

The best hope is that corporates become the engine of growth. Certainly in the terrestrial commodities of oil and precious and base metals, all producers are investing strongly to raise output. 

The constraints here are capital, equipment and labour. They can sell everything they produce so the market is not a limiting factor. Sure, there is a risk that China, now the single largest consumer of base metals, will crash and burn in a banking crisis - as has happened all too frequently in fast growing emerging markets. 

But miners face a bigger risk if they don’t invest in new capacity, because if they don’t they will cede market share to rivals who are prepared to take that risk.

Bold decisions are needed now. Companies in other sectors need to build new capacity in anticipation of a pick-up in demand. That would create growth, employ more people, bring prosperity and maintain demand for commodities. 

It is clear that governments are not going to spend the money yet on new infrastructure, however much it is needed. Despite all that encouragement from the ECB and other central banks, states are not in the mood to take risks, despite the absurdly low financing costs that currently prevail. 

It is hard to believe that the British, American, Japanese and German governments cannot find investments that will make more than the current two per cent nominal risk-free rate, given that in real terms it’s more like a minus rate.

Central banks are paying people to take risks, but no wants to take up the challenge - except miners of course.

Source >> www.minesite.com
*****


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## drillinto

S&P 500 and sector trading range charts

http://www.bespokeinvest.com/thinkbig/2012/3/2/sp-500-and-sector-trading-range-charts.htm
***********************


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## drillinto

March 03, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Copper seems to have been the hot metal on your market last week.

Oz. It was, and there were a number of corresponding upward share-price moves, though the newsflow down this way was dominated again by political shenanigans. The Prime Minister, Julia Gillard, survived a challenge from former Prime Minister Kevin Rudd though that didn’t stop the fun and games. There was then a shuffle of senior ministerial positions, and a vitriolic attack on Australia’s super-rich miners by Gillard’s deputy, Wayne Swan.

Minews. Now that is interesting. You mean the government is levelling higher taxes on mining and criticising the people running the industry?

Oz. In a way, yes, though the attacks are at a personal level and aimed at the three top iron ore entrepreneurs, Andrew Forrest, Gina Rinehart and Clive Palmer. Their sin seem to have been criticising the mining tax and, in the case of Rinehart and Palmer, seeking a foothold in the media from which to continue their anti-tax and anti-government campaigns.

Minews. Does that mean the government is close to declaring war on the industry that kept Australia out of the global financial crisis?

Oz. Well spotted. That’s exactly what it means. Not only is mining facing higher taxes, but some of its most successful investors are now being hit with personal abuse. And that reeks of envy on the part of the politicians doing the name calling.
...

Source >> www.minesite.com


----------



## drillinto

March 05, 2012
Warren Buffett Sounds A Positive Note On Base Metals, Though He’s More Cautious On Gold
By Rob Davies

When the ECB threw â‚¬529.5 billion at European banks last week it had more effect on base metals than any other asset class. Equities hardly moved, gold dropped a bit, but the LME index rose by 2.1 per cent to 3,751 - by far the best performance of any of the major assets.

Whether that rise reflects anything fundamental is hard to know especially as Ben Bernanke, Chairman of the US Federal Reserve, made a speech last week which did not encourage people to think that QE3 was anything like just around the corner.  

It is unclear if the European operation signals the return to growth in the eurozone, as the rise in metal prices might suggest. In truth there are more signs of growth in the US than in Europe, and that is the more likely driver for the rise in base metals, never mind the lacklustre response from equities.  

Indeed, the ECB operation seems to be more driven by a need to stop momentum slipping back, than by a specific desire in this instance to kick start growth. Italian and Spanish bonds rallied on the deal and took yields back below the crisis levels of seven per cent. 

However, following the European conference at which 25 countries signed up vigorously to abide by new financial rules, a jarring note was immediately sounded. Within hours Spain admitted that it will breach its previously agreed deficit by 1.4 per cent, causing some observers to wonder why it had even bothered to sign something it knew it could not comply with. 

Still, that’s Europe. Sign something and then carry on as normal. It’s not ideal, but then the world is not perfect. 

Within the metals space copper was again the front runner, gaining 1.9 per cent to US$8,569 a tonne. This market remains incredibly tight, is shown by the 13,000 tonne drop in LME inventories to 292,250 tonnes. When you compare that to the 20 million tonnes that the world chomps through every year, it’s clear that the stockpile represents just a few sweepings at the edge of the warehouse. 

But if, as some say, Europe is past the worst and the US is on course for a recovery, albeit mild, then the implication is that metal demand in the west is going to increase. Some idea of the scale of the potential upside can be gleaned from views presented by the sagacious investor Warren Buffett in his most recent letter to shareholders. 

As far as gold is concerned, Mr Buffett wasn’t that bullish, criticizing the current infatuation the market has with the yellow metal, even while admitting that the dollar is worth only a one seventh of what is was when he started his business. 

But he make the point that his housing business is only running at a third of the level it was in 2005. Even allowing for the large element of froth that was present in the housing market during the sub-prime boom in the middle of the noughties this striking fact does suggest that there is a still a lot of upside in US housing. And few industries consume copper like US houses. 

Each one uses about 440 pounds. Buffett makes the valid point that the US housing industry has flatlined for four years as it shakes off the excess capacity. Tellingly, though, he also observes that household formation in the US now exceeds housing starts. It is only a matter of time before that shortfall starts to impact house builders and create a positive market. At heart, Buffett is clearly more positive on base metals than precious metals.


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## drillinto

Commodity snapshot

http://www.bespokeinvest.com/thinkbig/2012/3/8/bespokes-commodity-snapshot.html
***


----------



## drillinto

March 10, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have suffered a down market in a strong news week.

Oz. That’s not a bad description of what happened. It was an extremely good week for news, and a relatively poor week on the market. Despite some sort of resolution of the Greek financial farce, and the latest Australian national accounts which confirmed that 2011 was the country’s twentieth successive year of growth, most share prices trended down. The gold index led the way with a three per cent decline. The metals and mining index wasn’t far behind, down 2.8 per cent, while the all ordinaries index slipped by 1.5 per cent. As those numbers imply, every sector had more losers than winners.

What weighed most heavily on the mood of Australian investors were fresh doubts about the health of the Chinese economy, and the likely future demand from China for commodities. There was also fresh evidence that Australia’s central bank plans to keep interest rates high as an anti-inflation measure, which means the exchange rate will stay higher for longer. And that combination of exchange rates and interest rates copped the blame for a small rise in unemployment last week, as jobless claims rose by 0.1 per cent to 5.2 per cent. In the resource-focussed states the unemployment rate is closer to four per cent.

Minews. Does that mean your resources sector is running out of puff?

Oz. Pausing for a breather is perhaps a better way of putting it. China is the key to what happens down this way. If growth in China does slip from double-digits to the government’s target of 7.5 per cent then commodity demand will not be as strong as had been forecast. If that does turn out to be the case, it’ll be interesting to see whether the major expansion projects underway in the coal and iron ore sectors hit the market at just the wrong time, triggering sharp price falls.

Minews. A sobering thought. But let’s switch to prices now, starting with gold.

Oz. There was one reasonable rise among the gold companies, a handful of hefty falls, and a generally lower trend across the rest. Star of the week, for reasons yet to be explained, was Allied Gold (ALD) which regained recently lost ground, but which this week put in a rise of A17 cents to A$1.73. Good as that looks, the shares were trading around A$1.00 higher late last year. Other risers were hard to find. Auzex (AZX) gained A1 cent to A26.5 cents, but that was the only obvious upward move.

The long list of gold companies that lost ground included: Silver Lake (SLR), down A18 cents to A$3.55, Evolution (EVR), down A5 cents to A$2.25, Papillon (PIR), down A1 cent to A$1.23, Troy (TRY), down A24 cents to A$4.61, St Barbara (SBM), down A7 cents to A$2.16, and Medusa (MML), down A18 cents to A$5.96. Intrepid (IAU) fell a hefty A26 cents to A97 cents, in the wake of proposed changes in Indonesian mining laws, which will require the sale of 49 per cent of all new mines to local investors within 10 years of production starting. Other Indonesian companies were hit by the proposed legal changes too, among them Kingsrose (KRM), which slipped A3 cents lower to A$1.45 despite reporting a record half-year profit of A$11.4 million.
...

Source >> www.minesite.com
*****


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## drillinto

March 12, 2012
Relax, This Uncertainty Is Normal
By Rob Davies

Uncertainty is the normal state of affairs in capital markets. Few people are pretending to claim now that they know what will happen next. It is when commentators profess that the market is clearly rising or about to fall off a cliff that investors should be worrying. 

The risk rally that marked the start of the year has come to halt, although it certainly has not given up its gains either. Even though base metals gave up four per cent last week, as measured by the LME index, they are still up by 6.2 per cent on the year to date.

Most equity indices are up a little more, while bond prices are still at levels that defy rational explanation to anyone except a pension fund trustee or a governor of a central bank. 

Economic growth in the developed world is positive, though only just, at low single digits. China has admitted that it too is growing less rapidly. Though at 7.5 per cent it is a rate most countries can only pray for. 

The outlook therefore seems benign, but certainly not exciting. Even gold has drifted back below the US$1,700 an ounce level as inflation is tamed by overcapacity in almost every industry, except commodities. In such an environment it is hard to know where to place the risk dollar to get the maximum return. 

But in the longer term a bet on rising inflation, fuelled by central bank monetary incontinence, makes a holding in gold still look sensible. Equities, with prospective yields of over four per cent, look stunningly cheap. The story in base metals is more complex.

In base metals, copper still has the best fundamentals, as steady demand around the world for electricity underpins demand for copper, while bottlenecks at producing operations continue to constrain capacity. 

Aluminium is finely balanced, between high cost marginal smelters in China and firm demand from that country and elsewhere. Lead and zinc are both priced at around the same level as aluminium at just over US$2,000 a tonne. They too seem to be in a sweet spot, where the marginal cost of production is enough to keep most miners happy. 

Nickel is probably the metal under the most pressure, as new capacity is gradually brought on stream in an environment in which demand for stainless steel is not rising as fast as it once was. 

Underlying all this is concern that rising oil prices will increase production costs across the board for all miners. At prevailing metal prices only copper, and maybe nickel, could cope with higher costs without marginal capacity being affected. 

The remainder of the complex would undoubtedly face some tough decisions and marginal capacity might have to close. 

That probably would not affect the major mining companies too much because of their reliance on bulk commodities like iron ore and coal, where prices have remained more resilient. 

However, some of the smaller gold miners in remote locations relying on diesel power may find margins being squeezed, even at these gold prices, if oil continues to edge up. 

All this adds up to metal prices continuing to trade at the full marginal cost of production for some time to come unless and until a major up or down trend is established. And no one knows when that will be. Which is all perfectly normal. 

Source >> www.minesite.com
*****


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## drillinto

March 26, 2012
Oil Prices Will Play A Crucial Role In The Strength Or Weakness Of The Coming Economic Recovery
By Rob Davies

There is one big difference between the metallic commodities and the carbon commodities – metallic ones don’t burn, carbon ones do.  And that means that while the prices of copper, other base metals and gold may shoot up and down there will always be metal available at a price. 

And ultimately, if prices go high enough, metal is scrapped and fed back into the system. Indeed, that is where the bulk of lead comes from now and the about a third of the other metals. 

That argument does not apply to oil and coal because once consumed, and transformed into carbon dioxide, neither oil nor coal can ever be used again. That is why the price of oil reaching US$125 a barrel is such a concern. 

No matter how many wind farms are built the fact remains that modern industrial economies are still based on carbon. A rise in energy prices has two big effects: it reduces overall demand by diverting cash into oil producers, and it increases costs, mainly through transport.

And the latest rise in energy prices now threatens to derail the global economy, just as it looked as if it was reaching an understanding on how to deal with the aftermath of the banking and euro crisis.  

Anaemic growth has been slowly building in the major Anglo-Saxon economies over the last few months, but the sustainability of that is now being questioned as energy prices tick higher.

Last week risk assets all moved lower on these, and other, concerns. Base metals, as measured by the LME Index dropped back 3.8 per cent. Equity markets fell a couple of percent as well.  

London, with its heavy exposure to miners was unsettled by a comment from BHP Billiton that demand for iron ore in China, its cash cow, was flattening.  Rumours of an attempted coup in the Middle Kingdom did not help sentiment in that direction either. 

No one really knows the inner machinations of the Chinese political machine, but rumours like that serve as s a stark reminder that the economic well being of a many large industries, and hence countries, relies on the egos and ambitions of a handful of obscure, little known and of course unelected politicians. 

Their goals are certainly not the same as the goals of most others. They want to get to the top of the heap. They are less interested in making the heap bigger.

So there could be a degree of self correction ahead. If political uncertainty reduces growth in China, that will reduce demand, and prices, for oil and other commodities. And those reductions could be enough to maintain growth in the West. Life is rarely that simple, though. Any political upheaval in China could be very destabilising and the impact almost unquantifiable. 

Such uncertainty is probably going to be a fact of life in the future, and will just be one more component in the mixture of factors that determine asset prices. That is what makes the markets such fun. 

Though perhaps not if you are Chinese technocrat wondering about your power base.  The technocrat is too busy trying to make sure he has made enough before he gets pushed off the greasy pole.


Source >> www.minesite.com
*****


----------



## drillinto

March 19, 2012
The Current Market Rally Will Run For Several Years Yet
By Rob Davies

It is almost impossible to determine the specific point when the mood of the market changes. There is no doubt though, that the mood has changed and that the effect of the change is tangible on the exchanges. Technical analysts will point to moving averages and golden crosses, but the best demonstration of the change is the sharp rise in the cost of money.

Taking 10 year US Treasury bonds as the best proxy for the global price of money, the 12.8 per cent sell-off this week clearly shows that demand for money has pushed fixed income yields up to 2.3 per cent from 2.1 per cent. After all, who wants to hold boring fixed income securities when equities are rising and industrial commodities are on a tear?

The LME base metal index rose 2.8 per cent last week and equities in developed markets, the other main risk asset, rose a similar amount. Moving the other way, but by almost the same amount, was gold, providing further evidence that the nervousness is fading from capital markets.

Whether the markets are right to be less nervous is a totally different matter. But for the time being anyway, it makes little sense to stand in the way.

One immediate impact of more expensive money is to push up the future prices of base metals. Aluminium offers a case in point. Over the week the cash price rose by one per cent to US$2,195 a tonne, but the 15 month price rose 8.9 per cent to US$2,540 a tonne, taking the contango up to 15.7 per cent.

Compare that to the 7.3 per cent it stood at last week, and the pace of the recent change becomes clear. The same argument applies to lead, where long dated metal rose 2.4 per cent last week, while cash only gained 0.4%. 

Copper is a much tighter market than the rest of the base metals group and the upward pressure pushed it out of contango, so that the current cash price of US$8, 490 per tonne is now higher than the US$8,480 15 month price.  The real issue here is just scrambling to get copper to use now.  

It is quite clear from these changes that more expensive money is now being translated directly into higher commodity prices. That dynamic will, eventually, push inflation up, and that will be the mechanism for eroding the mountain of debt that still overhangs the global economy.

After three and a half years of financial gloom it is hard for many financial analysts and commentators to accept that the situation has changed. But if you had said three years ago that it was too early to buy risk assets like metals you would have missed out on one of the biggest rallies this century.

Equities are up 80 per cent and base metals have more than doubled since the start of 2009. The problem for many is that having ignored the powerful effect of free money, and massive money creation over that time, it is hard for them to now start turning bullish. So they stay bearish and advise investors to take profits. 

But if you do that, where do you then allocate the cash? Bonds may be cheaper, but the yields, at two or three per cent, are little short of laughable when inflation is at the same level. Cash on deposit earns you nothing either, even though many people have massive holdings.

What will happen is of course totally predictable. The bears will keep proclaiming this is false rally and get more and more vociferous as risk assets get more and more expensive.

One by one, investors will succumb to envy and gradually move money into the markets to avoid being left behind and that will continue to drive the rally. And it won’t stop until everyone is fully invested. But that won’t happen for many years yet.

Source >> www.minesite.com
**********************


----------



## drillinto

Oil volatility also dips

http://www.bespokeinvest.com/thinkbig/2012/3/27/oil-volatility-also-dips.html
***


----------



## drillinto

Energy sector tanks

http://www.bespokeinvest.com/thinkbig/2012/3/29/energy-sector-tanks.html
***


----------



## drillinto

Country stock market returns: OZ is up 6.94%

http://www.bespokeinvest.com/thinkbig/2012/3/29/2012-country-stock-market-returns.html
***


----------



## tinhat

drillinto said:


> Country stock market returns: OZ is up 6.94%
> 
> http://www.bespokeinvest.com/thinkbig/2012/3/29/2012-country-stock-market-returns.html
> ***




Hey, we beat New Zealand!


----------



## drillinto

March 31, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, it looks like you had a better week on your market this week, but there seems to be concern growing about the Australian government’s finances.

Oz. The question of the moment is: how will the government an extra A$40 billion that it needs to plug a big hole in its budget. The fear is that the mining industry is about to get whacked again.

Minews. Surely your government can’t be so silly as to raise the already contentious mining tax?

Oz. No, it will be more subtle this time. The current speculation is that mining will lose some of its tax breaks, such as being able to write off expenditure on capital equipment. The end result is the same though - more money from mining flowing into government coffers.

Minews. Alarming stuff! Are investors in Australia taking the threat seriously?

Oz. Not yet. The proof either way will come in the next federal budget in mid-May. In any case, it’s the major miners, BHP Billiton, Rio Tinto and Fortescue (FMG) who are likely to be hit hardest.
...

Source >> www.minesite.com


----------



## drillinto

April 02, 2012
The US Is Now The Only Major Economy Without A Credible Debt Reduction Plan
By Rob Davies

For a while it all looked quite promising. After the ECB pumped a trillion euros into the European banking system in December by offering three year loans at one per cent, it seemed as if the credit problems in Europe were being quietly forgotten. 

The resultant optimism probably peaked in early February when the LME index reached 3,821, although equity markets peaked about a month later. 

On the face of it there is no reason to be less optimistic than there was a few months ago. That said, there is now a mood of caution which is persuading investors to hang back. A contractionary budget in Spain last week is the only the latest evidence that growth in Europe is going to be modest for some time to come. 

Indeed, analysts at Barclays now expect European demand for copper to fall to 3.71 million tonnes this year, from 3.78 million tonnes last year, as an indirect consequence.

That shouldn’t pose too much of a threat because copper inventories have continued to shrink. This year to date they are down 31 per cent and LME warehouses now only hold 255,625 tonnes. 

While that looks good for the copper price, Barclays also points out that China is sitting on inventories of 650,000 tonnes so the market may not be as tight as it seems. That is just a reminder, if one is needed, of exactly how important China is to commodity markets. 

Bulls can point to rising expectations of growth in the US, which is the main reason US Treasury bonds fell 17 per cent over the quarter, to give the worst returns for that asset class since the end of 2010. 

But while the improved outlook for the US is true, it is also worth noting – as many gold bulls do - that the US is now the only major economy without a credible long term sovereign debt reduction strategy. 

Borrowing more and more money is a great way to grow, until lenders change their minds.  While that is not a problem right now, it will be one day, and then Uncle Sam will have to face the same issues that Spain is tackling right now. 

After all, the US has a higher ratio of official debt to GDP than Spain. Worse, its ratio of total net government liabilities to GDP is over 500 per cent. In Spain it is only 250 per cent according to Albert Edwards of SociÃ©tÃ© GeneralÃ©. 

The difference is that the US can print as many dollars as it wants, while Spain has no ability to create euros to order, even if the ECB is doing a pretty god job in its stead. 

None of this amounts to much of economic strategy. Rather the world’s economic policy makers are simply limping on from one period to the next. Elections dominate economic policy, and no one is going to prejudice their chance of election, or re-election, by introducing policies that will benefit the next incumbent of the seat of power and not the current occupier. 

Who knows what the next quarter will bring? Chances are that what will do well are those assets that underperformed last time. Gold did not have a bad time over the first quarter - it was essentially flat. But maybe it is time for it to shine again.      

Source >> www.minesite.com


----------



## drillinto

Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/4/4/bespokes-commodity-snapshot.html
***


----------



## drillinto

April 06, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. How did you market perform in the short week before the Easter break?

Oz. It started well, then fizzled out. The net result was a modest overall decline in the all ordinaries of around half a per cent, a bigger decline of 1.3 per cent in the metals and mining index, and a more painful four per cent slide by the gold index. And the same forces which cut into commodity markets last week also produced a solid fall in the value of the Australian dollar, which appears to be rushing back towards parity with its US cousin. Last week’s closing rate of US$1.02 represents a fall of US2 cents in the week, and takes the drop over the past five weeks to US6 cents.

Minews. That lower rate should mean that your miners, and especially the gold producers are being shielded from the worst effects of the commodity-price correction.

Oz. They are, but the sentiment down this way is distinctly negative, as a result of factors that go beyond the commodity market. Politics in Australia gets more bizarre by the day, and could become quite nasty for the resources sector over the next 12 to 18 months. There now seems little doubt that the Australian government is preparing to spring a tax surprise in its May budget by slashing tax allowances, and this will have the effect of raising more revenue from mining.

What’s more, the relationship between the national government and state governments has taken an unpleasant turn, also over tax. The Premier of Western Australia even went so far last week as to say that if the tax situation was not resolved he would not be encouraging new mining developments. His beef is over a value-added tax called the goods and services tax (GST) which is supposed to be shared evenly by the states. But WA’s share in recent years has dropped, leading him to make the following threat: “For WA, the logical thing would be to leave the minerals in the ground”.

Minews. Remarkable. That sounds like a government mine-development strike.

Oz. It does, but it’s probably not that extreme. What it really means is that the state will not spend as much providing essential services such as roads, schools and hospitals in remote locations because Canberra is not sharing the GST revenue. So any company planning a mine development will face a higher capital cost to pay for things government normally pays for.
...

Source >> www.minesite.com


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
Bill Matlack

http://www.kitco.com/ind/matlack/mar292012.html
[Among the gold big caps, Newcrest Mining Ltd, NCM.AX, is still a buy]


----------



## Garpal Gumnut

The Mining Tax will see a severe retracement in the sp of all mining stocks.

gg


----------



## explod

Garpal Gumnut said:


> The Mining Tax will see a severe retracement in the sp of all mining stocks.
> 
> gg




Not too sure about severe due to the mining tax.  The downturn showing up of late from China is going to have its effects too.

All the money they can take off many of the big rich non-philanthropic types the better.

But anyhoouuww, plenty of money being made by Aussie offshore miners at the moment.


----------



## drillinto

US Annual Energy Outlook, 2012
http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2012).pdf

Energy prices
Natural gas
With increased production, average annual wellhead prices for natural gas remain below $5 per thousand cubic feet (2010 dollars) through 2023 in the AEO2012 Reference case. The projected prices reflect continued industry success in tapping the Nation’s extensive shale gas resource. The resilience of drilling levels, despite low natural gas prices, is in part a result of high crude oil prices, which significantly improve the economics of natural gas plays that have high concentrations of crude oil, condensates, or natural gas liquids.
After 2023, natural gas prices generally increase as the numbers of tight gas and shale gas wells drilled increase to meet growing domestic demand for natural gas and offset declines in natural gas production from other sources. Natural gas prices rise as 
production gradually shifts to resources that are less productive and more expensive. Natural gas wellhead prices (in 2010 dollars) reach $6.52 per thousand cubic feet in 2035, compared with $6.48 per thousand cubic feet (2010 dollars) in AEO2011.
:::::::::::::::::::::::::::::::::::::::::::


----------



## drillinto

Iron Ore(Juniors)
Bill Matlack

http://www.kitco.com/ind/matlack/apr092012_juniors.html
[Among the iron ore juniors, Sundance SDL.AX is the best buy]


----------



## drillinto

April 09, 2012
The Market May React To Short-Term Indicators, But They Are No Basis For Long-Term Investment Decisions
By Rob Davies

Since the bull run of the first quarter came to an end a few weeks ago, capital markets are searching around for signs of what happens next. And when there is no clear direction any indicator tends to grow in importance. 

Thus the recent news that growth in US employment was lower than expected caused a great deal of soul searching among the financial chatterati. At 120,000, the number of new jobs generated last month was about 85,000 below expectations, which had risen after an unexpectedly good set of employment figures was announced for the first two months of the year.

These data changed the mood in the market and revived talk that the US Federal Reserve might engage in more monetary stimulus, although the Fed itself kept mum. There were also suggestions that US growth is now more likely to be two per cent this year rather than the three per cent some had been hoping for. 

This downbeat tone was enough to depress equities and lift bond prices towards the end of the week. But base metals, as measured by the LME index, tickled 0.6 per cent higher over the week to end at 3,567.

But the trouble with economic data is that it is pretty poor quality. Moreover, data over such a short time period is little more than noise, and hardly justifies being called a signal at all.  

Even the authorities admit that the monthly payroll data has a sampling error of plus or minus 100,000. In other words the actual figure for March could be virtually zero, or to put it another way, more or less in line with expectations after all.

Constructing an investment strategy based around this sort of news flow is difficult, if not impossible. After all, trying to determine inflexion points is a superhuman task at any time. Not only is the data hard to read because of volatility, it is also subject to all manner of distortions. 

And despite the bad jobs report, records also showed that US unemployment has dropped from 8.3 per cent to 8.2 per cent. However, that improvement was a result of fewer people actively seeking jobs because they gave up, rather than as a result of more people actually starting work,

All we know is that there is still a vast amount of spare capacity in the US and other major economies, which is why interest rates are still close to zero. In practical terms that means future prices remain low, and the base metal market provides an excellent demonstration of that. 

Prices for copper 15 months out are US$8,190 a tonne, which is 2.1 per cent less than the current spot price of US$8,365 a tonne, although the discrepancy is more to do with the very tight situation specific to this metal rather to any macro-economic effect. 

And forward prices for zinc show a similar pattern, with 15 month metal at US$1,982 a tonne, roughly 3.3 per cent below the prevailing spot price of US$2,050 a tonne. 

The other metals show a more normal distribution, with higher future prices to reflect funding costs. But even then these are not that high. 

Fifteen month nickel is trading at US$18,035 a tonne, or just one per cent more expensive than cash metal at US$17,860 a tonne. Lead too shows a modest premium of 5.5 per cent for fifteen month metal, which trades at US$2,103 a tonne, as compared to a spot price of US$1,993 a tonne. 

The exception is fifteen month prices for aluminium, which at US$2,418 a tonne are 17.8 per cent higher than the spot price of US$2,053 a tonne. This premium, though, is probably a reflection of the alumina capacity cuts recently announced by Alcoa.

But daily, weekly, monthly and even quarterly data is little more than noise that should be ignored by investors. The signals for the longer term picture simply don’t change that fast.  And nothing has really changed. While some base metals look good the overall economic outlook still seems pretty lacklustre.

Source >> www.minesite.com
*****


----------



## drillinto

April 14, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your gold sector seems to have had a good week.

Oz. There were some solid rises in the gold space, but it was mainly a case of making up lost ground. The gold index rose by 3.2 per cent, which almost makes up for the previous week’s four per cent fall. Meanwhile, the wider market last week had good days and bad days, and closed at almost precisely the point at which it opened.
The big news down this way remains political, as investors grow ever more nervous about a government which is showing signs of running off the rails. Mining leaders are finally getting a whiff of more tax trouble, of the sort we’ve been talking about for weeks. Their lobby group, the Minerals Council of Australia, has re-started its anti-government advertising campaign ahead of next month’s Australian government budget, which is expected to impose a number of fresh costs on mining. The tax rates will probably not change, but deductions currently available, such as a rebate on diesel fuel, and generous depreciation schedules will be tightened.

Minews. The overall effect being that profits from mining will fall, possibly taking share prices with them?

Oz. That’s the financial picture, though a darker interpretation would tell of a government being dragged further to the left by a dramatic change in the senior ranks of the Green Party, which provides essential votes in Parliament to keep the government in power. Senator Bob Brown, founder of the Greens in Australia, quit Parliament last week, tossing Green leadership to another Senator, a far more extreme Green, Christine Milne. Her rise to the top will lead to more attacks on mining at a national political level.

Minews. It sounds like you need an election.

Oz. That will come, though probably not for another 15 months. Before then we’re in for a wild political ride, during which time mining will be put under pressure, and will perhaps hit back at the government. BHP Billiton played a big card last week, in closing a coal mine during a strike. The Norwich Park mine was a marginal business and might not have gone on for much longer, but within days of that decision questions were being asked about other BHP Billiton projects, including the biggest of them all, the Olympic Dam copper and uranium mine, currently undergoing a major expansion.

Minews. If BHP Billiton pulls out of big Australian mining projects, Rio Tinto and Xstrata will not be far behind.

Oz. Precisely. That’s why we are in for a wild ride up to the next election.
...

Source >> www.minesite.com


----------



## drillinto

April 16, 2012
Debt: The Elephant In The Room
By Rob Davies

However much markets get excited about US jobs figures or Chinese growth data there is still one overwhelming feature of capital markets these days. 

Most days the markets try and ignore the big grey object that is the massive amount of outstanding debt. But however hard they try to turn a blind eye, the elephant in the room just won’t go away.

Large amount of debt are OK if they are matched by large amounts of assets. And politicians and central bankers try and pretend that this is indeed the case. But deep down the authorities know that the markets know that they know otherwise.  

In fact that prognosis is a million miles away from reality. And last week was another one where that reality bobbed back up again. 

This time another sell-off in Spanish bonds took yields back over six per cent. Everyone knows that Spanish sovereign debt will not be repaid in full, in just the same way that Greek debt has been written off. 

But the only thing that is uncertain is the mechanism by which that debt will be unwound. To try and paper over the cracks the ECB leant Spanish banks â‚¬227.4 billion euros in March. In February it was “only” â‚¬152.4 billion. 

As markets get more and more sceptical about the value of European sovereign debt, the ECB is being forced to take a larger and larger role in replacing free market capital. While that doesn’t solve the problem it does have the benefit, from the Germans point of view, of allowing more and Latin debt to be bought by the Latin banks, thus allowing the Teutonic banks to reduce their exposure.

The problem is that the crisis is not just confined to European sovereign debt.  It applies to European bank debt, US bank debt, US sovereign debt and all manner of other liabilities that are matched to assets that are now worth far less than when the debt was incurred. 

Not least of these are the US$47 billion of mortgage related securities the Federal Reserve Bank of New York acquired after rescuing AIG in 2008. It is now seeking to sell these securities, known as the Maiden Lane assets. How that transaction goes will provide a good window on the true value of some of these complex securities.

All these issues weighed on markets last week and pushed risk assets down. Base metals, as determined by the LME index, were less badly hit than equities and only fell 0.7 per cent.

Copper was one of the metals most affected, and fell 5.1 per cent to US$8,180 a tonne, even though inventories in LME warehouses are at an incredibly low 266,075 tonnes. 

As ever, of course, capitalists are more concerned about what might happen next than what the current situation is. Which is why first quarter Chinese growth of 8.1 per cent was the other dominant influence on markets during the week. 

That rate of growth might sound good to anyone in a developed country, but it is low for China and is part of its deliberate campaign to reduce inflation. However, even this lower level of growth is difficult for iron ore producers to cope with, and demand pushed iron ore prices back above US$150 a tonne for the first time in six months. 

That strength in iron ore was the underlying reason for the good relative performance of the big mining companies, even though equities were weak over the week.

And while stronger iron ore prices are good for miners, the elephant in the room is still the mismatch between debt and assets that threatens the whole fragile economic recovery. Ignoring it remains the preferred option for the authorities, but that won’t work for ever.

Source >> www.minesite.com
*****


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
Bill Matlack

http://www.kitco.com/ind/matlack/apr172012.html
[Among the large cap gold miners, the best buy is Newcrest Mining Ltd, NCM.AX]


----------



## drillinto

Commodities bubble ?
Three articles for your consideration:

Mining stocks to fall with prices
The Australian - ‎Apr 16, 2012‎
STAND by for a gradual easing in prices among mining stocks despite the fact China is not likely to have a bust, says Goldman Sachs Asset Management chief Dion Hershan. Hershan, who's head of equities at GSAM in Australia, says he is "cautious or ...

The Next Global Crash: Why You Should Fear the Commodities Bubble
The Atlantic(USA) - ‎Apr 16, 2012‎
By Ruchir Sharma Investors have gone crazy for commodities, pouring money into everything from oil to copper. Just like the world's mania for tech stocks in the 1990s, this boom is headed for a bust. Wheat is dumped into a grain truck for transfer.

What If 2007 Was the Commodities Cycle Peak?
Resource Investor - ‎12 hours ago‎
By Danielle Park As we layer price plots of the credit bubble peak in 2007 over stock and commodity charts we cannot help but wonder whether we might not already have seen the peak of commodity prices for some years to come. From 2005 to 2007, ...


----------



## joea

drillinto said:


> Commodities bubble ?
> What If 2007 Was the Commodities Cycle Peak?
> ...




Well if it was, Treasurer Wayne and PM Julia are " up a creek, infested by crocs, in a leaky canoe and no paddles".

joea


----------



## tinhat

drillinto said:


> Metals & Mining Analysts' Ratings & Estimates - Seniors
> Bill Matlack
> 
> http://www.kitco.com/ind/matlack/apr172012.html




Thanks for the link.


> [Among the large cap gold miners, the best buy is Newcrest Mining Ltd, NCM.AX]




Based on what?


----------



## drillinto

tinhat said:


> Thanks for the link.
> 
> 
> Based on what?




The tables are compiled from the Thomson One Analytics database of consensus Ratings & Estimates of equity analysts.
Thomson One Analytics Rating System: Buy (1.0), Buy/Hold (2.0), Hold (3.0), Sell/Hold (4.0), Sell (5.0)

Source: Thomson One Analytics.


----------



## tinhat

drillinto said:


> The tables are compiled from the Thomson One Analytics database of consensus Ratings & Estimates of equity analysts.
> Thomson One Analytics Rating System: Buy (1.0), Buy/Hold (2.0), Hold (3.0), Sell/Hold (4.0), Sell (5.0)
> 
> Source: Thomson One Analytics.




OK - thanks. Hadn't drunk enough coffee this morning when I read it the first time.

NCM isn't showing any turn around on the charts yet but on the watch list. MML could be turning around at the moment (market over-reacted to their production problems IMHO). SLR looks to have more upside in it yet too. But neither of those are large caps if that is important.


----------



## drillinto

Sector P/E Ratios (USA)


As shown, the Energy sector currently has the lowest valuation with a P/E of 10.65.  Energy's P/E has fallen quite a bit recently since the sector has been weak.  


http://www.bespokeinvest.com/thinkbig/2012/4/20/sector-pe-ratios.html


----------



## drillinto

April 21, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

...
The gold company that outperformed was Ausgold (AUC), which continues to report highly encouraging assays from its Katanning project in the south of Western Australia. In response, the shares added A18 cents to close the week at A98 cents.

Minews. Let’s continue with gold.

Oz. Thanks. After Ausgold there weren’t too many eye-catching moves, in what after all was a down week for gold companies. Among the better performers were: Ampella (AMX), up A5 cents to A$1.05, Kingsgate (KCN), up A14 cents to A$6.41, Perseus (PRU), up A20 cents to A$2.52, Medusa (MML), up A13 cents to A$5.49, and Evolution (EVN), up A3 cents to A$1.78. And Scotgold (SGZ), a gold company close to you, is also starting to attract some interest, creeping up another A0.1 of a cent to A8 cents.

But there was a long list of gold companies that lost ground, including: Gold Road (GOR), down A2.5 cents to A26.5 cents, Gryphon (GRY), down A4 cents to A99 cents, Troy (TRY), down A18 cents to A$4.60, Northern Star (NST), down 4.5 cents to A90.5 cents, and Kingsrose (KRM), down A3 cents to A$1.20.
...
Source >> www.minesite.com


----------



## drillinto

April 23, 2012
The Long And The Short Of It:Big Players Take Big Positions As The French Election Rolls On
By Rob Davies

Bets can be made on virtually anything these days. A popular one right now involves the outcome of the French presidential election. If President Sarkozy did manage to win, you could make ten times your money. 

But there are many ways to place such a bet. Some, like John Paulson the hedge fund manager, are simply shorting German bonds. Presumably the argument is that whoever wins is going to have a tough time reconciling his actions to the promises he made before the election - and that ultimately the Germans will have to pay. 

Although the size of Paulson’s bet is undisclosed it is probably pretty big.   

But as bets go, though there can’t be many that are bigger than that being made by the company that is said to have cornered 90 per cent of the copper inventory in LME warehouses. At the current price that is worth US$1.46 billion. Some punt. 

No one seems to know much about the position, but it is tempting to presume that it is a long trade, i.e. a bet on prices rising. If so, the 1.7 per cent fall in copper prices over the week must have hurt.  

The logic of buying copper is driven by low inventory levels. Total stocks in LME warehouses have now fallen to 262,700 tonnes, and stocks in Shanghai have dropped to 211,179 tonnes.

In short, there simply is not much copper around. And if the stories of economic recovery are correct then this is good news for consumption, demand and prices. 

In support of the bull case it is noteworthy that German confidence is at a nine month high and car sales in the US are rising steadily. After bottoming out at 10.4 million in 2009, a 30 year low, US car sales rose to 12.8 million in 2011. And this year analysts are predicting sales could exceed 14.5 million. 

Since even a small car in the US uses 15 kilogrammes of copper, the impact on copper demand could be substantial even after allowing for the scrap generated by recycling old cars. And because the average age of a US car is now ten years, there is plenty of scope for this surge in car sales to be maintained for some time. 

Despite this positive news copper and the other base metals fell last week, taking the LME index down 2.4 per cent to 3,457.6. This was in contrast to equities, which strengthened in developed markets.  

Given the good news about the US and the uncertainty in Europe, the weakness in the euro against the dollar was to be expected.  Indeed, dollar strength probably accounts for some of the weakness in commodity prices. 

It wasn’t so long ago that markets were making a binary call on asset classes so that the trade was either Risk On or Risk Off. Now, the geographic differences are making that call much more subtle.  

It won’t be obvious for some time which way the discreet copper trader is aligned. But it is an excellent demonstration of what opportunities still remain to be had in base metals. 

Source >>> www.minesite.com
*****


----------



## drillinto

Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/4/23/bespokes-commodity-snapshot.html
***


----------



## drillinto

Visit >> http://www.planetaryresources.com/
***


----------



## drillinto

April 28,2012

That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had a busy week, but without much movement on the market.

Oz. Events outside the stock market, including grave uncertainty about the future of the current government, continue to dictate the direction of Australian share prices. Last week a fresh scandal forced the resignation of the Speaker of Parliament, a development which could obstruct the passing of the government’s budget and possibly trigger a fresh election. Some observers have been predicting such a crisis since the appointment of this finely-balanced minority government 18 months ago. Ever since then we’ve lurched from crisis to crisis, despite a strongly performing domestic economy.

Minews. Would a change of government kill the mining and carbon taxes that have caused so much concern for investors in your mining companies? 

Oz. Almost certainly, which is why investors are watching Australian politics as carefully as they’re watching Chinese demand for minerals and metals. The next election is not scheduled for another 18 months, but the opinion polls are pointing to a landslide in favour of the conservative parties which will undoubtedly be more pro-business, and pro-mining.

Minews. A change might be good for mining but it sounds like you’re in for a few more months of uncertainty before a clear picture emerges.

Oz. That’s probably right, which is why we’re seeing minimal movement on the market, as measured by the key indices. Last week was a virtual repeat of what’s happened in every week this April. The all ordinaries index slipped lower, but by less than half a percentage point. The metals and mining index did worse, shedding 2.7 per cent. Gold did worst of all, falling by five per cent, but that drop was caused almost entirely by an 8.3 per cent fall by the sector leader Newcrest (NCM), shares in which tumbled A$2.34 to A$25.71 after the announcement of a profits downgrade.  
...

Source >> www.minesite.com
*****


----------



## notting

drillinto said:


> Oz. Almost certainly, which is why investors are watching Australian politics as carefully
> *****




What a load of absolute drivel. Couldn't give a rats toss about the donkeys running the administration. Neither would any other investor with half a brain.


----------



## drillinto

April 30, 2012
The World Steel Association’s Short Range Outlook Indicates That Metal Demand Will Stay Relatively Robust In The Near Term
By Rob Davies

Economic data dominated the financial news last week. First, the numbers came out: a contraction of 0.2 per cent in the first quarter for the UK and 2.2 per cent growth in the US. Then came all the caveats, excuses and clarifications. 

But instead of all the subsequent obfuscation and bluster, what’s really needed is for each estimate to come attached with a standard deviation. That would make the uncertainty associated with each number much clearer. 

The U Group - the UK and US - are unique in getting out their estimates for GDP so quickly. Although these estimates are then subject to many revisions, at least this way of doing things allows for an early snapshot of the economies are doing. The data for other large economies, like Japan, is delivered much later.

Whether this early delivery of news is helpful or not is harder to say. On balance, risk markets thought it was more good news than bad, so equities rose. Base metals were also stronger, rising 2.8 per cent to 3,555.7 as measured by the LME index.  

But part of the reason metals did well related to dollar weakness. The dollar fell 0.6 per cent against the euro and 1.2 per cent against gold. Worryingly, sterling was the stellar performer last week, rising 1.6 per cent in dollar terms - which is not good news for sterling based mining companies. 

Data on GDP is interesting but, because modern developed economies are so biased towards the service sector, they don’t tell us an awful lot about metal demand. 

Far more relevant to miners was the Short Range Outlook published by the World Steel Association. Because anything that uses steel is likely to use other metals as well, either for alloying, coating and or as associated fittings.  

The World Steel Association expects apparent steel use to rise 3.6 per cent in 2012 to 1,422.3 million tonnes. While this is a lower rate of growth than the 5.6 per cent recorded for 2011, it is still a healthy positive number.

However, it’s also lower than the estimate that the same body made six months ago. The reason for the reduction can be found in the estimates for Europe. Steel output in Europe is expected to shrink by 1.2 per cent in 2012 to 151 million tonnes. 

To put that into perspective Chinese steel use is forecast to rise four per cent in 2012, taking it to 648.8 million tonnes.  North American steel use is even lower than in Europe, but it is growing faster at 5.2 per cent, though that too is lower than the heady nine per cent expansion recorded last year. 

Any forecast for 2013 is a brave prediction given the amount of uncertainty still swirling around. For what it is worth the World Steel Association is expecting steel use to rise by 4.4 per cent, although part of that comes from a perhaps optimistic estimate of recovery rates in Europe. 

Such a scenario is undoubtedly constructive for base metals. However, what these figures demonstrate more than anything is that commodities are a play on emerging markets. 

The data shows that by 2013 steel use in the developed markets will be 14 per cent below the level in 2007. Contrast that with the 45 per cent growth in steel use in developing markets over the same period. 

By then the developing markets will account for 73 per cent of world steel demand instead of the 61 per cent they accounted for in 2007. The figures for base metals will surely be broadly similar. Now that’s what you call growth!

Source >> www.minesite.com


----------



## drillinto

USA: Materials is the most oversold sector

http://www.bespokeinvest.com/thinkb...versold-telecom-and-utilities-overbought.html


----------



## drillinto

May 05, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have done little last week.

Oz. That’s one way of looking at it. Another is that there were plenty of positive moves early which were then wiped out by a pair of poor days at the end as falls on Thursday and Friday took us back to where we started. At one stage the overall market, as measured by the all ordinaries, was up the best part of two per cent. When we all sloped off to the pub on Friday night, the gain had been reduced to around 0.5 per cent. It was a similar story with the industry-specific metals and mining index, which also added less than one per cent for the week, while the gold index lost a shade over one per cent.

Minews. Hardly inspiring! What’s troubling investors down your way?

Oz. Many of the same issues that are troubling investors in London, with an overlay of a deeply-troubled Australian government. The rolling European crisis, which this week gathered up Spain and promises to deliver a socialist President in France, has raised doubts about whether Europe can achieve any economic growth for some years, and that means European banks and investors will be sidelined for a good while yet. Closer to home, there are doubts about the strength of the local economy, but little doubt that the mining industry will be the prime target of higher taxes in next week’s budget - a diesel fuel rebate is likely to be wiped out, along with depreciation allowances for certain mine works, such as overburden removal. Capping those worries is concern that the two biggest miners in Australia, BHP Billiton and Rio Tinto, are shifting their focus to greener financial pastures in Africa and North America.

Minews. Surely Chinese commodity demand will pull your economy through any slowdown?

Oz. In theory, yes. In reality that might not be the case. The Chinese have their own worries, and while demand for minerals and metals remains relatively strong, there is a lot of new supply heading for China. The best example of that is the thermal coal that’s being forced into the international marketplace by the glut of natural gas in the US. This so-called shale gas is causing all Australian coal miners to think twice about expansion plans.
...

Source >> www.minesite.com


----------



## drillinto

CRB Index: Commodities Back in Bear Market Territory

http://www.bespokeinvest.com/thinkbig/2012/5/4/commodities-back-in-bear-market-territory.html


----------



## drillinto

May 07, 2012
Political Uncertainty In Europe Will Lead To Increasing Uncertainty In The Commodity And Capital Markets Too
By Rob Davies

Spending money is usually a lot more fun than earning it. Spending other people’s money is even better. Such are the underlying feelings behind recent elections in various countries.

And if, at the end of the day, electorates decide they don’t want more cuts in government spending and increases in taxation they will kick out the politicians that advocate those policies and replace them with others. 

That seems to be what is happening now in Europe as a new socialist regime takes the reins in France and the mandate of the Greek coalition looks shaky to say the least. The consequences could be far reaching for a number of asset classes, not least commodities. Everyone wants growth, of course but, human nature being what it is, few are prepared to wait for the cash flow to fund it. 

Far more attractive is to borrow the money and “create” growth.  You just need to find someone to lend you the money. And that is where it starts to get tricky. 

Right now global capital markets are very happy to lend to the Germans at 1.6 per cent, the Americans at 1.9 per cent, and even the Brits at two per cent. Go down to Spain and Italy though and the rates shoot up to 5.5 per cent. Even France has to pay 2.8 per cent. 

And the Greeks pay 17 per cent on what they still owe, after having already walked away from a big chunk of their obligations. 

In theory yes, Governments can offer an alternative to austerity if they are prepared to pay for it. In practice even the socialists get to a point when the pain is too great.  

Capital markets sense that austerity programmes are taking too long to deliver the goods to the voters. That is pushing values down because investors are nervous about what will replace these strategies. Last week, global equities fell several percent, bond prices rose and base metals fell 1.5 per cent as measured by the LME index. 

But the depressed state of the major western economies was already well understood. What really upset markets last week were some downbeat comments from Rio Tinto and BHP Billiton. These two bellwether behemoths stated that they will slow the pace of their expansion programmes, save for iron ore, in the face of slower growth in China. 

Right now, Chinese expansion is the only beacon of light in a rather gloomy economic world. And if that flame starts to flicker and sputter, the implications for metals, and other industries, would be dire. 

Not everyone takes a negative view, though. Talk is that just two entities now control the bulk of the (albeit small) inventory of copper in LME warehouses. That’s a bullish position to take, even if copper is the one base metal that seems to offer the most promise in the medium term. 

Because, even adding the 196,627 tonnes of copper held in Shanghai to the 235,200 tonnes the LME has, the total is still pitifully low, and makes the metal vulnerable to supply side shocks. 

Still, traders seem to be moving to the wider macroeconomic view that the downside is more likely than the upside. That opinion will be reinforced by the news that oil for delivery in June fell below US$100 a barrel, and that oil inventories at Cushing rose 2.9 per cent to 43 million barrels. 

That is the highest since 2004. High prices work to constrain demand, be it in oil, copper or government debt. The markets know this, but do the incoming governments? We shall have to see.   

Source >> www.minesite.com
*****


----------



## drillinto

Crude oil inventory report from the Department of Energy (USA)

http://www.bespokeinvest.com/thinkbig/2012/5/9/oil-oil-everywhere.html


----------



## drillinto

International Market Returns From 2012 Peaks
Australia equities(S&P/ASX200) are down -3.2%, from 2012 peak (May 2).
Only China has seen less of a decline than Australia (see link below)

http://www.bespokeinvest.com/thinkbig/2012/5/9/international-market-returns-from-2012-peaks.html


----------



## drillinto

Recent Changes in Share of World Market Capitalization

Australia and Brazil (commodity producer countries) are among the top 10

http://www.bespokeinvest.com/thinkbig/2012/5/11/changes-in-share-of-world-market-cap.html


----------



## drillinto

May 12, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Have you any good news, after another tough week on the market?

Oz. Not a lot. But if you look hard enough there are always a few nuggets to be found, even if they were well buried by the latest ghastly example of financial mismanagement from the Australian government, which announced its budget on Tuesday. Political populism is the only way to describe the cash hand-outs that are being given to traditional Labor voters, as business was whacked with higher taxes. The net result was a further fall in the value of the Australian dollar, which is back to parity with its US cousin. Other indexes were also weaker, including the ASX all ordinaries index, which was down 2.6 per cent, and the gold index, down 2.5 per cent fall. There was also a 5.1 per cent fall in the metals and mining index thanks to a sharp sell-off in the big miners, BHP Billiton and Rio Tinto.

Minews. How are those big declines by the mining leaders being reported in Australia?

Oz. One interpretation is that the super-cycle of stronger commodity prices has come to an end. Another is that investor pressure is forcing all of the big miners to reconsider their growth plans, with a number of major expansion projects likely to be delayed. However, that could turn out to be a blessing in disguise.

Minews. You mean that the seeds of a recovery are being sewn in the possibility of a reduction in future supply?

Oz. Precisely. You can’t mothball giant projects of the sort in the pipelines of BHP Billiton and Rio Tinto without causing a supply hiccup which, in turn, leads to a commodity-price recovery.

Minews. That will be interesting to watch. But on a more immediate point, did those cash hand-outs - or bribes, as some of your media are calling them - go down well with the electorate?

Oz. No. In the first wave of opinion polls after the budget the government suffered a further decline in support. It seems that even the average Aussie can seen through a bribe, and also rejects the attempt to start a class war by pitting the poor against the rich. The attacks on the rich might actually turn out to be the biggest mistake that the current government has made because most Australians like to think we live in an egalitarian society where class distinction is more than irrelevant, and is actually treated with contempt. The mood down this way is one of: bring on the next election as quickly as possible.

Minews. Interesting thoughts, but time for prices, starting with any of those nuggets of good news hinted at earlier.

Oz. There weren’t many, but they’re more interesting than the long list of fallers. The most spectacular move of the week was from a minnow called Kibaran Nickel (KNL) which jumped aboard the fad of the week, graphite. Technically, Kibaran tripled in price from A4.7 cents to a closing price of A17.5 cents, with some sales going through at A20 cents before the close. However, that move needs to be taken with a hefty pinch of salt because Kibaran is thinly traded, graphite is not a mainstream mineral, even if popular today with punters, and the company is capitalised at just A$4.9 million, which wouldn’t buy you a decent apartment in London these days.

Another company that moved up sharply was Coalworks (CWK), which added A17 cents to A$1.02 after receiving a long-awaited takeover bid from Whitehaven Coal (WHC). For its part, Whitehaven duly fell by A30 cents to A$4.61. A handful of gold companies also shook off the effects of the weaker gold price, which was in turn offset slightly by the falling exchange rate. Dual-listed Endeavour Mining (EVR) reported a strong first quarter of production, and added A13 cents on the ASX to A$2.17. Newcrest (NCM) clawed back a meagre A5 cents to A$25.70, bringing to an end, temporarily at least, a heavy slide in its price. The shares traded as high as A$41 a few months ago. Perseus (PRU) added A2 cents to A$2.52, and Kingsrose (KRM) managed to stem the outgoing tide, with a rise of A1 cent to A$1.15.
...
Source >> www.minesite.com
**********************


----------



## drillinto

CRB Commodity Index: Commodities fall to lowest levels since 2010

http://www.bespokeinvest.com/thinkbig/2012/5/14/commodities-fall-to-lowest-levels-since-2010.html
*****


----------



## Joules MM1

tweet


> Walter Murphy ‏ @waltergmurphy
> 
> Commodity Bull Market? Continuous Commodity Index hit a new 52-week low today.


----------



## Joules MM1

> A Rare Speed Bump in Commodities' Long Run



BY LIAM PLEVEN 

http://online.wsj.com/article/SB10001424052702303505504577401901780204374.html?mod=wsj_share_tweet


----------



## drillinto

Geoscience Portal is an initiative of the Australian Chief Government Geologists Committee >> http://www.geoscience.gov.au/


----------



## drillinto

Australian Gas Resource Assessment 2012

https://www.ga.gov.au/products/servlet/controller?event=GEOCAT_DETAILS&catno=74032


----------



## drillinto

May 14, 2012
There's A Massive Bubble In The Bond Market Right Now, But The Implications For Commodities Aren't Yet Clear
By Rob Davies

There is no question that each individual metal price reflects the unique supply and demand characteristics for the given metal. It is also true that these characteristics, especially the demand side, are very sensitive to the prevailing macro-economic environment. 

But perhaps even more important to the pricing of commodities are perceptions as to how the economic landscape might change in the future. The economic background is set, to a large degree, by the great and the good, consisting of politicians, treasury departments and the assorted monetary authorities. And among the most important of the last group are central banks. 

Central bankers are not politicians on the prowl for the next vote so their pronouncements are rarer and ought, perhaps, to be taken more seriously. Which is why the recent lecture given by Mervyn King, Governor of the Bank of England, attracted a great deal of attention. Among his many observations was one that struck some as particularly strange.

He said there was a bust without a boom. 

This sounds bizarre to anyone who experienced the tripling of house prices from the late 1990s to 2007. It also contradicts the experience of the commodity world in which the price of nickel rose tenfold from US$5,000 to US$50,000 a tonne, copper quadrupled in price, and most others experienced dramatic increases as well. 

To be fair commodities shot up because of the vast sucking sound from China. Nevertheless, a fair chunk of that nickel went into the Smiths’ new kitchen that they could only afford by taking equity out of their house after it had shot up in value. 

Underlying the booms in China and the west were soaring property prices, as banks opened up the spigot on real estate lending to the maximum they could, and then some. All this happened under the watchful eye of central bankers who denied the existence of a property bubble. 

And these are the same people now charged with extricating the Eurozone from its self-imposed mess. No wonder the markets have little faith in the power of the authorities to create a lasting solution.

Political impasse in Greece is matched by uncertainty about exactly what President elect Hollande in France will do to bridge the gap between his promises and the economic straightjacket of the bond and foreign exchange markets. 

No wonder the euro fell against the dollar last week - and a strong dollar usually makes for weaker metal prices. That was certainly the case this time as the LME base metal index fell 1.6 per cent to 3448. 

Gold, perhaps surprisingly, had an even bigger fall, dropping 3.5 per cent to US$1,588 an ounce. Instead, investors put their faith in debt issued by the US government. 
Demand for these IOUs to be redeemed in ten years time is such that they only yield 1.85 per cent. Since US inflation is running at 2.7 per cent that seems like a guaranteed way to lose over one per cent a year for the next ten years.

It is doubtful that central bankers read these pages. But, in case they do, they should read this: Guys, the bond market is a massive bubble, stop buying it.

Every commentator is arguing for governments to adopt strategies for growth. But it is hard to do that when the a fifth of the loans the banks have made are not servicing their debt - as is the case with the Spanish banking system. 

Unless the authorities can contrive a credible solution, the market will impose its own. And solution will essentially be to stop providing capital to anyone market participants suspect won’t be able to repay it.

On that scenario, a disorderly break-up of the Eurozone seems more likely than a managed one. But unfortunately, it still seems more plausible than expecting the authorities, who denied there was a problem in the first place, to draft a strategy to resolve it.  

Source >> www.minesite.com
**********************


----------



## drillinto

Commodities Oversold

http://www.bespokeinvest.com/thinkbig/2012/5/16/commodities-oversold.html
***


----------



## drillinto

CANADA

May 18, 2012
That Was The Week That Was … In Canada
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed over the past week.

CC. It was another painful week in the resource space, as a couple of Canadian-listed African plays disappointed investors in a big way. And, while the price of bullion managed to bounce off its recent lows, it’s nonetheless clear that investors have absolutely no appetite for mineral resource plays at the moment. Once all the trading was done this past week, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had plunged 8.8 per cent, while the TSX Gold Index bucked the down trend and managed to squeak out a gain of 0.13 of a per cent.
...
Source >> www.minesite.com


----------



## drillinto

May 19, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Have you any good news for us after a truly dreadful week?

Oz. No, is the short answer. Like the rest of the world our market behaved like a rabbit caught in the headlights of an oncoming car with a manic Greek taxi driver at the wheel. The least bad - a cumbersome expression but one which sums up the situation - was the gold sector which on Friday managed to do what no other index did, rise modestly. But after the falls of the previous four days, that was of course too little too late. The damage to investor confidence has been profound. The 5.6 per cent fall in the all ordinaries index has wiped out what remained of the gains made earlier in the year. The metals and mining index also dropped by 5.6 per cent, and the gold index fell by 4.7 per cent, despite a 2.7 per cent rise on Friday.

Compounding the gloomy mood down this way is deepening uncertainty about the performance of the Chinese economy, and the demand it will stimulate for Australian mineral exports. That doubt saw the mining leaders, BHP Billiton and Rio Tinto, hammered lower, with BHP also hit by threats of a fresh round of industrial action in its coal mines.

Minews. Falling prices and industrial action to boot - that’s not a good combination. 

Oz. It’s not, and it looks like Australia is heading into a period of considerable uncertainty as domestic political squabbles weigh on the popularity of the government, even as its unpopular new mining and carbon taxes weigh on investors. The next shoe to drop in the Australian economy will be a realisation that the promised return of the government budget to a small surplus is likely to be little more than wishful thinking, because corporate taxes will not be as high as assumed in the year ahead.

Minews. Time for prices, and don’t hold back on the bad news. It’s better to face the truth than hide from it, like some European governments.

Oz. Okay, but just before we get there, there was one spark of good news from this side of the world. While the minerals industry is being hit by low prices and even lower confidence, the energy industry is looking much more optimistic, especially for companies exposed to natural gas. Japan, in particular, is leading a charge into the Australian gas export sector, as it seeks additional supplies of fuel to fill in the gaps left by its mothballed fleet of nuclear reactors. With that dynamic in the background, Japan, coupled with China, is pushing our gas industry to the point where Australia should become the world’s biggest exporter of liquefied natural gas (LNG) within the next 10 years, displacing the current leader, Qatar.
...

Source >> www.minesite.com
*****


----------



## drillinto

May 21, 2012
Who Will Be Left To Buy Government Debt, When The Current Crop Of Buyers Come To Sell?
By Rob Davies

The moves in capital markets last week were all negative, save from the perspective of a selected number of governments. Equities fell three or four per cent, and the base metal index dropped four per cent to 3311. Copper fell six per cent to US$7,707 a tonne. 

Conversely though, many governments saw the price of their debt fall. US treasuries rose 6.9 per cent taking the yield on 10 year US Treasuries down to 1.7 per cent, while German bunds of the same maturity became even more expensive with a yield of 1.4 per cent. 

It is doubtful that the respective governments concerned viewed these developments as positive. As Neil Collins of the Financial Times pointed out, this asset class has now morphed from being the definitive risk-free asset, to simply offering return-free risk. 

Despite that, the market still views a select group of AAA and AA governments as the safest place to be during this unprecedented period of uncertainty. That is bad news for business and economic growth, because it is pulling risk capital away from productive investment opportunities, and allocating it instead to unproductive lending to bureaucrats. 

It is not only governments and central banks that are buying these IOUs - corporations and aspiring pensioners are as well. Such an emphasis on one asset class in so many different portfolios does not bode well, and history strongly suggests it will have a sticky ending.   

At the heart of modern portfolio theory is diversification. But the necessity of diversity applies to the owners as well as the asset classes. If one asset class is so widely held by so many different types of investors, it begs the following question: who will be the buyers when all the current investors decide to exit? 

Whatever the ramifications are for asset allocation, the reason for the crisis is well understood. There are huge doubts over the creditworthiness of banks and countries on the periphery of Europe. 

Although everyone knows that these banks and countries are really bust, there is still a hope that someone will bail them out. It’s just that Angela Merkel hasn’t volunteered yet. 

In the short term, the cost of bailing out Greece and Spain will be a lot less than what’s likely to be incurred in kicking them out of the euro. Such a development would expose the ECB as insolvent and in need of a massive capital injection from the Bundesbank - not something likely to appeal to German voters.  

Moreover, allowing all those countries to leave will shrink the export market for German goods. And it is this trade with uncompetitive neighbours that has been Germany’s big advantage over the last decade.

Once that goes so does Germany’s growth, and with it any prospect for a pickup in metal demand in Europe.

But China remains a never-ending pit of metal consumption and there are good signs that US fabrication is also picking up. So at the moment metal demand is running pretty close to supply and the markets are not too far out of balance, save for copper where published data on inventories in LME and Shanghai warehouses still show amazingly low levels at 391,254 tonnes.  

But if overall demand does weaken further and depress prices, there will be a supply side response with production cuts that will act to stabilise prices. 

No such mechanism exists in the sovereign debt market. When pension funds, central banks and investors are no longer willing, or able, to mop up the torrent of bonds being issued by all and sundry there is no self correcting procedure to limit supply. 

Then, prices will collapse in what will be a truly scary sell-off, because there will be no one left to buy them. Whether the other asset classes will rally as bonds sell off is the big question for asset allocators.      

Source >> www.minesite.com
*****


----------



## drillinto

List of the largest sovereign wealth funds
The majority is oil & gas related

http://www.swfinstitute.org/fund-rankings/


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           

http://www.kitco.com/ind/matlack/may212012_juniors.html


----------



## drillinto

London, UK

May 20, 2012
That Was The Week That Was … In London
By Martin Li

The Eurozone crisis took another significant turn for the worse as Spain's borrowing costs again reached critical levels. Meanwhile, the problems in Greece rumble on as talk of a Greek exit from the Euro becomes ever more pronounced. Against this gloomy backdrop, not even the US$100 billion flotation of Facebook could prevent markets plummeting further. The FTSE 100 dropped 308 points, or 5.5 per cent, to 5,268.

But after last week’s falls, precious metals mostly held their own. Gold closed at US$1,591 per ounce, silver edged lower to US$28.62 per ounce, platinum edged lower to US$1,454 per ounce and palladium held firm at US$603 per ounce. The picture was more mixed in base metals, where copper fell to US$7,745 per tonne or US$3.51 per pound, but nickel climbed to US$17,150 per tonne. Zinc edged lower to US$1,920 per tonne. 
...
Source >> www.minesite.com


----------



## drillinto

June 02, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. How did your market perform in another difficult week?

Oz. Not as badly as might have been expected, but we’ll almost certainly be hit hard on Monday because the big sell-off in New York on Friday came after we had closed, and also, incidentally, after I had started a long-haul air trip over to your part of the world.
Minews. Yes, you mentioned a spot of travel over the next few weeks, while keeping an eye on your home market, so let’s make this the first of a few short reports for June.

Oz. Thanks, though I suspect that your readers will be grateful for hearing as little as possible about a market which is looking more shell-shocked by the day. As ever, it is the problems of Europe which are dragging the rest of the world down, though unlike the American version of the same excess-debt crisis which hit in 2008, this version appears to have no early solution because of the fractured and fractious nature of the European family.

For Australia and other resources-focussed economies, it’s a case of plugging ahead, and hoping that the major nations can agree on a solution that restores demand for commodities. Unfortunately, in Australia’s case there is the added problem of a government in deep political trouble, thrashing about looking for gimmicks and stunts to maintain its grip on power. The net result is a sort of stalemate which is hurting the small miners most, but which is also causing the big miners to put up the shutters when it comes to new-project investment.

Minews. Time is tight, as you have mentioned, let’s move quickly to prices.

Oz. Okay, bearing in mind that you’ll need to put a history filter over everything that happened last week because New York’s 2.2 per cent fall will flow into the Australian market on Monday, knocking out last week’s modest 0.8 per cent rise in the all ordinaries index, and the 0.6 per cent rise in the metal and mining index. The one sector that should produce good news next week will be gold, which reacted solidly to New York’s equity correction and to talk of more quantitative easing, code for more paper money and higher inflation in the future. Those concerns lifted gold to around US$1,625 per ounce late on Friday, and up to A$1,675 per ounce on conversion.
...

Source >> www.minesite.com
*****


----------



## drillinto

June 04, 2012
Don’t Miss Out: Any Breakup Of The Euro Would Trigger The Mother Of All Rallies
By Rob Davies

Albert Edwards, an economist at SociÃ©tÃ© GeneralÃ©, wrote a piece of research last week with a sub-title that went something like: “All hope will be crushed”. 

Since then equities and commodities have dropped and some sovereign debt markets have climbed. It is the collective wisdom of “the authorities” that the safest thing banks should be holding is debt issued by the governments of Germany, USA and the UK. 

And so the yields on ten year bonds issued by these countries are respectively: 1.2 per cent, 1.45 per cent and 1.53 per cent. But Albert Edwards believes yields on these instruments could fall to under one percent. 

No wonder Ross Norman of Sharps Pixley floated the kite that the Bank of International Settlements, the central bankers’ bank, is contemplating allowing commercial banks to hold gold as part of their Tier I assets. But surely that won’t happen until gold is much, much higher?

But what these market moves are telling us is that expectations of growth are being scaled back very rapidly, and not from a very high level in the first place. Even so, red-blooded investors seek out this sort of mood because they can provide excellent money-making opportunities. 

The difficulty is measuring how depressed people are. The simple way is looking at the change over the week.  Base metals fell 2.8 per cent to 3,216, as measured by the LME base metals index, about the same percentage fall as was endured in the major equity markets. 

And in percentage terms the gains made by US Treasuries of 16 per cent over the week are outstanding and put everything else in the shade and, along with the two per cent rise in the gold price, are testament to the apprehension in the market.  

Such pessimism can become self-fulfilling and investors become locked into a cycle of despair. While many observers are deeply sceptical of the effectiveness of intervention by the authorities, intervention nonetheless still has the potential to make a big impact. 

In the past few years central banks have responded several times to the prevailing gloom by creating liquidity through quantitative easing. These events have had a dramatic effect on the markets and spurred sharp rises in risk assets. The risk now is not being in the market if such an event was to be repeated.

Perhaps more likely though, is the event the authorities dread most: the departure of one or more countries from the eurozone, whether voluntary or involuntary. 

If the eurozone were to break up, even partially, a number of analysts think it would be the single most important factor to bring growth back, whatever the Germans might think. 

Such a development would have the benefit of inflicting the pain on the one country that is most able to suffer it. Germany, as a 27 per cent shareholder of the ECB, would be the country that would be most impacted by fringe countries leaving the euro. 

Such an action would mean that these countries would revert to their national currencies and almost certainly default on the euro loans they and their banks have taken from the ECB. 

While it would be painful for the Germans, and many European banks, a breakup of the euro would kick start growth in Europe and trigger the mother and father of rallies in risk assets like commodities and equities. 

Succumbing to the prevailing gloom, and not being invested in these assets if such a development happened, could potentially be very expensive - and galling, as cautious types watch those prepared to take risks being rewarded, at last.    

Source >> www.minesite.com
*****


----------



## drillinto

Must read !

PWC: Review of global trends in the mining industry - 2012
http://www.pwc.com/en_GX/gx/mining/publications/assets/mine-2012_final-6.4.pdf


----------



## drillinto

Global Mining Deals - 2012 Outlook

http://www.pwc.com/en_GX/gx/mining/...mining-2011-deals-review-and-2012-outlook.pdf

*****


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
Jun 5 2012 

http://www.kitco.com/ind/matlack/jun052012_juniors.html
[Several australian juniors are present in these lists]


----------



## drillinto

June 09, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Have you been able to keep an eye on your market while travelling?

Oz. I wouldn’t dare miss a day when conditions are this unstable! Even while in London it’s been important to check regularly on the ASX because, like you, we’ve been up one minute and down the next. Last week was a good example of that trend, with the gains from four up days cancelled out by one bad day, leaving the overall market almost exactly where it started. The exception was the gold index which managed to hold on to much of its gain thanks to the ongoing European wobbles, closing the week with a solid five per cent gain.

Minews. Have you seen differences between your home market and London?

Oz. Difficult to say, yet. Last week was exceptional in both places. London, obviously, was in party mood, when not dodging the weather. Australia was also being lulled somewhat by remarkable economic growth data which showed gross domestic product growth of 1.3 per cent in the March quarter, an annualised 5.2 per cent, which is a number you would normally associate with Chinese growth.

Minews. You don’t believe the numbers?

Oz. No, I suspect it will be revised down when the June quarter data comes out. But even if the number drops to an annualised three or four per cent that would still make Australia one of the world’s better performing economies, for now. But - and it is a big but - it is hard to see Australia maintaining that sort of growth if the rest of the world, particularly China, slows significantly.

Minews. Have you seen any other differences between our part of the world and yours? 

Oz. The key variance appears to be confidence, brought about by lower debt levels, our obvious proximity to China, and its demand for raw materials. Australia, unlike Europe, is not trying to compete with China. Instead it is successfully riding on the dragon’s tail, a profitable position for now, but one which will, in time, be tested.
 ...

Source >> www.minesite.com
*****


----------



## drillinto

June 11, 2012
Short Covering Pushes Commodities Markets Up Temporarily, But The Chinese Slowdown May Put A Longer Term Dampner On Prices
By Rob Davies

China accounts for 40 per cent of the 20 million tonnes of copper the world consumes every year. So when it sneezes lots of people rush out with tissues and words of reassurance, hoping that it hasn’t got Legionnaire’s disease. 

But when China cut its interest rate from 6.56 per cent to 6.31 per cent last week, it confirmed a widespread suspicion that the rate of growth in Chine is slowing quite rapidly. In turn that raised concerns about the prospects for global growth.

The initial reaction of capital markets to this bad news was to close short positions in commodities and equities. While these positions were probably put in place more to cover fears about the Eurozone than to offset worries about China, the negative news from the Middle Kingdom was still enough to confirm the opinion that there continues to be a lot to worry about. 

In any event the short covering rally pushed base metals up 0.9 per cent to take the LME index up to 3,241 by Thursday. Friday showed a weaker tone and left three month copper down US$200 at US$7,290 a tonne. 

On the face of it LME copper inventories of only 229,300 tonnes should support prices at these levels. Unfortunately, ANZ Bank estimates that China is sitting on another 750,000 tonnes of the red metal. That is quite an overhang, and more than enough to affect sentiment and depress prices.

The problem is that it is hard to know what the longer term outlook for China is. No one doubts the work ethic or the entrepreneurial zeal of the country. 

While those are important factors, much of the growth over the last two decades has been driven by the mass movement of labour from rural to urban areas. Here that labour - and there is lots of it - has been used much more productively, in a manner similar to the way that the industrial revolution deployed labour and drove growth in the UK in the nineteenth century.

There is, however, a cloud on the horizon. Uniquely among large countries China instigated a “one child” policy thirty years ago to limit explosive population growth. That worked, and the impact of the policy is now being felt in a labour force that is growing more slowly. 

Indeed, UBS estimates the Chinese work force will peak in 2015 and then start to shrink. From then on economic growth will depend on rising productivity rather than an expanding workforce. Making both occur at the same time, as is ideally the case in developed countries, remains a challenge.

If Chinese growth does stall, commodity markets will get precious little help from other parts of the world. There is a massive difference between China and the next largest source of demand for copper, which is Europe at 20 per cent of the total. 

Not only is this a much smaller market, it is now forecast to shrink by 0.3 per cent this year.  And since the heart of the Spanish banking crisis was overenthusiastic lending to property, leading to a massive overhang of unoccupied property, it is clear that the building industry is going to be subdued for a while. That is bad news for copper, since construction accounts for about a quarter of demand. 

It is always dangerous for any business to be overly reliant on any one customer. Unfortunately, that is the situation that commodity producers have got into now with China.

It is of course better to have had that demand over the last decade than not. Nevertheless, it may be that the mining industry may have to go back to the more mundane levels of demand growth it had before China took off on its bull run. 

Source >> www.minesite.com
*****


----------



## drillinto

Goldman Sachs Group Inc. (GS) said it expects a 29 percent return from the Standard & Poor's GSCI Enhanced Commodity Index over the next 12 months, with the biggest gains in energy and base metals.
Source >> Bloomberg, June 11.


----------



## drillinto

The gold/oil ratio: an ounce of gold will now buy you close to 20 barrels of crude oil 

http://www.bespokeinvest.com/thinkbig/2012/6/11/goldoil-ratio-approaching-20.html
***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
Bill Matlack           
Jun 5 2012 

http://www.kitco.com/ind/Matlack/jun052012.html
***     [Among the fertilizers, Incitec Pivot, IPL.ASX, is the best buy]


----------



## Mr Z

Wiess Research



> Chinese banks issued a whopping $125 billion in new loans in May, a record for the month of May and widely exceeding analyst estimates. In addition, M2, the broadest measure of money supply, surged 13.2% in May from a year earlier.




The taps are open again in China.


----------



## drillinto

Statistical Review of World Energy 2012

http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481


----------



## drillinto

June 15, 2012
That Was The Week That Was … In Canada
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed over the past week.

CC. Canadian manufacturing sales declined for the third time in four months in April, and Canada’s Federal Finance Minster warned Canadians that the European financial crisis will affect the Canadian Economy. 

Minews. You have to love the brilliant deductive reasoning of a politician. 

CC. Yes. And the Governor of the Bank of Canada and his policy team voiced similar logical conclusions by reiterating that Europe’s worsening drama could do damage to the global recovery. The end result of all that bleak economic news was a very cautious week of trading ahead of the Greek election on Sunday. Once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had lost 3.24 per cent, while the TSX Gold Index had moved the other direction having added a modest 0.13 of a per cent.

Source >> www.minesite.com


----------



## drillinto

June 16, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You don’t seem to have gone anywhere last week.

Oz. Not quite right. I’m still moving around Europe - it’s the Australian stock market which went absolutely nowhere last week. All major indices ended roughly where they started, with the only significant movers being the Aussie dollar and the price of gold, which both rose quite strongly. The dollar moved back through parity with its US cousin, negating for local gold miners some of the effects of the gold price stacking on the best part of US$50 an ounce. Across the sectors most share-price moves were modest, either way, with no discernible trend. Rises broadly matched losses, even among gold stocks.

Minews. That sounds a bit like northern hemisphere markets - almost as if we’re all waiting for something to happen.

Oz. Not a bad way of describing today’s mood, though by Monday we might have a clearer picture of what’s going to happen in Greece, which should help determine what happens in Europe. The problem, which we’ve discussed in the past, is how the different pieces of the world are connected with slowdowns in one area affecting the next and that, in turn, affecting demand for minerals and metals and share prices on the ASX.

Minews. And that uncertainty you refer to can be seen in the higher gold price. But why the stronger Australian dollar?

Oz. The only explanation is that the Australian currency is being treated as a safe haven from what might happen in Europe - a bit like the way your pound has become a favourite of rich Greek escapees.
...

Source >> www.minesite.com
*****


----------



## Uncle Festivus

Mr Z said:


> Wiess Research
> 
> 
> 
> The taps are open again in China.




:bazooka: Hank Paulson had the bazooka solution too - still waiting for the US 'recovery' to materialise??

But nobody can (wants to) put a bucket under the tap because all their buckets are overflowing already?

It'll be like all the rest - pushing on a piece of spaghetti if there is no intrinsic demand (because of oversupply)

What are they going to do - build more apartments  that nobody buys, build more roads, bridges, cars, power stations etc

The commodities boom has just busted......


----------



## drillinto

June 15 - The Hong Kong stock exchange said Friday it had entered into an agreement to buy the London Metal Exchange (LME) for a total of £1.39 billion (US$2.15 billion).

*****


----------



## drillinto

Performance numbers for the major stock market indices of 77 countries around the world

Major commodity-producer countries: South Africa: +5.72%; Australia: -0.35%; Brazil: -2.49%; Canada: -4.02%

http://www.bespokeinvest.com/thinkbig/2012/6/14/us-overtakes-germany-for-top-spot-in-2012.html


----------



## drillinto

Jim Rogers' advice amid all the global economic turmoil: Short stocks, consider commodities and to heck with European bailouts. (June 12, 2012)


----------



## drillinto

Japan is the world's largest LNG importer

Australia is a major exporter of LNG to Japan

http://www.eia.gov/countries/cab.cfm?fips=JA


----------



## drillinto

drillinto said:


> June 15 - The Hong Kong stock exchange said Friday it had entered into an agreement to buy the London Metal Exchange (LME) for a total of £1.39 billion (US$2.15 billion).
> 
> *****




Visit >> http://www.lme.com/
***


----------



## drillinto

June 18, 2012
Buying The Market, Literally
Rob Davies

If you are not sure which part of the market is going to go up, then it makes sense to buy all of it. And that, literally, is what the Chinese have done, by buying the London Metal Exchange for £1.39 billion. 

According the Financial Times that price is somewhere between 120 and 180 times last year’s earnings, which seems appropriate in a funny sort of way, since the exchange is 135 years old. 

It is of course entirely sensible that markets migrate to where the demand is. In times past regional centres of metal processing, like Swansea, had their own metal exchanges, but business migration and technology subsequently resulted in London becoming the dominant centre for commodity trading. 

Now that China accounts for 40 per cent of world metal demand it makes sense for it to own the exchange, even if it does not physically move. 

And there was plenty of news flow this week to remind the market why the east is more important. US industrial production fell by 0.1 per cent in May, but during the same month inventories of copper in Shanghai fell to 130,143 tonnes. This is the lowest level this year. 

It is true that concerns over slowing growth in China hit mining shares and pushed the LME index down one per cent to 3,210.7. Nevertheless, China is still growing, in marked contrast to some other parts of the world, most notably Europe.

And while the euro-drama keeps everyone transfixed, the ultimate outcome remains as unclear as ever. What does seem obvious, especially to Anglo-Saxon capitalists, is that the highly ordered structure of the eurozone seems destined to follow the Second Law of Thermodynamics and become disordered. 

The elegant creation of bureaucrats and politicians united under the rules and regulations of Roman Law is about to be destroyed by the raw brutality of free markets under common law.

The concept that no one actually knows the right price of anything until tested by competing buyers and sellers is anathema to those that wish to control such matters.  But it is the only one that works.

This resistance to letting markets determine the right price is making the whole process much more protracted than it should be. There seems to be little doubt though, that the current set-up is unstable. 

And whatever evolves from the ructions that seem about to befall the continent will surely be more stable, albeit less ordered, and that ought to be conducive for growth. And it is growth that drives metal demand. 

Nowhere is this better illustrated than in the nickel market. Prices are languishing at US$16,825 a tonne, the lowest for three years because, according to Bloomberg, it was oversupplied by 14,600 tonnes in the first quarter. 

Refined output has exceeded demand by 1.8 per cent this year so far, and has resulted in a 15 per cent increase in LME nickel inventory to 103,932 tonnes. Until prices drop even further and force capacity closures, this market will stay oversupplied. 

And that logic applies to all the other base metals apart from copper. However, even that market will start to feel the pressure unless global growth rates increase. At least the low inventory levels in copper will provide support that is lacking in the other metals. 

Having just bought the metal exchange at an eye-watering valuation no one is hoping more than the Chinese that the growth will continue. Otherwise it will look as if the metal exchange brokers have pulled off the deal of the century: for themselves.  

Source >> www.minesite.com
*****


----------



## drillinto

World's Coal Consumption 

http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9041233&contentId=7075263


----------



## Joules MM1

*Speed Up or Slow Down””Don’t Exit the Commodities Highway*

June 18, 2012
http://www.usfunds.com/investor-res...-slow-down-dont-exit-the-commodities-highway/

excerpt




excerpt



> ...positive signal received recently came from Goldman Sachs, when the firm recommended “stepping back into the markets” in its latest Commodity Watch. Goldman is anticipating a 29 percent return for the S&P GSCI Enhanced Commodity Index over the next 12 months and......


----------



## Uncle Festivus

> ...positive signal received recently came from Goldman Sachs, when the firm recommended “stepping back into the markets” in its latest Commodity Watch. Goldman is anticipating a 29 percent return for the S&P GSCI Enhanced Commodity Index over the next 12 months and......



That's good enough of a top for me - if ever there was a contrarian signal as a long call from GS?


----------



## drillinto

Platinum to gold ratio is again below zero

http://www.bespokeinvest.com/thinkbig/2012/6/20/platinum-to-gold-ratio.html
***


----------



## Garpal Gumnut

Yep.

I'd agree.

Anyone not buying commodities atm is going to be poor in 24 months time.

gg


----------



## drillinto

Oil and Natural Gas are still moving in different directions

http://www.bespokeinvest.com/thinkb...gas-still-moving-in-different-directions.html
***


----------



## drillinto

Commodity prices versus long-term average

http://www.bespokeinvest.com/thinkbig/2012/6/22/commodity-prices-vs-long-term-average.html
***


----------



## drillinto

June 24, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Any good news from what looks to have been another gloomy week on your market?

Oz. Yes, but from an unexpected sector. Uranium, for the first time in months, produced the largest collection of winners in what was otherwise a generally flat market. None of the rises stood out, but there was an unmistakable upward trend following a Japanese decision to re-start some mothballed nuclear reactors. Investors seem to have treated that news as a sign that the rest of the world will re-embrace nuclear power as an alternative to fossil fuels and high-cost renewable power sources.
...

Source >> www.minesite.com
*****


----------



## drillinto

June 25, 2012
Calling The Market? - It's Business As Usual For The Likes Of Glencore
By Rob Davies

While the leaders of the world’s leading countries flit from conference to conference in a seemingly never-ending circuit of high level talks that change nothing, the business of exploring, developing and running mines continues. 

And it’s worth noting that even if these talks may have huge impacts on demand there haven’t been too many hiccups of late on the supply side. The most recent is fairly small and unlikely to affect markets too much - in Bolivia the government of Evo Morales has decided to nationalise the Colquiri tin and zinc mine owned by Glencore. 

But since tin is a tiny market and there are huge stockpiles of zinc - 991,850 tonnes at the LME alone - the impact is limited.

More important is the fall in the oil price to US$90 a barrel, albeit that the effects of the fall have been a little diluted by the rise in the dollar. Even so, the weaker oil price will provide a welcome relief to miners, as oil is one of their largest input costs. 

And the impact on margins should be noticeable too. The 24 per cent drop in the oil price mitigates against the 13 per cent decline in the LME index of base metals to 3,141 over the same period. 

As is often the case though, mining shares have already discounted this decline in metal prices. Over the last twelve months base metal prices have dropped 29 per cent, which is only a tad more than the 28 per cent decline in the UK mining index. 

Mind you, two per cent of that 28 per cent fall happened on Friday. And, knowing the way markets over-react it is highly likely that mining shares will continue on slide on price weakness in metals. 

That said, there is already a lot of scepticism about the prospects for metals and miners built in - the sector is currently trading on a price earnings ratio of less than five. 

Of course, the case can be made that that multiple reflects bumper earnings that may not be repeated. But while it may be true, it still doesn’t account for the reserves that miners currently boast, which ensure that most of them will be digging out metals for a lot more than five years. 

What is harder to quantify is the impact of any sudden loss of those reserves through events such as happened in Bolivia. Glencore and Xstrata are perhaps more vulnerable to these events than the other miners because their historic growth has been biased to these high cost mines in parts of the world that other miners have avoided.  

While metal prices were rising this was a great strategy and generated rising profits for both companies. Now that momentum is fading, the business imperative to strengthen the balance sheet to survive whatever comes next is clear. 

That is one of the underlying reasons for the two to merge. Some City types are cavilling at the size of the retention packages being sought by the senior executives and Mick Davies in particular. 

Yet if anyone deserves a prize for calling the commodity sector correctly it must be him. He was the one who acted decisively by buying high cost mines, like Mt Isa, that had struggled for years with low prices just before they took off on the surging Chinese demand that then transformed the earnings.  

But whatever happens in Europe, or Bolivia, the hardest trick of all in mining remains trying to anticipate what might happen next. And that is business as usual for miners like Glencore.

Source >>> www.minesite.com
*****


----------



## drillinto

NYSE: Fertilizer Stocks Outperform
25-Jun-12 12:00 (NY time)

The major averages remain on session lows as a loss of 2.0% has the Nasdaq pacing the decline.
One bright spot in today's selloff is the fertilizer sector which was upgraded at Dahlman Rose. CF Industries (CF 181.27, +3.58), Potash Corp. (POT 40.78, +0.44), and Mosaic (MOS 108.14, +0.56) are among those seeing solid gains. The sector's upgrade comes at a time when grain prices continue to climb amid dry weather in key crop areas.

[ At ASX, on 25 June, Incitec Pivot (IPL.AX) was up 1.45% ]
***


----------



## drillinto

drillinto said:


> NYSE: Fertilizer Stocks Outperform
> 25-Jun-12 12:00 (NY time)
> 
> The major averages remain on session lows as a loss of 2.0% has the Nasdaq pacing the decline.
> One bright spot in today's selloff is the fertilizer sector which was upgraded at Dahlman Rose. CF Industries (CF 181.27, +3.58), Potash Corp. (POT 40.78, +0.44), and Mosaic (MOS 108.14, +0.56) are among those seeing solid gains. The sector's upgrade comes at a time when grain prices continue to climb amid dry weather in key crop areas.
> 
> [ At ASX, on 25 June, Incitec Pivot (IPL.AX) was up 1.45% ]
> ***




Incitec Pivot (IPL.AX) is currently up 2.51%


----------



## drillinto

Fertilizer Names Advance for Second Day
26-Jun-12 12:30, NY Time

Fertilizer stocks are seeing a continuation of yesterday’s strong gains as dry weather continues to plague key crop areas. CF Industries (CF 189.28, +5.62%), Mosaic (MOS 53.34, +2.24%), and Agrium (AGU 87.03, +1.57%) are all seeing strong gains.  

*****


----------



## drillinto

drillinto said:


> Fertilizer Names Advance for Second Day
> 26-Jun-12 12:30, NY Time
> 
> Fertilizer stocks are seeing a continuation of yesterday’s strong gains as dry weather continues to plague key crop areas. CF Industries (CF 189.28, +5.62%), Mosaic (MOS 53.34, +2.24%), and Agrium (AGU 87.03, +1.57%) are all seeing strong gains.
> 
> *****




Week June 21 - June 27
Incitec Pivot (IPL.AX): +7.14%


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
By Bill Matlack           
Jun 25, 2012 

See the link below for the senior producers of fertilizers
There is only one australian company listed, Incitec Pivot (IPL.AX)
Incitec Pivot has the best buy rating, 1.9


http://www.kitco.com/ind/Matlack/jun252012.html
***


----------



## drillinto

US ETFs: Energy Commodities Struggle

Oil's (USO) struggles in 2012 are apparent too, as it's now the second worst performer on the entire list behind natural gas (UNG).

http://www.bespokeinvest.com/thinkbig/2012/6/22/the-us-outperforms-energy-commodities-struggle.html


----------



## drillinto

US Crude Oil Inventories Fall Less Than Expected

http://www.bespokeinvest.com/thinkbig/2012/6/27/crude-oil-inventories-fall-less-than-expected.html
***


----------



## drillinto

Garpal Gumnut said:


> Yep.
> 
> I'd agree.
> 
> Anyone not buying commodities atm is going to be poor in 24 months time.
> 
> gg




“Commodities are just an unknown asset class at the moment. A huge amount of money will come into commodities the next decade as people learn about supply shortages. Very few people are invested in real assets.”
Jim Rogers, June 27, 2012
*****


----------



## drillinto

June 29, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like your market started flat but ended strongly.

Oz. It was good Friday, as the market recouped quite a bit of lost ground and was enlivened by a high-priced gold merger and fresh hope of a European financial solution. The patient shareholders of Allied Gold (ALD) certainly had a lot to smile about when St Barbara Mines (SBM) rolled out a friendly cash and shares bid priced at a 90 per cent premium to Allied’s previous closing price. Needless to say Allied soared, rising 60 per cent to A86.5 cents, closing at A$2.30. St Barbara investors will be less thrilled. Their company fell by A35 cents (16.5 per cent) to A$1.77.


Minews. Very hot and cold. What do you make of the deal?

Oz. The theory seems fine. It creates one of the biggest gold companies on the ASX, with production heading for a combined 435,000 ounces a year from 2013. The price, however, is just as interesting and has a whiff of excessive urgency on the part of St Barbara, which needs to do a deal to supplement existing production from old and deep mines.

Minews. And the rest of the market?

Oz. As mentioned it was an up week, but only just. The all ordinaries added one per cent, with all of that coming on Friday. The metals and mining index rose an even more impressive 2.3 per cent on Friday, on hope of a deal to end the European crisis, but that one-day swing needs to be seen against a modest 0.5 per cent fall across the overall week. The gold index dropped by 2.1 per cent as local companies felt the pressure of a weaker US dollar gold price, and fresh uplift in the Australian dollar which sailed back to US$1.01. There were equally impressive rises against the Euro and the UK pound.
...

Source >> www.minesite.com
*****


----------



## drillinto

July 02, 2012
Friday’s Positive Blip Does Nothing To Mask The Reality That The Eurozone Is Still In Thrall To Zombie Loans
By Rob Davies

Investors will look in vain to any development in the mining world for an explanation for Friday’s two per cent rise in the price of copper for delivery in three months, to US$7,585 a tonne. 

The sudden jump was in sharp contrast to the steady decline in the quote over recent last weeks and months. But as is so often the case these days the reason lies in the volatile and frenzied world of European politics and monetary policy, rather than in the logical and ordered commodity markets that respond to changes in demand by altering supply.

The reason for the leap in the copper price was yet another midnight statement from a collection of European leaders designed to reassure “the markets”. Here they were addressing sovereign debt traders rather than commodity dealers, and it is actually rather surprising that that they reacted so well. 

Whether their optimism was justified or not, the euphoria spread to equities and base metals and then everything jumped. No doubt a lot of it was simply traders covering short positions.
That the net change in the LME index over the week was a actually fall of 0.3 per cent demonstrates that the rally was really just a small blip in a long gradual slide. 

What is surprising to many observers though, is that bond investors have been naive enough to swallow the story that the problems of failed banks in Spain will be solved by the injection of cash from the ECB.  

The loans have not been repaid - they are still a problem. All that will happen now is that ownership of them will be transferred to the ECB, and thus socialised around the whole eurozone, and especially Germany. 

Consequently German taxpayers are now on the hook for debt owed on a property that will never be recovered. A free market solution would be for the Germans, and other Europeans, to take ownership of these properties and eventually sell them to recover as whatever value they still retained. 

That won’t happen for all sorts of reasons, so there needs be a political fudge that is acceptable to all sides. It does not change the underlying economic reality and these zombie loans will hang over the eurozone, stunting growth in the same way that the debt mountain in Japan consigned that country to more than two lost decades.

While the blip on Friday is a welcome relief it seems unlikely to reverse the moribund state of the capital markets. Investors need to see evidence that real change is underway, and that means a dramatic ally different approach to the treatment of the bad debt held by the banks. 

There is no evidence that is about to happen. Indeed, it probably won’t happen until and unless there is some large catalyst for change. 

Dramatic statements after a conference make good headlines for the next day’s press. But the lack of real detail will soon become apparent. The sort of fudge we saw last week is no substitute for the harsh discipline of capitalism, however painful. 

In the end, the problem of a bad loan is the same, whether hidden in the reserves or recognised and written off in a blaze of red ink. 

The difference is that once written off the bank and the economy can move forward quickly.  Unfortunately, no European politician wants a headline that says a bank has failed. 

Source >> www.minesite.com
*****


----------



## drillinto

Asset Class Performance: Natural Gas (UNG) did well in the second quarter.

http://www.bespokeinvest.com/thinkbig/2012/7/2/first-half-asset-class-performance.html
***


----------



## drillinto

Bespoke's Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/7/3/bespokes-commodity-snapshot.html
***


----------



## drillinto

US Dollar Rallying to Two Year Highs

http://www.bespokeinvest.com/thinkbig/2012/7/11/us-dollar-rallying-to-two-year-highs.html


----------



## drillinto

US: Key ETF Performance

http://www.bespokeinvest.com/thinkbig/2012/7/10/a-weak-4-days-since-the-4th.html
***


----------



## drillinto

July 13, 2012
That Was The Week That Was … In Canada
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed over the past week.

CC. Worries about a faltering global economy put sell pressure on commodities, and that in turn impacted the resource-rich Canadian markets. And there was plenty of other negativity about, to go alongside the weak macroeconomic picture. Certain Canadian-listed miners are also grappling with political interference, production issues and angry shareholders. In addition, regulators are raising questions about a recently reported 10.6 million ounce gold resource which appears to have technical shortfalls. Once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had dropped 2.01 per cent, while the TSX Gold Index had plunged 4.92 per cent.
...
Source >> www.minesite.com


----------



## drillinto

Must read !

MIT study (2012): "The Future of Natural Gas"

http://web.mit.edu/mitei/research/studies/documents/natural-gas-2011/NaturalGas_ExecutiveSummary.pdf


----------



## drillinto

July 14, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like it was another tough week for your market but with a brighter ending.

Oz. That’s stretching it a bit. The week was down all the way with the tiniest of upticks on Friday. China’s softer-than-expected landing, so far, was the reason for the Friday recovery, though the recovery here was much more modest than on other international markets. On the ASX, all of the major indices crept a few points higher on Friday, but not enough to offset the solid falls of the first four days of the week. 
While the London and New York markets were up by around one per cent on Friday, the ASX rose by 0.3 per cent. Among the mining companies the reaction to China’s surprisingly strong June quarter growth rate was even more muted. The metals and mining index added just 1.5 points on Friday, which is too small to even measure as a percentage rise, and meaning it still ended the week down a thumping seven per cent, beaten only by the gold index which lost 10 per cent.

Minews. With so much of the economy exposed to Chinese demand that modest reaction must have been a surprise.

Oz. It was, but the Australian market is being held back by the uniquely Australian factors which we’ve discussed in the past. The heavier tax regime that’s being imposed on miners, and on the broader economy through the new carbon tax, is weighing heavily on investors who seem to have decided that not much is going to happen while a deeply unpopular government serves out its term.

Last week, the big news down this way was a cat fight between the ruling Labor Party and the Green Party which is keeping it in power through a loose alliance. Some observers hope the name-calling is a precursor to an early election, but it’s more likely that we’ll limp along for another 12 months with a deeply-divided minority government trying to run the country through a hung Parliament.

Minews. A process which seems to have sidelined investors. Time for prices now, with any good news first, and then a call of the card.

Oz. Well, the good news will be short and not very sweet because there is virtually none to report. Of the companies I track on a weekly basis, and that’s about 100 of the smaller to medium explorers and miners, six managed to gain ground last week, which must be the worst result since the global financial crisis of 2008.

As far as can been seen, three iron ore companies managed small rises, along with two gold companies and one copper explorer. Iron Road (IRD) added A4 cents to A40.5 cents in thin trading, on no fresh news from its South Australian projects. Mindax (MDX), which has a mixed bag of uranium and iron ore assets, continued its curious upward run, adding A2 cents to A12.5 cents, meaning the shares have now nearly doubled over the past month. And Cape Lambert (CFE), another favourite of local speculators, crept up by half-a-cent to A12.5 cents.

The copper company in the black was Hot Chili, which also rose by the smallest possible amount, half-a-cent, to A43 cents. In the gold space, CGA (CGX) rose A4 cents to A$1.88, after reporting record gold production of 50,813 ounces for the June quarter, while Burey Gold (BYR) rose by half-a-cent to A4 cents in heavy trading, as interest continues to grow in its Mansounia project in Guinea.
...

Source >> www.minesite.com
*****


----------



## drillinto

July 2012
Kevin Rudd: The west isn’t ready for the rise of China
Distracted by economic crisis, social unrest and slipping influence, the west is completely unprepared for China’s imminent global dominance. Australia’s ex-prime minister says we must act to build new bridges.

www.newstatesman.com


----------



## drillinto

The end of the coal boom ?
By John Quiggin

http://johnquiggin.com/2012/06/27/the-end-of-the-coal-boom/
***


----------



## drillinto

July 16, 2012

"Rising Costs And Falling Demand May Put Mining Company Margins Under Increasing Pressure In The Months And Years Ahead"
Rob Davies

Over the last decade miners have enjoyed fat margins as a result of the confluence of two factors. First, because there’s been no spare capacity in the industry metal prices have moved to, and stayed at, the full marginal cost of production.

And more metal has only been available if prices have gone high enough to cover production costs and development and exploration costs. 

Second, production costs have been contained by an astonishing round of consolidation that involved the disappearance of long standing companies like Inco, Falconbridge, Western Mining, Mt Isa, Phelps Dodge, Asarco, Ashanti and many others into the maw of a handful of truly global miners.

The cost savings generated from this rationalisation more than compensated for higher input costs for fuel, tyres and labour. 

That game is over and more fundamental cost issues are beginning to surface. A straightforward enough example involves the cost of electricity in Zambia. Currently priced at six or seven cents per kW hour, Zambia’s existing 1,585 MW of installed capacity now falls short of demand by 54 MW. To bridge that gap and supply the additional power that forecasters say well be needed, implies a doubling in the price of electricity to 10 to 12 cents a kW hour by 2015, according to Bloomberg. 

More worrying even than cost inflation is the outlook for demand. In the last decade demand grew faster than supply, and that has helped keep prices up at the full marginal cost of production. Now it seems global economic activity is set for a prolonged period of slower growth. 

Bill Gross is boss of Pimco, the world’s largest bond fund manager. He knows about economics from the sharp end and he reckons that the US, still the world’s largest economy, is set for a decade when it will, on average, expand by 1.5 per cent a year. 

One reason for that rate of growth is the ballooning government obligations. Gross estimates that total US debt stands at 800 per cent of GDP when all its future obligations are included. Economic history tells us growth suffers when debt exceeds 100 per cent of GDP. 

The US is a developed economy so it doesn’t need much metal to generate wealth. It is more about services than building stuff so a 1.5 per cent rise in GDP will probably translate into just 0.75 per cent additional demand for metal. That modest expansion should be easy for the world mining industry to supply.

The optimists of course point to China where not only is growth still strong, but where the economy is highly metal intensive. That’s why it is the largest consumer of metals despite being the second largest economy. According to official data released on Friday China is still growing at 7.5 per cent a year.

This might be less than the eight or nine per cent recorded last year or the 10 per cent reached in one quarter in 2010 but it is still an extremely healthy figure. 

Yes, but. Chinese data is best described as soft. What concerns some analysts is that this expansion has been achieved with no measurable increase in electricity generation. It seems unfeasible to get a 9.5 per cent increase in industrial production, which accounts for 40 per cent of the economy, without any more power being needed. Even with energy saving programmes in place. Maybe Chinese growth is not that robust.

If demand does slow, causing metal prices drift back to match cash operating costs at the same time as those costs are rising, margins for the miners are going to come under pressure. Instead of widening, the two sides of the pincers will be starting to close.

Source >> www.minesite.com
*****


----------



## drillinto

Fertilizers strong at NYSE (July 17)

Fertilizer names are seeing strong gains after Mosaic Co. (MOS 57.56, +2.19) reported solid second quarter results.  Today’s advance has the stock trading at its best level since the end of March as bears look to defend resistance near the $58.00 level. Competitors Potash Corp. (POT 45.21, +1.13) and Agrium (AGU 92.59, +1.04) are piggybacking gains with respective advances of 2.6% and 1.1%.

[Incitec Pivot, IPL.AX, on July 17: +0.00%]


----------



## drillinto

High Short Interest for Some ETFs traded on US exchanges

http://www.bespokeinvest.com/thinkbig/2012/7/17/high-short-interest-for-some-etfs.html

[Note: EWA, the Australia ETF, is not in the current list]


----------



## Joules MM1

drillinto said:


> High Short Interest for Some ETFs traded on US exchanges
> 
> http://www.bespokeinvest.com/thinkbig/2012/7/17/high-short-interest-for-some-etfs.html
> 
> [Note: EWA, the Australia ETF, is not in the current list]






> In fact, there are four ETFs that have more shares shorted than shares outstanding.





there's a major bull market in many major instruments now.....it's the shorting bull market......

how soon shall it  be crushed ?


----------



## drillinto

drillinto said:


> Fertilizers strong at NYSE (July 17)
> 
> Fertilizer names are seeing strong gains after Mosaic Co. (MOS 57.56, +2.19) reported solid second quarter results.  Today’s advance has the stock trading at its best level since the end of March as bears look to defend resistance near the $58.00 level. Competitors Potash Corp. (POT 45.21, +1.13) and Agrium (AGU 92.59, +1.04) are piggybacking gains with respective advances of 2.6% and 1.1%.
> 
> [Incitec Pivot, IPL.AX, on July 17: +0.00%]




Incitec Pivot, IPL.AX, advanced +2.867%(July 18)


----------



## drillinto

US: Technology the Lone Holdout

http://www.bespokeinvest.com/thinkbig/2012/7/18/technology-the-lone-holdout.html

[Where could one find this type of tool for OZ stocks ?]


----------



## drillinto

July 21, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have performed well last week.

Oz. It did, as China’s release of surprisingly strong economic growth data boosted confidence. But having said that, the overall mood remained deeply cautious. All of the key indices rose last week, but so did stockpiles of Australia’s major mineral exports, iron ore and coal. The all ordinaries rose by 2.7 per cent. The gold index added 3.2 per cent, while the metals and mining index crept up by 1.8 per cent, the weaker rise perhaps reflecting the stockpile issue, and the lower iron ore price.

The best performing sector down this way was oil and gas, a result of the rising oil price and never ending Middle East tensions. You can measure the progress of oil in a number of ways.

Obviously there are the higher prices of oil producers, but for followers of mining companies, it’s also worth considering the gap that opened up between Rio Tinto (RIO), which does not have an oil division, and BHP Billiton (BHP), which does. Rio Tinto fell by A69 cents last week to A$53.39. BHP rose by A88 cents to A$31.36.

The falling price of iron ore, which accounts for close to 75 per cent of Rio Tinto’s profit, dragged its share price down, just as it did a number of other iron ore stocks. It was also a possible contributor to a surprise “man overboard” event. Russell Clark, the hard-driving chief executive of Grange Resources (GRR), made a sudden exit on Friday, just as Grange attempts to put the finishing touches on a big capital and debt package for its Southdown magnetite processing venture.
...

Source >> www.minesite.com


----------



## drillinto

"The Economics of Mining Booms"
By Henry Ergas

http://blogs.theaustralian.news.com...alian/comments/the_economics_of_mining_booms/

*****


----------



## drillinto

July 23, 2012
Prospects For Global Growth Drive Up Metals Prices, In Spite Of The Gloomy Prognostications Of Western Commentators
Rob Davies

If the mass media were to be believed the world is an economic train smash that is about to get a lot worse. 

So it was pleasant to read the latest economic forecast from the IMF. First off, this august body stated that world growth in the dim and distant past that was the first quarter of this year was 3.6 per cent.  

As that was 25 basis points more than it forecast there was rejoicing all round. 

Except that the IMF then said it had edged down its forecasts for 2012 and 2013 to 3.5 per cent and 3.9 per cent respectively. Even so, although these figures are not fantastic, they are not horrific either. 

And this expression of confidence was enough to push the LME base metal index up 2.7 per cent to 3275.1. That is good going in anyone’s language, especially with equity markets going nowhere and bond prices for any country without a Latin base to its language in the stratosphere.

It has become commonplace now to write off commodities. Surely, many analysts and fund managers say, it must be right to short them if the prospects are so weak?  

Well, only if you can get the metal to sell. True, inventories of zinc in LME warehouses did rise above one million tonnes last week. In a small market that is quite a lot of surplus metal. 

But even so the zinc price climbed from US$1,832 to US$1,882 a tonne over the week, so most people seem fairly relaxed about it. 

Meanwhile, LME inventories of copper rose 0.5 per cent to 252,550 tonnes. So, even adding in the disclosed 160,973 tonnes in the Shanghai warehouse there is really very little excess copper visible to the trader’s eye. 

And even if there are massive undisclosed stocks of copper in China the chances of getting hold of it to short look pretty remote.  That was why copper prices gained 3.5 per cent to $7,764 a tonne last week.  

Because if the IMF is right, and China grows at eight per cent this year and 8.5 per cent next year, that copper will be needed by the Middle Kingdom to help construct its infrastructure. 

The overwhelming tone of gloom in the press is undoubtedly because the developed world, where most commentators reside, is only forecast to grow at 1.4 per cent and 1.9 per cent this year and next. 

These data from the IMF remind us that the metal markets are still an emerging market story, from the demand side even more than the supply side.

And production figures last week from the two big miners reminded the market just how strong that demand remains. BHP Billiton has delivered its twelfth consecutive year of increased iron ore production. The previous day Rio Tinto had set the scene with its production data which recorded increases across the board.  

This is rather at odds with the comment in the Financial Times that demand is sagging in China. Most journalists still seem unable to distinguish between lower rates of growth and markets that are actually shrinking. 

Despite the commentators’ wish for the bad news of a train smash, the IMF and the miners make it clear that the world is still growing. But when did good news ever sell a newspaper?

Source >> www.minesite.com


----------



## drillinto

Global Mining: 2011 Deals Review & 2012 Outlook

http://www.pwc.com/en_GX/gx/mining/...mining-2011-deals-review-and-2012-outlook.pdf

*****


----------



## JLM Financial

There aren’t as many commodities as there are stocks.  I wonder if renewable commodities may be more lucrative in the future.  

http://www.futuresmag.com/topic/commodities?ref=nav - this is a great website for news on ags, energies and metals.


----------



## drillinto

"Uranium 2011: Resources, Production and Demand", commonly referred to as the "Red Book", shows that total identified uranium resources have grown 12.5% since 2008. However, the costs of production have also increased, leading to reductions in lower cost category resources. These figures, which reflect the situation as of 1 January 2011, mean that total identified resources are sufficient for over 100 years of supply based on current requirements.

http://www.iaea.org/newscenter/pressreleases/2012/prn201219.html
***


----------



## drillinto

July 28, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks we’ve both had an interesting end to the week, you with a discovery, and London with the start of its Olympic party.

Oz. And what a start you’ve had with that astonishing opening ceremony. All we could manage down this way was a nickel and copper strike in an attempt to spark some life into what was really another fairly flat trading week. The all ordinaries and metals indices barely moved despite the Friday uplift which barely cancelled out the other four down days. Gold stocks did best overall, with the gold index rising by three per cent, following a solid rise in the price of bullion.

Minews. Tell us more about the discovery.

Oz. Sirius Resources (SIR) was the centre of attention as it rocketed up by a jaw-dropping 890 per cent in just 48 hours after reporting ore-grade assays from the its 70 per cent-owned Nova project in the Fraser Range near the south coast of Western Australia.

Much more work is required at the discovery site, but last week’s drill results drove the shares from A5.7 cents to a closing price on Friday of A56.5 cents. The shares even got as high as A63.5 cents in early Friday trade.

Two factors caught the eye of investors. First were the assays themselves, which included four metres at 3.8% nickel, plus 1.4% copper from a depth of 191 metres. Second was the potential importance of the discovery, as it could validate a theory that the largely unexplored Fraser Range will become a new mineral province, albeit one currently hidden by thick beds of wind-driven sand.

Minews. It sounds impressive, but is it really that good?

Oz. Now, that’s an interesting question, because there are some observers who wonder whether the market got somewhat over-excited about what is undoubtedly a very encouraging drill hit, but one that is relatively deep and in a very remote location. In theory, Nova could mark the start of opening a new mineralised province, but it could also turn out to be a one-hole wonder.

Still, the management at Sirius is certainly optimistic, and believes it has the tools to find a substantial deposit of nickel, copper, and possibly gold. There is also the added bonus that the man behind much of the current work at Fraser Range has a track record of discovery, and a pile of money to fund his exploration work.

Mark Creasy, the British-born prospector, who made his first fortune by selling the Bronzewing gold discovery some 20 years ago, has a 30 per cent personal stake in the Nova discovery and its surrounding package of tenements. Mark is convinced that the region will eventually yield major orebodies because it lies at the junction of two colliding geological structures.
...

Source >> www.minesite.com
*****


----------



## drillinto

July 30, 2012
Was Last Week Good Or Bad For Metals?
By Rob Davies

Was last week good or bad for metals? On the face of it a 3.5 per cent fall in the LME base metals index to 3160.2 doesn’t look encouraging. Copper led the way with a 3.3 per cent drop to US$7,510 a tonne but, rather confusingly, inventories of copper in LME warehouses also fell. 

True, the decline modest at only 2,650 tonnes, taking the total down to 249,900 tonnes. But that is an astonishingly low figure compared to the 1,006,475 tonnes of surplus zinc sitting in the same warehouses. 

On top of that copper in Shanghai warehouses also declined and now stand at just 156,510 tonnes.

Even if the Chinese are sitting on a lot of unreported metal the outward signs are that the markets remain tight. The premium for cash metal also underscores that. 

But those seeking evidence to support a bearish point of view can also point to the iron ore market where spot prices reached a 31 month low of US$116 a tonne. Bloomberg says this key industrial commodity may only average US$135 a tonne for the third quarter. 

Here again though, there are conflicting signals. 

In its interim results last week Anglo American admitted that its new iron ore mine in Brazil is suffering from more delays and that first production has been pushed back another year to 2014. It has yet to reveal what the revised capital cost is. The current estimate of US$5.8 billion is clearly way too low.

Anglo blamed bureaucratic and regulatory problems for the delay, but stopped short of accusing Brazil of frustrating it in order to assist its home grown miner. 

Given the slowdown of steel production in China, the major market for internationally traded iron ore, it would be understandable for the Brazilian government to do what it could to help Vale. 

Still, whether the 1.7 per cent fall in Chinese steel production in June relative to May is significant is hard to say at the moment. And what the implications are for steel output in two years time is beyond the wit of any analyst. 

All we know is that still takes a long time and a lot of money to add capacity.

At the moment the mood music in capital markets is universally bearish, and it is hard to find anyone prepared to put their head above the parapet and say something positive. Because in such an environment anyone brave enough to do so is likely to get it blown to smithereens. 

However, there is a ray of hope. 

If everyone is so negative the rewards for taking a positive stance could be enormous. The tone in Europe is so bearish that no one can contemplate any good outcomes. 

But it is perfectly possible that a small crack in the edifice of the euro, perhaps caused by a large country leaving or defaulting, would actually trigger a massive rally in risk assets. 

Most people understand, deep down, that many of these large countries will never repay the debts they have incurred as a result of the bank crisis. 

However, the pretence that they eventually will is constraining activity in every sector, as bank lending is constrained. Once reality is accepted, and assets are written down to realistic levels, there is a good chance distressed sales of property and other assets will trigger the mother and father of all recoveries. 

It just needs the Germans to realise they won’t be getting their money back. And that may take a while. And in the intervening time, the message of negativity in Europe will be the hardest signal of all to interpret.

Source >>> www.minesite.com
*****


----------



## drillinto

Performance of key ETFs

Outside of the US, Spain (EWP), Italy (EWI) and Japan (EWJ) took it on the chin in July, while Australia (EWA) did very well.  Commodities also did well, with natural gas (UNG) leading the way with a July gain of 14.26%.  This was the strongest performance of any ETF on the entire list

http://www.bespokeinvest.com/thinkbig/2012/8/1/july-key-etf-performance.html
***


----------



## drillinto

Jim Rogers International Commodities Index Agriculture: RICIA

http://www.worldcommodityfunds.com/RICIA
***


----------



## alex123711

Just wondering is there a way to invest in commodities for the long term and without leveraging?


----------



## drillinto

August 04, 2012
That Was The Week That Was … In Australia
By Our Man in Oz


...

Minews. Over to the fuels, coal and uranium, please.

Oz. Whitehaven, as mentioned, continues to worry investors because of the huge gap between a promised bid price and its sagging share price. The rest of the coal sector was mixed, trending down. Movers included: Coal of Africa (CZA), down A7.5 cents to A35 cents, Continental Coal (CCC), down A1 cent to A7.7 cents, Bandanna (BND), up A5 cents to A37.5 cents, Stanmore (SMR), up A1 cent to A36 cents, and Guildford (GUF), down A6 cents to A6 cents to A31 cents.

In uranium it was one up, and the rest down or flat. Toro (TOE) was the only explorer to swim against the tide. It added half a cent to A7.1 cents. Other movers and non-movers included: Uranex (UNX), down A1.5 cents to A10 cent, Greenland (GGG), down A1.5 cents to A40 cents, Bannerman (BMN), down A1.1 cents to A9.9 cents, Paladin (PDN), steady at A$1.16, and Manhattan (MHC), also steady at A18 cents.

Minews. Minor metals to close, thanks.

Oz. There were three reasonable rises among the minor-metal companies. Rare earths developer, Alkane, as mentioned earlier, rose A16 cents to A99 cents. Tin explorer Venture (VMS) caught the eye of investors with more discovery news from its Tasmanian operations, adding A10 cents to A37 cents, and Montezuma (MZM), one of the graphite hopefuls, put on A4 cents to A24 cents.

Elsewhere, Atlantic (ATI), the vanadium developer, fell A7 cents to A40 cents, rare earths specialist Lynas (LYC) rose A3.5 cents to A78.5 cents, and manganese miner OM Holdings (OMH) rose A1.5 cents to A41.5 cents. 

The lithium project developers, Galaxy (GXY) and Orocobre (ORE), went in opposite directions. Galaxy added A3.5 cents to A50 cents, and Orocobre lost A12 cents to A$1.57.

Minews. Thanks Oz.

Source >> www.minesite.com
*****


----------



## drillinto

alex123711 said:


> Just wondering is there a way to invest in commodities for the long term and without leveraging?




One way is BHP.


----------



## drillinto

Finviz.com (Financial visualizations)

Finviz works only with stocks listed in the american stock exchanges

Here is a list of the australian stocks:

Alumina AWC	
BHP Billiton	BHP	
Genetic Technologies GENE	
James Hardie Industries	JHX	
Lihir Gold LIHR	
Novogen NVGN	
Prana Biotechnology PRAN	
Samson Oil and Gas SSN	
Sims Metal Management SMS	
Westpac Banking	WBK	

*****


----------



## drillinto

August 06, 2012
Mario Draghi’s Game Of Euro-Poker Is Having A Far Greater Effect On Metals Prices 
Than The Mechanics Of Supply And Demand
By Rob Davies


It was another mixed week in capital markets, and the fact that it was so mixed can be blamed almost entirely on Mario Draghi, the President of the European Central bank. 
Not much more than a week ago, he said the ECB would do whatever it takes to defend the euro, even though with more than 10.4 per cent of Europeans without jobs the reasons for defending it are highly questionable.   

Nevertheless, when he said it the markets reacted to this assertion with euphoria and rallied strongly. But a week later he qualified his statement somewhat, and the markets blew a large raspberry. 

These gyrations, driven by investors trying to second guess what will happen next are far more important to the world of mining and metals than the internal mechanics of supply and demand. The two per cent fall in the LME index to 3094.8 last week was more influenced by attempts to interpret the ECB statements than news from the industry.

That said, BHP Billiton’s statement that it was taking a US$430m charge against the value of its Australian nickel assets did help to push nickel prices down US$335 a tonne to US$15,590, even though the move is constructive for the long term. 

An early recognition that some operations are not viable will help stabilise key metal prices over the economic cycle. But these actions don’t have the power to move markets in the way that pronouncements from the great and the good do.

It is though, increasingly clear that Draghi is simply playing a very large game of poker, with other people’s money, to defend the indefensible. Every rational person knows the euro needs to change drastically even if total failure does not occur.

The question other market operators have to figure out is how they can cope with and survive an event that seems certain to happen but which no one at a senior political level seems to be planning for. 

Instead, it’s down to the individuals. One such is International Airlines Group, the owner of both British Airways and Iberia, which admitted last week that it has put measures in place to deal with a breakup. 

IAG, and almost certainly every other international corporation, recognises that at some point Mr Draghi’s bluff will be called. And when that happens, the world will watch with bated breath to see if the Germans really will stand behind him and give him the ammunition he needs to back up his brave assertions. 

While Angela Merkel might be keen to help, there seems less assurance that Jens Weidman, President of the Bundesbank, will be so obliging. 

And what no one really knows are the consequences of the markets calling the bluff of the ECB, and winning. Bond markets think German bunds are the safest place to be and are prepared to buy them on a yield of 1.45 per cent. 

Next safest are US and UK debt at 1.56 per cent. Equities are viewed as the most dangerous place to put your money which is why they yield four per cent. 

Commodities are harder to value as they don’t provide an income, just protection against inflation. Right now inflation is relatively low, and falling, so this defence mechanism is not in demand. 

Believers in the Efficient Market Hypothesis would argue that these prices are all correct because the market is the ultimate repository of all knowledge. That is fine, if you think the market thinks Mr Draghi is not bluffing. 

It is harder to accept that if you believe the markets think he is bluffing. 

However, once everyone believes the market thinks he is bluffing, and Mr Draghi is forced to show his cards, the poker game is over. And that is when we really will see if the prevailing prices in the capital markets are correct, or not. 


Source >> www.minesite.com
*****


----------



## drillinto

S&P 500: Materials and Energy are both in extreme overbought territory.

http://www.bespokeinvest.com/thinkbig/2012/8/9/nine-of-ten-sectors-overbought.html
***


----------



## drillinto

August 11, 2012
That Was The Week That Was … In Canada <<<
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed over the past week.

CC. It was hard to focus on the financial markets with the excitement of the London Olympics taking hold. By all accounts, word from this side of the pond indicates a roaring success. That said, the tail end of the second quarter earnings parade and a bevy of corporate deals did keep traders at least partially locked onto their computer screens. Once all the trading was done the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had managed to tack on a modest 0.34 of a per cent, while the TSX Gold Index had fared much better, having added 3.58 per cent.
...

Source: www.minesite.com


----------



## drillinto

August 11, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like a rare good week all-round, with markets up, your Diggers & Dealers forum in full cry, and the Olympics keeping London happy.

Oz. It was a welcome break from the unpleasant period of everything falling, but I don’t think we’re out of the woods yet. News out of China after we closed on Friday remained fairly grim as iron ore and coal prices continue to fall, and the base metals show no sign of picking up. Nickel will be the one to watch because at its current level of around US$6.90 a pound there can’t be many nickel miners making money.


Minews. If that’s the case why was your nickel sector so strong last week?

Oz. Now that’s a really interesting question because we did see several nickel companies perform very well. The only answer seems to be that there was so much excitement about the Nova nickel-copper discovery of Sirius Resources that some investors decided to overlook the depressed metal price, and the discount on top of that which came as the Aussie dollar rose back over US$1.05, shrinking the local nickel price to around A$6.60/lb.

Last week, as nickel tumbled to its lowest level for three years, Western Areas (WSA), one of the local leaders, added A50 cents to its share price, which closed on Friday at A$5.00. Independence Group (IGO) was just as strong, rising by A26 cents to A$3.30, although no doubt aided by its exposure to gold. And Panoramic (PAN) and Mincor (MCR) were both better off too. Panoramic added A2 cents to A57 cents and Mincor also rose A2 cents to A67 cents.

Sirius, the company which started the current nickel stampede, crept A4 cents higher to A90 cents, but did hit an all-time high of A99 cents on Monday. But companies with exploration interests close to Nova failed to make much headway. Sheffield (SFX) crept up by half-a-cent to A40.5 cents. Buxton (BUX) added A1 cent to A17.5 cents, and Matsa (MAT) slipped A3 cents lower to A22.5 cents.

Minews. If I remember correctly, nickel is seen as an early-warning indicator in the Australian market.

Oz. You do remember correctly, and that’s why we started this week’s report with the nickel companies because they, for whatever reason, are often first to rise, and first to fall in our base metal cycle. Whether that’s happening this time, given the slowdown in the Chinese steel industry, which is the biggest consumer of nickel, remains to be seen.
...

Source >> www.minesite.com


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
Aug 6 2012 

http://www.kitco.com/ind/matlack/aug062012_juniors.html
***


----------



## drillinto

August 13, 2012
This Recession Won’t Last Forever, No Matter What The Papers Say
By Rob Davies

Most booms are described as unsustainable. By their very nature they are ephemeral. What fewer people realise is that recessions are also short lived, though to be sure this one is certainly turning out to be one of the longest on record.  

Last week is regarded as the fifth anniversary of the start of the recession.

The event that marked the beginning according to the standard view was the suspension by BNP Paribas of trading in two of its money market funds because of “the complete evaporation of liquidity in certain market segments of the US securitisation market”. 

The statement heralded the end of the subprime refinancing boom in the US and a collapse of a source of a vast amount of funding for the global economy. 

However, it did take a while for the bad news to feed through into other asset classes. Base metal prices, as measured by the LME index did not peak until March 2008, at 4,300 and the major mining companies carried on rising for another few months as BHP Billiton pursued its bid for Rio Tinto. 

After that the decline in metal prices was fast and furious as the index dropped like a stone to 1,600 in the first quarter of 2009. 

But thereafter the rebound was solid and steady as the industry realised that China was now for more important as a consumer than the West and that China was hoovering up metal to use in its development programme.  

In fact the base metals recession lasted barely 18 months. The rebound gathered pace and the index carried on rising until it surpassed its previous peak in the second quarter of 2011 at nearly 4,500.

Since then it has gradually declined to the current level of 3,187, as it is evident that growth is slowing in China and that this slower growth has not been augmented by a return to growth in Europe and that US economic activity remains anaemic.

The roller coaster ride undertaken by the index does not fully reflect the actual experience of the mining industries because industrial commodities like iron ore and coal have had a much better price history than base metals. 

It is only now, as these prices too fall back, that the major miners are starting to feel the effects. To put these developments in context it is always helpful to refer to the Rio Tinto Economic Outlook and Commodity Price presentation that accompanies its interim results. 

This time round Rio’s Economic Outlook makes many insightful comments. First, it makes the point that the recovery in US housing is still underway. Even though the subprime financing issue is no longer live, there is, and will probably always be, an underlying demand for more and better housing. Human nature always seeks to improve its lot. 

The same argument applies in China. Rio Tinto points out that metal demand increases with rising income. Even though Rio expects Chinese growth to slip back to an annual growth rate of six per cent, it points out that Chinese income per capita in 2011 was still less than US$10,000. 

Contrast that with current global income per head of about US$12,000 and the scope for additional commodity consumption is clear. Even after the Chinese consumption boom of the last decade, the average per capita consumption of steel there is just four tonnes a year. In South Korea over the same period it has been over three times that.   

A major driver for the Chinese consumption boom has been, and will continue to be, the migration of the Chinese population from the country to the cities. That transition alone increases steel consumption per head up 10 or 15 times.  And half the Chinese population is still rural. 

It is this drive to improve living conditions that underlies economic growth and ensures that recessions are the exception rather than the rule. They are unsustainable whatever the papers might say and that is what investors need to remember.

Source >>> www.minesite.com
*****


----------



## drillinto

August 18, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

...

Minews. Upward moves like those must be building confidence across the small end of the market.

Oz. They are, but there is equally no doubt that there are significant imbalances and disconnections in the market. No-one, for example, has been able to explain why nickel stocks are performing so strongly while the nickel price remains stuck at US$7.00 a pound, and no-one has been able to explain the utterly astonishing discrepancy between valuations on European and Australian banks.

Minews. We don’t normally discuss banks, but you have a point to make I assume?

Oz. The point lies in a graph generated by Bank of America Merrill Lynch during the week, which showed that the stock market value of Australia’s modest banking sector is now greater than the stock market value of the entire Eurozone banking sector. That, to put it mildly, is a nonsense when you consider that Australia is a country of 22 million people as against the Eurozone’s 300 million. But it is a strong pointer to the relative health of the Australian banks, and the size of the crisis yet to be played out in Europe.

Minews. Perhaps you’re right, but in the short-term prices are rising.

Oz. For how long is the question. And what happens after the next injection of artificial cash?

...

Source >>> www.minesite.com


----------



## drillinto

US: The sector "Materials" is currently overbought

http://www.bespokeinvest.com/thinkbig/2012/8/16/significant-rotation-out-of-defensives.html


----------



## drillinto

August 20, 2012
"Holding Base Metals Will Protect From Uncertainty If And When Europe Returns To Growth"
By Rob Davies

No one rings a bell when a security or an asset class reaches a peak or a trough. Only the passage of time and the brutal truth of history can tell us what we should have done, and when. 

Even so, trying to sense the potential arrival of a storm from the faint breezes on our cheeks is what the investment game is all about, difficult though it is.

August is the northern hemisphere summer and all the important people are on holiday. Markets are quiet and liquidity is low.  

In this thin air it doesn’t take much of a barometric gradient to disturb the equilibrium.  The question is, then, whether the moves we are seeing are the precursors of real change or mere williwaws that mean nothing. 

This month is barely half done but has already seen the biggest monthly loss by the bond market since 2010. 

Bloomberg points out that one major global bond index is down 0.64 per cent this month so far. In part this reflects more stress in Iberian sovereign debt, as remaining holders take advantage of the ECB’s generosity and offload more stock. 

But there can be no doubting the 10.8 per cent decline in US Treasuries over the last week that has taken yields back up to 1.8 per cent. 

Asset allocation is more about proportions than components. So if one asset class is down, especially if it is the biggest, then the other assets must be up, at least in relative terms. 

It was therefore not surprising to see equities rally by 2.9 per cent over the week. Gold was little changed, adding just US$7.00 an ounce to $1,615. 

But despite this move in favour of risk, base metals declined by 1.7 per cent over the week to leave the LME index at 3,133.5. 

Whether these moves presage a deep-seated sea change in the attitude to risk by investors will not be known for months or years. While many would argue such a move is overdue there is no specific event to suggest it’s time has come.  

There is of course no reason why there should be. In many cases assets fall in and out of favour for a whole host of reasons, while the underlying forces may happen to coalesce at a random point in time.   

Nevertheless, there are lots of reasons to suggest that a sea change in attitudes to risk is being underway. 

Bonds might preserve capital in nominal terms, but inflation makes mincemeat of them in real terms. Besides, the income from bonds these days is laughably low, unless you don’t expect to get your capital back. 

Equity markets have gone nowhere for five years but dividends, the real driver of stock market returns, have now surpassed pre-crash levels and show every sign of rising steadily. 

That just leaves base metals to consider as an asset class. Although they don’t generate any income they do protect against inflation. 

And that sell-off in fixed income tells us inflation is now being taken seriously. 

Moreover, if these moves indicate that investing for growth rather than protecting against a slow-down is more important, then base metals must have a role to play. 

But of course the story is not as simple as that. A unit of growth in the West uses less metal than the same unit in emerging markets. 

There is also the problem of Europe, although almost any development there should be good for growth given its current moribund state. 

Asset allocation is largely about dealing with uncertainties. And holding base metals, either directly or through miners, should give more protection from those uncertainties if - surprise surprise - growth does actually return to the developed world.

Source >>> www.minesite.com
*****


----------



## drillinto

Country ETFs
EWA(Australia) is still in overbought territory

http://www.bespokeinvest.com/thinkbig/2012/8/22/global-momentum-stalls.html
***


----------



## drillinto

Commodity Snapshot

Natural gas is currently right in the middle of its range

http://www.bespokeinvest.com/thinkbig/2012/8/23/bespokes-commodity-snapshot.html
***


----------



## drillinto

August 25, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Did your mining boom really come to an abrupt end last week, as has been reported?

Oz. It certainly took a heavy blow when BHP Billiton canned plans to spend US$30 billion digging the biggest man-made hole in the world at its Olympic Dam copper and uranium mine. But looking past the headlines, it’d be more accurate to say that the boom has ended its first phase, because the underlying driver, demand for minerals, energy and food in heavily-populated Asian countries, has not suddenly stopped.

Minews. How did the market react to the Olympic Dam news?

Oz. Now that’s the more interesting question. The reaction from investors was quite different to news media reports. Immediately after BHP Billiton confirmed the mothballing of its Olympic Dam expansion, which had been widely-expected, its shares rose, as did the rest of the Australian market.

However that upward move was then followed by a sell-off on Friday, which also occurred in China and Japan. As a result most indices ended the week virtually where they started, except gold which had its best five days of trading in months.

Minews. We’ll get to gold later, but first a bit more on the mood in your market, which you say seems to be taking the end-of-boom reports in its stride.

Oz. The thing is, the Australian economy has become over-heated, with too many resource projects chasing scarce services and too few skilled workers. The result has been an explosion in costs. For example, developing a gas export project costs three-times as much in Australia as it does in the US, and double the amount it does in Asia location.

Minews. In effect, Australia has been pricing itself out of the market.

Oz. That’s probably a fair comment, but it only applies to projects with less robust profit margins like Olympic Dam, which has uranium in its copper ore and hence needs additional processing. 

But meanwhile, in the iron ore space, BHP Billiton shelved a US$20 billion plan for a new harbour. It will now implement a less costly alternative, which will involve building two new export berths the existing Port Hedland harbour. The grand plan has been mothballed for now, but expansion continues nevertheless.

Minews. So, the boom continues but at a slower pace.

Oz. A more manageable pace, yes. We will see more projects mothballed, especially in coal, where prices have fallen sharply. But there will be plenty to get on with in iron ore, copper, gold, and the latest hot sector, oil and gas, which is becoming rather exciting down this way thanks to the discovery of thick beds of gas-rich shales, which look strikingly similar to the structures which have revolutionised the US energy sector.
...

Source >>> www.minesite.com
*****


----------



## drillinto

August 27, 2012
Lack Of Liquidity Has Exaggerated Market Volatility In Metals And Equities This Summer
By Rob Davies

One of the lasting consequences of the GFC, as Australians have labelled the Global Financial Crisis, has been the withdrawal of hedge funds from many areas of the capital markets. While this may have removed some unwanted volatility it has also dramatically reduced liquidity. 

This was most obvious in the recent bear raid on Standard Chartered Bank when trading volumes suddenly increased twenty-fold as the stock dropped 25 per cent in a day.

Something similar is occurring in other markets as well. There was no particular news flow last week but base metals, as measured by the LME index, gained four per cent to 3,257.8.

Part of this strength was due to a decline in the dollar, which fell 3.3 per cent against gold.

But the weakness in the dollar was more a result of the bounce in the euro as Mr Samaras of Greece decided to spend money on airfares visiting his lenders rather than paying them back.

No one pretends that the euro is without problems but vague talk of the US returning to the gold standard reminded everyone how bad the problems in the US are too. 

The six per cent bounce in the platinum market was another demonstration of how news can move prices in thin markets, as participants reacted to the strife at Marikana. 

Maybe it was this irrefutable demonstration that many commodities come from troubled parts of the world, combined with an awareness that inventories are still low, that was, at least in part, responsible for the general rise in metal prices last week. 

Because even though the European auto-catalyst market is weak now, it won’t always be weak. And there is no indication that South Africa is going to be surpassed as the source of 80 per cent of world supply of PGMs. 

The same logic applies to other metals. Copper is increasingly reliant on fewer countries, some of which are very new and have yet to settle down into democracies. 

In the future any hint of disruption in the Democratic Republic of Congo will have a significant impact on the copper price, as long as inventories stay tight. 

Despite a poor set of figures from BHP Billiton last week it was encouraging that the company is taking a sensible approach to the expansion plans at Olympic Dam. 

Lower metal prices have reduced the likely returns from this project and the company is reviewing ways of proceeding at a lower capital cost. Such tight capital discipline will ensure that metal prices stay firm and give efficient miners good returns. 

Last year BHP Billiton earned 23 per cent on its invested capital. For a commodity business still in the middle of the GFC that has to be good going, and makes you wonder what it could do if economies everywhere were growing, and not just in China.

What is, perhaps, more indicative of the power BHP Billiton now has is that 50 per cent of its earnings before tax and interest come from iron ore. This is one of a few global commodities that has does not have a vibrant terminal market so it is effectively one of the least liquid as well. 

Anyone prepared to take the risk on long term projects in iron ore knows that while the rewards are potentially very high, there is little scope to hedge prices. 

And it’s far too illiquid for any hedge fund - as iron ore prices drop below US$100 a tonne for the first time in three years that deficiency is all too obvious. 

On the other hand Chinese steel consumption in July was a record at 61.7 million tonnes. No summer lull there in what is still a very buoyant business.

Source >> www.minesite.com
*****


----------



## drillinto

September 02, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had a dreadful week.

Oz. In parts it was pretty dreadful. The collapsing iron ore price knocked the stuffing out of that sector. But the most damage seems to have come from a belief that the value of the Australian dollar will follow the iron ore sector down, causing a stampede of foreign investors out of the Australian market.

Minews. And did the dollar collapse as predicted?

Oz. No, or to be more cautious, not yet. Despite forecasts that the dollar would fall below parity with its US cousin it remained firmly rooted at US$1.03 all week, even as the iron ore price plunged below US$100 a tonne, and appeared to be heading for US$80 a tonne, or less.

Minews. Is iron ore really a proxy for the Aussie dollar?

Oz. Of course not, but that seems to be the way some investment bankers in London and New York see Australia - as a large iron ore pit with Chinese demand dictating the price of the commodity and hence the value of the dollar.

There is, obviously, a lot more to the Australian economy than a single commodity, and while the dollar is overdue for a correction there are three factors keeping it up.

The first is that liquefied natural gas (LNG) exports are fast challenging iron ore and coal as the most valuable commodity export. Another is that people outside this country forget the existence of the agricultural sector and other aspects to a fundamentally solid economy. The third is that every other country in the world is trying to depreciate its currency in a bizarre race to the bottom, as a means of aiding exports.

Minews. You’re saying the sell-off last week was overdone.

Oz. Probably not. There’s no doubt flows of hot money - even from the Swiss National Bank looking for a safe haven for its cash - have keep the Australian dollar higher for longer. But there’s also no doubt that a lot of Australian industry would benefit from a major currency correction.

Farmers, manufacturers, tourism operators and education “exporters” are desperate for a more competitive dollar. So, while the metals and mining index, led by iron ore stocks, fell by 5.4 per cent, the all ordinaries index, which incorporates the entire market, slipped by just 0.8 per cent. When you take the mining shares out of the equation, the market actually rose.
...
Source >> www.minesite.com


----------



## drillinto

8/31/2012 | "Water: Good as gold for investors" | The world's most critical commodity is getting harder to find, which makes it an attractive investment | By Jim Jubak


----------



## drillinto

September 03, 2012
Information Overload Leads To Indecision On The Markets, As The World’s Central Bankers Gather In Jackson Hole
By Rob Davies

In the final few seconds before Neil Armstrong landed Apollo 11 on the moon he was distracted by signals warning that that the onboard computer was overloaded - there was much more information coming to the machine than it had the capacity to deal with. 

Fortunately Armstrong was able to complete the maiden landing by taking manual control. 

In some ways prevailing conditions in the global capital markets are reminiscent of that old overloaded computer from the 1960s. As the northern hemisphere summer winds down there is sense that a lot of information is being generated and distributed, much of it quite significant. 

But there is no general consensus as to what all this data means. Consequently markets have carried on going nowhere. 

The mining industry is a classic case in point. Even though the LME base metal index drifted off 1.6 per cent over the week to close at 3204.5, and is 20 per cent lower than this time last year, the real driver of sentiment has been the steady continuing fall in the price of iron ore.

Bears point out this is now below US$90 a tonne and is the main reason the FT Mining index is down 22 per cent on a year ago. Bulls say the price is still twice what it was three years ago.

It is well known that the largest buyer of iron ore is China, so the fact the Shanghai Composite index is down 66 per cent from its high in October 2007 worries some observers.  

But those that are worried should remember though that the correlation between economic growth and domestic share prices is one of the lowest there is. Over that period of time the Chinese economy has virtually doubled, even if the index is down. 

In the developed world the problem seems to be the reverse, as there has been a strong bounce in stock markets over the last three years, even as the economies of the USA and Europe have gone nowhere. 

This background gives added urgency to the annual gathering of members of the US Federal Reserve and other central bankers in Jackson Hole. The Fed seems to be expected to clean up the mess by left politicians who are unwilling to take the tough decisions that are required. 

A small sub-plot to this are rumours that Jens Weidmann, President of the Bundesbank, is poised to resign in protest at the policy of the ECB in buying Latin debt. 

He has only been there a year, after Axel Weber, the last President, resigned over the same issue in 2011. Were Weidmann to leave it would signal that the anti-inflationary grip of the Bundesbank is being further weakened. 

That raises serious questions about the wisdom of holding German debt that only yields 1.3 per cent.  No wonder the gold price is holding steady at US$1,661 an ounce. 

However, suggestions that the US return to the gold standard can safely be ignored on the basis that the catastrophic collapse in house prices that would ensue is not a vote winner for any President. 

It might be encouraging to think that the US election could result in some change. Unfortunately, the system of checks and balances of the US constitution mean that unpopular policies to reduce the deficit are in any case unlikely to see the light of day. 

Even if Ben Bernanke, Chairman of the Fed, decided to implement QE3 to do what politicians can’t to revive the economy, its impact is expected to be less than the previous two liquidity injections.  

So at this stage market participants need to decide if all this information means the glass is half full or half empty. And no computer can help with that.    

Source >>> www.minesite.com


----------



## drillinto

Commodity Snapshot: Gold and silver are overbought

http://www.bespokeinvest.com/thinkbig/2012/9/5/bespokes-commodity-snapshot.html
***


----------



## Mr Z

Not on a monthly chart!


----------



## Joules MM1

"The best place to be is in commodities"

....apparently so

*10 most expensive energy projects in the world*
http://money.cnn.com/gallery/news/economy/2012/08/27/expensive-energy-projects/1.html

girt by sea


----------



## drillinto

Is Global Nuclear Energy Demand Growing ? 
By Gail Tverberg

http://www.theoildrum.com/node/9419
***


----------



## drillinto

September 04, 2012
This Year’s Africa Down Under Conference Threw The Differences Between The Dark Continent And The Lucky Country Into Stark Relief
By Our Man in Oz

Inviting a competitor to take a close look at your business may be a polite thing to do, but don’t be surprised when they recruit your staff, steal your customers and set about driving you out of business. That, in a somewhat exaggerated fashion, is what’s happening in the relationship between the Australian and African mining industries. 

While Africa has been playing second fiddle to Australia in the mining business for past few decades the relationship is changing, and nowhere can that be seen more clearly than at the annual Africa Down Conference, which has now grown from an initially modest gathering to rank as Australia’s biggest mining event, and Africa’s second biggest.

Delegate numbers at the ninth edition of ADU held in Perth last week swelled to 2,700, eclipsing by 200 the long-term Australian conference leader, Kalgoorlie’s Diggers & Dealers forum which is tightly restricted by the small city in which it is held, isolation and high costs.

But ADU’s Perth location proved congenial enough for 17 African government delegations to make the trek across the Indian Ocean, though some would have been surprised by the cramped conditions in the two hotels that hosted the talks and exhibitions. Success, it seems, has a price.

Discomfort, and the need to use elbows to fight through the crowd, was a small price to pay for both the Africans and the Australians at the three-day talk-fest. What made it worthwhile was the opportunity for deals to be done with both sides keen to capitalise on their assets, with busy investment bankers acting as marriage brokers. 

The Africans made it clear that they want skills and capital. The Australians made it clear that they want a fresh start, far from a home government determined to tax them to death. And what happened at ADU this year could set the tone for the future of the mining industries on both continents. Australia in decline, thanks to sky-high tax policies, higher government approval hurdles, and an appalling, and worsening, industrial relations climate. Africa, on the rise thanks to excellent geology and governments which welcome mining investment.

The man who set the tone at ADU was Andrew Forrest, founder of the iron ore miner, Fortescue Metals Group, and once Australia’s richest man, with a fortune valued at more than A$6 billion. Today, Andrew is a more humble A$2.5 billion-man thanks to the crumbling share price of Fortescue. However, what put Andrew in the spotlight at ADU wasn’t his shrinking fortune, it was his timely warning that Australia should: “watch out for Africa”.

“Africa will be Australia’s greatest competitor, and let’s celebrate that,” Andrew told a government trade seminar on the sidelines of ADU. “Let’s say what is great for Africa is great for the world and great for Australia.” 

Said – undoubtedly - in the spirit of encouraging economic development in a region in dire need of fresh investment, Andrew might have wished he had been a little less enthusiastic four days after his speech welcoming African competition – when he was forced to announce a dramatic cutback in Fortescue’s ambitious Australian iron ore expansion plans. 

Officially, Fortescue’s problem is falling Chinese demand for iron ore. In the background is the steady development of new iron ore mines in Africa which will be highly competitive with the best Australia has to offer.

Throughout the event a steady stream of worthy African government ministers strutted up to the podium of an appallingly crowed seminar room to sing the praises of their country. Malawi’s Minister for Energy and Mining, Cassim Chilupha, said he was keen to see more and different mines opened to diversity the industry currently dominated by uranium and coal. Lesotho’s Mines Minister, Tlali Khasu, told his Australian audience that his country actively encouraged investment in its free enterprise market economy, and was home to skilled mine workers who had lost their jobs in South Africa and were keen to work.

One after the other a common sales pitch was heard from spokesmen for countries such as Botswana, Tanzania, Zimbabwe, South Sudan, Zambia, Madagascar, Nigeria, Ethiopia, Niger and even South Africa, home to the continent’s biggest (and most troubled) mining industry.

In a display that was chillingly cool a few days after the Marikana massacre in which 34 striking platinum miners killed by police, the South African Minister for Minerals Resources, Susan Shabangu, shrugged off the crisis while also distancing herself from the event. 

Her explanation was that she had been “out of the loop” at conferences when the shooting took place, and that it was now a case of allowing the law to take its course. She could not, however, resist slipping in a reference to the previous regime which ruled her country. “We are only 18 years into democracy”, she said. “Pains and wounds of the past need time to heal.”

Highlights of the 61 small to medium mining companies which presented at ADU included:

• Mark Connelly, chief operating office of ASX-listed Endeavour Mining, who outlined how his company would lift gold production to between 282,000 and 304,000 ounces this year.

• John Welborn, managing director of Equatorial Resource, who forecast that the next major source of iron ore for China would be central and west Africa.

• Len Jubber, chief executive of uranium explorer, Bannerman Resources, who warned that new uranium mines needed a price of between US$75 a pound and US$90/lb to attract investment.

• Jason Brewer, director of Continental Coal, who said his company’s third thermal coal mine, Penumbra, would start production in the current quarter.

• Jeff Williams, former managing director and now adviser to Mineral Deposits, who contradicted a widely-reported view of the titanium and zircon market by saying that the outlook was favourable.

But the final word on ADU belongs to a survey of delegates designed to measure Australian investor sentiment towards Africa. In it 89.5 per cent of respondents said they expect Australian companies to increase their investment in Africa over the next 12 months. Another result of the survey was that two countries were seen as offering the best growth prospects, Ghana and Botswana. They both got 15.3 per cent of votes, with South Africa third with 12.9 per cent.

As for the biggest challenges confronting African mining, the delegates picked poor infrastructure (31.4 per cent), government regulation and nationalisation (23.5 per cent), political instability (11.8 per cent) security (also 11.8 per cent). A continent-wide skills shortage came top of the list of challenges at 35.3 per cent – but that is a problem potentially fixed by attracting Australian miners to follow the ADU delegations back to Africa. 

And that’s something which will undoubtedly happen as the Australian Governments works hard at making the country as unattractive as possible for mining or, asone headline in Oz recently read -- “Australia to the world: do not invest here”.

Source >> www.minesite.com
*****


----------



## drillinto

The performance of key US ETFs across all asset classes since the month, quarter and year began. 
Since the third quarter began Australia(EWA) is up 7.78%.

http://www.bespokeinvest.com/thinkbig/2012/9/6/recent-asset-class-performance.html
***


----------



## drillinto

September 08, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks from London like another rough week for your market.

Oz. True, in part. Iron ore certainly hit the headlines for the wrong reasons, and coal remains under pressure from falling prices. But when you wrap the many commodities that go into the Australian mix the end result of last week’s stock market trade was rather interesting. We went up, not down. Even the Australian dollar, which is widely seen as being over-valued, crept up marginally.

The score card by commodity looks something like this. Gold stocks led the way up, and should go even further on Monday since the gold price sailed comfortably through the US$1,700 an ounce mark after we had closed.

Copper companies also firmed. Iron ore, coal and uranium weakened, but the base metals held their ground, and exploration news kept speculators interested, particularly in the favourite of the month, Sirius (SIR) which reported fresh nickel and copper assays from its Fraser Range drilling, and rose A50 cents to A$1.91. That’s not bad for a company that was at A5 cents two months ago.

Minews. We’ll get to more prices later, but first it would be interesting to hear why your market rose when many reports about the Australian economy over here are negative.

Oz. There are good reasons to be wary about Australia over the next 12 months. Our terms of trade have undoubtedly turned for the worse, thanks to the slowdown in Chinese manufacturing and energy demand. But offsetting that is optimism that the world’s major economies of Europe, China and the US will continue creating money to stimulate growth and jobs. And that will mean more consumption of basic raw materials, an Australian speciality.

But another reason to be wary, and perhaps to get ready for a rocky ride, is that we are now in the final 12-months of a deeply unpopular government which is starting to panic. Botched tax and environmental policies are weighing heavily on confidence. And the dour mood is being exacerbated by reports of the resources boom ending abruptly, which might throw thousands of workers out of their jobs.

Minews. It doesn’t sound like a happy outlook. So why is your market rising and not falling?

Oz. Because the gloom has been overdone, and the outlook is not as bad as is being portrayed. Companies that are in trouble are those that are carrying too much debt. Fortescue Metals (FMG) is a prime example, and in response it has slashed its expansion plans and sacked 1,000 workers. Other iron ore miners with far less debt are riding out the downturn, and hoping that the next round of international economic stimulus boosts demand for minerals.
...

Source >>> www.minesite.com
*****


----------



## drillinto

Why Bill Gross is Leaning to Gold over Bonds 
Source >> Jesse’s CafÃ© AmÃ©ricain

http://jessescrossroadscafe.blogspot.fr/2012/09/bill-gross-i-am-leaning-to-gold-over.html
***


----------



## drillinto

September 10, 2012
Commodities Rise, As Bad US Data Combines With Further Intervention From Super Mario
Rob Davies

Anyone seeking to understand the 2.6 per cent rise in base metal prices last week as a consequence of industry fundamentals would have been wide of the mark. 

The fact that Chinese consumption of tin is forecast to fall 3.8 per cent this year to 147,900 tonnes, 47 per cent of the world demand, is overwhelmed by a bigger story.

Instead it was all to do with a group of 23 people sat around a table in Frankfurt on Thursday 6th September. Twenty-two of them voted for a new policy, devised by European Central Bank chief Mario Draghi, which has been  dubbed Outright Monetary Transactions or OMT. 

Doubtless traders will soon invent a new interpretation of this TLA (three letter acronym). The details are complex and way above the heads of simple commodity writers. It is clear though, that the 22 who voted for it expect the tab to be picked up by the guy who didn’t. 

No names, no pack drill but the chance of that dissenting vote belonging to Jens Weidmann of Germany look pretty good. 

The issue the meeting wanted to deal with was that while Germany can borrow ten year money at 1.5 per cent, Spain gets charged six per cent. While that alone demonstrates that the euro is not a single currency any longer, the politicians do not want to tell their voters that. 

In their view it is far better for them to outvote Germany and tell it to underwrite all sovereign debt in the eurozone. The gamble is that firepower of this size will outgun the markets and will never need to be used.  The Germans are not so sure. 

In the short term, the markets say this is good for European growth. All the eurozone equity markets shot up, and that encouraged commodities to rise in tandem.  

This boost to the euro was further augmented by weak US jobs figures which depressed the dollar. And a weak dollar is always good for commodities, especially gold which shot up 4.4 per cent to US$1,734 an ounce.  

How long other European countries will be able to exploit their democratic majority over the Germans is the tricky part. Everyone knows there are more poor people than rich people and that is why electorates around the world consistently elect governments that promise to tax somebody else for their benefit. 

The psephology of the Euro works the same way. Most member states are poor compared to Germany and they will always vote for Germany to pick up the tab. 

Change will only happen when either German voters or capital markets realise that the arrangement cannot work if put to the test. 

What happens when that point is reached will be the crucial event for investors. Either way German debt looks expensive. The obvious destinations for capital currently invested in it are risk assets like equities or commodities. 

However, there are lots and lots of people who have a vested interest in maintaining the status quo, so don’t expect a change any time soon.

On a different tack it is good news to hear that Royal Bank of Scotland has called time on commodity trading and research. While sad for the individuals concerned, this is just another step in shrinking an over-ambitious retail bank out of high risk markets into its core activities. 

Cumulative losses of £31 billion since 2008 demonstrate how out of its depth the bank was. It does mean there will be a little less risk capital in commodities and a reduction in the number of forecasts. But it also means there are fewer intermediaries between consumer and supplier, and that must be good news for both ends of the trade.

Source >>>>> www.minesite.com
*****


----------



## Joules MM1

http://www.businessinsider.com/the-repricing-of-oil-2012-9

some good research in here.....absent of other ideas


----------



## Joules MM1

http://www.reuters.com/article/2012/09/12/australia-mining-idUSL3E8JR08T20120912

*Australia miners slam brakes on huge pipeline of projects*Wed Sep 12, 2012 6:50pm EDT

excerpt







> The $246 billion of planned projects is based on government data on projects under study or awaiting approval and mining expenditure estimated by bankers and lenders. It also includes $40 billion of projects already halted by BHP.
> 
> According to project finance lenders, lawyers and analysts, some of the major projects at risk include the $10 billion Roy Hill iron ore mine, Xstrata's $6 billion Wandoan mine and GVK Power & Infrastructure's $10 billion Alpha Coal mine. They are in new mining areas, requiring huge investment on railways and ports, which makes them tougher to fund.


----------



## drillinto

September 17, 2012

US Money Managers Dance To Ben Bernanke’s Tune, As QE3 Gets Underway

By Rob Davies


It was only a 565 word statement, but it was enough to whack up equity markets by a couple of per cent and enough to add 5.2 per cent to base metal prices as measured by the LME index. 


Ben Bernanke’s statement that US Federal Reserve will buy up mortgage-backed securities to the tune of US$40 billion per month was bold, and certainly caught the market’s attention. 



On the debit side there was some collateral damage to the dollar. It fell 2.2 per cent against gold. US Treasuries fell 15 per cent to offer a yield of 1.9 per cent on the 10 year. 



These sorts of actions only happen when an important person stands up and commits to spend an awful lot of other people’s money.



Mr Bernanke put a theoretical time limit on the Fed’s asset purchase programme, saying it will last until the end of the year. 



But if it doesn’t work, he said the Fed will keep on buying until it does. A blank cheque of that size is enough to get most money managers off their gluteus maximuses and doing something.  



They have to do two things. One is to buy something with a depreciating dollar that will hold its value; and secondly to buy something that will generate an income that will maintain its worth after inflation in the future. 



Metals, as any miner will tell you, fit the first category exceptionally well, even if it is hard work and expensive to find new deposits, raise the finance to exploit them, build a mine and then manage it profitably throughout its life. 



And while the metals per se don’t generate any income, the mining companies that extract them do, and therefore are ideally suited for the second category of inflation-proofed income.



It was therefore not surprising that the mining sector was one of the best performing sectors the day after the statement from the Fed. 



As is often the case when an asset class experiences a sharp increase it was the most oversold commodities that provided the largest gains. Aluminium jumped six per cent to US$2,081 per tonne, while zinc both six per cent to US$1,984 a tonne. 



But while the stimulation from the US Federal Reserve is a welcome development, it is worth bearing in mind that the US economy now only accounts for nine per cent of global aluminium demand, according to Bloomberg. 



It is a measure of the totemic power of Mr Bernanke that his words last week had a bigger impact on markets than a similar commitment made by Mario Draghi, President of the ECB, the week before. 



In a way, Mr Draghi’s statements should be more influential on some commodities. After all, Europe makes up 15 per cent of world aluminium demand. 



Recent data show that demand for heavy commercial vehicles in Europe has slumped and turned negative on a year on basis, after enjoying strong growth in 2010 and early 2011. 



In theory then, the European stimulus should have more impact on the prospects for metal demand. 



But in practice it is US money managers that call the shots, even though they are more focussed on domestic politics as a guide to their investment strategies. 



They can see that the US Federal Reserve will do whatever it takes to reduce US unemployment. 



If that means commodity prices rise as an indirect consequence they will go with the flow. After all, one thing all of them have learned is: never to fight the Fed.   


Source >> www.minesite.com
************************


----------



## drillinto

September 22, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had an interesting week, with a mix of positive and negative news.

Oz. It was a bit of everything, ranging from the debt crisis at Fortescue Metals (FMG) to a burst of exploration and discovery news that excited the small end of the base metals sector.

Minews. Discovery news is always interesting, but let’s start with the crisis.

Oz. Fortescue’s debt mess forced it into a balance sheet restructuring exercise which involved raising of an extra $A1 billion in debt. Investors were pleased that the company had survived the immediate crisis, and lifted its price by A62 cents to A$3.61. 

But fixing a debt crisis with more debt sounds awfully like a Euro solution to a financial crisis, and we all know that’s not working.

Minews. You think there’s more bad news ahead for iron ore, and Fortescue?

Oz. There could be. China is certainly not showing signs of recovery. Steel prices are still falling, and that must eventually be reflected in demand for iron ore, and for another significant Australian export, coal. It is the China factor which lies behind the relatively flat performance of iron ore and coal stocks last week, though that flatness was offset somewhat by rising gold and base metal prices.

Overall, the Australian market ended in positive territory last week, just. The all ordinaries index crept up by 0.5 per cent. The metals and mining index did better, with a rise of 1.8 per cent. Gold did best of all, rising 2.7 per cent. The Australian dollar, which is widely seen as overdue for a sharp correction, slipped US1 cent lower to US$1.04. 

However, with pressure building on the government to cut interest rates as a means of stimulating the local manufacturing and retail sectors, we could soon see a move down through parity with the US dollar, which would also benefit mineral exporters.
...

Source >> wwww.minesite.com


----------



## Joules MM1

*Morgan Stanley's Outlook For The 14 Most Important Commodities In The World*

Read more: http://www.businessinsider.com/morgan-stanleys-commodities-outlook-2012-9?op=1#ixzz27O2nATQr

http://www.businessinsider.com/morg...ues-to-be-affected-by-geopolitical-tensions-1


----------



## drillinto

September 24, 2012
Commodities Offer An Obvious Safe Haven As Governments Continue To Court Inflation With Monetary Easing
By Alastair Ford

The difference between what people want the world to be and what it actually is offers enormous potential for making a buck. 

The unrelenting gloom in much of the mainstream media has convinced many investors that the commodity super-cycle is over. 

And the resultant battle of opinion is being fought out most savagely on the stock market, as the share prices of the large mining companies bob about depending on which particular opinion is in vogue in any given week.  

Maybe the moves are exaggerated by the exceptionally low volumes, given that the FT says equity trading volumes are the lowest for twelve years. 

But they are a good measure of sentiment nonetheless. 

The problem for the bears is that despite their opinion that things are going to get a lot worse, hard data keeps popping up to confound their views. Last week for example base metal prices gained 2.9 per cent and took the LME index up to 3,559.9. 

Two months ago this index was down at 3,100 and its overall rise of 15 per cent since then, is an indication of how strong the fundamentals remain for this industry that is so vital for the modern world.

Another indication of the strong fundamentals backing up the industry comes from the high prices still being achieved for scrap metal.  

Although down from £190 a tonne at the start of the year they too have enjoyed a modest bounce to £170 a tonne and are still high enough to attract comment from the mainstream media.  

Most investor attention is focussed on equity and commodity prices. However a great deal of the capital used by mining companies is debt. 

Fixed income investors are always more worried about the downside than the upside because they have don’t have any upside if things go well but everything to lose if they don’t.   

It is interesting then, to see that BHP Billiton raised US$5.4 billion in fresh debt last week and secured that at a spread of only 72 basis points. That compares to an average spread in that section of the market of 136 basis points. 

Equity investors might be gloomy but it appears that bond traders don’t see too much downside. 

One reason for their complacency is that commodities are natural hedges against inflation. Despite their denials, it is quite clear that the authorities in all the major economies are keen to stoke inflation through monetary policy, i.e. printing money. 

While that may have all sorts of unpredictable consequences the chances are that miners will be in better position than most companies if inflation does take off. 

What is even more insidious is that governments continually tinker with ways of measuring inflation to try and assuage fears that it is a concern.  But of course it is a problem, and everyone knows it.

The latest wheeze comes from the UK Government, which has announced that it is to investigate the causes of the differences between the government-favoured measure, the retail prices index, and the consumer prices index, which is favoured by the Bank of England. 

The RPI is typically 0.5 per cent to one per cent higher than the CPI, so any switch that followed on from the consultation could save Her Majesty’s Government £2 billion a year in interest payments.

How is that for a conflict of interest?

Governments want inflation, but are keen to minimise the negative effects to themselves.  Investors have to find their own way of dealing with it, and there are few better ways than gaining exposure to commodities. Ask BHP Billiton’s bond holders, or a scrap metal dealer.

Source >> www.minesite.com
*****


----------



## drillinto

Australia, Brazil and South Africa ETFs, large commodity producing countries, are currently neutral

http://www.bespokeinvest.com/thinkbig/2012/9/27/stocks-pull-back-around-the-globe.html
***


----------



## drillinto

September 29, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz
...

Oz. Pick of the gold stocks, at least on a percentage basis, was Saracen (SAR), a local producer with a low profile. It added A6 cents to A49.5 cents after reporting a solid 57 per cent rise in gold reserves at various mines in Western Australia, and is now sitting on a proven 1.1 million ounces. The company also generated a spot of North American investor interest after delivering a well-received report at the Denver Gold Forum. 

Troy (TRY) was another of the small group of gold companies to move higher by a reasonable amount. It added A23 cents to A$4.96.

Other gold companies to gain ground included Perseus (PRU), up A7 cents to A$2.91, Newcrest (NCM), up A24 cents to A$29.14, Papillon (PIR), up A13 cents to A$1.75, Regis (RRL), up A26 cents to A$5.71, Alacer (AQG), up A24 cents to A$7.01, OceanaGold (OGC), up A17 cents to A$3.21, and St Barbara (SBM), up A5 cents to A$2.16. 

Shareholders in Cortona (CRC) were also better off as it moved up A1 cent to A10 cents after announcing a friendly merger with Unity Mining (UML), which also crept up A1 cent to A14 cents.

Minews. Not much to write home about in that lot.

Oz. Agreed. The stocks to lose ground also did so by relatively small amounts, which is why last week was really one to forget. One of the heaviest falls in the week was posted by Doray Minerals (DRM) which upset its supporters by announcing a A$31 million capital raising to brings its Andy Well project into production. It fell by A13 cents to A82.5 cents. 

Other downward moves came from Kingsrose (KRM), down A3 cents to A$1.17, Ampella (AMX), down A7 cents to A70 cents, Kingsgate (KCN), down A5 cents to A$6.04, Medusa (MML), down A13 cents to A$6.06, Tanami (TAM), down A11 cents to A78 cents, and Intrepid (IAU), down A4.5 cents to A47 cents.
...

Source >> www.minesite.com


----------



## drillinto

October 01, 2012
The Fundamentals For Copper Will Be Strong For Several Years, As Net Supply Struggles To Keep Up With Demand
By Rob Davies

It is party conference season in the UK - a time when politicians exhort companies to invest more and “help” the country. What many of them have failed to realise is that the UK is now really just a large market place for raising and allocating capital in the most efficient way. 

Nowhere is that better demonstrated than in the mining industry.

First, the UK is home to the London Metal Exchange, whose quality in terms of transparency and ease of price discovery looks even better after the revelations of price fixing in the Libor market. 

Secondly, the London Stock Exchange is by far the most important stock market for mining companies, hosting, as it does, six of the largest mining companies in the world.  

These companies can raise money in the UK, as Glencore did last year at its IPO, and then direct the funds to where they are needed. 

In mining that might mean copper mines in Peru to supply the still rapidly growing Chinese economy. Or it might mean any number of other options. 

Politicians and think tanks still fail to understand that this sort of activity is far more profitable than encouraging widget makers in Borsetshire to make stuff to export to Shanghai. 

According to Bloomberg the current average cash cost of producing a pound of copper is US$1.49. That is equivalent to US$3,385 a tonne. 

But compare that to the cash quote for copper on Friday of US$8,172 a tonne. A gross cash margin of US$4,887 a tonne or 60 per cent, has to be pretty attractive in anyone’s language.  

Not surprisingly these margins are attracting more capital to the industry and will, over time, increase capacity.  

The problem is that building a copper mine is a time consuming and expensive business. Bloomberg estimates that it can cost anywhere between US$5,000 and US$30,000 a tonne of annual capacity to construct a new mine. 

So depending on where the mine sits on that capex cost curve the depreciation charge can take a big lump out of the margin. Remember too, that some of this capital is required to replace declining output from mines that are being depleted. 

Even so these encouraging numbers will result in a significant addition to net supply over the next eight years. The build up is quite slow to start with. 

According to Bloomberg net supply will only increase by one per cent in 2012 to 16.476 million tonnes. Thereafter the additions are quite dramatic with a rise of 5.6 per cent forecast in 2013 and a rise of 9.2 per cent in the year after. 

In 2015 the increase in net supply is expected to be 8.4 per cent, and then there’ll be a staggering jump of 10.3 per cent in 2016, before it tails off again into low single digit gains for the rest of the decade. 

On these numbers global mine supply will be over 25 million tonnes by 2020. 

One thing this rise in mine supply will do is to increase the pricing power of smelters to who process the concentrate. Sumitomo expects a 14 per cent increase in concentrate supply next year, but only an 11 per cent expansion in smelter capacity. 

Consequently it is forecasting treatment costs and refining costs (TC/RCs) to rise from their current levels of US$70 and US$0.07 as smelters exploit their pricing power. 

While politicians and think tanks agonise about how to cajole industries into spending money for the greater good, the mining companies are getting on with the job and following the numbers.

And that will eventually show through in valuations.  

Source >> www.minesite.com
*****


----------



## drillinto

The ISM Commodities Survey: No Inflation...Yet

http://www.bespokeinvest.com/thinkbig/2012/10/1/ism-commodities-survey-no-inflationyet.html
***


----------



## drillinto

The Hidden Costs of Electricity: Comparing the Hidden Costs of Power Generation Fuels 

http://www.synapse-energy.com/Downloads/SynapseReport.2012-09.CSI.Hidden-Costs.12-013.pdf
***


----------



## drillinto

1 October 2012: Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/10/1/bespokes-commodity-snapshot.html


----------



## drillinto

Hot commodity: LNG

http://www.theoildrum.com/node/9526
***


----------



## drillinto

Oil breaks down

http://www.bespokeinvest.com/thinkbig/2012/10/3/oil-breaks-down.html
***


----------



## drillinto

October 06, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

...

Minews. Let’s start the price call with gold, because we’re all waiting for it to go back through the US$1,800 an ounce mark.

Oz. There was an upward trend in gold shares, as shown in that 1.2 per cent increase in the index. But the modesty of that rise was somewhat surprising, as the US dollar gold price gained ground and the Australian dollar fell back to US$1.02, meaning that in local currency the gold price rise was even stronger.

Among the best performers in the gold space was a company that has been off most radar screens for a few years, Haoma Mining (HAO). Haoma, which has been ASX-listed for 42 years, has spent the past few decades beavering away at the historic Bamboo Creek goldfield in Western Australia. Last week the company reminded the market that it is still around when it dashed up to a 12-month share price high of A19.5 cents after reporting excellent platinum and palladium grades from tailings left by previous gold miners. 

The plan is to process about one million tonnes of tailing to extract remaining precious metals using a new metallurgical process. After setting its price high, Haoma slipped back to A17.5 cents, a gain of A7 cents for the week.

After that spot of excitement there was a long list of moderately good rises, and quite a few companies which lost ground, or didn’t move at all. Among the more notable risers were: Silver Lake (SLR), up A23 cents to A$3.87, Endeavour (EVR), up A18 cents to A$2.37, Papillon (PIR), up A13 cents to A$1.88, St Barbara (SBM), up A11 cents to A$2.27, Troy (TRY), up A9 cents to A$5.00, Northern Star (NST), up A8 cents to A$1.28, Perseus (PRU), up A7 cents to A$2.98, Saracen (SAR), up A5.5 cents to A55 cents, Doray (DRM), up A8 cents to A89 cents, and Cobar (CCU), up A7 cents to A67.5 cents.

Among the gold companies that fell were Intrepid (IAU), down A1 cent to A46.5 cents, Olympus (OYM), down A1.5 cents to A20.5 cents, and Ausgold (AUC), down A1.5 cents to A26.5 cents. The sector leader Newcrest (NCM) shed A2 cents to A$29.12, and while that is an insignificant fall, whatever Newcrest does has a disproportionate effect on the gold index.
...

Source >>> www.minesite.com


----------



## drillinto

October 06, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to be rising as your economy retreats.

Oz. That’s not a bad comparison. The trend in all sections of the stock market last week was up, with industrial shares and banks leading the way. The all ordinaries index added 2.4 per cent, and while miners lagged a little they still ended in the black. The metals and mining index rose 1.8 per cent, and the gold index rose by 1.2 per cent. In the wider economy there was a cut in official interest rates in preparation for what are expected to be a couple of tough years ahead as the mining boom runs out of puff.

Minews. If the boom is ending why is your market rising?

Oz. Investors, it seems, are looking forward to a return to normality, because while the mining sector has dominated in Australia for the past 10 years other sectors have suffered.

Fortunately, there is plenty of room for conventional stimulus such as lower interest rates and a lower exchange rate to kick start the industries sidelined during the mining boom. Manufacturing, tourism, and retail have most to benefit from the changing economic landscape.

Minews. In other words a conventional economic cycle of the sort we’re not seeing in Europe or the US.

Oz. It seems so. Mining and oil will remain the backbone of the Australian economy, but they depend largely on the forces of international supply and demand, and there’s nothing to be done there, other than wait for prices to settle and see who’s afloat and who’s not. The fact the Australian mining industry is fairly close-knit means that as one part of it falls another picks up the slack. At the moment, people losing their jobs in iron ore and coal are being quickly snapped up by copper, gold and liquefied natural gas construction projects.
...
Source: www.minesite.com


----------



## drillinto

World Bank cuts 2012 Asian growth forecast from 7.6% to 7.2%. 
The 2013 estimate was lowered from 8.0% to 7.6%.


----------



## drillinto

Agricultural Commodities >>> www.agrimoney.com


----------



## drillinto

October 08, 2012
Gold Finds Favour With Bond Holders, Estate Agents And Equity Investors As Quantitative Easing Rolls On
By Rob Davies

Autumn is the season of mellow fruitfulness, and October is the most popular month for a financial crash, according to the Financial Times. 

It is not hard to find a reason for being worried, as any reader of the financial media can attest.

This time though, there is the big difference between 1907, 1929, 1987 and the other five times the US stock market has fallen more than 10 per cent in the month. 

Right now everyone is expecting things to get worse. In at least some of those previous crashes the event came out of a clear blue sky.

Despite this chronological concern, commodities have generally speaking made good progress over the week. Base metals, as measured by the LME index, gained 1.3 per cent to 3,572, while gold edged up 0.4 per cent to US$1,782 an ounce. 

To a certain extent both those rises reflected the 0.5 per cent decline in the dollar. US jobs data, although good, was perceived as not good enough. 

But in fact it is still Europe where the largest worries are. Europe’s declining economic activity was blamed directly by Vale of Brazil for its decision to cut iron ore pellet production by 18 per cent, since Europe is the destination for the majority of its output. 

Australia mostly supplies China and the rest of Asia. Even so, the 25 basis point interest rate cut by the Royal Bank of Australia to 3.25 per cent shows that even the lucky country is not immune. 

While the news on iron ore might be disappointing, there is better news for gold bugs.

Historically, gold investors and bond holders have been the cat and the dog of the financial world. While one thinks all governments are venal the other thinks advocates of gold still live in the financial Neolithic. 

So it is quite a surprise to read that Pimco, the largest bond investor in the world, now thinks that all portfolios should have some exposure to gold. 

It comes up with some dodgy mathematics to impute a value a US$2,500 an ounce for all of the 155,000 tonnes of gold ever mined, on the basis that there are US$12.5 trillion of sovereign physical and electronic currency reserves. 

This rather sweetly overlooks the basic point that a major reason for the crisis is that no one believes these reserves provide anything like enough strength in depth, and probably fall short by a factor of ten. 

The gold bandwagon also drew support from the rather surprising direction of an upmarket estate agent in London.

It too discovered it owned a calculator and revealed that although it cost the equivalent of 24,000 ounces of gold to buy a super-prime house in London a decade ago, the same property could now be acquired for only 9,800 ounces. 

In other words, gold has done a better job of preserving wealth against inflation than property. 

The same estate agent also helpfully pointed that that this amount of gold was equivalent in size to a small foot stool, albeit a very heavy one. Yes - 304.78 kilogrammes to be precise. 

Now that the financial floodgates of quantitative easing have been fully opened in the US, labelled by some as QE Infinity, and with the ECB also embarking on the same path there seems little to hold gold back. 

What better time for labour relations in South Africa, still the second largest producer, to take a sharp turn for the worse as Amplats fires 12,000 platinum miners?

Source >> www.minesite.com
*****


----------



## drillinto

S&P 500: Sector prices versus trading range

As shown, the S&P 500 and six of ten sectors are currently overbought, with Consumer Staples and Health Care the most extended.

http://www.bespokeinvest.com/thinkbig/2012/10/9/technology-all-alone-below-its-50-day.html
***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
Oct 10 2012 

http://www.kitco.com/ind/matlack/octo102012_juniors.html
***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates >>> Senior Producers
By Bill Matlack           
10 Oct 2012 

http://www.kitco.com/ind/Matlack/oct102012.html
************


----------



## tinhat

drillinto said:


> Metals & Mining Analysts' Ratings & Estimates >>> Senior Producers
> By Bill Matlack
> 10 Oct 2012
> 
> http://www.kitco.com/ind/Matlack/oct102012.html
> ************




I wonder why that doesn't include copper miners.


----------



## drillinto

tinhat said:


> I wonder why that doesn't include copper miners.




The copper miners are under Base Metals & Diversified


----------



## drillinto

Gold is the new asset class for the confused
Diane Francis |Toronto, Canada | Oct 12, 2012 

Source >> http://opinion.financialpost.com/2012/10/12/gold-the-new-asset-class-for-the-confused/


----------



## drillinto

October 13, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market doesn’t seem to have moved at all last week.

Oz. It was probably the flattest week in several years. Both the all ordinaries and the metals index closed almost precisely where they started. Gold was the only sector to show a significant trend, and that was down. The ASX gold index lost three per cent, as the gold prices slipped by US$25 an ounce, and the Australian dollar refused to obey the country’s central bank by falling. In fact, the Aussie dollar rose slightly during the week before retreating. It also finished where it started.
...

Source >> www.minesite.com
*****


----------



## tinhat

drillinto said:


> The copper miners are under Base Metals & Diversified




Ah yes, so they are. Thanks.


----------



## drillinto

Global map of oil refining and trade to be redrawn over next 5 years, IEA report says

http://www.iea.org/newsroomandevents/pressreleases/2012/october/name,32158,en.html
***


----------



## drillinto

October 15, 2012
It’s Not All Doom And Gloom For Commodities: The Global Economy Will Still Grow By 3.6 Per Cent This Year, And China By Nine Per Cent
By Rob Davies

Last week was a time for revising forecasts down. Alcoa did it for aluminium demand, and the IMF did it for world growth. 

That degree of consensus between industry and academics is surprising, but does suggest that the overall trend is correct.

However, it’s not all gloom and doom and even if accurate, there’s nothing in these headlines that says we should all resign ourselves to penury. 

Sure, Alcoa did reduce its forecast for growth in aluminium demand in 2012, but from seven per cent to six per cent. 

Most companies would be delighted with such a robust market to feed. 

More importantly Alcoa also still expects the global appetite for aluminium to double between 2010 and 2020. Given that consumption this year is estimated at 46.1million tonnes it suggests this pot has plenty of scope to feed lots of people over the next eight years.   

Unfortunately the press and the market paid more attention to the reduction in the rate of demand growth and aluminium rattled back 4.6 per cent over the week to US$1,992 a tonne.

As the largest base metal by volume that decline had a knock-on effect on the asset class and the LME index closed down 2.2 per cent on the week at 3494.6. 

Meanwhile, a major influence on all capital markets over the week was the IMF report. Although this report was trailed as being gloomy, in fact it is still forecasting global growth of 3.6 per cent in 2013. 

While this is not dramatic it is at least a lot better than the 3.3 per cent now expected for 2012. 

The main reason for the reduction was the ongoing strife in Europe where even Jens Weidmann, President of the Bundesbank, is now resigned to a stagnant German economy in the second half of this year. 

As the continent’s leading metal basher that matters. Indeed, Alcoa cites Europe as the only region expected to record a drop in aluminium consumption this year. 

Although many write Europe off, it’s important to remember that it is still the second largest market for aluminium, and most other metals, after China. 

So a two per cent fall in a market of 6.5 million tonnes matters. The good news is that a nine per cent growth rate in the Chinese market of 20.7 million tonnes matters even more.

The argument is the same on a global economic scale. The IMF is forecasting a lacklustre growth rate of only 1.5 per cent for the economies of the developed world in 2013. 

Mature economies are doing not much more than treading water at the moment. 

Another indication that this is true is the depressed prices being achieved for No 2 copper scrap in the US. These are trading at a 25 per cent discount to the futures prices according to Bloomberg. 

And that is with a global copper deficit this year of 102,000 tonnes. 

But even in the US though there are rays of sunshine. Consumer sentiment has ticked up from 78.3 to 83.1. 

That improvement may be related to a better housing market. According to Jamie Dimon, Chief Executive of J P Morgan, the US housing has “turned the corner”. 

Now he just needs to tell the IMF. It might like some good news.

Source >>> www.minesite.com
*****


----------



## drillinto

October 20, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, what’s driving the outbreak of confidence in your market? 

Oz. In a word, China. In two words, Chinese statistics. Last week there was a surprise upward revision of official economic growth data. The data seems to show that China suffered its hard landing in the first quarter of this year and has been in recovery mode for the past six months, with growth appearing to be accelerating.

That news was enough to wake market bulls who rushed back in to basic raw material stocks, especially iron ore and copper miners, a switch which hit the gold miners. The change in sentiment was enough to lift the metals and mining index on the ASX by a healthy 3.9 per cent. The gold index fell by 1.5 per cent, helped along by the lower gold price.

Minews. How much confidence can be put in the latest Chinese data?

Oz. That’s a good question because it’s always prudent to treat any government statistics with care. However, it’s worth noting that a few normally cautious observers, including the chief economist at Westpac Bank, Bill Evans, have turned bullish. Evans shocked the market by tipping that commodity prices will rise by 30 per cent over the next 12 months.

Easy as it might be to say that that’s just one-man’s view, Evans has been the most accurate forecaster of trends in the Australian market for the past few years, most famously predicting a big fall in interest rates at this time last year, just as his peers were tipping rate rises. Evans won, and now he’s stuck his neck out on commodities he has plenty of listeners.

Minews. And his tip is based on that Chinese data you mentioned.

Oz. It would seem so. The National Bureau of Statistics in Beijing revised down its first quarter number for gross domestic product growth from 6.8 per cent to 6.1 per cent, a shift which seems to show that the opening months of 2012 were the bottom of the cycle. The Bureau then revised up the second quarter from 7.4 per cent to 8.2 per cent, with third quarter growth back to 9.1 per cent. While that means overall growth for 2012 will probably still be less than eight per cent, a clear picture of improvement can be seen.
...

Source >> www.minesite.com
*****


----------



## drillinto

October 22, 2012
Bond Investors: The Metals Markets Are Ready And Waiting For You
By Rob Davies

The world of commodities, especially metals, is pretty specialised and demands a lot of attention to detail to understand. 

But sometimes, just sometimes, you can learn something so fundamentally important from another sector that it radically changes your perspectives. 

The world of drug research is about as far removed from mining as it is possible to get. 

Drug companies make their living by spending a lot of money on researching new drugs and then marketing the successful ones for extremely high prices until they lose patent protection. 

Many investors think this a great, high quality business because it is underwritten by government health spending. And no one wants to vote against that. 

Yet drug development is expensive and risky and not all new drugs work. Moreover, it is getting harder to protect margins as cheaper generic drugs become available. 

It’s largely for these reasons that AstraZeneca, a large British drug company, is only trading on seven times earnings. 

And yet despite this rather short term view on the earnings, the company has just sold one billion dollars of debt with a coupon of only four per cent as part of a US$2 billion financing. 

Here is the staggering part though. 

It is a thirty year note. In other words the market is prepared to believe that the company will be financially strong enough in 2042 to redeem these notes at par. 

Any market needs to have a buyer and a seller. Clearly, the buyers thought this was a good deal.

Equally, the treasurer of AstraZeneca thought it was a brilliant trade. In fact, if someone offered this writer one billion dollars for thirty years at four per cent I think he would view it as an outstanding deal. 

The biggest uncertainty in this deal is not actually the creditworthiness of the issuer. It is what inflation will be over that period. 

AstraZeneca clearly thinks inflation will reduce the value of the capital, and the coupon, over that period. The investors presumably think that, despite the risk, it is a trade worth doing. 

That seems a strange bet given that while UK inflation fell to 2.2 per cent in September, it was 5.2 per cent a year ago. 

The data for the US is similar.  In September of this year it was two per cent, but 3.9 per cent in 2011. Who knows what it will be thirty years from now?  

Not everyone is so complacent. Over the course of the week the benchmark 10 year US Treasury bond fell 8.5 per cent to yield 1.8 per cent. 

Some people are getting worried about inflation, and not just drug company treasurers. 

Bizarrely though these developments seem to have bypassed the metals market. Base metals, as measured by the LME index, drifted back 0.6 per cent to 3,475 and gold fell 1.8 per cent to $1,734 an ounce.

The concern here focussed on lacklustre growth figures from China and hope that the Europeans will resolve their problems. 

For anyone who doesn’t think China is about to come to grinding halt and is sceptical that Eurocrats will fix their sovereign debt problem, inflation hedges, like metals, look a one way bet. 

And that includes borrowing money at four per cent for thirty years.  When will bond investors wake up? The metal markets are ready and waiting for you. 

Source >>> www.minesite.com
*****


----------



## drillinto

October 27, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, your market seems to have had a rough week.

Oz. Forgettable, at any rate. Most companies lost ground, with a few managing to post modest rises after reporting positive discovery and development news. Lower prices for most commodities, especially gold, weighed on investor confidence and even iron ore, which managed to reclaim the US$120 a tonne mark, did little for the iron ore miners and explorers.


Overall, the market lost two per cent as measured by the all ordinaries index, but there were bigger falls in the indices we watch more closely. The metals and mining index shed 4.1 per cent.

Gold dropped by six per cent, copping the double-whammy of a lower US dollar price for the metal, and a fresh rise in the value of the Australian dollar which continues to defy attempts by the country’s central bank to drive it back below parity with its American cousin.

Minews. But there was good news from Queensland? 

Oz. Uranium explorers had a modest win during the week when another state government - Queensland this time - said it was lifting an embargo on uranium mining. That news triggered a small ripple of positive sentiment in the uranium sector, including a rise from our old friend Manhattan Corporation.

Nickel was on the receiving end of bad news as there were further retrenchments from BHP Billiton and more talk about it selling its Nickel West operation - a move which might produce a surprisingly positive result as a new owner might inject a bit of life into one of BHP Billiton’s forgotten operations.
...

Source >> www.minesite.com
*****


----------



## drillinto

October 28, 2012
That Was The Week That Was ... In London
By Alastair Ford

It was goodbye to Cynthia Carroll this week and goodbye to the prospect of West Africa emerging as a major iron ore province, at least if commentary from iron ore heavy weight BHP Billiton is to be believed. On the market the departure of Ms Carroll had a more marked effect than the potential extinguishing of a new mining province. 

Shares in Anglo American rose by three per cent on the day she quit, and ended the overall week up 38p at 1,934p.

In a valedictory speech Ms Carroll stated that the platinum industry is not competitive and that it’s unlikely to thrive unless fundamental changes are made, although she didn’t spell out precisely what those changes might be. 

Separately though, Anglo’s platinum subsidiary Anglo Platinum announced that it will re-hire 12,000 workers that it recently fired due to illegal strike activity. This move will come as no surprise to industry watchers, but does reinforce a well-established point that platinum mining companies have very little in the way of ultimate sanction against a restive workforce. 

London-based broking house Liberum issued a brief assessment of Cynthia Carroll’s reign, criticising her acquisition of Minas Rio and the handling of certain elements of the De Beers deal. Liberum had also apparently hoped that the platinum interests would have been spun out under her watch, but was at least pleased that she’d fended off what it called a “bear-hug approach from Xstrata.

Overall though, the verdict was less than favourable: “The history books won’t be kind on Carroll’s tenure”, the broker said. 

Meanwhile, on the sidelines of a shareholders’ meeting BHP Billiton chief Marius Kloppers stated that: "We believe the production in Brazil and in Australia will be sufficient to meet demand and there is increasing consensus, and a recognition by investors and the market, that this is indeed the case". 

That statement followed on from a decision by iron ore heavyweight Vale to press the go-slow button at its giant Simandou project in Guinea.

"Progressively, you have seen other companies come to a conclusion that is closer to our position", said Kloppers. In July, BHP Billiton announced that it planned to pull out of its Mount Nimba project in Guinea, in order to focus on production from the Pilbara.
...

Source >>> www.minesite.com
*****


----------



## drillinto

October 29, 2012
Miners Are Still Under Stress, In Spite Of Marginally Better Economic News
By Rob Davies

Time and again history has shown that economic data taken to be current has actually turned out to be so unreliable as to be positively harmful to those trying to use them to run countries, businesses or investment portfolios. 

Last week both the UK and the USA released growth data for the third quarter. 

Even though the numbers were good the net effect seemed to depress capital markets.

A growth figure of one per cent for the UK economy was widely derided as being in la-la land yet, if history is any good, that figure is likely to be revised upwards by a substantial amount. 

The problem for metal markets is that the UK hardly counts as a metal basher these days and the closure of two more car plants this week demonstrates that industrial production will continue to shrink as a component of the UK economy. 

But even though the UK is not an important consumer of metal any longer it is still home to the London Metal Exchange and the negative tone here may partially account for the 5.1 per cent fall in the LME index over the week to 3,299.34. 

The story in the US is more positive. Even though economic growth was only two per cent on an annualised basis, it was encouraging that residential construction increased by 14 per cent in the quarter. 

That is a meaningful increase on the 8.5 per cent recorded in the previous quarter and is significant because construction is such big component of metal consumption.

Despite these encouraging signs the stress in the mining industry was demonstrated yet again when Brazilian miner Vale reported a 66 per cent fall in third quarter profits to US$1.67 billion. 

Lower metal prices were the main problem and the company has taken action to address this by suspending operations at the Frood nickel copper mine in Canada and placing the Zogota iron ore project in Guinea under review.

These moves demonstrate that the mining industry is being pro-active in accepting the reality of modest world growth. 

While China may be a beacon of light in a rather gloomy world there is little doubt that growth rates there are now closer to mid-single digits than high single digits. 

The reality is that it looks as if the whole world now has to adapt to modest levels of growth, and that has implications for pricing across all asset classes. 

Metals have enjoyed elevated prices for the last decade, as super-demand from China stretched the mining industry to absolute capacity. 

Now a combination of additional production and subdued levels of growth are allowing the industry to get back into balance. 

However, what is not in balance is the spending habits of governments everywhere. Governments had been relying on strong economic growth to drive tax receipts up and pay down debt.

Unfortunately, sluggish activity has led to ballooning sovereign debt which is acting as drag on recovery. 

Nowhere is this more apparent than in Japan, once the powerhouse of metal consumption. Now it is struggling to get parliamentary approval to refinance  ¥150 trillion of debt. 

With a total outstanding sovereign debt of US11.6 trillion, equivalent to 212 per cent of GDP, it is a problem it has to solve before it can resume vibrant growth.

Until all governments deal with the issue of too much debt, all economic activity, including mining, will be under pressure. 

One thing is for sure. States will not pay the debt back. They will either formally renege by renouncing the debt or informally renege through inflation. 

Either way, hard assets offer protection. 

Source >>> www.minesite.com
*****


----------



## drillinto

ETF Performance: EWA(Australia) is +2.94%, month to date

http://www.bespokeinvest.com/thinkbig/2012/10/29/recent-asset-class-performance.html
***


----------



## drillinto

Please visit >> http://www.resourcesroadhouse.com.au/
********


----------



## drillinto

November 03, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, your market seems to have been fairly flat last week.

Oz. That was the overall picture with the all ordinaries index down a fraction, metals and mining up a fraction, and gold doing best of all with a rise of 1.4 per cent. Next week will be a much sterner test for gold stocks because the price fall through US$1700 an ounce occurred after the ASX closed on Friday.

Minews. Did any sector stand out, either rising or falling?

Oz. Nickel, somewhat perversely, was the star performer with a number of explorers moving sharply higher even as the nickel price fell and producers were forced to make deep cuts in their operating costs.

Minews. That sounds like an interesting disconnection, or speculators playing games.

Oz. The latter, most likely, because the nickel price has fallen back into crisis territory of less than US$7.25 a pound, causing miners such as First Quantum to report that it is looking for further cost cuts at its Ravensthorpe project. The company said that total costs at the mine it acquired from BHP Billiton rose to US$7.84/lb a pound in the September quarter which obviously means that the future looks uncertain without a higher nickel price or lower costs.

As that news from First Quantum was being digested Sirius (SIR) and explorers close to its Nova nickel discovery charged higher. Sirius added A68 cents to A$3.05, but did trade as high as A$3.20 on Friday after management released a particularly upbeat report. Near neighbours Matsa (MAT), Sheffield (SFX)  and Boadicea (BOA) joined in the game. Matsa rose by A18 cents to A44 cents. Sheffield gained A9.5 cents to A69.5 cents, and Boadicea put on A8 cents to A50 cents.

Minews. Let’s finish the nickel call, and then move through the other base metals.

Oz. Mincor (MCR), which is mainly seen as a producer, was in demand thanks to its latest exploration news, rising by A10 cents to A$1.23, a 12-month high which is quite an achievement as the price of the only metal it produces slides lower. Other nickel moves, either way, included: Western Areas (WSA), up A7 cent to A$4.36. Panoramic (PAN), down A2 cents to A59 cents. Independence (IGO), down A7 cents to A$4.02, and Mirabela (MBN), down A1 cent to A45.5 cents.
...

Source >>> www.minesite.com
*****


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## drillinto

November 05, 2012
Words Are Cheap, Cheques Are Expensive
By Rob Davies

This year the two largest countries by economic activity will change their leaders. The media is focussed on the one that is costing US$6 billion for understandable reasons. However, the other one that is costing a fraction of that will actually have much more impact on the global economy, and hence on metal markets. 

As the US approaches the last few days of campaigning the fact that the two candidates are neck and neck is as good an indication as any of how little different their policies are.  The only question of note is which candidate is more likely to let the Fiscal Cliff actually occur on 1st January 2013. This package of tax hikes and spending cuts is needed to address the US deficit but is political disaster because it would reduce GDP by 4 per cent. Maybe a second-term Obama administration with nothing to lose may let it happen unchecked. But it seems unlikely. So a compromise is on the cards whoever wins. One reason perhaps why capital markets are so unfazed by the election. 

Slightly better than expected growth in US jobs in October, 171,000 were generated, provided some support. Against that the unemployment rate increased from 7.8 per cent to 7.9 per cent reminding everyone that the economy is still not growing fast enough to generate enough new jobs for the expanding workforce. 

These data were enough to encourage risk markets and base metals rose 2.8 per cent as measured by the LME base metals index.  It is the case though that what happens in China is far more important to the demand side of the metal market than four percentage points of US growth. Unfortunately, there is very little in the public domain to help us second guess what might happen. 

The only thing that seems certain is that the winner will do even better financially than ex US Presidents do. But then they have to recover their election expenses which are not really a problem for successful Chinese Premiers.  

In both countries the winner will do all he can to boost economic growth, which is why the Fiscal Cliff probably won’t happen in the US.  But economic growth comes in different flavours and the type that is important to miners and metal bashers is industrial production. This is making real stuff that hurts when you drop them on your foot, not fancy software that destroys your laptop battery life.  And this is the real difference between these two economies.  While US industrial production grew by 4.1 per cent in 2011 it was 13.9 per cent in China.  In developed economies, like the US, IP growth is typically less than GDP growth while in developing economies the opposite is the case as the state builds infrastructure. 

The market knows that whatever grand promises the candidates make to the voters the money is simply not there to deliver them. Words are cheap, cheques are not. More plausible is that voters will actually be worse off in four years’ time if the US finally starts to address its deep-seated budget problems. 

In China the relationship might be less transparent. Nevertheless, the winner knows he has to keep the population gainfully employed or face civil insurrection. Keeping the workers busy in China is good for metal demand. And, unlike the US, it is a country that can afford to write big cheques.

Source >> www.minesite.com
*****


----------



## drillinto

"Buy gold whatever the outcome in the US elections"
Jan Skoyles, Head of Research at The Real Asset Co. / Nov 5, 2012
*********


----------



## drillinto

November 10, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, it looks like your concern when we last spoke about a big fall in gold stocks was a bit askew.

Oz. It was. Gold did what gold often does, make a fool of anyone who thinks he can tip short-term price moves. Having chastised myself about gold, as looked at through the lens of a week-in-review, it might also be said that Monday was a bad day with the recovery coming later in the week as the price climbed back over the US$1700 an ounce mark.

The net effect of that wobbly start, and a tense week which saw multiple external factors at work such as the U.S. presidential election and Chinese presidential anointment, was that gold won the week when compared with other metals, but the overall result was a market which went absolutely nowhere with most indices ending where they started.

The all ordinaries index fell by 1 point which, at 4482 points, is a percentage move down to the second decimal point. Metals and mining added 5 points (up 0.14 per cent) and gold starred with a rise of 65 points (up 1.1 per cent).

Minews. Hardly worth writing home about, but presumably there was some interesting news flow even if the market was flat.

Oz. There certainly was, and it’s continuing into the weekend. Of most interest to mining investors is that the first flush of optimism that we saw a few weeks ago about commodity prices and Chinese demand for minerals and metals is gathering pace. A number of close observers of China in the banking community published optimistic demand comments, including one from ANZ Bank which started “Improving backdrop for higher prices”, followed by HSBC which started by saying “start your engines” while also noted the Chinese presidential change was a positive development for commodity exporters and finally, there was a very upbeat outlook from Rio Tinto about demand for metals.

Minews. Offsetting the good news that you’re picking up is the latest act in the Greek tragedy and the march towards the U.S. fiscal cliff.

Oz. Points that cannot be ignored, but the view from this side of the world is that Europe is becoming less important because even if it muddles through a second recession next year the rest of the world is getting on with business, especially Asia where there seems to be a view that there is sufficient demand from fast-growing countries in the region to offset sluggish Europe.
...

Source >> www.minesite.com (The registration is free)
*****


----------



## Joules MM1

*Australian miners dig for precious new commodity cash*
James Regan and Umesh Desai

SYDNEY/HONG KONG | Sun Nov 11, 2012 2:02pm EST 
http://www.reuters.com/article/2012/11/11/us-australia-mining-idUSBRE8AA0CZ20121111

excerpts



> "In Australia, the equity markets are broken," said Chris Tonkin, managing director of Perth-based Arafura Resources Ltd (ARU.AX). "On the debt side we will be approaching sovereign funds, export credit agencies, as well as banks."






> In January-September, the number of financing and capital-raising deals fell to 167 worth A$14 billion, according to Ernst & Young's senior mining analyst Paul Murphy. That compares with 201 deals valued at A$28.2 billion a year earlier.


----------



## Joules MM1

Nov. 12, 2012, 5:30 a.m. EST 
*
U.S. set to overtake Saudi in oil output: IEA*

excerpt



> According to Washington's Energy Information Administration, U.S. oil production has increased 7% to 10.76 million barrels a day since the IEA's last outlook a year ago. The agency's conclusions are partly backed by the Organization of the Petroleum Exporting Countries, which last week acknowledged for the first time that shale oil would significantly diminish its share of the U.S. market.
> 
> The group said the U.S. would import less than 2 million barrels a day in 2035, almost three-quarters less than it does today. That's not to say OPEC's role will be marginalized globally. The group's share of global production will increase from 42% today to 50% in 2035, with much of it going to Asia.....


----------



## drillinto

Country Stock Market Performance

http://www.bespokeinvest.com/thinkb...erformance-qtd-ytd-us-struggling-in-q4-1.html


----------



## drillinto

November 17, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like your market suffered another tough week.

Oz. It was pretty awful. Finding stocks that rose was a needle-in-the-haystack exercise, whereas finding stocks that hit 12-month share price lows was relatively easy. Like London and New York, the Australia market is being buffeted by the ill winds blowing off Europe, the US, and China.

If it’s not the US “fiscal cliff” worrying investors, it’s trying to understand what’s happening in Beijing, or it’s guessing when the official diagnosis for Europe switches from recession to depression.

Minews. Or all three.

Oz. Well, that’s the point, isn’t it? We seem to have stumbled through the recovery phase after the big meltdown of 2008 to have reached a sort of triple-witching hour as the world’s three biggest economies experience simultaneous crises.

The net effect on the Australian market last week was that the all ordinaries index shed 2.7 per cent, its worst weekly performance in six months. The metals and mining index did even worse, losing five per cent, and the gold index topped them all with a fall of seven per cent.

Worst hit were the smaller mining stocks that we follow most closely, with 39 of them trading down to 12-month share price lows, including some relatively big names such as the phosphate explorer, South Boulder (STB), the iron ore miner, Mt Gibson (MGX) and the uranium producer, Paladin Energy (PDN).
...

Source >> www.minesite.com
*****


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## drillinto

BlackRock’s Hambro Bullish on Mines

According to fund manager Evy Hambro Chief investment officer of BlackRock’s natural resources equity team, the mining sector is at the moment “rife with investment opportunities.” These opportunities, arising from expected supply shortfalls, should help spur a recovery in share prices after a sustained period of weakness, he said in a note to clients. (NOV 16, 2012)
*******************


----------



## drillinto

November 19, 2012
LME Inventories Give A Clearer Guide To The Global Economy Than The Background Noise Surrounding The Fiscal Cliff And The Sell-Off In Junk Bonds
By Rob Davies

Given the walloping equity markets took last week the modest, 0.5 per cent increase in base metal prices, as measured by the LME index, looks like a good result.

Well... at least in the short term. 

Quite why capital markets have taken fright now is one of those perennial mysteries mere mortals will always fail to understand. 

The prospect of the US Government dealing with the “fiscal cliff” in the New Year is no more or less likely now than before the election.

In any event many observers would view a real attempt to tackle bloated government spending as a massive positive factor for the private sector in the long term. 

The foreign exchange markets took it as an excuse to bid the dollar up but, as always, it is hard to know if that is because the US looks good or that Japan and Europe look even worse.  

In terms of the metal markets the change of leadership in China was by far the most important event of the week, even though no one knows how Xi Jinping will rule. 

He certainly has every incentive to maintain economic growth to keep the population on-side and that will be good for metal markets.

Perversely, mining shares came under pressure last week despite a rising dollar and a falling oil price. Why perverse? Because both those dynamics will act to moderate costs.

That will help maintain margins as long as metal prices don’t decline in sympathy. 

Even so, all these short term movements are simply noise that is impossible to interpret. The US$607 billion that the “fiscal cliff” will take out of the economy is a signal, and a massive one at that. Unfortunately no one knows if it will happen and what the effects will be if it does. 

In the same vein the sell-off in the junk-bond market in recent weeks may just be noise. Alternatively, it could be a signal that days of easy money for large corporations are coming to an end. 

So, to get a better idea of what is going on we need to look at fundamentals rather than prices. In the metal markets few items are more crucial than the inventories of metal in LME and other warehouses. These have been remarkably stable for some time, although they are changing. 

The metal with highest profile is copper and its inventory on the LME remains staggeringly low at 253,465 tonnes - in a market that consumes 20 million tonnes a year. 

Even allowing for the estimated one million tonnes of additional inventory in China it is still an amazingly low figure. What is even more noteworthy is that stocks are this low four years into the worst economic conditions for sixty years. 

To cap it all the LME inventories are now are even lower than the 358,250 tonnes they were at the beginning of the year. 

But copper is the exception. LME inventories of aluminium now exceed five million tonnes. Although this is only slightly up on the 4.9 million tonnes held in inventory at the start of the year, it does help to explain the decline in the price this year from US$2,157 to US$1,931 a tonne. 

Zinc inventories have also risen this year. They now stand at 1.1 million tonnes, a significant gain over the 818,000 reported at the beginning of the year. 

Given that increase the price has done well to stay at US$1,906 a tonne. Compared to the US$1,944 a tonne it was trading at at the start of 2012, that fall could have been much worse.   Or maybe the big fall has yet to happen? 

Source >>> www.minesite.com
*****


----------



## drillinto

Sector Snapshot

http://www.bespokeinvest.com/thinkbig/2012/11/15/bespokes-sector-snapshot.html
***


----------



## drillinto

Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2012/11/20/bespokes-commodity-snapshot.html
***


----------



## drillinto

ETF Performance

EWA(Australia) has posted a nice gain this quarter, +1.77%

http://www.bespokeinvest.com/thinkbig/2012/11/19/key-etf-performance.html
***


----------



## drillinto

S&P 500: Sector Prices vs Trading Range

http://www.bespokeinvest.com/thinkbig/2012/11/21/close-but-no-cigar.html
***


----------



## drillinto

November 24, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, a little stability seems to have returned last week to your market.

Oz. It was described by local observers as the best week of gains since October, but when you think about that it might have been said as a joke, given that we haven’t even reached the end of November.

Prices were up, thanks to better trends on most of the world’s leading markets, especially New York and Shanghai which tend to set the lead for Australian investors.

Overall, the Australian market as measured by the all ordinaries index added 1.6 per cent, a gain which is so modest that it undermines that best-since-October claim. There was a firmer trend among the mining stocks. The metals and mining index rose 2.1 per cent while the gold index did best of all with a rise of 2.3 per cent.
...

Source >> www.minesite.com
*****


----------



## drillinto

World Energy Outlook 2012

http://www.worldenergyoutlook.org/publications/weo-2012/#d.en.26099

Executive Summary >>> http://www.iea.org/publications/freepublications/publication/English.pdf
**************


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## drillinto

November 26, 2012
All Quiet In The Capital Markets
By Rob Davies

Despite the unusually low volatility, or perhaps because of it, there is a growing sense that many securities are trading at the wrong price. 

However, it is virtually impossible to be sure if the current lack of movement reflects a market that is perfectly priced or one that is subject to so much hedging that it is artificially constrained. 

The answer to the question will not be known until a sudden burst of activity hits capital markets, or until nothing much happens. 

All we do know is that traders hate inactivity - partly because it conflicts with their basic instinct to “do something”, but also because you don’t make any money sitting around talking and not trading.

One thing traders can do is provoke some interest by marking prices up or down and see if it generates any subsequent activity. 

If it does, such a strategy could set off a self-perpetuating change of direction as it taps into an underlying trend that was just waiting for a trigger. 

If people thought prices should be higher or lower but had no excuse to trade, the mere act of seeing quotes move in the direction they want could be enough for them to take action. 

This response is well documented as Bayes’s Theory, which tells us that the best guide to what happens next is what has just happened. Others will just say this is just a fancy name for momentum investing.

Whatever it is called there isn’t much of it at the moment. 

Despite good rallies in equity markets, base metal price moved little over the past week, A half percent increase in the LME index to 3,305 is a pretty good indication of the lacklustre state of the market. 

And, while the newswires may claim the storm Sandy will result in the injection of US$240 billion into the US economy few would argue that the event was a net benefit to that country. 

In the short term the dollar was depressed by a stronger than expected business survey in Germany and thin trading due to Thanksgiving holidays. 

That was one reason base metals edged higher and together with the news that there are now 2,605.3 tonnes in ETFs, why gold pushed higher to US$1,748 an ounce. 

One piece of news epitomises the difficulty of interpreting current data. Next year Bloomberg estimates that new container ships will add 1.673 million tonnes of capacity to the global shipping fleet. 

That is a substantial increase on the 1.336 million tonnes expected to be delivered this year and will put downward pressure on freight rates. 

While that might be bad news for shipping companies or ship builders it will encourage world trade, which is good for economic growth and hence metal demand. 

Perhaps we just have to get used to quiescence in asset prices and accept that growth will be low, albeit steady. Better that, surely, than wild swings between excessive optimism and deep pessimism, however good that is for traders. 
...

Source >> www.minesite.com
*****


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## drillinto

Please visit the blog of Jamie Ross(mining engineer) >> www.miningman.com


----------



## drillinto

Blog focused on the chinese mining industry >> http://chinaminingblog.com/
***


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## drillinto

OLAM and Muddy Waters

http://www.bbc.co.uk/news/business-20521957
***


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## drillinto

EWA(Australia) >> YTD change: +13.90%

http://www.bespokeinvest.com/thinkbig/2012/11/26/global-stocks-rebound.html
***


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## drillinto

China & India

http://www.bespokeinvest.com/thinkb...brics-india-surges-while-china-struggles.html


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## drillinto

December 01, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have had a better week.

Oz. It was, but it was patchy, and without a cohesive theme, apart from the weaker tone among the gold companies. These struggled with the sharp gold-price fall during the week and continued strength in the Australian dollar which is being pushed up by buyers from the oddest places. The latest country to develop an appetite for the Aussie currency is Russia, which has been loading up on dollars since it was elevated to a global reserve currency status.

Minews. And a high dollar hurts all of your export industries.

Oz. It does, but neither the government nor the central bank, seem to have any way of countering the rise, unless they slash interest rates - which could well be the big news of next week.

Minews. That’s next week’s news, let’s stick to last week, starting with an acknowledgement that this might be a briefer than usual rundown because you’re somewhere between Oz and London on the way to Mines and Money.

Oz. Correct, and I’ll also make a quick visit to next week’s Minesite Forum. The tight schedule means that this week’s report is being written at 30,000 feet en route to Singapore, so please forgive any bloopers caused by the turbulence or the occasional glass of the rather delicious Charles Heidsieck bubbly.

Minews. Enough of the idle chatter, let’s get those figures out of you before the bubbles do their job.

Oz. Overall, the market had its best week in a month, adding a respectable 3.6 per cent as measured by the all ordinaries. But that was mainly thanks to strength in financial and industrial stocks. Metals and mining companies delivered a rise at roughly half that rate, 1.9 per cent, while the gold index barely moved, adding just 0.2 per cent, and with most of that attributable to a small rise by Newcrest (NCM)
...

Source >> www.minesite.com (Free registration)
*****


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## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
Nov 27, 2012 

http://www.kitco.com/ind/Matlack/november272012B.html


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## drillinto

December 03, 2012
The Appointment Of Mark Carney As Governor Of The Bank Of England Could Be A Game-Changer As Far As Inflation And Metals Are Concerned
By Rob Davies

Investors buy commodities to speculate on changes in prices as demand fluctuates, and to protect themselves from inflation.

Since the Global Financial Crisis of 2008 authorities around the world have played a simple game of supplying sufficient liquidity to prevent the major economies from seizing up. 

This has worked by maintaining growth, which has in consequence helped keep metal prices at high levels.

It has though, come at the expense of increased inflation, which of course vindicated commodity speculators.

Two large countries, Australia and Canada, did not join in this game because they didn’t need to. They were relatively well run and benefitted from being large exporters of natural resources.

One of these countries, Canada, has just discovered that there is now an overseas appetite for its financial skills as well. There can be few better examples of how international the UK economy now is than its recruitment of Mark Carney from Canada as the next Governor of the Bank of England.

There is no doubt that the UK is not the financial powerhouse it was 100 years ago. Nevertheless, the occupant of Threadneedle Street is still one of the four most powerful central bankers in the world.

He, and his peers, can have a major influence on inflation, and expectations of inflation, in a significant part of the world.

The appointment of a foreigner to such a key position tells us two things. One is that British politicians are not very impressed by the cohort of suspects that have followed safe career paths to be within shouting distance of the top job.

Instead, the Chancellor was prepared to take the dramatic step of looking outside the domestic gene pool in a way few other countries would, to signal a sharp change in tone and approach.

Secondly, and more importantly for commodity investors, it sends a message that the old approach of fudge and muddle through probably won’t be used by the new man.

If Carney is serious about this role, and there is no reason to believe he isn’t, then the implications for inflation, interest rates and exchange rates could be profound. If his approach works it will undoubtedly have ramifications for other central banks and economies as well. 

There is of course no guarantee that his solutions will work. For a start he hasn’t got the following wind he had in Canada - specifically a large domestic resource industry. Moreover, he has to factor in how his decisions will impact the financial world of the City of London which is still the home of metal trading. 

His biggest challenge, like a number of new leaders in recent years, is to meet the exalted expectations now placed in him.

However, if does succeed, even with his short tenure of only five years, it could radically change expectations of future inflation in the UK and possibly elsewhere.

Were that to happen it is possible to envisage an appreciation of sterling, a reduction in the value of overseas earnings from commodity related businesses and maybe even a sharp, step change, in commodity prices.

Overriding these impacts will still be the long-term fundamentals of demand and supply for all commodities, especially metals.

But what Carney may succeed in doing is reducing some of the speculative interest in metal prices.

Whether that is a good thing or not is for others to judge.  It certainly seems though that this appointment has changed the rules of the game. A central banker who actually cares about inflation - that’s a novelty.

Source >> www.minesite.com
*****


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## drillinto

December 15, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have had a solid week.

Oz. There was certainly a more buoyant mood, with a pleasing return to favour of iron ore companies after a further increase in the iron ore price. At around US$126 a tonne, iron ore is at a three-month high, thanks largely to confirmation that the Chinese economy continues to recover from its slowdown.

Mining stocks led the rest of the ASX up, with the metals and mining index adding a healthy 3.5 per cent, comfortably outperforming the all ordinaries, which managed a gain of 0.8 per cent, and the gold index, which underperformed with a rise of 0.7 per cent.

Minews. As with the past few weeks we’ll keep this report short, as you’re about to start the long haul back to Australia. 

Oz. Right you are. But before calling the card, it’s worth making a few comments on the bigger picture. The Australian market ended the week at an 18-month high, and the Australian dollar continues to rise, much to the annoyance of exporters. Last week saw the dollar add another US1 cent, though very much because of continued weakness in the US currency, which is being deliberately driven lower by the US Government.

The Australian currency is now being referred to as a “Bradbury”, in honour of Stephen Bradbury, Australia’s first winter Olympics gold medallist, who won a skating sprint in 2002 at Salt Lake City after the rest of the field crashed, leaving him as the last man standing, literally. Today, the Australian dollar is standing while everyone else falls.

Minews. Time for prices, starting this week with iron ore, please.

Oz. Fortescue Metals (FMG) led the way thanks to the announcement of an expanded resource at its Iron Bridge project. The shares rose by A35 cents to A$4.31. Atlas Iron (AGO), which secured a big capital injection to fund development plans, wasn’t far behind with a rise of A26 cents to A$1.56. BC Iron (BCI) added A30 cents to A$3.27, also after raising fresh capital to buy back part of a mining deal it has with FMG. And IronClad (IFE) put on A9 cents to A27.5 cents after reporting the discovery of additional material at its Wilcherry Hill project.

Other iron ore moves, mainly up, included: Gindalbie (GBG), up A1.5 cents to A24 cents, Grange (GRR), up A5 cents to A26.5 cents, Mt Gibson (MGX), up A7 cents to A70 cents, Iron Ore Holdings (IOH), down A3 cents to A75 cents, Northern Iron (NFE), up A6 cents to A48 cents, and Aquila (AQA), up A25 cents to A$2.65.
...

Source >> www.minesite.com
*****


----------



## drillinto

December 10, 2012
Why Metals Are Now Contra-Cyclical
By Rob Davies

Among the many tales of investing folklore that have been passed down from seasoned old lags to eager young tyros in wine bars and pubs across the world there is always one relationship that is venerated as the most basic. 

Commodities, especially industrial metals, are cyclical. Their price is dictated more by the vagaries of changes in GDP than by any other factor. 

Unfortunately for old lags, but fortunately for miners, this relationship has not held true in this great recession. 

The rupture of this correlation was demonstrated again this week when the Bundesbank revised down its estimates of growth for the German economy next year from 1.6 per cent to 0.4 per cent. 

As Germany is the biggest metal basher in Europe that implies metal demand will be lower than previously expect. Did that worry metal markets?  

Not really. Copper gained 2.2 per cent to US$8,020 a tonne, though overall metal prices, as measured by the LME Index, slipped 0.4 per cent to 3,456.7. 

One reason for this disconnect is that this apparently is not a normal recession.

This is a balance sheet recession and that means, we are told, that recoveries take eight to ten years instead of the more common two or three. 

The West is now in its fourth year of this recession and there is little, indeed there are no signs of recovery. 

And while this recession grinds on it is having a demonstrable impact on the stock of goods held by the public. 

According to Bloomberg the average age of a US consumer durable good, like a car or a washing machine, has increased to 4.6 years. 

This is the highest since 1962, and has been rising for four years in a row which makes it the longest period of rising longevity since the Great Depression. 

Events like the superstorm Sandy are a godsend to those lucky enough to survive it as insurers allow affected residents to replace old goods with brand new ones. 

But even that one-off blip is not enough to revive moribund demand in the developed world. 

The problem is that the public still has too much debt and the process of deleveraging is eroding the ability of consumers to spend. 

Even though US household debt has fallen to 81.5 per cent of GDP from 97.5 per cent in June 2009 few want to go back the old days of being in hock to the bank. 

The other problem is that many banks in the developed world are still pretending that many of the loans they have extended will be repaid. 

Some analysts feel that about 10 per cent f these outstanding loans will eventually be written off, further damaging the balance sheets of banks and their ability to lend.

This means is that it is still China and the developing world that is driving metal consumption and they are dancing to a different beat from the West. 

They are not members of the OECD and this distorts the usual cyclical relationship of GDP growth and metal prices for the world’s richest countries. 

The best hope is that when they have their crisis, as they inevitably will, the Western countries will have got their balance sheets in sufficient order to take over again as the engine of world growth.

It looks like they have plenty of time.

Source >> www.minesite.com
*****


----------



## noirua

Copper and nickel have done well in the last 30 days -- augers well for an eventual across the board recovery, me thinks.


----------



## drillinto

December 17, 2012
Recovery Ahoy? Aluminium Goes Into Backwardation
By Rob Davies

Everyone knows bad news sells papers, and that the same applies to radio, TV and the internet. There is therefore an understandable concentration on negative stories in the old and new media.

But it is the job of the investor to break through this crust of negativity on the news crÃ¨me bruleÃ© and to discover the moist and creamy delights below.

Last week was a good example. 

While the pundits chattered away about the “fiscal cliff” of impending tax rises and spending cuts in the US, it turns out that industrial production there rose by 1.1 per cent in November. 

Many believe that the US is living in the la-la land of pretending it doesn’t need to make big adjustments to taxation and spending to bring the two into line. 

Either the gap is closed or the debt is eroded by inflation. Americans just need to accept the idea and move on. 

It certainly seems the bond market senses which way the wind is blowing judging by the five per cent sell-off in the 10 year US Treasury, taking its yield back above 1.7 per cent. It senses growth is in the air. 

But developed equity markets have not really priced this in, even though they are making slow upward progress. 

More interesting perhaps was the exuberant five per cent leap in the Chinese stock markets on Friday, driven by a jump in a purchasing managers’ index to a 14 month high. 

And another demonstration of the way the world is changing was the news that Brazilian exports are falling - its main market is Europe - as demonstrated by a 3.8 per cent drop in freight rates for Capesize vessels. 

Since China is now a bigger market for metals than Europe metal prices responded well and gained 1.7 per cent over the week, taking the LME index to 3,514.7. 

One metal that responded particularly positively to the week’s news was aluminium. Its cash price increased 7.1 per cent to US$2,121 a tonne, ten times the gain recorded by the three month price. The rise has now put the quotes into backwardation. 

When that happens it means prices for immediate delivery are higher than for metal in three months time, and is usually a sign of vigorous demand. 

But even the most rampant of bulls would be hard pressed to argue that case right now. The alternative explanation is that stockpiled metal is not actually available for delivery. Certainly, that is what seems to be the case for aluminium. 

Which is rather odd, because there are currently 5.1 million tonnes in LME warehouses and probably a lot more in China. It seems someone is taking a pretty optimistic stance on the metal despite the gloom in the press. 

What is rather strange is that it is only aluminium in backwardation and not the other metals.

That may be because aluminium is the largest base metal by volume and is one of the few that can accommodate large amounts of money being invested in it without distorting the market. 

Alternatively it might be because it is probably the most cyclical of all the industrial metals with use spread across transport, construction and consumer spending. 

If recovery really is round the corner, and you have a lot of funds to invest, going long on aluminium does make a lot of sense.

Source >> www.minesite.com
*****


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## drillinto

Recent performance of emerging markets ETF

http://www.bespokeinvest.com/thinkbig/2012/12/13/emerging-markets-stage-a-late-year-comeback.html


----------



## drillinto

Commodity Snapshot 

http://www.bespokeinvest.com/thinkbig/2012/12/10/bespokes-commodity-snapshot.html
***


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## drillinto

COAL

Global coal demand will probably rise by 2.6 percent a year to 6.17 billion metric tons of coal equivalent in the six years to 2017, driven by China’s economic expansion, according to the International Energy Agency(IEA).
Countries outside the 34-nation Organization for Economic Cooperation and Development are expected to drive growth with an annual increase of 3.9 percent, the Paris-based agency said today in its first Medium-Term Coal Market Report. Within the OECD coal use is projected to fall by 0.7 percent a year.
“Even though coal demand growth is slowing, coal’s share of the global energy mix is still rising, and by 2017 coal will come close to surpassing oil as the world’s top energy source,” the IEA said.
U.S. coal demand is expected to fall by 2.5 percent a year as it faces competition from cheap natural gas, the IEA said.

Source >> Marek Strzelecki (Bloomberg, Dec 18)


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## drillinto

Coal to challenge oil's dominance by 2017, says IEA

http://www.guardian.co.uk/environment/2012/dec/18/coal-challenge-oil-international-energy-agency
***        (At the end of the article there are more than 130 comments from readers)


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## drillinto

Financials on top

http://www.bespokeinvest.com/thinkbig/2012/12/19/financials-on-top.html
***


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## drillinto

"Gold Closes Below 200-Day Moving Average"

http://www.bespokeinvest.com/thinkbig/2012/12/20/gold-closes-below-200-day-moving-average.html
***


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## drillinto

EWA(Australia): The trend and timing are good.

http://www.bespokeinvest.com/thinkbig/2012/12/20/the-world-is-overbought.html
***


----------



## drillinto

December 22, 2012
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like you were having a good week until fresh doubts surfaced about economic recovery in the U.S.

Oz. Optimism ruled until Thursday afternoon, when news filtered through about the collapse of the latest effort in the U.S. to avoid falling of the so-called fiscal cliff. It just got worse after that as a sell-off on Friday unwound most of the good work done earlier.

However, having acknowledged two down days it’s worth noting that the overall mining market still ended up for the week, albeit by a marginal 0.7 per cent.

The gold sector was hit hardest by the latest bout of global uncertainty. It dropped faster than the gold price, shedding a sharp 6.8 per cent, as measured by the ASX gold index.

Minews.  If the gold sector was that weak, then other mining stocks must have performed reasonably well to get that overall 0.7 per cent rise.

Oz. That’s a very good point because it shows that the widespread sell-off in gold stocks failed totally to over-shadow what was a reasonable week for iron ore and coal miners

Minews. There seems to have been an interesting rotation back into bulk commodities, so let’s get to gold later and focus now on the areas which performed best, starting with iron ore.

Oz. Driving the iron ore sector was continued strength in the iron ore price. The price hit a five month high of US$130 a tonne during the week thanks largely to Chinese steel mills rebuilding depleted stockpiles. The higher price helped lift all producers, led by Fortescue Metals (FMG) which mimicked the ore price, also hitting a five-month of A$4.72 on Wednesday before then sliding back in the “fiscal cliff sell-off” to close the week at A$4.38 for a modest overall rise of A7 cents.

The story of rising then falling was repeated across the sector as optimism gave way to pessimism. Atlas Iron (AGO) rose to A$1.75 before ending the week at A$1.67 for a gain of A11 cents. Mt Gibson added just half-a-cent to A75.5 cents but did reach A82 cents in early Thursday trade. Iron Ore Holdings (IOH) got to A79 cents before easing back to close steady at A75 cents.

Among the other iron ore movers were: BC iron (BCI), up A15 cents to A$3.42, Northern Iron (NFE), up A7 cents to A55.5 cents, Iron Road (IRD), down A2.5 cents to A35 cents, and IronClad (IFE), up half a cent to A28 cents. Cape Lambert (CFE) rose A3 cents to A27 cents despite a police and tax office raid on the offices of its chief executive, Tony Sage.

Minews. That’s an interesting final point. Isn’t Mr Sage associated with Romanian entrepreneur Frank Timis?

Oz. Yes, he is, but that’s probably as much as can be said at this stage. It will be interesting to see how the situation evolves.
...

Source >> www.minesite.com
*****


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## drillinto

December 24, 2012

Metals, Markets And Prices: The Year In Review
By Rob Davies

There is still an attitude in the minds of some that economies can be controlled, or at least guided in particular directions. But events in 2012 demonstrated how far that is from the truth. 

Ever since the global credit bubble burst in 2008 many different government and central banks have tried to do all they can to engineer a recovery in growth.

There is still an attitude in the minds of some that economies can be controlled, or at least guided in particular directions. But events in 2012 demonstrated how far that is from the truth. 

Ever since the global credit bubble burst in 2008 many different government and central banks have tried to do all they can to engineer a recovery in growth. 

Collectively, these efforts are best described as quantitative easing, or more brutally labelled as printing money.     

One measure of the scale of this exercise can be demonstrated by reference to gold. In the 6,000 years that man has been industrially active he has extracted about 150,000 tonnes of gold. 

At today’s prices that is worth about US$8 trillion. On 31st August 2008 the balance sheets of the US, UK, ECB, Germany, France, China and Switzerland had a nominal value of US$8.16 trillion. But this collective figure had increased to US$15.05 trillion by 31st October 2011. 

In other words the central banks of the five largest countries took five years to fabricate as much “wealth” as the collective effort of all mankind over the previous six millennia. 

The problem is that each successive round of money printing is having less and less effect. That was most notable this year when QE4 was announced by the US Federal Reserve on September 2012 and capital markets hardly reacted at all. Compare that to the vigorous responses to QE1 and QE2. 

It seems the world economic corpus is becoming progressively less sensitive to these massive drug injections of free cash.

Even so, the economic stimulus presumably stopped things getting even worse, and the performance of base metals over the year is a reflection of that. The LME base metals index started the year at 3,000 and looks set to finish over six per cent higher at about 3,192. 

That gives it an average value over the year of 3,047, a modest 1.2 per cent ahead of the average of 3,010 recorded in 2011. But it’s hard to envisage that the year on year change would have been positive without QE.

Aluminium is a classic example. In the developed economies demand actually fell in 2012 by 0.5 per cent, despite all that QE. It was only the 8.2 per cent increase from the BRICs, (Brazil, Russia, India and China) that allowed the industry to record an overall rise in consumption of 4.7 per cent. 

Unfortunately, even that was not enough absorb the 2.5 per cent rise in production. As a consequence it is estimated there will be a surplus of 660,000 tonnes in 2012 to add to the 1.6 million tonnes of excess metal generated the previous year. Not surprisingly this has pushed prices down with an expected average for the year of US$2,018 a tonne, nearly 16 per cent less than the 2011 average of US$2,400 a tonne. 

The story in copper is not dissimilar with the proviso that it is operating off much lower inventory levels. In contrast to an inventory equivalent to six weeks of consumption in aluminium, stocks of copper are only sufficient to support three weeks of demand. That level of reserve drops to just one week if it is based solely on LME warehouse inventories. 

After experiencing two years of vibrant growth, demand for copper increased at a more sedate1.3 per cent in 2012. Once again it was a story of lower demand in the developed world offset by increased appetite in the developing world. 

The mature economies used 2.3 per cent less copper this year than in 2011 while China and others used 3.6 per cent more. However, that was a big decline from the 9.8 per cent increase in usage from China and others in 2011. 

Growth in copper production is estimated to have slowed in 2012 to 1.9 per cent, the lowest since 2009, and that effectively gives a balanced market. Despite the low inventory level it looks as if copper will average about US$7,955 a tonne this year, nearly 10 per cent less than the US$8,811 it averaged in 2011.

Lead is one of the few metals to exhibit good growth in demand in 2012, as it put in a rise of 4.3 per cent. Once again this is largely as a result of an increase of 6.4 per cent in consumption from the BRICs. 

At least lead was able to experience growing consumption in the developed world, albeit a rather measly 0.6 per cent. Lead is an intriguing market because so much supply is sourced from scrap. Out of the estimated 11 million tonnes produced in 2012, 3.4 per cent more than 2011, only 5.4 million was new mine supply. 

But that was a 16 per cent increase as a mild winter in Europe reduced scrap availability. This looks likely to leave the metal in a small surplus this year and an average price for 2012 of about US$2,060 a tonne, 14 per cent less than the US$2,398 recorded in 2011.

Despite good growth in consumption of 4.4 per cent, nickel is on track to deliver the worst price performance of all the base metals in 2012.  A likely average of US$17,522 a tonne makes it still the second most expensive base metal, but that price is still about 23 per cent lower than the average of US$22,831 achieved in 2011. 

The causes are familiar. Demand from the developed economies shrank by 1.6 per cent, but expanded by 8.8 per cent in the BRICs. The problem is that a 5.6 per cent increase in production in 2012 follows an 11 per cent increase in 2011 and leaves the market oversupplied by about 34,000 tonnes. 

With total stocks of 220,000 tonnes in a small industry that only consumes 1.7 million tonnes a year it leaves inventories at a rather large seven weeks of consumption. These new mines and lower costs are a haunting legacy of the boom times in nickel five years ago when it averaged US$37,181 a tonne in 2007 and encouraged so much new capacity.

No one gives much attention to tin because it is such a small market that only consumes 364,000 tonnes a year. Even so, as the most expensive base metal with an average price in 2012 of US$21,020 it should attract more attention.  The price has fallen 19 per cent, even though production fell 3.6 per cent because demand fell by even larger 3.8 per cent. 

Zinc remains the problem child of the base metals because its inventory of surplus metal of 1.2 million tonnes is high in absolute terms. Moreover, adding in other stocks, excess metal is equivalent to seven weeks of consumption. 

Zinc’s use in galvanising steel makes it closely correlated with the construction industry and it is therefore little surprise that consumption contracted by 4.5 per cent in the developed economies. Unfortunately, its use in the BRIC economies only increased by 1.5 per cent, leaving it with a lacklustre overall increase of just 0.1 per cent. Even a contraction of 0.9 per cent in supply was not enough to prevent a surplus of 245,000 tonnes, and that pushed the average price down 11.2 per cent to US$1,945 a tonne.   

Bulk commodities are far more important to the profits of the diversified miners these days than base metals. The two largest are thermal coal and iron ore and both are crucially reliant on the Chinese market - iron ore for help in building it and coal to power it. 

Chinese imports of thermal coal in 2012 are thought to have risen slightly to 106 million tonnes. While Chinese electricity production is rising a larger percentage is being generated by hydro, which now accounts for nearly 22 per cent of output, up from 15 per cent a year ago. One consequence of this has been to reduce pressure on demand, and prices for thermal coal have slipped over 20 per cent in 2012 on the previous year. This takes thermal coal down to US$95 a tonne. But that is still a very attractive level for the miners. 

In iron ore the story is more construction as Chinese steel production in 2012 is expected to be 2.5 per cent higher than last year. While this increase is less than was initially expected, and is still a vast amount, it has led to cutbacks. This has impacted pricing, which is on track for a 27 per cent decline for 2012 to about US$125 a tonne. 

There is no doubt that miners have ridden the storms of the great recession better than many industries as a result of firm commodity prices. In turn commodities have been a direct beneficiary of stimulus in the developed world and robust growth in the developing world. It is not often that influences combine positively, but 2012 was certainly one such occasion for miners.   

Source >>>>> www.minesite.com
*****


----------



## drillinto

Performance of EWA(ETF Australia)
YTD: +15.20%

http://www.bespokeinvest.com/thinkbig/2012/12/24/recent-asset-class-performance.html
***


----------



## drillinto

"A Desperate Need for Electricity in China and Other Developing Countries Is Fueling Global Coal Use"
By Robert Bryce
***

http://www.thedailybeast.com/articl...ing-countries-is-fueling-global-coal-use.html


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## drillinto

Commodity Performance

http://www.bespokeinvest.com/thinkbig/2012/12/26/2012-commodity-performance.html
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## drillinto

S&P 500: Materials sector is overbought

http://www.bespokeinvest.com/thinkbig/2012/12/27/back-to-neutral.html
***


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## drillinto

Best Commodities of 2012
1. Lumber: Lumber futures shot up over 38%
2. Soybeans/Soybean meal: Soybean meal 36%, while soybean futures gained 16.7%
3. Corn: Corn futures rose 15%
4. Gasoline RBOB: Futures jumped 12%
5. Platinum: Gained more than 7%

Source >> Jared Cummans, 28 Dec 2012
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## drillinto

Stock markets are in rally mode

http://www.bespokeinvest.com/thinkbig/2012/12/28/us-investors-get-a-lump-of-coal.html
***


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## drillinto

December 27, 2012
The Year That Was ... In Australia
By Our Man in Oz

Divorce is never pretty, but the split between Australian investors and gold over the past 12-months has been spectacular and difficult to explain – as is often the case in a separation.

In a year when the gold price, as measured in U.S. dollars, crept up around 4.5 per cent from US$1590 an ounce to a recent price of US$1662 an ounce the gold index on the Australian Securities Exchange (ASX) fell by 20.4 per cent.

One up, and the other down is such a divergence between the price of the metal and the collective value of companies that do nothing but explore for and produce the metal that it stands out as one of the highlights of 2012 -- or lowlight to be more accurate.

In contrast to the 20.4 per cent slide in goldmining company share prices the overall mining index fell a relatively modest 4.7 per cent while the rotation of money into Australian domestic bank, retail and industrial stocks, lifted the overall market by 11.8 per cent, as measured by the all ordinaries index.

One possible reason for the decline in the price of Australian gold stocks over the course of 2012 is that the relatively high-value Australian dollar killed the domestic gold sector.

Unfortunately, that explanation fails because while the dollar moved around a bit, oscillating from a low of US97 cents to a high of US$1.04, it opened and closed at almost the same level (US$1.03 at the start to US$1.04 near the close), meaning the domestic gold price opened and closed at roughly the same level.

Why the Australian dollar is trading as high as it is has some of the best brains in business looking for a cause because the country’s economy has lost its boom-time shine, corporate profits have faded and annual economic growth retreated from around 3.5 per cent to less than 2 per cent.

A slowing economy ought to lead to a falling exchange rate. That fact that this is not happening in Australia is piling pressure onto all exporters, especially miners who are also battling a sharp increase in cost pressure.

One possible explanation for the strong Aussie dollar is that it is an example of relativity at work, with the dollar not so much rising as standing still while most other currencies collapse. 

Currency pressure on exporters is being exacerbated by a mood-shift among investors who appear to have lost interest in companies and commodities which promise only capital gains and minimal dividend yield. That trend can be seen in the rotation of funds out of mining stocks that pay low dividends, into banks and other forms of high-yield investments.

Lack of dividends, and a poor record in accurate reporting of costs, and other key performance indicators, was a hot topic raised at the London session of the Mines and Money circus earlier this month by one of the world’s top mining investors, BlackRock’s Evy Hambro.

No-one will ever know whether Evy was talking about a plan to sell poorly-managed gold companies in the future, or whether he was speaking about sales already made – putting BlackRock in the frame as a prime contender for killing the Australian gold sector in 2012.

Gold was not the only big loser in Australian mining last year. Coal was not far behind, a victim of one of the world’s great economic surprises which started with the U.S. discovery of vast fields of natural gas trapped in hard rocks once regarded as too difficult to tap.

That geological and technical phenomena triggered a collapse in the gas price, which led to increased gas competition with coal for domestic electricity production, and finally ended with the U.S. coal miners dumping their unsold material into the Asian market where a glut of coal killed the price.

If it was a U.S. gas glut which killed confidence in coal, the board of BHP Billiton did a similar job on confidence when it mothballed the country’s biggest planned mining project, the A$50 billion expansion of the Olympic Dam copper and uranium project.

High costs and political uncertainty flowing from a hung Parliament and an erratic government doing whatever it can to cling to power were cited as reasons for shelving the Olympic Dam upgrade with the Fukushima nuclear power plant accident in Japan a contributing factor thanks to its effect on nuclear operations worldwide.

While it might seem a bit grim to focus on what flopped over the past 12-months there is no escaping the point that it was a year of “stable cleaning” and, to put a positive spin on that, a cleaner stable means that the groundwork has been done for a better year in 2013.

The exciting Nova nickel discovery of Sirius Resources in the largely unexplored Fraser Range area near Australia’s south coast provided a rare glimpse of what might be expected next year. From a standing start at 5c, Sirius stampeded to a high of A$3.80, before settling back to around A$2.14 under the weight of capital raisings, and a number of unsuccessful holes as drilling tries to outline the shape and size of the discovery.

More about future possible developments next week when I preview what to expect from Oz in 2013. For now, let’s examine the entrails of a year which started badly, got worse, and started to show a few flickers of recovery as the curtains were drawn.

To understand what happened in 2012 it’s worth looking back exactly 12-months to the 2011 edition of Mines and Money in London when I attended, observed, and flew home to Australia thoroughly depressed. Others might have seen the event differently, but I still remember attending Christmas parties in the heat of a Perth summer telling anyone who would listen that 2012 was going to be a beast of a year.

That forecast, based on the simple principles of observation and listening, was dismissed by my Australian audience which largely comprised paid-up members of the “China forever” fan club – a organisation which lost many members as 2012 rolled along.

China’s slide into its version of a recession (annual economic expansion below 8 per cent) took a heavy toll of the Australian stock market, especially iron ore companies where management had seemingly been oblivious to the problems of excess iron ore supply hitting a market where demand was contracting.

Like coal, where a similar surplus of supply caused precisely the same problem, iron ore received a wake-up call when Chinese steel mills whacked a temporary buying ban on fresh deliveries as a way to shrink stockpiles which were clogging its ports.

The net result was a precipitous plunge in the iron ore price from around US$150 a tonne to less than US$90/t, and an even more spectacular slide in the share prices of iron ore miners. Fortescue, the biggest of the Australian pure-play iron ore stocks, plunged from A$6.18 on March 22 to A$2.81 on September 6, a 54 per cent fall in less than six months.

Since that low point, Fortescue and other iron ore miners have recovered, along with the iron ore price. Atlas has rebounded from A$1.14 to A$1.66 (perhaps on its way back to A$3.43 reached early in 2012). Mr Gibson is up from A61 cents to A76c, which is still a long way short of the A$1.46 reached in February.

The pattern of prices peaking early in 2012 and then falling sharply before the recent recovery is repeated across multiple sectors, effectively mirroring the rise-and-fall of the international mood as Europe stumbled towards possible solution to its debt crisis and the U.S. neared its fiscal cliff and the threat of a renewed recession.

Australia, while far from either centre of crisis, is being buffeted by the winds of uncertainty because of its close trading affiliations with China which is very much exposed to the U.S.-E.U. centres of insecurity.

After the wobbles suffered by gold, coal and iron ore stocks the next area of concern for Australian mining companies (and investors riding the roller-coaster) is the shortage of risk capital, best expressed in a widespread shortage of cash among small to medium explorers.

Many of the 1000, or so, small resource companies on the ASX are struggling to survive the cash drought, existing on miserable share placements and share purchase plans which, in some cases, raise less than A$1 million a pop, a classic example of hand-to-mouth existence, hopefully until confidence returns or a merger for survival is orchestrated.

Hardest hit have been the minor metals where confidence in exotic elements such as rare earths, lithium, graphite, titanium and tungsten, have suffered even more than for bulk and precious metals.

In many ways 2012 unfolded in precisely the way I expected after the 2011 London Mines and Money conference – grim and just got grimmer as year unfolded.

The good news is that 2013, thanks to the better mood at the most recent Mines and Money event in London, is looking a lot better though, to be fair, it couldn’t possibly be as bad as what we’ve just passed through.

Source >>> www.minesite.com
*****


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## drillinto

December 24, 2012
Metals, Markets And Prices: The Year In Review
>>> Rob Davies

There is still an attitude in the minds of some that economies can be controlled, or at least guided in particular directions. But events in 2012 demonstrated how far that is from the truth. 

Ever since the global credit bubble burst in 2008 many different government and central banks have tried to do all they can to engineer a recovery in growth.

There is still an attitude in the minds of some that economies can be controlled, or at least guided in particular directions. But events in 2012 demonstrated how far that is from the truth. 

Ever since the global credit bubble burst in 2008 many different government and central banks have tried to do all they can to engineer a recovery in growth. 

Collectively, these efforts are best described as quantitative easing, or more brutally labelled as printing money.     

One measure of the scale of this exercise can be demonstrated by reference to gold. In the 6,000 years that man has been industrially active he has extracted about 150,000 tonnes of gold. 

At today’s prices that is worth about US$8 trillion. On 31st August 2008 the balance sheets of the US, UK, ECB, Germany, France, China and Switzerland had a nominal value of US$8.16 trillion. But this collective figure had increased to US$15.05 trillion by 31st October 2011. 

In other words the central banks of the five largest countries took five years to fabricate as much “wealth” as the collective effort of all mankind over the previous six millennia. 

The problem is that each successive round of money printing is having less and less effect. That was most notable this year when QE4 was announced by the US Federal Reserve on September 2012 and capital markets hardly reacted at all. Compare that to the vigorous responses to QE1 and QE2. 

It seems the world economic corpus is becoming progressively less sensitive to these massive drug injections of free cash.

Even so, the economic stimulus presumably stopped things getting even worse, and the performance of base metals over the year is a reflection of that. The LME base metals index started the year at 3,000 and looks set to finish over six per cent higher at about 3,192. 

That gives it an average value over the year of 3,047, a modest 1.2 per cent ahead of the average of 3,010 recorded in 2011. But it’s hard to envisage that the year on year change would have been positive without QE.

Aluminium is a classic example. In the developed economies demand actually fell in 2012 by 0.5 per cent, despite all that QE. It was only the 8.2 per cent increase from the BRICs, (Brazil, Russia, India and China) that allowed the industry to record an overall rise in consumption of 4.7 per cent. 

Unfortunately, even that was not enough absorb the 2.5 per cent rise in production. As a consequence it is estimated there will be a surplus of 660,000 tonnes in 2012 to add to the 1.6 million tonnes of excess metal generated the previous year. Not surprisingly this has pushed prices down with an expected average for the year of US$2,018 a tonne, nearly 16 per cent less than the 2011 average of US$2,400 a tonne. 

The story in copper is not dissimilar with the proviso that it is operating off much lower inventory levels. In contrast to an inventory equivalent to six weeks of consumption in aluminium, stocks of copper are only sufficient to support three weeks of demand. That level of reserve drops to just one week if it is based solely on LME warehouse inventories. 

After experiencing two years of vibrant growth, demand for copper increased at a more sedate1.3 per cent in 2012. Once again it was a story of lower demand in the developed world offset by increased appetite in the developing world. 

The mature economies used 2.3 per cent less copper this year than in 2011 while China and others used 3.6 per cent more. However, that was a big decline from the 9.8 per cent increase in usage from China and others in 2011. 

Growth in copper production is estimated to have slowed in 2012 to 1.9 per cent, the lowest since 2009, and that effectively gives a balanced market. Despite the low inventory level it looks as if copper will average about US$7,955 a tonne this year, nearly 10 per cent less than the US$8,811 it averaged in 2011.

Lead is one of the few metals to exhibit good growth in demand in 2012, as it put in a rise of 4.3 per cent. Once again this is largely as a result of an increase of 6.4 per cent in consumption from the BRICs. 

At least lead was able to experience growing consumption in the developed world, albeit a rather measly 0.6 per cent. Lead is an intriguing market because so much supply is sourced from scrap. Out of the estimated 11 million tonnes produced in 2012, 3.4 per cent more than 2011, only 5.4 million was new mine supply. 

But that was a 16 per cent increase as a mild winter in Europe reduced scrap availability. This looks likely to leave the metal in a small surplus this year and an average price for 2012 of about US$2,060 a tonne, 14 per cent less than the US$2,398 recorded in 2011.

Despite good growth in consumption of 4.4 per cent, nickel is on track to deliver the worst price performance of all the base metals in 2012.  A likely average of US$17,522 a tonne makes it still the second most expensive base metal, but that price is still about 23 per cent lower than the average of US$22,831 achieved in 2011. 

The causes are familiar. Demand from the developed economies shrank by 1.6 per cent, but expanded by 8.8 per cent in the BRICs. The problem is that a 5.6 per cent increase in production in 2012 follows an 11 per cent increase in 2011 and leaves the market oversupplied by about 34,000 tonnes. 

With total stocks of 220,000 tonnes in a small industry that only consumes 1.7 million tonnes a year it leaves inventories at a rather large seven weeks of consumption. These new mines and lower costs are a haunting legacy of the boom times in nickel five years ago when it averaged US$37,181 a tonne in 2007 and encouraged so much new capacity.

No one gives much attention to tin because it is such a small market that only consumes 364,000 tonnes a year. Even so, as the most expensive base metal with an average price in 2012 of US$21,020 it should attract more attention.  The price has fallen 19 per cent, even though production fell 3.6 per cent because demand fell by even larger 3.8 per cent. 

Zinc remains the problem child of the base metals because its inventory of surplus metal of 1.2 million tonnes is high in absolute terms. Moreover, adding in other stocks, excess metal is equivalent to seven weeks of consumption. 

Zinc’s use in galvanising steel makes it closely correlated with the construction industry and it is therefore little surprise that consumption contracted by 4.5 per cent in the developed economies. Unfortunately, its use in the BRIC economies only increased by 1.5 per cent, leaving it with a lacklustre overall increase of just 0.1 per cent. Even a contraction of 0.9 per cent in supply was not enough to prevent a surplus of 245,000 tonnes, and that pushed the average price down 11.2 per cent to US$1,945 a tonne.   

Bulk commodities are far more important to the profits of the diversified miners these days than base metals. The two largest are thermal coal and iron ore and both are crucially reliant on the Chinese market - iron ore for help in building it and coal to power it. 

Chinese imports of thermal coal in 2012 are thought to have risen slightly to 106 million tonnes. While Chinese electricity production is rising a larger percentage is being generated by hydro, which now accounts for nearly 22 per cent of output, up from 15 per cent a year ago. One consequence of this has been to reduce pressure on demand, and prices for thermal coal have slipped over 20 per cent in 2012 on the previous year. This takes thermal coal down to US$95 a tonne. But that is still a very attractive level for the miners. 

In iron ore the story is more construction as Chinese steel production in 2012 is expected to be 2.5 per cent higher than last year. While this increase is less than was initially expected, and is still a vast amount, it has led to cutbacks. This has impacted pricing, which is on track for a 27 per cent decline for 2012 to about US$125 a tonne. 

There is no doubt that miners have ridden the storms of the great recession better than many industries as a result of firm commodity prices. In turn commodities have been a direct beneficiary of stimulus in the developed world and robust growth in the developing world. It is not often that influences combine positively, but 2012 was certainly one such occasion for miners.   

Source >>> www.minesite.com
*****


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## drillinto

The five worst commodities of 2012

1. Coffee: it shed nearly 38%
2. Sugar: it sank more than 34%
3. Orange Juice: it lost 21%
4. Natural Gas: NG lost 13% on the year
5. Cotton: cotton futures surrendered just under 13% on the year

Source >> Jared Cummans, 31 Dec 2012
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## drillinto

January 02, 2013
How Will Base Metals Perform In 2013?
By Rob Davies

Over the course of 2013 the world economy will be bigger than it was in 2012. That means several things for commodity investors. 

First, the world economy will get through a hell of a lot of raw material. We will witness the largest consumption of commodities ever known. 

And the mining industry not only has to replace everything it consumes next year but it also needs to find enough additional material to cope with increasing demand in the future. 

Whatever the detractors say mining is a growth industry, because it continually has to find new material to replace what it uses. Unlike a service industry its employees cannot simply provide the same function day in day out. 

The issue for investors is whether the industry can deliver new resources faster than they are being consumed. If they do prices fall; if they don’t prices rise. That small difference between two large numbers determines the prospects for the industry. What makes the game so hard is that neither number is easy to estimate.  

Demand is always the starting point, since without it there is no need for any supply. There are two factors to consider for demand: the size of the market and how fast it is likely to grow.  

Fortunately for metals the largest market, China, is also the fastest growing.  In 2013 the OECD reckons China will grow by 8.5 per cent and the IMF thinks the region it labels Developing Asia, which includes China, will expand by 7.2 per cent. 

Contrast that with the 2.3 per cent growth the OECD expects its member countries to deliver or the 2.9 per cent the IMF expects for the world as a whole, and it is clear where the impetus is coming from.  

Another positive factor for metals is that the growth in developing markets is led by industrial production rather than services. In other words, stuff you don’t want to drop on your toe because it is big, heavy and made of metal. Economies that have already developed get richer by sending each other emails, and they don’t have any metal in them.

A good example of how this divergent world operates is provided by aluminium. It is estimated that 21 million of the total world consumption of nearly 48 million tonnes will occur in China next year. 

It is true that some of this will be exported, but the bulk will be consumed internally. All the so-called mature economies put together, Europe, Japan and the US, will only consume two thirds of the Chinese figure. 

While this rampant demand looks good, and it is, production is likely to be half a million tonnes more than that. The excess material is forecast to be from China, but wherever it comes from it will depress prices and aluminium will probably do well if it trades above US$2,000 a tonne for most of the year.

Copper is half the size of the aluminium market in tonnage but twice as big by value. Its consumption is intimately related to the installation of electricity generation and distribution. This is happening fastest in industrialising economies and China is expected to lead the way in 2013 with a 5.8 per cent increase in copper consumption. 

With demand of over eight million tonnes, the Middle Kingdom will account for over 40 per cent of global copper demand and makes the US and Japan look like bit players with their off-take of just over a million tonnes each. Europe will process about 3.2 million tonnes but that will be a similar level to 2012. It is this weakness that will keep overall demand growth down to about three per cent.

Unusually these days the story in copper is more about supply than demand, as Chinese output rises and the first metal from the giant Oyu Tolgoi mine in Mongolia is delivered.  African production will continue to rise and will be about twice the level it was just five years ago. This supply though comes with a big caveat over its reliability and leaves copper more susceptible than most metals to interruptions. 

More reliable is the flow from Latin America where Chile, Peru and Mexico are all expanding production and will add nearly half a million tonnes to the supply side. Rising supply and only modest increases in demand, combined with an already high price suggest that copper won’t make much progress in 2013, but will probably stay the right side of US$8,000 a tonne. The right side for miners, that is.

The sweet spot for metals is when demand exceeds supply, for whatever reason. Lead is probably one of the few metals that that will apply to next year. Even though it is small market, with total consumption of less than twelve million tonnes a year, parts of it are growing rapidly. 

Most notable is lead-acid battery demand in China that is expected to increase by 10 per cent in 2013 to nearly five and a half million tonnes. That will take the global increase in demand up by over six per cent and with production only forecast to expand by five per cent that will leave the market in deficit to the tune of about 50,000 tonnes. Not much perhaps but enough to keep the price well above US$2,000 a tonne, as it has been for the last three years. 

Nickel is anther metal where the scrap cycle has a marked impact on volatility of demand and hence price. Stainless steel is the major use for nickel but forecast weakness in European off-take next year will act to constrain overall demand levels. Yet again this soft spot is overwhelmed by forecast growth of nearly nine per cent in China that will take overall demand up nearly seven per cent to over 1.7 million tonnes. 

Weak prices in 2012 did raise some question marks over the economics of new mine capacity but the need to service project debt means these new mines will increase output, and by a substantial amount as well. It appears that global production will exceed 1.8 million tonnes and create another modest surplus. While that will limit the upside, production costs will put a floor under prices so quotes could be broadly similar to last year’s.

It is a pity that tin is such a small market because it has the best prospects. The signs are that it is heading for another deficit in 2013 as miners struggle to cope with surging demand from the electronics industry in China. Prices look set to beat the levels achieved last year and return to the mid US$20,000 a tonne. 

Zinc is the problem child of the base metals sector. It is labouring under a large stockpile that is expected to increase in 2013 to over eight weeks when expressed as a weeks of consumption. Firm demand in China will offset much of the weak consumption growth in the developed world. 

Unfortunately, mine production is set to increase by low single digits after barely rising over the last two years. That will create another surplus, possibly as much as a quarter of million tonnes. However good the rest of the sector is it is hard to see the price of zinc staying above US$2,000 a tonne. 

Iron ore prices enjoyed a late surge at the end of 2012 so spot prices should start 2013 in good order at around US$140 a tonne. The story as usual is set by Chinese demand growth of 1.7 per cent that will take steel production there up to 712 million tonnes. As it represents 60 per cent of global seaborne trade, it is the price setter and no-one is better placed to supply than the Australians, as they are the closest and with the ability to increase capacity.

The outlook for thermal coal is probably not quite as rosy as iron ore. Although the Chinese economy is growing it is not growing as fast as in previous years. One way that is visible is through electricity demand which is increasing, but at a more modest rate. Despite the threat from hydro, coal remains the principle fuel for electricity generation and prices are forecast to edge up in 2013 to just under US$100 a tonne.  

Much of the media will obsess over the US economy and its “fiscal cliff” in 2013.  Miners and mining investors should not ignore that problem, but it will be a secondary issue to the continuing expansion of China and other developing economies. Metals remain the easiest and possibly the safest, way of playing that growth story.  

Source >>> www.minesite.com
*****


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## drillinto

For your consideration >> Commodities site >> http://commodityhq.com/news/
***


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## drillinto

January 05, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

...

Minews. Over to the base metal sector now, please.

Oz. Copper leaders rose strongly, but it was pretty flat elsewhere. Nickel stocks improved, just, and zinc tried again to make a break-out, but didn’t really quite get there.

Best of the copper stocks was OZ Minerals (OZL) which continued its recovery after a heavy pre-Christmas sell-off. Last week Oz added A44 cents to A$7.17, but did get as high as A$7.32 on Thursday. Ivanhoe (IVA) was also in demand, rising by A9 cents to A48 cents, and Rex (RXM) put on A6 cents to A71 cents. Other copper movers included: Sandfire (SFR), up A11 cents to A$8.82, Metminco (MNC), up A0.3 of a cent to A6.2 cents, Altona (AOH), up A2 cents to A30.5 cents, and Sabre (SBR), down A1 cent to A17.5 cents.

Panorama (PAN) was the best of the nickel stocks, though perhaps because of developments in its gold exploration assets. It added A9 cents to A58 cents. Sirius (SIR) recovered recently lost ground with a rise of A21 cents to A$2.34. And Sirius’s freshly-floated associate, Windward Resources (WIN), added A2.5 cents to A26 cents. Other nickel moves included: Mincor (MCR), up A2 cents to A$1.02, Western Areas (WSA), up A6 cents to A$4.62 and Matsa (MAT), up A4.5 cents to A35.5 cents.

Perilya (PEM) led the way among the zinc stocks with a rise of A4.5 cents to A38 cents, but did get as high as A40.5 cents on Thursday, its highest since April. The rest of the zinc sector tried to follow, but failed. Ironbark (IBG) crept up a tiny A0.2 of a cent to A8.5 cents. Balamara (BMB) added A0.6 of a cent to A9.1 cents, and KBL (KBL) was half-a-cent stronger at A14.5 cents.

...

Source >> www.minesite.com
*****


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## drillinto

January 05, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have got off to a strong start in 2013.

Oz. It certainly did. The metals and mining index shot up by an eye-catching 4.2 per cent in the first two days of trading for the year, but lost confidence on Friday to end the week up by a still impressive 2.4 per cent.

That rise by mining stocks was exactly double the 1.2 per cent achieved by the overall market as measured by the all ordinaries index, and substantially stronger than the gold sector where the index could manage only a modest rise of 0.4 per cent.

Minews. What’s behind the confidence?

Oz. Relief is the first factor at work as the U.S. opted to not stifle its economy with higher taxes and reduced spending - the threatened fall off the fiscal cliff. A second factor is evidence that the Chinese economy continues to expand, which is good news for most raw material exports, especially for iron ore, coal and copper.

Minews. Iron ore is interesting, has the recovery in share prices been overdone?

Oz. Quite possibly. The rebound in iron ore stocks has been remarkable since the sector hit the skids in the middle of last year. Much of the recovery, which mimicked a rise in the iron ore price, has come as steel mills rebuilt depleted stockpiles, a process which will eventually end, quite possibly causing the price to retreat again.

Minews. Let’s start the first call of the card for 2013 with iron ore, bearing in mind your warning that a correction might be around the corner.

Oz. Stars of the sector, after a few years in the doghouse, where Gindalbie Metals (GBG) and Grange Resources (GRR), both of which are in the business of producing high-value, but high-cost, magnetite iron ore. Gindalbie added A6 cents (24 per cent) to A31 cents after reporting the first shipment of processed magnetite ore, while Grange went a step further with a rise of A6.5 cents (29 per cent) to A37.5 cents.

Minews. Very interesting moves. Does that mean Australian investors are finally accepting the magnetite story?

Oz. Possibly, though the trick now will be to see how profitable the magnetite projects are after some horrendous cost overruns.

Continuing with the rest of the iron ore sector we saw a widespread uplift in prices. Among the more notable movers were: Fortescue (FMG), up A22 cents to A$4.86, Atlas (AGO), up A5 cents to A$1.81, Mt Gibson (MGX), also up A5 cents to A89.5 cents, Iron Road (IRD), up A2 cents to A35 cents, and BC Iron (BCI), up A5 cents to A$3.70. There were also a few minor falls, including IronClad (IFE), down A2 cents to A29 cents, and Latin (LRS), down A1 cent to A15 cents.
...

Source >> www.minesite.com
**********************


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## drillinto

January 07, 2013
Commodities Outlook: Gold Falls, But It's Quiet In Base Metals As The Threat Of The Fiscal Cliff Recedes
By Rob Davies


What financial comment there has been over the Christmas period has been dominated by speculation, and account of the progress, on negotiations between President Obama and the Republican Party about the “fiscal cliff”.  

While these discussions were underway, and after a rather unsatisfactory fudged resolution, capital markets had a little party of their own. 

Although with so many participants away, the moves may not be a good reflection of the sentiments of all investors.

The most dramatic change was the decline in the price of US debt. In the middle of December these bonds were trading with a yield of 1.7 per cent. 

By the close of the first week of trading of 2013 the yield had increased to 1.93 per cent, indicating a fall of over 13 per cent. 

In contrast equity markets had a ball and made some sharp one day gains, albeit in very thin trading.

Another casualty was gold which fell nearly three per cent to US$1,649 an ounce, a move that largely mirrored the gain in the dollar. 

Reasonably good US payroll figures and optimism about the deal made the dollar look better than the yen. 

In today’s world no one expects perfection. The trick is to find the least bad alternative and, bizarrely, the US seems brighter than Japan just at the minute.

Amongst all this turmoil base metals had a relatively quiet time and the LME index closed the first week of the year at 3,539.6, only 0.7 per cent up on its level in mid-December. This lacklustre response seems lethargic in contrast to the vigorous activity of other asset classes. 

The markets seemed to have decided that US politicians will do nothing to prejudice whatever growth the American economy can deliver. 

Any consequences from this action in terms of reducing the deficit and creating inflation can, the politicians are implying, be dealt with by their successors. 

This fix is fine in the short term, and possibly even the medium term but over the longer term it is a different story, for two reasons.  

Federal debt stands at 68 per cent of GDP, and is forecast to be either 58 per cent in 2022 on CBO estimates or 83 per cent based on Obama's spending plans according to J P Morgan.  

Economists Rogoff and Reinhart presented good evidence in their book "This Time Is Different” that economic growth rates slow dramatically as debt reaches these levels. 

The second problem is that 53 per cent of US treasuries are held by foreigners, and 17 per cent is held by the Fed. This is a very different situation from Japan where sovereign debt is held nationally.

The US is vulnerable to a change of sentiment and unless some politician addresses the problem it will cause the mother and father of an economic accident at some time in the future.  

In the meantime world economic growth is increasingly being driven by China. And that suits commodities just fine because that country is already the largest consumer of metals. 

The US is still the world’s largest economy, but some estimates suggest it will cede that position to China by 2020. It’s just that the metal market has already priced that in.

Source >> www.minesite.com
*****


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## drillinto

From Byron Wien's 2013 surprises (7 Jan 2013)

Although inflation remains tame, the price of gold reaches $1,900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous.


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## drillinto

Byron Wien's 2013 Surprises

http://www.blackstone.com/news-view...ounces-predictions-for-ten-surprises-for-2013
***


----------



## drillinto

Soft commodities >> www.agrimoney.com
*************


----------



## drillinto

About That Large Drop in the VIX...
JANUARY 7, 2013 

There has been a lot of talk regarding the recent record decline in the CBOE Volatility Index (VIX) over the weekend and this morning.  With a decline of 37% over the last five trading days, the current decline is the largest 5-day decline since 1990.  Large drops in the VIX are generally considered to be indicative of investors perceiving there to be less risk in the market going forward.  So are they correct?

Source >>> http://www.bespokeinvest.com/thinkbig/2013/1/7/about-that-large-drop-in-the-vix.html


----------



## drillinto

"The World Remains Overbought"

Source >> http://www.bespokeinvest.com/thinkbig/2013/1/8/the-world-remains-overbought.html
*****


----------



## drillinto

January 12, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, your market seems to have run out of steam after a solid start to the year.

Oz. That’s a fair description, but it’s hard to pin down precisely why prices dropped in a week when commodity prices picked up, and iron ore raced back to near-boom trading.

Minews. Now that is interesting. You’re saying iron ore hit US$158 a tonne and the iron ore miners fell?

Oz. That’s exactly what happened, which is a very good pointer to something reported in the New Year outlook from Oz you carried last week - neither investors nor company managers believe that the current iron ore price is sustainable.

Weakness among the iron ore miners also spilled over into the gold sector, but widespread falls there were probably more due to investors rotating funds out of gold into other sectors as reports of global economic recovery gain strength.

Overall, the metals and mining index on the ASX lost three per cent last week. The gold index lost four per cent, while the all ordinaries got away with a very modest decline of 0.2 per cent, propped up by bank and retail stocks.

Minews. Tricky in the mining sector, isn’t it? Gold falls because of a recovery, and iron ore stocks also fall because no-one believes the strength of the recovery.

Oz. It is getting a bit confusing, so let’s shuffle along to prices and leave the theorising to people on higher pay grades. And because it’s been in the news all week, we’ll start with iron ore, to illustrate the gap between the commodity and the companies producing it and exploring for it.

Out of the 20-or-so iron ore companies we track six rose and 14 fell, which really is quite remarkable given the sharp rise in the price of iron ore itself. The handful to rise included Iron Ore Holdings (IOH) which added A9 cents to A85 cents, and Gindalbie (GBG), which continued its recovery with a rise of A2 cents to A33.5 cents. Also on the rise was an explorer we rarely hear about, Nemex (NXR), which rocketed up by A8 cents (200 per cent) in thin trading to A12.5 cents after reporting progress at its Telimele prospect in Guinea.

The list of companies that lost ground was headed by Fortescue (FMG), down A13 cents to A$4.73. Also weaker were Mt Gibson (MGX), down A8 cents to A81 cents, BC Iron (BCI), down A10 cents to A$3.60, Grange (GRR), down A2.5 cents to A35 cents, Latin (LRS), down A1 cent to A14 cents, Ironclad (IFE), down A2 cents to A27 cents, and Cape Lambert (CFE), down A1.5 cents to A27 cents.
...

Source >> www.minesite.com
*****


----------



## drillinto

January 14, 2013
Alcoa’s Aggressive Predictions For Aluminium Demand Have Come True In Spades, 
Despite Initial Scepticism From Analysts
By Rob Davies

In any industry the people most likely to know what is really going on are those companies at its heart, whether producers or consumers. 

But unfortunately whenever these participants express a view or an opinion they are often accused by observers of talking their own book. 

So it is not surprising that Alcoa, the industry leader in aluminium, took the opportunity in its results statement for 2012 to refer back to the comments it made in 2010. 

Then, with the world still raw with the shock of the global financial crisis, it said it expected aluminium demand to double over the next ten years from just under 40 million tonnes a year to 73 million tonnes. 

That implied a compound annual growth rate of 6.5 per cent. Many commentators at the time thought that was far too optimistic. 

In fact over the last two years demand has increased at an annual rate of eight per cent, and not just because of China. 

The Chinese market grew at 12 per cent, significantly higher than the forecast made in 2010 of nine per cent. 

But even more impressive was the five per cent expansion recorded by the rest of the world compared with 2010 forecast of four per cent.  

Looking forward into 2013 Alcoa is being a little conservative and is only projecting a seven per cent global growth rate. 

Even that equates to nearly 50 million tonnes of aluminium, so it is fortunate that supply is forecast to grow by enough to match this consumption and more. In fact Alcoa is projecting a surplus of 535,000 tonnes this year, mostly in China.

Maybe it was this rather downbeat outcome that was behind the 1.6 per cent fall in the aluminium price this week to US$2,074 a tonne. 

That was worse than the metals sector as a whole which only fell 0.3 per cent as measured by the LME index. 

This decline contrasted with the positive return from equities, although equities were less exuberant than the week before when thin markets exaggerated movements. 

Bonds recovered some of the ground they had lost in the previous week when uncertainty over the US “Fiscal Cliff” peaked. The can has been kicked far enough down the road to avoid a trip hazard for the next month or so. 

Some of the detail in the Alcoa report confirmed what most people think is going on in the world. Alcoa expects global aerospace to continue growing at nine-to-ten per cent while autos will manage a rather feeble one-to-four per cent expansion. 

Auto in particular is being dragged down by a one to one-to-four per cent decline in Europe.

Heavy trucks are a brighter story, with a global aluminium offtake expected to increase by two-to-seven per cent in this category. Here again though it is contraction of six-to-ten per cent in Europe that constrains the big picture.  

There is a similar story in construction. Europe, with a forecast decline of four-to-six per cent, is the only negative contributor to the projected rise of four-to five per cent around the globe. China’s contribution to this sector is expected to be an impressive eight-to-ten per cent.

Alcoa can be accused of talking up its own industry but the evidence from recent years is that it has been more accurate than most. Its expectations for this year are modest and it is hard to argue with that.   

Source >> www.minesite.com
*****


----------



## sydboy007

drillinto said:


> January 14, 2013
> Alcoa’s Aggressive Predictions For Aluminium Demand Have Come True In Spades,
> Despite Initial Scepticism From Analysts
> By Rob Davies
> 
> In any industry the people most likely to know what is really going on are those companies at its heart, whether producers or consumers.
> 
> But unfortunately whenever these participants express a view or an opinion they are often accused by observers of talking their own book.
> 
> So it is not surprising that Alcoa, the industry leader in aluminium, took the opportunity in its results statement for 2012 to refer back to the comments it made in 2010.
> 
> Then, with the world still raw with the shock of the global financial crisis, it said it expected aluminium demand to double over the next ten years from just under 40 million tonnes a year to 73 million tonnes.
> 
> That implied a compound annual growth rate of 6.5 per cent. Many commentators at the time thought that was far too optimistic.
> 
> 
> Source >> www.minesite.com
> *****




The simple fact is if pricing gets much better then the idle capacity in China will be started up again.  Until the extreme excess capacity is removed I just don't see Aluminium pricing improving too much.

On another commodity, oil, I am wondering what impact the shale gas / oil revolution in the USA will have on the price.  Should the US have a large reduction in their imports, surely the price has to drop.

From what I read China has pretty significant deposits too.  They might be able to provide a lot of future growth from their domestic supplies?

For some reason i always kept thinking platinum would be the metal to invest in - but seems the market doesn't agree with me.  Always thought it would be a better store of value, because at least it has a lot of industrial uses compared to gold.


----------



## drillinto

January 19, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had a better week.

Oz. We did, and we didn’t. Friday was reasonably strong, but until then the metals and mining index was underwater after the overdue downturn in the iron ore price. Amusingly - if you like black humour - much of the metals index’s near one per cent rebound on Friday came courtesy of Rio Tinto, after its “man overboard” announcement and the appointment of a new chief executive.

Minews. The Rio change seems to be viewed as a positive in Australia.

Oz. I suspect it is also in the UK, and that the fall in Rio shares on the London market reflects concern about the impact of the big asset write offs on profits and future dividend policy.

In any event, there’s little doubt that the Rio management shake-up helped wipe out a decline in the metals index on the ASX, leaving it flat for the week.

Gold companies did better, as gold rose back towards the US$1,700 an ounce mark. That helped the ASX gold index rise by three per cent. The other positive development down this way was a solid flow of discovery news and the rise of a few companies we rarely hear from, which indicates that speculators are busy hunting bargains.
...

Source>> www.minesite.com
*****


----------



## drillinto

January 19, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

...

Minews. Minor metals to close, thanks.

Oz. TUC and Tungsten led the way up in an interestingly stronger minor metals section, where investors appearing be developing an appetite for greater risk.

Titanium minerals developer Base Resources (BSE) had a strong week as construction accelerates at its Kwale mine in Kenya and potential government obstacles are cleared. It added A2.5 cents to A35 cents.

Graphite companies moved up, just. Talga (TLG) put on A1 cent to A30 cents. Syrah (SYR) added A12 cents to A$2.88, and Archer (AXE) was half-a-cent stronger at A19.5 cents.

Rare earth stocks, excepting TUC, generally lost ground. Lynas (LYC) slipped A4 cents lower to A63 cents, and Alkane (ALK) was A4.5 cents weaker at A63 cents.

Lithium stocks were mixed. Orocobre (ORE) added A9 cents to A$1.54. Galaxy (GXY) lost half-a-cent to A39.5 cents, but might have done worse after confirming the death of a second worker at its Chinese processing plant.

Source >> www.minesite.com
*****


----------



## drillinto

BP Energy Outlook 2030 Shows Increasing Impact of Unconventional Oil and Gas on Global Energy Markets

http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7083149
***


----------



## drillinto

For your consideration >> http://www.agrimoney.com/
*****


----------



## drillinto

Overbought and Oversold Markets
Australia is currently overbought

http://macromon.files.wordpress.com/2013/01/wir_overbought3.jpg
***


----------



## drillinto

Grains better bet than soft commodities, Macquarie (18 January 2013)

Grains represent agriculture investors' better bet for most of 2013, but it is soft commodities, in particular cotton and sugar, which will end the year on the up, Macquarie said.

The bank, in a major crop report, rated corn as its "favourite in the short-term" in agricultural commodities, forecasting a return in prices to an average of $8.50 a bushel in the April-to-June quarter, well above the level that futures are pricing in.

"The support of corn prices in the second half of the season will be the recovery of the US export programme," as soybeans takeover Brazil's export logistics.

Furthermore, there was "greater difficulty" in controlling ethanol demand, with a potential for greater exports to China too, to judge by cash market dynamics.

Source >> agrimoney.com
*****


----------



## drillinto

January 24, 2013
In The World Of Base Metals Volume Matters Far More Than Price
Rob Davies

In the wake of Rio Tinto taking a US$14 million charge against its aluminium business it might sound a trifle odd to say that metal prices are less important than volumes. 

But to understand why it makes sense, just contrast the most expensive base metal, tin, with aluminium. 

Tin is on a roll. In the second week of January it gained another 1.1% to finish with a cash price of US$25,150 a tonne, although it’s slipped a little bit since to the current US$24,850. The next priciest base metal is nickel but that’s currently US$7,000 a tonne cheaper at $17,485. 

Tin is the most valuable base metal by a country mile. So why don’t big mining companies, like Rio Tinto, devote all their efforts to the metals with the highest price? 

The simple answer is volume. Global tin consumption in 2012 was about 364,000 tonnes. At current prices the whole primary tin industry therefore has yearly revenue of about US$9 billion.

Assume a reasonable operating margin of 20 per cent and the tin mining industry could be making a gross profit of about US$1.6 billion. 

While that’s not bad it does assume that competition authorities would be happy for one company to dominate a whole industry. Moreover, such a scenario would leave that company massively vulnerable to one highly specialised part of the industry.

Now contrast that to the aluminium industry that every year ploughs through 40 million tonnes of the stuff.  Even at the rather miserly price of US$2,000 a tonne, that consumption still equates to an industry that has revenue of US$80 billion - making it ten times bigger than tin. 

More importantly the rate of aluminium consumption is growing in high single digit percentages as we saw in Alcoa’s results last week.  

Compare that with tin where demand is hardly rising at all. It is far more profitable to get a get a big chunk of the aluminium market and grow with it, rather than defend a large market share in a flat business like tin. 

That was why Rio Tinto wanted to expand its aluminium business in 2007. At the time it made a lot of sense and investor sentiment was not critical. 

It was just unfortunate that the deal was concluded a year before the global financial crisis and that it coincided with a massive expansion in Chinese production, as China sought an easy way to monetise all the cheap hydro-electric power capacity it was building.

However, no industry demonstrates the remorseless logic of scale better than iron ore. And it is not surprising that the successor to Tom Albanese at Rio Tinto is Sam Walsh, the man who ran the iron ore business. 

Despite what the media is saying about the Chinese economy slowing down, the fact is that it grew at annual rate of 7.9 per cent in the fourth quarter of 2012. 

More important to miners is that industrial production expanded at an annualised rate of 10.3 per cent in the same quarter. 

A key component of that measure is steel production which grew 7.7 per cent in 2012 to 717 million tonne. Continued expansion of this industry is expected in 2013, partly to help the 650 billion renminbi railroad construction programme. 

That, and other infrastructure, is behind the 3.6 per cent increase that is forecast for Chinese iron ore imports in 2013. Iron ore might only be worth US$143 a tonne but the value of Chinese imports alone is worth US$110 billion.  

That makes it far bigger even than aluminium let alone tin or the other metals and demonstrates how right the big miners have been to focus on bulk commodities.  

Volume usually beats price in a business model. It was just unfortunate for Tom Albanese that his idea was right, but his timing was wrong.  

Then again, if Rio hadn’t bought Alcan in 2007 Billiton could have completed its purchase of Rio in 2008. Which would mean it would be the one making the write-offs now.

 Source >>> www.minesite.com
*****


----------



## drillinto

Gold
http://visualeconomics.creditloan.com/gold-good-investment-or-waste-of-time/
***


----------



## drillinto

January 26, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. The rally on your market seems to have continued last week.

Oz. It did, but it’s almost a rally by stealth, creeping up by small steps and not always lifting the sector that we watch most closely.

Last week saw the overall market, as measured by the all ordinaries index, added another 1.3 per cent, continuing the longest upward rally in almost two years. Unfortunately, the metals and mining sector missed the boat, slipping 0.6 per cent lower. The gold index ended the best part of one per cent lower.

Minews. That seems an unusual reaction from mining stocks given China’s continued growth.

Oz. It was, but it also reflected the trend of the day which is the hunt by investors for companies generating a reasonable yield. Sadly, the management teams of too many miners are miserly when it comes to rewarding shareholders with higher dividends, or share buybacks, preferring instead to continue spending on exploration and project development.

There was also the instability factor introduced by the management shake-up at Rio Tinto and the expected shake-up at BHP Billiton, plus the imminent release of what are expected to be poor profit results by both companies.

Minews. All very interesting, of course, but let’s get on with the job at hand and talk about prices.

Oz. That might be a quick conversation because there were few eye-catching moves, up or down, with no discernible trend emerging in the different sectors. Gold stocks drifted lower, with a handful of exceptions. It was a similar picture in the other sectors where falls outnumbered rises in what was really a rather unexciting week.

Minews. Let’s go straight to gold because even if the trend was down there remains great interest in the metal as governments around the world seem to be encouraging higher rates of inflation.

Oz. Which ought to trigger a rise in the gold price, although that doesn’t seem to be happening yet, as can be seen in last week’s lacklustre market for ASX gold stocks.

Among the better performers was St Barbara (SBM), which added A9 cents to A$1.53 after earning a buy tip from Goldman Sachs which likes the improving production profile of the company. Regis (RRL) was another to catch the eye of investors, rising by A21 cents to A$5.17. And Endeavour (EVR) added a reasonable A26 cents to A$2.22 after reporting a positive preliminary economic assessment for the Hounde project in Burkina Faso.

The only other rises of note were posted by Troy (TRY), which put on A16 cents to A$3.79, Papillon (PIR), which rose A12 cents to A$1.60 and sector leader, Newcrest (NCM), which added A62 cents to A$23.62.

The list of gold stocks to lose ground was much longer and included: Silver Lake (SLR), down A17 cents to A$2.80, Beadell (BDR), down A7 cents to A98 cents, Alacer (AQG), down A27 cents to A$4.39, Ausgold (AUC), down A3.5 cents to A13 cents, Medusa (MML), down A5 cents to A$5.28, and Kingsgate (KCN), down a heavy A58 cents to A$4.40. Resolute (RSG) fell just half-a-cent to A$1.39 despite all the publicity coming out of Mali. Perseus (PRU) fell A14 cents to A$1.90 after replacing long-serving chief executive, Mark Calderwood.
...

Source >> www.minesite.com
*****


----------



## drillinto

January 28, 2013
Production Numbers From The Majors Show Growth In Bulk Commodities, Which Bodes Well For The Earnings Numbers In A Few Weeks’ Time
By Rob Davies

January is when mining companies report their production data for the previous year. These results are always interesting in their own right, but also act a precursor to the release of their financial results which usually happens in February. 

The production data gives a good indication of how the industry is doing, although of course it says nothing about metal prices or costs.

Even so, most companies are produce more of the stuff that is selling well and making a good profit and producing less of the stuff that is not so lucrative.

In terms of size of business there is no doubt that iron ore is the most profitable line for the major mining companies.

So it is no surprise to see that Rio Tinto lifted its attributable production by four per cent to 253 million tonnes in 2012.

BHP Billiton has a June year end so it isn’t quite so accommodating when it comes to making comparisons. But the two per cent increase it reported in iron ore production in the last six months of 2012 to 82 million tonnes demonstrates the widespread demand for the primary raw material for steel.

Even Anglo American was able to record four per cent growth in iron ore production for the year, to 43 million tonnes, despite strikes at the Sishen mine and the ongoing delays at its Minas-Rio mine in Brazil.

Anglo American had a good year with its metallurgical coal exports, which rose by 24 per cent increase to 18 million tonnes.

BHP Billiton didn’t do so well and its exports were flat at 18 million tonnes in the second half of the year.  Rio’s performance was even worse as it recorded a three per cent decrease to 11 million tonnes for the full year.

The story in thermal coal was better for Rio Tinto, with output up 16 per cent to 21 million tonnes. BHP Billiton’s thermal coal output rose seven per cent to 18 million tonnes in the second half, while Anglo American recorded a total decline of 1.8 per cent to 69 million tonnes across all its categories of energy coal.

The other key material for steel making is manganese. Anglo American’s output rose 20 per cent to 3.3 million tonnes while BHP’s production in the last six months rose 11 per cent to 4.3 million tonnes.

Moving onto base metals, BHP Billiton’s aluminium output fell 10 per cent to 567,000 tonnes in the second half, which was the same rate of decline recorded by Rio Tinto over the whole year. That said it is a bigger player with annual output of 3.5 million tonnes.

Anglo American is growing its copper business and a two per cent increase in output to 172,900 tonnes is a good step.

It is outclassed though by Rio Tinto with its six per cent increase to 549,000 tonnes for the year and BHP Billiton’s  14 per cent rise to 569,000 tonnes in the second half alone.

But it’s not all wine and roses – in the nickel data we can see the stress. BHP Billiton reported a six per cent decline to 72,000 tonnes in its reporting period. Anglo American had a better experience over the year, reporting a 35 per cent increase to 39,000 tonnes, even allowing for a 25 per cent fall in the fourth quarter to 7,000 tonnes.

But of course that last quarter suggests that the overall rise in 2012 it won’t be repeated next year.

The woes of platinum have been well recorded, and the eight per cent production drop posted by Anglo American to 2.2 million ounces of platinum equivalent will not be a surprise.

Looking at diamonds in volume terms is not very helpful. Nevertheless, the 11 per cent drop recorded by Anglo American to 28 million carats is indicative of the pressure in the industry. It was echoed by a six per cent decline to 608,000 carats at BHP Billiton and a 12 per cent slide to 13 million carats at Rio Tinto.

All the miners produce other commodities as well, but the growth in the bulk commodities across the board bodes well for the earnings when they do come out in the next few weeks.       

Source >> minesite.com
*****


----------



## drillinto

"Ten Reasons Why High Oil Prices Are a Problem"

http://www.theoildrum.com/node/9789

[Note: at the end of the article you will find more than 90 comments from readers]


----------



## drillinto

Asset Class Performance in January 2013

Australia (EWA) was up 3.90%

http://www.bespokeinvest.com/thinkbig/2013/1/31/asset-class-performance-in-january.html
***


----------



## drillinto

Feb 2, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, it seems the recovery in equity markets is well underway. How did the ASX perform last week?

Oz. Fairly well, with most sectors up by around 1.5 per cent which, it should be said, is hardly a return to the boom. Gold was the odd man out, again, suffering from the phenomena dubbed the great rotation, as funds flow out of low risk assets into riskier assets.

Overall, the ASX as measured by the all ordinaries added 1.7 per cent, rising on three of the four days that the market was open last week, since Monday was a holiday down this way. The metals and mining index rose by 1.6 per cent, thanks mainly to strength in the major miners, BHP Billiton and Rio Tinto. The gold index slipped 1.4 per cent lower.

Minews. Those index moves seem pretty modest so presumably most share price moves were modest also.

Oz. They were, and there was no discernible trend among the different sectors. What can be said is that most gold stocks lost ground whereas iron ore, base metals, uranium, coal and the minor metals were mixed, some winners and some losers.

But looking at the pattern on the Australian market since the start of 2013, it seems that there’s a reluctance to embrace mining equities with the same enthusiasm as local banks, retail and industrial shares are being embraced.

Since December 31, the all ordinaries index has risen by six per cent, which isn’t bad work for 21 trading days. The metals and mining index, however, is up by just two per cent, and gold is up by 0.6 per cent.

Minews. Interesting indeed. But what’s it telling investors?

Oz. Three things. Firstly, the Australian mining sector remains a prime tax target of the current Australian Government, either through super taxes on profits or the carbon tax. Secondly, foreign investors are loath to buy Australian stocks while the currency is so high and seemingly headed for a correction from its current US$1.05 back to US90 cents, or lower. And thirdly, that political uncertainty is high with the government not only in trouble politically but starting to lash out at its enemies ahead of an election called, prematurely, for September 14.
...

Source >>>>> www.minesite.com
*****


----------



## drillinto

Gold Leasing: The Case Of The Disappearing Gold
by Tyler Durden on 02/02/2013 


The practice of gold leasing has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return. The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee. In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.” Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

Source >>> www.zerohedge.com
*****


----------



## drillinto

February 04, 2013
"Are Low Interest Rates Finally Delivering The Gains Expected Of Them ?"
By Rob Davies

For many decades in the City, Julian Baring was probably the best known commentator on mining, metals and gold. 

He went on to found two very successful commodity funds.

He always had a way with words and had a particular phrase he was fond of using to describe something that was bizarre but which had become accepted as “normal”.

“If a financially savvy Man from Mars landed tomorrow”, he used to say, “and saw such and such he would be amazed”.

If Mr Baring were alive today he would undoubtedly apply that phrase to the current interest rate structure in the developed markets.

In Europe, the US and Japan short term money is virtually free and even ten year debt borrowed by governments only costs the borrowers about two per cent.

As the graph in Saturday’s Financial Times showed, these are the lowest rates for 300 years.

Of course Mr Baring would have quickly deduced that while the price of money is low its volume, or availability, is also low.

Money is cheap if you can borrow it but, not surprisingly, not many banks are keen on the trade.

For the four years since these low rates began in the West economic growth and the appetite for risk have been subdued. Commodities have enjoyed good returns over this period as the giant sucking sound from Asia has hoovered up metals to feed a massive construction boom.

Equities have staged a good recovery as well since 2009.

However, the start of 2013 has seen the best rise in equities for a over decade as investors have woken up to the fact that equities yielding four per cent in real terms, i.e. after inflation, are a probably better bet than bonds yielding two per cent before inflation.

So far this year commodities have not really participated in this bull run, and have only made a net gain of 0.5 per cent in the LME index to date.

In part this is because the roll yield from metals, the difference between forward prices and cash prices, is a function of the interest rates. However, with bond prices under pressure this year that has depressed returns from this spread, known as the contango.  

Last week though, there were signs that this could be changing. A 1.2 per cent rise in the LME index to 3,557.9 was largely a result of a 6.3 per cent increase in nickel prices to US$18,370 a tonne.

Maybe the rise was spurred by news from Vale, the Brazilian miner, that its nickel production declined by 6.6 per cent in 2012 to 69,000 tonnes.

In any event metals were not overly spooked by the surprise 0.1 per cent fall in fourth quarter US GDP.

As in the UK this data seems at odds with better than expected news on employment. US payrolls rose by 157,000 in January, after an upwards revision to 196,000 in December and a respectable 247,000 in November.

More workers means more consumers and better prospects for commodities.  And that story was reinforced by good news from the US manufacturing index which rose from 50.2 in December to 53.1

Low, indeed negligible, interest rates are a pretty blunt policy to deal with a financial crisis. They also take a long time to register with consumers.

But the mythical man from Mars might just come away thinking that, eventually, these exceptionally low rates are, finally, delivering the results expected of them.


Source >>> www.minesite.com


----------



## drillinto

Trading Range Screen for Country ETFs
FEB 5, 2013 

http://www.bespokeinvest.com/thinkbig/2013/2/5/trading-range-screen-for-country-etfs.html
                                  [EWA(Australia) is in overbought territory]


----------



## drillinto

February 08, 2013
Mining Companies With Women Directors Enjoy Greater Margins, Study Shows
By Alastair Ford

Profit margins are higher for mining companies with women on their boards, according to the preliminary findings of a study compiled by the London-based organisation Women in Mining in conjunction with PriceWaterhouseCoopers.

This, says the report, is consistent with the findings of other studies. 

It cites a similar survey undertaken by Catalyst, a Canadian pressure group, which showed that companies with women on their boards also benefited from higher return on sales, higher return on equity, and higher return on invested capital. 

Similarly, a study by the Credit Suisse Research Institute found that companies with women on their boards have a higher return on equity, lower gearing, higher price/book value and better than average growth.

What conclusions can be drawn from this? The WIM report is primarily concerned with reporting the facts, rather than to applying particular pressure on specific issues. 

Thus it sets out the broad framework first: women occupy eight per cent of the board seats of the top 100 global mining companies, and just four per cent when the net is cast slightly wider to include the top 500 companies. 

However just one per cent of the executive directors of the top 100 companies are women, with the rest holding non-executive roles. Among the next 101-500 companies the figure is slightly higher, at three per cent.

Overall, among the top 500 mining companies, women hold just three per cent of the directorships.

And boards which have more members tend to have more women on them, which allows for some nuanced interpretations of the statistics. 

“While the exact cause of the correlation between market capitalisation, board size, and the level of women’s participation on boards is not known”, says the WIM report, “this correlation raises the question of whether board seats have been created to accommodate female directors and highlights the fact that expanding board size to accommodate female directors dilutes the influence female directors have on such boards”.

That’s a sentiment which rather echoes the views of female MP Caroline Flint when she wrote her famous letter of resignation to Gordon Brown in 2009. “Several of the women attending Cabinet – myself included – have been treated by you as little more than female window dressing.”

That particular battle in the gender wars got a lot more publicity that the one going on in the mining sector ever will. After all, as the WIM report acknowledges, this is a sector where finding women to undertake senior roles is a “challenge”, partly because women are less likely to stay in mathematics and science education.

Technical industries such as mining, oil and gas, aerospace and construction, are, the report notes as a matter of fact, dominated by men. 

But does any of this actually matter? After all, if it’s true that extra board positions are being created for women at the larger company level, does that actually mean that it’s the women themselves who are driving the greater efficiencies that their presence is correlated to?

Or is it in fact the other way round? Are the more financially efficient miners by their very nature more likely to appoint women, whether as “window dressing” or otherwise?

That is a question that isn’t precisely addressed in the WIM report, although some other benefits are laid out pretty clearly. 

For example, it notes that The Conference Board of Canada found that boards with three or more women showed different governance behaviours to those with all male boards. The more gender balanced boards were more likely to ensure better communication, adhere to a code of conduct, identify criteria for measuring strategy and monitor its implementation. They were also more likely to focus on gender diversity, employee satisfaction and corporate social responsibility.

Equally, companies in all sectors with women as directors are 20 per cent less likely to go into liquidation than ones without, according to a study conducted by the University of Leeds. 

But if it’s only the more financially robust companies that are appointing women in the first place, that would stand to reason as self-evident.

What’s more, not all women agree that this is a major issue. One female mining company chief executive told Minesite last year that if women want to be treated as equals then it is surely counterproductive for them to set themselves up as a special interest group with their own agenda. 

Minesite’s own thoughts? We also need more female mining fund managers. But that’s another story...

Source >> www.minesite.com
*****


----------



## drillinto

February 09, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia, or should it be good morning South Africa, because it seems you’ve been spending a bit of time in the region after last week’s Mining Indaba conference.

Oz. That’s right, but I’ve been able to keep an eye on the Australian market, and a closer eye on Australian mining stocks active in Africa. 

Minews. Was there any rub-off effect from the talkfest in Cape Town?

Oz. Not really, and what there was couldn’t be described as positive. The problem, as with previous Indaba conferences, was that the heavy hand of politics descended on the event.

A range of issues were dredged up that miners, bankers, and investors had rather hoped would not be kept on the sidelines.

Minews. We don’t need to go over that ground again - it’s sufficient to remind readers that the issues are those of rising costs, poor industrial relations, and talk of nationalisation. As time’s short and you’re packing for the return trip to Australia let’s go straight to the performance of the ASX.

Oz. That’s a good idea because I’m certain we’re not going to fix South Africa’s issues in a brief chat. We’re not going to fix Australia’s problems either, though it is interesting to take a look at a divergence between the two countries on the question of hitting miners with higher taxes.

In Australia, the much-criticised super-tax on coal and iron ore appears to be heading for the scrap heap, as the government architects of the impost have confirmed that it is proving to be a very poor revenue raiser. The Opposition has confirmed that it will toss the tax out if elected in the September 14 national poll.

Amusingly - or sadly - just as Australia prepares to ditch its mining super tax, South Africa and other African countries are moving closer to introducing their own extra levies on mining. And ironically the Africans are arguing, in part, that if it’s appropriate for Australia, it’s appropriate for Africa.

Minews. Now that will be worth watching, because Australia removing the tax while rivals introduce it could end up giving Australian miners an edge.

Oz. Precisely, though there is a lot of water to go under those bridges before we get a clear picture of the future tax treatment of mining profits.

...

Source >> www.minesite.com
*****


----------



## Garpal Gumnut

RIO's results next week will be a pointer for commodities this year.

gg


----------



## drillinto

Twelve questions for Kirk (a trader)

http://www.kirkreport.com/2013/02/05/12-questions-for-kirk/
***


----------



## drillinto

February 11, 2013
The Elephant In The Commodities Room: Chinese-Japanese Friction
By Rob Davies

No amount of paleontological investigation of dinosaurs would have enabled a contemporary observer to have predicted their demise at the end of the Cretaceous.

An external event in the form of large asteroid wiped out all major life forms seventy years million ago.

In the same way detailed analysis of industry and listed corporations in July 1914 would not have helped investors who found the stock exchange closed from 31 July 1914 until the beginning of January 1915.

The London Metal Exchange was closed for the duration of the Second World War.

These large, external, risks pose constant underlying but potentially significant threats to capital markets.

Most of the time they are distant, low level worries that do not impinge on the day to day business of traders and investors.

Just occasionally though they bubble up and become something that changes the nature of the market overnight. Investors at least ought to be aware they exist even if perhaps there is not awful lot that they can sensibly do.

Right now the dispute between China and Japan over the Senkaku islands of the South China Sea is one of those small items that does not make it on to mainstream TV news very much, and is instead generally confined to the inside pages of the broadsheets and international news magazines.  

Although it is only one of a myriad of international border disputes it has the potential to trigger a full-blown international crisis, simply because the two adversaries are the second and third largest economies.

For the metals industry China’s role as the single largest consumer of commodities makes this a knife–edge situation.

No one is suggesting that these two countries are about to go to war over five islands and three reefs.

But in a highly charged situation it only takes a few missteps and some mutual misunderstandings for things to escalate rapidly out of control.

If that happened the consequences for the regional economies, and the global economy would be catastrophic in the extreme.

The two countries have many features in common, which can often make rivalries worse. A particularly sensitive issue for Japan is the speed at which China has industrialised and then overtaken Japan in economic terms.

There are of course parallels here with Germany and the UK 100 years ago.  Interbreeding between the royal families was not enough to prevent a territorial dispute in the Balkans snowballing into a one of the worst conflicts ever known, and one that had debilitating economic consequences for decades to come.  

At the moment the global economy, and especially the metals and mining business, is hugely reliant on the demand from China.

Any businessman knows that such a huge concentration is tolerable when things are going well. But it is massive headache when your largest client takes big knock.

There is nothing that miners can do about the politics of the South China Sea. What they can do is continue to expand in order to serve their largest and most important customer at the same time as ensuring they are not overly committed to projects that might be vulnerable if things go wrong.

It is a tricky balancing act, and not made any easier to assess by the democratic deficit in China.

Focussing on the intricacies of demand and supply, cost curves and new projects should not dull the minds of investors to the potential for larger political risks in the wider world. 

Source >>>>> www.minesite.com
*****


----------



## drillinto

Chinese investments abroad (2012)

Canada $22.9 billions
USA $10.7 billions
Australia $8.6 billions

Source: WSJ
**********


----------



## drillinto

Investing in Steel
By Justin Kuepper

http://commodityhq.com/2013/investi...ign=c78971517f-RSS_CHQ_PULSE&utm_medium=email


----------



## drillinto

February 17, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It seems that your market is in full recovery mode.

Oz. More than that. The steady rise over the past few months has prompted comments that we have entered a bull market, following the best start to a year since 1980. The ASX200 index, which measures the leading 200 stocks on the Australian market, is up by 26 per cent since mid-2012, a dramatic increase that largely reflects a stampede into high-yielding Australian banks.

Minews. Which is pleasing for bank investors. Bu what about mining shares?

Oz. Not quite as good, but impressive nevertheless. The mining and metals index is up by 16 per cent since June. The odd man out in this significant change of sentiment is gold. The gold index has reflected concern about the outlook for the price of gold itself by sliding 1.6 per cent lower since the middle of last year.

Minews. And that slide in gold will not yet reflect the dip in the price below US$1,600 an ounce that took place after your market closed on Friday.

Oz. No, which means our gold stocks could be in for a torrid Monday.

Minews. What’s driving the big Aussie revival?

Oz. It’s hard to pin it down to a single event, and not many observers have made this suggestion – yet - but there’s a fair chance that the strength of the past week or so is linked to a growing belief that Australia is in for a big political shift at the election set for September 14.

Over the past few weeks the government has lurched from crisis to crisis. The latest has been a recognition that the much-maligned super-tax on iron ore and coal has been a complete failure, as it has raised just one-tenth of its forecast revenue and is probably costing as much to administer as it has raised.

The resurrection of the mining tax as a prime political issue has put the spotlight on poor economic management and the failure to deliver a promised government budget surplus. In fact, the latest forecasts point to a deficit of A$10 billion.

Minews. And will a change of government kill the mining tax?

Oz. Almost certainly, though we need to wait and see if the Opposition will keep its word if elected.
...

Source >>> www.minesite.com
******


----------



## drillinto

"The best place to be is in commodities"

Cannabis as an investment

http://www.economist.com/news/finan...898-fund-seeks-opportunity-weed-audacity-dope
***


----------



## drillinto

Global Equity Performance (Year-to-Date)

Commodities Producing Countries
Australia: +8.36%
Brazil: -5.00%

http://macromon.wordpress.com/2013/02/16/week-in-review-59/wir_equity_ytd-73/
***


----------



## drillinto

Ed Yardeni on the current gold weakness


http://blog.yardeni.com/2013/02/gold-excerpt.html
***


----------



## drillinto

February 23, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like you had a tough week at the office.

Oz. Dreadful is not too strong a word for the sell-off which hit all parts of the resources sector on Thursday, following a fresh outbreak of global uncertainty and concern about the strength of the U.S. and Chinese economic recovery.

Curiously, however, the wider market which incorporates classic defensive stocks in the healthcare and retail industries did quite well. That combination produced a very lopsided picture of the market with the ASX metals and mining index falling by five per cent while the all ordinaries index slipped by just 0.4 per cent.

Minews. A result which indicates that the damage was confined to mining?

Oz. Yes. Gold was hit hardest as the price of the metal tumbled, taking the ASX gold index down by seven per cent. And as is often the case, the bulk of that damage was linked to a single stock, Newcrest (NCM) which dominates the Australian gold sector. Newcrest’s fall of A$1.42 to A$21.68 had a major effect on the index.

Somewhat surprisingly amongst the all the red ink it was possible to find smatterings of black ink too, with the uranium sector appearing to do best and with a modest recovery on Friday restoring some faith in the market.

Minews. We might shuffle on quickly to prices unless there’s anything else worth discussing.

Oz. Not a lot that you aren’t already aware of. The BHP Billiton management shake-up will have been well reported in the U.K. The appointment of Andrew Mackenzie completes the changing of the guard at the world’s major miners and, somewhat interestingly, adds a Scot to the list of sector leaders alongside three Australians, if you count Glencore’s Ivan Glasenberg as an Aussie - which is feasible given he took our citizenship in the 1990s, lives in Switzerland, did part of his education in the US, and still speaks with a South African accent.

If there is an unfolding theme for UK investors to keep an eye on it is the Australian political scene, where a change of government in September, or sooner, is looking increasingly likely. The current mob running the place have spent the past week lurching from crisis to crisis and while that might not mean much to anyone overseas it is a pointer to the likelihood of a more pro-business and pro-mining government taking the reins in about seven months.
...

Source >> www.minesite.com
*****


----------



## drillinto

A death cross for gold

http://www.bespokeinvest.com/thinkbig/2013/2/22/a-death-cross-for-gold.html
***


----------



## drillinto

February 25, 2013
All Change At The Top: The Departure Of Key Executives At The Majors Is Not Necessarily A Bearish Signal
By Rob Davies

Some elements of the media are making brave efforts to interpret recent management retirements and promotions at the major mining companies as a portent of great sea change in the industry.

It is certainly unusual for four chief executives of the five largest mining companies to be stepping down at the same time. 

However, it is only in recent years that the industry has been so consolidated. 

And some of the men that have been key figures in that process are the ones now standing aside, most notably Mick Davis of Xstrata. 

This cohort of executives have made a huge difference to the structure of the industry and have created far more stable businesses along the way. 

In contrast to some observers who see this mass retirement as a portent of bad times to come it is more likely simply due to age, tiredness and a recognition that this stage is over.

Doomsters have been encouraged in their warnings by the 4.5 per cent drop in metal prices over the last two weeks, taking the LME index down to 3,406. 

More ammunition has been provided by gold dipping below US$1,600 an ounce to US$1,575. 

But both these measures tell us more about the dollar, which is trading at a five month high, than the fundamentals for the underlying metals. 

Currency wars have broken out again, and these have had the effect of pushing the dollar up against most of its major competitors. 

In the UK there are increasing expectations that the incoming Canadian Governor of The Bank of England will pursue a more inflationary stance that will further weaken sterling.

Growth forecasts in Europe have been revised down to a contraction of 0.3 per cent for 2013, as opposed to the previously forecast anaemic 0.1 per cent increase. 

Finally there are high expectations that the policy of “Abenomics” promoted by new Japanese Prime Minister Shinzo Abe will restore growth to Japan through a programme of more public spending and looser monetary policy which will lead to a lower yen. 

What this means in practice is that in most local currencies metal prices are unchanged. Good for miners, but not so good for inflation. 

Besides, none of this addresses the deep seated problems in the US economy which will undoubtedly reappear at some point and manifest themselves as a weaker dollar, weaker against gold if nothing else. 

Nickel recorded one of the biggest falls in recent weeks with its 8.2 per cent slide to US$16,735 a tonne. 

As the most volatile of all the base metals it is often the canary that signals impending increases in activity. Copper wasn’t far behind with its drop of 4.8 per cent. 

No one of course supposes that the mining bosses triggered these declines, or are responsible for them. 

It is, though, reasonable to assume that some investors have interpreted this mass exodus as “ a sign” that things are about to change in the world of commodities and that prices will migrate to lower levels. 

While that is a possibility, it seems more likely that metal prices will hover around the full marginal cost of production for some time to come. 

That means prices will reflect not just cash production costs but also the costs in finding and developing new resources. 

The legacy this group of executive’s leaves the industry is that is now strong enough to close capacity if prices do not cover the full costs of extraction. 

The old days of carry on digging just because cash costs are covered, which so damaged mining, are now behind us; thankfully. 

Source >> www.minesite.com
*****


----------



## drillinto

Glencore’s CEO Says Rival Mining Chiefs ‘Really Screwed Up’
By Jesse Riseborough - Feb 26, 2013 

http://www.bloomberg.com/news/2013-...rates-mining-ceos-for-building-new-mines.html


----------



## drillinto

The case against commodities and emerging markets

http://markdow.tumblr.com/post/43620144186/the-case-against-commodities-and-emerging-markets
***


----------



## drillinto

2013: Global Stock Market Performance

Australia: +8.34%
New Zealand: +6.50%

http://www.bespokeinvest.com/thinkbig/2013/2/27/2013-global-stock-market-performance.html
***


----------



## drillinto

Fifth BRICS Summit - March 2013

http://www.brics5.co.za/
***


----------



## drillinto

Key Asset Class Performance in February and YTD
FEB 28, 2013 

Australia(EWA) is up 6.92%, ytd.

http://www.bespokeinvest.com/thinkbig/2013/2/28/key-asset-class-performance-in-february-and-ytd.html
***


----------



## drillinto

March 02, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Another unusual week for you, with the overall market up but mining down. What does that tell us about Australia?

Oz. It tells you that a change is underway as the non-mining sectors of the economy pick up the slack created by the end of a resources boom which has been such a loud event over the past decade that it drowned out everything else.

Last week was an interesting example of the change underway with the all ordinaries index up 1.3 per cent while the mining and metals index lost 0.7 per cent. Gold slipped lower by 0.4 per cent.

Minews. Hardly big moves, but it seems to have become a trend.

Oz. It has, driven by developments such as a sharp fall in local interest rates which were kept higher here for longer during the boom, but which are now down to a level which has made property an attractive investment for the first time in years, and a competitor for funds which were previously directed into mining.

Minews. If the boom is over, what next?

Oz. Normality, or as close to it as possible, because what’s meant by the boom ending is that the capital investment phase is coming to an end and now we move into the production phase, as new and expanded projects are switched on or cranked up. The net result will be higher rates of mineral production but reduced rates of investment.

Minews. Sounds like it could be good news for some investors and bad for others.

Oz. Miners in production could do quite well, if not from commodity prices which remain subdued but from an overdue fall in the value of the Australian dollar which is struggling to stay above parity with its US cousin, and which could quite easily drop to US90 cents, or lower, very quickly.

Minews. Enough big picture stuff, time for prices, starting with any good news to brighten our day.

Oz. There’s not a lot of good news but we did see a number of stocks outperform for a variety of reasons. Nickel star Sirius (SIR) thrilled its followers when it briefly moved back above the A$3.00 mark after reporting what seems to be a fresh discovery to the east of its original Nova strike. Assays are yet to be reported but the thickness of the sulphide mineralisation, 125 metres so far and still drilling, helped lift Sirius to a Friday high of A$3.09 before it eased to end the week at A$2.85 for a gain of A75 cents.

Another eye-catcher was BC Iron (BCI) which has emerged a stronger company after securing a bigger share of the Nullagine iron ore joint venture. Investors boosting the stock to a 12 month high of A$4.18 on Friday before it too slipped before the closing bell to end at A$4.03, a rise of A17 cents for the week.

Iron Ore Holdings (IOH) was another company in demand after announcing a deal to bring its Iron Valley project into production through a joint venture with Mineral Resources (MIN). Iron Ore Holdings shot up to A$1.26 on Friday, before closing at A$1.24, a gain of A27 cents. Mineral Resources went the other way, shedding A23 cents to A$11.11.

Minews. Let’s continue with iron ore and then go through the rest of the market.

Oz. Two other iron ore stocks did quite well last week, both relative newcomers. Nevada Iron (NVI) which has made an interesting discovery in the US put on A2.5 cents to A17 cents. And Mamba Minerals (MAB), which is drilling at its Snelgrove Lake project in Canada, rose by A14 cents to A54 cents.

The rest of the iron ore sector was more subdued with most stocks losing ground. Falls included: Fortescue Metals (FMG), down A30 cents to A$4.53, Atlas (AGO), down A19 cents to A$1.41, Gindalbie (GBG), down A2 cents to A24 cents, Mt Gibson (MGX), down A9 cents to A71 cents, and Kogi Iron (KFE), down A1.5 cents to A16 cents.

...

Source >>> www.minesite.com
*****


----------



## drillinto

How to bet against gold

http://commodityhq.com/2013/3-ways-to-bet-against-gold/
***


----------



## drillinto

The white sugar market is increasingly switching to containers for shipment because they are cheaper and more flexible than conventional bulk vessels, reported Reuters.

http://www.cargonewsasia.com/secured/article.aspx?article=30233
***


----------



## drillinto

March 04, 2013
The Voters Are Revolting, But Warren Buffett Remains Upbeat
By Rob Davies

It doesn’t take a psephological genius to join the dots between the Tea Party in the US, UKIP in the UK and Beppe Grillo in Italy. 

In those three countries, and many others, the anti-politician vote is rising and getting more strident as austerity grinds on into its fifth year following the global financial crash.

Politicians say the voters don’t like austerity.

But that is the point, they are not supposed to.

Markets are not that enamoured of austerity either because it depresses economic growth which is the key to global prosperity.

But in theory bond investors at least should appreciate this hair shirt approach as it increases the chances of them getting their money back.

However, as the UK has now been expelled from the shrinking club of AAA rated borrowers to join the US, France and others in the ranks of the fallen angels, even bond investors can see the risk that low growth brings to their capital.

It is becoming more and more obvious that inflation is the only way that massive sovereign debtors will be able to shed their nominal obligations.

Which ought to be good for commodity investors. The commodity asset class is traditionally viewed as a hedge against inflation.

But in that context, it’s perhaps a bit surprising to see the 1.9 per cent fall in the LME index that took place over the week, driven by a 2.6 per cent fall in copper to US$7,620 a tonne and a 5.4 per cent drop in the price of aluminium to US$1,914 a tonne.

The proximate reason was a drop in the Chinese Purchase Managers Index from 50.4 to 50.1 between January and February.

Underlying the move though, was a realisation that growth in the West remains lacklustre.

Moreover, the US sequestration has now cut US$85 billion from government spending between March and September.

While this is excellent news for the long term it is undoubtedly bad news in the short term.   Commodities need growth more than they need inflation.

But before anyone gives up on the US economy they should read Warren Buffet’s annual letter to shareholders.

The latest one was released on Friday 1st March and he remains as upbeat as only a mid-western American can.

He doesn’t let trifles like wars, budget deficits and elections get in the way of the serious business of making money - and few people have a better record of putting their money where their mouth is than he has.

Interestingly, he prefers old established businesses like railways and newspapers to new fangled internet “solutions”. It’s an approach which has served him well.

Moreover, with tens of billions of cash available for more acquisitions he is actively looking for yet more cash generative businesses.

But given his penchant for solid, boring businesses it is perhaps surprising that he has not already moved into the mining industry. Maybe the valuations have been too rich in the past.

But there can though be no denying the longevity of the business with its claim to be the world’s second oldest profession.  

After all, no matter how revolutionary the voters become they still want the basics of an electricity supply and modern appliances.

None of these are possible without metals. The business of supplying them is about as reliable as any industrial activity could be. 

Source >>> www.minesite.com


----------



## drillinto

Mining giants accused of iron price manipulation
March 8, 2013

Fat Prophets mining analyst David Lennox discusses Chinese allegations that the three biggest iron ore miners (including Australia's Rio Tinto and BHP Billiton) have delayed shipments to push up prices.

By resources reporter Sue Lannin
Source: ABC News 
*****


----------



## drillinto

>>> Prospectors and Developers Association of Canada conference (PDAC)

March 08, 2013
The 81st PDAC Conference Wraps Up In Toronto, After Some Deep Soul-Searching About The Potential For M&A Activity This Year
By Ryan Jackson

The first Prospectors and Developers Association of Canada conference (PDAC) took place in 1932 playing host to roughly 150 miners keen to advocate on behalf of Ontario prospectors. 

Now, 81 years later, PDAC has evolved to become the world’s foremost mining conference, kicking off the spring marketing season every year.

It is a forum unmatched in North America as far as wooing investors and making deals with others in the industry is concerned.

This year though, there was concern that the weak economic environment for junior miners would put a damper on the 2013 show. But the final attendance numbers were announced at this year’s closing ceremony, and rang in at 30,147.

The figure matches the record set in 2012 and is a testament to the resilience of those in the industry.

Speaking with mining executives on the conference room floor, you get the sense that people in this business are a tough crew and understand, having lived though many downturns in the past, that in commodities there is a cycle of prosperous and lean times that requires different strategies and a fair bit of flexibility.

One such executive, Ingrid Hibbard of Pelangio Exploration, says that in lean times, “the key is really to be setting yourself up for the next turn in the market”.

To that end, Pelangio is planning a small exploration program this year on its properties in Ghana, with a view to keeping the momentum going, while also conserving capital. Target generation will be the order of the day to tee properties up for some serious drilling once the financing taps begin to flow again.

“You want to have tons of targets and really understand everything so you can hit the ground running when the market turns”, says Ingrid.

But Ingrid says that tough capital markets can also provide juniors with remarkable opportunities: “The last one [the 1998 crash] is how we got Detour. That’s how a small company ended up with the Detour project and during this cycle it is being developed to become Canada’s biggest gold producing mine. That’s the kind of opportunity that exists during a downturn.”

The Detour Lake lands were originally owned by Placer Dome, before they were sold to Pelangio in 1998 for only US$2.3 million, as gold prices fell away dramatically. Pelangio sold the property to Detour Gold in 2007 for C$75 million. And this February, six years later, the first gold bars were poured there.

Just as Pelangio was able to take advantage of the situation in 1998, there’s no doubt that opportunities will arise during the current crunch. It’s a topic which John Nyholt of PWC covered during a well-attended lecture addressing M&A activity in 2012 and the outlook for 2013.

“To be upfront with you, we saw a major retreat in M&A activity in the global mining industry in 2012 with the lowest number of deals since 2005”, he said. And he pointed out that a single deal, the US$54 billion Glencore-Xstrata transaction, made up nearly half of the overall value of all deals completed. Including that deal, the total US$110 billion in activity declined by 26 per cent decline. “Without it”, said Mr Nyholt, “deal value would have been in the pre-2005 level, even less than in 2009 when we felt the impact of the 2008 global financial crisis.”

Looking to the future, Nyholt predicts that, “after a dose of reality in 2012, the outlook for 2013 shouldn’t be much of a surprise; deal activity will remain low. There aren’t lots of US$54 billion deals to be done out there.”

Many of the deals which will be done are likely to be majors divesting projects, and by consequence others tucking them in “as they seek to refine their portfolios and trim debt.” But Nyholt does not foresee any large transactions as management are unlikely to take any serious risks.

“The sobering reality is that the fallout from some of the major deals that have taken place over the last few years have cost companies billions in write offs and, in some cases, have cost CEOs their jobs”, he said. That way of thinking provides a strong disincentive towards the signing of any truly bold transactions.

For the juniors, a lack of capital is likely to drive efforts to merge and form joint ventures in order to spread the capital load and de-risk their properties. Meanwhile, those with financial horsepower might be able to assemble a portfolio of highly prospective projects for later investigation.

The wildcard though is China. China as remained conspicuously quiet recently as the ongoing leadership change has given rise to a cautious approach. “That leadership change takes place next month”, says Nyholt, “and the new president, Xi Jinping, has already signalled that revving up the economy is one of his key priorities.”

That’s likely good news, especially for base metal companies, as a boost in infrastructure spending could drive commodity prices up and send Chinese state owned entities on further campaigns of investment and acquisition.

For Basil Botha, chief executive of Northern Iron, China’s interest in expanding steel production has been driving a deal-making process years in the making. After a long process of building trust and signing off-take agreements, in the winter of 2012 the company sold two non-core projects in the vicinity of its flagship Griffith mine near Red Lake, Ontario to Ontario Iron Mining (OIMI).

OIMI is a privately held Canadian company controlled by shareholders of a leading Chinese commodity handler, trading house and asset manager, specialising in the iron ore market and with a focus on developing brownfield iron ore assets for domestic and international sales.

The two companies have signed a MOU to work together by sharing infrastructure, expertise, and resources while advancing their independent projects.

Northern Iron will manage mining, crushing, and beneficiation at all the properties as they come into production effectively taking care of the operational end of the partnership.  For its part, OIMI will endeavour to secure funding from Asian investors and will manage the marketing of the product in Asia, where they already supply a number of state owned enterprises in China with iron ore.

“The assets where we have agreed to share costs are the most capital intensive part of bringing this area into production”, said Northern Iron chief Basil Botha. “This MOU is a further step in de-risking the development of the Griffith mine.

Jason Li, chief financial officer of OIMI added: “Our investors appreciate the existing infrastructure and the political stability of Canada. We also believe that there is minimal downside risk as the area is a past producer.”

While it’s still too early to see if the networking done at PDAC will bear fruit in the form of M&A activity, the story of Pelangio demonstrates that tough times can make for unique opportunities. Meanwhile, the latest developments at Northern Iron highlight that China remains hungry for raw materials to fuel its continued economic growth.

The PDAC conference wrapped up on Wednesday night, as it does each year, with a themed gala featuring dinner, drinks, and prizes to be won at the decadent Canadian Room of the Fairmount Royal York Hotel. This year’s theme was Denim and Diamonds, featuring the Union Cowboy Band which pumped out bluegrass and country tunes to a boot-thumping crowd.

After a busy week, the miners were ready to hit the dusty trail and leave the conference behind them until we do it all again in 2014.

Source >> www.minesite.com
*****


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## drillinto

March 09, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It seems you had another odd week, when the miners dipped out on the continued recovery in global markets.

Oz. That’s true overall, but as with previous weeks in the phase we’re passing through there were reasonable performers scattered across the sectors, although this time iron ore was the odd man out. Even gold, which has been in the doghouse since the price slipped below US$1,600 an ounce, produced a few stars.

Minews. Iron ore seems to be suffering in the wake of forecasts of a sharp price fall by Christmas.

Oz. There is certainly pressure in the iron ore market, with Chinese steel mills alleging price manipulation by the miners and even the top economist at Rio Tinto tipping a price drop from US$150 a tonne to US$100 a tonne over the course of 2013.

The effect of the iron ore price warnings could be seen in the major producers.

Rio Tinto fell by A$1.72 to A$64.30. BHP (BHP) lost A75 cents to A$36.09, and Fortescue Metals (FMG) eased back by A11 cents to A$4.42. It was those falls by big miners, which can have an unduly heavy influence on an index, which caused the metals and mining index to fall by 1.5 per cent in a week when the overall market, as measured by the all ordinaries, added 0.7 per cent, and the gold index rose by the same amount, 0.7 per cent.
...

Source >> www.minesite.com
*****


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## drillinto

After Fukushima fallout, future brightens for uranium juniors

http://www.miningweekly.com/article...ture-brightens-for-uranium-juniors-2013-03-06
***


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## drillinto

March 11, 2013
Equities Have Outperformed Gilts Over The Past Hundred Years, But Not For The Reasons You Think
By Rob Davies

Commodities have been touted as a new asset class at various times over the last decade. 

Indeed, the venerable Barclays Equity Gilt Study for 2013 includes a table that shows that ‘Hedge Funds’ and ‘Other Assets’ now account for 8.3 per cent of average UK defined benefit pension schemes. 

These two classifications are where commodities sit, and their percentage of pensions has risen considerably. The number in 2006 was 4.3 per cent.

Equities now only account for 38.5 per cent of the average pension fund. Most of their money, 43.2 per cent, is in bonds. 

Few people look to Consulting Actuaries for investment advice. Apart, that is, from pension fund trustees. Their preference for minimising career risk over best advice for aspiring pensioners is well understood by practitioners. 

So when a trend starts to develop, such as incorporating commodities into pensions, no self respecting adviser would dare to buck the trend. 

It is of course fashionable to advocate commodities as an asset class that will preserve wealth in the face of the threat of inflation created by quantitative easing. 

Unfortunately the truth is a little different, as the Barclays study demonstrates in exquisite detail. It is called the Equity Gilt Study because it deals with those two asset classes. 

Nevertheless, the conclusions it generate can be applied more widely. 

The data it analyses extends back to 1899, when the Gold Standard prevailed and economic crises never really got out of hand because of the constraints imposed by this financial straight jacket. 

So it encompasses a period of very great social, military, economic, political and financial change. Whatever this data tells us should be applicable in most circumstances. 

What it says is that equities have outperformed gilts (UK bonds) in real terms by an average of 3.7 per cent a year over 113 years. 

That may come as no surprise to mining investors who have a preference for equities over bonds.  However, what may be a surprise is why. 

The research demonstrates quite clearly that it is not the capital growth of equities that has delivered this superior return over bonds. 

Instead what it shows is that it is the dividends paid out by shares that are reinvested and then grow again through the alchemy of compound interest that delivers this outperformance. 

Because dividends, on the whole, largely keep pace with inflation it provides the inflation proofed returns that are so sought after. 

And here of course is the big difference with commodities. Lumps of metal do not, on their own, generate any income. 

Unlike bonds which pay interest or shares that pay dividends or property that generates rent metal does not exude cash. 

It is of course possible to sell metal forward to generate a return but that is essentially a function of current interest rates, and that return will depend on prevailing markets. 

The Barclays study demonstrates quite convincingly that cash is the worst asset class of all so that does not constitute a valid investment premise.

The best, and effectively the only, way to generate long term returns from metals is to invest in the mining companies that find them, develop them and extract them at a profit. 

And right now those companies are doing that exceedingly well and paying out huge amounts in dividends. 

But don’t expect consulting actuaries to start suggesting mining shares should be treated as a distinct asset class. That would be far too original. 

Source >> www.minesite.com
*****


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## drillinto

Survey of Mining Companies: 2012/2013

http://www.fraserinstitute.org/research-news/display.aspx?id=19401
***


----------



## drillinto

World's ten biggest gold mines - three mining majors dominate list

http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=156837&sn=Detail


----------



## drillinto

You can bet on the price of oil at the end of 2013

 Here >>>>> http://www.paddypower.com/bet/current-affairs/commodities?ev_oc_grp_ids=1148255
*****


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## drillinto

2013 Country Stock Market Returns: Local Currency vs. Dollar Adjusted
March 13, 2013 

Australia: +8.41%

http://www.bespokeinvest.com/thinkb...arket-returns-local-currency-vs-dollar-a.html


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## drillinto

Global trading ranges

Australia(EWA) is currently overbought

http://www.bespokeinvest.com/thinkbig/2013/3/15/global-trading-range-screen.html
***


----------



## drillinto

For your consideration >> http://www.gold.org/


----------



## drillinto

March 16, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had another difficult week.

Oz. It was, except for Friday when we clawed back some of the ground lost earlier. Despite a 1.1 per cent gain in the metals and mining index in the dying hours of trading, overall the index lost 2.4 per cent over the week, a performance which looked worse alongside a steady all ordinaries index and a modest 0.3 per cent slide in the gold index.

Minews. Is there a reason for what seems to be a steady decline of confidence in your mining sector?

Oz. The fall in metal prices over the past month is definitely a factor, but we are also cursed by a government which rapidly unravelling.

Last week there was a fresh outbreak of political uncertainty at a national and state level. In the background there are pressures building in all government budgets which will invariably lead to a fresh tax grab, a prospect making business very nervous.
...

Source >> www.minesite.com
*****


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## burglar

Thank you drillinto, for the wonderful insights you bring with this thread.



> In the background there are pressures building in all government budgets which will invariably lead to a fresh tax grab, a prospect making business very nervous.




These past months, I have been at a loss to understand.
Why is the AllOrds rising but not all boats are rising with the tide?


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## drillinto

Recent Asset Class Performance
March 15, 2013 

Australia(EWA) is up +10.14%, year-to-date.

Commodities staged a little comeback this week, but they're still down year-to-date 
with the exception of natural gas.

http://www.bespokeinvest.com/thinkbig/2013/3/15/recent-asset-class-performance.html
***


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## drillinto

Commodity Professors

http://commodityhq.com/2013/15-commodity-friendly-professors/


----------



## drillinto

March 24, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. What a strange week down your way, with a botched attack on your Prime Minister, and a bloodbath to follow. What did your market make of the political games?

Oz. Dismayed, in one sense, but also disinterested because the current government has passed its use-by date and a change in the September election is as close to a certainty as is possible to predict in politics.

Most share prices retreated last week, but that was more to do with global events such as the ongoing uncertainty over China’s economic growth rate, and Europe’s latest problem child, Cyprus.

Australia is a long way from what’s happening in Cyprus but the uncertainty flowing off that small island is causing anxiety in all markets, because of its potential to spread globally, especially if Europe cannot heal its north v south problems.

Minews. We’re acutely aware of what’s happening in our backyard. What’s happening in yours?

Oz. Civil war without shooting is one way of describing events at the highest level of the Australian Government last week, where the pressures of a hung Parliament and an internal split in the ruling Labor Party were on full display.

First came an attempt to dethrone the Prime Minister, Julia Gillard. The only problem was that the pretender and former PM, Kevin Rudd, declined to be nominated when Gillard called for a vote in the party room. Then came a day of long knives, with four senior Ministers quitting or being sacked for apparently supporting Rudd even though there wasn’t a vote.

For the next six months Australia will be a very divided country, but also one waiting for a chance to end the farce being played out in Canberra where good government seems to be the last thing on anybody’s mind.

Meanwhile, in the market, a different world is taking shape, as a rotation of capital puts pressure on mining stocks as funds are reallocated to industrial, retail, bank and construction stocks.

Minews. Exciting times for you, but let’s stick to the market we follow, the miners.

Oz. Not much good news there, unfortunately. The metals and mining index, weighed down by the majors such as BHP Billiton and Rio Tinto, dropped by 4.6 per cent, a somewhat faster pace than the all ordinaries which ended the week down by three per cent. The gold index, reflecting a higher price for the metal and the uncertainty surrounding Cyprus, rose by a modest 1.1 per cent, although all of that gain, and a bit more, came on Friday when the gold index added 1.8 per cent.

Unlike previous weeks when it has been possible to find a few stars to brighten the day for your readers there weren’t any stand-out performers from any of the sectors. A few stocks rose reasonably well, but not enough to offset a downward trend.
...

Source >> www.minesite.com
*****


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## drillinto

March 25, 2013

Even Though The European Crisis Is A Drag On Demand, Commodities Remain Well Supported By Ongoing Capacity Constraints
By Rob Davies

The latest leg of the bull market in risk assets was precipitated in June 2012 when Mario Draghi, President of the European Central Bank, said “the ECB would do whatever it takes to preserve the euro”.

That triggered a massive surge in confidence in risk assets like equities and commodities.  

But the five per cent increase in commodities, as measured by the LME Index of base metal prices to 3311, lagged the 11 per cent gain in equities because of evidence of slower growth in China over that period.

Even so, the blank cheque that Draghi was promising Europe seemed a good enough reason to expect more stability, and hence growth, in Europe.

However, the crisis in Cyprus demonstrates the importance of reading his words carefully. Draghi was referring to the euro, not the European economy.

It is evident that the ECB, and the Germans in particular, are prepared to let individual countries suffer the ultimate humiliation of bankruptcy rather than do anything that prejudices the survival of the euro.

While that might be good news for Germany it is patently not such a welcome development for Cyprus and probably a lot more countries around the Mediterranean as well.

The bullish argument is that Cyprus is such a small part of the eurozone economy that its economic collapse will not have significant adverse consequences.    

Bears, on the other hand, will note that the Germans have now drawn a line in the sand.

What is unclear is how bank depositors in other countries will react to the discovery that there is a limit to the largesse of the ECB.

If they start withdrawing cash and precipitate a run on their banks the consequences are hard to foresee, but will almost certainly be painful in the short term.  

How that will play in capital markets is impossible to discern.

But it’s not all gloom and doom for commodity investors. What is of some comfort is another reminder of the importance of how capacity constraints in infrastructure are keeping prices up.

South Africa is facing another power shortage five years after the last one caused widespread production cuts in mines and smelters.

According to Bloomberg, Eskom, the state owned power company, only has spare capacity of 1.5 per cent and more power cuts are likely.

That will cause closures in the industry and act to limit the supply of raw and refined metals.    

It is because so much of the mining industry is still operating at close to full availability that metals prices are still trading near to the full marginal costs of production.

Normally in recessionary times such as these it might be reasonable to expect metals to trade closer to the cash costs of production.

The industry is working hard to expand capacity. Schemes such as the reopening of a stretch of the Benguela railway after a hiatus of forty years will allow copper to be exported directly from Zambia to the west coast of Africa.

This is not really an expansion, just a restoration of productive capacity that used to be there nearly half a century ago.

Then the global copper industry was a fraction of the size of its current 20 million tonnes a year. It is the infrastructure to support a much bigger business that has failed to keep up.  

The drama in Europe will not help commodity demand and indeed may well be a negative factor.

Against that must be set the supply side bottlenecks that still dominate the industry and will help to maintain prices at levels higher than many might expect at this point in the economic cycle.

Source >>> www.minesite.com
*****


----------



## drillinto

Australia(EWA) is currently in neutral territory

http://www.bespokeinvest.com/thinkbig/2013/3/25/world-ex-us-mostly-oversold.html


----------



## drillinto

Asset Class Performance
March 27, 2013 

Natural gas (UNG) is up the most with a gain of 17.72%, year to date.  

http://www.bespokeinvest.com/thinkbig/2013/3/27/recent-asset-class-performance.html
***


----------



## drillinto

For your consideration >> http://commodityhq.com/


----------



## drillinto

March 29, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It seems you went into the Easter holidays in a pretty gloomy mood.

Oz. Yes, it was a bad week, especially for shareholders in Australia’s biggest goldminer, Newcrest (NCM), which committed the sin of surprising the market with an unexpected production downgrade.

The forecast output cut is from 2.5 million ounces of gold this year to a maximum of 2.15 million ounces, which was enough to trigger a rush for the exits with sellers knocking A$1.82, or 8.3 per cent, off the stock on Friday alone.

Newcrest closed for the Easter break on Thursday at A$20.05, a 12-month low, with the fall for the week totalling A$1.94, or 8.8 per cent. And that drop reverberated through the entire gold sector, dragging the gold index on the ASX down by 6.8 per cent.

Minews. That is a heavy fall for a sector leader. Did it affect other gold stocks?

Oz. Hard to tell, there was a downward trend among the gold producers, but the same could be said for the rest of the Australian market, which has become increasingly influenced by the uncertainties swirling around the Australian government.

The last time we spoke there had just been a failed challenge against the Prime Minister, Julia Gillard. Since then the focus has switched to the prospects of a tough budget and the potential for higher taxes to paper over wasteful spending and rein in an unexpected increase in government borrowings.

Minews. Don’t tell me you’re going down the same path as Europe?

Oz. There is a danger of that, but only until September 14 when the current government goes to an election facing almost certain annihilation.

In the meantime, we look like having five very unstable months. In response the metals and mining index lost 2.4 per cent last week, and the all ordinaries drifted lower, but closed about where it started.

Given that we know most of the usual suspects will have lost ground, this week we’ll start with the positive news by looking at stocks went against the trend, which might provide readers with fresh ideas.

Minews. That sounds acceptable but don’t overemphasise the good news, as we need to get an accurate picture.

Oz. You’ll get that, but first it’s worth looking at a couple of the more interesting upward movers. We’ll start with Azimuth Resources (AZI), a company that has been flying beneath most radars, except that of Troy Resources (TRY) which has just stitched up a friendly merger that will allow Troy apply its South American gold mining expertise to the West Omai project of Azimuth in Guyana.

Azimuth shareholders love the terms of the share swap merger, pitched at one Troy share for every 5.695 Azimuth shares, valuing the target at A$188 million, and boosting the Azimuth share price by A12 cents to A34.5 cents. Existing Troy shareholders might not be so happy because Troy’s share price fell by A21 cents to A$2.17.

Minews. An interesting move for Troy, which might make it more appealing as a takeover target itself.

Oz. That could happen. Meanwhile, let’s consider a few more interesting moves. Among the iron ore stocks, Crusader (CAS) announced first cash flow from its Posse project in Brazil, news that lifted the stock by A11 cents to A35 cents. Southern Hemisphere (SUH) announced fresh drill results from its Llahuin copper project in Chile, lifting it by A4 cents to A14 cents. And Breaker Resources (BRB), a gold explorer which has kept a low profile, said it might be on to a big gold system at its Dexter project in Western Australia, a report which boosted the stock by A6 cents to A41 cents.

Among the coal stocks, Atrum (ATU) continued its strong upward move, adding another A16 cents to A$1.02, while Talga (TLG) was the best of the graphite stocks after announcing fresh drilling success at its Swedish projects, rising by a modest A1.5 cents to A25 cents, reversing three weeks of decline.

Minews. Thanks for the good news, it’s time now for the call of the card, starting with gold.

Oz. After Newcrest, Troy and Azimuth it was a mixed bag with a downward trend. Some of the stocks to rise, though not by much, included Alacer (AQG), up A20 cents to A$3.92, Gryphon (GRY), up A1.5 cents to A35 cents, Sumatra (SUM), up A1 cent to A21 cents, Ampella (AMX), also up A1 cent to A25 cents, Stratum (SXT), up A3.5 cents to A31 cents, and Intrepid (IAU), up half-a-cent to A25 cents.

Gold stocks to lose ground included: Northern Star (NST), down A3 cents to A$1.04, Kingsrose (KRM), down A5 cents to A64.5 cents, Kingsgate (KCN), down A25 cents to A$3.89, Resolute (RSG), down A4 cents to A$1.33, Medusa (MML), down A15 cents to A$4.30, Endeavour (EVR), down A6 cents to A$1.46, Tanami (TAM), down A1 cent to A16 cents, Silver Lake (SLR), down A9 cents to A$2.11, and Papillon (PIR), down A5 cents to A$1.30.

Minews. Base metals next, please, as the copper sector seems to have been rather weak.

Oz. There were a few heavy copper falls from some of the favourites but there were also a number of reasonable rises. Heaviest fall was posted by Sandfire (SFR), which shed A32 cents to A$6.02. Ivanhoe (IVA) lost A3.5 cents to A26.5 cents, and OZ Minerals (OZL), slipped a modest A2 cents to A$5.33. Having said that, Oz has now lost A$2.39 since mid-February. Other copper moves included: Hot Chili (HCH) down A5 cents to A62 cents, Peel (PEX), up A7 cents to A70 cents, Blackthorn (BTR), up A5.5 cents to A$1.00, and Talisman (TLM), down A1 cent to a 12-month low of A13 cents.

Nickel stocks were mixed, trending down. Sirius (SIR), the speculator’s favourite, continued its retreat, losing another A33 cents to A$3.75. Western Areas (WSA) lost A18 cents to A$3.41. Mincor (MCR) was A2.5 cents weaker at A73 cents, and Independence (IGO) fell by A14 cents to A$3.97. Nickel stocks to gain ground included: Panoramic (PAN), up A1.5 cents to A37 cents, and Poseidon (POS), up half-a-cent to A20.5 cents.

Minews. Iron ore next, please.

Oz. After Crusader it was mixed with rises and falls effectively cancelling each other out. Moves included: Fortescue (FMG), up A13 cents to A$3.94, Atlas (AGO), down A6 cents to A$1.11, Gindalbie (GBG), up A1 cent to A21 cents, Mt Gibson (MGX), down half-a-cent to A52 cent, Iron Ore Holdings (IOH), down A9 cents to A96 cents, and BC Iron (BCI), down A6 cents to A$3.25. Sundance (SDL) remained suspended while a proposed takeover bid from China’s Hanlong looked less and less likely

Minews. Coal and uranium next, please.

Oz. Both were mixed, with a few bright spots in generally weak trading. Atrum, as mentioned, was the best of the coal stocks. Other upward moves came from: New Hope (NHC), up A6 cents to A$3.97, and International Coal (ICX), up A3.5 cents to A16 cents. Falls were posted by Whitehaven (WHC), down A7 cents to A$2.12, Coalspur (CPL), down A4 cents to A51.5 cents, and Bathurst (BTU), down A1.5 cents to A31 cents.

Paladin (PDN) was one of the stronger uranium stocks, though its rise of A1 cent to A99 cents shows just how flat the uranium market was last week. Other moves, either way, included: Uranex (UNX), down A1.1 cent to A6.9 cents, Greenland (GGG), down A2 cents to A30 cents, Bannerman (BMN), down A0.2 of a cent to A8.1 cents, and Berkeley (BKY), up half-a-cent to A39 cents.

Minews. Minor metals to close, please.

Oz. Talga, as mentioned, was the best of the graphite stocks. Syrah (SYR), the graphite leader, lost A26 cents to A$2.75, and Archer (AXE) slipped A1.5 cents lower to A21.5 cents.

Galaxy (GXY), the lithium leader, continued its decline, shedding another A4 cents to A29 cents, although fellow lithium explorer Orocobre (ORE) added A1 cent to A$1.35.

Tin and tungsten stocks weakened. Venture (VMS) fell by A1.5 cents to A18 cents, and Wolf Minerals (WLF), slipped half-a-cent lower to A29 cents.

Rare earth stocks weakened. Lynas (LYC) by A3.5 cents to A56 cents, and Alkane (ALK), by A2 cents to A58 cents.

Zinc stocks were mixed. Perilya (PEM) added A1.5 cents to A25 cents, and Balamara (BMB) put on A1.2 cents to A11 cents. Ironbark (IBG), lost A0.8 of a cent to A5.6 cents, and Terramin (TZN) slipped by another A0.3 of a cent to close at a 12-month low of A1.6 cents.

Minews. Thanks Oz.

Source >>> www.minesite.com
*****


----------



## drillinto

April 02, 2013
China Is The Only Game In Town, But Is Struggling Nonetheless
By Rob Davies

It is difficult to underestimate the importance of China not just to commodities but to the global economy as a whole.  

In the wake of the financial crash of 2008 China created a massive economic stimulus.

This boost to growth as other economies cratered meant that Chain’s share of world merchandise exports surged from four per cent in 2000 to 10 per cent in 2011 according to Lombard Street Research.

As a consequence, mainland China now accounts for 30 per cent of world exports of office and telecoms equipment, and textiles.

It also means that capital spending now makes up 48 per cent of GDP.

This increase in economic power has made its Asian neighbours even more dependent on China.  

Even former behemoths like Japan have relied on the upstart rival across the sea for 30 per cent of its albeit lacklustre, growth.

The effect is felt as far away as Germany, where China is now the third largest export destination and makes up seven per cent of its exports.

Not only is China important but so are its economic satellites, and this is what makes it so crucial to commodities.

In 2001 energy and metal imports into China accounted for 1.3 per cent of GDP.

This increased to a peak of five per cent in 2008 before the crises plunged the figure down to 3.5 per cent in 2009.

Since then it has recovered to 5.3 per cent. In practical terms this means China’s share of global metal imports is 26 per cent, but if its’ total share of imports of manufactured goods are included as well must be much higher.

Even if the secondary effect is ignored China is still Australia’s largest trading partner making up 28 per cent of its exports and five per cent of its GDP.

That is fine when China is growing at 10 per cent a year, as it has done over the last three decades.  

Much of that growth has been driven by exports and investments. But the experts at Lombard do not believe that putting 48 per cent of GDP into capital spending is sustainable, nor is the 29 per cent going into exports.

Its view is that consumer spending at only 35 per cent of GDP is too low and will have to grow at the expense of the other two components. This, it thinks, will drag down economic growth down to five per cent a year over the next three to five years.

That might sound pretty good to voters in the developed world who are becoming hardened to years of little or anaemic growth, but it will have a major impact on the metals and mining market in two ways.

First, it will reduce demand for hard commodities in China itself as the economy moves away from building ever more infrastructure.

Secondly, the knock-on effect of slower growth in China will further reduce economic activity from Germany to Japan. After China and the US these are the world’s biggest consumers of metals so the impact will be compounded.

So, while there are still many positive factors for the metals and mining industry the report from Lombard is a sobering reminder of just how important China has been over the last decade, both directly and indirectly.  

Source >> www.minesite.com
*****


----------



## drillinto

For your consideration >> www.agrimoney.com


----------



## drillinto

April 04, 2013
Gunson’s Joint Venture Collapses And Shareholders Call For The Resignation Of The Managing Director
By Our Man in Oz

Tough times at Gunson Resources just got a lot tougher. A week after the Australian titanium and zircon project developer was hit by the withdrawal of a Korean syndicate from its proposed Coburn mine development, a consortium of angry shareholders demanded the resignation of Gunson’s chief executive, David Harley.

No-one at the company is saying whether the two events are connected but, to an outsider, there is a straight line between what happened at 1.30pm on Thursday last week, just before business closed for the Easter break, and what happened at 9.30am in Australia on Thursday 4th April, when a formal request was filed for a meeting of shareholders with one item on the agenda, the removal of David as managing director.

According to the notice lodged at the Australian stock exchange the group seeking David’s removal holds 12.4 per cent of the stock, a big position in a business where there is no dominant shareholder, where the board holds just 1.8 per cent, and David personally speaks for 1.5 per cent of the board stake.

The meeting, according to corporate rules, must be held with two months of the request being lodged. Gunson told the stock exchange that a notice convening the meeting would be sent out within the next 21 days.

For Gunson and David the past week has been a turning point in a decade-long effort to develop Coburn, a classic “beach sands” deposit on the west Australian coast.

Re-designed over the past six months to meet the demands of a Korean syndicate led by the big steel-maker, Posco, Coburn has the potential to produce up to 49,000 tonnes of zircon a year as its major cash-generating product, plus 109,000 tonnes of ilmenite and 23,500 tonnes of an upgraded titanium product called Hi Ti90.

Just six weeks ago David was confident that he had taken Coburn to the point where a go-ahead decision could be made with the Koreans, working through a joint venture called Posco SPV. The idea was that they would earn a 40 per cent stake by making a payment of A$28 million, as well as providing a major share of the estimated A$192 million capital cost.

But, just as Gunson failed to secure a deal with a Chinese syndicate that came close to investing in Coburn some three years ago, so did the Koreans find the terms too expensive given the weak state of the zircon and titanium market.

David, in announcing the ending of negotiations with the Koreans, described the outcome as disappointing, especially after 18 months of due diligence, engineering and optimisation studies had resulted in making Coburn considerably more robust. But not good enough to overcome the significant deterioration in the zircon market over the past six months.

What really killed the interest of the Koreans was a forecast of continued weakness in the zircon and titanium minerals price, including the latest gloomy outlook from TZMI, the world’s top research firm specialising in zircon and titanium.

“This resulted in Posco SPV’s returns being below their required level after allowing for their A$28 million earn-in payment,” David told the ASX.

David indicated that a discounted entry price was offered. But, he added, “Gunson was unable to successfully engage with Posco SPV in relation to whether an acceptable return could be achieved by them with a reduction to the earn-in payment”.

The problem for Gunson worsened when it found that the gloomy outlook for the zircon price made it difficult for it to raise its own share of the funding for Coburn.

“Previous term sheets for debt facilities could not be progressed without zircon offtake agreements with adequate floor prices, which could not be secured in the current market, and many potential large equity investors wanted to see some clarity on the market before making any commitments”, David said.

Gunson is now in a difficult situation. The collapse of the Korean deal follows a significant shortfall in a capital raising which, in turn, was designed to supplement a thin bank balance. Back in December, Gunson’s cash stood at just A$405,000. A share purchase plan designed to raise A$1.5 million attracted just A$859,500, with an additional A$195,000 raised by placing three million shares at A6.5 cents each.

On the market, Gunson shares were today sold down to a 12-month low of A2.3 cents, before recovering modestly to A2.5 cents, a price which values the company at a lowly A$6.4 million.

The board of Gunson wants time to work out a “what next” plan, and has appointed the Australian corporate advisory firm, Azure Capital, to help with the preparation of a strategic review, not just of the Coburn project, but Gunson itself.

David said the Coburn project remains a valuable asset, being well located, and well advanced in terms of engineering and planning. It would be able to produce high quality products with low impurities in a high-value concentrate.

Corporate events, however, will now dictate the future of Gunson. The strategic review is now underway, and will include an analysis of the future structure of the company, “including the size and composition of the board and its executive management team, as well as the possible introduction of a strategic shareholder”.

Gunson said the brief handed to Azure had started immediately after Easter, with a report due to be received at the end of April.

That timetable designed by management has to accommodate the demands of shareholders who speak for at least 12.4 per cent of the company, and who want David removed as managing director.

The clock, as they say, is ticking.

Source >> www.minesite.com
*****


----------



## drillinto

Lundin on gold (5 April, 2013)

“With the speculators shorting gold and pulling money out of the gold ETFs, the bears are winning the battles right now,” said Brien Lundin, editor of Gold Newsletter.

Lundin said he expects gold to post a “very sharp, albeit brief rally off of the bottom it’s now establishing.” Gold may then correct into June and July, and establish another “interim bottom” around the end of July, he said. The typical strong period of the fall may kick in after that, and the market could see gold post a broad rally into the end of the year.

That said, he suggests that investors and traders “act quickly once it appears that gold is rallying off of the current bottom, then to focus any further buying around mid-summer.”


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
3 Apr 2013 

http://www.kitco.com/ind/Matlack/04032013A.html
***


----------



## drillinto

April 06, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. The tough weeks just keep coming! Are we close to the bottom in this downward phase of the cycle?

Oz. You would hope so, because it has been a torrid start to 2013, with last week’s falls by Australian-listed mining stocks taking the metals and mining index on the ASX to within sight of being declared an official bear market. The gold index is already officially in a bear market.

Minews. You had best explain what a bear market means.

Oz. Any asset class that falls by 20 per cent is classified as being in a bear market, and last week the metals index lost another 3.7 per cent, taking the fall since the start of 2013 to 15 per cent. The gold index crashed back by eight per cent, following another heavy fall by the sector leader, Newcrest (NCM), taking the gold index decline since the start of 2013 to 21 per cent.

Minews. Newcrest is certainly doing a lot of damage to sentiment in your gold market. What went wrong last week?

Oz. Surprise production downgrades at the company’s Lihir, Gosowong and Telfer mines had investors heading for the exits. That stampede knocked A$1.25 off Newcrest’s price which closed on Friday at A$18.80, but did trade down to a 12-month low of A$18.46 on Thursday. Since the start of the year the shares have dropped A$3.38 (15 per cent).

Minews. The rest of the gold sector doesn’t seem to have done much better.

Oz. Nearly all down, but that was the case across all sectors, with the Korean crisis weighing on sentiment, along with those persistent worries about Europe and the latest government money-printing exercise, this time from Japan.
...

Source >> www.minesite.com


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates >>> Seniors <<<
Bill Matlack           
25 Mar 2013 

http://www.kitco.com/ind/Matlack/mar252013.html


----------



## drillinto

April 08, 2013
"Japanese Money Printing Bodes Ill For The Global Economy"
By Rob Davies

Japan is the third largest economy in the world and has had no meaningful economic growth for two decades. 

That has significant effects on all sorts of markets, not least in commodities, and the announcement last week that the Bank of Japan has taken the radical measure of buying in US$78 billion of government bonds a month to kick start the economy is big news. 

It's the cornerstone of new prime minister Shinzo Abe's economic policy.

News of its implementation boosted the stock market by 3.5 per cent but pushed the yen down from Y93 to Y97 against the dollar.

This is only the latest stumble from the peak of Y78 reached in September last year.

More importantly for the locals, it has depressed yields on thirty year bonds to 0.9 per cent.

Now that has to be a bargain for somebody, and a worry to others. If you can’t make money when your opportunity cost is that low something has to be really wrong.

Unfortunately, it is not just Japan that has deep seated issues.

The US only added 88,000 new jobs last month, half what was expected. That was the cue for a 1.6 per cent decline on Wall Street and was probably the dominant factor in the 2.1 per cent drop in the LME Index over the week to 3,193.  

Low growth translates itself into weaker demand for metals and is one reason that the Bloomberg consensus forecast now expects the copper market to have s surplus of about 102,000 tonnes this year.

That isn’t much in a 20 million tonne market, but it is a sign that the fundamentals of even the best placed base metal are now starting to turn.  

Copper inventories on the LME only amount to 579,600 tonnes so that surplus will be warmly welcomed.

Although they are very different countries the message is the same: economic growth is proving to be very hard to create in two of the world’ three largest economies.

Both countries suffer from high sovereign debt, but in the case of Japan it is eye-watering at 240 per cent of GDP.

Since 93 per cent of this debt is held domestically it does not yet present a problem for global capital markets.

However, since debt service costs now account of 50 per cent of tax revenue the size of this bet is staggering.

Effectively the Bank of Japan is now playing double or quits to solve the problem. When it goes wrong, as simple logic suggests it inevitably will, the scale of the disaster will make the 2008 banking crisis look like a tea party.

The last serious attempt to solve the problems of imbalanced global capital flows after a major crisis was the Bretton Woods agreement of 1944.

It was an attempt by central planners in the Roosevelt administration to replace sterling and gold as reserve currencies with the dollar. Its deception was to conflate the dollar and gold.

Using exchange rates fixed to the dollar it sought to impose the dollar as the new world reserve currency and escape from the straightjacket imposed by gold.

It also provided the mechanism to deliver the fatal blow to the UK economy drained by two World Wars that enriched the US at the expense of all the combatants.

Within three years the problems this generated were exposed when the UK was forced to devalue.

It struggled on until the whole system collapsed in 1971 when President Nixon was forced to devalue the dollar against gold.  

Europeans appear to have learnt nothing from this history when they invented the euro.

Now, each major currency block is engaged in a race to the bottom to see who can print money the fastest in order to generate economic growth in their own currency area.

It is impossible to foretell how it will end. But it is hard to escape the feeling that these desperate measures cannot end well.

Source >>>>> www.minesite.com
*****


----------



## drillinto

SNL Metals Economics Group

http://www.metalseconomics.com/


----------



## tinhat

The Japanese quantitative easing program is US$1.4 trillion over two years which will double their money supply. Yet it's not getting that much attention compared to what the US QEs got. 

http://www.guardian.co.uk/business/2013/apr/04/japan-quantitative-easing-70bn

So the question is, which commodities will be the best investment against the backdrop of Japanese money printing? Precious metals - which ones? Copper, iron ore?


----------



## drillinto

Gold Reserves by Country (2009-2010)

http://minefund.com/mineral-deposits/country-reserves.php


----------



## drillinto

tinhat said:


> The Japanese quantitative easing program is US$1.4 trillion over two years which will double their money supply. Yet it's not getting that much attention compared to what the US QEs got.
> 
> http://www.guardian.co.uk/business/2013/apr/04/japan-quantitative-easing-70bn
> 
> So the question is, which commodities will be the best investment against the backdrop of Japanese money printing? Precious metals - which ones? Copper, iron ore?




tinhat >> for your consideration >> http://commodityhq.com/2013/silver-slaughtered-by-selling-pressures/


----------



## drillinto

tinhat said:


> The Japanese quantitative easing program is US$1.4 trillion over two years which will double their money supply. Yet it's not getting that much attention compared to what the US QEs got.
> 
> http://www.guardian.co.uk/business/2013/apr/04/japan-quantitative-easing-70bn
> 
> So the question is, which commodities will be the best investment against the backdrop of Japanese money printing? Precious metals - which ones? Copper, iron ore?




Goldman Sachs shorts gold >>> http://www.cnbc.com/id/100630626
***********


----------



## tinhat

drillinto said:


> Goldman Sachs shorts gold >>> http://www.cnbc.com/id/100630626
> ***********




Interesting. Thanks.


----------



## drillinto

>>> Natural Gas Catching Fire <<<

http://commodityhq.com/2013/natural-gas-catching-fire/
***


----------



## drillinto

April 13, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. The mood of your market seems to have improved last week.

Oz. It did, though the big fall in the gold price came after our market had closed, which means Monday could be quite a torrid day for gold stocks. But I should just say that I’m actually in New York for a few days this week, which means that you are physically closer to the Australian market than me, so we’re going to have a long distance discussion about a place that’s even more distant.

Minews. No doubt you’ve kept in touch with events at home, so let’s go straight to the numbers and any significant news events.

Oz. No big change in the Australian domestic scene. The government remains deeply unpopular which means the mining sector is on countdown to the September 14 election and a chance to re-start the economy.

Interestingly, some of the better share price moves last week came from oversold copper and iron ore stocks, with gold producers staging a modest rally.

Overall, the Australian market rose last week by 2.4 per cent as measured by the all ordinaries index, with the mining and metals index performing slightly better with a rise of 2.8 per cent, and the gold index doing best of all with a rise of 3.6 per cent. Most of the improvement in gold was attributable to a single stock, the local leader, Newcrest (NCM) which clawed back A73 cents to A$19.53, a gain which will be tested when the market re-opens on Monday.

Minews. We might do something a little different this week and start with the base metals, given your comments about copper stocks performing well.

Oz. The revival of interest in copper stocks was interesting because the price of the metal itself did not perform strongly during the week. Copper returned to where it was two weeks ago at around US$3.41 a pound which means it added just US4 cents over the week.

That small rise was enough to see OZ Minerals (OZL) add A53 cents to A$5.28, and Sandfire Resources (SFR) put on A79 cents to A$6.34. PanAust (PNA) was another copper producer in demand, rising by A31 cents to A$2.60. And Peel Mining (PEX) continued to attract interest in its Mallee Bull exploration project, with the stock being lifted by A8 cents to A72 cents. 

It wasn’t all one-way traffic among the copper stocks. Blackthorn (BTR) was hit with a downgrade by brokers after its latest report on the resource at its Mumbwa project in Zambia, dropping by a sharp A33 cents (35 per cent) to A61 cents. And Ivanhoe (IVA) continued to be marked down amid reports of a Rio Tinto subsidiary selling its stake in the stock, news that rubbed another A1.5 cents of the price, taking it to A21.5 cents, and the fall since the start of the year to more than A30 cents.

Other copper moves, either way, included: Hot Chili (HCH), down A7 cents to A55 cents, Altona (AOH), up A3.5 cents to A21.5 cents, Rex (RXM), down A4 cents to A37.5 cents, Talisman (TLM), up half-a-cent to A12 cents, and Marengo (MMC), down half-a-cent to A11 cents.
...

Source >>> www.minesite.com
*****


----------



## drillinto

April 14, 2013 
Commodity traders’ $250bn harvest
By Javier Blas // Financial Times(UK)

The world’s top commodities traders have pocketed nearly $250bn over the last decade, making the individuals and families that control the largely privately-owned sector big beneficiaries of the rise of China and other emerging countries.
...


----------



## drillinto

April 15, 2013
Metals Markets Look Finely Balanced, As Chinese Growth Slows And Cyprus Emerges As A Possible Seller Of Gold
By Rob Davies

Metal markets demonstrated last week how just how finely balanced they are. 

Even though Rio Tinto reported a slide in a pit wall at its Bingham Canyon copper mine the impact on the markets was muted.

It is unclear yet how much production will be lost, but Bloomberg reported that it could be between 100,000 and 200,000 tonnes of copper.

If true, that wipes out the projected surplus in the copper market for 2013.

Despite that, and LME inventories of only 593,650 tonnes, the copper price ended the week at US$7,508 a tonne, only a little higher than the US$7,375 it started at, although it did peak at US$7,544 on Thursday.

Overall, the base metal complex drifted off 0.3 per cent over the week, but that did include a 2.5 per cent retracement on Friday.

While some of the decline could be attributed to expectations of weaker global growth to come, much of the decrease was undoubtedly simply due to a stronger dollar.  

Gold also suffered from the positive attitude to the dollar, driven by rising expectations of US growth, and it dropped four per cent to US$1,500 an ounce.

The gold price wasn’t helped by speculation that Cyprus might need to sell some of its 13.9 tonnes of gold to deal with its financial crisis.

It seems that this island economy is now short of a further â‚¬6 billion.

While the amount of gold held by Cyprus looks modest compared to the 383 tonnes held by Portugal, even that figure is dwarfed by the 1,184 tonnes held through the SPDR gold ETF in New York.

But the amount of gold held by this retail investment fund hit a 21 month low as investors redirect cash to equities in order to benefit from an improving economy.  

What is slightly perplexing about the fall in the gold price is that the opportunity cost of holding it has never been lower. 

Long term interest rates on all the major currencies are less than two per cent as central bankers from Tokyo to Washington act as bond buyers of last resort. 

Presumably they feel comfortable buying something they know they can control in a way they cannot with gold. It is odd that other investors are not offering them every single bond they own. After all, who else is a bond buyer on that scale? 

Better economic growth should be good for base metals. Unfortunately these days the economy that matters is China not the US. 

Fears that it will report first quarter growth of “only” eight per cent next week were one reason for the 2.4 per cent decrease in the zinc price on Friday to US$1,843 a tonne.

The large 1.1 million tonne zinc inventory makes it the most vulnerable of all the base metals to concerns over weaker growth. Its consumption bias to construction makes it especially sensitive to changes in infrastructure spending which has been so important to China.    

It would be nice to think that a strengthening US economy could compensate for a slowing Chinese one. 

But given that the US is more reliant on services than China, and is therefore less metal intensive, it seems that scenario is unlikely as far as industrial commodities are concerned.

Nevertheless, for the time being at least, none of the major base metal markets seem too far out of balance.   

Source >>> www.minesite.com
*****


----------



## drillinto

"Gold Trades at Most Oversold Levels on Record"

http://www.bespokeinvest.com/thinkbig/2013/4/15/gold-trades-at-most-oversold-levels-on-record.html


----------



## drillinto

tinhat said:


> The Japanese quantitative easing program is US$1.4 trillion over two years which will double their money supply. Yet it's not getting that much attention compared to what the US QEs got.
> 
> http://www.guardian.co.uk/business/2013/apr/04/japan-quantitative-easing-70bn
> 
> So the question is, which commodities will be the best investment against the backdrop of Japanese money printing? Precious metals - which ones? Copper, iron ore?






When Goldman Sachs Says Short Gold, It’s Time To Buy

http://commodityhq.com/2013/goldman-sachs-says-short-gold-its-time-to-buy/


----------



## drillinto

For good charts, please visit >>> http://www.chartoftheday.com/


----------



## drillinto

April 12, 2013

Concerns About Sluggish Demand Casts An Air Of Pessimism Over Oil Markets
By Eithne Treanor

An air of pessimism hit the oil market this week and investors and traders were swift to react and hit the sell button. US inventories are at their highest levels in years and demand is sluggish. In early trading on Friday, Brent crude was at an eight-month low below US$104 with WTI lingering above US$93 a barrel.

The market has been generously supplied with oil in recent months in anticipation of stronger global economic growth.  The recent global economic data has not been encouraging and there are now fears that demand will falter, causing the price to fall even lower. The International Energy Agency revised its forecast for global oil demand lower by 45,000 barrels to 90.6 million barrels a day for 2013.

The US Energy Department as well as OPEC also warned of the danger of falling demand in their monthly outlook reports this week. Only last month, the IEA cut its demand outlook, citing the fragility of the global economy. The IEA said Europe is suffering the most with demand at an all time low since the 1980s. All of the industrialised countries are seeing a fall in oil demand but thankfully the bright spots remain China, India and the Middle East. The agency also cut its forecast for non-OPEC supply growth in the year ahead and warned of “significant risks” to OPEC supply, because of geopolitics and security issues.

Iran continues to be an issue impacting the market with production now estimated at 1.1 million barrels a day in March.  That’s down from 1.26 million barrels in February. Ongoing security problems in Libya remain a concern, despite encouraging investment roadshows and reassurances from the government. Output was down in March to 1.36 million barrels a day, according to the IEA, about 150,000 lower than the official figure from Libya. Nigeria also lost production last month to continued vandalism and militant attacks on the country’s oil infrastructure.

The US Energy Information Agency cut its demand growth outlook from 135,000 barrels a day in March to 89,995 in April. Forecast for total global oil demand in 2014 is estimated at 91.328 million barrels a day. Forecasts are currently pessimistic despite a small improvement in the US jobs data. Fewer people in the unemployment line would be good news for the American economy, but American stockpiles are high right now and future demand is less than promising.

The EIA said Asia continues to lead oil demand growth and it sees better refinery crude oil inputs in China, “as new refining capacity continues to come on line and investment in the property market and infrastructure sectors expands."
But the agency is still cautiously optimistic on a return to growth in the US.  There’s a general feeling that there’s just too much oil in the market right now. Production from OPEC fell last month and the organization also reduced its estimate for global oil demand for the rest of the year from 840,000 barrels last month to just 800,000 barrels a day.

A senior advisor to the Saudi Arabian oil minister said he expects oil prices to remain stable at close to current levels for the rest of the year.  Speaking at a gathering in Kuwait this week, Ibrahim Muhanna was more optimistic than many others and he said that Saudi Arabia expected “the world economic situation to remain similar to the last two years.”

He added  that the Saudi Arabian ministry expected growth to continue from China and he said he believed that economy alone could add 1 million barrels a day growth in demand in the coming year. He added that, assuming OPEC maintains production of 30.5 million barrels a day and with “anticipated withdrawals from commercial stocks in the forth quarter,” he said the market would remain balanced.

The Iraqi oil minister, Abdul Kareem Luaibi Bahedh says he estimates that Iraq crude oil reserves now stand at more than 150 billion barrels. He said he will announce “technical details” soon. He said the increased reserves figure was the result of a study of many fields and recent data from the Dema oil field. Last October, Iraq estimated reserves at more than 143 billion barrels, an increase from 115 billion.  All good news for Iraq as it aims to increase production from its current level of 3.15 million barrels a day in the coming years.

Another development in infrastructure expansion in Iraq will be the construction of an oil pipeline between Jordan and Iraq. The pipeline would deliver oil to the Jordanian Red Sea port of Aqaba with up to 150,000 barrels of crude oil consigned to the refinery at Zarqa.  The director of Iraq’s State Company for Oil Projects, Nudah Mousa said the basic agreement had been signed this week. A build-operate-transfer (BOT) proposal is being offered to local, regional and international investors with invitations to tender expected next week.  Both parties expect the pipeline to be complete by 2017.

The spread between the two front-month crude contracts narrowed to around US$10.76 a barrel at the end of the week. Brent crude has dropped about 12 per cent in the last two months for a few reasons; namely the state of the Eurozone economy, increased supply and low demand. This is a combination of factors that will continue to worry producers in the months to come.

Source >>> www.oilbarrel.com
*****


----------



## drillinto

BIG: Commodity Snapshot
April 17, 2013 

http://www.bespokeinvest.com/thinkbig/2013/4/17/bespokes-commodity-snapshot.html


----------



## drillinto

April 19, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. What a dreadful week for mining stocks.

Oz. That’s an under-statement, and even if you consider the improved mood on Friday there was an immense amount of damage done early in the week, especially among the gold stocks.

Somewhat surprisingly, given the resource-heavy nature of the Australian market, the overall result wasn’t too bad. The all ordinaries index slipped by just 1.8 per cent, a function of strength among banks and retailers.

But it was a totally different picture among the gold and other mining stocks which were hammered flat early in the week before staging that Friday recovery which left the metals and mining index down by 7.5 per cent.

That fall looks awful until you consider that the index was down by more than 10 per cent on Thursday.

The gold index closed the week down by 16.7 per cent, but was down by more than 20 per cent on Thursday, perhaps the biggest one-week fall on record.

Minews. Grim indeed. Time now to move across to the prices, and a short call this week as it will be all bad news, and you’re still travelling.

Oz. Correct on both counts. Still in New York, which has been an exciting place given the proximity and close connections to Boston, site of the bombings and last night’s man hunt.

There is no easy place to start the price check so we might as well go straight to the place where most of the pain was felt, gold, and an early warning, there were no stocks in positive territory. Everything was down.

St Barbara (SBM) fell by A35 cents to A70.5 cents, just up from a 12-month low of A69.5 cents reached during early Friday trade. Silver Lake (SLR) lost A43 cents over the week to close at A$1.35, a price which was actually up A7.5 cents on the Friday starting price, and A10 cents up on the 12-month low of A$1.25 reached on Wednesday.

Other gold-stock movements included: Resolute (RSG), down A14 cents to A97.5 cents, Evolution (EVN), down A38 cents to A93 cents, Endeavour (EVR), down A35 cents to A85 cents, and Troy (TRY), also down A35 cents to A$1.81.

They were followed by Kingsrose (KRM), down A9.5 cents to A48 cents, Newcrest (NCM), down A$2.88 to A$16.65, Northern Star (NST), down A15 cents to A74.5 cents, Perseus (PRU), down A34 cents to A$1.36, and Medusa (MML), down A81 cents to A$3.18. Reed (RDR) fell A1 cent to A9 cents despite pocketing a quick A$27.1 million by closing out its hedge book and repaying debt.
...

Source >>> www.minesite.com
*****


----------



## drillinto

Kotok on Gold
19 april 2013

http://www.cumber.com/print.aspx?file=/content/commentary/041913.asp


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack           
15 Apr 2013 

http://www.kitco.com/ind/Matlack/04052015B.html
*****


----------



## drillinto

US Stocks: One Key Trait Driving Performance

http://www.bespokeinvest.com/thinkbig/2013/4/19/one-key-trait-driving-performance.html
***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates >>> Seniors <<<
Bill Matlack           
15 April 2013 

http://www.kitco.com/ind/Matlack/apr082015.html


----------



## drillinto

Leo Hickman(The Guardian, UK) interviews Jeremy Grantham(GMO)
15 April 2013

On the rising price of oil:

…2002 was a nothing year. The only numbers I was paying attention to in 2002 was for oil. A little wheel was turning at the back of my brain that noted that oil was beginning to act differently. Our firm specialises in the study of investment bubbles. We have the best data. Over the years, we have put together a database that has 330 bubbles of which about 40 are really important ones. What we found about the important bubbles is that every single one had burst completely back to the original trend. Three years up to something triple, and then three years down. They actually tend to go down a little more quickly than they went up, which is surprising. But they always broke. I used to specialise in asking financial audiences to give me an example of the paradigm shift, a major shift in a major financial asset class. And never was one offered. Six years ago I wrote about the paradigm shift in the New York Times. It had 100 years of oil prices – very volatile, but a very central, steady trend line of about 16 dollars a barrel in today's currency. But then around OPEC in 1972/3, the price trend leaps up to $36.
*****************


----------



## drillinto

Bullion brokers >> http://www.sharpspixley.com/
**********


----------



## drillinto

April 22, 2013

China And The IMF Are The Excuse For The Commodities Sell-Off, But Investors Are Simply Raising Cash 
To Switch Into Equities And Bonds
By Rob Davies

It is quite surprising that the disparate group of raw materials that constitute the commodities market have such a high correlation of price movements. 

In theory the demand and supply environments for gold, base metals and oil are hugely different.  

But in practice the commonality of trading desks and especially of the ultimate owners means that movements in one market pretty rapidly make themselves felt in the others. 

Gold hit the headlines with its 6.8 per cent fall over the week to US$1,400 an ounce and making for a 27 per cent tumble since its peak of US$1,920. 

Gold is never consumed, unlike oil, so it has very different economics.  Yet oil suffered in the sell off as well and fell below US$100 a barrel. In such an environment base metals were unlikely to escape; and they didn’t. 

The LME index fell 3.5 per cent over the week to 3,073 but that masked some much larger volatility. 

Tin recorded the largest fall in percentage terms, dropping  7.8 per cent to US$20,990 a tonne. But it was closely followed by copper with a 7.2 per cent decline to US$6,974 a tonne. 

Other metals, with weaker fundamentals, fared quite well with aluminium actually gaining 1.7 per cent on the week to US$1,871 a tonne and zinc adding 0.8% to US$1,857 a tonne.

It was almost as if the bad news was already factored into the weaker players and it was only now that the stalwarts were capitulating. 

The publicised version for the reason behind these moves was a downbeat revision of the world economy from the IMF. 

Its great engineers of analysis had toiled long and hard in the workshops to craft a new forecast. In reality the new number for 2013 of 3.3 per cent world growth is only 0.2 per cent lower than its estimate made in January. Moreover, the figure for 2014 of four per cent is unchanged.  

Mind you, it’s worth bearing in mind that its previous chief economist, Ken Rogoff, was shown last week to have made a schoolboy error in an Excel spread sheet. 

The data, and its conclusion, were used in his recent book co-authored by Carmen Reinhart “This time is different”.  So, like all forecasts, they should be used with caution. 

Nonetheless, the week started badly on the basis of real data, when China reported growth of only 7.7 per cent. The consensus had been for eight per cent. 

It might be lower than forecast but it is still a figure that western politicians can only dream of.      

In reality what happened was that the slowly decaying momentum in favour of commodities as an asset class reached an inflexion point and suddenly it was a trade that everyone just wanted to do; right then.  

Equities have gradually been becoming attractive on a fundamental and a momentum basis, and have as a result been gaining ground at the expense of commodities.  

On top of that bonds have started to find favour again in recent weeks. To fund this trade there was really only one place investors could go to raise cash in a hurry and catch up with rising fixed income market. 

Commodities were the funding source for the switch. The IMF and the Chinese were just the excuse.

Source >>> www.minesite.com
*****


----------



## drillinto

2013 Country Stock Market Performance(Year-to-date)
April 22, 2013 

Australia: +6.83%
New Zealand: +10.26%

http://www.bespokeinvest.com/thinkbig/2013/4/22/2013-country-stock-market-performance.html
***


----------



## drillinto

Why are gold miners underperforming ?

There are a number of factors that are combining to hurt gold miners. For starters, the weakness in gold prices has certainly been an issue. Gold miners typically come handcuffed to high betas, meaning that they will often underperform gold on negative days and vice versa.

Investor confidence has been another problem. While it seems that a number of retail investors are comfortable with adding mining exposure, a number of institutions are not very pleased with how miners have been reporting costs and profits. “The managements and the boards of the gold companies really have no one to blame but themselves for some of the negative sentiment and disappointment” said Joseph Wickwire of Fidelity Investments.

Though many of the world’s largest miners have pledged to clean up their act and add more transparency, it may take some time before confidence can be restored in what appears to be a number of poorly-run firms. With gold enduring a rough bear period, it will be especially important to monitor miners and producers to see how their administrative changes will impact returns and investor confidence in the coming years.

Source >> http://commodityhq.com/; by Jared Cummans; 23 April 2013
*****


----------



## drillinto

Oil: Brent - WTI Spread Drops to a 52-Week Low
April 24, 2013 

http://www.bespokeinvest.com/thinkbig/2013/4/24/brent-wti-spread-drops-to-a-52-week-low.html


----------



## drillinto

>>> Jim Rogers: Gold Will Resume Its Bull Market <<<

http://commodityhq.com/2013/jim-rogers-gold-will-resume-its-bull-market/


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Juniors
Bill Matlack           
Apr 22 2013 

http://www.kitco.com/ind/Matlack/04222013A.html
[You will note that the majority of "Small-Cap Gold" stocks have have the rating of Buy and Buy/Hold]


----------



## drillinto

April 28, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your return to home turf after a few weeks in our part of the world seems to have coincided with a reasonable recovery in share prices.

Oz. It does, though I doubt there’s a direct link between my return and what happened on the market last week.

Minews. Have you had time to measure the mood in Australia which, from London, comes over as somewhat downbeat.

Oz. The buzz has certainly faded, but that’s what happens every time the commodity cycle turns down, bringing with it mine closures, job losses and unhappy investors.

Minews. And in Australia’s case some very messy politics.

Oz. Now, that is something I haven’t missed for the past three weeks because the situation here is drifting from the daft to the dangerous, and should put Australia on the tread carefully list of any investors concerned about unstable governments and the potential for damaging decisions in regard to tax and spending.

What appears to be happening is that the Australian Government’s financial position has gone from bad to worse with a  whopping deficit likely to be revealed in the May 14 budget.

Failure of the controversial mining and carbon taxes to raise much revenue, coupled with profligate spending, has left the government teetering on the edge of a European-style debt crisis which will probably be avoided but only by a pre-emptive move to raise conventional taxes and slash spending.

Minews. Your point being that it might be good public policy but painful for investors.

Oz. Precisely. Tough times lie ahead after the fun times of the boom which is a fading memory.
...

Source >>> www.minesite.com
*****


----------



## drillinto

April 29, 2013
>>> Open And Transparent Pricing Is A Great Strength Of Capital Markets, 
But It Doesn’t Make Forecasting Any Easier

Rob Davies

Modern capital markets are wonderfully efficient. News shoots round the world that retail investors in the US are redeeming their gold backed ETFs and causing a steep fall in the metal price. 

The following week canny buying comes in from India and pushes the price up four per cent. 

A similar story prevails with base metals. 

Sharp falls left the sector looking oversold and last week the group, as measured by the LME index, recovered 2.5 per cent to 3151. 

The recovery in base and precious metals was aided by 1.2 per cent fall in the dollar, the normal reference currency for commodities. 

Even so, these moves demonstrate the power of price as a signalling mechanism. Some investors regard price as an outcome of their investment process.

They want the price of their assets to rise and accordingly they seek out securities that are moving that way by momentum.  

Others regard price as a flag that the asset it applies to has become cheap and therefore worthy of acquiring. Last weeks’ rally demonstrates that there is a still a lot of support for the asset class.

In some ways the recovery in commodity prices is a little surprising, given that the US only grew at an annual rate of 2.5 per cent in the first quarter instead of the three per cent experts were forecasting. 

That shortfall explained the weakness in the dollar which, paradoxically, led to the rise in metal prices as quoted in dollars. 

In many ways that data simply served as a reminder that the US is no longer the most important factor in commodity markets. 

What happens in Asia is far more significant. Xstrata last week agreed a thermal coal deal at US$95 a tonne, which is 17 per cent lower than prices secured a year ago. 

According to Bloomberg, current prices mean that about five million tonnes of current capacity is uneconomic. While that sounds a lot it is important to remember that Australia is forecast to export 189 million tonnes of coal this year, up from 171 million tonnes last year.

In other words over 95 per cent of the industry is still profitable. And there aren’t many sectors that can say that these days. 

This coal is destined for the burgeoning markets of China and its Asian neighbours, where growth is about three times that of the US, which itself is doing a whole lot better than its European competitors. 

What these disparate sets of data demonstrate yet again is the complex nature of the modern world. 

US car sales are now running at an annual run rate of 15.3 million. That is 6.2 per cent higher than last year and the highest for three years. 

The best way to connect this rising demand to zinc miners who are finding life difficult at US$1,877 a tonne is to bid up prices to encourage them to produce more. The increase over the week was only US$20 a tonne, but lead gained 1.5 per cent to US$2,037 a tonne as well.

No one knows whether that will be enough to encourage zinc miners to keep their mines open or produce more. But open and transparent pricing through capital markets is the best way to transfer that complex information all round the world in an instant. 

Speculators can try and make a buck by second guessing these trends and anticipate these moves. 

And, while often decried, they serve a valuable role in providing liquidity and adding their own sense of direction. But none that makes the final job of forecasting any easier.

Source >> www.minesite.com
*****


----------



## drillinto

>>> Roubini: Commodity Weakness Signals Global Economic Weakness
April 29, 2013
By Jared Cummans

http://commodityhq.com/2013/roubini-commodity-weakness-signals-global-economic-weakness/


----------



## drillinto

Gold rallies up !

http://www.bespokeinvest.com/thinkbig/2013/4/29/gold-rallies-up-near-important-levels.html
***


----------



## drillinto

BIG: Gold Rally Stopped Dead In its Tracks
MAY 1, 2013 

http://www.bespokeinvest.com/thinkbig/2013/5/1/gold-rally-stopped-dead-in-its-tracks.html


----------



## drillinto

USA: Oil and Gasoline Inventories Go Their Separate Ways
May 1, 2013 

http://www.bespokeinvest.com/thinkb...oline-inventories-go-their-separate-ways.html


----------



## drillinto

>>> The Copper Prices Signal Bear Market Is Near
Jared Cummans
May 3, 2013 

http://commodityhq.com/2013/copper-prices-signal-bear-market-is-near/


----------



## drillinto

May 04, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. It seems the sell-off continued on your market last week.

Oz. It did, and while it might be cold comfort to anyone nursing losses from the big slide in values over the past year, there were signs that we are close to the bottom, as well as flashes of enthusiasm from hard-core speculators.

Minews. Those hard-core speculators sound interesting, but we’ll get to them later. Firstly, a run-down of the key metrics from last week on the ASX.

Oz. Overall, the market as measured by the all ordinaries was up a marginal 0.5 per cent, largely because Australian bank stocks are booming. That might sound odd to anyone in the northern hemisphere where banks remain in the sin bin but down this way we have a remarkable situation where the banks are posting record profits and paying record dividends. What’s even more surprising is that the top four Australian banks rank among the world’s top 11 banks by market capitalisation despite Australia being a relatively small country.

Minews. That is a remarkable performance, and perhaps explains where the money flowing out of the resources sector has been going.

Oz. It does, and there was more of it last week because as all ordinaries crept that half-a-percentage point higher the financial index went up another 2.7 per cent. In contrast, the metals and mining index fell by 2.8 per cent, and the gold index fell by a thumping 6.7 per cent, despite the gold price moving a little higher.

Minews. What makes you think the bottom is close?

Oz. There’s no hard evidence, but when sentiment turns as negative as it has recently, and investors are prepared to take any price to leave the room, then that’s a good sign that we’ve getting to the low point in this cycle.
One way of measuring the bottom is that last week more than 50 small-to-medium mining stocks hit 12-month share price lows, and questions were raised over the future of a number of high-cost mines, and whether they can stay in production much longer. If they cannot, the surplus metal will be removed metal from world markets.

The challenge now is to hang on for the turn which, in Australia’s case could come in the next two-to-three months, as the country gets ready for a change of government with the current Labor administration sliding to unimaginable low ratings in the polls, and the election set for September 14.

Minews. With your theory being that investors will start to take positions ahead of the vote.

Oz. That seems a good bet, with a game of “pick the winners” already starting ahead of the highly likely swing from left to right in Canberra.
...

Source >>> www.minesite.com
*****


----------



## drillinto

USA: The Cheapest ETF for Every Investment Objective

http://etfdb.com/cheapest-etf-for-every-investment-objectives/#Materials


----------



## drillinto

Five Reasons Natural Gas Prices Are Headed Much Higher
[KAR.AX yesterday jumped +22.56%]

http://etfdailynews.com/2013/05/03/5-reasons-natural-gas-prices-are-headed-much-higher/


----------



## drillinto

May 06, 2013
Where To Invest In A World In Which Comedians Are Growing In Power
By Rob Davies

Last week a political party in in the UK labelled as clowns and fruitcakes won 23 per cent of the vote in local elections. 

Earlier this year an Italian party led by a stand-up comedian secured 26 per cent of the vote for the Chamber of Deputies. 

In the United States a poll two years ago estimated that 25 per cent of those asked supported the Tea Party.  

In France the Fronte National secured 17 per cent of the vote in the last presidential election. 

In a world that is increasingly restless at the effects of austerity regimes imposed by the mainstream political parties it is not surprising that protest groups have attracted a significant share of the vote.  

So far none of these groups have succeeded in getting a toehold in the corridors of power, but it is no longer something that can be readily dismissed.   

Since investing is often as much about politics as about finance, it is an area of asset allocation that long term investors ignore at their peril. 

Right now investors have never had more faith in their respective governments; at least that’s if the bond markets are any guide. 

Not only do pension funds have a record 40 per cent allocation to bonds, but the price of fixed income has never been higher. 

If you lend money to the German government you will receive an income of 1.24 per cent a year on the sum invested. The markets think the UK is riskier so you get slightly more, 1.72 per cent. 

Lending to Uncle Sam is deemed even riskier still, so the US Treasury will pay 1.74 per cent to encourage you, and the Chinese, to hold its debt.  

Spanish and Italian debt is viewed as substantially riskier and investors demand yields of 3.8 per cent and four per cent respectively before they will lend these states money. 

Australia, where mining accounts for 10 per cent of the economy, and its debt accounts for only 11 per cent of GDP, is regarded as only slightly less risky than Italy and Spain, and its debt cost three per cent.

So investors seem pretty relaxed about sovereign governance in the developed world. But in the current environment this seems complacent, since the biggest issuers have flooded the market and there is a reasonable chance that novice politicians might take over the controls in one or more of these countries within the next few years. 

The complacency reached new heights a few weeks ago when commodities had a big retracement. 

Since then a slow recovery has been underway with gold edging up to US$1,463 an ounce and copper rising one per cent to US$7,121 a tonne over the last week. 

On Friday the tentative gains in risk assets were boosted by better than expected US employment figures that showed 165,000 new jobs had been created in April and the unemployment rate stable at 7.6 per cent. 
It might be lacklustre but these data do show that recovery is underway. 

On a global scale there was also encouraging data, as freight rates jumped 24 per cent to US$5,694 a day for Capesize ships. 

While that is good news, it is sobering to reflect that it is still a long way below the peak rates of US$9,500 achieved in 2008. 

The train wreck of the global financial crisis is taking a long time to repair and is testing the patience of voters everywhere. 

At the moment the recovery plans in place in some economies are working, albeit slowly as these data demonstrate.

If, however, voters eventually get frustrated and replace politicians with untested tyros the security of hard assets such as commodities over an IOU from a newly elected government might prove very reassuring. 

Besides, if commodity prices fall, the insurance premium gets even cheaper.  

Source >>>>> www.minesite.com


----------



## drillinto

Japanese Stock Market

http://www.bespokeinvest.com/thinkbig/2013/5/7/land-of-the-rising-stock-market.html
***


----------



## drillinto

drillinto said:


> Japanese Stock Market
> 
> http://www.bespokeinvest.com/thinkbig/2013/5/7/land-of-the-rising-stock-market.html
> ***




Japan's Nikkei Ends With Weekly Gain of 7% (May 10)


----------



## drillinto

drillinto said:


> Five Reasons Natural Gas Prices Are Headed Much Higher
> [KAR.AX yesterday jumped +22.56%]
> 
> http://etfdailynews.com/2013/05/03/5-reasons-natural-gas-prices-are-headed-much-higher/




KAR.AX
Changes at 05/10/2013 market close
5-day price change: +56.84%


----------



## drillinto

Alan Abelson: 1925 to 2013
By Ed Finn 

http://online.barrons.com/article/SB50001424052748704253204578473291926739834.html


----------



## drillinto

May 11, 2013
>>>>> That Was The Week That Was … In Australia <<<<<
By Our Man in Oz

Minews. Good morning Australia. You seem to have enjoyed near-boom conditions last week.

Oz. It was an interesting time, and yes, some of the upward moves had the appearance of a boom though the near 10 per cent rise by the ASX minerals and metals index was more about currency and interest rate changes than underlying metal prices.

Minews. You had best explain what happened, because a 10 per cent rise over one week in any asset class at a time of low yields is outstanding.

Oz. Agreed, but in this case the driving force was a decision by Australia’s central bank to join the global currency war. It cut official interest rates by 0.25 per cent, taking the cash rate down to 2.75 per cent, the lowest in 60 years.

That seemingly small reduction triggered a stampede by investors into currency-exposed stocks, especially the mineral and agricultural exporters that should enjoy higher returns on conversion from commodities sold in US dollars.

Interestingly, however, the dollar only dipped by around US2 cents to be sitting just above parity with the U.S. currency which means a lot of last week’s action was about an expectation of a much bigger fall in the Aussie dollar later this year.

The currency move, and perhaps a widespread belief that global recovery is indeed happening, helped the two dominant diversified miners, BHP Billiton (BHP) and Rio Tinto (RIO) enjoy a solid burst of buying support. BHP rose by 8.7 per cent and Rio rose by 7.3 per cent respectively.

It was those moves by the big boys of mining which were the principal driving force behind the 9.5 per cent rise in the metals and mining index. That jump strongly outshone the all ordinaries which rose by a modest 1.7 per cent following a retreat by bank shares.

Minews. Presumably your gold stocks also benefited.

Oz. They did, and gold is perhaps the most interesting because it is the mineral world’s closest thing to a currency.

On the ASX the gold index added an eye-catching eight per cent despite the US$19 fall in the gold price to US$1,458 per ounce at the time of the markets close. That increase was driven largely by a A$1.38 rise from sector leader Newcrest (NCM) to A$17.40,

Because of the US2 cent currency shift, the Australian gold price actually rose by US$10.00 per ounce, rising from A$1,448 a week earlier to be sitting close to parity with the U.S. price by the end of the week at A$1,458 per ounce.

Minews. That’s all very interesting, but it’s time now for our readers to see what it did to prices, starting with the gold sector.

Oz. Newcrest set the lead but there were handsome rises across the board, marred by a few falls from junior explorers not able to participate in the currency-led rise.

Some of the better upward moves included: St Barbara (SBM), up A17 cents to A75.5 cents, Regis (RRL), up A36 cents to A$4.18, Medusa (MML), up A21 cents to A$2.86, Kingsgate (KCN), up A22 cents to A$2.04, Perseus (PRU), up A13 cents to A$1.43, Silver Lake (SLR), up A10 cents to A$1.12, Troy (TRY), up A18 cents to A$1.96, Northern Star (NST), up A13 cents to A84.5 cents, and Gryphon (GRY), up A5.5 cents to A24.5 cents.

Gold stocks which did not do as well included: Endeavour (EVN), up a modest A1.5 cents to A95.5 cents. Evolution (EVR), down A2 cents to A93 cents, OceanaGold (OGC), up A4 cents to A$2.07, Haoma (HAO), down A2 cents to A19.5 cents, and PMI (PVM), also down A2 cents to A37 cents.
...

Source >>>>> www.minesite.com
*****


----------



## MARKETWINNER

Don’t you think it is time to think about some other commodities including neglected commodities? For examples people use gas and food oriented commodities in good and bad times.

If I am correct Gold investment is based on safe heaven concept. On other hand some commodities can have demand and supply mismatch due to climate threat and less arable land in the future. It is common to see drought in Africa time to time. It is same in other countries such as USA and Australasia now. Prolonged drought situations will reduce inventory level for some commodities. When we see drought in major grain producing countries such as USA, Russia and Australia there will be great demand for grains. Similarly when we see drought in Kenya, India or China not only grains but also tea and coffee production can go down in the future.

I believe still the possibility that gold could retest the mid-1300s before stabilizing.

Although some soft commodities are trading in the futures market some commodity such as tea, salt are not trading there except listed companies link to particular commodity globally.

If we analyze financial history no commodity, currency, stock or any other stocks can go straight up or down. Time to time there will be day for each and every commodity including commodities such as coffee, sugar, salt, tea and potatoes.


----------



## drillinto

MARKETWINNER said:


> Don’t you think it is time to think about some other commodities including neglected commodities? For examples people use gas and food oriented commodities in good and bad times.
> 
> If I am correct Gold investment is based on safe heaven concept. On other hand some commodities can have demand and supply mismatch due to climate threat and less arable land in the future. It is common to see drought in Africa time to time. It is same in other countries such as USA and Australasia now. Prolonged drought situations will reduce inventory level for some commodities. When we see drought in major grain producing countries such as USA, Russia and Australia there will be great demand for grains. Similarly when we see drought in Kenya, India or China not only grains but also tea and coffee production can go down in the future.
> 
> I believe still the possibility that gold could retest the mid-1300s before stabilizing.
> 
> Although some soft commodities are trading in the futures market some commodity such as tea, salt are not trading there except listed companies link to particular commodity globally.
> 
> If we analyze financial history no commodity, currency, stock or any other stocks can go straight up or down. Time to time there will be day for each and every commodity including commodities such as coffee, sugar, salt, tea and potatoes.




I trust this site will interest you >>> http://commodityhq.com/commodity/softs/coffee/


----------



## drillinto

MARKETWINNER said:


> Don’t you think it is time to think about some other commodities including neglected commodities? For examples people use gas and food oriented commodities in good and bad times.
> 
> If I am correct Gold investment is based on safe heaven concept. On other hand some commodities can have demand and supply mismatch due to climate threat and less arable land in the future. It is common to see drought in Africa time to time. It is same in other countries such as USA and Australasia now. Prolonged drought situations will reduce inventory level for some commodities. When we see drought in major grain producing countries such as USA, Russia and Australia there will be great demand for grains. Similarly when we see drought in Kenya, India or China not only grains but also tea and coffee production can go down in the future.
> 
> I believe still the possibility that gold could retest the mid-1300s before stabilizing.
> 
> Although some soft commodities are trading in the futures market some commodity such as tea, salt are not trading there except listed companies link to particular commodity globally.
> 
> If we analyze financial history no commodity, currency, stock or any other stocks can go straight up or down. Time to time there will be day for each and every commodity including commodities such as coffee, sugar, salt, tea and potatoes.




Softs >>> Heatmap

http://commodityhq.com/softs-heatmap/


----------



## drillinto

Cut In Australian Interest Rates May Push Aussies Toward Gold 

http://www.kitco.com/reports/KitcoNews20130510DeC_interview.html


----------



## MARKETWINNER

Thank you my friends for your information.

Best regards


----------



## drillinto

May 13, 2013
Two Basic Rules Of Economics Underpin The Emerging Signs Of Global Growth
Rob Davies

It might be sporadic and it might be weak, but evidence of growth in the Western world, apart from on mainland Europe, is growing. 

The simplest indicator is the vibrancy of the major stock markets.

Many of them are back to pre-crash levels not seen since 2007.

Much of this so-called recovery is due to the artificial stimulation from quantitative easing in all the major economies, with the most recent being in Japan.

The proximate effect of this has been to push the yen down against the dollar so that it now trades at over 100 to the buck.

This has had the knock-on effect of invigorating the local stock market, pushing it up 50 per cent in six months.

And once the dollar starts a run it can become self-sustaining, as it is evidence of confidence in the US economy. If that is the case there is no need to hold gold against the uncertainties of economic Armageddon.

Gold duly responded by dropping another 2.3 per cent to US$1,429 an ounce. Base metals in contrast enjoyed a modest gain of 0.9 per cent to take the LME index up to 3,163.

Further evidence of the recovery comes from the premium of 12 cents a pound now being demanded by US copper producers for cathode.

Even in lacklustre Europe zinc, the dog of the sector, is enjoying a surcharge of US$137 a tonne, up from US$120 in March.  

These data seems to be at odds with some of the comments in the financial press - but then trying to analyse the world economy is beyond the skills of most of us. The best we can do is rely on a few tried and tested rules of economics.

The most basic of these is ensuring that any business activity adds more value than it consumes.

The corollary to that is that there is a strong incentive to stop doing things that lose money.

It is these two basic rules that have reshaped the US economy over the last five years and allowed it to start expanding again.  

And these two rules of business were the driving forces of the great consolidation in the mining sector over the last decade.  

No one played a greater role in that than Mick Davis at Xstrata.  Now that the acquisition of Xstrata by Glencore is complete he is at liberty to start a new mining empire from scratch.  

One thing he won’t be doing is fine tuning his acquisition strategy in accordance with the economic cycle. He knows that by sticking to the two rules the business cycle will take of itself.  

Of course it helps to get a tailwind from the US Federal Reserve. Its QE programme has devalued the dollar and given everyone the apparent feeling of wealth.

The argument is that it is better to pretend the nation is creating wealth again, rather than being certain that it is not, is hard to argue against.  

Some observers argue that the central bank printing presses have created an artificial recovery.

But there is such a willingness to have any sort of recovery, that a synthetic one is better than none at all.     

Source >>> www.minesite.com
*****


----------



## drillinto

Asset Class Performance
May 10, 2013 

Australia (EWA) is up on the year. 

Commodities like gold (GLD) and silver (SLV) remain weak, and while we've seen a small bounce in oil (USO) recently, it's still down for the quarter and up just 2.31% on the year.  Natural gas (UNG) is up 11.90%, on the year.

Source >>> http://www.bespokeinvest.com/thinkbig/2013/5/10/recent-asset-class-performance.html


----------



## drillinto

When Will the Gold Bull Run Resume?


----------



## MARKETWINNER

Hi Drillinto I like some of the factors in your link (www.minesite.com)

We can learn lot of things from this article. I think it is time to identify next most bullish commodities, stocks, sectors, assets and currencies.  There can be opportunities in almost all types of markets such as developed, emerging and frontier markets. 

Some of the factors to consider in this article are:

It might be sporadic and it might be weak, but evidence of growth in the Western world, apart from on mainland Europe, is growing. 

The simplest indicator is the vibrancy of the major stock markets.

Many of them are back to pre-crash levels not seen since 2007.

Much of this so-called recovery is due to the artificial stimulation from quantitative easing in all the major economies, with the most recent being in Japan.

The best we can do is rely on a few tried and tested rules of economics.


----------



## drillinto

BIG: Ugly Charts
May 15, 2013 

http://www.bespokeinvest.com/thinkbig/2013/5/15/ugly-charts.html
***


----------



## drillinto

BIG: 2013 and Q2 Country Returns
May 15, 2013 

Australia is up 11.67% in 2013, while New Zealand is up 14.26%.

http://www.bespokeinvest.com/thinkbig/2013/5/15/2013-and-q2-country-returns.html


----------



## MARKETWINNER

If I am correct there are three types of commodities 

Soft commodities 

Orange juice, corn, wheat, coffee, sugar and cocoa beans are all examples of "soft" commodities.

Hard commodities 

Hard commodities are typically mined or extracted.

Gold, oil, aluminium and copper are examples of hard commodities 

Hard commodities dominated the market during last couple of years 

Emerging Commodities

Beyond those listed above, there is an another class of commodities; they, have no liquid futures market. These include things like coal, tea, salt, timber and iron.

There are also "emerging commodities" like wind, solar, water, water rights and pollution rights.

For now, investors can only access these emerging commodities by buying stock in companies listed in the global markets that operate in these fields.

I thinks it is time to study on emerging commodities and commodities beyond soft and hard commodities. I believe more than gold and other hard commodities, Investors can have great opportunities in emerging commodities.

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

May 17, 2013

Demand For Physical Gold Remains Strong, According The World Gold Council’s Latest Report, While ETFs Still Only Represent 1% Of Gold Stocks
By Alastair Ford


http://minesite.com/news/demand-for...le-etfs-still-only-represent-1-of-gold-stocks


----------



## drillinto

May 18, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had a tough week both on and off the market.

Oz. It was heavy going financially and politically. The mining sector of the market was hit by solid selling and the Australian Government finally confessed about the mess it’s made of the country’s budget. Just to round off a down week the dollar fell sharply.

Minews. The budget and currency moves are something you’ve been predicting for some time.

Oz. It has been fairly obvious that the local currency has been significantly over-valued with the only questions being how far it would fall, and when would the slide start.

We have an answer to the second question, the slide has started. We now have to see how far it falls and my best guess is US90 cents as a first target, and then down to around US80 cents, and perhaps further if commodity prices stay low.

Minews. Isn’t the currency fall good for your exporters?

Oz. It is, but it will also add to the cost of repaying foreign debt and imported capital goods, with both being major costs for the country.

On balance it’s probably a good thing that the dollar has fallen from the US$1.05 it was trading at just five weeks ago, but the 7.6 per cent fall over recent days can be expected to stretch out to 15 per cent fairly quickly.

Minews. Enough currency and politics, time for a quick run-down of prices.

Oz. It will be quick because there’s virtually no good news and I’m on a field trip to South Australia which means there’s only a narrow window of opportunity to talk about the market.

Overall, the ASX did not perform too badly with the all ordinaries index losing just 1.2 per cent. Losses on mining stocks were offset by reasonable strength among the banks, retailers and agricultural exporters which will also benefit from the lower exchange rate.

It was a different story with the metals and mining index which dropped four per cent and a very different story with the gold sector which plunged 14.6 per cent lower, as the gold price fell through US$1,400 an ounce.

Not even the currency effect which helped hold the local gold price at around A$1,427 per ounce failed to stem the outgoing tide of gold investors.

If you looked hard enough, and I did, you could find one-or-two gold stocks which rose over the course of the week, but you needed a pretty powerful microscope.

It was not so bad in other parts of the mining industry, but the overall trend was down, everywhere.

Minews. Let’s get the bad news out first by starting with a selection of gold mining share prices.

Oz. The sector leader, Newcrest (NCM), weighed heavily on the index with a fall of A$2.71 (15.5 per cent) to A$14.69, and while there were percentage falls greater than that in the week-long sell-off it was Newcrest’s weighting which contributed heavily to the 14.6 per cent drop in the gold index.

Other gold falls included: Perseus (PRU), down A29 cents to A$1.14, Medusa (MML), down A53 cents to A$2.33, Regis (RRL) down A58 cents to A$3.60, Resolute (RSG), down A12 cents to A74.5 cents, Silver Lake (SLR), down A30 cents to A82 cents, Troy (TRY), down A28 cents to A$1.68, Northern Star (NST), down A12 cents to A72 cents, Papillon (PIR), down A8 cents to A73 cents, Kingsgate (KCN), down A47 cents to A$1.57, Beadell (BDR) down A11 cents to A62 cents, St Barbara (SBM), down A12 cents to A63 cents, Kingsrose (KRM), down A10 cents to A48 cents, and Gryphon (GRY), down A3 cents to A21 cents.
...

Source >> www.minesite.com
*****


----------



## drillinto

How to make a play on cotton

http://commodityhq.com/2013/beware-cotton-heading-for-a-dip/
***


----------



## drillinto

May 20, 2013
What A China Crash Might Mean For Commodities
Rob Davies

Knowing that China accounts for about 40 per cent of global metals consumption is both comforting and a concern.  

It is good to know that the industry is not reliant on the lacklustre economies of the western world.

On the other hand there is always the underlying worry about what might happen to your biggest customer.

Unfortunately that worry is not allayed at all by a recent report from Lombard Street Research which lifts the lid a little on the Chinese economy.

Data for this massive country is soft to say the least, but this research house has made a valiant effort to try and identify some of the numbers investors should focus on.

Its most immediate concern is the overvaluation of the Chinese currency. Lombard estimates that this began in 2011 and now leaves the RMB about 33 per cent overvalued.

It says there are two reasons for this. One is the aggressive monetary policies that have been pursued first by the US and then more recently by the Japanese. This has devalued the dollar and the yen against the RMB.

The second reason is the massive capital spending programme by the Chinese government which reached an incredible 48 per cent of GDP in 2010-2011.

Like many state programmes not all these infrastructure projects were sensible and many bridges, roads and buildings are simply not needed and superfluous. Lombard estimates there is 4.5 billion square metres of surplus real estate inventory, up from 1.6 billion in 2007 and equivalent to 3.5 square metres per person.

This has been paid for by debt, and the inefficient use of this debt will damage the economy. Some of the cash has also gone into commodity hoarding that has probably helped elevate metal prices and is also unproductive.

This excess activity has had two negative impacts. One has been to drive up real wages to an estimated 20 per cent above the equilibrium level.

The other has been to push real interest rates up to nine per cent. Both effects reduce the competiveness of the country.

External evidence for that comes from CRU, a commodity consultancy. CRU estimates a third of China’s aluminium capacity, about five million tonnes, is currently uneconomic.

An additional problem caused by this state spending splurge has been to raise government debt to about 140 per cent of GDP. Not as bad as some Western economies but a long way from what might be expected of a booming emerging market economy.

Lombard says one way of solving the problem is to remove currency controls and allow capital flows to restore balance.

So far that has only been done on inflows, which has actually made the problem worse. What is needed, these experts say, is to allow capital outflows too, so that some of China’s annual savings of US$4.5 trillion could go overseas and weaken the RMB.

This massive amount is more than twice the US$2 trillion of savings made in the US. The trouble is that any substantial moves out of the country risk destabilising Chinese banks.

If this currency outflow were to happen it would likely boost asset prices in many capital markets. What the impact on China might be is harder to tell, which is probably why the new leadership will delay it for as long as possible.

Whatever happens, the effect on commodities will be large and hard to dodge.

For the time being it makes sense for investors to stay in this dance. Too many players have an interest in keeping the music going.

But it might be an idea to keep an eye on the exit in case the song changes.

Source >>> www.minesite.com
*****


----------



## drillinto

Mergers, acquisitions and capital raising in mining and metals
2012 trends
2013 outlook
When opportunity knocks, who answers?


http://www.ey.com/Publication/vwLUAssets/Global_mining_and_metals_transactions_2012_trends_2013_outlook/$FILE/Mergers_acquisitions_and_capital_raising_in_mining_and_metals.pdf


----------



## drillinto

Rice: China's Cadmium Problem May Be Boost for Rice Exporters

http://online.wsj.com/article/SB10001424127887323336104578498751887802128.html
***


----------



## drillinto

For your consideration >> Intl Grains Council >> http://www.igc.int/en/downloads/gmrsummary/gmrsumme.pdf


----------



## drillinto

Commodities: Aluminium deals

http://www.reuters.com/article/2013/05/23/us-iran-sanctions-un-idUSBRE94L17P20130523


----------



## drillinto

Huge cattle station fails to sell, a second time
Will it prove third time lucky for Australia's Australian Agricultural Company ?

http://www.agrimoney.com/news/huge-cattle-station-fails-to-sell-a-second-time--5872.html
***


----------



## drillinto

Solar’s Great Recovery: Photovoltaics Reach $155 Billion Market in 2018

The solar crisis will become a boon, as record low prices boost demand, more than doubling the market to 61.7 GW – with China emerging as the largest market, Lux Research says.

http://www.luxresearchinc.com/news-and-events/press-releases/171.html


----------



## drillinto

Please visit the site of Jim Rogers >> http://www.jimrogers.com/


----------



## drillinto

World Stock Market Cap: US, Japan Gain on Rest of World in 2013
May 22, 2013 

http://www.bespokeinvest.com/thinkbig/2013/5/22/us-japan-gain-on-rest-of-world-in-2013.html
***


----------



## drillinto

May 24, 2013
>>> That Was The Week That Was … In Canada <<<
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed this past week.

CC. Disappointing manufacturing data out of China and worries that the United States will turn off its quantitative easing spigot prompted another wild trading week for resources-related stocks.

On top of the macroeconomic developments, Barrick Gold came out with some more bad news on Friday that investors simply shrugged off.

Once all the trading was done this past week, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had rallied 1.46 per cent, while the TSX Gold Index had added 4.69 per cent.
...

Source >>> www.minesite.com


----------



## drillinto

May 25, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like it was another tough week for your market?

Oz. It was, and it wasn’t. That might be a confusing answer, but is easily explained: most commentators focused on the movements of the major indices and ignored those that we follow, the metals and mining index and the gold index. They either barely moved, or rose fractionally.

Minews. How interesting. Why the divergence?

Oz. In a word, currency. What happened last week was something we’ve been waiting for all year, a sharp fall in the value of the Australian dollar, or a rise in the US dollar.

Whatever explanation you prefer the result is the same, higher income for Australian exporters on conversion when they sell in US dollars, which is essentially what they all do.

Minews. Let the numbers tell the story.

Oz. As you mentioned first, the Australian market as measured by the all ordinaries index had a torrid time, falling by 3.2 per cent, following a sell-off in bank and retail stocks. The metals and mining index was virtually flat, or down one-tenth of a percentage point if you’re a stickler for accuracy. The gold index was up 1.2 per cent, largely because gold is a perfect hedge against currency movements.

Minews. And the dollar itself?

Oz. It dropped to around US96.5 cents, which is a hefty fall on the US$1.05 that it was trading at four weeks ago. More interestingly, there is now a widespread expectation that the Australian dollar will quickly fall through US90 cents and perhaps much lower. Indeed one forecaster is tipping a long slide down into the US60 cent range.

Minews. Is that seen as a bad thing?

Oz. Yes and no. Exporters would like it, but inflation will get a boost and a fall of that magnitude will certainly signal the end of the mining boom as we have known it. It might, however, trigger a fresh influx of international money getting into position for the next resources rush because the fundamentals of a rising Asia have not gone away, and rising Asia needs minerals and metals.

Minews. So much for the philosophy, time for prices, starting with gold, please.

Oz. Overall, the gold sector could correctly be called mixed. That modest 1.2 per cent rise in the index was largely attributable to a three per cent rise from the sector leader, Newcrest (NCM), which added A43 cents to A$15.12.

Among the other risers were: Troy (TRY), up A9 cents to A$1.77, Regis (RRL), up A24 cents to A$3.84, Intrepid (IAU), up A2.5 cents to A29 cents, Beadell (BDR), also up A2.5 to A64.5 cents, Medusa (MML), up A4 cents to A$2.37, and Papillon (PIR), up half a cent to A74.5 cents. Also better off was Australian Mines (AUZ), which rose A0.2 of a cent after receiving further encouraging assays from its Yargarma project in Nigeria.

Offsetting the rises was an even longer list of equally modest falls, including: Perseus (PRU), down A9 cents to A$1.05, Kingsgate (KCN), down A2 cents to A$1.55, Gryphon (GRY), down A1.5 cents to A19.5 cents, Evolution (EVN), down A6 cents to A79 cents, Northern Star (NST), down A5 cents to A67 cents, and Kingsrose (KRM), down A5.5 cents to A41.5 cents.
...

Source >> www.minesite.com
*****


----------



## MARKETWINNER

_There can be great opportunities in the short run, medium run and long run in some soft, agri and food based commodities such as corn and tea due to demand and supply mismatch time to time. Initially many analysts expected one of the biggest harvests for corn in 2012.Instead corn production went down dramatically due to drought and there were bullish trend for corn market in 2012. Similarly there were uptrends for tea market as well.

In some period output for some soft and food based commodities can go up in first half of the year and output can go down dramtillcally in the second half of the year. For example If we don’t see improved weather pattern in the second half of this year inventory level can go down for some commodities. Year end lower inventory level means higher prices for the commodity.

In good time or bad times people cannot postpone eating food such as cereal, meat, grain, and drinking coffee, tea, coco and milk. There will be great demand for all types of food and hot beverages in the coming decade not only in developed world, but also in emerging world and frontier world. There will rapid rise in population in countries such as India, Pakistn, Indonesia, Bangladesh and China. Therefore there will be improved market for all types of food such as rice, corn, meat, coffee, tea, salt, milk, potato, timber and Australasian fruits etc. 

In addition other commodities such as metals and gas also will have great demand from Asian region in the long run. However there will be less demand for different commodities at different period due to different reasons and as result prices will go down in the short run and medium run.

In short time to time there will be opportunities’ in all types of markets such as commodity market, stock market and other markets.

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions._


----------



## drillinto

Dairy market rally 'well and truly over'

The dairy rally is "well and truly over" for now, given the breaking of drought in New Zealand, the top milk exporter, and some economic uncertainties, National Australia Bank said.

The decline in dairy prices, which have tumbled 9.3% at GlobalDairyTrade from last month's record high, will set a trend, given signs of loosening fundamentals.
...

http://www.agrimoney.com/news/dairy-market-rally-well-and-truly-over--5880.html


----------



## MARKETWINNER

_Commodities investing is volatile, promising big gains and capable of big losses. But this volatility can work in our favor in a broad investment portfolio. If we invest part of our money in commodities we can offset risks associated with stocks, bonds and cash.

There is no set formula for the best time to buy commodities, just like stocks. It really depends on an investor’s time horizon and investment goals.

Buying cheap is often the best option in my opinion if we have a long-term investment horizon.

If we take gold market the price of gold reached $850 an ounce in 1980, which was an extraordinary price for the time.  Gold prices reached multi-years lows in 1999 near $250 an ounce. Gold prices subsequently mounted a decade long rally dwarfing the previous record high in 1980.

Remember that commodities are often considered a hedge in an investment portfolio.

Analysts argue that prices of many commodities may not have much further to fall. I agree with this because some soft, food and beverage commodities are damn cheap. Some are cheaper than water

Following are two Commodity Investments to Profit from Population Growth

Food commodities will jump
Energy commodities will power up

In short it is time to buy cheap commodity stocks with great potential and commodities with demand and supply mismatch and emerging commodities.Finally I believe we can expect rally in some commodities and commodity stocks in the second half of this year.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions._


----------



## drillinto

Gas pipelines in Europe

http://www.reuters.com/article/2013/05/28/eu-gas-idUSL6N0E41JX20130528

http://newsimg.bbc.co.uk/media/images/45326000/gif/_45326552__45203988_nabucco2_gas_map466.gif
(This is an helpful map)


----------



## drillinto

Commodities: Sand and gravel for construction

Australia is Top 10 >> http://www.mapsofworld.com/minerals/world-sand-and-gravel-producers.html

US Data >> http://minerals.er.usgs.gov/minerals/pubs/commodity/sand_&_gravel_construction/mcs-2013-sandc.pdf


----------



## MARKETWINNER

drillinto said:


> Commodities: Sand and gravel for construction
> 
> Australia is Top 10 >> http://www.mapsofworld.com/minerals/world-sand-and-gravel-producers.html
> 
> US Data >> http://minerals.er.usgs.gov/minerals/pubs/commodity/sand_&_gravel_construction/mcs-2013-sandc.pdf




Another two important emerging commodities to follow. Thank you for the link.

I believe there will be great opportunities in some commodity stocks listed in developed, emerging and frontier markets during next six months to 12 months. I think current bull market in global stocks market can pause or can have pull back during next six months. Therefore money will flow back to some commodities, some sectors in global stock markets and selected stocks markets in frontier world. At least we will see strong short term rally in some commodity and commodity stocks. Even gold can go up.

As I said before this is the time to rotate and identify the next most bullish sectors, stocks, commodities and currencies.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

Top Cement Producers

http://www.mapsofworld.com/minerals/world-cement-production.html
***


----------



## drillinto

Country ETFs Trading Range Screen

Australia (EWA) is in oversold territory

http://www.bespokeinvest.com/thinkbig/2013/5/30/global-etf-trading-range-screen.html
***


----------



## drillinto

June 01, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your mining market seems to have gone against the grain and crept a little higher last week.

Oz. It did, but most of the improvement was confined to the bigger companies, and to a handful of gold stocks. The small end, which we follow, remained very subdued with a raft of stocks setting fresh 12-month share price lows.

Like the rest of the world investors in the Australian market remain focussed on the changing macro picture of government finances. The great unknown is: what happens when the artificial pump priming, or money printing, comes to an end.

Minews. And you’ve also got to contend with the end of your mining boom.

Oz. That too, but interestingly that’s starting to shape up as yesterday’s story. Most of the stock market pain has already been inflicted, with some of the smarter chaps in the room starting to look at the relative value of mining stocks over other assets classes and coming out in favour of miners.

Minews. You mean the Goldman Sachs calculation that Australian banks are now 40 per cent more expensive than miners.

Oz. That’s certainly a starting point to what could be a rotation of funds away from low yield and safe haven investments back into assets with greater growth prospects, especially those which have been heavily sold down.

Minews. You believe a bit of that was evident last week in the Australian market?

Oz. It was at the top end, where the big miners led a modest rise of 0.7 per cent in the metals and mining index while the financials index declined by 2.3 per cent and the all ordinaries slipped one per cent lower. BHP Billiton (BHP) and Rio Tinto (RIO) rose by a fraction over one per cent for the week.

The gold index slipped 0.6 per cent lower, but that was almost entirely due to a fall of A61 cents by sector leader Newcrest (NCM) which closed the week at A$14.51.

Minews. How soon before that slight improvement flows through to the mid-tier miners and small explorers?

Oz. That is the key question and a betting man would probably not expect much this calendar year but next year could see the start of a revival.
...

Source >>> www.minesite.com
*****


----------



## drillinto

June 03, 2013
Be Careful What You Wish For: Bond Yields Fall As The US Economy Shows Signs Of Recovery
By Rob Davies

Mining investors might have been focussing on the 10 per cent drop in iron ore prices over the past week, but the real news was in a different asset class.  

Iron ore prices have tumbled to US$110 a tonne, down 30 per cent from their peak of US$158.90 in February.

That fall really reflects the slower rates of growth now being recorded in China, India and Brazil.

Brazil is growing at a slower rate because iron prices are falling because China is growing at seven per cent not 10 per cent.

All that is logical.

What is more important, though, is the massive sell-off in bond markets.

It started in Japan two weeks ago when yields shot up to one per cent for 10 year money. Last week the contagion spread to the US where US Treasuries dropped sharply to offer a yield of 2.2 per cent.

The 10 per cent drop in a week is bad enough, but it is worth recalling that these instruments were only offering a yield of 1.5 per cent last summer so the decline from the peak is quite dramatic.

The reason for this fall is actually good news because there are increasing signs the US economy is recovering and, as a consequence, the US Federal Reserve may soon be able to stop spending US$85 billion a month on US debt.

But without that support from the buyer of last resort the question is who will underpin the market.

Because the US debt market is the single largest asset class in the world, and is used as a benchmark for others, it has ramification in just about every other capital market.

The first impact was to push the dollar higher and that weakened gold to US$1,394 an ounce.

It did not, though, depress base metals. They moved higher in anticipation of this stronger US growth and resulted in the LME Index gaining 1.2 per cent to 3,170.

What no one knows, and can never be known until sometime in the future, is if this is the start of the big move out of bonds into other assets.

On the face of it this should be good news for commodity investors because some of the flow will go into hard assets and some will go into equities, including miners, and that will provide more capital for resource exploration and development.

There is a downside though.

This retraction effectively increases the risk free rate, though perhaps not after inflation.

That raises the economic hurdles that new projects have to meet before getting approval. Although that may go hand in hand with higher returns arising from stronger metal prices.

What is certainly does is make it cheaper to buy income, at least in nominal terms, and that may deter some from looking around at other asset classes for alternative sources of income.

The biggest uncertainty of all is what this development means for inflation. It has already had an impact in Japan where a falling yen has started to push up prices of imported goods.  

In the same vein the fall in the rand to a four year low against the dollar will have a negative impact on prices in that country which is so reliant on the mining industry.

While many have been arguing that bonds have been too expensive for too long, and deserve to be sold, some wishes may have unforeseen consequences if they come to pass.  

Source >>> www.minesite.com
*****


----------



## drillinto

USA >> ISM Commodities Survey Shows Prices Contained

http://www.bespokeinvest.com/thinkbig/2013/6/3/ism-commodities-survey-shows-prices-contained.html
***


----------



## drillinto

China's SRB is again buying nickel

http://www.mining.com/report-china-starts-stockpiling-metals-again-90612/
***


----------



## drillinto

Stock Tipping Competition: miners are the majority of the tips 

https://www.aussiestockforums.com/competition/


----------



## drillinto

Good news for the australian wines...

http://finance.yahoo.com/news/wine-vs-solar-panels-china-072911477.html
***


----------



## drillinto

drillinto said:


> Stock Tipping Competition: miners are the majority of the tips
> 
> https://www.aussiestockforums.com/competition/




Joe: we need greater participation at your stock tipping competition.
***


----------



## drillinto

Jim Rogers >>> Long-term bull market in commodities is not yet over

>>>>> http://www.business-standard.com/ar...s-not-yet-over-jim-rogers-113060301170_1.html


----------



## drillinto

June 06, 2013
PWC Lays Out A Seven-Point Action Plan For Miners Who Want To Regain The Confidence Of The Markets
By Alastair Ford

Globally the top 40 mining companies delivered a six per cent increase in output last year, according to the latest analysis by PriceWaterhouseCoopers, but softer commodities prices meant that that wasn’t translated into greater sales. 
...


http://minesite.com/news/pwc-lays-o...-want-to-regain-the-confidence-of-the-markets


----------



## drillinto

June 09, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like it was a horror week on your market.

Oz. It was more than that, especially if your politics lean to the left. Not only were all of the key indices which measure the performance of the ASX down, but the wheels fell off a government mob now being universally derided as the worst ever Australian Government.

Minews. A bit like your cricket team?

Oz. Now that’s a cheap shot, but it might prove to be correct, with both the Labor government of Julia Gillard and the cricketers being put to the test over the next 100 days. Gillard in what even her loudest supporters acknowledge will be an electoral bloodbath on September 14, and the boys at ovals across the U.K.

Minews. Are you saying Australia is having its version of a winter of discontent?

Oz. In a way, yes. The market is down sharply. The politics are awful. The economy is slowing and the country has a rudderless feel in the countdown to the inevitable change of government.

The good news, and there is a bit of it in the political and market situations, is that a change of government will bring a more mining-friendly administration, with the mining super-tax set for the chop and explorers likely to see the re-introduction of generous tax treatment.

There was also the surprisingly upbeat talk from new BHP Billiton boss, Andrew Mackenzie, in London during the week when he noted that Chinese demand for commodities remained strong. Perhaps that means that a price recovery might not be too far off.

Minews. Enough of the chit-chat time for prices.

Oz. Before providing the specifics it’s worth noting that heavy falls on the metals and gold indices were largely the result of the big companies being sold off. Smaller stocks, of the sort we follow, did not suffer as much.

Minews. Perhaps because they’re already reached the bottom?

Oz. That could well be the case, because there are quite a few well-run small miners which are trading close to cash backing, which is always a good starting point for the eventual recovery.

Take the 8.7 per cent fall in the gold index last week as an example, because virtually all of that can be attributed to one stock, Newcrest (NCM), simply because it dominates the local gold mining sector and because it has suffered a resounding crash in profitability and credibility.

Newcrest’s A$2.16 (15 per cent) fall last week to A$12.35 was the result of A$6 billion write-down of its assets, the cutting of its dividend and the sacking of 250 employees.

Possibly worse than the numbers is the way they were revealed. The corporate cops from the stock exchange and the government regulator ASIC are now asking questions about why the share price fall started two days before the formal announcement. Some of Australia’s better-known stockbrokers, such as Charlie Aitken from Bell Potter, are calling for a full investigation into who said what, and when.

Minews. Interesting stuff, but if Newcrest did the damage to the gold index how did other gold stocks hold up?

Oz. Not too badly, and that’s the interesting bit. Rises and falls were fairly evenly matched, perhaps because investors discovered that the Australian gold price has been rising for the past two months as the local currency falls, or perhaps because the sell-off has been so savage that bargain hunters thought it time to enter the market.

But before we get to the sectors, we’ll just state for the record that the all ordinaries index fell by 3.7 per cent and the metals and the mining index dropped by 5.3 per cent.

Minews. Now for prices, continuing with gold.

Oz. After Newcrest there really weren’t too many fallers. One of the best performers was Troy (TRY), up A24 cents to A$1.96 as it makes progress in bedding down its merger with Azimuth (AZH) which itself put on A3.5 cents to A32.5 cents.

Other gold movers included: Northern Star (NST), up A2 cents to A84 cents, Kingsrose (KRM), up A4 cents to A36 cents, Silver Lake (SLR), up A3.5 cents to A84.5 cents, Kingsgate (KCN), up A13 cents to A$1.80, Endeavour (EVR), down A4 cents to A88 cents, Resolute (RSG), down A2.5 cents to A76 cents, Scotgold (SGZ), up A0.6 of a cent to A2.2 cents, Regis (RRL), down A23 cents to A$3.83, Evolution (EVN), up A5.5 cents to A86 cents, and Perseus (PRU), down A4 cents to A$1.03.
...

Source >> www.minesite.com
*****


----------



## MARKETWINNER

_There are beating down commodity stocks in ASX and globally. When money starts to fall back to these stocks they will go up again.

Remember Oil went down to around $35 level per barrel of oil and then it went up to $120. Speculations also will add to downfall or uptrend of any commodity.

Commodities with supply mismatch and link to population growth will go up in the coming decade. It is time to identify emerging sectors, stocks, commodities globally. 

Different markets, stocks, sectors and commodities go up and down in cycles at different times. Both Australia and New Zealand will have growth in some out of favour sectors due to new developments. Some commodity companies should benefit lot over others.

Falling AUD and NZD will create great opportunities for some commodity companies and production oriented companies.

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions.

In short we should see some rally in some commodity stocks during second half of this year globally while having minor fluctuations._


----------



## drillinto

Cow smuggling is one of the highest-return and lowest-risk businesses in India

http://www.hindustantimes.com/India-news/uttarpradesh/Money-on-four-hooves/Article1-1072100.aspx
*****


----------



## MARKETWINNER

_According to following links both corn and soybean prices can go down in the second half of this year.

http://www.producer.com/2013/05/record-wor...sh-prices-down/

Record world crops could push prices down

http://www.bloomberg.com/news/2013-...s-drier-weather-may-help-crop-conditions.html

Corn Drops With Soybeans as Dry Weather May Aid Crop Conditions.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites  _


----------



## drillinto

June 10, 2013
Recovery May Be Breeding Uncertainty, But Mining Shares Still Give Investors A Higher Yield 
Than Any Government IOU
By Rob Davies

The growing belief that the US economy is starting to get back on its feet has, bizarrely, triggered a great deal of uncertainty in capital markets. 

A bit like a nervous ice skater gripping on to the wall of the rink for support, investors still rely on the US Federal Reserve printing US$85 billion dollars of new money every month to support the bond market and keep interest rates low.

Right now traders are unsure that they won’t fall over without that supporting hand.

The mere thought that it might be withdrawn has been enough to give the bond market the collywobbles, and that in turn has caused upsets in equity, currency and commodity markets.  

A strong dollar depressed the gold price but its subsequent retracement has not led to any recovery in the price of gold.

Base metals usually respond well to a weaker dollar, but last week the LME index slipped back 0.5 per cent to 3,153.  

Overall sentiment to commodities has turned negative, partly because of the expected withdrawal of the QE support with its hints of inflation.  

Consequently, many commentators have already written off the sector and are recommending a zero allocation to it.

Some might argue that this is a classic case of making the call after the event. It is sobering to note that the FTSE 350 Mining Index is already down 40 per cent from its peak in early 2011.

Over on the AIM market the Basic Resources Index is down 64 per cent over the last two years, as you might expect from the racier end of the market.  

Yet zinc is only down 25 per cent, aluminium 31 per cent, copper 27 per cent from their peaks. Although it also has to be said that nickel is down an eye-watering 48 per cent from its peak price of this cycle.  

In theory of course the downside to equities is 100 per cent, i.e. they can fall to zero. So maybe the call is still worth making. There is, however, one big difference between equities and commodities.

While it is quite feasible to imagine a mining company having no worth at all it is impossible to imagine that being the case for the underlying commodity. No one is going to offer you metal for free.  

Moreover, despite the uncertainty about the future of QE it is worth remembering that the world is still functioning - indeed growing at the rate of three or four per cent a year.

That means base metals are still required for new electrical reticulation systems, houses, infrastructure and replacement of transport vehicles. Even allowing for a growing element of recycling, new material is always required.

That demand can only be satisfied by new production and, generally, miners only produce metals if they can do so profitably. At the moment most of them still can and will continue to do so as long as the economics are right.

The fall in the mining equity indices over the last two years reflects changes in sentiment as much as the prices of the underlying commodities.

It is hard to know whether it is pricing in more uncertain times ahead.  

All that is known is that most mining companies are still making good profits and paying out good dividends.

Cynics might argue that is the problem, and that the bottom won’t be reached until the industry is making large losses again. That might be the case.

But in the meantime mining shares give investors a higher yield than any government IOU.

Source >>>>> www.minesite.com
*****


----------



## drillinto

New Zealand is TOP 25 !

http://www.bespokeinvest.com/thinkbig/2013/6/7/2013-country-stock-market-returns.html
***


----------



## drillinto

>>> Lots of Red Across the Board
June 12, 2013 

http://www.bespokeinvest.com/thinkbig/2013/6/12/lots-of-red-across-the-board.html
***


----------



## drillinto

>>> Soybean prices <<<

http://commodityhq.com/2013/soybean-prices-set-to-simmer/
***


----------



## MARKETWINNER

Finally I am bearish on gold, corn and soya bean. There will be weak demand for all of the above commodities in the coming months.  Both corn and soya bean inventories will go up in the second half this year due to record harvests. Only weather shock will change the direction. Now even banks are down grading prospects for corn and soya bean.

If investment demand continues to decline and gold ETF holders continue to sell, I believe a gold price below $1,000/oz .Gold will eventually return to its true cost of production. 

In addition we have to accept no currency, stock or any commodity will go straight up and down. We had great rally for gold during last 10 years and gold cycle has reversed to bear territory now. There can be dead cat bounce for gold time to time and intelligent players will make use of this opportunity to sell their gold positions. 

It is time to become bullish on commodities with demand and supply mismatch and emerging commodities globally. Investors will have some great opportunity to pick some emerging commodity stocks globally in the coming weeks and months.

In the long run gold, corn and soya bean prices will go up. Intermediate trend for these commodities are down now. Money will outflow from these commodities to the next most bullish commodities and stocks.

My ideas are not a recommendation to either buy or sell any security, commodity  or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

June 17, 2013
The Short-Term Matters To Money Managers, Not The Long-Term, 
Which Gives Private Investors A Distinct Advantage
Rob Davies

Investing is complex mixture of arithmetic and psychology. It is the second element – psychology - that gives rise to the innumerable aphorisms that journalists like to quote about the markets. 

Most are misleading and some are downright wrong. 

A few though seem to capture the mood of the moment.  

One that does quite aptly is the idea that markets always seem to move to impose the maximum amount of damage on as many people as possible. 

A little thought suggests that this makes sense. 

If everyone has already bought as much of a particular asset as they want it suggests that the pool of additional buyers is going to be relatively small.  

That now seems to be the case with emerging markets, Japanese equities, US Treasuries and the dollar. 

Sharp changes in all these asset classes in recent weeks have unsettled markets and commentators alike and have left them all struggling for explanations.   

The one asset class that was universally agreed to have more downside was commodities and they were not immune either, dropping 2.7 per cent on the LME index last week. 

What was surprising though was that this occurred even though the dollar moved to a four month low. Normally a weaker dollar is good for metals.  

Turmoil in emerging market currencies has not made life much easier for miners. A falling dollar compounds the effect of weaker metal prices and effectively pushes up costs in some countries with large mining industries. 

Dollar weakness is slightly perplexing as the steady flow of data evidencing a US recovery continues. Industrial production was unchanged in May after a drop of 0.4 per cent in April. Car sales increased by 1.8 per cent in May as well, which builds on the 0.7 per cent gain in the previous month. 

Even so the IMF is only predicting US growth of 1.9 per cent this year and has revised its forecast for 2014 down from three per cent to 2.7 per cent. 

The good news is that this growth is being achieved despite tightening US fiscal policy to reduce the deficit. The IMF estimates that this will reduce growth this year by 1.75 per cent.

It is a well-known feature of markets that they often prefer to travel than to arrive. Confirmation of the US recovery was expected and now generates the question as to what happens next. 

Mining investors know that an expanding US economy is no match for a Chinese one that is growing more slowly. 

More problematic is that after these two themes have played out there isn’t really another one to take up the slack now that emerging markets have played out.  In any case, at heart the emerging markets were just regional plays on the commodity story. 

The core of the problem is that so much money is locked up in “safe” bond markets, especially that of the US, that investors are scared stiff of adding risk by diversifying into other asset classes. 

Sure, they know that inflation is eating away at their capital, but that doesn’t really impact on quarterly performance data. Someone else can deal with problem in a few years’ time.   

It is the short term that matters to money managers, not the long term. 

The problem is that the more they dither the more money they lose as bonds move against them. The advantage the private investor has is that he or can she can look through the short term and invest for the long term.   

Source >>> www.minesite.com
*****


----------



## drillinto

June 15, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You certainly had a wild ride last week, but seem to have ended where you started.

Oz. Much like the rest of the world really, down for much of the week followed by a big lift on Friday. The net result was that the all ordinaries actually added around one per cent, the metals and mining shed one per cent, and the gold index continued its sharp decline, shedding another 5.7 per cent, with Newcrest once again the main offender.

Minews. That Newcrest situation seems to be tainting the whole gold sector.

Oz. It certainly is, and as the corporate cops sift through the evidence they’re finding exactly what you might have expected: private briefings by someone in the company to a select few equity analysts.

Minews. You would think that management in a big listed company would know better than that.

Oz. You would, but Newcrest has always been a little aloof from the rest of the industry, perhaps because size breeds arrogance. In any event, the news from the multiple investigations underway has revealed an email trail of analyst warnings to important clients with those warnings containing very accurate detail about Newcrest’s future gold production forecasts.

Minews. Presumably the bad publicity saw Newcrest sold off again last week.

Oz. It did. On Thursday, Newcrest touched a fresh 10 year low of A$11.40, before closing the week at A$11.57 for a loss of A78 cents. That takes the fall over the past three weeks to A$3.55. Less than two months ago, Newcrest was trading at more than A$20. Last October, it was trading close to A$30.

...

Source >>> www.minesite.com
*****


----------



## MARKETWINNER

http://www.bloomberg.com/news/2013-...to-oil-slump-on-fed-outlook-china-crunch.html

Commodities From Gold to Oil Slump on Fed Outlook, China Crunch

http://www.bloomberg.com/news/2013-...th-high-as-demand-to-weaken-for-u-s-crop.html

Corn Drops as Warmer U.S. Weather May Speed Up Crop Development


----------



## MARKETWINNER

http://www.thehindubusinessline.com...r-steam-at-kolkata-auction/article4837728.ece

Tea prices gather steam at Kolkata auction.

http://www.insidefutures.com/article/974552/WILL LUMBER AND COFFEE TURNAROUND?.html

 WILL LUMBER AND COFFEE TURNAROUND?


----------



## drillinto

June 24, 2013
Will The Chinese Bail Out US Gold Investors, Or Won’t They?
By Rob Davies

It is obvious to all that global capital markets are in a state of heighted tension. What is less clear is exactly why.

And what is totally unclear is what happens next, what it means for investors and how they should position portfolios.

The largest sign of stress is the 19 per cent fall in the US Treasury bond market, as measured by the yield on the 10 year bond.

Over one week it increased from 2.1 per cent to 2.5 per cent as investors digest the hints that the US Federal Reserve is actively considering withdrawing its monthly US$85 billion financial injection to the economy. 

The first sign of Cold Turkey has been the rise in US mortgage rates. The benchmark 30 year mortgage has increased from 3.4 per cent to 4.2 per cent, which has the effect of sucking an awful lot of disposable income out of the world’s largest consumer market. 

Almost at a stroke that reduces worries about rising inflation and is probably the major reason for the abrupt fall in the gold price.

Last week it fell nine per cent and the prime culprit is redemptions of gold backed ETFs. Having accounted for 45 per cent of demand for gold in 2011 SociÃ©tÃ© GÃ©nÃ©rale now estimates that redemptions from ETFs are releasing a 100 tonnes of gold a month onto the market.

Despite an initial surge in demand from the Middle East on the early falls in price, SociÃ©tÃ© GÃ©nÃ©rale does not think there is sufficient appetite to absorb the 800 tonnes it expects to flow from ETFs this year.

This dumping is equivalent to almost one third of new mine production and is a massive surge in supply at the same time that demand has weakened.

Moreover, SociÃ©tÃ© GÃ©nÃ©rale does not think high production costs, now estimated to average US$1,211 an ounce, will provide much of a floor to the price.

Not until gold reaches US$1,150 an ounce, when it estimates that 44 per cent of production will be loss making, does it expect any support.

For many years gold miners craved mass market support for their product. Now they are discovering, as many others have, that retail investors can be fickle

To complicate matters further China is under pressure. This command and control economy run by communists has been the salvation of the capitalist world for the last few years.

A massive jump of 168 per cent in Chinese private debt in the third quarter of last year has persuaded the authorities to start tightening bank lending.

That has had the predictable effect of pushing up overnight rates to 8.4 per cent, triggering concerns of a liquidity crisis akin to that experienced by the west in 2008. 

This fear is behind the reduction of HSBC’s forecasts for Chinese growth from 8.2 per cent to 7.4 per cent. 

As the world’s largest consumer of metals that reduction was a good excuse for base metals, as measured by the LME index, to slide 3.3 per cent to 2,969. Copper took one of the biggest hits, falling 3.8 per cent to US$6,775 a tonne.

At the end of a such a week what do we know now that we didn’t before?

Actually, not much. But we have had confirmation of a few things. One is that the three-decade bull market in bonds is certainly over.

The other noteworthy news is the comment from Yi Gang, a deputy governor of the Peoples Bank of China. He said: “We can only invest one-to-two per cent of the foreign exchange reserves into gold because the market is too small.”

It does not seem that the Chinese will bail out US gold investors, and possibly any other investors either. The Chinese have enough problems of their own.

Source >>> www.minesite.com
*****


----------



## drillinto

June 22, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have been as rattled as everywhere else by the end of the cheap-money era.

Oz. We certainly got a loud reminder that the world is changing, and not for the better, when it comes to gold, in the short-term at least.

What really hurt the Australian market was the stampede of carry-trade speculators who suddenly discovered that not only had a decision been made to turn off the cheap-money tap but that their exposure to falling commodity-heavy currencies was producing a second downward force on their investments.

Minews. The net result being heavy falls across all sectors?

Oz. Falls, yes. Heavy, not really. When we get to the numbers you’ll see that most of the damage in areas other than gold had already been done.

As a guide, the all ordinaries index on the ASX ended the week down a relatively modest one per cent. The metals and mining index was down a more substantial three per cent, and gold was whacked by a very painful 10.5 per cent fall.

Minews. We’ll start the call of the card with gold, unless you have anything else to add.

Oz. Only that the process started during the week by the head of the U.S. central bank, Ben Bernanke, was unequivocally good news for equity markets once the damage of funds being rotated is complete.

It’s not guaranteed but what seems to have started is a shift of capital away from emergency locations, such as gold and government bonds, back into more conventional destinations such as equities.

It’s a process which will eventually filter through to traditional markets, and could be the start of the long-awaited global recovery, led by the US, but a recovery which will trigger increased demand for basic raw materials.

Minews. Is that your long-winded way of the saying we’ve hit the bottom?

Oz. In a word, yes. We’re either at the bottom, or at the start of a period of bouncing along the bottom, but with a slow rise starting as money starts to make its way back into well-run stocks, especially those trading at less than cash backing, of which there are quite a few listed on the ASX.
...

Source >>> www.minesite.com
*****


----------



## drillinto

June 25, 2013

What Is The Outlook For Iron Ore, Scrap, And Metallics?
By Ryan Jackson in Vancouver

After reaching a seven month low at the end of May, the price of iron ore has been marching upward recently. 

China’s spot 63.5% iron ore price has jumped to around US$120 per tonne.

But despite that, many analysts continue to predict 2013 will be a weak year for iron ore. And the majority predict prices will to continue to slide into 2014.

There are a number of factors at play in China and the United States which are fundamentally bearish for iron ore and a big shakeup of the markets would be needed to overcome them.

China is the world’s largest importer of iron ore and accounts for some 60 per cent of global seaborne iron ore demand. Given the magnitude of the Chinese market, it’s only natural that the price of iron is closely linked with the prospects for continued growth in China.

A strong selloff by traders in April, which drove the price down considerably, led to lowered stockpiles which required shoring up in June driving the price upward.

And while it’s fairly safe to say that China will continue to grow, whether the colossal growth rates we have seen to date remains to be seen.

Part of the changing economic landscape in China could involve a shift from an economy based on rapid infrastructure and construction growth to a more consumer-oriented economy. If such a transition becomes a reality, we could see demand for steel begin to wane over the next few years.

That’s not the picture in the immediate term, though. China’s iron ore imports rose to the third highest level in history this May to 68.6 million tonnes, according the official Chinese customs figures, illustrating that demand does remain strong for now.

But major players within the Chinese iron and steel production industry are having doubts about the future. Just recently Ontario Iron Mining, a private Canadian company which is backed by a number of Chinese state owned interests in the steel business, scrapped a deal with Venture-listed Northern Iron to purchase two properties in the Red Lake region of Ontario.

Jonas Struthers of Ontario Iron cited “difficult market and trading conditions in China’s steel industry” as the primary reason for the deal’s collapse, despite satisfactory due diligence on the property.

There are also structural changes afoot. At the moment, China’s steel production relies primarily on the less advanced blast furnace technique of steel production. But the Chinese government has been actively promoting a shift to electric arc furnaces which would provide a number of benefits, including reduced power consumption and dramatically decreased air pollution, two areas which are a focus for Chinese policy makers.

After China, the United States is the next major steel producer and, unlike China, the US has embraced electric arc furnaces to produce steel from scrap steel, hot briquetted iron, and other metallics.

That makes the United States the biggest electric arc furnace user in the world and therefore the country to watch when considering the future prices of scrap and other metallics.

If the US economy picks up and steel production is on the rise, it will inevitably mean that global prices of scrap steel and metallics will rise. This is especially because the US is also the largest exporter of scrap steel. Increased use domestically will have an immediate effect on the global supply.

The recent pickup in the US auto industry has been widely publicized and, with new cars rolling off the line, that is good news for the American steel industry.

But the news elsewhere is less promising. Northern Iron’s chief executive Basil Botha shared some insight regarding the state of the US steel industry during a recent interview with Minesite.com, pointing to another major component of US steel demand which remains on life support.

“When we spoke with Nucor, the biggest steel producer in the US who run 18 electric arc furnaces dotted along the Great Lakes and the South” said Basil, “they were telling us that they were running at 80 to 85 per cent capacity for all rolled products, for cars, fridges, etcetera. But on the rebar side they were only running at about 30 per cent.”

So, while the demand from the consumer and auto sectors is strong, the continued weakness in real estate and construction in the United States puts a serious damper on the steel industry. In effect, the industry is firing on only one cylinder as the construction industry remains stalled.

It’s even got to the point where manufacturers are fighting back collectively against the erosion of the rebar market in the United States. The rebar price has fallen from as high as US$690 a tonne in February to US$645 a tonne now. And even at the February price, margins at American steel mills were tight. So major steel producers Nucor and Gerdau Long Steel North America have dug in their heels and are resisting any further price erosion. That’s prompted a number of other manufactures to follow suit.

For scrap steel and metallics, the price outlook can be tracked in the headlines - if the auto sector is strong and construction sees an improvement, the global prices will respond favourably. In fact, the response is likely to be quite marked, considering the smaller market size when compared to iron ore, and the large component controlled by the United States.

For iron ore, the supply side of the equation is a little more complicated. At present there is a large amount of capacity which is slated to come online, especially from Australia where exports hit a record annualised rate of 592 million tonnes in December, before dropping back to 494 million tonnes in February.

At the same time though, export growth from Brazil has largely flatlined at 275 million tonnes as companies have failed to bring major projects online there.

India has been the most dramatic mover in the iron ore supply equation. Having been a major supplier shipping 81 million tonnes in 2011 and a peak of 119 million tonnes in 2009, Indian producers managed to achieve an annualized rate of only eight million tonnes in the second half of 2012. The massive drop off is a product of government interference in the sector and is likely to be an interesting factor in the supply equation going forward.

Nevertheless, new capacity is expected to come on stream in the near term and, when combined with the general slowdown in China, is expected to spell erosion in the global iron ore price. For scrap and metallics, the big swing factor is US construction, and a turnaround there could spell an uptick in the price. 

Source >>>>> www.minesite.com
*****


----------



## drillinto

*Re: &quot;The best place to be is in commodities&quot;*

Metals & Mining Analysts' Ratings & Estimates - Juniors
25 June 2013
By Bill Matlack 

http://www.kitco.com/ind/Matlack/2013-06-25-dfdf.html
***

- - - Updated - - -



drillinto said:


> Metals & Mining Analysts' Ratings & Estimates - Juniors
> 25 June 2013
> By Bill Matlack
> 
> http://www.kitco.com/ind/Matlack/2013-06-25-dfdf.html
> ***




Among the Microcap Gold, 38.5% have a buy rating.


----------



## drillinto

June 29, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market doesn’t seem to have suffered too much from the sacking of one Prime Minister and her replacement with a recycled PM.

Oz. Quite the opposite. It revelled in the dumping of Julia Gillard, but remains a bit uncertain about whether the return of Kevin Rudd to the PM’s post might be enough to keep the country trapped in an anti-mining Labor Party straight jacket.

Minews. Is that likely?

Oz. It can’t be discounted. Rudd is strangely unpopular with his own colleagues, but quite popular with the electorate.

Early opinion polls, which undoubtedly reflect the excitement of the dramatic events of last week, show that the two major parties are now much closer, whereas Gillard’s unpopularity had created a situation where Labor was heading for one of its biggest electoral thrashings.

Minews. Job losses seem to have been big news down your way last week.

Oz. Now that is an interesting observation, because while we were replacing PMs and other Ministers, another 900 mine workers lost their jobs.

Glencore Xstrata was doing most of the axe swinging last week, hacking into its coal division, but gold miners were also playing the cost-cutting game with Barrick trimming its workforce while smaller miners teetered on the edge of collapse. One, Apex Minerals, finally succumbed to a mountain of debt and not enough gold.

Minews. Let’s move along to the markets now where, presumably, gold stocks remain in the doghouse.

Oz. If it was only one week in the doghouse it wouldn’t be too bad, but gold miners have been there for several months. Last week, the gold index on the ASX lost another nine per cent. That fall came on top of a 10.5 per cent fall in the previous week, 5.7 per cent in the week before that and then two weeks of eight per cent, which compounds into a drop of more than 40 per cent in five weeks.

The extent to which gold stocks were sold off last week can be gauged by the relative strength elsewhere in the Australian market, which actually rose by one per cent as measured by the all ordinaries index. That gain was mainly due to strength among bank stocks, counteracted by a relatively modest three per cent fall by the metals and mining index.
...

Source >> www.minesite.com
*****


----------



## drillinto

ETFs: First 6 months performance

Commodities: Oil was up in June; Natural Gas, Gold & Silver were down
Australia(EWA) was down -7.50% in June

http://www.bespokeinvest.com/thinkbig/2013/7/1/final-first-half-performance-numbers.html
***


----------



## drillinto

The LME and beer

http://commodityhq.com/2013/how-the-lme-is-impacting-beer-prices/
***


----------



## drillinto

Metals & Mining Analysts' Ratings & Estimates - Seniors
June 25, 2013 
By Bill Matlack

http://www.kitco.com/ind/Matlack/2013-06-25-Metals-Mining-Analysts-Ratings-Estimates-Seniors.html
[No bargains among the "Gold, Large Cap"]


----------



## drillinto

Commodities: Gold

http://www.bloomberg.com/news/2013-...-floor-after-66-billion-rout-commodities.html
***


----------



## drillinto

July 02, 2013
Canada’s Prime Minister Stephen Harper Pledges To Bring Greater Transparency To The Extractive Industries
By Ryan Jackson in Vancouver

The Wild West attitudes which once abounded in the Canadian mining industry are no longer a match for today’s modern sensibilities. 

Though increased regulation, not to mention the red tape which inevitably comes with it, can sometimes be a thorn in the side of companies, there’s little doubt that plenty of progress has been made in the mining sector over the last few decades when it comes to fairer exploitation of resources and improved environmental practices.

And the work continues.

The Prospectors and Developers Association of Canada and the Mining Association of Canada, both major groups representing Canada’s resource industry, have teamed up with interested NGOs to form the “Resource Revenue Transparency Working Group” which is consulting with the federal government to advance the Canadian regulatory framework to promote greater transparency.

The story goes back to 2011 when a G8 initiative was tabled with the intention of fighting corruption in resource rich countries by requiring mining companies to disclose payments to all government bodies and officials.

Already, the United States and Hong Kong have instituted policies to that effect and Canada is getting ready to follow suit.

“I’m pleased to announce that Canada will establish new mandatory reporting standards for payments made to foreign and domestic governments by Canadian extractive companies”, said Prime Minister Harper while attending a press conference in London, England.

“Canada is recognized as a world leader in promoting transparency and accountability in the extractive sector both at home and around the world”, he added.

The government cited six primary objectives of the new regulation: Improving transparency; ensuring Canada’s consistency with with other G8 countries; ensuring a level playing field for companies operating domestically and abroad; enhancing investment certainty; helping to reinforce the integrity of Canadian companies; and ensuring residents in resource rich countries have a better understanding of the benefits of resource extraction.

The measure is also expected to be a significant factor in curbing corruption in resource rich countries where large amounts of money are paid as royalties, taxes, and in other forms to all levels of government.

Often, local residents have little knowledge of where those funds end up.

While other countries have beaten Canada out of the gates in instituting similar policies, a change in Canadian regulation is will have broad reaching effects around the world.

Canada is home to sixty per cent of the world’s mining and exploration companies and 35 per cent of all oil and gas companies are listed here.

The official announcement is really the beginning of a process which will involve policy making and a great deal of consultation with representatives from Canadian resource companies, provincial and territorial governments, First Nations groups, and other stakeholders.

Clearly the process will require some time to iron out the folds, It’s been reported that it’ll probably take two years before the law can be implemented.

Details including how reporting will be undertaken, what agency will be in charge of enforcement, and the penalties for non-compliance are all important considerations which need to be taken into account.

But while greater transparency and fairness are key concerns of the Harper government, and the other G8 countries, the Prime Minister is also mindful of the need to limit red tape for an industry which is already plagued with complicated regulatory and reporting standards.

It’s a factor which will be a priority during the consultation process as provincial governments have been keen to cut red tape in recent years.

BC’s recently re-elected Premier Christy Clark has been at the forefront of streamlining the regulatory regime, having cut the permitting backlog for Notice of Work (NOW) permit applications by 84 per cent in 2012.

BC is now spending another C$7 million in the first half of 2013 further to address inefficiencies in the permitting process and the Clark government is sure to be an important voice in the discussions to design Canada’s new reporting standards.


Source >>>>> www.minesite.com
*****


----------



## drillinto

NAB lowers bar for Australian wheat crop forecasts

National Australia Bank lowered the bar for Australia's wheat harvest despite a relatively upbeat view of prospects in Western Australia, where concerns over dryness sent prices to a five-month high.

The bank said that "favourable soil moisture levels", thanks to late-sowing-season rains which "injected a much-welcomed dose of confidence amongst farmers", would see Australia improve this year on its 2012 harvest result, estimated by the official Abares commodity bureau at 22.1m tonnes.

"Some decent rainfall May and the first couple of weeks in June proved to be the saving grace which replenished the critical subsoil moisture level," NAB agribusiness economist Vyanne Lai said.

However, Ms Lai estimated that the rebound will take the crop to 24m tonnes - well short of estimates from other forecasts.

Abares has pegged the crop at 25.4m tonnes, with the International Grains Council putting it at 25.0m tonnes and the US Department of Agriculture at 24.5m tonnes.

...



Source >>> http://www.agrimoney.com/news/nab-lowers-bar-for-australian-wheat-crop-forecasts--6018.html


----------



## drillinto

July 06, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have enjoyed a reasonable recovery last week.

Oz. Gold was the big revival story, but that might not be the case next week after Friday’s fall in the gold price, which came after our market had closed and U.S. interest rates moved up sharply.

Next week obviously has to wait, but it’s a worth bearing in mind when looking at last week’s 10.6 per cent rise in the ASX gold index. Also worth bearing in mind, is that that double-digit jump was off a low base, which amplified the recovery effect.

Minews. How did the other mining sectors of your market perform?

Oz. Reasonably, is the one-word answer. The overall trend was up, with the metals and mining index adding 2.4 per cent, roughly double the all ordinaries rise of one per cent.

Minews. Presumably, politics remains the big news down your way?

Oz. It certainly was. The new, or to be more accurate, the recycled Prime Minister, Kevin Rudd, has been busily patching over some of the mistakes made by his predecessor, Julia Gillard, raising hopes for the socialist parties that they can win the next election.

As if that isn’t enough for business to worry about, there is now doubt as to when the election will be held. Gillard nominated September 14th. Rudd refuses to confirm the date. The net result is that the country has drifted into a sort of political and business limbo.

Minews. Uncertainty is the worst enemy of any business, and speaking of business let’s get on with the call of the card, starting with gold, even if you believe there will be a fresh correction on Monday.

Oz. The challenge with last week’s gold market is to find any stock which fell, which makes for a pleasant change after months of decline.

Quite a few of the rises were in the 10 per cent range seen in the index move. Among the stronger risers were Kingsrose (KRM), up A11.5 cents to A47.5 cents, Perseus (PRU), up A12 cents to A56 cents, Endeavour (EVR), up A11.5 cents to A53.5 cents, Papillon (PIR), up A15 cents to A83 cents, Newcrest (NCM), up A88 cents to A$10.73, Regis (RRL), up A50 cents to A$3.40, Alacer (AQG), also up A50 cents to A$2.54, and Medusa (MML), up A19 cents to A$1.83.

Other, more modest, rises came from Silver Lake (SLR), up A8 cents to A67 cents, Kingsgate (KCN), up A15 cents to A$1.40, Northern Star (NST), up A7 cents to A65 cents, Endeavour (EVN), up A3.5 cents to A59.5 cents, and Beadell (BDR), up A8 cents to A58 cents.

At the tail end of the gold sector there were a few stocks which ended the week steady, or lost a few cents. Troy (TRY) slipped A1 cent lower to A$1.55. Kalnorth (KGM) was down A1.6 cents to A5.4 cents. Sumatra (SUM) slipped half-a-cent lower to A16 cents, while Focus and Scotgold were unmoved at A1.4 cents each.
...

Source >>> www.minesite.com
*****


----------



## drillinto

Nothing Gold Can Stay

Nature's first green is gold,
Her hardest hue to hold.
Her early leaf's a flower;
But only so an hour.
Then leaf subsides to leaf,
So Eden sank to grief,
So dawn goes down to day
Nothing gold can stay. 

Robert Frost
(1874-1963)


----------



## MARKETWINNER

It is time to identify emerging commodities and next bull commodities before others.

In the past we had some of the greatest bull markets for gold, copper, corn, coffee, sugar and soya bean. As I expected in 2012 now they are in a bear tertiary. Some are in the beginning of long term bear market. Now we will see bull markets for new baskets of commodities. Remember even in stock markets some missed the train when they left market during global credit and banking crisis without identifying future winners. Some sectors especially consumer staples outperform the broader market. Just because some commodities are crashing we should not forget the commodity market. There are opportunities even in commodity market.

There are cash rich commodity stocks globally. In addition some other commodity stocks also get hammered when investors tried to sell gold, silver and other commodity stocks. It is similar to what happened to financial sector in the past. Later some financial stocks ended up with more than five or ten baggers.

Everybody attention has gone to expected quantity easing. But there are plenty of silver linings in new development in commodity and currency market. Some sectors and companies in developed, emerging and frontier world particularly some export oriented food and beverage based companies and production companies are going to benefit lot in the coming quarters.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

Charles Li Direct 
LME Warehouse Queues: Perception and reality

http://www.hkex.com.hk/eng/newsconsul/blog/blog.htm
***


----------



## drillinto

July 07, 2013
That Was The Week That Was ... In London
By Robert Tyerman

Investors took heart from indications from new Bank of England Governor Mark Carney that interest rates would remain at rock bottom for longer than the City had been expecting. 

This helped the FTSE 100 Share Index again 2.1 per cent to 6,375.52, backed up by similar-sounding commitments for the Eurozone from Mario Draghi, president of the European Central Bank.

But for those interested in the gold space a note of caution was sounded as the key monetary player, the US Federal Reserve, said that it is sufficiently impressed by robust economic indicators for the US economy not to foreswear its commitment to ‘taper out’ its quantitative easing programme. 

This helped strengthen the dollar, thus clipping the rise of gold and the also the high spirits of mining investors. 

With gold rallying by less than US$50 to US$1,2590.3 an ounce and platinum, copper,  aluminium and iron ore showing modest upturns, the FTSE Mining Share Index nonetheless moved some two per cent lower to 13,547.61.

...

Source >> www.minesite.com
*****


----------



## drillinto

Australia to scrutinize company disclosures after Newcrest probe

SYDNEY, July 7 
Securities regulators will closely monitor disclosures by Australian-listed firms in the upcoming financial reporting season after claims Newcrest Mining Ltd held one-to-one briefings with a small number of analysts prior to releasing bad news.

...

Source >> Reuters
*****


----------



## drillinto

Australia (EWA) is oversold 

http://www.bespokeinvest.com/thinkbig/2013/7/8/country-etf-trading-range-screen.html
***


----------



## drillinto

US equity market: sector performance

Materials sector is currently up 2.3%

http://www.bespokeinvest.com/thinkbig/2013/7/5/2013s-top-stocksso-far.html


----------



## drillinto

July 08, 2013

Will The US Speeding Up Balance China Slowing Down?
Rob Davies
********

Commodities, more than other asset classes, have become the battleground for the two great forces of change now underway in the global economy.  

The US is still the world’s largest economy, but China is the biggest consumer of commodities. 

China’s rapid industrialisation means it needs to build a lot of infrastructure and its population is fast loading up on consumer durables like cars and white goods. 

Even though China’s growth rate has declined from 10 per cent to seven or eight per cent, it still knocks spots off anything in the West. 

Even better than expected US non-farm payroll data on Friday, which showed that 195,000 new jobs had been created in June, is unlikely to push US growth above the current consensus of about 2.8 per cent. 

Given that US auto sales are running at an annualised rate of 15.9 million a year, the best since November 2007 and way above the 14.3 million recorded last year, this is somewhat disappointing for commodity and mining investors. 

They are only too aware that metal prices and mining shares have been the biggest victims of the recent “cold turkey” sell-off in capital markets. 

This rout has been driven by the actions of the authorities in the two largest economies. 

In the US, the Federal Reserve has made it clear it is contemplating ending, at some unspecified time in the future, its US$85 billion a month Treasury purchase programme. 

The news that this large buyer will withdraw from the game because the economy is gaining strength has pushed bond prices down and forced yields up to 2.65 per cent. 

That effectively makes investing a more expensive game for everyone and discourages speculation. 

On the other hand the People’s Bank of China is trying force speculation out of the system by tightening up liquidity to the main banking system. 

Chinese banks had been taking cheap money and on-lending it to the shadow banking system where, amongst other things, it had been financing speculative stockpiling of commodities.  

That squeeze is now probably responsible for some liquidation of speculative holdings. 

Either of these actions on their own would have been painful for metals and miners. 

Getting hit by both at the same time has been like taking a one two from a prize fighter. That is the proximate reason for the five per cent drop in the LME index over the last few weeks to 2,932. 

Although the rising dollar, which reduces production costs in countries like Australia, Brazil and South Africa, will mitigate the effects of the metal price falls to some extent, there is no doubt that the brutal logic of the cost curve will soon start to take effect. 

Deutsche Bank, in a recent note, reckons the current marginal cost of nickel production is US$17,000 a tonne, well above the current price of US$13,530 a tonne. 

In particular it thinks the nickel pig iron producers in China will be feeling the pain. How long will it be before some of this production is curtailed?

In copper the situation is not quite so acute. 

Here Deutsche Bank believes the current marginal cost of production is just over US$5,000 a tonne and that provides comfort for mot producers at the current price of US$6,821 a tonne.

But in the short-term it seems unlikely that stronger US growth is going to save metals from slower growth in China. 

The industry will have to rely on its own survival instincts to keep metal in the ground for sale at a profit later, rather than selling at a loss now.

Source >> www.minesite.com
*****


----------



## drillinto

China to import more wheat

Chinese flour mills bought wheat from France in June, a rare purchase that highlights China’s concerns about its low-quality harvest amid recent declines in global prices.
... 

http://agfax.com/2013/07/02/china-to-import-more-wheat/
***


----------



## drillinto

Mongolia's Oyu Tolgoi copper exports underway - Rio Tinto

Sydney, July 9 
Copper concentrate shipments to China from Mongolia's giant Oyu Tolgoi mine kicked off on Tuesday, 
after repeated delays that underscored the risks of investing in the country's burgeoning mining sector.

The mine is expected to make up a third of Mongolia's economy by 2020, and at full tilt produce 
around 450,000 tonnes of copper and 330,000 ounces of gold a year.
...

http://www.reuters.com/article/2013/07/09/riotinto-oyutolgoi-copper-idUSL3N0F70VC20130709
***


----------



## MARKETWINNER

I believe Commodity super cycle not over. It is taking some break. It can last   another 16-20 years.

Factors to watch: Population growth and rapid urbanization

There will be cycles within super cycles.

As I said before different commodities will rise at different times. Then there are opportunities for both traders and investors.

Not all commodities needed to be consistently high all the time.

We had some of the greatest rally in gold, silver corn, coffee, palm oil and natural rubber etc. in the past. We will have mega commodity rally in some other commodities including emerging commodities in the coming decade.

At the moment lot of people are talking about there will be great demand for gold due to jewellery sector. In the long run if we analyse demographic changes in India and China there will be less demand for jewellery. One child policy in China and preference of having boys more in Asian family also will affect for gold market. Fewer women in the future in some Asian countries in the future mean less demand for jewellery.

My ideas are not a recommendation to either buy or sell any security, commodity   or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

NY: Precious Metals Up Sharply
11 July 2013 at 10:35 ET

Precious metals are leading commodities today with Sept silver up 4.5% at $20.03/oz 
and Aug gold up 2.9% at $1282.90/oz. 

Sept copper is +3.3% at $3.19/lb.


----------



## drillinto

For your consideration >> http://www.iea.org/


----------



## drillinto

Food and Agriculture Organization of the United Nations >> www.fao.org


----------



## drillinto

July 13, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. The recovery on your market that we discussed last week seems to have continued.

Oz. It did, and if anything it got even better, with investors developing confidence in sectors other than gold which has been the big revival story down this way.

When we last spoke the gold index on the ASX had just staged a remarkable 10.6 per cent rise.

That was followed over the latest five trading days by a rise of another 9.4 per cent. Add those two numbers and you get a 20 per cent lift in just two weeks.

Minews. Yes, but a 20 per cent lift off a low base.

Oz. That’s true, but I don’t think there are many investors who would complain about an upward move like that.

Gold, however, was only part of last week’s story because the improved mood was reflected in iron ore, copper and nickel, though price movements in those sectors were mixed, a trend shown in the metals and mining index which rose by 5.4 per cent.

What’s interesting to investors looking for trends is that if you add the latest rise in the metals and mining index with the 2.4 per cent of the previous week you can see an overall mining recovery in the order of 7.8 per cent over the past two weeks, which is less than half the pace of gold but close to double the pace of the all ordinaries, possibly signalling the start of the keenly-awaited mining recovery.

Minews. Is the recovery sustainable?

Oz. Perhaps, but it will also be volatile as the world adjusts to a leadership change in the growth stakes, with the US leading the way, China following and Europe still behaving like a ship’s anchor.
...

Source >> www.minesite.com
*****


----------



## drillinto

Wheat Outlook >> http://www.ers.usda.gov/media/1130448/whs13f.pdf


----------



## MARKETWINNER

Majority of commodity stocks are now selling below their panic low prices achieved in March of 2009. In addition if I am correct commodity stocks have underperformed the broader markets since April of 2011. They have been in a deeper cyclical bear market than the commodities themselves. For example Gold ETF has gone down more than gold. Soft commodity stocks and ETFs have gone down more than some soft commodities. We can find great value in these food based commodities now. I think the broader developed equity and bond markets are generally overvalued in some markets. Undervalued commodity stocks have a strong probability of delivering positive returns in the future

We are in a longer-term secular bull market in commodities and commodity stocks. Now we are having cyclical bear markets in commodities and commodity stocks. Even in cyclical bear market there can be bull stocks and bull commodities.

Timing is very important. After more than two years of underperformance by commodities and commodity stocks, I believe we are at the bottom in terms of valuations and prices for commodity stocks.

There is a contrarian opportunity in commodity stocks. Some commodity stocks with demand and supply mismatch, emerging commodity stocks will out perform other stocks in the coming years. 

In short I am bullish on commodity stocks and there can be strong rebound in commodity stocks sooner than later.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

July 15, 2013

As Metals Rebound, Choose Your Worry: Inflation Or Deflation?
By Rob Davies

The high level of volatility in capital markets is in large part because investors cannot decide if they should worry about inflation or deflation. 

Despite the gargantuan sums of money created by central banks around the world, inflation has resolutely stayed around two per cent in most of the major economies. 

It was the dawning realisation that deflation was still the biggest threat to the global economy that was the main reason for the sell-off in commodities this year. 

Evidently some investors thought the trend had gone too far by the middle of last week, and received some encouragement in that view from Fed Chairman Ben Bernanke when he said that policy would remain accommodating until all the signs were green. 

That was enough to give commodity markets a reason to rally. Base metals, as measured by the LME Index, rose three per cent to 3,026.

Even gold rallied, by 4.7 per cent to US$1,279 an ounce.   

The future course of capital markets largely depends on whether fears that QE-induced inflation will drive prices up, or whether overcapacity and austerity resulting from lower government spending will depress values.  Evidence can be found to support both arguments. 

Alcoa, as usual, was the first miner to kick off the results season, and although it made a loss because of plant closures it is still confident of a seven per cent increase in aluminium demand this year. 

That suggests growth will be good and capacity reductions will help maintain prices. Indeed, some of the 2.6 per cent jump in aluminium prices to US$1,789 a tonne was undoubtedly due to this news. 

On the other hand the professional gloomsters at the IMF have reduced their forecast for world growth this year, mainly because of reduced activity in developing economies.

China has joined in by casually admitting it is expecting to only grow at seven per cent in 2013 instead of the 7.5% it was bandying around only a few months ago.  

That difference might look like a rounding error to most analysts but the nuance is being examined very closely by sinologists. It is also important to commodities, given China’s leading role in commodity consumption. 

Moreover, Lombard Street Research points out that Germany’s reliance on exporting manufactured goods to China means it also vulnerable to a Chinese economy growing more slowly. 
And Germany is Europe’s large consumer of metals. 

But what was interesting about the rally last week in metals and mining was the sudden recall that this sector still generates huge amounts of cash. 

The valuations of the large miners seemed to be discounting an outright Chinese recession, yet metal and commodity prices are nowhere near factoring in that sort of scenario. 

It is quite possible for markets to exaggerate the negative possibilities of slow and anaemic growth. 

That of course means that if conditions are not quite as apocalyptic as forecast there is scope for quite a strong rally as bears adjust to better conditions. That is what seems to have happened last week. 

It does not though answer the fundamental question of whether to worry about inflation or deflation.  Maybe the answer is to worry about both, but just on different weeks.

Source >>>>> www.minesite.com


----------



## drillinto

Jim Rogers has this to say to ASF's readers

http://commodityhq.com/2013/jim-rogers-why-gold-broke-its-bull-run/


----------



## drillinto

Big iron ore miners pushing supply side to weed out rivals

Source >>> http://uk.reuters.com/article/2013/07/17/australia-bhp-idUKL4N0FN04Z20130717
*****


----------



## drillinto

>>> Shrimp Exports From Thailand Poised to Decline 50% on Disease <<<

http://www.bloomberg.com/news/2013-...thailand-poised-to-decline-50-on-disease.html

http://www.fao.org/news/story/en/item/175416/icode/


----------



## alex123711

the commodities boom has mostly been driven by the energy/ resource sector. This may or may not be winding down, but I think raw food/ agriculture has been relatively flat and could be the next boom.. Thoughts?


----------



## MARKETWINNER

My view on commodity market.

Globally commodity stocks are cheaper than commodity themselves now.
Always there is demand for things. People will eat and drink during good and bad times. 

Climate change will create demand for some things in the future. 

Less arable land will create short supply in some commodities in the future 

Labour shortage in some countries will reduce output in some commodities in the coming years.

Finally we cannot forget growing populations in Asian and African countries. 

They will need more commodities in the future.

Cash rich strong commodity companies can survive in good and bad times as long as they have demand and market for their products.

We always use commodity and things in our life. Can we live without having food and drink? Can we run our cars, homes and schools without having commodities? Can we build houses and other building and develop towns and infrastructure without having commodities? It is true there are cycles for different commodities, stocks, currencies and other assets at different times. We should have some idea about these cycles as well.

Based on my study I am bullish on both stock and commodity market in the coming decade. As I said before it is time to identify next most bullish markets, sectors, stocks, commodities, currencies and other things. I believe globally consumer staples sector will lead the market in the coming decade.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

July 20, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz
...

Minews. Over now to minor metals to wrap up our new and snappy review of the market.

Oz. There was a modest upward trend among the minor metals. Base (BSE) led the titanium stocks with a rise of A1.5 cents to A39 cents.

Alkane (ALK) was the best of the rare earth stocks with a rise of A3 cents to A45 cents.

Syrah (SYR) was the pick of the graphite stocks with a rise of A8 cents to A$2.26, while the vanadium producer Atlantic (ATI) added A5 cents to A25 cents.

Minews. Thanks Oz.

Source >> www.minesite.com
*****


----------



## drillinto

22 July, 11:18 am (NY time)

Precious metals soared higher this morning, led by strength in silver prices. 
Aug gold rose above $1300, while Sept silver rose above $20/oz. 
In current trade, gold is +2.7% at $1327.20 and silver is +4.8% at $20.39/oz. 
Sept copper is +2.0% at $3.20/lb.


----------



## drillinto

July 22, 2013

Is China Heading Towards A Recession?
Rob Davies

The old clichÃ© was that if America sneezed the rest of the world caught a cold. 

But these days commodity investors monitor every twitch in China to analyse how it might affect them. 

Even though China’s second quarter GDP growth came in at a respectable 1.7 per cent - an annualised rate of 6.8 per cent - the inner temple priests at Lombard Street Research have peered through the fog and believe the real rate of GDP actually declined by 0.2 per cent in that period. 

Lombard Street cites declines in steel and industrial production to support its case, although it concedes electricity output did grow.

It seems its views are shared by most commodity investors, because the LME index declined by 0.6 per cent over the week to finish at 3,007. 

That goes against the rule of thumb that a weak dollar is good for metals, given that the US currency wobbled then eased back over the week.

Lombard Street Research is quite trenchant in its view that weak external demand, an overvalued currency, poor corporate profits and high real interest rates will cause more damage in the third quarter, leading to an another period of negative growth for China. 

Two of those in a row would be a recession. 

The research house also believes that China has no choice but to reform its economy, despite the pain it might inflict in the short term. 

One small step in that direction was taken last week when the People’s Bank of China removed the floor on interest rates. 

That itself won’t make much difference. However, when it feels strong enough to lift the cap on interest rates too, the impact could be quite dramatic. 

Current rates of six per cent could look quite tame if, or when, the cost of money goes up. 

No one is quite sure what the effects might be. Certainly, commodity investors will be sensitive to how Chinese hoarders of metal inventory might react. 

If they decide to liquidate stockpiles at a time of weak demand, metal prices could react quite sharply. 

This slowdown is already triggering a response from the mining industry. Rio Tinto, for example, has slashed its exploration budget in the first half of 2013 to US$542 million, from US$1,025 million last year. 

Where that money is going is probably a good guide to selecting junior exploration stocks.

They are likely to be joint venture partners for the majors and doing the heavy lifting of exploration mapping and drilling. 

So it is good to read that 44 per cent of the expenditure is going on copper, and 16 per cent on diamonds and minerals. The small amount - just six per cent -going into iron ore won’t affect juniors too much as they tend not to get too involved in this sector. 

Nevertheless, the first shipment of copper from Oyu Tolgoi in the quarter is a reminder of the importance of scale in mining now. 

Juniors may be good at finding metal but few, even Bob Friedland, the seed investor in Oyu Tolgoi, have got the capacity or expertise to spend the US$6.2 billion over the seven years it has taken to build this one. 

China may be experiencing a recession right now but large mines like Oyu Tolgoi will undoubtedly see many over the course of their lives. 

During its projected 50 year life copper will certainly trade below the current price of US$6,919 a tonne, but it is new mines like this one that will cope with lower prices better than most.

Source >>> www.minesite.com


----------



## drillinto

OPEC Revenues

http://www.eia.gov/countries/regions-topics.cfm?fips=OPEC&trk=c


----------



## drillinto

World energy consumption by fuel: projections 2010-2040

http://www.eia.gov/todayinenergy/detail.cfm?id=12251
***


----------



## drillinto

2013 International Year of Statistics

http://www.statistics2013.org/files/2012/12/STAT2013Poster.pdf
***


----------



## drillinto

Maritime chokepoints critical to petroleum markets

http://www.eia.gov/todayinenergy/detail.cfm?id=330
***


----------



## drillinto

July 27, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minesite. Good morning Australia. Your market seems to have performed quite well last week.

Oz. It did, with gold leading the way thanks to the stronger bullion price, followed by some reasonable rises in other sectors.

Overall, the metals and mining index added a respectable 2.7 per cent, was double the 1.3 per cent rise posted by the all ordinaries.

Gold, however, had a stellar week with the rise in its ASX index hitting double figures, up an eye-catching 10.7 per cent.

Minews. That seems to be an awfully strong rise for what was a modest rally in the gold price.

Oz. It was, and it is a worry because of what might be called the ‘too-far, too-fast rule’, and a degree of concern that gold stocks are being pushed and pulled by fast moving speculators rather than genuine investors.

Minews. You mustn’t complain, a win is a win.

Oz. I trust that comment about winning isn’t leading this conversation in the direction I think it is, towards a certain cricket competition.

Minews. Wouldn’t dream of it, we’re too well-mannered here in London, but since you mentioned it …

Oz. Right, that’ll do. Let’s shuffle along now and undertake our new quick-fire call of the card, starting with gold, even if there is a degree of concern that what we’ve just seen could be quickly reversed next week.

Stars of the gold sector, and there were quite a few included Resolute (RSG), up A14 cents to A82.5 cents, Endeavour (EVR), up A21 cents to A75 cents, Evolution (EVN), up A13 cents to A83.5 cents, Alacer (AQG), up A23 cents to A$2.75, Norton (NGF), up A3 cents to A14.5 cents, Gryphon (GRY), up A6 cents to A20 cents, and Newcrest (NCM), the stock which really drives the index, up A$1.29 to A$12.41.
...

Source >>> www.minesite.com
*****


----------



## sibeiho

The commodities are already in transition to move away from its bear market....if you are investing this is probably one of the best opportunities to be in right now....

I believe the S&P 500 is about to make its way lower and into its bear market....take a look at this blog and you will understand better....there is a gd possibilty i might have shorted the S&P right around the top....


----------



## drillinto

The World Nuclear Industry Status Report 2013

http://www.worldnuclearreport.org/The-World-Nuclear-Industry-Status-165.html
***


----------



## drillinto

July 29, 2013

Production Cutbacks Will Be Good For Prices In The Long-Term, 
But The Likes Of Anglo Will Suffer A Great Deal Along The Way
By Rob Davies

Anglo American is the latest large mining company to announce it is trimming its sails to the wind of change in in the industry. 

Anglo has always been the runt of the mining litter.

That was tolerable when there was plenty to feed on from elevated metal prices.

But another one per cent fall last week, as measured by the LME index, is further evidence that conditions are getting tighter.

And a 28 per cent decrease in first half underlying earnings for Anglo to US$1.3 billion is a clear demonstration of its sensitivity to the prevailing economic weather.

Like Rio the week before, Anglo is going to reduce capital expenditure, US$1 billion less in the first half, as the first step to drive return on capital employed up to 15 per cent from the current eight per cent.

In the longer term Anglo said half of the US$17 billion of unapproved projects in its pipeline would be stopped.

This is where the interests of shareholders and managers can sometimes split.

Mining investors want higher commodity prices, more volume and higher profits. That’s fine when prices are rising.

It is when prices start to stagnate, or even worse decline, that the conflict arises.

In that situation investors want loss making mines closed so that cash is conserved for profitable projects and, even more importantly, hard to find reserves of metal are not sold at a loss.  

Understandably, managers are reluctant to close mines and lay people off, because it reduces the size of their toy box.

But be that as it may, in practice the easiest way to boost profitability for most companies is simply to close high cost mines.

That has the effect of reducing supply which will, eventually, boost prices.

What Anglo’s figures do demonstrate is the acute sensitivity of marginal producers to commodity prices.

Even though iron ore prices only declined by US$5.00 to US$130 a tonne in the first half of 2013 from 2012 that decline reduced underlying earnings from the iron ore division by US$44 million.

More concerning was the US$48 million switch from profit to loss in the nickel division as a result from just a 12 per cent fall in the average nickel price to US$16,138 a tonne.

Last week nickel fell another one per cent to trade at US$13,825 a tonne, demonstrating the urgency of trying to hit a target that is moving away.

And Anglo is already very sensitive to iron ore prices.

Each US$10.00 move in the price changes earnings by US$78 million. That exposure will increase dramatically when the new Minas–Rio mine in Brazil starts up at the end of 2014.

This US$8.8 billion project may come on stream at a very difficult time for the steel business if Chinese growth remains less than stellar.

If prices are low it will be a tough challenge for Anglo to respond to. It can hardly announce a closure when it has US$9.8 billion of debt outstanding that needs to be serviced and eventually repaid.

Perhaps the most irritating fact of all is that it might be shareholders in other miners that could benefit the most from Anglo’s new, tougher capital discipline if it succeeds in tightening the commodity markets.

However, until those difficult decisions are taken commodity markets have probably got tougher times ahead.  

Source >> www.minesite.com
*****


----------



## drillinto

South Africa: Copper Theft Barometer (June 2013) 

http://www.polity.org.za/article/sa...t-barometer-for-june-2013-29072013-2013-07-29


----------



## drillinto

The ETF holdings of EWA (Australia)

http://www.etfinvestmentoutlook.com/etf_holdings.php?s=EWA
***


----------



## drillinto

July 2013 - EWA(Australia): +3.01%

http://www.bespokeinvest.com/thinkbig/2013/7/31/july-2013-stock-market-performance.html
***


----------



## drillinto

August 1, 2013

Proved reserves of crude oil and natural gas in the United States up sharply in 2011

http://www.eia.gov/todayinenergy/detail.cfm?id=12351
***


----------



## drillinto

World coal consumption by region
Please see China under Non-OECD Asia

http://www.eia.gov/oiaf/aeo/tablebr...=7-IEO2013&region=0-0&cases=Reference-d041117


----------



## drillinto

August 02, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like you had another reasonable week, except for in gold.

Oz. It wasn’t a bad week, but it was also a week without a strong direction.

Gold, as mentioned, was the sick man as the gold price fell back through the US$1,300 an ounce mark. Iron companies did quite well but the lion’s share of the 2.5 per cent rise in the metals and mining index was down to the big two, BHP Billiton and Rio Tinto, which both added around 3.5 per cent on the Australian market.

Overall our market added 1.5 per cent, as measured by the all ordinaries, a move which substantially compensated for the five per cent fall in the gold index.

Minews. We’ll get to gold later, but let’s start this week’s call with iron ore because the price seems to moving up again rather than down, as some people have been tipping.

Oz. Not only is the price up in US but it’s up even further in Australia thanks to a fresh slide in the Australian dollar to below the US90 cent mark, its lowest in three years.

The dollar seems to be reflecting a deterioration in Australia’s terms of trade as the resources boom becomes a fading memory with some tips of the next stop being in the US80 cent range.

The other big news in the Australian market last week involved more heavyweight asset-value write-downs, with deep cuts made by Panoramic (PAN), Western Areas (WSA) and Resolute (RSG), and the failure of one-time uranium star, Paladin (PDN) to attract a joint venture partner for its flagship Langer Heinrich project in Namibia, which means it will fall back on a big share issue.

Minews. That sounds painful for Paladin.

Oz. Probably, but the shares were suspended on Friday which means the bad news has been delayed until next week.
...

Source >> www.minesite.com
*****


----------



## drillinto

Fertilizer Stocks

http://www.marketwatch.com/story/ch...n-up-fertilizer-stocks-2013-08-02?siteid=nbch


----------



## drillinto

August 05, 2013

Which Way Now For Sentiment In The Mining And Commodities Sectors?
By Rob Davies

Warren Buffet once described the art of investing as being akin to judging the judges at a beauty contest.

Working out the winner was not a question of picking the prettiest girl but working out which one most appealed to the judges. 

In no section of the market is that more relevant than in commodities, where sentiment can be so crucially important.  

Right now the signals are more confusing than ever. 

The dollar is on a rollercoaster ride which directly impacts metals since it the principal unit for measuring value. 

Last week the greenback drifted off 0.6 per cent against the major currencies and helped base metals rise two per cent as measured by the LME index.  

Other signs are more negative, though. The likely departure of ENRC from the London Stock Exchange is another indication that capital is being withdrawn from the mining industry. 

To be fair, that particular story is far more complex than just a simple play on hard commodities but it is indicative of the mood. 

On the other hand, David Stevenson of the FT makes a strong argument for committing more capital to the sector. 

He cites a paper by a US economist that argues that commodity prices have risen in real terms since 1950 despite enormous levels of volatility. 

David’s argument is essentially that it is impossible to get too cute about prices and the best bet is simply to pick up stuff when it is cheap. 

There is no doubt that metals are considerably cheaper than they were, even after the bounce in recent weeks. What is harder, indeed impossible, to determine is whether we have seen the lows. 

A major complicating factor in this global industry is the role of currencies. 

Even though the US dollar weakened, it has strengthened against some currencies that are important to the mining industry. 

Last week it hit a four year high against the Brazilian real of R$2.30, and the Aussie dollar has plummeted 15 per cent since early April. 

The South African rand is only down 10 per cent over that period, but the decline is 20 per cent if measured from last September. 

All these changes will have a dramatic positive effect on production costs for mines located in these countries. This will help to maintain margins from the producers even though quoted metal prices will be lower year on year. 

Other factors will still be important, such as the currency of any debt, but investors need not be too downhearted that their mining investments will suffer, just because metal prices are weak in dollar terms. 

And it is intriguing, but probably just coincidence, that three base metals are all trading at similar prices. 

At Friday’s close aluminium was quoted at US$1,769 a tonne, lead at US$2,111 and zinc at US$1,834. It is true of course that lead and zinc are commonly found and mined together, but the extraction process for aluminium is very different indeed.  

Is it just happenstance that the marginal costs of production of three quite different metals incorporate roughly the same labour, fuel and capital inputs?  

The closeness is even more perplexing when the geographic dispersion, and hence currency exposure, of the three metals is considered.   

To judge the evolution of metal prices over the short to medium term investors are going to have form opinions not just on the other players in this market, but on the judges of the currency market as well. 

But, hey, no one said it was easy.

Source >>> www.minesite.com
*****


----------



## MARKETWINNER

Strength in commodity markets will be something we should see generally over the next 10 to 20 years. Because emerging world, USA, Europe even frontier worlds are not dead. They will need more things in the future. 

At different times different commodities will outperform others. I believe we will have some of the greatest returns from out of favor commodity stocks. It is time to identify future winners in the commodity sector. It is also time to identify emerging commodities with demand and supply mismatch.

We will see great commodity bear market when we see slow down in global population after 20 years.


----------



## drillinto

MARKETWINNER said:


> Strength in commodity markets will be something we should see generally over the next 10 to 20 years. Because emerging world, USA, Europe even frontier worlds are not dead. They will need more things in the future.
> 
> At different times different commodities will outperform others. I believe we will have some of the greatest returns from out of favor commodity stocks. It is time to identify future winners in the commodity sector. It is also time to identify emerging commodities with demand and supply mismatch.
> 
> We will see great commodity bear market when we see slow down in global population after 20 years.




The PC16: Identifying China's Successors

http://www.stratfor.com/weekly/pc16-identifying-chinas-successors


----------



## drillinto

Commodities Heatmap

http://commodityhq.com/commodityhq-heatmap/
***


----------



## drillinto

August 10, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have had a slow start and a reasonable finish to the week.

Oz. That’s pretty much how it unfolded, with the stronger China trade data on Friday re-booting interest in resources stocks, while the banking and industrial sectors drifted lower as a consequence of the uncertain pre-election mood of the country.

Minews. So the trend improved after the annual Diggers & Dealers forum?

Oz. Interestingly, it did. Cramming 2,000 miners, resource analysts and investors into a relatively small, outback mining town had a somewhat depressing effect on all involved, perhaps because there wasn’t much anyone there could do to influence events.

And the uplift which helped the ASX metals and mining index shake off a downward spiral only came when the China trade data brought international investors back into the Australian market.

Between Monday and Wednesday, the period which coincides with Diggers, the mining index actually lost 2.5 per cent. It then stacked on three per cent on Thursday and Friday to close the week up 0.5 per cent.
...

Source >>> www.minesite.com


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## drillinto

August 12, 2013

Cash Will Be Trashed By Low Interest Rates And Inflation, So The Case For Risk Assets Like Commodities And Equities Is Still Strong
By Rob Davies

Central banks now think they should tell us what interest rates are likely to do for the next few years. 

In short, they will be lower for longer than many previously thought.

In the past guessing where interest rates were going kept whole flocks of economists pointlessly employed by banks and fund managers.

But even though their primary function is now surplus to requirements it is unlikely that the cost base of financial institutions will decline as result of economists being made redundant.

Surprisingly, capital markets ignored this invitation to speculate wildly without the risk that the cost of money might suddenly increase.

Although equity markets were subdued, metal prices rose, but that was because better guidance from central banks spurred them on.  

Instead, it was the siren call from the east.

Chinese factory production reportedly rose 9.7 per cent in the year to July.

In addition copper imports were 27 per cent higher than the average for the first quarter.

These data triggered a 3.8 per cent increase in base metal prices as measured by the LME index.

Some base metals reacted better than others. Lead was the most lethargic, rising just 1.8 per cent to US$2,150 a tonne.

Tin was far more sprightly. It recorded a 5.9 per cent jump to US$22,100 a tonne.

As in many areas of the market these days this disparity in the varying prices of base metals probably tells us more about liquidity, or lack of it, than the underlying fundamentals for the individual metals.

Over the last few months metals and mining have been largely written-off by the financial chateratti.

These sages seem to think that the lacklustre recovery in the Western World, which many initially denied was even happening, was a reason to ignore commodities.

Their argument was that if the recovery is weak enough for central banks to keep interest rates low for several years ahead, then there is precious little to suggest that there will be a strong cyclical bounce in commodities.

That may be true in the West but does not apply to the East where nothing seems to stop China’s inexorable advance.

What might concern economists dreading the imminent arrival of their P45s is the small print in the message from the Bank of England and other central banks.

The authorities are saying they do not care about inflation.

There are two reasons for such a statement. First, that inflation simply devalues the outstanding stock of debt and thus helps borrowers.

Since governments are the biggest borrowers of all the incentive is pretty strong.

The second reason is that governments are more concerned about getting re-elected than anything else and employed voters are more likely to bring that about than unemployed ones.

So the message is clear.

Cash will be trashed by low interest rates and inflation. Bonds will be little better.

The only way savers will be able to defend their purchasing power is by investing in risk assets like equities and commodities.  

The authorities have set out quite clearly that they want voters to go out and dispose of cash either by spending it or investing it.

That can only be good for capital markets and suggests that the prevailing upward trend is set to continue.  

The only risk is that it may happen sooner, and be more vigorous, than many expect.

Source >>> www.minesite.com
*****


----------



## MARKETWINNER

As I expected there were some rebound in commodity and in commodity stocks. 

Copper and aluminium touched two-month peaks on Monday. From Canada to New Zeeland prices of some commodity stocks went up sharply. On Thursday natural gas, corn, and gold went up over 2 percent, silver went up more than 5 percent and oil hitting a four-month high. Coffee prices in Vietnam climbed to a three-week top on Tuesday. Both Coco and tea market also warmed up. In the mean time Cattle prices spiked on supply fears.

At the moment there is some short term support for some commodities including gold and for currencies such as AUD and NZD. Despite interest rate cut AUD went up. Despite earthquakes NZD had a strong base. Still some money out there. Next 12 months is very crucial for Gold, AUD and NZD.

In short at different times different stocks including commodity stocks and commodities will out perform other stocks and commodities.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

August 17, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your beleaguered gold stocks seem to have had a good week.

Oz. Very much so. The higher gold price flowed directly into most explorers and producers with the gold index on the ASX adding a very impressive 14 per cent over the week, four-times better than the overall mining index which gained three per cent, and 14-times better than the all ordinaries which was up one per cent.

Minews. In other words, a big week of recovery for mining stocks, led by gold.

Oz. That’s one way of describing it. The twin driving forces were stronger Chinese trade data for the base metals and iron ore, and a shift back to gold because of concern about over the end of paper-money printing by the US central bank.

The China factor pushed the iron ore price back over the US$140 a tonne mark, copper rose to US$3.34 a pound, and nickel reached US$6.76 per pound.

The US paper-money factor drove gold to US$1,377 an ounce, with US$1,400 in sight, according to some gold bugs.

A third factor, but one much harder to measure, was a discernible shift in the political pendulum back to the conservative parties, as our election campaign heats up ahead of the September 7th poll.

Betting now is firmly in favour of a change of government, the end of the deeply-disliked super tax on mining, and the end of the even more disliked carbon tax.

Minews. Sounds like an interesting few weeks ahead, but let’s stick with last week’s events, starting our call of the card with gold stocks to see the effect of the higher price.

Oz. All up, is the two word description of the gold market, most substantially and some modestly. Falls were hard to find.

Better moves included Kingsgate (KCN), up A40 cents to A$1.97, Endeavour (EVR), up A19 cents to A85 cents, Silver Lake (SLR), up A22 cents to A92 cents, Troy (TRY), up A35 cents to A$1.69, Orbis (OBS), up A6 cents to A36 cents, St Barbara (SBM), up A19 cents to A66.5 cents, Kingsrose (KRM), up A6 cents to A41.5 cents, and Regis (RRL), up A44 cents to A$3.95.
...

Source >> www.minesiste.com
*****


----------



## MARKETWINNER

http://www.bloomberg.com/news/2013-...-month-high-on-stimulus-demand-prospects.html

Gold Slumps on Stimulus Concern as Commodities Selloff Deepens


----------



## drillinto

Commodities: Aluminum

http://commodityhq.com/2013/goldman-sachs-jp-morgans-aluminum-game-unravels/
***


----------



## drillinto

Gold... regaining its lustre

August 25, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Gold seems to have retained its role as the driver in your markets.

Oz. Very much so. A five per cent rise in the gold index took the gain to 19 per cent over two weeks, and with the near-certainty of more to come next week because the gold price kept rising after we had closed on Friday. Another factor which returned last week was the falling Australian dollar which, at one stage was below US90 cents, but closed the week at around that figure.

The net result is that gold in US dollars is now up about another US$24 an ounce on our Friday close and tantalisingly close to the US$1400 per ounce mark, while the Australian domestic gold price is back to a very impressive A$1,547 per ounce.

Minews. We’ll watch next week with interest. Back to what’s been happening.

Oz. After gold, the rest of the Australian market was relatively sluggish, adding just 0.3 per cent as measured by the all ordinaries index, while the metals and mining index managed a gain of 1.1 per cent.

News from the election campaign is equally interesting because the gap between the conservative coalition and the Labor Party continues to widen with a change of government on September 7th looking more likely than at any time in the past month.

If the change occurs the Australian mining sector can expect a significant boost because the deeply disliked mining tax will go, as will the equally disliked carbon tax.

Minews. Interesting, but let’s switch to prices now, please, starting with gold.

Oz. Much like the last time we talked it was much harder to find any gold companies that fell, though the latest batch of rises were more modest than big recovery of two weeks ago.

Kingsgate (KCN) was one of the stars, rising by A68 cents (34 per cent) to A$2.65 as confidence returned to the company and its gold operations in Thailand. OceanaGold (OGC), added A54 cents (33 per cent) to A$2.15. St Barbara (SBM) continued its recovery with a rise of A13 cents to A79 cents despite reporting a big asset-value write-down, and Medusa (MML) put on A24 cents to A$2.62.

Other gold moves, mainly up, included: Troy (TRY), up A14 cents to A$1.83, Silver Lake (SLR), up A9 cents to A$1.01, Regis (RRL), up A15 cents to A$4.10, Middle Island (MDI), up A2 cents to A15 cents, Endeavour (EVR), up A3.5 cents to A88.5 cents, Evolution (EVN) also up A3.5 cents to A93.5 cents, Perseus (PRU), down half-a-cent to A78 cents, and Kingsrose (KRM), down by the same fractional amount of half-a-cent to A41 cents.
...

Source >> www.minesite.com
*****


----------



## MARKETWINNER

From Canada to Asia Pacific region we saw some sort of rebound in commodity stocks such gold stocks, plantations stocks and Agri stocks etc during last couple of days.  Globally there were some opportunities in out of favor commodities and commodity stocks as well. If we see supply threat or lower production in some commodities there will be short term spikes in some commodities in 2014.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

September 08, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia, and hello to your new pro-mining government.

Oz. Yes, Tony Abbott will be the new Prime Minister, leading a conservative government with a handsome majority.

Minews. Are investors expecting much change?

Oz. Yes. As we’ve discussed over the past few weeks a switch to coalition of Liberal and National Parties will see the end of the mining super-tax and, potentially, the end of the carbon tax if the new government gets control of the Senate as well as the lower house.

Minews. We’ll wait for the details but essentially you’re saying that a change will be good for mining.

Oz. Very much so, and while I’m not expecting a jump in mining company share prices on Monday morning the seeds have been sown for higher future prices.

Not that you could see that during another lacklustre week’s trading last week.

Minews. Why not?

Oz. Much as when we last spoke the wider market barely moved. Gold was the exception, with the lower bullion price during Friday knocking five per cent off the ASX gold index. The all ordinaries index added 0.3 per cent, and the metals and mining index slipped lower by 0.4 per cent.

Minews. You’ll probably see a solid increase in your gold stocks on Monday, because the crisis in Syria and less than inspiring economic data in the U.S. sent the gold price up after your trading hours.

Oz. That’s probably right, so what we might do with this review of the market is to focus initially on a few outliers, the stocks from any sector which outperformed. That way our readers might get a few investment ideas.
...

Source >> www.minesite.com
*****


----------



## MARKETWINNER

Following articles are  very intersecting and it gives some idea about ethanol demand, oil prices and corn prices in the coming decade. We have to wait and see. I believe in some period there could be short term spikes in oil and corn prices due to short term supply threat.

According to following link

http://www.northernag.net/AGNews/ta...Food-Prices-Fall-Again-on-Cheaper-Grains.aspx

FAO said: there will be strong cereal production this year and specially a sharp recovery in maize supplies(corn)

Brazil is using more sugarcane for ethanol production rather than sweetener.

The global food-import bill will probably be stable this year at $1.094 trillion as cheaper sugar and cooking oil make up for rising prices of dairy, fish and meat, the FAO predicted in June.


According to following link


http://www.cattlenetwork.com/e-news...h-is-over-corn-may-drop-to-325-223011001.html

Livestock producers are likely to see shrinking feed costs  and it’s time for livestock producers to have their turn.

Ethanol demand will be “flat-lining” into 2022.

 Forecasting $4 corn this fall and a range from $3.25 to $6 over the next decade.

US going to become a leading exporter of energy within seven years and will reduce oil prices below $70 per barrel.


We have to wait and see how market is going to react in the coming decade.


My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

September 09, 2013

UK Majors Have Now Written Off US$31 Billion, But Will It Be Enough To Bring The Market Back Into Balance?
By Rob Davies

These days, capital markets seem to be as aimless as the politicians who have the thankless task of conducting foreign policy. 

Another thing they have in common is doing it together. 

The best example of that can be found in the bond market, where yields on medium to long term bonds for US, UK and Europe have all risen together. 

Anglo-Saxon instruments even breached the three per cent figure for a while before falling back at the end of the week. 

To put that into context, those levels have not been seen for two years. 

In many ways these changes are good ones because they indicate that recovery is now visibly underway in these countries. 

It does though increase the opportunity cost for other asset classes. 

Despite that, equities and commodities both made progress last week, and this fed through into the LME index, which rose one per cent to 3092. 

Tin was the standout performer, rising 6.4 per cent to US$22,575 a tonne, a move which indicates that, as in many markets, liquidity is still a major problem at the fringes. 

At the other end of the scale the terrible twins of lead and zinc both eased back 0.5 per cent to US$2,150 and US$1,868 a tonne respectively. 

Zinc’s decline was somewhat surprising, given that LME inventories had fallen below one million tonnes for the first time in some years. 

The good news is that it demonstrates that production discipline is staring to take effect. 

Market forces are an extremely strong, if sometimes slow, mechanism of bringing supply and demand into balance. 

All well and good perhaps, but none of this gives us much of a clue as the future path of metal prices. 

Our best bet here is to rely on some long-established relationships. 

The bond sell-off is rooted on some solid economic data. US car sales are up 17 per cent year on year and are on track to get back to pre-crisis levels if the trend continues. 

China, still the largest consumer of metals, reported a 7.2 per cent rise in exports during August which was ahead of the six per cent that had been widely expected. 

Encouraging data from these two economies suggest that demand for metals will be remain positive this year. 

On the other side of the equation, all four of the largest London-listed mining companies have changed their executives this year, and it seems likely that the new boys will have a robust attitude to putting a red line through operations that are viable at today’s prices. 

Whatever level of demand there is, if supply exceeds that then prices will weaken. But the new guys have a period of grace to take tough decisions and close plants without too much embarrassment. 

Indeed, it is clear from the scale of the write-offs already announced that the big four have taken a lot of capacity out of the industry already. 

Glencore Xstrata took a US$7.7 billion charge, there was US$1.9 billion in write-offs at BHP Billiton, US$14.4 billion at Rio Tinto and US$7 billion at Anglo American. 

While not quite on the scale of the write-offs in banking, taking US$31 billion out of the asset base of the industry will make it a lot leaner. 

With solid demand it should not take too long to determine if the industry has done enough on the supply side to keep the market in balance. 

Source >>> www.minesite.com
*****


----------



## MARKETWINNER

China is once again coming through with some good news. The oldest of old players, Japan is also not bad. We cannot forget South Korea as well. These three players are some of the active economic players in the world.  We have got some source of stability. Frontier markets are in the initial stage of their economy and capital market developments. Some emerging markets and developed markets may have some volatility. Overall we may see gradual demand for some commodities. The trend has shifted in stock, commodity and currency market. Therefore new sectors, out of favour commodities, currencies and stocks including emerging stocks, currencies and commodities will lead markets in the coming years. Emerging markets will readjust again.

If we believe in stronger economic growth, then it is time to increase our exposure to the good commodity stocks

The current environment has opportunity. We can see the extremes of undervaluation for commodity stocks and some emerging markets now.

I think that the commodity stock rally is just getting started, and they should outperform the broader stock markets at least for some selected commodities including emerging commodities

Some Chinese Stocks And Commodity Stocks Are Bargains now.

Value orientated contrarian investors may identify cheap valuations in  commodity stocks combined with extreme negative sentiment and improving fundamentals.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## drillinto

September 14, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You’ve got your new government but what did it do for your stock market.

Oz. Not a lot, really. It seems that the result was so well telegraphed in opinion polls before we sloped off to the Australian ritual of compulsory voting that investors took the switch from Labor to a conservative coalition in their stride.

The actual market reaction, as measured by the indices, was: all ordinaries up 1.4 per cent last week, metals and mining up 1.9 per cent, and gold down six per cent, though the gold fall was very much driven by international forces.

Minews. How quickly will the new government move on those unpopular mining and carbon taxes?

Oz. Perhaps not as quickly as investors would like. We have a complicated political system. There are two houses in Parliament which can exert a lot of influence on legislation.

The problem for the new government is that it hasn’t got a clear majority in the upper house, the Senate, where a few curious new Senators have been elected, including two representing a party formed by mining millionaire, Clive Palmer.

Minews. Surely Clive wants to kill the mining tax.

Oz. He does, but he will also demand to be heard on other pet subjects and might drive a hard bargain.

Minews. Enough politics. You’ve got the government you wanted, so let’s get on with our regular call of stock prices.

Oz. If it’s acceptable to you I’ll start with the outliers again, the companies which stood out for one reason or another, and then move through the sectors because as the indices indicate there wasn’t a lot of movement.

Source >> www.minesite.com
*****


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## drillinto

September 16, 2013

Global Investment Styles Are Adjusting For The Times, With Interesting Results For Metals
By Rob Davies


Investment styles can, crudely, be broken down into three different buckets: momentum, reversion to the mean, and value. 

Growth investing can be regarded as a sub-set of momentum investing.  

What makes life difficult is that markets can flip between styles with barely a flicker.

It is all very well getting geared up to invest in one particular manner if the suddenly the market goes off on a totally different track.

Right now bond investors are discovering that their portfolios, bought for safety, are proving anything but.

For the four and a bit years after the bank crash of September 2008 buying bonds was the momentum trade to beat all others.

Then, at the beginning of the year, a value bias become favoured and bonds didn’t look too good on that basis.  Since then bonds, as measured by the yield on a 10 year US Treasury have declined 50 per cent.  

Making money more expensive has had a knock-on effect on to other asset classes. It has pushed base metal prices down - the LME index is 14 per cent lower - but equities have risen by about the same amount.

In a world where inflation eats away at nominal assets like cash and bonds at two or three per cent a year the attractions of real assets like equities and commodities that can hold their value are becoming more obvious.  

Even so, the support of that favourable trend over the last few months wasn’t enough to stop Alcoa being ejected from the Dow Jones Industrial Average Index as of 20th September.

Not many funds use this index as a benchmark so the effect on the shares will be minimal. But it is a sign that momentum rather than value is the driving force in that market.

The fact that Alcoa debt is now rated as junk is another indication of how out of favour the metals sector is and why momentum investors are ignoring it.

So that leaves investors who use value and reversion to the mean as their guide.

The trouble with using reversion to the mean as a guide is that there are few strong signals. Just because something has gone down is no reason to believe that it is about to suddenly turn around and go up. 

There is no evidence that, for example, the tin industry is suddenly going to expand much above its current consumption rates of 350,000 tonnes a year.

Even though it is a small industry production has declined in line, resulting in today’s price of US$22,625 a tonne.

It is still the most expensive base metal, but the small size of the industry means it will not attract much capital.

Aluminium has the opposite problem. It is a large industry and consumption is growing at seven per cent a year, with demand expected to be over 50 million tonnes in 2013.

The problem has been that slower growth in China has resulted in higher exports, leading to oversupply in the global market.  

Prevailing prices of US$1,746 a tonne mean that a large number of smelters are running at a loss. One estimate is that 189 out of 281 smelters in China are losing money at these rates.

On that basis buying something that is being made at a loss looks good value. The downward momentum in this price must surely be overridden by value at some point.

After all, that is what happened to bond markets at the start of the year, albeit in the opposite direction.   


Source >>> www.minesite.com
*****


----------



## MARKETWINNER

We have to follow new development in the global stocks and commodity markets now.

Not tapering is favorable for financial, investment and commodity stocks. Gold stocks too may shine at least in the short run. Globally commodity stocks are having their day now. If I am correct Johannesburg's gold mining index surged 8 percent to its highest in 10 days. As I said before commodity, stock and currency market are not dead. There will be plenty of opportunities in the coming decade. 

Even if we have tapering still some sectors and some commodity producers will benefit.

Next couple of months is very crucial for gold market. We will see next trend in gold market in 2014.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

September 22, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have emerged relatively unscathed from a volatile week’s trading.

Oz. The numbers don’t look too bad, but we missed the sharp slide in the gold price which came on Friday after we had closed. Monday could see some heavy selling.

Minews. Volatility certainly seems to be the key factor in all markets these days.

Oz. It certainly is, and that’s unlikely to change until investors get a clearer understanding of what governments are doing with their money creation operations.

Gold in particular seems to be heading for more of a wild ride, as does the Australian dollar which moved quite substantially last week, taking the gloss off marginally higher commodity prices.

Minews. Time’s short this week. Let’s move on quickly with the key indices and significant price moves.

Oz. All the major indices rose last week, which in the case of the all ordinaries makes it five straight weeks of gains. The latest increase was a modest one per cent, slightly better than the 0.8 per cent for the metals and mining index.

Gold was the big winner, shooting up by seven per cent thanks, following the mid-week U.S. decision to not slow its money-printing operations, yet.

Interestingly, that seven per cent rise made up for the six per cent fall in the previous week, which is a neat way of demonstrating the volatility in what is a good market for traders, but not so good for conventional investors.
...

Source >> www.minesite.com
*****


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## drillinto

September 23, 2013

Guessing The Intentions Of The Money Printers Is Now The Most Profitable Strategy Of All
By Rob Davies

The fact that something did not happen last week was enough to trigger a sharp rally in equities and commodities and is an excellent reminder of how unstable the world remains five years after the banking crash. 

That the US Federal Reserve did not announce when it would stop injecting US$85 billion a month into the US economy was enough to push risk assets up.

A day later the majority of those gains had been given up.  

These moves tell us that markets are still nervous and volatile.

Cynics might say they always are, but the scale of the bail-outs has changed the game.

The Financial Times provides a quick summary of the help governments have given banks since 2008 and calculated a figure of $575 billion.

On top of that they injected a further US$360 billion to help out other ailing financial institutions.

It is not surprising therefore that a dollar today does not buy what it did five years ago.

It is this massive financial firepower that dominates today’s capital markets rather than the intricacies of the individual markets.

Who cares that Rusal thinks the aluminium market is going to expand from the current 40 million tonnes a year of demand to 70 million tonnes by 2020 if prices are going to be jerked around by a bureaucrat in Washington?

Does it matter that new aircraft are now 50 per cent composite materials when they used to be 70 per cent aluminium?

Rather than the intricacies of the individual markets, all that seems to matter now is exactly how much money governments, mainly the US, are going to manufacture from thin air.

It is this synthetic finance that is moving markets. Trying to guess the intentions of the managers of the process has now become more profitable than other activities.

This has the effect of creating a topsy-turvy world in which there are few, if any, secure frames of reference.

Why sit on cash if someone else is manufacturing it at the rate of US$85 billion a month?

It doesn’t even matter if that happens in a country other than your own. Now that virtually all barriers on foreign exchange trading have been lifted that money is free to go anywhere it wants to earn the maximum return.

Emerging markets and commodities have both benefitted in the past from this financial incontinence.

Although emerging markets have suffered this year on suspicions that QE will be reduced, they are more or less back to where they were a year ago.

On the other hand base metals are about 15 per cent lower over the last twelve months and have only modesty participated in the most recent rally.

There is though one big difference between commodity market and those of foreign exchange, equities and bonds.

The latter three are all essentially about trust, just different forms of IOUs.

The holder hopes, indeed expects, that the security will either be accepted as exchange, pay him a dividend or a coupon.

It is these assets that have been kept afloat by quantitative easing in a way that almost defies gravity but, not yet, trust.  

In contrast the owner of a base, or a precious, metal expects none of these things. All he knows is that if he drops it on his foot it will hurt.      

Source >> www.minesite.com
*****


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## drillinto

Commodity Snapshot

http://www.bespokeinvest.com/thinkbig/2013/9/23/bespokes-commodity-snapshot.html
***


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## drillinto

September 29, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had another mixed week with rises being cancelled out by falls.

Oz. That’s not a bad description, though as we suspected when we last spoke it was the gold sector which suffered most of the damage. The ASX gold index dropped by a hefty eight per cent in a week when the overall market, as measured by the all ordinaries index, crept up by 0.6 per cent to close at a five-year high.

Minews. Why the big gold sell-off?

Oz. It was exactly what we discussed the last time we spoke with Australian gold stocks playing a game of catch up. Exactly a week earlier our market had closed before the Friday September 20 fall in the gold price so, when we opened on Monday of last week our stocks were hammered.

Minews. But the rest of your market seems to have held up quite well?

Oz. Not bad, but not particularly good either. That modest rise in the all ordinaries tells the story of a slow creep higher, though with mining stocks not attracting the same high level of attention which is the norm in Australia, as shown in a modest 0.5 per cent fall in the metals and mining index last week. 

Minews. Are Australian investors turning their backs on the mining sector?

Oz. No, the interest is still there but there is more activity in sectors which have been sidelined since the 2008 financial crisis. The property market, for example, is rocketing along thanks to the lowest interest rates in a generation and an abundant supply of debt from a very healthy banking industry.
...

Source >> www.minesite.com
*****


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## drillinto

For your consideration >> www.agrimoney.com


----------



## MARKETWINNER

drillinto said:


> For your consideration >> www.agrimoney.com




Good link. Thanks. According to the link Corn price has hit three year low.

Both Corn and Soya bean markets are not beautiful as in 2012. Higher inventory level will lead do lower corn and soya bean prices in the coming quarters.

Corn has tumbled 37 percent in 2013 amid forecasts for a record crop. We have to wait and see how the market is going to deal with big corn supplies for the next year. Soya supplies too are a little bigger.

Cheaper corn will benefit some sectors including food based companies such as  Archer-Daniels-Midland Co, Sanderson Farms Inc., the third-largest U.S. poultry producer etc. Already there were chicken rally in USA and we will see more chicken rally globally in the coming quarters and years.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


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## drillinto

September 30, 2013

Will China’s Growth Story End Up Following The Same Trajectory As Japan’s?
By Rob Davies

Capital markets were reminded last week that political risk is always present. 

In this case it was the promise by the Labour Party to freeze energy prices in the UK if it gets elected. 

Share prices in British utilities fell sharply. 

Across the Atlantic the US is facing up to another standoff between the President and the Congress over the budget. 

If agreement is not reached to increase the debt ceiling there is a risk, albeit small, that by the 17th October the US Government will not be able to pay its bills.

Every time this confrontation has happened before the price of US debt has appreciated, because however bad the economics and politics of the US is, it looks a lot better than anywhere else.  

Some might argue that this game of “chicken“ is now becoming embedded in the US political process and is therefore nothing to worry about. That analysis explains why the gold price is little moved. 

However, if played often enough the chance that one day the chicken gets runs over can only increase. That is when gold, and other commodities, might be viewed in a different light. 

In the absence of any resolution of this particular catfight base metals had an uneventful week and, as a group, gained 0.7 per cent. That took the LME index to 3,137. 

In truth, the bulk of this gain was probably a consequence of a 0.3 per cent decline in the dollar, as investors fretted over US politics. 

To some extent metals investors can ignore events in the US, because base metals and industrial bulk commodities are now much more dependent on China than the US. 

That said, a thought-provoking piece of research from Lombard Street Research, published back in July raises cause for concern. 

The research looked at the similarities between the rapid rise in the Japanese economy in the two decades from 1952 to 1973 and the massive expansion of China between 1980 and 2012.

Both of these events dramatically transformed commodity markets by adding a large and rapidly growing new source of demand.  

Japan grew at an average of 8.75 per cent a year from 1952 to 1973, then dropped to an annual rate of 3.75 per cent until 1991 since when it has hardly grown at all. 

Lombard Street Research wondered what the implications would be if China’s economy followed a similar trajectory of rapid growth followed by modest growth, and ending up with stagnation.  

There are many differences of course between the two, not least that China, at 14 per cent of world GDP, is already a mammoth economy and the world’s largest commodity consumer. 

Its sheer scale makes it harder for it to grow unless the world economy does as well. Looking at the messy developments elsewhere in the world right now suggests that that is not a very likely outcome at the moment. 

But what is worrying is the similarities between the Japanese growth story and the Chinese, especially with regard to banking systems and capital controls. 

Both countries experienced a huge rise in savings that could not be exported to earn higher returns than the measly rates of interest dictated by the authorities. 

Having easy access to such a large pot of cheap and uncomplaining funds led both countries to overinvest in unproductive assets. 

In Japan this resulted in low returns on capital, bank failures as debts could not be repaid, and then two decades of economic stagnation.  

Having a road map from Japan should allow China to avoid these mistakes. 

But to do that it will have to take some tough and difficult decisions. Commodity investors have to hope that it  has the political will and ability to make them.

Unfortunately, the examples from the West are not encouraging.

Source >> www.minesite.com
*****


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## drillinto

>>> September, Q3 and YTD Asset Class Performance <<<

http://www.bespokeinvest.com/thinkbig/2013/10/1/september-q3-and-ytd-asset-class-performance.html
***


----------



## drillinto

October 02, 2013

Ernst & Young Draws Attention To Substitution As A Major Risk For Mining Companies
By Ryan Jackson in Vancouver


In a Ernst & Young’s latest report on the risks facing mining companies in 2013, Bob Stall, the company’s Americas Mining & Metals Transactions Leader, highlights substitution as a powerful force. 

Nowhere is the risk of substitution more apparent than in the coal business.

“Coal’s share of power generation stood at about a third and natural gas accounted for approximately 30 per cent in 2012, compared with 50 per cent and 18 per cent, respectively, in 2002”, says the report.

Just before the financial crisis hit the coal industry was in the midst of an enthusiastic round of mergers and acquisitions.

While at the time industry players were bullish, the collapse of the financial system let to weaker demand.

On top of that, the rise of shale gas and increasingly stringent EPA regulation with regards to carbon emissions came also dramatically weakened demand.

Perhaps the biggest catalyst for the switch occurred in the second quarter of 2012 when US gas prices fell below US$2.00 per MMBtu.

In fact, since the first quarter of 2010 gas prices have fallen roughly 40 per cent while thermal coal prices have remained steady over the same period.

The abundant supply and lower pricing consequently made natural gas an attractive alternative to coal.

On the regulatory side of the equation, the Mercury and Air Toxics Standards which came into effect in 2011 put the squeeze on coal-fired power plants.

President Obama’s recent climate change strategy to reduce greenhouse gas emissions calls for the EPA to construct a complete carbon pollution standard policy which will direct future power generation.

The particulars of the policy are not yet known, but it is widely believed that natural gas will play an increased role in US energy policy going forward and investors have taken note.

Meanwhile, demand for metallurgical coal in the United States is also on the decline.

The use of natural gas in blast furnaces and the continued interest in electric arc furnaces – which operate far more efficiently and use no metallurgical coal in their operation – has sent demand plummeting in the Unites States.

While blast furnaces are still widely used in other regions of the world, many in the industry predict the shift to electric arc furnaces continuing in developing nations.

China in particular, while using a staggering amount of coking coal in steel production at present, has been battling with chronic air pollution and energy shortages.

Policymakers there see electric arc furnace steel production, from scrap and other metallics, as a way to alleviate both problems. It won’t be an overnight switch but the long term trend is bearish for metallurgical coal.

The report also draws attention to technological evolution as a major factor for mining companies to consider when planning for the future.

In particular, the shift towards more modern materials in industry is in full swing. Some of these have been a long time coming, such as the move towards fibre optic wiring resulting in less copper consumption by the electronics industry.

Other factors may be more unexpected though. The move towards lighter weight composites and aluminum in the automotive industry could result in shrinking demand for steel, and for zinc, which is used in the galvanizing process for rust inhibition.

In the aircraft industry, much like in the automotive industry, the quest for greater fuel efficiency has pushed producers to shy away from metals and move towards carbon fibre and other composites which can drastically reduce the weight of a completed aircraft.

Looking at it from another angle, commodities which have retained high prices have driven consumers to search for alternatives.

Bob Stall points to the platinum group metals as a prime example. Due to the consistently high platinum price, the automotive industry has been keen to look for an alternative metal to use in gasoline engine catalytic converters.

It’s clear that the increasing regulation with regard to engine emissions is here to stay and the need for a more affordable alternative has driven innovation in the field.

“Palladium can now be substituted for platinum on a one-for-one, ounce-for-ounce basis, which has strengthened the market for palladium in gasoline catalytic converters”, says the report.

With a platinum commanding a price in the order of US$1,546 per ounce compared with US$747 for palladium, it’s clear which metal automakers will choose when building catalytic converters.

With the demand landscape changing drastically in front of our eyes, the natural question is: what can mining companies do to mitigate the risk?

The writers at Ernst & Young believe it’s a matter of improving business intelligence to understand the trends and craft an appropriate enterprise risk management plan.

By understanding what underlying factors drive the commodity market and what factors contribute to the health of the industries which use the raw materials, companies can make decisions regarding the areas where investment is likely to present returns.

That’s easier said than done in many instances though and is particularly difficult in an industry where developing a new mine takes years of commitment and large capital investments.

Nevertheless, Bob Stall writes that companies have been employing a number of strategies to mitigate the risk. Among the initiatives taken are diversifying exposure in the commodity markets, looking for lower cost projects, and divesting projects which carry the highest risks.

In the case of coal, some producers have taken to concentrating on metallurgical coal and even joining in on gas production in the United States while searching for thermal coal customers abroad.

Increasingly, thermal coal has been shipped to European customers who have taken advantage of the new supply for power generation. Even there though, analysts predict that the European Union’s regulatory agencies will reign in the ballooning coal use given the region’s target of 20 per cent carbon emission reductions by 2020.

According to Ernst & Young, the threat of substitutes is the second most important risk miners face at present, between margin protection/productivity improvement and resource nationalism.

Looking back at the events which have shaken the US coal industry, it’s clear that the majority of companies were caught flat-footed by the rapid commercialization of horizontal drilling and the fracking of shale beds.

Now, Bob and his team are shining a spotlight on similar trends in other segments of the extractive industry and imploring miners to develop proactive strategies now. 


Source >> www.minesite.com
*****


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## drillinto

October 05, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like the recovery on your market stalled last week.

Oz. It did, but it had been running out of puff since the boost which came with the change of government in early September. Falls outnumbered rises in all sectors, while the primary market measure, the all ordinaries index, closed down for the first time in seven weeks.

Minews. And what about mining stocks?

Oz. That’s where the greatest weakness was noted, thanks to the uncertainty flowing out of the U.S. government shutdown and the effect it might have on commodities demand.

Over the week, the all ordinaries shed 1.8 per cent. The gold index held up reasonably well with a fall of 2.8 per cent, while the metals and mining index lost 3.3 per cent.

Minews. Were there local factors at work or was it all a result of international pressures?

Oz. Mainly the same international factors that will have been felt in London, but with a few local issues, including news that the much disliked mining and carbon taxes seem certain to be abolished, with the new government of Prime Minister Tony Abbott likely to win the support of newly-elected Senators. Until last week that was not a given.
...

Source >>> www.minesite.com
*****


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## drillinto

October 12, 2013

>>> That Was The Week That Was ... In Australia <<<
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have been infected by U.S. political and debt worries.

Oz. Until Friday we were weighed down by the U.S. uncertainty, and whether it would lead to a default with potentially disastrous consequences for global growth - and demand for our resource exports.

Minews. And have those concerns dissipated?

Oz. Up to a point. Next week will probably start with a spot more selling, with some investors preferring to sit on the sidelines until a budget and debt-ceiling deal is done in Washington.

One sector in our market almost certain to be whacked again early next week is gold, because the price continued to drift lower after we had closed on Friday.

At the close last week the gold index was already down by 6.5 per cent as the gold price slipped through the US$1,300 an ounce mark. That fall compared with an absolutely flat metals and mining index which opened and closed the week at 3,164 points. The all ordinaries managed a rise of 0.4 per cent, as bank shares bounced on Friday.

Minews. It seems that international events rather than domestic political turmoil are what’s driving the Australian market.

Oz. Good point. Many of the local issues which had been dogging investors in our market are being washed away by the change of government and a growing belief that the new conservative administration will be able to get all of its policies through Parliament with the help of like-minded independent political groups.

Minews. So, that really does mean the end of the mining super-tax and carbon tax.

Oz. It seems so, but probably not until mid-next year when the new Senate sits for the first time.

Minews. Enough chit-chat, it’s time for prices. Let’s start with iron ore, as that seems to have been the strongest performing sector, despite concern about an imminent price fall.

Oz. Iron ore has certainly become the most-watched part of the mining market, with an even split between optimists and pessimists.

The optimists were in the ascendant last week, bidding up stocks in the belief that a sharp fall is not around the corner.

The pessimists, though outnumbered, were able to point to a report by the investment bank UBS which forecast a very sharp fall in the iron ore price sometime over the next six weeks, with the price potentially dropping from US$130 a tonne to US$70 per tonne as Chinese buyers pull back after a burst of re-stocking.

Minews. That’s certainly a gloomy forecast, which will either make UBS look perceptive, or foolish. Let’s go through last week’s prices.

Oz. Atlas (AGO) led the way up, putting in a rise of A11 cents to A97.5 cents and shrugging off a few weeks of heavy selling. Centaurus (CTM), the Aussie explorer with its best assets in Brazil, was also in demand, adding A3 cents to A20.5 cents, meaning it has risen by A6 cents (42 per cent) in two weeks.

Other upward moves included: Fortescue (FMG), up A21 cents to A$5.00, BC Iron (BCI), up A7 cents to A$4.64, Iron Road (IRD), up A2 cents to A25 cents, IronClad (IFE), up A2 cents to A16 cents, and Mt Gibson (MGX), up A1 cent to A75 cents.

A handful of iron ore stocks lost ground, but none too severely. Kogi (KFE) slipped A0.3 of a cent lower to A8.7 cents. Gindalbie (GBG) was half-a-cent weaker at A12 cents, and Northern Iron (NFE), lost A1 cent to A18 cents.
...

Source > www.minesite.com
*****


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## drillinto

>>>>> October 07, 2013

What Happens To Miners After Economic Recovery In The West?
By Rob Davies

A good deal of evidence is now building that recovery, albeit weak, is now established in the developed Western world. 

Economic forecasts released over the last few months are either unchanged or are being edged up rather than down.

It doesn’t help that the US budget stand-off has prevented the world’s largest economy from collecting and publishing current data.

Indeed, the shutdown will slightly reduce economic activity in the current quarter.  

Even so, the picture of modest economic growth in the developed world remains intact and looks as if it has returned to more normal levels.  

What is clear from the latest OECD report is that growth momentum is moving from the emerging economies to the mature economies.

And that does not have positive implications for metal demand.

Well established countries rely more on the service sector while emerging ones are still at the infrastructure construction stage.  

You need lots of metal to build a bridge, not much to establish a website.  

This change in outlook has already been discounted by the markets and is why equities and commodities have both doubled from their lows.

The world did not end in 2008, but it has taken a long time to recover. Moreover, as the stand –off in the US and the stresses in Europe demonstrate, many risks still remain.

Even so, investors now face the challenge of pricing risk assets in a less volatile and racy environment.  

Commodities have already retraced some of their progress this year and the 0.4 per cent decline in the LME index last week to 3124 is consistent with that trend.

Mining equities too have had a poor month or so.  

Sentiment has often mattered more in valuing metals and miners because they are so sensitive to economic cycles, but right now sentiment seems to be at an inflexion point.

Few would argue that this is the peak of the cycle, and we are demonstrably no longer at the bottom.  So maybe we are in what might be considered a more “normal” environment.  

In such a scenario we would not expect metal prices to be much out of line with their long-term marginal cost of production.  

Indeed, the relative stability of base metal prices over the last year suggests that the industry is not too far from equilibrium.  

It is true that aluminium and nickel are currently too low for most producers, while copper generates healthy returns and lead and zinc are both reasonably priced.

Bulk commodities have already retraced quite a long way but they are not desperately oversold and, arguably, maybe have more to concede.

Few too, would postulate that all the world’s problems have been solved, but there is a consensus that nothing is too badly out of kilter.

In this environment, where large capital gains or losses seem less probable, investors will be focussing on the cash generative properties of the different metals and their associated producers.

On that basis the miners might not be spectacular, but they ought to pass muster as cash cows.   

>>> Source: www.minesite.com


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## drillinto

October 10, 2013

A Fair Slice Of The Pie: The Complicated Relationship Between Emerging Economies And Foreign Miners
By Ryan Jackson in Vancouver

According to Ernst & Young’s assessment of the global mining industry in 2013, resource nationalism is the most worrisome risk threatening miners. 

If you’ve been reading the papers over the last year, this may not come as much of a surprise.

But when you consider that resource nationalism has rapidly climbed from the bottom of the list of 10 factors included in Ernst & Young’s yearly report to the very top, it clearly illustrates a worrying trend. 

“There is no doubt projects around the world have been deferred and delayed, and in some cases investment withdrawn altogether, because of the degraded risk/reward equation”, writes Ernst & Young’s Global Mining and Metals Leader Mike Elliott. 

“The uncertainty and destruction of value caused by sudden changes in policy by the governments of resource-rich nations cannot be understated”, 

In many ways, mining companies are victims of their own success. 

The strong commodity prices and high reported profits seen in years past have spurred politicians and local stakeholders in some resource rich nations to demand a larger piece of the pie. 

The tragedy though is that bureaucracy moves slowly and the policy response to the mining boom has begun to take effect after the good times have passed and the industry has fallen into recession. 

And it’s not just the emerging economies that present risks to investors. While a number of South American and African states have been in the headlines for resource nationalism of late, Ernst & Young identify Australia’s proposal of a “super profits” tax in 2010 as the catalyst for the recent round of nationalistic tax reforms. 

The proposal later evolved into the Minerals Resource Rent Tax which came into effect on the 1st July 2012 placing an additional 30 per cent tax load on profits generated by iron ore and coal companies making over A$67 million.

That development in Australia prompted Chile and Peru to enact similar taxes targeting profits rather than simply production. 

Following, India has created a taskforce to work on the creation of new levies on minerals. The initiative followed demands raised by several provinces in India for a new mineral resource rent tax with a minimum of 50 per cent on “super profits” earned by miners.

A number of host governments are also now seeking to have minerals beneﬁciated in-country prior to export. That’s a fair enough aspiration, but the cost of constructing new refineries or smelters and, often, the lack of affordable power, skilled labour, competitive tax regimes, and the loss of flexibility in their global supply chains are all areas for concern. 

So far, South Africa, Zimbabwe, Indonesia, Brazil and Vietnam have announced beneﬁciation strategies. 

Still, Ernst & Young points out that the majority of growth in the global mineral supply has come from emerging economies. 

The rise of mineral exploration and supply from emerging economies has coincided with a slowdown in developed nations. This dichotomy is seen most sharply in the copper, aluminum, and steel sectors.

In these sectors growth has certainly been driven by emerging economies. 

Meanwhile, according to Metals Economics Group, between the year 2000 and 2010 mineral exploration spending in the developing world increased from 40 to 60 per cent of the global total. 

With so much of the exploration funding being spent in emerging markets, international mining companies and the governments of emerging economies must find a workable compromise in order to keep the industry on track. 

But there are examples of countries where the local government is eager to facilitate the expansion of mining. 

A notable example of this is Nicaragua where foreign direct investment has grown at an average compounded rate of 23 per cent since 2003, from US$186 million to over US$1 billion in 2012.

While mining does not account for all of the investment growth in Nicaragua, gold mining within the country has been one of the biggest growth industries and the government has set up a targeted agency to promote the sector abroad. 

To that end, the government is keen to point out that Nicaragua has a favourable tax regime, with a corporate tax rate of 30 per cent, and mining investment credits in place. 

What’s more, companies enjoy the freedom to expatriate all capital and profits, enjoy full international ownership, and maintain full protection of intellectual property rights, patents, and brands.

In fact, Nicaragua now has the second lowest labor market risk in Central America and, according to the Doing Business 2013 report put out by the World Bank, is the top jurisdiction there in enforcing contracts, resolving insolvency, and protecting investors.

One company making the most of Nicaragua’s favourable policies is Condor Gold. The company’s La India project already hosts an NI 43-101 compliant resource of 2.4 million ounces of gold grading 4.6 grams per tonne.

And the company has recently announced the completion of a 23,598 metre drilling program which is designed to provide an upgrade to the resource figure with an emphasis on defining open pit resources. 

Source >>> www.minesite.com
*****


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## drillinto

October 14, 2013

China Consumes 489 Kilogrammes Of Steel Per Person, And That Could Rise Still Further
By Rob Davies

Politicians seem to take it in turns to try and do the most damage to their countries. 

Right now US Congressmen are doing their best to derail the world’s largest economy and giving the markets all sorts of reasons to react violently.

Given that China now owns US$1.3 trillion of US government debt, congressmen should probably be a little less cavalier with their attitude to paying their debts.  

But despite these macro-economic concerns it is uplifting to read some research from SociÃ©tÃ© GÃ©nÃ©rale that argues that investors should position themselves for an upswing in global metal demand.

In a comprehensive 116 page report, SocGen argues that China is not collapsing and that the iron ore market is still in deficit.  

As with everything in China the numbers are always large.

The Chinese Government has set a target of renovating 10 million houses over the next five years, of which over three million will addressed this year.  

That cannot happen without the use of raw materials.

SocGen’s report cites evidence for the vibrancy of the Chinese economy by pointing to the 14 per cent increase in Chinese electricity production in August, the 12.9 per cent rise in steel production and the 8.8 per cent increase in cement production.

In a particularly fascinating study the report examines current per capita consumption of key commodities in China, using as comparisons historic averages for other parts of the world.

Right now, says the report, China consumes 489 kilogrammes of steel per person.

That sounds a lot, and obviously reflects the massive infrastructure boom that’s still underway, but it is considerably less than the 752 kilogrammes recorded for peak consumption by the peer group.

Japan at its peak was using 801 kilogrammes of steel per capita.

The data shows a similar pattern for other commodities.

China currently consumes just 6.1 kilogrammes of copper per head while the median for the US, Japan, South Korea and Malaysia at their peaks was 11.8 kilogrammes, almost twice as much.

In zinc the relevant figures are 4.1 kilogrammes per capita for China compared to 5.9 for its peers.

In the case of aluminium the disparity is not quite so large at 15.5 kilogrammes per capita for China and 21.6 for the peer group.

Even so the message is clear: China has got a long way to go before hitting the straps.

Although China is the most important element in the commodity business it is not the only player.

Other countries are industrialising as well, and that trend is driving the market for bulk commodities, most especially iron ore.

In a detailed analysis SocGen predicts that this key market will remain in deficit for the remainder of this year and next year before going into a small surplus in 2015.

As a consequence it expects prices to stay over US$100 a tonne until 2014 and then only decline to US$95 in 2015.

As with all forecasts they are subject to a whole range of potential events which may render them incorrect.

But, given that no one knows if the US will be paying its bills next week, these are probably the least of our worries.

Source >>>>>>>>>>> www.minesite.com
*****


----------



## MARKETWINNER

Despite government shutdown, debt ceiling debate, and economic uncertainty, there were number of very good commodity stocks globally in all types of markets such as developed, emerging and frontier markets. Recently we saw the extremes of undervaluation for commodity stocks and some emerging markets. Later they had rally. We may see large Gains ahead in some commodity stocks including cyclical Commodity Stocks in the coming months. They should outperform the broader stock market.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

Cattle better bet than softs, or grains - Goldman
Goldman Sachs became the second bank in two days to warn on arabica coffee futures, cautioning over cocoa and sugar prices too - but foreseeing a bright outlook for cattle investors.
...

Source >>> http://www.agrimoney.com/news/cattle-better-bet-than-softs-or-grains---goldman--6392.html


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## drillinto

>>> October 19, 2013 <<<

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. You seem to have had a reasonable finish after a wobbly start to the week.

Oz. It was a bit hairy for a while when the potential US debt-default was hanging over the market, but the real pick-up came with the stronger Chinese growth data.

Minews. The net result being renewed strength among iron ore and gold stocks.

Oz. They were the best performing sectors. Iron ore thanks to Chinese demand which is keeping the price up, and gold thanks to what seems to have been a spot of panic covering by short-sellers caught out by the US budget solution.

Overall, the Australian market as measured by the all ordinaries shrugged off the early uncertainties to add a respectable 1.8 per cent. Mining stocks, as measured by the metals and mining index rose by 1.7 per cent, while the gold index was two per cent higher.

Minews. Those are not really very strong rises.

Oz. No, they’re not, but it was a curious week. There was a fair degree of fear around that the far right faction of the Republican Party in the US really was determined to push the country into a debt default, with unimaginable consequences.

As it turned out the climb-down could represent a turning point, with the likelihood that there will not be a repeat of the brinkmanship when the debt question comes up again in February.

Minews. So much for international affairs, it’s time for some share prices.

Oz.  Because the indices really didn’t move far, let’s start the call of the card with a selection of stronger moves from across the field. One of the better performers was possibly influenced by a presentation at last week’s Minesite forum.

King River Copper (KRC) attracted quite a following after a presenting at Minesite in London, adding A3.6 cents (48 per cent) for the week to close at A11 cents, in reasonably heavy turnover. Punters liked the prospect of exploration success on its copper play in Western Australia.
...

Source >>> www.minesite.com
*****


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## drillinto

>>> October 21, 2013 <<<

At US$4.2 Trillion, China’s National Savings Are Now Significantly Higher Than Those Of USA
By Rob Davies

The news last week was dominated by the Mexican stand-off north of the Rio Grande by politicians in Washington.

But there were some other developments that were more significant for the mining industry.

Chinese growth for the third quarter was reported at 7.8 per cent, the first increase for three quarters and encouraging news from the largest metal consumer in the world.  

While this wasn’t enough to increase metal prices as a group for the week it did keep the LME index flat at 3,130.

Underlying the events last week were some larger trends.

Few observers, still less investors, can have watched the political events in the US with equanimity.

Knowing the process will be repeated in three months is not a bull case for holding US debt.

How long the US will be able to throw its weight around simply because it is the world’s largest economy will surely be questioned more and more.

In a thoughtful note from Lombard Street Research, Diane Choyleva points out that while US national savings amount to US$2.7 trillion, those of China are a staggering US$4.2 trillion.

She argues that once China feels strong enough to open up its capital account a wall of money will migrate from China as a way of reducing the overvaluation of its currency.

In a small way this financial liberalisation process is already underway.

Last week the Dalian iron ore futures exchange for physical delivery started trading. Since it is backed by 90 million tonnes of the stuff sitting on Chinese quays there shouldn’t be any issues about deliverability.

This news is quite timely as it coincided with a report from Anglo American disclosing that its iron ore production in the third quarter was down 24 per cent because of continuing problems at its Sishen mine in South Africa.

No wonder Dalian iron ore futures price increased to 979 yuan (US$159) for May delivery. Right now prices at Tianjin are US$134 a tonne, up 22 per cent from the lows in May.

Chinese imports of iron ore rose to a record 74.7 million tonnes in September.

Bloomberg points out that in 2012 China accounted for two thirds of the 1.18 billion tonnes of this vital commodity traded by sea.

At an average annual price of US$128.3 a tonne that makes it second only to oil in terms of value as a traded commodity.

On a brighter note, Anglo American was able to report a 32 per cent increase in copper production in the quarter.

This, though, was outweighed by a 23 per cent fall in copper output from Rio Tinto.

Inventories of copper at the LME have now dropped back to 497,500 tonnes and that decline was enough to push copper prices up 1.5 per cent over the week to US$7,232 a tonne.

Miners, it seems, are struggling to cope with the relentless demand from China, and that must be good for margins.

And investors are desperately seeking alternative investments to US debt.

Lombard’s Choyleva argues that Chinese capital will avoid US debt and instead target US, UK and Australian real estate, private equity and, eventually, quoted stocks.

If she is right, and that pincer movement does happen, the squeeze on commodity producers could be intense

Source >>> www.minesite.com
*****


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## drillinto

>>> Caterpillar’s Earnings Highlight Mining Industry’s Challenges <<<
OCTOBER 24, 2013 
by Daniela Pylypczak

On Wednesday, Caterpillar (CAT)–one of the biggest manufacturers of construction and mining equipment–posted lower-than-expected quarterly results and cut its full year forecast. The bellwether cited weak demand from its mining customers, its most profitable product category, as the primary source of Caterpillar’s sour quarter. In 2014, Caterpillar estimates revenue will be essentially flat to +/-5% compared to 2013. For the year, the company now expects revenues to come in around $55 billion versus the previously forecasted $58 billion figure.
... 

http://commodityhq.com/2013/caterpillars-earnings-highlight-mining-industrys-troubling-state/


----------



## drillinto

Cool website

China Econtracker is a free one-stop shop for Chinese economy data

http://graphics.wsj.com/econtracker-china/index.php#ind=gdp
***


----------



## drillinto

>>> October 27, 2013 <<<

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. The recovery in your market seems to have spread across most sectors last week.

Oz. There was a pleasingly positive tone in places neglected for some time. Nickel stocks for example attracted fresh attention as a result of a stronger nickel price. Gold stocks also reacted positively to the higher gold price, and should do better on Monday with another US$10 an ounce added to the price after we closed on Friday.

Overall, the Australian market, as measured by the all ordinaries, added 1.2 per cent last week, a modest upward move which failed to capture the full impact of a 3.5 per cent rise in the metals and mining index, and a 4.8 per cent rise in the gold index.
...

Source >> www.minesite.com
*****


----------



## drillinto

October 28, 2013

>>> Caterpillar’s Words Of Woe Are Bad News For Suppliers, But Good News For Mining Investors
>>> Rob Davies

If there was any doubt that a period of a huge expansion of capacity is coming to an end it was dispelled by the comments from Caterpillar last week.  

This heavy machinery manufacturer is the bellwether of the mining industry and its warning that revenue and profits will be lower this year than previously expected confirms what many have suspected.  

Mining companies are no longer building new mines and expanding or upgrading old ones, as they have been doing for the last decade.  

That hits equipment suppliers right between the purchase orders and is the best evidence that the industry is optimising output to slightly lower growth expectations.  

Bloomberg reported that the mining industry is set to decrease capital spending by 16 per cent in 2013 and 12 per cent over two years.

While that is not great news for suppliers it is good news for mining investors.

Last week the LME index of base metals edged up 0.5 per cent to 3,146 as the market recognises that the supply tap is slowly being tightened and will not be allowed to race ahead of demand.  

Another indication that conditions remain vibrant is the healthy state of bulk freight rates - at least for carriers if not consumers.

Since April, iron ore freight rates have increased from US$1,200 to US$4,000 in September and industry observers are forecasting a further rise of 23 per cent.

That said, Platts reported that iron ore prices fell in September even as mills restocked.  Trying to separate noise from signal is one of the hardest problems in this industry.

The supply story is not just about Western production though. Bloomberg is reported as saying that Chinese refined copper production will be 6.6 million tonnes this year, 700,000 tonnes more than last year.

Quite how long that rate of increase can be maintained however is a big question. Lombard Street Research believes that the yuan is about 30 per cent overvalued and unit labour costs are rising by 14 per cent.

Data like that suggests that Chinese copper production may be as uneconomic as a lot of its aluminium output.  

Despite being a semi-market economy China has shown a noticeable reticence to close loss-making capacity in the mining industry for fear of social unrest.

In its latest Asset Allocation report Lombard Street Research is still expecting a debt crisis in China in three to five years’ time. It also says that that the next few years will not be good for metal bashers.  

In a way though that is exactly why the mining industry is doing what it is doing now - cutting back on new investment to anticipate future changes in demand.  

Since mines typically have planned lives of 10 to twenty years the industry has already factored in a five to 10 per cent reduction in supply.

So the total loss of future capacity could be as high as 20 per cent.

If it is as high as that the conditions are already being established for the next upturn.

It is the long lead time on large expensive projects that is the key reason for the price volatility in the sector.

Add to that the sharp variations in demand that can occur in response to economic policy and it is easy to see why this industry has a unique ability to surprise everyone involved, whether manager, customer or shareholder. 

SOURCE >> www.minesite.com
******


----------



## drillinto

For your consideration >> http://uraniuminvestingnews.com/


----------



## drillinto

October 29, 2013

The Gold Industry Contributes $210 Billion A Year To The Global Economy, Says PwC
>>>>>>>>>>  Ryan Jackson in Vancouver


With the deterioration of the gold price in 2013 and the weak mining markets, many investors have lost faith in the yellow metal. 

But until recently it has been difficult to quantify the impact which the global gold industry has on the world economy. 

While it was clear that the impact was great, studies with transparent methods presenting clear results were few and far between. 

It’s for this exact reason that the World Gold Council, a prominent trade body for gold companies, commissioned PwC to put together an all-encompassing study entitled The Direct Economic Impact of Gold. 

“The report is both ground-breaking in scope and timely in its analysis”, says Randall Oliphant, executive chairman of New Gold and chairman of the World Gold Council. 

“It addresses, for the first time, the direct economic impact of gold on the global economy, and is unique in looking at an entire value chain, including gold mining, refining, and fabrication and consumption. It helps us understand the fundamental role that gold plays in advancing economic development and ultimately the needs of society.”

Previous reports have had a more limited scope, and typically examined the economic impact in a certain jurisdiction or in relation to only one segment of the industry. 

Taking a more holistic approach, the World Gold Council hopes to illustrate just how large of an economic influence the global gold industry has and to prove that it is a powerful engine of wealth generation around the world. 

According to the report, the global gold supply reached 4,477 tonnes in 2012 with approximately two thirds coming from mining and the remaining third from the recycling of gold. 

At that level, the sector contributed more than US$210 billion to the world’s economy in 2012, which is approximately the equivalent of the GDP of Ireland, the Czech Republic or Beijing. 

The 15 largest gold producing countries accounted for around three quarters of global output, and directly generated US$78.4 billion of gross value added (GVA) in 2012, which is roughly equivalent to the GDP of Ecuador.

The study finds that gold is a significant source of exports for many countries and a large proportion of the exports of some resource-rich developing countries. In particular, gold accounted for 36 per cent of all Tanzanian exports and 26 per cent of the exports of Ghana and Papua New Guinea. 

The impact on developing nations is clear in terms of GDP as well. In Papua New Guinea 15 per cent of GDP derived from the activities of the gold industry. In Ghana and Tanzania the figures were eight and six per cent respectively. So, although more economically developed countries such as China, the USA, Canada, and Australia produced more gold, the impact in smaller economies can be even more pronounced. 

In a video discussion presented by the World Gold Council accompanying the article, Jason Burkitt of PwC explained that gold does make a “significant impact” in all of the countries in which it is produced. “But that impact becomes very substantial in developing countries.” 

Jason also pointed out that the industries servicing mining operations as well as artisanal mining could not be analyzed in the report but no doubt add significant value over-and-above the figures quoted in the PwC paper.

While mining accounted for the majority of the gold supply, recycling accounted for a third of global supply and the estimated gross value added of the recycling industry was calculated to be between US$23.4 billion and US$27.6 billion in 2012. 

Per tonne, the gross value added of recycled gold clocks in at US$16 million compared with approximately US$36 million for gold produced from mines.

With so much gold being produced from mines and recycled, it’s natural to inquire where this gold is ending up. In 2012, jewellery accounted for the largest portion of demand at 41 per cent. Following hot on its heels was investment demand, which came in at 35 per cent of global demand. From there, central bank gold purchases accounted for 12 per cent while industry consumed 10 per cent. 

The total economic impact is around US$110 billion. US$70 billion of that is associated with jewelry and US$38 billion is associated with investment demand. 

Of the global demand, the 13 largest gold consuming countries in 2012 accounted for 75 per cent of gold used for fabrication and 81 per cent of gold used for (final) consumption, either in the form of jewellery or investment products such as small bars and coins. 

Topping that list are India and China, which together make up more than half of the global demand picture. 

This year, lower demand coming from India ahead of the Diwali gift-giving season this year has got some in the industry worried. But pundits point to the active measures taken by the Indian authorities to curtail gold buying as the major driver. If the restrictions are rolled back, many in the industry expect to see Indian consumers re-enter the market.

Meanwhile, Chinese demand has grown to take up some of the slack from India and the expectation is that 2013 demand will outpace the 776.1 tons recorded in 2012 by a wide margin.

“On the demand side, we’ve seen continuous growth driven by shifts in wealth creation, patterns of saving, and spending”, explains Aram Shishmanian, chief executive of the World Gold Council. “That shift, from west to east, is unstoppable.” 

Source >>>>>>>>>>>>> www.minesite.com


----------



## drillinto

>>>>>>>>> November 02, 2013

That Was The Week That Was … In Australia
By Our Man in Oz

...

Minews. Not a bad collection of moves, but perhaps not enough to lift the overall mining market.

Oz. No, the market, as measured by the metals and mining index ended down a marginal 0.8 per cent, which was fractionally worse than the 0.4 per cent fall from the all ordinaries, with both moves indicating how flat the week was when looked at over the full five trading days.

Gold, given the price retreat back to around US$1,325 an ounce when we closed, was the weak sector, and will be weaker again on Monday after the price kept sliding in London to around US$1,316 per ounce.

Minews. It seems that apart from the handful of exceptional performers mentioned earlier that the overall market barely moved, so let’s fly through the sectors, starting with gold.

Oz. After Tribune there was really only one more strong rise, and that came from the New Zealand gold miner, OceanaGold (OGC), which benefited from investor support after the release of its quarterly report, and added A37 cents to A$1.79.

Other gold moves, all down, included: St Barbara (SBM), down A7.5 cents to A45 cents, Evolution (EVN), down A4.5 cents to A81.5 cents, Papillon (PIR), down A5 cents to A$1.10, Perseus (PRU), down a thumping A20.5 cents to A41.5 cents, Silver Lake (SLR), down A6 cents to A73.5 cents, Troy (TRY), down A8 cents to A$1.30, and Northern Star (NST), down A10 cents to A81.5 cents, despite a burst of publicity about a coal discovery close to its Paulsens gold mine.
...

Source >>> www.minesite.com


----------



## drillinto

>>>>>>> November 04, 2013 <<<<<<<

The Capital Markets See-Saw Is Likely To Continue Swinging Up And Down For Some Time To Come
Rob Davies


Last week an encouraging Chinese PMI figure of 51.4, the highest for 18 months, once again reminded investors of the of sheer power of China as a positive force in the world economy and hence on commodities. 

Less prominence is given to the other end of the see-saw - the negative effect arising from the seemingly never-ending recession in Europe.

A report from Lombard Street Research quantifies this by pointing out that the Eurozone has moved from a â‚¬140 billion deficit five years ago to a â‚¬190 billion surplus now.  

This, it says, has sucked a massive amount of demand out of the world economy.

It is fortunate therefore that China has acted to counter-balance the malign effect of Europe.

Its power was demonstrated again last week when Bloomberg quoted the Beijing Antaike Information Development unit as forecasting a 6.3 per cent increase in Chinese lead consumption next year, to 5.26 million tonnes.

This will create a deficit of 13,000 tonnes, since local production is only expected to increase five per cent to 5.24 million tonnes.

This encouraging news helped push lead prices up one per cent on the London Metal Exchange to US$2,170 a tonne.

There was also encouraging news from China for zinc.  

The same research unit forecasts a five per cent increase in Chinese zinc consumption to 5.93 million tonnes.

That will require 800,000 tonnes of zinc concentrates to be imported to feed domestic smelters. A forecast of a five increase in local production to 5.5 million tonnes will still leave the domestic market undersupplied.

As with lead, this news was enough to add 1.2 per cent to the zinc price and take it to US$1,916 a tonne.

After a period in which LME zinc inventories had dipped below one million tonnes they have now started to creep back up again and currently stand at 1,027, 375 tonnes, about  13,000 tonnes less than last week.

Despite the good news on these two metals other base metals had weaker returns and, overall, the LME index ended the week down 0.2 per cent at 3,140.  

In part though that was due to a resurgent dollar as news of further weak growth in Europe was digested.

It is this contrast between strong demand in the East, weak consumption in Europe and the US somewhere in between, that is dominating capital markets.

Lombard Street Research feels that these conditions will prevail for some time to come and because of that, does not expect interest rates to rise during 2014.

When they do it expects Europe to lead the way, although it is likely that the US will have started to taper its QE programme before that happens.

This cheap money is helping to keep forward prices subdued as contangos in all the base metals are modest.

What will happen as the recovery gathers strength and interest rates start to rise is the big quandary.  

Base metals should fare well as they will be demand-driven, but speculative assets, such as high risk equities, might suffer as the opportunity cost increases.

However, along the way the capital markets see-saw is likely to increase its oscillating frequency.  That will be good news for some, less good for others.

Source >>> www.minesite.com
*****


----------



## drillinto

>>> Keep an Eye on the Dollar Index <<<
Nov 1, 2013 

If you haven't noticed, the US Dollar has had a nice rally this week.
...

http://www.bespokeinvest.com/thinkbig/2013/11/1/keep-an-eye-on-the-dollar-index.html
***


----------



## drillinto

Commodities blog, for your consideration >> http://spilpunt.blogspot.fr/


----------



## drillinto

>>>>>>>>>>>>>>>> November 09, 2013

That Was The Week That Was ... In Australia
Our Man in Oz

...

Oz. Price movements were generally modest, as can be seen in the 1.2 per cent rise in the metals and mining index over the past week, a 0.3 per cent fall in the all ordinaries, and a 2.5 per cent fall in the gold index.

What’s more, the gold index is likely to cop another hit on Monday because the gold price crashed back through the US$1,300 an ounce market after we closed on Friday.


Minews. Time to look at the gold sector, bearing in mind your comment about Monday shaping as a tough day for gold stocks.

Oz. The annoying part about the gold price moving sharply after we close on Friday is that any prices mentioned here are an historic snapshot of a point in time. Having said that the overall trend among the smaller gold companies was mixed, possibly even trending up.

Gold stocks to gain ground last week included Kingsgate (KCN), up A6 cents to A$1.47, Intrepid (IAU), up A2.5 cents to A29.5 cents, Papillon (PIR), up A5 cents to A$1.15, OceanaGold (OGC), up A4 cents to A$1.83, and Scotgold (SGZ), up A0.3 of a cent to A1.8 cents.

Gold stocks to lose ground last week included: Northern Star (NST), down A1.5 cents to A80.5 cents, Evolution (EVN), down A2 cents to A79.5 cents, Alacer (AQG), down a sharp A51 cents to A$2.51, Beadell (BDR), down A5 cents to A87 cents, Regis (RRL), down A17 cents to A$3.27, and Troy (TRY), down A5 cents to A$1.25.

...

Uranium moves, as mentioned, were very modest. Paladin (PDN) added half-a-cent to A40.5 cents. Greenland (GGG), fell A1.5 cents to A28.5 cents. Berkeley (BKY) lost half-a-cent to A22.5 cents. Manhattan (MHC) added one-tenth of a cent to A5.4 cents, while Uranex (UNX) added the same miniscule amount to end the week at A7.4 cents.

...

Source >>> www.minesite.com
*****


----------



## drillinto

November 09, 2013

That Was The Week That Was ... In London
By Robert Tyerman

Upbeat economic news competed for investors’ attention with fears that the upshot might be the ending of US monetary stimulus.

The FTSE 100 Share index marked time, closing the week 0.25 per cent lower at 6,708.42. 

Mining shares proved more robust, taking the FTSE Mining Share Index 2.25 per cent forward to 16,518.48.

However, gold slipped US$15.85 to US$1,307.95 an ounce, while platinum, copper and aluminium were also weak.

Anglo American gained a modest 32.5p to 1,450.5p, against a 12-month peak of 2,072p and a 1,207p low, after completing the sale of its Amapa iron ore operation in Brazil to Dubai-based Zamin Ferrous. 

The price was an initial US$134 million with up to US$130 million on top over five years, depending on the iron ore price. 

Now valued at £20.8 billion and yielding three per cent, the mining giant said it would use the proceeds to pay down debt. The company also announced the recruitment of investment manager Jim Rutherford as a non-executive director.
...

Source >>> www.minesite.com
*****


----------



## MARKETWINNER

Soya bean may go down. Base metals will have some demand. Oil may go down further. We have to analyse different commodities separately one by one now.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions


----------



## drillinto

November 11, 2013 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Unlike Dollars, Or Shares In Internet Companies, Metals Cannot Simply Be Created With A Keyboard Stroke
>>> Rob Davies <<<

Some academics proclaim that you never know if assets are overpriced (i.e. in a bubble), until after the bubble has burst. 

Active practitioners would argue that you can make a pretty fair assessment in real time.

Anyone watching the IPO of Twitter, when the stock rose 73 per cent on its first day, has to believe that bubble conditions now exist.  

There were extenuating circumstances of course.

Clearly, the issuers did not want a repeat of the Facebook flop a year ago so it was priced to go, even though Twitter does not make a profit.

Another sign that monetary conditions are too slack was the surprise jump of 204,000 in US payrolls announced on Friday, which was way in excess of what was expected.  

Given these developments it was unsurprising that capital markets started to price in the start of an end to monetary incontinence.

US Treasuries sold off 4.3 per cent, taking the yield up to 2.7 per cent.

Whether the US Federal Reserve will actually announce a reduction of the cash printing programme is another matter. But that is now what the market expects.

What was not built in was the surprise cut in European interest rates last week. The reduction of 0.25 per cent to 0.25 per cent is an indication of how dire the economic situation in Europe really is.

A rating cut by S & P on French debt only served as another kick at the victim.  

The problem for asset allocators is that if they think US bonds are overpriced as recovery gets underway, US equities are vulnerable to a withdrawal of monetary stimulus, and Europe just looks turgid.

So, where do you place your money?

Even gold failed to react positively to all these flashing warnings. Is it telling us that deflation is a problem in Europe and would be in the US if the printing presses were turned off?

Many authorities are desperate to create inflation but, apart from Internet valuations, it seems hard to generate

Like gold, base metals did not participate in this euphoria of capital values.

The LME index drifted off 1.5 per cent over the week despite reports that China is expected to grow 7.4 per cent in 2014, but the US only 2.6 per cent.

It might be thought that real assets to power Chinese growth might be more in demand than ethereal loss-making internet businesses.  

But no. Scarcity is a powerful mechanism for pushing up prices.  

Unfortunately that argument applies less to base metals now. Barclays expects copper production to increase five per cent next year and that will help generate a surplus of 193,000 tonnes of the metal in 2014.

That said, the signs of a bubble in US capital values cannot be ignored. Eventually, at some point, market participants and/or the authorities will recognise this and will take action.

Quite how it will pan out, let alone when, is anyone’s guess. When it does though the impact on all assets, including metals, will be profound.

The difference with metals is that, unlike shares in internet companies, or US dollars, they cannot simply be created by a few strokes of a keyboard. 

Source >>>>>>>>> www.minesite.com
*****


----------



## drillinto

A debate on nuclear power (last year, 2012)

http://www.economist.com/debate/overview/201
***


----------



## drillinto

Bill Matlack >> Metals & Mining Analysts' Ratings & Estimates - Juniors

November 04, 2013 

http://www.kitco.com/ind/Matlack/2013-11-04-Metals-Mining-Analysts-Ratings-Estimates-Juniors.html


----------



## drillinto

Bill Matlack: Metals & Mining Analysts' Ratings & Estimates >> Senior Producers <<
November 12, 2013 

http://www.kitco.com/ind/Matlack/2013-11-12-Metals-Mining-Analysts-Ratings-Estimates-Senior.html


----------



## drillinto

>>> Gold questions

http://www.livemint.com/Opinion/vAJuRvS15iiu6rStuxPmxO/Gold-questions.html


----------



## drillinto

World Gold Council

Gold continues its journey from West to East as buoyant consumer markets balance investment outflows

http://www.gold.org/media/press_releases/archive/2013/11/gdt_q3_2013_pr/


----------



## drillinto

>>> Country Stock Market Returns <<<

http://www.bespokeinvest.com/thinkbig/2013/11/12/qtd-and-ytd-country-stock-market-returns.html


----------



## drillinto

November 16, 2013

That Was The Week That Was ... In Australia
>>> Our Man in Oz <<<


Minews. Good morning Australia. You seem to have had a busy week, but with very little movement on your market.

Oz. There were certainly plenty of news events which moved individual stocks, though collectively the good and the bad cancelled each other out. The end result was virtually no movement in the major indices, apart from the gold index which slipped 1.7 per cent lower.

The metals and mining index which we track each week was up nine points, which represents a gain of less than half-a-percentage point, while the all ordinaries was up two points, which is less than one-tenth of a percentage point.

Minews. Hard to get much flatter than that, which means we should stick with Plan A and start by looking at how news flow affected specific stocks.

Oz. One of the big movers last week was one of our old favourites, Uranex (UNX), the uranium and graphite explorer. It rocketed up by A4.1 cents (55 per cent) after reporting encouraging graphite results from drilling on its Nachu project in south-east Tanzania. The price rise meant that Uranex earned a prized “speeding” inquiry from market regulators.
...

Source >>> www.minesite.com
*****


----------



## tinhat

Gold down. Copper down. Oil down.


----------



## drillinto

>>>>> November 18, 2013

China’s Demographic Time Bomb: Will It Get Old Before It Gets Rich?
>>>>> By Rob Davies

Once again, China was in the news last week.  

This time because it is starting to change its demographic policy.  While heavily caveated, and already breached in many ways, China is slowly moving away from its “one child policy”.

The need to do so is driven by simple economics.

The country’s working age population - those between the ages of 15 and 64 - was expected to peak in 2015 at 1.01 billion.

In fact it peaked last year and, unless action is taken, this huge motor of growth from increasing expenditure will switch to become a drag as pensioners cease being productive.

Even so, the dramatic changes announced are only expected to increase the number of births by five to ten per cent, or 1 to 2 million.

That won’t be enough to make a big difference to the percentage aged over 60 in the near future, currently 13.3 per cent.

There is also the crucial factor of gender. The one child policy has favoured boys, giving China 20 per cent more men than women.

That suggests that not everyone that wants a child will be able to, thus exacerbating the increase in the average age.

What worries demographers is that China will get old before it gets rich.

Some might wonder at the relevance of demography to commodities. But it is crucial.

China accounts for 40 per cent of world copper demand, and 40 per cent of that goes into its power sector.  

A growing population might want electricity, but only a rich population can afford it and the white goods that use it.  

So the news that investment in power plants fell 20 per cent to RMB 27.2 billion, and that investment in grid infrastructure fell 14 per cent to RMB 41.1 billion is not encouraging for the metal so vital to generating and distributing it.  

Whether that accounted for the 2.2 per cent fall in the price of copper last week to US$6,967 a tonne is harder to say.

In truth, short term factors, like a stronger dollar, are probably more important.

Overall, the LME index decreased 1.5 per cent to 3,048 over the week as currency movements dominated capital markets.

Abenomics continues to weaken the yen, which fell one per cent. Anaemic growth in Europe - 0.1 per cent in the third quarter - favoured the dollar too.

In other parts of the world, emerging market currencies like the Brazilian real and the Turkish lira continue to suffer on fears that a tightening US policy will attract money back to the US.  

Even that most stalwart of alternatives to the greenback, gold, has not been immune. Around 118.7 tonnes has been removed from ETFs in recent weeks.  

Another commodity that usually has a negative correlation with the dollar is oil.

It has now recorded its sixth week of decline, the longest stretch in 15 years. At US$94 a barrel WTI is about US$12 a barrel cheaper than Brent and a stark demonstration of the benefits fracking has brought the world and the US economy in particular.

Lower energy prices will probably do more to help economic growth than any amount of beggar-thy-neighbour currency devaluations, because it helps everyone equally.  

If nothing else it will at least help courting couples in China get together, and that has to be a good thing.     

Source >>>>> www.minesite.com
*****


----------



## drillinto

November 19, 2013

The Countervailing Forces Tugging At Gold
>>> By Alastair Ford <<<


What’s up with gold? 

Lately, the pattern in the market has been that heavy selling from ETFs has been effectively countered by physical buyers sensing a bargain, and an uneasy peace has settled.

Gold has been trading at within shouting distance of US$1,300 for a good few weeks now.

But what could break this pattern?

Simple. ETFs could stop selling. Physical buyers could stop buying.

Or the price could go up or down in response to some other extraneous event – like startling news on quantitative easing, a nuclear-related escalation of tensions in the Middle East, or more bad economic or structural news from the Eurozone.

The market knows any of those - or even a combination – is possible. But when and how they come are the great imponderables.

Suppose the ETFs stop selling. Theoretically that would mean the price ought to rise as the buyers should then outnumber the sellers.

But it might also mean that all those physical buyers out of China and India no longer get a sense that bargains are on offer.

So, higher prices could actually lead to a curtailing of demand, and hence a paradoxical falling back of prices. To chess players, that’s known as a stalemate.

But it rarely works like that, for the simple reason that the extraneous events usually tip the balance one way or another.

At the moment the uneasy calm prevails ahead of Janet Yelland’s appointment. She told Congress the other day that she’s minded to continue with the quantitative easing programme currently underway under the stewardship of Fed incumbent Ben Bernanke.

That news was enough to put US$25 on to the gold price, but lo and behold, it still closed on the day at US$1,285 per ounce, comfortably close to that US$1,300 point about which the price has been dancing since September.

Janet Yelland’s pronouncements on easing are not enough to support a significant upward leg, precisely because the market has already priced in some further easing, but also because it’s now pricing in eventual tapering too.

But hang on a minute. All this talk of easing and tapering relates to the wrong commodity, surely? It’s dollars that will be in greater or lesser supply, not gold.

Better perhaps to take the likelihood of tapering as read, and get back to the commodity in question: gold.

The supply-demand situation for gold itself, as opposed to gold as measured against the US dollar supply, is interesting.

Talk is that more gold goes to China than the official figures suggest. The reasons for this aren’t surprising. The big one is that the Chinese government is building up reserves, and it has a long way to go yet before it can match the amounts of bullion held by the US government in its own vaults.

But perhaps even more important is the retail interest. Why does your average Chinese person want gold? Because in China gold is about as far from a barbarous relic as it’s possible to get.

Holding a currency that’s controlled and manipulated by an unaccountable, unelected communist government is never going to going to appeal to hard-working people looking to store wealth.

Currency manipulation is like any other vice: it’s as old as time, and those who are already corrupt get the most out of it. The general populace in China know this as well as anyone.

But gold is gold. It can’t be made worthless at the stroke of a pen or a keyboard. And as long as the communists remain in power in China, gold will remain the ultimate hedge against their currency.

Meanwhile, China is continuing to get richer. That means exponentially increasing demand for gold.

In support of this view, broker SP Angel reported today that official figures from China suggest that 826 tonnes was imported in to China in the first nine months of this year. But that’s not the whole story.

“We suspect unofficial imports into China, eg smuggled and unreported gold add significantly to the official figure indicating that Chinese demand is far greater than mainstream estimates suggest”, continued the broker.

On this line of thinking, demand may well hold up even if ETF selling does dry up and the price goes higher.

That would bode well for the raft of gold equities that are now suffering the iniquities of multi-year lows. Because if demand holds up, that will combine with the recent drought in the capital markets to put a squeeze on supply.

And that could send the price higher still. And if Janet Yelland’s extension of QE and likely subsequent tapering is already priced in, the drag on that upward momentum is likely to be minimal.

At 864.6 tonnes, SPDR’s gold holdings are at their lowest since February 2009, when the price was at less than US$1,000 an ounce. The difference between that price and the current US$1,275 is interesting and open to interpretation.

But the obvious one would be that over the last five years physical demand has increased significantly to the point where it will now support a price more than 25 per cent higher when investment demand is constant.

What investors will want to know now is: if investment demand continues to fall, will that percentage increase? Or alternatively, there a possibility that that physical demand may actually pull the ETFs back into the market.

Source >>> www.minesite.com
*****


----------



## drillinto

>>>>> PhosAgro optimistic on nutrient industry prospects

http://www.agrimoney.com/news/phosagro-optimistic-on-nutrient-industry-prospects--6512.html


----------



## drillinto

>>>>>>>>>>>>>>>>>> November 23, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz


Minews. Good morning Australia. Another flat week but one with flashes of interest for investors.

Oz. Much like we’ve seen over the past month or so with gold stocks once again singled out for a hammering, much like the England batsmen in the first test at the Gabba.

Minews. I wondered how long it would take for you to mention cricket.

Oz. Sorry, but after the drubbing we took in the last few Ashes series it was a rare pleasure to see Australia on top.

Minews. At least Stuart Broad was on form. But moving quickly on, while secretly praying for rain in Brisbane, we’ll follow the new formula of an early focus on stocks that performed well, or moved against the tide.

Oz. There were a few noteworthy price moves in a market which lacked a firm trend, confirming what we said last week about the early onset of Christmas torpor.

Overall, the Australian market slipped 1.2 per cent lower, as measured by both the all ordinaries and metals and mining index. The gold index was the big loser, dropping an alarming 10.6 per cent and closing below the 2,000 point mark for the first time in many years.

Minews. Gold is certainly the sick man of mining as the financial world heads into a period of change, likely to be caused by an end to the era of easy money. Let’s hear about the exceptional movers.

Oz. Some of the stocks which caught the eye last week have never been mentioned here before and, I suspect, never mentioned anywhere.

Stonewall Resources (SWJ), a company which only puts its assets in the appendix of its presentation, announced the sale of a South African project to a Chinese investor which lifted its share price by A8 cents (66 per cent) to A20 cents.

Archer Exploration (AXE) put graphite back in the news with a report that said graphene, the material which has excited science over the past few years, could be easily extracted from its Campoona graphite deposit in South Australia. That news boosted the stock by A5.5 cents (35 per cent) to A21 cents.

Volta Mining (VTM), a new player in the iron ore sector and a company with close ties to local Aboriginal groups, said it was acquiring a well-placed tenement near BHP Billiton’s Mt Newman mine. On the market, Volta more than doubled with a rise of A4 cents (133 per cent) to A7 cents.

Surprisingly, a number of small gold exploration stocks defied the downward trend in the gold price. Northern Mining (NMI), which is exploring near Kalgoorlie, rose by A1.1 cents (73 per cent) to A2.6 cents, earning a speeding inquiry from corporate regulators.

And Crater (CGN) reported rich gold assays from drilling in Papua New Guinea, but saw an initial share-price rush up to A13 cents peter out as the gold price fell, closing down A0.2 of a cent at A8.4 cents.

The other significant event on the Australian market was the long list of stocks which are now trading at 12-month share price lows. On Friday, companies such as Newcrest (NCM), Ampella (AMX), Kingsgate (KCN), Perseus (PRU), Resolute (RSG), St Barbara (SBM), Tanami (TAM) and Troy (TRY) hit new lows, and in some cases closed at their low point.

Minews. Rather obviously, all are gold stocks. Let’s move to the calling of the card and get gold out of the way early before moving across the board.

Oz. As you would expect, especially given the list of gold stocks hitting 12-month share price lows, there isn’t much good news from that sector.

Among the few gold companies that rose was Reed Resources (RDR), which crept up by two-tenths of a cent to A3.1 cents as it repairs its damaged business base.

Intrepid (IAU), quite remarkably, added A1 cent to A28 cents despite being in gold and in Indonesia during a diplomatic spat over telephone bugging, a topic you’re familiar with in the U.K.

Most other moves were down, some substantially. Troy lost A16 cents to close at A$1.12 after setting a fresh low of A$1.10. Newcrest fell by A$1.10 to close at A$8.50 after setting its new low of A$8.49. Kingsgate dropped by A19 cents to close at a new low of A$1.20.

Perseus was down A10 cents to close at A29 cents with its new low set at A28.5 cents, and Resolute closed at A51 cents, down A7.5 cents, but up a few cents from its new low of A48.7 cents.

Minews. I think we get the gold story, let’s shuffle across to the base metals next, please.
...

Source >>>>>>>>>>>>>> www.minesite.com
*****


----------



## drillinto

>>>>> November 25, 2013

A False Warning Signal
By Rob Davies

Gold isn’t really a commodity; it’s more of a currency. It occupies a strange diaphanous world between the two asset classes. Nevertheless, many regard it as a lead indicator for commodities in general and the fact that it seems to be heading for its first annual loss in 13 years has persuaded some momentum driven investors that commodities are played out.  A further decline of 3.2 per cent last week in the gold price to US$1,246 an ounce was not matched by base metals. They edged up 0.5 per cent to take the LME index to 3,063.  Indeed, the weakness in gold reflects rising confidence in the US economy and, by extension, the dollar.  A stronger US economy is good news for raw materials. 

There is one exception to that which, happily, is good for the mining sector. Over most of the last twenty three years the price of oil in the US, usually referenced to the WTI benchmark has traded at the same price as oil in Europe normally published as Brent.  Since early 2011 the gap between the two has gradually widened to such an extent that now American oil is about US$13 a barrel cheaper. The reason of course is the widespread use of fracking in the New World that has opened up lots of new fields and supply. It promises to make the US energy independent in the future. This price disparity does create all sorts of issues in the oil, and especially in the refining industry, but it has two important implications for the mining sector. 

Firstly, given the weight of oil in most commodity indices, it has the effect of depressing these benchmarks and encourages investors to reduce their allocation to all commodities. This was a major factor in the underperformance of mining stocks earlier in the year even though metal prices did not decline that much.  

The second effect of lower oil prices is to reduce operating cost across large chunks of the economy, particularly in mining and also for consumers.  While the reduction in fuel costs won’t transform the mining industry, at least not on the scale seen so far, it will help to ameliorate the impact of declining revenues.  More importantly it will help to boost consumer spending across the world and that can only boost economic growth and hence demand for metals. 

So far few economists seem to have factored in lower oil prices into their growth forecasts. It is of course conceivable that it won’t actually happen.  But if it does though the impact could be quite significant and act to compensate for the removal of the US$85 billion injection from the US Federal Reserve every month.  

Lower oil prices won’t be so warmly welcomed in places like the Middle East, Russia or Venezuela, which is probably no bad thing.  It will also continue to have a depressing impact on commodity indices. While that may encourage some capital allocation away from commodities to equities mining stocks, being pro-growth, may not be so badly affected. 

Whether all these disparate threads are fully captured by the changes in the gold price is anyone’s guess.   But if gold is measure of “economic worry” then a falling price is no bad thing for everyone else.

Source >>>>> www.minesite.com
*************************


----------



## drillinto

For your consideration  >>  http://oilprice.com/


----------



## drillinto

London - Mines & Money Conference, December 1-5, 2013

http://www.minesandmoney.com/london...&utm_campaign=Mines_and_Money_Portal_Top_Menu


----------



## drillinto

>>> November 30, 2013

That Was The Week That Was... In Australia

>>> By Our Man in Oz

...

Minews. All interesting, now for the sectors, perhaps starting with gold to see if any other stocks enjoyed a similar spot of counter-cyclical investing which seems to have benefited Oceana.

Oz. There were a handful of gold stocks to gain ground but the trend, as you might expect, was down.

Going against the tide were stocks that included: Kingsrose (KRM) up A2 cents to A39 cents. PVI (PVM), up A3.5 cents to A30 cents. Predictive Discovery (PDI), up A0.3 of a cent to A2 cents. Azumah (AZM), up half-a-cent to A2.9 cents. Norton (NGF), also up half-a-cent to A13 cents, and Lachlan Star (LSA), which joined the half-cent rising brigade to close at A20 cents.

Gold stocks to suffer a fresh bout of selling included: Troy (TRY), down A12.5 cents to A99.5 cents. Papillon (PIR), down A14.5 cents to A94.5 cents. Silver Lake (SLR), down A9.5 cents to A46.5 cents. Kingsgate (KCN), down A16 cents to A$1.04. Orbis (OBS), down A7 cents to A25 cents. Scotgold (SGZ), down half-a-cent to A1.3 cents, and Northern Star (NST), down A1 cent to A68 cents.
...

Source >>> www.minesite.com


----------



## drillinto

>>>>> December 01, 2013

Unless The Developed World Gets Its Act Together, It Risks Being Eclipsed By Newcomers
>>>>> By Rob Davies


The claim that the UK is currently the fastest growing developed economy might be good news for some politicians, but it probably says more about the weakness of the peer group than the vigour of Albion. 

Third quarter growth of 0.8 per cent is not bad after so many years of poor performance.

The trouble is that isn’t actually that high and it just reminds us how difficult life is in the rest of the world.  

The UK, and London in particular, has always been a bit of special case.

London’s property market seems to be in a world of its own. It has been described as less an asset class and more a money-laundering operation.

Flight capital from all over the world has decided that London property is about the safest asset class there is, to the detriment of the gold price which languishes at US$1,254 an ounce and is set for its first annual decline in 13 years.

Anaemic growth in the developed world and over-expansion of capacity is continuing to depress the aluminium price, which last week dipped below US$1,700 a tonne before recovering a little to close just above that level at US$1,710.

It is still constrained by a large overhang of inventory - current LME stocks stand at nearly 5.5 million tonnes.

It is good for the industry, though not for the individuals involved, that Rio Tinto decided on Friday to close alumina production at Gove.  It cited low alumina prices and a high Australian exchange rate as reasons for the cut.

Another company that looks likely to take drastic action is Vale, the Brazilian iron ore miner. It is expected to announce a large reduction in its capital expenditure budget from US$16.3 billion to US$14.5 billion.

The process of bringing supply into line with weaker than expected demand is always painful.

Vale’s shares are down 20 per cent this year, making the lacklustre performance of the UK majors look good by comparison.

Aluminium is probably the metal facing the biggest challenges in getting its market back into balance.

Even zinc can now point to falling inventories - they now stand at 962,250 tonnes - as evidence that it is no longer in surplus.  Despite that help the zinc price remains lacklustre at US$1,858 a tonne.

Bears can easily argue that while these numbers may be valid, much of the growth that is evident in the developed world is largely a product of money printing on a prodigious scale.

The most high profile one of late is Japan.

Japan is working furiously to remove deflation and create inflation by a process known as “Abenomics”. It is working.

Inflation rose in October to 0.9 per cent from 0.7 per cent. While this has stimulated the stock market it has depressed the currency, pushing it down to  ¥102 against the dollar.  

Complaints from the US against this policy will be given short shrift while the US continues its never-ending quantitative easing.  

Similarly in Europe the ECB is doing all it can to weaken the euro despite grumbles from Germany.

As a major exporter, Germany has benefitted hugely from the imposition of a pan-European co-prosperity zone on aspiring competitors. This gives it a relatively weaker currency and its peers a relatively higher, and uneconomic one.  

While everyone knows that is not sustainable, the alternatives are even worse, for the time being.

World growth still relies more on the so-called undeveloped nations than the supposedly developed ones.

The risk is that economic tension between these two groups will translate into military tension if the disparity continues and widens.

China’s needling of Japan about islands in the South China Sea is one obvious flash point.  

Growing economies want to be taken seriously and stagnating ones are reluctant to acknowledge their diminished status.    

Unless the developed world gets its act together it risks being eclipsed by the newcomers as they take their turn in the spotlight.

Source >>>>> www.minesite.com
*****


----------



## drillinto

For your consideration >> Corruption Index 2013 >> http://cpi.transparency.org/cpi2013/results/

Australia(9th) and New Zealand(1st) are among the top 10 least corrupt countries.
The three most corrupt countries are: Afghanistan, North Korea and Somalia.


----------



## drillinto

December 03, 2013

Sunday Canada/Oz day, Mines & Money London 2013
>>>>> Laurence Read 

Nigel Gordon, head of the natural resources sector at Faskin Martineau, opened Sunday’s Canada-Australia day at Mines and Money London with a quote from Adam Smith. Smith was a Scottish moral philosopher and unsurprisingly the quote wasn't all that positive about resources and capitalism.

Gordon cites three major risks for the mining community across the globe:

- Resource nationalization

- Shortage of skills

- Access to infrastructure

With commodities prices dropping and host nations wanting increased benefit from projects in their countries, Gordon points out that an imperative for resources companies is to clearly align themselves with governments in terms of benefits. Protection against the sliding scale of various legislative issues ranging from indigenization to nationalization is the order of the day. Gordon wasn’t specific on how companies might do that, but considering his other two points were related to skills training and infrastructure, perhaps a good first pathway is working to address these concerns for the good of all: jobs and roads/power/rail that can be used by the populace in addition to benefitting a project.
...  

Source >>>>> www.minesite.com
*****


----------



## drillinto

>>> December 04, 2013

Mines And Money Wraps Up For Another Year, With Controversy Thin On The Ground And Optimism About 2014 Just About Trumping This Year’s Misery
>>> Alastair Ford

There were no fights at this year’s RFC Ambrian party, the organisers of which, having learned the lessons of previous years, restricted access to invitation only. 

Nonetheless, Tuesday evening’s Mines & Money was not without conflict as police were called and set up sentry duty outside the Islington Business Design Centre, chatting to activists who somewhat bizarrely had come to picket the Women in Mining Event.

They say there’s no such thing as bad publicity, and with certain long-standing PR professionals on the WIM team, the temptation was to think that it was all some sort of stunt.

But stunts weren’t necessary.

The WIM event went off in style, with several hundred attendees packing into the mezzanine-level conference hall to quoff champagne and beer at the expense of WIM’s generous sponsors, perusing all the while the latest WIM publication, the 100 most influential women in mining.

With the proviso that the women included in the list had to be nominated by someone else, it made for pretty interesting reading.

Some of the names were fairly predictable, like Cynthia Carroll. But also included were our very own jobs4mining star Janet Bewsey, who has helped place hundreds of mining people in influential positions around the world.

Inside the event there was some awareness of the protestors outside, but precisely what point they were trying to make remained unclear. Were they against women in mining, or just mining? Or were they women against mining?

No one seemed to care really. With Laurence Read’s CSR 21 taking an ever-more prominent role in the City, providing coverage and promotion of corporate and social responsibility, this isn’t an industry that feels – certainly at the respectable end at which London finance is involved – that it has any particular case to answer in terms of the ethics of mining.

If the protestors would care to dispense with their mobile phones, fridges, public transport, electrical wiring in their houses, and all the other essentials of every day life that carry metals, then maybe, just maybe they might deserve a hearing. On the other hand, they might then be dismissed as simple Luddites, or some sort of crazy Amish sect.

Not that there aren’t issues. It’s widely acknowledged that the Kimberley Process is flawed for example, and the connections between armed conflict and resources in the Democratic Republic of Congo remain one of the great open sores of the African continent.

On the whole though, this is an industry that’s prepared to pay its environmental and social dues, and which is very keen, in the face of a really lacklustre market, to try and get on and do some deals.

To that end, the feeling on the conference floor was that the best day was Tuesday. Monday was good as momentum built, but as mid-day wore on on Wednesday the feeling grew that the energy was spent.

Shutting the conference floor half an hour before Robert Friedland was due to speak was an interesting exercise in scheduling, since although Friedland remains undisputed as the leading draw in the mining world, many tired delegates with a half-hour void in front of them simply opted for departure.

But overall the feeling was that this year’s Mines & Money was better than last year, and if the money element wasn’t truly out in force, there were some useful investors walking the floor, and some useful people looking to do deals.

Delegates were unanimous that if London looks a bit lacklustre in its own terms right now, it is positively heaven compared to Toronto, which is still completely dead, a long way better than the ASX, which is flailing around especially as the gold price continues weak.

Rick Rule continued his relentless drumbeat that now is the time to go shopping, and plenty of investors and company directors agreed with him. Two questions followed, though.

One, having been heavily wiped out by all the value destruction that’s gone on over the past four years or so, where exactly are people supposed to summon up the appetite for more risk from?

And two, just because we may have bumped a little bit off the bottom in the final quarter of this year, doesn’t mean that a major upswing is at all imminent. Talk was that commodities are unlikely to perform particularly well next year, so that even if the equity markets do thaw and new money and new enthusiasm comes in, the gains are unlikely – with a few exceptions – to be spectacular.

After all, there are always one or two. It was notable that the team from Fission Uranium was keen to hit the town on Monday night – Monday! – but it takes a discovery of the scale of theirs to generate that kind of enthusiasm.

As for the rest, the networking was good, some useful conduits to finance were either opened or kept open, but the overall feeling was one of relief that the year is nearly over, and mild anticipation that next year could be a modicum better.

Source >>> www.minesite.com
*****


----------



## drillinto

December 06, 2013

That Was The Week That Was … In Australia
>>>>> By Our Man in Oz

Minews. Good morning Australia. Or should that be good morning to an Australian in London?

Oz. The latter, because the place to be last week was at the annual Mines and Money gabfest in Islington, an event which has become an essential part of the annual cycle of conventions, thanks to its close links to the money men of the City.

Minews. Did you take away a positive image of the outlook for mining?

Oz. Very much so. We seem to have reached a point where the pieces of the jigsaw made up of mining interests and money interests are starting to form a cohesive picture.

Essentially, prices of most mining stocks, good and bad, have hit the bottom, as have most commodity prices. At the same time it seems there is a wall of money sitting on the sidelines looking for a new home, largely because negative interest rates are burning holes in the pockets of its owners.

Minews. Which leads to the obvious question: when will we see better conditions, and what will start the ball rolling?

Oz. Oddly, I think the ball has started rolling in a few places, although the overall market might not get its skates on until mid-next year, perhaps sooner, but probably around June.
...

Source >>>>> www.minesite.com
*****


----------



## drillinto

>>>>> December 09, 2013

Will The Fed Move The Goal Posts On Quantitative Easing?
>>>>> By Rob Davies

Nothing much happens in global capital markets without some nod to the US Federal Reserve.

Effectively it is the central bank to the world and it sets the price for short term money.

So any hint or suggestion that it might change that price is taken very seriously by all sorts of traders in all sorts of markets in all sorts of places.

One way they react is through the US Treasury market, and the default benchmark for that is the yield on the 10 year bond.

Last week that bond fell 3.5 per cent taking its yield back up over 2.9 per cent, although it dipped slightly to finish at 2.853 per cent.

That was where it was a few months ago when the Americans had a domestic tiff on whether to pay their bills or not. 

Although that argument has gone into hibernation for a few months the US economy continues to exhibit positive momentum which is why bond prices are weakening.

The evidence for that has come in several ways.

One was an upward revision to third quarter US GDP growth to 3.6 per cent from 2.8 per cent.

Another was a better than expected increase in payrolls to 203,000. Another was the best car and light truck sales - at an annualised rate of 16.3 million - since 2007.

Finally, and most importantly, was the fall in unemployment to seven per cent.

This is important because it is getting close to the rate of 6.5 per cent which the Fed has set as the level at which it will start to review its monthly US$85 billion cash injection to the economy.

Despite the strong US growth numbers the fact remains that the world’s largest economy (though not the world’s largest commodity consumer) still needs life support through the continuing QE programme.

The question on the minds of investors is whether the Fed will review that 6.5 per cent unemployment level as the threshold for gradually removing QE as it approaches it.

Reducing the threshold would have a significant effect on the cost of capital which would impact markets everywhere.

Equities responded to these data by following the bond market lower.

On the other hand commodities took the news positively and the LME index gained 1.1 per cent over the week.

The commodity asset class was also helped by some specific issues as well.

The suggestion that Indonesia will ban exports of minerals and ores to favour a domestic processing industry was not taken seriously. It was enough, though, to push copper and nickel prices higher.

These two metals are regarded as most at risk and rose 1.2 per cent to US$7,111 and 2.5 per cent to US$13,735 a tonne respectively.

Despite tales of looming overcapacity it is noteworthy that the copper industry is still running at a 85.2 per cent utilisation rate and inventories in LME warehouses dropped again last week to stand at just 408,100 tonnes. 

Zinc too saw another decline in its inventory of unsold metal. It might only have been 21,000 tonnes taking the total down to 941,850 tonnes, but it does indicate a market regaining its balance.   

The weak gold price - a good measure of worry - and a resurgent dollar all point to recovering confidence about the prospects for the US.

Whether the Fed moves the goal posts is probably less important than the fact that the economy keeps scoring goals with whatever help it can get.

Source >> www.minesite.com
******


----------



## drillinto

8 December 2013 

Why do we value gold ?
>>> By Justin Rowlatt

Mankind's attitude to gold is bizarre. Chemically, it is uninteresting - it barely reacts with any other element. Yet, of all the 118 elements in the periodic table, gold is the one we humans have always tended to choose to use as currency. Why?
Why not osmium or chromium, or helium, say - or maybe seaborgium?
I'm not the first to ask the question, but I like to think I'm asking it in one of the most compelling locations possible - the extraordinary exhibition of pre-Columbian gold artefacts at the British Museum?
That's where I meet Andrea Sella, a professor of chemistry at University College London, beside an exquisite breastplate of pure beaten gold.
He pulls out a copy of the periodic table.
"Some elements are pretty easy to dismiss," he tells me, gesturing to the right-hand side of the table.
"Here you've got the noble gases and the halogens. A gas is never going to be much good as a currency. It isn't really going to be practical to carry around little phials of gas is it?
"And then there's the fact that they are colourless. How on earth would you know what it is?"
The two liquid elements (at everyday temperature and pressure) - mercury and bromine - would be impractical too. Both are also poisonous - not a good quality in something you plan to use as money. Similarly, we can cross out arsenic and several others.
Sella now turns his attention to the left-hand side of the table.
"We can rule out most of the elements here as well," he says confidently.
"The alkaline metals and earths are just too reactive. Many people will remember from school dropping sodium or potassium into a dish of water. It fizzes around and goes pop - an explosive currency just isn't a good idea."
A similar argument applies to another whole class of elements, the radioactive ones: you don't want your cash to give you cancer.
Out go thorium, uranium and plutonium, along with a whole bestiary of synthetically-created elements - rutherfordium, seaborgium, ununpentium, einsteinium - which only ever exist momentarily as part of a lab experiment, before radioactively decomposing.
Then there's the group called "rare earths", most of which are actually less rare than gold.
Unfortunately, they are chemically hard to distinguish from each other, so you would never know what you had in your pocket.
This leaves us with the middle area of the periodic table, the "transition" and "post-transition" metals.
This group of 49 elements includes some familiar names - iron, aluminium, copper, lead, silver.
But examine them in detail and you realise almost all have serious drawbacks.
We've got some very tough and durable elements on the left-hand side - titanium and zirconium, for example.
The problem is they are very hard to smelt. You need to get your furnace up into the region of 1,000C before you can begin to extract these metals from their ores. That kind of specialist equipment wasn't available to ancient man.
Aluminium is also hard to extract, and it's just too flimsy for coinage. Most of the others in the group aren't stable - they corrode if exposed to water or oxidise in the air.
Take iron. In theory it looks quite a good prospect for currency. It is attractive and polishes up to a lovely sheen. The problem is rust: unless you keep it completely dry it is liable to corrode away.
"A self-debasing currency is clearly not a good idea," says Sella.
We can rule out lead and copper on the same basis. Both are liable to corrosion. Societies have made both into money but the currencies did not last, literally.
So, what's left?
Of the 118 elements we are now down to just eight contenders: platinum, palladium, rhodium, iridium, osmium and ruthenium, along with the old familiars, gold and silver.
These are known as the noble metals, "noble" because they stand apart, barely reacting with the other elements.
They are also all pretty rare, another important criterion for a currency.
Even if iron didn't rust, it wouldn't make a good basis for money because there's just too much of it around. You would end up having to carry some very big coins about.
With all the noble metals except silver and gold, you have the opposite problem. They are so rare that you would have to cast some very tiny coins, which you might easily lose.
They are also very hard to extract. The melting point of platinum is 1,768 °C.
That leaves just two elements - silver and gold.
Both are scarce but not impossibly rare. Both also have a relatively low melting point, and are therefore easy to turn into coins, ingots or jewellery.
Silver tarnishes - it reacts with minute amounts of sulphur in the air. That's why we place particular value on gold.
It turns out then, that the reason gold is precious is precisely that it is so chemically uninteresting.
Gold's relative inertness means you can create an elaborate golden jaguar and be confident that 1,000 years later it can be found in a museum display case in central London, still in pristine condition.
So what does this process of elemental elimination tell us about what makes a good currency?
First off, it doesn't have to have any intrinsic value. A currency only has value because we, as a society, decide that it does.
As we've seen, it also needs to be stable, portable and non-toxic. And it needs to be fairly rare - you might be surprised just how little gold there is in the world.
If you were to collect together every earring, every gold sovereign, the tiny traces gold in every computer chip, every pre-Columbian statuette, every wedding ring and melt it down, it's guesstimated that you'd be left with just one 20-metre cube, or thereabouts.
But scarcity and stability aren't the whole story. Gold has one other quality that makes it the stand-out contender for currency in the periodic table. Gold is... golden.
All the other metals in the periodic table are silvery-coloured except for copper - and as we've already seen, copper corrodes, turning green when exposed to moist air. That makes gold very distinctive.
"That's the other secret of gold's success as a currency," says Sella. "Gold is unbelievably beautiful."
But how come no-one actually uses gold as a currency any more?
The seminal moment came in 1973, when Richard Nixon decided to sever the US dollar's tie to gold.
Since then, every major currency has been backed by no more than legal "fiat" - the law of the land says you must accept it as payment.
Nixon made his decision for the simple reason that the US was running out of the necessary gold to back all the dollars it had printed.
And here lies the problem with gold. Its supply bears no relation to the needs of the economy. The supply of gold depends on what can be mined.
In the 16th Century, the discovery of South America and its vast gold deposits led to an enormous fall in the value of gold - and therefore an enormous increase in the price of everything else.
Since then, the problem has typically been the opposite - the supply of gold has been too rigid. For example, many countries escaped the Great Depression in the 1930s by unhitching their currencies from the Gold Standard. Doing so freed them up to print more money and reflate their economies.
The demand for gold can vary wildly - and with a fixed supply, that can lead to equally wild swings in its price.
Most recently for example, the price has gone from $260 per troy ounce in 2001, to peak at $1,921.15 in September 2011, before falling back to $1,230 currently.
That is hardly the behaviour of a stable store of value.
So, to paraphrase Churchill, out of all the elements, gold makes the worst possible currency.
Apart from all the others.

Source >>> BBC World Service <<<
*****


----------



## drillinto

Commodity Snapshot
****************

http://www.bespokeinvest.com/thinkbig/2013/12/10/bespokes-commodity-snapshot.html


----------



## drillinto

Baltic Dry Index Surges to Three Year High
>>>>>>>>>>>>>>>>> December 12, 2013 

http://www.bespokeinvest.com/thinkbig/2013/12/12/baltic-dry-index-surges-to-three-year-high.html


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## drillinto

Fonterra [FCG:NZE] upgrades NZ milk output hopes after rains

http://www.agrimoney.com/news/fonterra-upgrades-nz-milk-output-hopes-after-rains--6592.html

Source >>> agrimoney.com
*****


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## drillinto

>>>>> December 13, 2013

That Was The Week That Was … In Australia
>>>>> By Our Man in Oz

Minews. Good morning Australia. Your market seems to have staged a reasonable comeback late in the week, after a few days of heavy losses.

Oz. It did look a little sick until Friday when we clawed back about half-a-percentage point, though even that small win saw the all ordinaries end the week down 1.6 per cent, with the metals and mining index shedding a slightly heftier 2.2 per cent.

The winner, and about time you might say, was the gold sector which added 2.2 per cent, perhaps because of a feeling that gold itself has been over-sold and the prospect of an end to the U.S. money printing exercise could see investors shift back to gold.

Minews. It will be interesting to see if gold can recover, but let’s stick with your market and the events which drove it last week.

Oz. The big story of the week, and one which will have interesting political ramifications, was a decision of the Australian Government to withdraw support for the car manufacturing sector. While not directly linked to mining it will throw a cog in the wheels of the wider economy and could signal the end of the honeymoon period for the pro-mining government elected as recently as September.

Minews. Meaning that the dreaded mining super-tax and the equally unpopular carbon tax could make a return sooner than expected.

Oz. More to the point neither tax has actually been killed, yet, because the new government doesn’t have the numbers in the Senate, and the car-support decision will hurt electorally, no matter whether it makes economic sense, or not.
...

Source >>>>> www.minesite.com
*****


----------



## drillinto

Jim Rogers still bullish on commodities but...

http://www.moneynews.com/StreetTalk/Jim-Rogers-financial-system-collapse/2013/12/09/id/540758


----------



## drillinto

"His [J. M. Keynes] commodities trading seemed to go well for some time, but then came the stock market crash of 1929 and the attendant collapse in demand for commodities. He lost some 80 percent of his net worth."

3 Dec 2013

Book Review: Wasik, Keynes's Way To Wealth
>>>>> By Brenda Jubin

John Maynard Keynes was not only a renowned economist, he was an investor. He managed his own money as well as that of King's College, his friends and family, and insurance companies. As John C. Bogle writes in his introduction to the book, "His spectacular success showed not only his passion for making money, but his growing aversion to losing it. As someone who had gained two fortunes through his trading prowess and lost them through his hubris, Keynes is a stellar example of how an investor can learn, fall on his face more than once, and still come out ahead." (p. xxxiv)

John S. Wasik explores this investing journey in Keynes's "Way to Wealth: Timeless Investment Lessons from the Great Economist" (McGraw-Hill, 2014). Let me start with the rewards of the journey: what Keynes did with his wealth. He bought art as well as rare books and manuscripts. The Keynes collection of rare books, bequeathed to King's College in 1946, is, according to the college's web site, "especially strong in editions of Hume, Newton and Locke, and in sixteenth and seventeenth century literature. About 1300 books in this collection have been catalogued on the online catalogue. … Keynes's collection of manuscripts by Newton, Bentham, John Stuart Mill, etc., is housed in the Modern Archive Centre." A man after my own heart, but with a bigger budget.

Keynes was a speculator. According to his own definition, "The essential characteristic of speculation … is superior knowledge. We do not mean by this the investment's actual future yield … we mean the expected probability of the yield. The probability depends upon the degree of knowledge in a sense, therefore it's subjective. If we regard speculation as a reasoned effort to gauge the future from present known data, it may be said to form the reins of all intelligent investing." (p. 8)

In 1920 he set up an investing syndicate to trade currencies, both long and short. Initially, he was successful, but then in the space of four weeks the syndicate's entire capital was wiped out. With the help of a "birthday present" from his father and a loan from a financier, Keynes got back in the game and by the end of 1922 was able to repay all of his investors and then some. At that point he decided to add even more volatile commodities to his trading portfolio. "When it came to commodities, Keynes was an absolute data wonk. His documenting of commodity price supplies and fluctuations fills nearly 400 pages of Volume 12 of his collected writings." (p. 26)

His commodities trading seemed to go well for some time, but then came the stock market crash of 1929 and the attendant collapse in demand for commodities. He lost some 80 percent of his net worth.

"Although Keynes was well known for his arrogance and his air of intellectual superiority, the humbling experience of having nearly lost two fortunes changed his thinking on the best way to invest. The macro view of trying to guess where the economy was moving, and to link currency and commodity trades to those hunches, had failed in a big way. His new focus on confidence, sentiment, and psychology made all of his extensive research into prices, supply/demand ratios, and monetary movement seem irrelevant." (pp. 48-49)

Keynes became a bottom-up investor, holding concentrated positions in companies that he was familiar with and in whose management he "thoroughly believe[d]." (p. 116) He used leverage; from 1929 to 1945 it "amplified his winnings" (and of course his losses as well), "multiplying his net wealth by a factor of 52." (p. 118)

As for asset allocation, he was a tactical investor. As he wrote in 1938, "the whole art is to vary the emphasis and the center of gravity of one's portfolio according to circumstances." (p. 115) But for the most part he now focused on the long-term profitability of companies. His investment philosophy rested on three principles: (1) "a careful selection of a few investments (or a few types of investment) having regard to their cheapness in relation to their probable actual and potential intrinsic value over a period of years ahead and in relation to alternative investments at the time; (2) a steadfast holding of these in fairly large units through thick and thin, perhaps for several years, until they have fulfilled their promise or it is evident that they were purchased on a mistake; (3) a balanced investment position, i.e., a variety of risks in spite of individual holdings being large, and if possible opposed risks (e.g., a holding of gold shares amongst other equities, since they are likely to move in the opposite directions when there are general fluctuations)." (pp. 111-12)

His principles have certainly had lasting power; they underlie some of the most successful investment portfolios today.

Source >>>>> Seeking Alpha


----------



## drillinto

>>>>> Dec 12, 2013 

ExxonMobil’s Outlook for Energy Says All Forms of Energy Required to Meet Growing Demand

http://news.exxonmobil.com/press-re...all-forms-energy-required-meet-growing-demand


----------



## drillinto

>>> December 16, 2013

Last Minute Revisions

The behaviour of mining equities and the underlying commodities travelled in different directions last week.  Mining shares again drifted down, driven more by worldwide negative sentiment to equities, while the LME Index gained 2% to close at 3,129. A large component of the gain in the index was derived from the 4% increase in the zinc price to $1,958 a tonne and the 1.5% increase in the price of copper to $7,218 a tonne. Indeed, at one point towards the end of the week the copper market went into a $13 backwardation as demand for metal for prompt delivery exceeded that for three months. 

Underlying the price move was a further fall in LME inventories. They declined 3.7% to stand at 393,000 tonnes and Bloomberg reported that total copper inventories including those on the New York and Shanghai exchanges stand at just 551,745 tonnes. This tightness was not predicted and Stephen Briggs of BNP Paribas commented that the forecast surplus in copper this year has now disappeared.

A tighter market this year means that the 2014 will start in better shape and Barclays has revised its projected surplus for 2014 down by 34% to just 127,000 tonnes of copper.  One reason for this is the admission by Anglo American that its copper production will slide from 755,000 tonnes this year to 690,000 tonnes in 2014.   

The industry is doing its best to respond to these good conditions as evidenced by the announcement that Codelco will invest $4 to $5 billion a year over the next five years in new capacity.  

The negative sentiment towards the miners as distinct from the metals can be explained to some extent by the perception that while price are steady they are not rising. Rising prices suggest the companies are growing revenue and profits while flat prices indicate flat profits. While true to a degree it does overlook the importance of cash flow and the compound growth that arises from that.

There are also powerful mitigating influences, not the least of which is currency. In the short term the weakness in the Australian dollar depresses the share prices of the big miners with overseas stock market listings. Set against that though is the consequent reduction in operating costs.  The 1.8% decline in the Aussie dollar last week to 89 cents will help a lot. If Glenn Stevens, the Governor of the Royal Bank of Australia, gets his wish that it declines even further to 85 cents the positive impact on the bottom line of the local mining stocks will be significant.

Capital markets still remain hugely distorted by the continuing repercussions of the financial crisis of five years ago when interest rates were reduced to virtually zero. Some asset classes, like junk European debt, were thrown a lifeline.  Others, like mining, have just soldiered on throwing out prodigious amounts of cash to those savvy enough to hold those equities. The volume of that cash flow has never really been recognised, but it will be eventually. Especially if conditions next year turn out to be less gloomy than some are still expecting.  It looks as if analysts will be revising their data right to the very end of the year.

Source >>> www.minesite.com
*****


----------



## drillinto

U.S. Energy Information Administration: Annual Energy Outlook 2014

http://www.eia.gov/pressroom/presentations/sieminski_12162013.pdf
***


----------



## drillinto

Please consider voting for ASF as one of Australia's top stock forums

http://www.thebull.com.au/the_stockies/forums.html


----------



## drillinto

New Zealand beats Australia: 16 - 9

2013 Country Stock Market Performance
Dec 17, 2013 

http://www.bespokeinvest.com/thinkbig/2013/12/17/2013-country-stock-market-performance.html


----------



## drillinto

In 2013, the United States was 100 percent dependent on foreign suppliers for 17 mineral commodities and more than 50 percent dependent on foreign sources for at least 24 other mineral commodities.

http://www.usgs.gov/blogs/features/...l-being-strategic-with-our-mineral-resources/
[The graph shows that Australia is a major import source for several of those mineral commodities]


----------



## drillinto

World Stock Market Cap: Australia is Top 10

http://www.bespokeinvest.com/thinkbig/2013/12/20/us-catches-up-to-world.html


----------



## drillinto

Gold was by far one of the worst trades of 2013
>>>>> By Matt Phillips

http://qz.com/160437/gold-was-by-far-one-of-the-worst-trades-of-2013/

Source >>>>> Quartz


----------



## drillinto

Graphite: Dive deeper with Jim Rogers

An enlightening interview with Benoit Gascon (CEO, Mason Graphite)

http://www.masongraphite.com/Media/Video/default.aspx
[Please click for the full length video, 29 minutes]


----------



## drillinto

>>>>> December 22, 2013

That Was The Week That Was ... In Australia
>>>>> By Our Man in Oz

Minews. Good morning Australia, your market seems to have enjoyed strong support in the last full trading-week of the year.

Oz. It looks that way, but the uplift was restricted to the last two days rather than the full week with early falls wiped out by a hectic return of buyers on Thursday and even more so on Friday.

The net result was a 3.1 per cent rise by the all ordinaries index, a 3.7 per cent rise by the metals and mining index and even a 1.4 per cent rise by the gold index despite the sharp fall in the price of gold.

Minews. Presumably an even better trend can be expected in the very short trading windows coming up with Christmas and New Year’s day bisecting each of the next two weeks.

Oz. That seems likely to be the case after the latest U.S. economic growth figures confirmed the strong recovery underway in the world’s biggest economy, and that the pace of central bank money printing will slow in the New Year.

A whiff of the pace of the recovery underway in the U.S. came with the release of third quarter growth figures showing that the economy grew at an annualised 4.1 per cent which was reflected in a Friday rally in the price of industrial metals.

Gold also staged a modest recovery after falling below US$1200 an ounce early in the week and while that came after we had closed on Friday the local gold sector was surprisingly strong.

Minews. Let’s move quickly across to prices as everyone is busy in the week before Christmas, starting with any newsworthy moves.

Oz. There were a few, though not as many as in previous weeks, and with the usual mix of good and bad news. The three which stood out were:

Sandfire (SFR) stepped up its efforts to consolidated copper exploration targets around its Doolgunna mine in Western Australia by striking a deal with its neighbour, Talisman (TLM). The tie-up saw Sandfire add A48 cents to A$6.40 and Talisman rise by A4.6 cents to A14 cents.

Newcrest Mining (NCM), the biggest local goldminer, added A28 cents to A$7.70 but did move between a low of A$6.99 and a high of A$7.87 in very heavy trade on Friday when more than 20 million shares valued at A$170 million were exchanged, perhaps an indication that a deal is brewing.

Discovery Metals (DML) was heavily sold off after a planned capital raising was cancelled with the net result being a A1.7 cent (30 per cent ) fall to A3.9 cents. At one stage on Friday it touched a 12-month low of A3.5 cents, which is a long way down from the 12-month high of A$1.65.

Minews. Time to move through the sectors, starting with gold because it seems your market did better than might have been expected.

Oz. It did, and a reason could be that the Australian dollar continues to weaken, dropping below US89 cents at one stage, but closing the week a fraction higher.

Minews. You’re saying that gold stocks are being treated as a currency hedge.

Oz. It’s possible, though an outright bullion investment would make more sense.

On the market, after Newcrest, rises and falls were evenly matched with some of the better rises including: Orbis (OBS), up A7 cents to A32 cents. PMI (PVM), up A8 cents to A36 cents thanks to a takeover deal with Asanko Gold. Medusa (MML), up A5 cents to A$1.89. Regis (RRL), up A10 cents to A$3. Gryphon (GRY), up A1.5 cents to A16 cents, and Sumatra (SUM), up A1.4 cents to A8.4 cents.

Gold stocks to lose ground included: Papillon (PIR), down A9.5 cents to A90 cents. Endeavour (EVR), down A6.5 cents to A52.5 cents. Kingsgate (KCN), down A7.5 cents to A92 cents. Beadell (BDR), down A1.5 cents to A73.5 cents. Doray (DRM), down A7 cents to A52.5 cents, and OceanaGold (OGC), down A4 cents to A$1.57.
...

Source >>>>> www.minesite.com


----------



## drillinto

>>>>> Australia Still Oversold <<<<<

http://www.bespokeinvest.com/thinkbig/2013/12/23/much-of-world-still-oversold.html
***


----------



## drillinto

Risk list 2012

An updated supply risk index for chemical elements or element groups which are of economic value

Source >>> http://www.bgs.ac.uk/mineralsuk/statistics/risklist.html


----------



## drillinto

10th Annual 
Nuclear Energy 
Opportunities for Growth and Investment 
February 5-6, 2014 • Renaissance Downtown Hotel • Washington, DC 

http://www.platts.com/IM.Platts.Con...ConferenceAndEvents/2014/pc409/agenda.pdf?S=n


----------



## drillinto

For your consideration >> Website on nuclear fuel >> http://www.uxc.com/Default.aspx


----------



## MARKETWINNER

Happy New Year and have a wonderful 2014!

As I said before both commodity and stock market are not dead. At different times some commodity and commodity stocks will outperform others. I am bullish on zinc, meat, pepper, tea and few more commodities. I am slightly bullish on copper as well. 

The EU-28 boiler sector is expected to grow in 2014. Domestic demand is slowly increasing. The significant decrease of grain prices in the EU-28 since the spring of 2013 will increase operating margins. It is same in the USA. Globally grain elevators and poultry producers could increase their profit margin in 2014.

http://www.fool.com/investing/gener...is-looking-healthy-for-2014.aspx#.UsO9yPQW2WY

The Chicken Menu Is Looking Healthy for 2014

http://tribune.com.pk/story/652358/essential-eatables-prices-of-eggs-chicken-shoot-up/

Essential eatables: Prices of eggs, chicken shoot up

http://www.thepoultrysite.com/poultrynews/31036/scottish-government-launches-poultry-plan

Scottish Government Launches Poultry Plan

http://www.wattagnet.com/Poultry_is_Mississippi_s_top_commodity_for_19th_straight_year.html

Poultry is Mississippi's top commodity for 19th straight year
Mississippi poultry valued at $2.7 billion, say Mississippi State University experts

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites.


----------



## Paavfc

Copper and Zinc my picks in the base metals sector.

Supply increase in Cu has not eventuated and Zinc mines are in decline due for shutdown..


----------



## MARKETWINNER

I believe it is time to identify emerging commodities. For example it is expected that zinc market could turn the metal into one of the best performers in the coming years due to looming supply shortage. What about poultry and beef? It is expected as a commodity and food both poultry and beef market to do well in the coming decade. Of course it is going to be wonderful year for chicken and beef in 2014. Please see following link that not only emerging world such as China and India but also Americans are going to eat more chicken in the coming years.

It could be different ball game in the coming decade. It is expected that USD could become bull currency in 2014 and 2015. It will be the game changer in many ways. I am one of the big bulls for USD and one of the big bears for both AUD and NZD. No commodity will stay high or low for ever.  During last couple of years when global economy was not doing well all type of market players were desperate to park their money somewhere. So they parked some of their money in NZD and AUD as well. In the commodity world all types of metals and grain also got boost from these types of money. As I said now it is going to be different ball game. It is expected that some sectors are going to benefit lot in the coming years. 

http://resourceinvestingnews.com/64886-zinc-outlook-mine-closures-may-push-prices-up-in-2014.html

Zinc Outlook: Mine Closures May Push Prices Up in 2014
Monday December 30, 2013, 4:30am PST

http://www.huffingtonpost.com/2014/01/02/chicken-vs-beef_n_4525366.html#!
Chicken More Popular Than Beef In U.S. For First Time In 100 Years

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites.


----------



## drillinto

>>>>> 6 January 2014

Byron Wien's 10 Market Surprises for 2014
>>>>> By Byron Wien

Among the strategist's predictions: strong economic growth turns Fed tapering into a nonevent.


Editor's Note: This is the 29th year that investment strategist Byron Wien has given his views on a number of economic, financial market and political surprises for the coming year. Wien is currently a senior advisor with Blackstone, the private-equity and asset-management firm.

Here are a list of surprises for the coming year. A "surprise" as an event which the average investor would only assign a one out of three chance of taking place but which I believes is "probable," having a better than 50% likelihood of happening.

1. We experience a Dickensian market with the best of times and the worst of times. The worst comes first as geopolitical problems coupled with euphoric extremes lead to a sharp correction of more than 10%. The best then follows with a move to new highs as the Standard & Poor's 500 approaches a 20% total return by year end.

2. The U.S. economy finally breaks out of its doldrums. Growth exceeds 3% and the unemployment rate moves toward 6%. Fed tapering proves to be a nonevent.

3. The strength of the U.S. economy relative to Europe and Japan allows the dollar to strengthen. It trades below $1.25 against the euro and buys 120 yen.

4. Shinzo Abe is the only world leader who understands that Dick Cheney was right when he said that deficits don't matter. He continues his aggressive fiscal and monetary expansion and the Nikkei 225 rises to 18,000 early in the year, but the increase in the sales tax, the aging population and declining work force finally begin to take their toll and the market suffers a sharp (20%) correction in the second half.

5. China's Third Plenum policies to rebalance the economy toward the consumer and away from a dependence on investment spending slow the growth rate to 6% in 2014. Chinese mainland traded equities have another disappointing year. The new leaders emphasize that their program is best for the country in the long run.

6. Emerging market investing continues to prove treacherous. Strong leadership and growth policies in Mexico and South Korea result in significant appreciation in their equities, but other emerging markets fail to follow their performance.

7. In spite of increased U.S. production the price of West Texas Intermediate crude exceeds $110. Demand from developing economies continues to outweigh conservation and reduced consumption in the developed world.

8. The rising standard of living and the shift to more consumer-oriented economies in the emerging markets result in a reversal of the decline in agricultural commodity prices. Corn goes to $5.25 a bushel, wheat to $7.50 and soybeans to $16.00.

9. The strength in the U.S. economy coupled with somewhat higher inflation causes the yield on the 10-year U.S. Treasury to rise to 4%. Short-term rates stay near zero, but the increase in intermediate-term yields has a negative impact on housing and a positive effect on the dollar.

10. The Affordable Care Act has a remarkable turnaround. The computer access problems are significantly diminished and younger people begin signing up. Obama's approval rating rises and in the November elections the Democrats not only retain control of the Senate but even gain seats in the House.

Every year there are always a few Surprises that do not make the Ten either because I do not think they are as relevant as those on the basic list or I am not comfortable with the idea that they are "probable."

Also rans:

1. Through a combination of intelligence, extremism, celebrity and cunning, Ted Cruz emerges as the clear front runner for the 2016 Republican presidential nomination. Chris Christie and the moderates fade in popularity as momentum builds for fiscal and social conservative policies.

2. In two and a half years the price of a bitcoin has increased from $25 to $975. The supply of bitcoins is fixed at 21 million with 11.5 million in circulation. Bitcoins lack gold's position as a store of value over time. During the year bitcoin's acceptance collapses as investors realize that it cannot be used as collateral in financial transactions and its principal utility is for illegal business dealings where anonymity is important.

3. Overcoming objections from the Cuban exile community, President Obama opens discussions on initiating trade and diplomatic relations with Cuba. A reduction in sanctions is proposed, as well as limited financial support in the form of bonds, quickly dubbed as "Castro convertibles."

4. Hillary Clinton decides not to run for President in 2016. She says her work with various Clinton not-for-profit initiatives is important and unfinished. Specifically, she explains that her health was not an issue in her decision. The Democratic race for the top seat becomes chaotic.

Source >>>>> Barron's (USA)


----------



## drillinto

Gold And Silver Sell Off, Sitting Near Session Lows
07-Jan-14 10:35 ET(NY time)

Commodities are higher today overall, but metals are almost all lower
Gold, silver, copper, iron ore and platinum futures are all in the red. Palladium futures are higher this morning
The energy sector is strong with gains in both WTI crude oil and brent crude oil, gains in natural gas, heating oil and RBOB gasoline futures
Gold and silver futures sold off shortly after pit trading opened and are now near session lows

Source >> briefing.com
*****


----------



## drillinto

Key ETF Performance to Start the Year
January 8, 2014 

Australia: Bronze Medal

http://www.bespokeinvest.com/thinkbig/2014/1/8/key-etf-performance-to-start-the-year.html
***


----------



## drillinto

04 Jan 2014 

That Was The Week That Was ... In Australia
by Robert Tyerman 

...

Minews. Enough from the opening week, time now for a few observations from you about the year ahead.

Oz. In a word, better, though for the less-than-thrilling reason that 2014 couldn’t be much worse than 2013.

Last week’s mini gold rush on the ASX was a sign that investors are keen to re-enter the small end of the market in the context of a combination of factors that include global economic growth led by the U.S. recovery and China ploughing ahead at its regulation 7.5 per cent expansion rate.

There are also indications that mineral stockpiles are declining, while the continued slide in the value of Australian dollar will aid exporters selling in U.S. dollars.

Another reason for investors to take a fresh look at the tail-end of ASX is that 2014 will be a year of intense merger and acquisition (M&A) activity, for multiple reasons.

The most obvious M&A driver is that there are too many asset-rich, cash-poor, stocks on the market. Another is that micro-stocks must get bigger to attract the eye of investors.

Minews. Where’s the best place to start looking for value-creating activity?

Oz. Gold stocks. If the price of the metal holds its current price or rises just a little further, we should see a continuation of the recovery bounce which dominated trade last week. And that in turn could act as the trigger for an acceleration of M&A activity among gold stocks of all sizes.

Zinc, after a year of false starts, should finally start to attract serious interest with the big mine closures that have been well-flagged over the past few years.

The sharp upward move by Triausmin late last week was a fresh reminder that big things are expected from zinc stocks at some time in the future simply because of the promising supply-and-demand outlook.

Copper stocks should also have a better year thanks to the continued fall in the global stockpile and signs of rising demand as the U.S. economic recovery gathers pace.

Last week’s rise in the copper price to its highest level in seven months was a reminder of what might happen as demand in major copper-consuming countries accelerates and supply remains steady, or falls.

Minews. Are there any problem areas ahead?

Oz. Iron ore, aluminium and uranium remain the great uncertainties, for the reverse of the explanation, excess supply overpowering damp demand.

Iron ore has been the surprise performer of the past 12 months with the price sticking above the US$130-a-tonne market, a level which could become harder to maintain if Chinese steel demand slows and iron ore production continues to expand.

Uranium stocks continue to suffer from a price for the metal which is well below break-even for most projects, including the ASX sector leader, Paladin (PDN), which probably has six-months to get its financial affairs sorted before another crisis.

Aluminium is in a hopeless position as too many countries churn the metal out almost as a by-product of power production.

Minews. Thanks Oz. It looks like 2014 will be another interesting year.

Source >>>>> www.minesite.com


----------



## drillinto

06 Jan 2014

The Minesite Commodities Outlook For 2014
>>>>> by Rob Davies <<<<<

Lord Weinstock, the legendary CEO of the General Electric Company, commenting on the projections for the year ahead, used to remind his audience that on day one the coffers are totally empty.

Everything to be earned that year has to be created from nothing even if the necessary infrastructure is in place.

So it is with any analysis of what lies ahead for commodities in 2014.

Nothing happens on its own. Metal has to be mined to be satisfy fresh demand from consumers.

But just because they bought a car last year does not mean they will buy another this year.

Fortunately it seems consumers are becoming more confident and are likely to increase spending in 2014.

The latest forecast from the IMF is for global economic growth in 2014 to average 3.6 per cent, which is substantially higher than the estimated expansion of 2.9 per cent in 2013.

Although the numbers used by The Conference Board are slightly lower - 2.8 per cent in 2013 rising to 3.1 per cent in 2014, the rising trend is the same.

Given that between one third and two thirds of metal demand is satisfied by recycled material it suggests that the mining industry can anticipate its market expanding by one to two per cent.

Not fantastic, but not bad in a generally sluggish world still overburdened with debt.

As with all data, these numbers need to be treated with a degree of caution. A small economy growing fast is not as important for consumption as a large economy growing slowly.

Here, metals are once again in the sweet spot because just under half of world growth now comes from emerging and developing economies, which includes China.

This group is forecast to expand at 4.6 per cent in 2014, a tad lower than the 4.7 per cent estimated for last year.

Even so, it is a lot faster than the 1.7 per cent projected for the mature economies, and that in turn is much higher than the predicted expansion of one per cent in 2013.

So while there may be much talk of the developed world picking up the baton of growth in 2014 relative to the developing world, the reality is that the action is still with emerging economies.

Moreover, not only are the emerging economies growing faster, but they also use more metal and recycle less scrap, as they have a smaller, and newer, stock of goods.

So even though it is popular to downplay the commodity sector, metals in particular have a lot going for them in terms of end markets.

Moreover, the industry has already drastically cut back its expansion plans so there will be a reduction in the amount of new material being supplied to the market.

Whether the industry has got that balance right will be the key determinant to how metal prices evolve over the year.

One metal where the market has already passed judgement is aluminium. It starts the year at US$1,802 a tonne but the forecast average price for 2014 has declined sharply from the US$2,550 predicted back in 2011 to the current consensus forecast of US$2,045 recorded by Bloomberg.

Much of this is due to the overcapacity arising from new plants in China and the Middle East. Given that Chinese demand is predicted to increase by 10 per cent in 2014 this enthusiasm is understandable.

SociÃ©tÃ© GÃ©nÃ©rale predicts world demand for aluminium will increase to 53 million tonnes in 2014 with 26 million tonnes of that coming from China.

The problem is that China is also forecast to produce 27 million tonnes, thereby creating a surplus.  On projected growth figures the long term outlook for aluminium looks good, but unless capacity is closed the short term does not appear favourable.

Copper has a much better fundamental structure than aluminium. Nevertheless, 2014 price forecasts have followed the same downward trend. The consensus for the year now stands at US$6,945 a tonne having been as high as US$7,800 a year ago.

At 21.7 million tonnes, this market is half the size of aluminium but is growing at 4.8 per cent a year.

Experts at SociÃ©tÃ© GÃ©nÃ©rale are fearful that the big expansion of mine capacity over the last decade will now start to overwhelm even this impressive level of growth and lead to rising inventories and weaker prices.

That said the metal starts the year with LME inventories of just 365,700 tonnes and prices at US$7,421 a tonne.

To achieve the consensus average for the year reported by Bloomberg implies prices falling to near US$6,000. If that happened SociÃ©tÃ© GÃ©nÃ©rale estimate that nearly 10 per cent of capacity, roughly 1.5 million tonnes, would be losing money.

That suggests that price level is a pretty strong floor, and it is hard to see prices going as low as that for any length of time.

Nickel starts the year at an already depressed price of US$13,975 a tonne, yet SociÃ©tÃ© GÃ©nÃ©rale forecasts an average price for 2014 of US$15,000 a tonne while ABN Amro thinks it will be US$15,500.

If either estimate is anywhere near the mark it implies that prices should rally sharply by about US$2,000 or maybe US$3,000 over the course of the year.

That view is supported by the analysis from the French bank that about 50 per cent of production is currently unprofitable.  Whether producers react by cutting production to reduce the surplus will be the key feature in the evolution of prices this year.

SociÃ©tÃ© GÃ©nÃ©rale makes no apologies for anointing zinc as its favourite metal. However, it could be argued that the current level of US$2,081 a tonne already discounts this favourable position. Indeed, the forecast average of US$2,040 from the French bank suggests that there is not much more to go for.

Iron ore remains by far and away the most important hard commodity for the mining companies. Fortunately SociÃ©tÃ© GÃ©nÃ©rale does not expect any major change in this market over the next few years, even though it will move from being in deficit to being in surplus.

It argues that the projected surplus in 2015 will only be 0.3 per cent of global demand and will not be material.  It therefore only expects a modest decline in average prices to US$110 a tonne (61% FOB Australia) from US$116 last year.

Prices of metals and mining shares already reflect the consensus view of the experts.  If prices move it will be because the consensus changes, either on fresh data or revised opinions.

All that can be said with any certainty is that metals are now mostly trading at close to marginal costs of production and that there is precious little hype in mining equity valuations.  That should be a good base to work from, at least in theory.    

Source >>>>> www.minesite.com


----------



## drillinto

>>> Oil Breaking Down <<<
Jan 9, 2014 

http://www.bespokeinvest.com/thinkbig/2014/1/9/oil-breaking-down.html


----------



## drillinto

11 Jan 2014

That Was The Week That Was ... In Australia
by Our Man in Oz


Minews. Good morning Australia. Your red-hot iron ore stocks appear to have been buffeted by headwinds last week.

Oz. There was a weaker tone in the iron ore sector, though it was a change we had been expecting for the past six months.

Minews. Presumably, that view was based on the principle that everything which goes up must come down.

Oz. It’s not a very scientific approach, but iron ore has been a terrific performer for much longer than most investors expected, so when the price dropped a few dollars last week there was a definite move towards the exits.

On the other hand, the money flowing out of iron ore seems to be testing the heavily-sold gold sector and while we didn’t see much of an upward move in gold stocks last week we might do next week because the gold price moved up quite sharply after we closed on Friday.

When Australian investors were heading for the pub on Friday the gold price was US$1,234 an ounce. We they woke on Saturday morning it was up to US$1,249 per ounce, and looking stronger, following those weaker-than-expected U.S. employment numbers.
...

Source >>> www.minesite.com


----------



## drillinto

07 Jan 2014

PwC Predicts A Turnaround In Metals Prices, But Warns Not To Expect Record Prices Any Time Soon
>>>>> by Ryan Jackson in Vancouver <<<<<

http://minesite.com/news/pwc-predic...rns-not-to-expect-record-prices-any-time-soon


----------



## drillinto

13 Jan 2014

Which Is To Be Feared More - Inflation Or Deflation?
>>>>> by Rob Davies <<<<<


The asset allocation experts at SociÃ©tÃ© GÃ©nÃ©rale summed up the prospects for the year ahead in a presentation last week.

When asked whether they feared deflation more than inflation, they answered: both, first deflation then inflation.

As if to drive the point home, the below consensus rise in US payrolls of 74,000 in December caused fresh concerns that the recovery in the US economy is still anaemic.

The consensus was for an increase of 197,000 but the coldest December since 2009 and 21 per cent more snow than normal caused a significant miss.

But it wasn’t only the weather.

Others pointed to the still massive overhang of debt that is keeping interest rates low in the US and pretty much everywhere else, and the residual fear that the economy remains fragile.

That was why bonds went up and equities went down in the first full week of trading in 2014.

Base metals enjoyed a relatively good week and moved higher as a group to give a closing LME Index level of 3,124.

A major component of that increase came from nickel.

It rose 2.3 per cent to US$13,430 a tonne on fears that Indonesia will actually carry out its threat to ban the exports of raw materials in a bid to increase the amount of processing done in the country.

Nickel, much of it exported as high grade lateritic ore for Chine nickel pig iron plants, is seen as particularly vulnerable. The threat of the ban, due to come in on the 12th of January was reinforced when Indonesia prevented ten Chinese ships leaving the country last week.

Other news from China was more positive.

In 2013 Chinese iron ore imports increased 10 per cent to 820 million tonnes, copper imports increased 29 per cent and the country imported 330 million tonnes of coal.

The big fear that the commodity sector is vulnerable to a Chinese slow-down was not realised last year and there is no evidence in the data that it is about to happen this year either.

Bears argue that growth in China is slowing down. Even if it is as “low” as seven per cent it still knocks spots of anything in the West.

Indeed, the soothsayers at SociÃ©tÃ© GÃ©nÃ©rale make the point that the recovery in the US, weak as it is, is now five years old which is quite venerable as these things go.

Their concern is that as the market accepts the reality that what growth there is can only be maintained by prodigious volumes of newly printed cash, worries about deflation will resurface.

The argument is that the debt overload will not be reduced by economic growth or austerity and that the only way it can be resolved is by a formal default - or an informal default through inflation.

Either mechanism is good for commodities as investors seek real assets.

Perhaps the ”discovery” that China holds more than two and half times more gold in its reserves than was previously thought suggests that it has  already taken pre-emptive action.

Even if the recovery in the West is mature and starts to slow, it is not doing so from elevated levels so, other than bonds, asset prices are not generally overvalued, despite what the French bank thinks.

More likely is that the efforts to stimulate growth will start to work, via inflation, and reduce the real value of outstanding debt.  That encourages consumption and hence metal demand.

Source >>>>> www.minesite.com
*****


----------



## drillinto

>>>>> Indonesia bans export of raw minerals

http://www3.nhk.or.jp/nhkworld/english/news/20140112_07.html


----------



## drillinto

Graphite Outlook for 2014

http://www.kitco.com/ind/MiningRepo...ce-Rebound-Supply-Shift-and-New-End-Uses.html

Source >> The Mining Report, Kitco, January 2014
*****


----------



## drillinto

January 15, 2014
Australia Off to a Slow Start vs. Rest of World

http://www.bespokeinvest.com/thinkbig/2014/1/15/us-off-to-a-slow-start-vs-rest-of-world.html


----------



## drillinto

Fed Mulls Limits on Physical Commodity Trading by Wall Street Banks
January 14, 2014
Source >>> Reuters

The U.S. Federal Reserve on Tuesday took a first formal step toward limiting the role of Wall Street banks in physical commodities markets, asking for public input on whether such activity endangers financial markets and whether additional capital requirements are necessary.

The Fed board voted 6-0 to seek comment through an "advance notice of proposed rulemaking".

"The Board is considering whether additional restrictions would help ensure that physical commodities activities authorized for financial holding companies are conducted in a safe and sound manner and do not pose a threat of financial stability," the Fed said in a release.

The Fed said it is asking for comment about the financial risks that physical commodity activities could pose, the potential conflicts of interest for banks, and the risks and benefits of additional capital requirements or other restrictions.

The Fed is seeking comments through March 15.


----------



## drillinto

15 Jan 2014

>>>>> Are Commodities Due for Rally ? <<<<<

http://online.barrons.com/article/S...79322563407214566.html?mod=googlenews_barrons
*****


----------



## drillinto

January 15, 2014

"BP Energy Outlook 2035" Shows Global Energy Demand Growth Slowing, 
Despite Increases Driven by Emerging Economies

http://www.bp.com/en/global/corporate/press/press-releases/energy-outlook-2035.html


----------



## drillinto

January 14, 2014

Australia and China to lead global fracking market race

Australia is primed to become the next big play in the booming frac market, with China and Argentina close behind, as global nations with estimated reserves of 1.7 trillion barrels of oil equivalent seek to emulate the United States’ pioneering, and astonishing success in tapping shale gas and tight oil.

Source >>> www.luxresearchinc.com
*****


----------



## drillinto

Vancouver Resource Investment Conference 2014

The Vancouver Resource Investment Conference is the world's largest investment conference dedicated on resource exploration and the largest of all annual trade shows held in Vancouver, Canada. Hear from investment thought leaders and wealth influencers. Speak one-on-one with executive members from companies covering every corner of the mineral exploration sector along with metals dealers, oil & gas, renewable energy, media and financial services companies. This is a must-see for investors and stakeholders in the global mining industry.

http://cambridgehouse.com/event/vancouver-resource-investment-conference-2014


----------



## drillinto

That Was The Week That Was … In Australia
>>>>> 19 January 2014 
>>>>> by Our Man in Oz


Minews. Good morning Australia. Your market seems to have had a good week.

Oz. It was quite strong, thanks largely to three factors. There was the Indonesian nickel fiasco which lifted all nickel stocks. There was Rio Tinto’s very encouraging fourth quarter production report; and there was also a significant change of opinion about the outlook for mining from the big U.S. investment bank, Citigroup, which has flipped from being a bear to being a bull.

Minews. Citi’s change of heart is certainly encouraging, but seems to be mainly restricted to the top end of the industry.

Oz. The recovery has to start somewhere and it is usually the big miners which attract investors with smaller stocks enjoying a later trickle-down effect.

The rise of Rio Tinto and BHP Billiton can be clearly seen in the metals and mining index which put on 4.6 per cent, easily outstripping the all ordinaries which was absolutely flat -zero movement. The gold index also had a reasonable week, rising by 1.6 per cent.

Last week’s trading was also noticeable for renewed strength in the mid-tier gold sector, aided by a modest recovery in the gold price and quite a few eye catching moves by stocks we know well and some we rarely hear about.
...

Source >>>>> www.minesite.com


----------



## drillinto

20 Jan 2014

Metals Prices Tick Up, As Supply And Demand Factors Turn Positive
>>>>>>>>>>>>>>>>>>>>>>> by Rob Davies <<<<<<<<<<<<<<<

The polar vortex and its associated record low temperatures in the US might be painful for its inhabitants, but it’s not done the lead market any harm.

The main use of lead is in car batteries and those than can recall O-Level physics will know battery performance drops sharply as the temperature drops.

The performance drop also coincides with the extra demand for power as the battery struggles to start cold engines in thick oil, setting up the perfect environment for battery failure.

Add to that the closure of Doe Run’s lead smelter in Herculaneum, Missouri, which has taken 130,000 tonnes of capacity out of the market, and the reasons for the 2.7 per cent jump in the lead price to US$2,175 a tonne last week become readily understandable.

Once you get positive news about one metal it often triggers a similar response in the other metals.

That partly explains the 1.8 per cent rise in the LME Index to 3,181 over the week, although there were other constructive factors also at work.

Alcoa closed its Massena aluminium smelter, taking out 84,000 tonnes of capacity. Although not much in the context of a 5,484,375 tonne inventory overhang it is nevertheless a positive step in tightening up the market and doubtless contributed to the 2.9 per cent increase in the price of aluminium to US$1,755 a tonne. 

There was also news that Ford is substituting aluminium for steel in its top selling F150 pick to serve as a timely reminder that aluminium is still a growth market.

The change will take 700 pounds off the two and half tonne truck and improve fuel consumption.

On annual sales of 650,000 it might only impact steel consumption by 227,500 tonnes but it will make a bigger difference to the aluminium industry.

Randall Scheps of Alcoa expects North American auto sector aluminium demand to grow by one million tonnes by 2025.

And good news on the demand side of the industry is being matched by supporting news flow from the supply side.

Although it may not please geologists and drilling companies the 30 per cent fall in exploration budgets worldwide last year is a clear demonstration that the industry is cutting back on spending.

That will impact additional supply in years to come and help keep the market tight. Rio Tinto’s exploration spend in 2012 was US$948 million, down from US$1,970 million, while BHP Billiton is believed to have halved its allocation from US$2,450 million. Given the cost squeeze on the industry that trend is likely to continue.

Fortunately the big miners are supported by the still-buoyant iron ore market.

Bloomberg estimates that 98.5 per cent of the industry is profitable at the current price of US$130 a tonne for 62% Fe content.

Even at the 2014 consensus forecast price of US$119 a tonne it says only two per cent will be making losses.

Coincidentally Rio Tinto announced last week that its global iron ore production increased five per cent in 2013 to 266 million tonnes.

At an estimated cash production cost of just over US$40 a tonne Rio will be very happy with that, even if Vale does remain the lowest cost producer.  

Source >>>>>>>>>>>>>>>>>>>>>> www.minesite.com


----------



## drillinto

India to boost raw sugar exports 

But higher supplies of raw sugar from India, the world's biggest consumer and second-largest producer of the sweetener, will put further pressure on global prices, which are currently hovering at a 3-1/2-year low. 


Source >> Reuters | Jan. 2014 |


----------



## drillinto

Cotto, Cotton, Cotton

Stung by local cotton prices, Chinese yarn makers go global
By Dominique Patton and Lewa Pardomuan | 15 Jan 14


Source >> http://www.reuters.com/article/2014/01/14/cotton-china-idUSL3N0JS0PS20140114
*****


----------



## drillinto

The Baltic Dry Index (BDI) is showing a 220% improvement from 2013 opening levels
By Frik Els | Dec 11, 2013

http://www.mining.com/what-hard-landing-chinese-bulk-trade-barometer-surges-to-3-year-high-84796/
               (Pay attention to the map showing the three main maritime routes from Australia to China)


----------



## drillinto

UNCTAD: Review of Maritime Transport 2013

Background
Maritime transport is the backbone of international trade and the global economy. Around 80 per cent of global trade by volume and over 70 per cent of global trade by value are carried by sea and are handled by ports worldwide. These shares are even higher in the case of most developing countries.

http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=668


----------



## drillinto

>>>>> Oil, Oil, Oil <<<<<

Global oil demand will rise more quickly than previously forecast this year as economic growth in industrialized countries accelerates, according to the International Energy Agency(IEA).

It predicts consumption of crude will increase by 1.3 million barrels per day this year to a total of 92.5 million barrels per day, up from 91.2 million last year and 90 million in 2012.

Source >>>>> http://www.iea.org/


----------



## drillinto

>>> Gas, Gas, Gas <<<

EU Shies Away From Shale Gas Legislation

Britain scored a victory Wednesday, when the European Commission shied away from earlier plans to put forward legislation on the exploration of shale gas.

The European Union's executive issued only guidelines for the technology after strong pressure from Britain and Poland, which are keen to forge ahead with the controversial technique of hydraulic fracturing, or 'fracking,' used to tap shale gas reserves.

The International Association of Oil & Gas Producers, which represents the world's largest oil and gas companies, welcomed the lack of legislation, saying enough safeguards were already in place.
...

Sources >>> Vanessa Mock, WSJ | Jan. 22, 2014 | http://www.ogp.org.uk/


----------



## drillinto

>>>>> Platinum <<<<<

23 January 2014 

Economic impact of South Africa platinum mine strike


The largest union in South Africa's platinum sector has called a strike over pay, the biggest since the 2012 Marikana massacre in which 34 workers were shot dead by police.

The AMCU trade union says 70,000 of its members at the three top platinum producers are walking out indefinitely in the row over pay.

South Africa holds about 80% of the world's known platinum reserves - and the dispute is expected to cripple the global industry.

Source >> Lerato Mbele (BBC) reports from Johannesburg/RSA.
*****


----------



## drillinto

>>>>> Natural Gas <<<<<


http://www.bespokeinvest.com/thinkbig/2014/1/24/natural-gas-soars.html


----------



## drillinto

>>>>> 25 Jan 2014

That Was The Week That Was ... In Australia
by Our Man in Oz


Minews. Good morning Australia, investors in your gold sector seem to have had a good week.

Oz. There was a golden edge to an otherwise weak market, brightened for U.K. followers of events in Australia by a win for England in the cricket.

Minews. Cause for a double celebration, though the big fall on the New York market after you closed might point to a rough week ahead.

Oz. Perhaps, but there should be more mileage in the gold stocks because the price of the metal kept climbing as investors switched to a “risk-off” setting which meant the Australian dollar continued its overdue fall which has now stretched to 17 per cent against the U.S. currency over the past 12-months.

Minews. Which should be making a significant contribution to your domestic gold price.

Oz. The twin effects of gold up and dollar down has lifted the local price above A$1,460 an ounce which is being reflected in gold stocks with strong domestic exposure.
...

Source >> www.minesite.com
*****


----------



## drillinto

>>>>>>>> July 2013

Staff Papers of the Dallas FED

How Bad Was It? 
The Costs and Consequences 
of the 2007–09 Financial Crisis 

by Tyler Atkinson, David Luttrell
and Harvey Rosenblum 

Source >>> http://dallasfed.org/assets/documents/research/staff/staff1301.pdf


----------



## drillinto

>>>>> 26 Jan 2014

Emerging Market Currencies Take A Tumble, With The Notable Exception Of China
>>>>> by Rob Davies

If the price of gold is a measure of trust in the world economy, then confidence dropped sharply on Friday after a week in which nerves had become increasingly frayed.

A closing price of US$1,267 an ounce might only show a gain of 1.3 per cent over the week but is almost six per cent above recent lows.

The proximate reason for the moves was the sudden 13 per cent devaluation of the Argentine peso as its central bank ran out of ammunition to keep defending it.

Argentina though was not the only emerging market to face assaults on its currency.

Turkey, Brazil, Mexico, South Africa and Russia were among a number of recent market favourites that saw their currencies decline.

Although the moves reached a crescendo on Friday the trend had been underway for some time. In 2013 emerging markets currencies as a group declined 9.9 per cent.

These developments affect the mining industry in two key ways.

One is to reduce the cost of production for companies lucky, or maybe unlucky, enough to have mines in those countries.

The second impact is to increase metal prices in local terms.  That doesn’t help manufacturing, but it does make hoarders feel good as they see sharp price increases in local currency.

It will take some time before the net effect of these developments becomes apparent to the metal industry but the 2.4 per cent decline in the LME index to 3,105 indicates that, in the short term at least, these are viewed as negative developments.

The contrast with gold is striking and is a good illustration of how the dynamics affecting the metals differ so much.

Even more surprising is that these wobbles come during a week when the IMF actually slightly increased its forecast for global growth in 2014 to 3.7 per cent from 3.6 per cent.

The IMF also thinks that growth at the end of 2013 was stronger than it had expected. That certainly helps to explain why copper inventories have now fallen for 20 consecutive weeks. The LME inventory now stands at only 326,975 tonnes.

The magnitude of the change in economic forecasts is modest but the direction is encouraging. Quite why the two events should be connected, if indeed they are, is harder to explain.

One view is that as economies in the developed world strengthen, especially the US, it encourages funds to flow in the same direction. Indeed, over time there is a strong correlation of dollar strength with global economic activity.

This outflow from emerging markets will expose weaker countries whose underlying problems have been masked until recently by capital inflows.

The countries under pressure last week are not significant metal and commodity consumers and are, on balance, net exporters, so weaker exchange rates are beneficial. This effect will act to constrain metal prices as it encourages production.

But China is in a different category and was not part of the rout. There are though increasing concerns in its banking sector over the credit risk of some of the country’s coal mines.

Whether China has sufficient capital, and resolve, to fix these problems remains to be seen, but it is one more thing to worry about.

Source >>>>> www.minesite.com
*****


----------



## drillinto

Year of the Wood Horse: Soft Commodities Should do Well

CLSA Feng Shui Index 2014 - Year of the Wood Horse
Tired stock horse fit for the glue factory? Or fiery Mustang Seng set to giddy-up up up?

Hong Kong - 22 January 2014 - CLSA, Asia’s leading independent brokerage and investment group, today launches its 20th annual CLSA Feng Shui Index – a tongue-in-cheek financial forecast for the coming Year of the Wood Horse, with a focus on the Hang Seng Index, key market sectors, world leaders and celebrities, and each of the 12 Chinese zodiac signs. All based on little more than a whisper of wind (feng) and a babble of water (shui).

How do we see the bourse under the influence of the Horse? We conclude that this Pony is un toro in toto - pure bull from teeth to tail. Its fortune chart may not be the best balanced, but it is full of Fire - the intrinsic element that’s widely regarded as the driver of investor sentiment.

This is especially so for the Hang Seng Index, as Fire is also its “lucky element”. We uncovered so many unexpected connections, coincidences and links between the HSI and this Wood Horse that we discern a definite Casablanca connection - ‘the beginning of a beautiful friendship’. And one that should be very rewarding. Our “pure bull” forecast sees the index hit 28,105.

Positive, powerful and race-paced - there’s much to like about the Horse. It’s also well positioned: At No.7 in the zodiac, the Horse kicks off the second half of the 12-year cycle. Traditionally, the vital force or energy known as qi is considered to be spent or stale half-way through a cycle - the Horse heralds the arrival of the so-called second wind - a burst of invigorating fresh qi.

Once again, this year’s CLSA Feng Shui Index features a month-by-month guide to the HSI, the outlook for key sectors, four-sphere forecasts for each zodiac sign, our popular Hong Kong property guide, and fates of some famous faces – the likes of US Fed chair apparent Janet Yellen, Japan’s Shinzo Abe, Alibaba’s Jack Ma Yun and futbol capital Rio de Janeiro.

Our Sector-selector Element Detector suggests we’ll see the best performances from businesses associated with Wood (retail, soft commodities, plantations . . . plantations?) and also Fire (the likes of internet, tech, telecoms, some oil & gas and power suppliers).

Among the zodiac signs, the Horse favours Tigers, Sheep (Goats) and Dogs. Those that may be in for a more challenging ride are Rats, Cows and Rabbits. But then pluck beats luck every time. Kung hei fat choi! And may the Horse be with you.


Source >>> https://www.clsa.com/about-clsa/med...ng-shui-index-2014-year-of-the-wood-horse.php


----------



## drillinto

>>>>> Jan 28th 2014

Wait, We Need MORE Oil ? What Happened ?
>>>>> by Tyler Crowe  

You know who has had a pretty frustrating job lately? People who make projections for oil demand and supplies. Just when we thought that the U.S. was on track to steadily decrease its total oil consumption, recent data from the International Energy Agency basically threw that projection into the rubbish.

So what exactly does this mean for the U.S.? Are we headed back to our gas-guzzling ways, or is this just one of those statistical aberrations that happen from time to time? Let's take a look at the numbers and see what it could mean.
...

Source >>>>> http://www.dailyfinance.com/2014/01/28/wait-were-going-to-need-more-oil-what-happened/
*****


----------



## drillinto

>>>>> Jan. 29, 2014 <<<<<

China is urging its steelmakers to buy more iron-ore assets abroad

by Chuin-Wei Yap 

China is urging its steel companies to buy more iron-ore assets abroad amid signs that many have been losing their appetite for such investments.

China imports around two-thirds of its iron ore, an ingredient in steel. Breakneck economic development and a flood of new wealth drove an overseas spending spree in recent years by Chinese steelmakers hungry for assets that produce iron ore. Many of those ventures have been plagued with expensive delays, however.

The National Development and Reform Commission(NRDC) on Monday said Chinese steelmakers should keep building up stakes in global iron-ore assets in the interests of China's strategic security and "speaking rights," or influence, in global trade. China's ore imports rose 10% last year to a record 819 million metric tons, according to customs data.

"China's iron-ore demand will still rise, its reliance on imports won't change, and the degree of monopoly in global iron-ore resources will still keep increasing," the NDRC said.
...

Source >>>>> WSJ <<<<<


----------



## drillinto

>>>>> 18 Dec 2013 <<<<<<

Diamonds in Antarctica ?
by Alister Doyle

A kind of rock that often contains diamonds has been found in Antarctica for the first time, hinting at mineral riches in the vast, icy continent where mining is banned.

No diamonds were found, but researchers said they were confident the gems were there.

"It would be very surprising if there weren't diamonds in these kimberlites," Greg Yaxley of the Australian National University in Canberra, who led the research, said in a telephone interview.

Writing in the journal Nature Communications, an Australian-led team reported finding the kimberlite deposits around Mount Meredith, in the Prince Charles Mountains in East Antarctica. Kimberlite is a rare rock where diamonds are often found; it is named after the South African town of Kimberley, the site of a late 19th-century diamond rush.
...

http://www.reuters.com/article/2013/12/18/us-antarctica-diamonds-idUSBRE9BG0XF20131218


----------



## drillinto

>>>>> 01 Feb 2014

That Was The Week That Was ... In Australia
>>>>> by Our Man in Oz

Minews. Good morning Australia. Did you get caught up in last week’s emerging market sell-off?

Oz. Not in a major way, or at least not yet. The continued slide in the value of the Aussie dollar against its U.S. cousin is the only obvious measure of the current bout of global investor uncertainty, but the overall picture is one of relative calm.

Minews. Is that one way of saying not much happened on the ASX last week?

Oz. It is, because while there was lots of daily movement, one way or the other, by the time we closed on Friday it was almost as if we need not have bothered turning up.

The all ordinaries index lost a little less than one per cent, which took its fall for January to 2.9 per cent, the worst start to a year since 2010. The metals and mining index was down by 0.5 per cent last week, while the gold index was almost dead flat.

Minews. Doesn’t sound like we have much to talk about then?

Oz. Oh, there’s always something once you dig beneath the surface, and the best way is to single out some of the companies which outperformed in an otherwise dreary market.

But another factor weighing on investors in the mining market was the sheer volume of information which hit them on Thursday and Friday, as hundreds of small miners lobbed in their December quarter reports.

It is a system which is supposed to help with investment decisions, but it is also impossible for anyone to sift through so much information filed at virtually the same time, or even after the market closes.

On Friday, for example, more than 260 reports, mainly quarterlies from miners, were released by ASX regulators after 5pm, with the last report posted on the exchange website at 8.30pm.

Minews. Information overload is a common problem for everyone these days. 
...

Source >>>>> www.minesite.com
*****


----------



## drillinto

>>>>> Please read also the last paragraph <<<<<

2 Feb 2014 

The End Of The Bernanke Era: Gold Up, Trust In Financial Markets Down

>>>>> by Rob Davies

Last week saw the departure of Ben Bernanke as Chairman of the US Federal Reserve.

Although it is not directly relevant to the metal markets, a change in the person in charge of what is, in effect, the Central Bank to the world does impact on markets everywhere.

While it is true that his eight year term of office encompassed the greatest financial crash of the last sixty years, it would be unfair to blame it all on him.

His predecessor, Alan Greenspan, must take responsibility for exploiting, and abusing, the high level of trust in the financial system established by Paul Volcker before him and allowing an unprecedented explosion of credit.

One simple measure of the efficacy of the Chairman of the US Federal Reserve is whether he increased or decreased trust in financial markets during his time in charge.

If trust is measured by the gold price then Volcker undoubtedly did a good job. It fell over the course of his tenure from an average of US$524 to US$390 an ounce.

Greenspan did less well with, the gold price broadly unchanged at around US$450 an ounce during his period in office. However, in his last few years it had doubled from US$256 and then, under Bernanke, soared to US$1,900 before settling back to US$1240. Not so good.

It is arguable that Bernanke made the best of a bad job, but only by calling on the balance sheet of the US Government to print dollars to maintain an illusion of prosperity.  It is the consequences of that action that are the root cause of the current turmoil in capital markets.

The news that the Fed is reducing the support it gives the US economy to “only” US$65 billion a month reinforced the flight of money from emerging markets to developed ones.

That triggered interest rate rises in India and South Africa as currencies came under pressure. While that gives miners some relief as (for example) the rand dropped to a five year low of R11.38 to the dollar, it is a reminder of the problems some countries face.

Base metal prices ended the turbulent week two per cent lower, almost matching the decline in equity markets.

Bonds had a better time and edged up 3.4 per cent. A two per cent fall in the gold price to US$1,239 was more a reflection of a stronger dollar than increased confidence in economic matters.

The weakening of currencies of countries that produce and export commodities has an immediate effect on prices, even if quoted in dollars.

That was demonstrated last week as international thermal coal prices slid three per cent to just under US$80 a tonne.

As one of the most important traded bulk commodities that move in thermal coal will have an impact on the larger miners.

That said, bulls could easily argue those fears are already factored into the share prices. Lower exchange rates will certainly help miners reduce costs in a competitive world.

It is though worth remembering that the world economy is still growing, and faster than last year. Reduced support for the US economy is a good sign as it demonstrates it is recovering.

That was evidenced by the 3.2 per cent growth reported for the fourth quarter despite the government shutdown. Cynics might even argue that growth would have been even higher if the government has shut down for longer.

Source >> www.minesite.com
*****


----------



## drillinto

For your consideration   

Investing in African Mining Indaba is the world’s largest mining investment event  
 >>>>> http://www.miningindaba.com/ <<<<<


----------



## drillinto

The index S&P 500 is oversold 

The sectors "Materials" and "Energy" are also oversold

http://www.bespokeinvest.com/thinkbig/2014/2/4/extreme-oversold.html
***


----------



## drillinto

Governments in emerging markets face fuel subsidy dilemma
2 Feb 2014 

Amrita Sen quoted by the FT on impact of higher fuel prices on the emerging markets energy consumption.

“Falling currencies and higher oil import costs are testing energy-intensive patterns of growth across emerging markets,” said Amrita Sen, head of the Energy Aspects consultancy.


----------



## drillinto

>>> New book <<<

"The misunderstood crisis" 
by Oskar Slingerland & Maarten Van Mourik (2014)

"Bank collapses, the sub-prime crisis and state debts running out of control – since 2008, experts and politicians have defined the economic crisis as a derailment of the financial system. Governments, without hesitation, instituted emergency bank bailouts and numerous other measures to revive the ailing economy. Five years on, the recovery is, at best, faltering and, at worst, illusory. In this timely and thought-provoking book, Dutch oil industry experts Maarten van Mourik and Oskar Slingerland argue that the crisis has been falsely diagnosed. They make a compelling case that energy, rather than the financial system, lies at its root. In 2006, by analysing industry data, they correctly predicted steep oil price rises and the economic shock that would follow. Using the same data, they now argue that the era of cheap oil is over, and with it our prospects for long-term growth. The situation should trigger a radical change of our economic and production models, yet western governments have failed to grasp the challenge. If nothing changes, the book argues, we will be heading further into deep trouble. "


----------



## drillinto

The illegal trade in ivory

http://www.english.rfi.fr/africa/20131206-france-stepping-fight-against-poaching-and-ivory-trade


----------



## drillinto

Indaba Day Two: The Door Is Open For M&A, But Who Dares?
>>>>> 4 Feb 2014 

by Bianca Markram in Cape Town (RSA)

The mining industry has been ripe for a spate of mergers and acquisitions (M&A) for some time now. There has been some action in recent years, with the largest merger yet in the form of the marriage between Xstrata and Glencore.

But plenty of room for further consolidation remains.And as one would expect, at this year’s Indaba there are plenty of whispers and speculations of targets, and of who wants to be getting into bed with whom.
...

Source >>>>> http://minesite.com/news/indaba-day-two-the-door-is-open-for-m-a-but-who-dares


----------



## drillinto

Indaba Day Three: Enter Robert Friedland, With Great Hopes For South Africa’s Platinum Future
6 Feb 2014 

by Bianca Markram in Cape Town

...

However, mining phenomenon Robert Friedland, founder and chairman of Ivanhoe Capital Corporation, came out firmly bullish on South Africa’s platinum future.

“Platinum metal equals healthier air,” he told delegates during his presentation, adding that China, India and other major urban areas around the world urgently need to clean up their air.

“Seventy five per cent of global platinum is here in South Africa and, as this world shrinks, what’s happening in the air in Beijing, Shanghai and Delhi takes us directly to Limpopo”, he said. South Africa is uniquely placed to play its role in the fuel cell era, he added.

As for copper, he noted, the future is similarly bright for Africa, with the Democratic Republic of Congo (DRC) playing a pivotal role, since it is home to Ivanhoe’s Kamoa project, which Friedland claims will be the largest copper project in the world for years to come.

His take on the copper market is that, until all the doorknobs on public toilet doors are made of copper, you had better wrap them in toilet paper before touching them, since super bugs are found to live and breed on stainless steel, while 99.1% of these bugs are killed on copper.
...

Source >>> www.minesite.com <<<
*****


----------



## drillinto

>>> World Bank to map Africa's natural resources <<<

Feb 6, 2014

The World Bank plans to launch in July a $1-billion plan to map Africa's natural resources with the aim of delineating more clearly the continent's uncovered mineral wealth.

The project, dubbed the Billion Dollar Map, "will unlock the true worth of Africa's mineral endowment," Tom Butler, mining specialist at the Bank's private finance arm, the International Finance Corp., said Wednesday.

Speaking in Cape Town, South Africa, Butler said most of Africa's subsoil resources have not been surveyed.

Doing so, in a public way, would be useful to policy makers, investors and the public, helping to boost development, he said, according to prepared remarks.

"There is yet an enormous amount of wealth left to discover," he said.

"Coupled with in-country training and institutional support, and the work of exploration companies, this initiative will unlock the true worth of Africa's mineral endowment."

The World Bank , which calls accessible data on resources a "public good", said it has already invested over $200 million in developing geological data for Africa over the past 10 years.

Currently, it is supporting a comprehensive airborne geological survey of the entire country of Malawi.


Source: AFP and http://www.newvision.co.ug/
*****


----------



## drillinto

>>> Mergers and acquisitions in the mining industry 
>>> 7 Feb 2014

The latest report on mergers and acquisitions in the mining industry from Ernst & Young shows that deal-making hit a low ebb in 2013, which was the third consecutive year in which the deal completion tally fell.

According to Ernst & Young, acquisition plans found little support from investors in 2013 and, as a result, few deals were pursued.

What’s more, as the year progressed even divestment plans were abandoned as management teams discovered that their assets were valued too poorly to justify letting them go.

However, balance sheets also became less stressed due to refinancing and improved cash generation in the second half of the year. And this in turn actually made divestment plans less critical for many companies.

Ernst & Young found that the number of deals completed last year fell 25 per cent year-over-year to 702, the lowest level since 2007.

While the value of deals did increase by 20 per cent to US$124.7 billion, the researchers note that the increase was primarily due to the completion of the Glencore Xstrata merger. Excluding that one super-deal, value decreased 16 per cent to US$87.3 billion.

There were 19 large deals, which Ernst & Young defines as over US$1 billion, during 2013, down from the 26 completed in 2012.

Instead, smaller transactions made up the bulk of activity.

Ernst & Young notes that the majority of deals were low-risk acquisitions undertaken to increase an existing stake, to achieve domestic or inter-regional consolidation, or as a strategic attempt to secure future supply.

Capital raising followed a similar course, with only a nine per cent increase in total proceeds to US$272 billion, a rise which was largely due to some exceptional loan refinancing.

The total volume of issues fell during 2013 by nine per cent to the lowest level since 2008. While the total capital did rise year-over-year, the increase was largely attributable to refinancing work.

Looking ahead though, there are grounds for renewed optimism.

“Confidence in the global economy is improving, companies have taken action to deleverage balance sheets and the industry-wide focus on productivity and efficiency should begin to yield results”, says Ernst & Young.

“As a result, we expect the gradual strengthening of mining and metals equity valuations to continue and the increased availability of capital.”

That said, economic volatility stemming from continued instability in the Eurozone, Chinese economic rebalancing, and US Federal Reserve policies could throw a wrench in a potential recovery.

As a result, any uplift in mergers and acquisitions activity and any improvement in capital raising conditions will likely be gradual and will require “innovation in pricing” to tame volatility.

Over the longer term, Ernst & Young speculates that the bitter conditions seen over the last couple years could be sowing the seeds of the next minerals boom, as the supply and demand fundamentals of many mineral commodities begin to shift into shortage.

Source >> www.minesite.com
*****


----------



## drillinto

>>> M&A and capital raising in mining & metals: Outlook for 2014 <<<

>>> February 2014


The mining and metals sector is entering 2014 with a more positive outlook.

Confidence in the global economy is improving, companies have taken action to deleverage balance sheets and the industry-wide focus on productivity and efficiency should begin to yield results.

As a result, we expect the gradual strengthening of mining and metals equity valuations to continue and for increased availability of capital. However, continued economic volatility is also expected in 2014 due to:

Eurozone economics
Chinese economic rebalancing
US Federal Reserve policies regarding the tapering of quantitative easing

As supply and demand struggle to return to post-super cycle equilibrium, we expect further price volatility to occur for at least the next two years. This will see caution prevail, and any uplift in M&A activity and improvement of capital raising conditions will be gradual and will require innovation in pricing to tame volatility.
...

http://www.ey.com/GL/en/Industries/...ok-for-2014---long-term-health-in-the-balance


----------



## drillinto

That Was The Week That Was … In Australia
9 Feb 2014 

>>>>> by Our Man in Oz <<<<<
...

Minews. Let’s move along and cover the rest of the Australian market which should have produced quite a few winners in the gold sector last week.

Oz. Gold was the strongest performing area last week thanks to a US$20 an ounce rise in the price and continued global economic uncertainty.

The gold index on the ASX outshone everything else with a rise of 6.2 per cent, thanks largely to a strong rise by 
Newcrest (NCM) which added A72 cents to A$10.37, but aided by a long list of solid rises by other gold stocks.

That gold index rise looks even better when compared with a modest 0.4 per cent slide in the all ordinaries index and an absolutely flat mining and metals index which opened and closed at 3,254 points.

Minews. Let’s call the card, starting with gold, and keeping it snappy, please.

Oz. Most gold stocks gained ground, with a few outliers shedding a little value. Some of the better movers included: Tribune (TBR), up A31 cents to A$2.71, Papillon (PIR), up A17 cents to A$1.34, Northern Star (NST), up A8 cents to A96 cents, Troy (TRY), up A14 cents to A$1.27, Gold Road (GOR), up A1.5 cents to A13.5 cents, Doray (DRM), up A6 cents to A88 cents, Medusa (MML), up A8 cents to A$2.03, and Evolution (EVN), up A6.5 cents to A70.5 cents.

Gold stocks to lose ground included: Gryphon (GRY), down A2 cents to A16 cents, Sumatra (SUM), down A1.5 cents to A10 cents, Middle Island (MDI), down A0.3 of a cent to A2.7 cents, and Kidman (KDR), down half-a-cent to A16 cents.
...

Source >>>>> www.minesite.com


----------



## drillinto

>>> 9 Feb 2014

Problems In Emerging Markets Take The Shine Off Growing Stability In The Developed World
>>> by Rob Davies <<<

As the year settles down, the economic messages are getting more mixed and taking the shine off the rosy optimism that accompanied the start of the year.

The US payroll figure of 113,000 was below consensus forecasts of 180,000, but all the same most capital markets had a good week.

Base metal prices, as measured by the LME index, gained 1.1 per cent to 3,076 and equity markets in the developed world made similar progress.

It is in emerging markets where the problems are concentrated.

Last week it was the turn of the Ukraine to take the heat as its reserves were shown to have fallen 13 per cent in January. That led to a devaluation of its currency, the hryvnia, to 8.45 to the dollar, down from 8.1 a few months ago.

Some countries will welcome a devaluation of their currencies. South Africa is currently gripped by a strike at all three of its platinum mines as 70,000 miners coordinate action across the industry for the first time.

A weaker rand will certainly help profitability but history tells us that that is only a short term fix.

These labour intensive underground mines are inherently expensive to operate compared to heavily mechanised open cut mines. The problem is that the majority of platinum group metals are sourced from this one unique geological feature known as the Bushveld Complex.

There was more encouraging news elsewhere. Arcelor Mittal, the world’s largest steel maker by revenue, announced a smaller net loss in 2013, US$2.5 billion compared with US$3.3 billion the year before. More significantly, it expects global steel demand to rise by between 3.5 per cent and four per cent in 2014.

As the basic component in so many industries from transport to construction that is good for all commodities. Its own steel production increased 3.4 per cent last year to 91.2 million tonnes.

The underlying concern across many markets is that growth remains weak and what there is still reliant on what were supposed to be short term measures like quantitative easing.

Inflation of just one per cent in the US and Europe demonstrates that there is no real shortage of anything, especially labour.

Even though the US is gradually reducing its QE programme, via a process known as tapering, there are concerns that this and similar projects have already distorted markets.

The ability of a co-founder of Ocado, a UK-based internet based food retailer, to walk away with £15 million is one measure of exuberance in the market.  The business has lost money for every one of its 14 years.

That sort of sentiment is tempting 60 companies to list on the LSE before April with the expectation of raising £15 billion. Boring mining companies that dig stuff up for a profit and pay dividends don’t get a second glance these days.

Nevertheless, more attention is now being focused on China where credit creation has surpassed everywhere else and kept metal prices buoyant since 2008.

No one knows the full extent of the shadow banking system in China, or if they do they are keeping quiet.  Knowing that the state has US$3.5 trillion in liquid reserves that could be used to bail out failure s is at least some comfort to those selling into the largest commodity market in the world.

Source >>> www.minesite.com
*****


----------



## drillinto

>>> New Iran oil contracts to win over a large number of foreign investors <<<
>>> 9 Feb 2014

http://www.presstv.ir/detail/2014/02/09/349937/iran-oil-contracts-to-draw-in-investors/


----------



## drillinto

USA: groups post taper

Materials are among the winners and Energy is currently a looser

http://www.bespokeinvest.com/thinkbig/2014/2/11/groups-post-taper.html


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## drillinto

>>> Asset Class Performance <<<

>>> Feb 12, 2014

YTD: Natural Gas (UNG) is the big winner, +16.77% 

Since Feb 3: Australia (EWA) is up, +7.36

http://www.bespokeinvest.com/thinkbig/2014/2/12/recent-asset-class-performance.html


----------



## drillinto

>>> 12 Feb 2014
>>> Rice tumbles on stock sale call <<<
...

Thailand, once the world’s biggest exporter, is short of funds to help growers under Prime Minister Yingluck Shinawatra’s 2011 programme to buy the crop at above-market rates. After the government built record stockpiles big enough to meet about a third of global import demand, exports and prices have dropped, farmers aren’t being paid, and the programme is the target of anti-corruption probes. Political unrest may contribute to slower growth in Southeast Asia’s second-largest economy.

Selling the government inventory to pay farmers would flood the market with rice, eroding prices that in 2013 fell by the most in at least five years, and would escalate competition for shippers in Asia, including India, Vietnam and Cambodia.

“The programme is simply unsustainable and hurting the finances of the country,” said Concepcion Calpe, a senior economist in Rome for the United Nations’ Food & Agriculture Organization. “The suspension of the rice-pledging programme will exacerbate the decline in Thai market prices as farmers enrolled in the programme increasingly fail to be paid.”
...

Source >>> Bangkok Post
*****


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## drillinto

>>> Trading range screen for the S&P 500 and its ten sectors <<<
>>> Feb 13, 2014

Energy remains oversold

Source >>> http://www.bespokeinvest.com/thinkbig/2014/2/13/sp-500-sector-trading-range-screen.html


----------



## drillinto

Rubber Inventories in Producing Countries to Drop on Drought 
>>> By Supunnabul Suwannakij 
>>> February 10, 2014

Rubber stockpiles in Thailand, Indonesia and Malaysia are low and may decline further when the low-production season starts, said a group of top suppliers, asking members to refrain from cutting prices. Futures gained.

Inventories available for sale in the three countries are “low contrary to what is being reported in the media,” International Rubber Consortium Ltd., a unit of a group that comprises government officials, growers and exporters, said after a Feb. 8 meeting. The low level “would be further aggravated in the coming months with wintering expected to be severe,” it said, referring to the dry period when trees shed leaves, reducing latex yield.

The Southeast Asian countries, representing about 70 percent of world supply, failed to agree on new curbs last year after reducing exports by 300,000 metric tons in the six months through March to boost prices, according to International Tripartite Rubber Council, of which IRCO is the marketing arm. The global benchmark in Tokyo entered a bear market last month as supplies exceeded consumption of the commodity used in tires.
...

Source >>> Bloomberg
*****


----------



## drillinto

14. 02. 14
Vietnam’s cocoa dream
>>> by Duy Anh <<<

Never before has Vietnam seen so many foreign invested projects in cocoa production like now. 
The “big guys” in the world now eye Vietnam as the newly emerging material area.
Vietnam once followed the one-century path to become the world’s biggest coffee grower. 
Will the same thing repeat with cocoa ?
...

Source >>> http://english.vietnamnet.vn/fms/business/95558/vietnam-s-cocoa-dream.html
*****


----------



## drillinto

That Was The Week That Was ... In Australia
16 Feb 2014 

>>> by Our Man in Oz <<<


Minews. Good morning Australia, investors in your gold stocks must have been smiling last week.

Oz. They certainly were. The gold index on the ASX had its best week in more than a year, stacking on 9.3 per cent with most companies joining in the party. Interestingly, the good news should continue to roll on next week because the gold price kept rising after we had stopped trading.

At the close on Friday, the gold price was sitting around US$1,306 an ounce. By the time we woke on Saturday morning the price had been pushed up to US$1,319/oz and there was a whiff of optimism in air that US$1,400 is the next stop.

Minews. That’s certainly something to look forward to, but let’s focus on what we know rather than what we’re hoping for.

Oz. Well, what we do know is that gold companies rose on the ASX last week at more than double the pace of the wider mining market, which was itself up a very respectable 4.7 per cent thanks largely to Rio Tinto’s dividend-driven bounce. The overall market, as measured by the all ordinaries, was up a pleasing 3.5 per cent.

Minews. That’s much better than the losses posted over previous weeks.

Oz. No doubt about that. Most sectors of the mining industry contributed in some way, including nickel, copper and iron ore stocks.

Before calling the card, which will obviously start with gold, it’s worth focussing on an assortment of the stars without worrying about their preferred commodity.

Minews. Good idea.

Oz. Chalice Gold (CHN), a stock which made its name and generated its strong cash balance in the north African country of Eritrea, was back in favour last week as a result of an interesting acquisition in Canada. On the market, Chalice added A3 cents (20 per cent) to A17 cents, a price which is still A2 cents less than the company’s cash backing even after the Canadian deal.
...

Source >>> www.minesite.com
*****


----------



## drillinto

For your consideration >> The Gold Bullion Vault

http://www.youtube.com/watch?v=CTtf5s2HFkA


----------



## drillinto

Dividend Declarations From Rio Tinto And Anglo American Show That The Industry Is In A Healthy State

>>> 16 Feb 2014 

>>> by Rob Davies


The results season for 2013 has kicked off and is allowing investors to see how the mining companies have coped with the prices, costs and volumes over the last year.

Good results and high margins would suggest commodity prices have scope to come down a bit, while losses or low margins indicate that commodity prices have limited downside.

Rio Tinto kicked off with by declaring an 11.2 per cent increase in operating profit from iron ore. This is good news, but worried investors wonder how long these returns can be maintained.

However, Anglo American could only manage to maintain profits at its Kumba Iron Ore division as volumes shrank two per cent, which indicates that this facility is struggling to operate at the current rate.

To increase production would require more capital. So Kumba gives a good guide to total marginal operating costs.  On the other hand a return on capital employed of 24 per cent in Anglo’s manganese division demonstrates it is a healthy operation and would merit expansion if demand was strong enough.

Anglo experienced an 89 per cent decline in operating profits in the coal division, resulting from a 24 per cent decline in hard coking coal prices. That is a good indicator of how sensitive these bulk commodities are to price changes.

Thermal coal was not quite so bad. Even so, a 32 per cent drop in operating profit from a 17 per cent fall in prices is still painful.  Rio managed broadly to maintain its profits from thermal coal.

But both companies suffered at their copper divisions. Anglo’s unit offset weaker prices by a 17 per cent increase in production to leave profits unchanged. At Rio there was a 17 per cent fall in operating profits to US$2.4 billion.

The damage done by weak nickel prices was demonstrated by the US$44 million operating loss in this division in Anglo American. Wisely, the company is planning to use this period of low prices to rebuild some furnaces. It makes good sense to restrict supply in times of weak prices.

An operating profit of US$464 million instead of the US$120 million loss last year in the platinum division of Anglo American is evidence of what can be done to reduce costs, albeit helped by a weaker currency.

Finally, a US$1,003 million operating profit from diamonds shows just what can be done when rising production and higher prices are combined with lower costs.

Even Rio, which gave up trying to sell its diamond mines, was able to record 142 per cent increase in operating profit to US$257 million. That is a good demonstration of the power of operational leverage in favourable markets when low margin mines suddenly start to have reasonable margins after all.

Aluminium has been a tale of woe for Rio, but the 38 per cent increase in operating profit to US$1.9 billion from the aluminium division gives some hope that the bottom of this market may not be far away or may have already been reached.

Analysts will spend many happy hours digesting these results and revising forecasts.

It is clear though that the industry is in a healthy state and, as the dividend declarations show, able to generate solid cash flows.

There are some commodities that are suffering but action is being taken to address the issues in nickel and aluminium. Copper and iron ore remain the cash cows. They won’t always.

But until a lot more capital is devoted to increasing supply it is hard to see prices drifting far from the full marginal costs of production.  And that is good news for low cost producers.


>>> Source >>> www.minesite.com


----------



## drillinto

>>> Gold: Merk, Paulson, PIMCO, Soros et al
>>> Friday, Feb 14, 2014 
>>> by Frank Tang <<<

Hedge fund Paulson & Co maintained its stake in the world's biggest gold-backed exchange-traded fund, SPDR Gold Trust, in the fourth quarter, even as others exited when bullion prices posted their biggest annual loss in 32 years.

Well-known manager George Soros bought shares in Barrick Gold Corp, one of the world's top gold mining producers, while other institutional investors, including PIMCO, continued to cut their exposure to gold investments.
...


Source >>> http://www.reuters.com/article/2014/02/14/hedgefunds-filings-gold-idUSL2N0LJ1VW20140214


----------



## drillinto

>>> Australian Government - Department of Agriculture <<<

ABARES Outlook 2014: Conference Program 
4-5 March in Canberra

http://www.daff.gov.au/ABARES/outlook-2014/Pages/Program.aspx


----------



## drillinto

PDAC 2014

The Prospectors & Developers Association of Canada (PDAC)

http://www.pdac.ca/docs/default-source/convention---common-docs/schedule-at-a-glance-(feb-5).pdf


----------



## drillinto

>>> Oil to Natural Gas Ratio Drops to Three and a Half Year Low <<<

>>> February 20, 2014

http://www.bespokeinvest.com/thinkb...ratio-drops-to-three-and-a-half-year-low.html


----------



## drillinto

That Was The Week That Was ... In Australia

22 Feb 2014 

>>> by Our Man in Oz <<<


Minews. Good morning Australia. That firmer tone we’ve talked about recently seems to have continued last week.

Oz. It did, but more selectively. The overall mining sector was up, though that was mainly thanks to strong performances from the leaders, BHP Billiton and Rio Tinto.

It was the two biggest miners which contributed most of the 2.8 per cent rise in the metals and mining index, offsetting a surprise 1.6 per cent fall in the gold index, in what should have been a strong week for gold stocks thanks to the higher gold price.

Minews. If gold didn’t lead the way what did?

Oz. A bit of everything really. A few iron ore companies had a good week, as did a mix of nickel and coal stocks, backed up by some strong individual performances from a handful of gold explorers.

Perhaps the most interesting number of the week could be found in the all ordinaries index which measures the overall Australian market. It added 1.5 per cent to 5,449 points which is just short of a six year high.
...

Source >>> www.minesite.com


----------



## drillinto

France’s New State-Owned Mining Vehicle Is Unlikely To Mount A Serious Challenge 
To The Established Major Mining Companies | 24 Feb 2014 

>>> by Rob Davies <<<


It wasn’t so many decades ago that large state-owned companies dominated the mining industry. Today that situation is reversed, with only Codelco of Chile maintaining that position.

The likes of Gecamins and ZCCM demonstrated the fundamental conflict that exists between a corporate entity trying to compete in a global market and to maximise local employment at the same time.

So it is curious that France’s interventionist-minded Minister of State for Industry, Arnaud Montebourg, announced last week that his Government will invest â‚¬400 million into a state mining company.

This enterprise, to be called the National Mining Company of France, will prospect for resources in France, French overseas territories and in Africa, central Asia and South America.

Top of the list of targets will be rare earth elements, lithium and gold.

M. Montebourg believes that Francophone countries in Africa would rather do business with the French state than multinationals, according to the Financial Times.

Any PR company will tell you that â‚¬400 million is hardly enough to pay for a road show let alone a half decent exploration programme so the ambitions of this new enterprise are quite limited.

More relevant is that this news came in the same week that BHP Billiton announced its interim results.

The contrast could not be starker.  BHP Billiton was pleased to report a 28 per cent fall in capital and exploration expenditure to US$7.9 billion, underlining the point that expansion rates can now start to come down after the breakneck pace of the last decade or so.

Alongside that the company reported a 31 per cent increase in underlying attributable profit to US$7.8 billion.

To drive the point home BHP Billiton noted that over the last decade it has delivered a compound annual growth rate of 17 per cent and turned US$100 invested in its shares into US$466.

It is hard to avoid the impression that the French have, rather belatedly, espied a bandwagon disappearing into the dust ahead and decided to set off in leisurely pursuit.

That is not to say the game is over for mining.

BHP Billiton makes the point that competition for capital will act to increase returns. Its new hurdle rate for projects is a rate of return in excess of 20 per cent.

That alone will rule out lots of small projects, in places like Francophone Africa that have neither the scale, nor the business environment to deliver large enough returns for the majors.

It is possible that the new French company will get some projects off the ground, but they will be small scale and conflicted by the need to keep local politicians happy.

Any mines developed will not make large returns or disrupt the global commodity business in the way the old state owned companies in Zambia and Zaire used to.

Although it is possible to read these results as suggesting complacency and more relaxed times as the balance sheet is strengthened by reducing debt, that is probably a mistake.

Mining companies always need to replace their assets to feed the hungry mill.

And with Rio Tinto estimating that Chinese steel demand won’t peak until 2030, and then at one billion tonnes, there is still plenty of demand for commodities.

There might even be enough scraps left on the table to keep the French happy.

Source >> www.minesite.com
*****


----------



## drillinto

Strategy and Investment

Equities - the "new safe option" for portfolios ?

https://www.allianzglobalinvestors.....pdf?5c0edc314c14a437fb4934ba62786310746797e6

[To drive the point home BHP Billiton has recently noted that over the last decade it has delivered a compound annual growth rate of 17 per cent and turned US$100 invested in its shares into US$466 (Feb 2014)]


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## drillinto

Junior Graphite Mining companies: options for the output

A Junior Graphite Mining company has 2 options: 

They can set up their own sales & marketing team and then travel worldwide to try to get long term end user customers. The issue they have with this option is that most of the time the end user customers only want some of the grades they produce, such as the large flake particle size grades; and thus the Junior Graphite Mining company now has to find customers for all the remaining particle size grades the end user customers do not want to take and this is where they have a difficult time.

The second option is to sign a sales & marketing agreement with a well established existing graphite company and make sure the agreement covers all grades the Junior Graphite Mining company will produce. Then the only issue the Junior Graphite Mining company has is hoping that the average sales price for 100% of the production is above their cost to mine, dry, screen, bag and prepare shipments.

[Notes: 1. The comments are from Mr. Stephen Riddle, CEO, Asbury Carbons (USA); 2. Those comments are valid for the Junior Graphite Mining companies, worldwide.]


----------



## drillinto

>>> 3 Mar 2014

>>> Will The Ukraine Blow The Commodities Recovery Off Course?

>>> by Rob Davies <<<


The bounce back in asset prices in February was a delight for most investors.

Unfortunately, the clouds of conflict in the Ukraine make it look as if the bounce will be short-lived. And, while the recovery was welcome it has not overcome the deeper problems that caused the sell-off in January.

US growth in 2013 has been revised down to 2.4 per cent as consumer spending only increased by 2.6 per cent and not 3.3 per cent in the last quarter. That still gives the impression of a distinctly weak recovery.

The woes in emerging markets seem to be spreading further and are now lapping at the doors of China. The 1.4 per cent devaluation of the renminbi last week to 6.14 may or may not have been engineered by the authorities. But it is a sign that even this economic power house is not immune from the financial problems.

Another emerging market, Brazil, used these tough times to raid its biggest mining company for cash.

Vale, the large iron ore miner, eventually succumbed to state pressure and settled an outstanding tax dispute by handing over US$6.5 billion to the Brazilian Government.  Like its peers it reported bumper results for 2013, as underlying earnings increased 15.4 per cent to US$12.3 billion.

It is also copying its rivals by reducing its capital expenditure, from US$16.2 billion in 2012 to US$14.2 billion in 2013.

Although the end markets for commodities are finding it hard to maintain growth rates, the mining industry has reacted well by seeking to reduce the pace of expansion.

It needs to. The increase in nickel production by Vale in 2013 of 24,000 tonnes to 260,200 tonnes was one reason why the nickel market recorded its second biggest surplus since 1985.

The oversupply rose from 94,500 tonnes in 2012 to 172,200 tonnes in 2013. That resulted in refined nickel production reaching 1.94 million tonnes.

While that is a small market in global terms it is still a high value commodity at US$14,550 a tonne.  That surplus has led to a rise in inventory, but at 270,000 tonnes it is not too bad.  Indonesia, which accounts for 14 per cent of the refined nickel market, is a country that will certainly be hoping that recovery is not too far away.

One metal that is seeing its inventory declining quite rapidly is zinc. Having been over one million tonnes, inventories have now shrunk by a quarter to stand at 761,725 tonnes. That tightening is an important reason why its price has held up well this year and is currently trading at US$2,100 a tonne. Its sister metal lead has a similar price at US$2,115 a tonne.

Other sections of the industry are also working to deal with conditions that are not as buoyant many would like.

Aluminium probably has one of the worst imbalances so it is encouraging that Rusal will reduce its volumes in 2014 by 10 per cent to 3.5 million tonnes, the lowest in eight years.

But it is unfortunate that all the detailed planning and fine tuning of mine, smelter and refinery capacity can be blown off course by political events.

It can only be hoped that the self-interest of all concerned will act to persuade them to reach a peaceful accommodation in the Ukraine and allow the economic recovery to be maintained.

>>>  Source >>> www.minesite.com


----------



## drillinto

>>>>> That Was The Week That Was ... In Australia <<<<<
>>>>> 2 Mar 2014 

>>>>> by Our Man in Oz
...
Minews. Did any mining sectors receive special attention, good or bad?

Oz. The best performer for the week was uranium, and it’s a long time since we saw that, with interest growing after reports of Japan re-starting its mothballed fleet of nuclear reactors, and continued strong uranium demand from China.

Worst was iron ore with stocks hit by a slide in the iron ore price which has been so long coming that most investors had forgotten the warnings of a supply glut which first surfaced about two years ago.

Minews. Let’s start the price call with any outstanding individual moves and special deals.

Oz. Paladin (PDN), the local uranium favourite despite its appalling record of heavy losses, rode the Japan reactor story with aplomb, adding A10 cent (24 per cent) to A52 cents.

Berkeley (BKY) wasn’t far behind in the uranium stakes with a A5 cent (17 per cent) rise to A33.5 cents, though the best percentage performance came from the Namibian-focussed explorer, Deep Yellow (DYL) which added A1.1 cents (58 per cent) to A3 cents.
...

>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Source: www.minesite.com


----------



## drillinto

>>> PDAC: The Greatest (Mining) Show On Earth Is Attracting Ever Greater Numbers Of Chinese And Koreans

>>> 3 Mar 2014 

>>> by Axel Blackrod <<<


In March each year the prospectors and developers of the mining world come from all continents to attend the PDAC in Toronto.

This year there are 30,000 attendees with 560 trade exhibitors and 540 mining companies showing their wares in the huge Toronto convention centre beside the train tracks at Union station.

All those with an interest in mining are here.

Notably new this year was the Kazakhstan national mining company with a display of projects available for western investors, a private Russian company (GV Gold) from Yakutia seeking investors and a stock market listing, and several Chinese companies with stands looking to attract projects. The latter were busy.

The past year has seen many of the junior exploration companies falling on hard times as their share prices have more than halved and cash reserves are approaching the threadbare.

They man their stands and show their projects, many of which have made no progress in a year. The promoters are looking for a recovery in interest from the retail investor.

But the major mining companies are there with a different agenda. They have the big booths and meeting rooms nearby, and to them the great opportunity is for the junior company to offer them participation by joint venture where the major can dictate the terms.

The majors like Newmont, Kinross, Barrick and GoldCorp have the cash and need to replace depleting reserves and the juniors have projects that need funding but have no cash. The market is not a fair mistress.

But the new element this year is the organised Chinese or Korean buyer. There are several groups of Chinese operating in an organised manner. They tend to be led by attractive English speaking ladies, and to have geologists and engineers in the group who visit the booths of companies with big emerging market copper or gold projects.

While your correspondent was at the Marengo mining (TSXV:MRN) booth, the lady was asking questions and collecting information and one of the geologists was taking photographs of the exhibits.

The lady leader explained that they were attending on behalf of a major Chinese group that wanted to invest in advanced projects capable of near term production but still needing funding.

Unbelievably, five minutes later two Korean representatives of a major smelter came to the same booth. Apparently the Marengo stand had six Chinese and two Korean visits on the first day.

This points to an interesting dichotomy, or trichotomy, in the resource sector.

The large Asian state-owned enterprises are looking to have major investments in large new projects in the emerging markets and are competing with the mining majors.

The Chinese in particular are becoming more aggressive and are establishing companies listed on the Canadian stock market such as China Metallurgical Exploration Company, in direct competition with the majors.

Or, more commonly, they are taking a stake in junior exploration companies. Sinotech, for example, has built up a 24 per cent stake in Golden Share (TSXV-V:GSH). They are establishing footholds in  the major mining market to compete.

This surely presages a shift in market dynamics. The junior exploration stocks have had a major shaking out since the PDAC last year and are often now trading at between 50 per cent and 60 per cent lower than a year ago.

The majors are mostly up about 30 per cent in 2014 to date.

So it is obvious that if acquisitions can be made at these ratios then resources of gold, copper or whatever can be acquired materially cheaper with greater certainty and faster than through the internal exploration efforts of majors.

So your correspondent believes that the casual meetings at PDAC will lead to courtships and marriages between the juniors with known resources and majors with the need to replace reserves.

But the new factor is the Asian demand which the majors should see as a clear and present danger to their dominant position.
...

Source >>>>>>>>>>>>>>>>>>>>>>>>>> www.minesite.com


----------



## drillinto

>>> Commodities Survey <<<

>>> March 3, 2014

http://www.bespokeinvest.com/thinkb...ies-survey-shows-modest-upside-in-prices.html


----------



## drillinto

>>> March 3, 2014

Performance of country ETFs

Australia(EWA) is currently neutral. A week ago was overbought.


http://www.bespokeinvest.com/thinkbig/2014/3/3/international-trading-range-screen.html


----------



## drillinto

That Was The Week That Was ... In Australia
8 Mar 2014 

>>>>> by Our Man in Oz


Minews. Good morning Australia, parts of your market seem to have done well last week but there might be a bumpy start next week.

Oz. You’re obviously referring to the strong performance by nickel and uranium stocks which were the highlights of the week we’re reviewing, and the fact that the copper price fell sharply after we closed on Friday.

Minews. That’s right, plus the ongoing concern over what’s happening in Ukraine.

Oz. China, far more than Ukraine, is what keeps investors awake at night in this part of the world. In fact, it can even be argued that the unpleasantness in Crimea and elsewhere along the border with Russia is being treated as a positive for the Australian mining and oil sectors.

That fall in the copper price on Friday, reportedly the biggest drop in two years, was a result of a major corporate failure in China which can be tied back to concern about the slowing pace of growth in China.

The Ukraine factor, including threats from Russia about cutting off gas supplies to Europe, boosted Australian energy stocks, including uranium explorers, while nickel producers rose sharply as Indonesia’s ban on unprocessed ore exports started to bite and thoughts turned to Russia putting its foot on nickel supplies from Norilsk.

Minews. It’s certainly a complex, and fast moving situation, perhaps we should just stick to what we know rather than what might happen.

Oz. Good idea, and what we do know is that nickel stocks were the star of last week thanks to the price of the metal taking a brief peek above the US$7.00 a pound level before easing back at the close on Friday.

Gold stocks also did well thanks to a US$20 an ounce rise in the price, and even some copper stocks were up, though they are certain to be hit by sellers on Monday.

Overall, the Australian market ended the week up fractionally, with the all ordinaries index adding 0.5 per cent. The mining index, largely thanks to falls by BHP Billiton and Rio Tinto, was down a modest 0.8 per cent. Gold stocks did best overall with the ASX gold index up 4.5 per cent.
...

Source >>>>> www.minesite.com


----------



## drillinto

>>> Better US Jobless Numbers Outweighed By The Crisis In The Ukraine And A Big Chinese Debt Default
>>> 9 Mar 2014 

>>> by Rob Davies


There are times when the information coming in to investors becomes overwhelming.

There is so much going on it is difficult, if not impossible, to prioritise the crucial from the merely important.

Right now feels like one of those times.

In the past the US jobless figures were a vital element in assessing the US economy.

But Friday’s good news that 175,000 new jobs had been created was swamped by other data.

Instead the whole copper market focussed on the news that Shanghai Chaori Solar Energy Science and Technology Company could only pay a fraction of a US$15 million interest payment due on its bonds.

This triggered concern that the default might be a signal for a spate of corporate insolvencies in China that would reduce demand for copper in its biggest market.

And that pushed copper down US$104 on Friday below US$7,000 to US$6,930 a tonne, the lowest for seven months.

The fact that this price drop was accompanied by a 3,000 tonne drop in inventories in LME warehouses to just 269,000 tonnes was overlooked.

There might be a lot of copper in Chinese yards, but that is still a pretty low figure.

In the same way iron ore prices dropped 2.3 per cent to US$114 a tonne despite an increase in Chinese imports to 86.8 million tonnes. That’s significantly up from the 73 million tonnes that was imported in December and the 66 million tonnes imported the previous January.

Maybe the forecast of a three per cent increase in steel production for 2014 is a lot less than the nine per cent recorded in 2013, but it is hardly bad news.

Meanwhile, on a different continent the problems of maintaining copper production, let alone increasing it, were made clear.

Freeport McMoRan is developing the Tenke mine in the Democratic Republic of Congo. But it has to cope with power supplies being rationed to 95 MW when it will need 105 MW at full capacity.

To resolve this it is investing US$220 million in new capacity while the country is importing 150MW from neighbouring Zambia.

Since the DRC produced 900,000 tonnes of copper in 2013 the fact that it can only satisfy half the 900 MW power requirement in the Katanga region raises big questions over the reliability of this supply.

And overhanging all this data specific to the industry is the geopolitical uncertainty created by the crisis in the Ukraine. While the US ratchets up the belligerence index the Europeans are all too aware that Russia is the largest supplier of gas to Germany, still the industrial powerhouse of the region.  

Mr Putin seems to be the only politician with a plan and the ability to execute it. His ambitions appear to be on the scale of Bismarck more than a century ago as Germany expanded and consolidated its commanding position. The European leaders, by contrast, are divided and confused. However, they have learnt two very important things. 

One is that that they cannot trust Russia and Mr Putin. The second thing is that being green is all very well and good in stable times. But relying on a volatile and unreliable neighbour to power your industry and keeping your voters warm is not very sensible.

It surely cannot be long before Mrs Merkel reverses her plan to close all Germany’s nuclear power stations. After that an announcement on a programme of new plants cannot be far behind. 

The one metal that might come out best of this crisis could be uranium. Oh, and expect approvals for shale gas exploration in Europe to be quickly granted in a quite a few countries.  

Russian gas will never be cheap enough again for it to dictate the region’s foreign policy. And suddenly dirty old coal looks a lot more attractive too.


>>> Source: www.minesite.com


----------



## drillinto

>>> Asset Class Performance During the Current Bull Market (Since March 2009)
>>> March 10, 2014 

Of the country ETFs, Australia is bronze medal !


> http://www.bespokeinvest.com/thinkb...rformance-during-the-current-bull-market.html


----------



## drillinto

>>> US fruit firm Chiquita and Dublin-based Fyffes are merging to create the world's biggest banana distributor 
and a new company that will generate sales of about $4.6bn a year.

>>> by John Mulligan – 11 MARCH 2014 


http://www.independent.ie/business/...s-target-46bn-sales-with-merger-30080066.html


----------



## drillinto

>>> 26 - 28 May 2014, Sydney, Australia

>>> 82nd IFA Annual Conference

International Fertilizer Industry Association (IFA)

http://www.fertilizer.org/ifa/HomePage/EVENTS/IFA-events.html/2014-IFA-Annual-Conference


----------



## drillinto

>>> Country Trading Range Screen

>>> March 12, 2014

Australia (EWA) current valuation: neutral 

http://www.bespokeinvest.com/thinkbig/2014/3/12/country-trading-range-screen.html


----------



## drillinto

>>> Global Equity Market Correlation Matrix

>>> March 14, 2014 

The grid below is a correlation matrix of most major stock markets around the world.  It quickly shows the correlation of daily returns between any two country stock markets, and it's heat-mapped to show which countries are most or least correlated with each other.  There are two matrices shown: one for the period from the start of the US bull market to present and one for the last year.  So...what does it all mean ?
...

Source >>> http://www.bespokeinvest.com/thinkbig/2014/3/14/global-equity-market-correlation-matrix.html


----------



## drillinto

>>> Iron Ore Majors Remain Unfazed By Bearish Chinese Demand Trends

>>> 14 Mar 2014


The big names in the iron ore market gathered this week in Perth, Australia for an industry conference and in an interesting turn of events the global spot iron ore price recorded its most dramatic one-day decline since the financial crisis of 2008.

The price slump came on the heels of data which indicated the Chinese trade balance had swung into deficit.

That lead investors to fear that the world’s second largest economy and biggest importer of steel may weaken further.

But the 8.3 per cent decline in the benchmark price of iron ore for delivery to China to US$104.70 a tonne was brushed aside by executives from both BHP Billiton and Rio Tinto, and conference attendees in Perth reported a cheery atmosphere at the show.
...

Source >>> www.minesite.com


----------



## drillinto

>>> Copper: China Financing Business May Cause Further Price Falls
>>> By Nat Rudarakanchana

>>> March 11, 2014 


A Chinese economic slowdown isn’t the only worry on the horizon for copper, as the industrial red metal sees fallout from its use as a financing tool in China, the world’s largest copper consumer.

Copper is used as collateral by companies and investors in China, in an effort to work around strict lending standards enforced by Beijing. Companies obtain a letter of credit, use it to import copper, sell the copper or deploy it as collateral, and often invest in higher yield assets, before paying back the loan, reports the Wall Street Journal.

China is the world’s largest consumer of copper and represents 40 percent of global copper demand. Copper is used in construction, power lines and refrigerators, among other things, so it is often taken as a gauge of industrial and business activity.

But Credit Suisse Group AG analysts estimate that a third of China’s imported copper is used in financing, while others believe that half of the copper in China’s warehouses is tied up in such financing deals.
...

Source >>> http://www.ibtimes.com/copper-china-financing-business-may-cause-further-price-falls-1560678


----------



## drillinto

>>> Metals & Mining Analysts' Ratings & Estimates - Juniors
>>> by Bill Matlack

March 10, 2014 


>>> http://www.kitco.com/ind/Matlack/2014-03-10-Metals-Mining-Analysts-Ratings-Estimates-Juniors.html


----------



## drillinto

>>> That Was The Week That Was ... In Australia
>>> 16 Mar 2014 

>>> by Our Man in Oz


Minews. Good morning Australia. How did your market perform during last week’s commodity-price wobbles?

Oz. Badly, as you would expect. The metals and mining index dropped five per cent thanks largely to the fall in the price of iron ore and copper, and even the gold index could manage only a 1.8 per cent rise despite revived interest in gold as a hedge against the uncertainties flowing out of Russia and China.

Minews. The share price falls were to be expected, but why hasn’t your currency gone down as well?

Oz. Now that’s perhaps the most interesting question of the week, because normally the Aussie dollar moves in the same direction as the country’s major commodity exports. Not last week - it opened and closed at US90 cents.

What seems to have happened is that our dollar benefited from the hot money flows being generated by the threat of U.S. and European sanctions on Russia. In effect, Australia is being seen as something of a safe haven from the troubles in your part of the world, despite the economic problems likely to be caused by falling demand for commodities as the pace of growth in China slows.
...

Source: www.minesite.com
********************


----------



## drillinto

>>> China to build more railways to help raise number of urban residents as it seeks more growth
>>> March 16, 2014

BEIJING –  China will build more railways and increase the number of small and medium-sized cities as it seeks to raise the proportion of urban residents in the population, which it sees as the country's next big engine for economic growth.
...

http://www.foxnews.com/world/2014/0...elp-raise-number-urban-residents-as-it-seeks/


----------



## drillinto

China’s Low Debt To GDP Ratio Means It Still Has Plenty Of Scope To Keep On Spending
17 Mar 2014 

>>> by Rob Davies <<<


It is sobering to contemplate that the short term future of asset prices in the Western capitalist world is heavily dependent on events in what were the two largest communist countries.

Because while much of the media is focused on the mind games President Putin is playing with the leaders of the US and Europe, the real driver of prices is China.

Economic data for January and February for the middle kingdom came in much weaker than expected. This has raised the possibility that it will be unable to meet its target of seven per cent growth for the first quarter.

One dramatic consequence of that news was a 6.4 per cent tumble in the copper price to US$6,489 a tonne, its lowest for four years.

Other metals suffered as well, though not nickel, and the LME Index ended the week 2.9 per cent lower at 2,938.

Nickel responded to tightness the market, partly caused by the Indonesian embargo on ore exports, by gaining 3.1 per cent to US$15,800 a tonne.

What worried investors was the slowdown in Chinese credit growth. M0, or the liquid money supply, grew by 13.3 per cent in February after growing 22.5 per cent in January.

The 63 billion renminbi decline in demand for loans was driven by weakness in the shadow banking sector.

And it is this sector that has, apparently, been using copper as collateral for loans.

Demands for repayment here have forced liquidations of copper and pushed prices down.

The scale of this business can be judged by comparing the 251,300 tonnes of copper held in LME warehouses around the world with the 725,000 tonnes that Exane BNP Paribas estimates is held in the trust loan sector.  

It seems then that the dramatic move in the copper price is more to do with the shadowy world of non-bank finance sector than the underlying economy.

Industrial production, a good proxy for metal demand, did slow in January and February from 9.7 per cent to 8.6 per cent.

But here French investment bank SociÃ©tÃ© GÃ©nÃ©rale points out the news is far from universally bad.

It reminds us that Chinese real estate remains robust and that rents are still rising, which indicates that demand is still robust.

It also points out that property accounts for 33 per cent of Chinese steel demand, and infrastructure for another 24 per cent.

Machinery takes 16 per cent, transport and railways three per cent each with autos taking six per cent.

And car sales are still rising at 11.3 per cent year on year.

SociÃ©tÃ© GÃ©nÃ©rale reminds us that the Chinese state is still relatively un-indebted.  China has a debt to GDP ratio of 55 per cent, which compares favorably with 80 per cent in Germany, 88 per cent in the US, and 250 per cent in Japan.

That gives Beijing scope to maintain spending to keep its populace happily employed.

Even so it is clear that stresses are building up in the Chinese economy, just as in every other major industrial country.

There may come a time when demand weakens enough to push metal prices lower. The problem with copper is that it has enjoyed buoyant conditions - i.e. high margins - for so long that there is a large gap between current prices and the marginal producers.

Zambia says copper will have to fall to US$5,000 a tonne before its production is affected.

Chinese demand would need to shrink enormously for that to happen. And, if it did, the copper price would be the least of our worries.

How would a nominally communist state keep its population happy if its economy stopped growing?

>>> Source >>> www.minesite.com


----------



## drillinto

>>> Australian Cotton <<<

Cotton-Origin Countries Picked for ICE Exchange Global Contract
by Marvin G. Perez
March 17, 2014

http://www.bloomberg.com/news/2014-...-picked-for-ice-exchange-global-contract.html


----------



## drillinto

>>> Carlyle Buys Traxys

>>> 18 Mar 2014

While the big banks have been offloading their physical commodity trading assets amid faltering commodity prices, private equity has been growing increasingly interested in natural resource and commodity investments.

Perhaps it’s the old adage of “buy low, sell high” which draws the more flexible private equity firms to the table amid falling precious metals prices and softening demand for commodities form China.

In a major move last week, the Carlyle Group, the global alternative asset manager which manages US$189 billion in assets, announced an agreement to acquire a majority interest in the Traxys Group in association with other investors.

Traxys is a commodities trader, or as the corporate speak would have it, “a major financial and logistical solutions provider for the ferroalloy, metal, mineral, mining and energy industries”.

The exact terms of the deal or the sum which was agreed to remain a mystery.

But Traxys keeps over 20 offices worldwide and achieves over US$6 billion in annual turnover, so it is at the very least a major transaction for Carlyle.

Traxys has established a number of strategic alliances with major players in the mining industry including Anglo American and Molycorp.

Despite the generally lower metal prices and difficulties with Chinese commodity demand, Traxys has grown as a profitable business and is a global leader in the metals and mining raw materials markets.

This is not Carlyle’s first foray into the commodity world.

The company acquired commodities hedge fund Vermillion in October 2012 for an undisclosed sum, but has seen the fund’s assets fall dramatically in value over the past year. Vermillion Asset Management was managing about US$2 billion in March 2013 but Carlyle reported that the figure had fallen to around US$900 million by the end of 2013, amid falling commodity prices.

As far as Traxys is concerned though, the time looks right. Alan Docter, Traxys’s chairman exs, explained: “Based on my decades of experience in the industry, I view this as a great opportunity and a perfect time to strengthen our capabilities and continue to grow and invest in Traxys for the future.”

David Stonehill, Carlyle’s managing director, added: “We are impressed by the diverse, global capabilities of Traxys and the growth potential of the platform.  We have known Alan, Mark and the Traxys team for several years and look forward to supporting the team in its next phase of growth.”

The transaction is expected to close in the third quarter of 2014, assuming the required regulatory approvals are granted.

Source >>>>> www.minesite.com


----------



## drillinto

>>> Nickel Enters Bull Market as Supply Concerns Mount After Crimea

>>> Mar 18, 2014 

>>> By Maria Kolesnikova

http://www.bloomberg.com/news/2014-...et-as-supply-concerns-mount-after-crimea.html


----------



## drillinto

>>> Why Coffee Futures are up 80% in 2014
>>> March 17, 2014 
>>> by JARED CUMMANS

After commodities had a rough go in 2013, taking the backseat to surging equities, it seems that this year has more favorable conditions in store for a number of hard assets. Though a number of commodities have gotten off to a white-hot start this year, none have even come close to the gains that coffee futures have notched, as that commodity has spiked more than 80% through the first 10 weeks of the year.
...

http://commodityhq.com/2014/why-coffee-futures-are-up-80-in-2014/


----------



## drillinto

>>> JPMorgan Agrees to Sell Commodities Unit for $3.5 Billion
>>> By Andy Hoffman and Hugh Son  
Mar 19, 2014 

JPMorgan Chase & Co. (JPM) will sell its physical commodities unit to Mercuria Energy Group Ltd. for $3.5 billion, ending a five-year foray into owning and storing raw materials amid pressure from regulators to leave the business.

The deal, disclosed in a statement from New York-based JPMorgan today, takes the bank out of industries such as petroleum products and power while cementing Mercuria’s standing among the world’s biggest commodity traders. JPMorgan will continue to provide services and products tied to commodities including financing, market-making and the vaulting and trading of precious metals, the bank said.
...

[Click the link below to read also 11 comments from readers]

http://www.bloomberg.com/news/2014-...-on-sale-of-commodities-unit-to-mercuria.html


----------



## drillinto

Meet the Swiss traders who just bought JP Morgan’s commodities business for $3.5 billion

>>> By Mark DeCambre	 

March 19, 2014

http://qz.com/189907/meet-the-swiss...morgans-commodities-business-for-3-5-billion/


----------



## drillinto

>>> Asset Class Performance Following the Fed <<<
March 19, 2014 
...

Global ETFs took big hits following the Fed news.  India (INP) and Russia (RSX) were down the most with declines of 2.93% and 3.53%, respectively, while Australia (EWA) was down 1.58%.  Oil and natural gas both ended the day higher, but Gold (GLD) and silver (SLV) both fell more than 1% as the US Dollar index rose.  Gold is now down 3.76% on the week, but it's still up 10% on the year.  


http://www.bespokeinvest.com/thinkbig/2014/3/19/asset-class-performance-following-the-fed.html


----------



## drillinto

>>> MG's 'audacious' dairy goal
>>> by ANDREW MARSHALL
Mar 21, 2014 

AUSTRALIA'S farm sector needs two key ingredients in order to thrive during the next 20 years - new investment backing for family farms, and milk.

The Murray Goulburn (MG) co-operative estimates every Australian would be, on average, more than $800 better off today if the nation's dairy farmers hadn't quit the industry in droves during the past decade.

Instead of maintaining a respected 15 per cent share of global dairy export markets, Australian milk production has been slipping 1.7pc annually, despite a big surge in world dairy product demand in the past five years.

We now supply just 7pc of the international trade.

Across the Tasman Sea, New Zealand has been doing the opposite, converting beef and sheep country into dairy farms and growing its annual production by about 3.5pc.

NZ's share of the global milk product trade is now 37pc - up from a stake similar to Australia in 2002.

...

http://www.theland.com.au/news/agri...al-news/mgs-audacious-dairy-goal/2691983.aspx


----------



## drillinto

That Was The Week That Was ... In Australia
23 Mar 2014 

by Our Man in Oz


Minews. Good morning Australia. Your market seems to have taken one step back and then another forward last week to end up where it started.

Oz. That would be true if not for the gold sector which took one step back and then another to end up down a thumping 9.5 per cent.

Minews. Ouch! Obviously the drop in the gold price towards the end of the week was a shock to investors.

Oz. It certainly was, but so too was the late fall in the nickel price which had been rising strongly until Thursday. Interestingly, the modest recovery in the nickel price on Friday helped most stocks in that sector gain a little ground over the week.

Minews. Let’s wrap up the big picture discussion and move along to prices, please.

Oz. Before doing that - and we will start the market review with a look at any outstanding price moves - it’s worth noting that the overall change in the Australian market was negligible.

The all ordinaries actually added one-tenth of a percentage point, which is about as flat as you can get, but that was due to a rise of almost one per cent on Friday, while the metals and mining index slipped 1.1 per cent lower over the course of the week.

Now for the news-making moves which included a continued burst of buying for stocks exposed to graphite. Top of that list was the Swedish-focussed explorer, Talga Resources (TLG). It shot up by A5.3 cents (58 per cent) to A14.5 cents in heavy trade all week but without reporting anything new apart from a small capital raising of A$1.7 million.

Other stocks to participate in the graphite rally included Uranex (UNX), a company perhaps best known as a uranium explorer but which also has graphite interests. It added A4.5 cents (45 per cent) to A15 cents. Archer (AXE) rose by A2.5 cents (16 per cent) to A18 cents. Valence (VXL) gained A5.5 cents (15 per cent) to A42 cents. Bora Bora (BBR), the Sri Lankan-focussed graphite stock, added A7 cents (27 per cent) to A33 cents, and Syrah (SYR), the sector leader also rose, but modestly, with a gain of A6 cents to A$3.61.

Minews. That is interesting to see a graphite revival. Let’s carry on with any more exceptional moves before calling what should be a fairly dull card.
...

Source >>> www.minesite.com


----------



## drillinto

Environmental conflicts on gold

Australia is clean

For gold, stick to Australian miners

http://ejatlas.org/commodity/gold


----------



## drillinto

Russian oil... Gunvor and Timchenko

Gennady Timchenko denies Putin links made him one of Russia's top oligarchs.
US sanctions target friend of Putin who became one of Russia's richest men through oil firm Gunvor and Sochi construction deals.

Alec Luhn, in Moscow

Source:theguardian.com


----------



## drillinto

Will The Mining Shorts Get Caught Out On China?
24 Mar 2014 

>>> by Rob Davies <<<

Metal and mining markets are suffering a double whammy on Chinese issues. A lower rate of growth has already resulted in a reduction in the increase of commodity demand from China.

On top of that, perceptions that the economic situation in China will worsen has encouraged some market participants to use metal markets and mining shares as vehicles to take even bigger negative positions.

Normally traders who think an economy will have a worse outcome than the consensus opinion can hope to monetise that by shorting stocks that are exposed to it.

In the case of China that is difficult because the domestic equity market is virtually closed to foreigners.

There is some limited connection through the Hong Kong exchange. And last week a record US$1.3 billion in ETFs flowed out of there. That helped depress some equities to single digit multiples of earnings.

Others though have extended their activities to shorting mining stocks as proxies for the Chinese economy, making it one of the worst performing sectors this year.

There are dangers in this approach though. For a start the large mining companies are still exceedingly profitable and throwing off huge amounts of cash which they are paying out as dividends.

The other worry for the shorts is that the supply side of the equation is not so clear cut. Nickel has risen 15 per cent this year and has now experienced its seventh week of rising prices taking it to US$15,935 a tonne.

The main reason for this is the Indonesian ban on exports of unprocessed raw material. That has resulted in Indonesian exports of nickel ore to China falling from 6.1 million tonnes in January to 3.1 million tonnes in February with expectations that it will drop to zero in March.

As a consequence Chinese nickel pig iron production is down 26 per cent this year to 380,000 tonnes.

The negative view on the market is also at risk from actions the authorities might take.

Last week the People’s Bank of China widened the trading band for the renminbi to two per cent above and below the daily fixing rate.

Encouraged by this the currency fell to a 13 month low against the dollar of 6.22 renminbi.

On its own that move is probably not enough to assuage all the worries, but it will certainly help to boost exports.

And it does demonstrate that the authorities are prepared to do what it takes to maintain economic growth.

Maybe the real sell signal for China is when it finally allows foreigners to buy domestic equities.

Elsewhere in the developed world economic news continues to be mildly positive for metals.

Most significant was the statement from Janet Yellen, Chairwomen of the US Federal Reserve, that interest rates could rise to one per cent by the end of 2015.

While that is still a long way off anything that could be regarded as normal it does at least mark a step in the right direction.

Miners just have to hope that the West fixes its economy before the ones in the East fall over.

Source >>> www.minesite.com


----------



## drillinto

New Metals-Backed ETFs Help Push Palladium Prices to $800
March 21, 2014 

>>> by Tom Lydon


With two new physically backed palladium exchange traded funds on the way, palladium prices spiked to $800 Friday as traders anticipate increased demand for the metal on top of supply concerns out of South Africa and Russia, the two largest producers.
...

Source >>> http://www.etftrends.com/2014/03/new-metals-backed-etfs-help-push-palladium-prices-to-800/


----------



## drillinto

Energy Department gives conditional approval for Oregon coast liquefied natural gas terminal

>>> March 24, 2014 

>>> By Gosia Wozniacka

...

In recent days, House Speaker John Boehner and other congressional Republicans have urged the Obama administration to speed up natural gas exports and send more liquefied natural gas to Eastern Europe and Ukraine in light of its conflict with Russia over Crimea. Ukraine relies heavily on Russian natural gas shipments.

Boehner has called on President Barack Obama to "do everything possible to use American energy to reduce the dependency on Russia for our friends in Europe and around the globe."
...

http://www.usnews.com/news/business...y-department-oks-lng-terminal-on-oregon-coast


----------



## drillinto

Women In Mining

For your consideration >> http://womeninmining.com/


----------



## drillinto

Mines & Money Hong Kong: Gold Veterans Argue That The Dollar's Days As The Currency Reserve Of Choice Are Numbered

>>> 27 Mar 2014  

>>> by Axel Blackrod <<<


The Mines & Money conference at the waterfront convention centre in Wan Chai in Hong Kong attracted 2,500 delegates with a fair split between the Chinese/Asians with the money, and westerners with the mines to finance.

There were more Australians than Canadians in the latter category.

It all meant the one-on-one meeting area and the bars of the Hyatt hummed as representatives of each category went from one meeting to the next.

There is no doubt that despite brief courtships arranged marriages will take place.

There was little evidence here that China was going to experience a serious slow down. And neighbour Mongolia, which was heavily represented, was making a major pitch for new mining investment to serve Chinese, Russian and Korean demand.

But, perhaps surprisingly, the first issue that came to the forefront of audience discussions was gold.

The keynote speaker on Day One was noted financial author and pundit Jim Rickards. He unsettled the massed ranks with his geopolitical view that Russia and China were working together to replace the US dollar as a reserve currency and bring the era of the petrodollar to an end.

The President Obama legacy will be leaving a nation with astronomic debt levels created by a Federal reserve that has made up policy on the run and not been in control.

In this context, Rickards considers that gold will have key role to help restore some confidence before Chinese and Russia sales of US bonds take the dollar to record lows.

Jim was followed by the famous gold veteran Jim Sinclair, chairman of the Singapore Gold Exchange. Jim Sinclair went even further. Russia intends to sell oils and gas in other currencies as an economic weapon and with Chinese support will challenge the supremacy that the dollar has enjoyed since the end of the Second World War.

The only certain store of value is gold, Sinclair argued, and that gold has to be physical gold. Paper gold will have no value other than cash. Sinclair sees a future where banks will collapse and customer deposits will be assets of the collapsed bank not of the individual.

A catalyst will be when COMEX cannot settle in gold but only in cash as then its role will be over.Fortunately the messiah then arrived before lunch turned into a wake.

Fresh from great success in creating value from the deserts of Mongolia, Robert Friedland confirmed that Ivanhoe Mines is creating the world's largest new platinum mine in South Africa to make Asia a cleaner place.

At the same time Ivanhoe will build the world's largest new zinc mine in the Democratic Republic of Congo because the world is short of zinc. No gloom or recession here. The sun will rise tomorrow and it will be business as usual for the world's leading mining entrepreneur.

In the afternoon the ebullient Frank Holmes looked to accentuate the positives by stressing the ongoing benefits from technological innovation and Asia's drive for urbanisation.

The Bible calls us to go forth and multiply: we should not be gloomy while babies consume over a million tons of commodities each before reaching adulthood. If we take a positive view we will deliver all these goods and we will see that the mining stocks which are oversold today will be the leaders again tomorrow, albeit there will need to be a new generation of business leaders to replace the accountants and regulators who are holding back progress today.

Then just as investors were recovering poise, Mines and Money veteran Rod Whyte chaired a gold panel of many talents. On it, Jim Sinclair and Egon Von Greyerz (Gold Switzerland) began to duet that gold was the only thing of assured value and David Tice, the US fund manager made it a trio with Chris Powell excoriating the central banks for continuing manipulation.

Sinclair sees gold at US$2,000 per ounce this year, but the surprising thing is that the consensus of this veterans panel was that the dollar will inevitably be replaced by a new reserve currency which will be trade-related (including renminbi and Euro) and be anchored by gold.

The new order will require gold to be rebased and gold will in due course be priced at many thousands of dollars. So gold will be restored to its rightful role and the world will get back on its axis.

The welcome drinks provided by ANZ Bank was much needed as groups of Chinese engaged each veteran gold panellist with their list of questions. It seems that the sun will continue to rise in the east and set in the west while the physical gold and economic power transfer from the West to the East each day.

Source: www.minesite.com


----------



## drillinto

That Was The Week That Was ... In Australia
29 Mar 2014 

>>> by Our Man in Oz <<<


Minews. Good morning Australia. Your market seems to have held up quite well last week despite the big hit taken by gold stocks.

Oz. It was a tough week for everyone in the gold market, especially some of the louder speakers at the annual Mines and Money conference in Hong Kong who resorted to personal abuse of Janet Yellen, the new head of the U.S. central bank.

Michael Belkin, a man who is always good for a headline, went as far as to call Yellen a “goofball” for her policies, which he reckons will eventually lead to a boom in the gold price.

Unfortunately for Michael and the rest of the gold bugs on parade in Hong Kong the gold price did exactly the opposite of what they’re been predicting for more than two years and fell sharply, taking share prices with it, and knocking 8.3 per cent off the Australian stock exchange gold index.

Minews. You sound as if you’re tiring of hearing from the gold crusaders?

Oz. You could say that. They’re entitled to their opinion but when their argument descends into conspiracy theories and personal abuse they do become rather boring.

The simple fact with gold, which the bugs refuse to acknowledge, is that last week there were more sellers of the metal than buyers. Why that was so is anybody’s guess, but to rant and rave about the market being illogical is a pointless exercise because the market does what the market wants to do.

Minews. I think we get the point about gold. Presumably the rest of the Hong Kong conference was more positive.

Oz. It was, and more importantly it was more positive than Mining Indaba in Cape Town held about six weeks ago, and more positive than the London edition of Mines and Money held late last year, which leads to a few interesting conclusions. Firstly, that (a) we have hit the bottom of the down cycle, and (b) we might have started an upward swing.

Minews. Let’s not get carried away, you are talking about big changes that always take longer than most of us imagine.

Oz. True, but last week provided an interesting glimpse into the mood of investors with the graphite sector racing away without anyone seeming to notice.

Minews. We’ll get to graphite soon, but first let’s finish with your market.

Oz. Overall, the Australian market was flat, as it has been for most of March. The all ordinaries index added 0.4 per cent, the metals and mining index rose by 1.2 per cent, and gold fell by the 8.3 per cent mentioned earlier.

Graphite stocks were the pick of the market with some impressive rises. The Sri Lankan explorer, Bora Bora (BBR) effectively doubled, with a rise of A31 cents (up 94 per cent) to A66 cents after announcing a fund-raising placement to professional investors at A28 cents.

Kibaran (KNL) was another graphite stock to move sharply, adding A6.5 cents (43 per cent) to A21.5 cents.

Other graphite stocks to respond to the revitalised interest in the commodity included: Talga (TLG), up A5 cents (35 per cent) to A19.5 cents after a strong showing in Hong Kong, Lincoln (LML), up A2.5 cents (36 per cent) to A7.5 cents, Valence (VXL), up A10 cents (24 per cent) to A52 cents, Syrah (SYR), up A24 cents (6.6 per cent) to A$3.85, and Archer (AXE), up A1 cent (5.5 per cent) to A19 cents.

Minews. Looks like a return of interesting times for graphite investors. 
...

Source : www.minesite.com


----------



## drillinto

Mines & Money Hong Kong: Financiers With Deep Pockets Are Ready To Spend
28 Mar 2014 

>>> by Axel Blackrod <<<


The essential question at Mines and money was: would the Mines attract the project finance (money) to go into production?

Many worthy exploration companies need to know the answer before nervous investors lose hope as retail investors and banks to sit on the fence watching share prices go down to the floor.

Fortunately there were a lot of fund managers and banker ready to address that very question.

Rob Brierley of Paterson Securities set the ball rolling by drawing attention to the low level of retail investor confidence. There were only nine IPOs on the Australian stock exchange for mining companies last year, and merger activity is now increasing as the weak companies with good projects are not getting financed. 

Give us the mandate he said and we will get the money.

Bett Koth of Denham capital then led a panel of private equity investors who went a step further. This panel agreed that there was US$10 billion to US$15 billion available now for the right project.

Bert Koth implied that Denham is currently evaluating investment opportunities and that several billion more could readily be found if needed, and companies did not need to be listed on stock exchanges to attract finance. 

A French investment banker, Didier Lamarche then brightened up proceedings by saying that the real money available exceeded US$100 billion, as when momentum builds as the mining recovery starts, generalist investors will be boarding the moving bus.

Ah the relief, as help was now near at hand.

The Mongolian deputy mines minister then took the stand and assured the audience that a new and rational Mongolian mining code is imminent and is designed to attract and retain foreign investment. He also said that US$57 billion was needed to provide the infrastructure needed for the next generation of mines.

Then the representative of Greenland, with a tiny population of 60,000 persons, informed the conference that Greenland has four world class projects needing US$1 billion each to develop plus infrastructure.

Clearly new investment opportunities appear when money is available. The bell then rang as the dynamic David Harquail of the US$ 7 billion Franco Nevada royalty company came onto the stage like a bull not a bear.

This is not the time to be sitting on your hands you bankers and private equity investors. What are you doing? You should be investing now!

In the past six months Franco has invested US$250 million in five companies and Franco has over a US$1 billion in cash to invest in mining and shale gas projects. You should not waste time waiting for the bottom and allowing hedge fund investors get rich by shorting mining stocks that announce the need for finance, David continued. Investing in good projects would guarantee performance and financiers should stay with the project and not be butterflies flitting between projects that are all in need.

Taking his cue from Harquail who was offering royalty finance, David Awram of Sandstorm Gold announced that he was ready to offer US$100 million in streaming finance to help get multi-commodity projects under way.

This is the joy of mines and money! It’s not a giant conference like PDAC with 30,000 attendees.

It is a forum where the miners meet the money face to face. The fact is that the royalty companies and the private equity guys have to spend the money. It is their job to invest and not to sit on the fence.

Next year in Hong Kong some worthy companies will be near to production from finance committed this week. Did you want a country forecast too? Next year Mongolia will not be a no go zone anymore, but an investment destination of choice!

Source >>> www.minesite.com


----------



## drillinto

>>> ETF Performance Matrix: Post Fed, Rotation Out Of US
>>> March 29, 2014 

YTD: Australia (EWA) is bronze medal

http://www.bespokeinvest.com/thinkb...mance-matrix-post-fed-rotation-out-of-us.html


----------



## drillinto

>>> Cargill, Copersucar to form world's No. 1 sugar trader

Source >>> http://www.cnbc.com/id/101532761


----------



## drillinto

>>> Base Metals Strengthen But Bears Continue To Watch Chinese Data Intently

>>> 31 Mar 2014

Markets always want something to worry about.

Indeed, the situation markets like the most is when there is something obvious that that they can focus attention on and fret about how much worse things can get.

Usually, they find it difficult to worry about two things at once - that just makes life too complicated.

Right now metal markets are glued to every morsel of data from China, looking for evidence to prove the bear case.

In fact last week Chinese manufacturing data did come in weaker than expected.

But that did not stop base metal prices, as measured by the LME index, gaining 1.8 per cent over the week. That move was reflected in mining equities as well with a 4.9 per cent gain in the FTSE350 Mining Index.

Even that gain still leaves them yielding 3.6 per cent which is a fairly good measure of how pessimistic investors are about the sector.

This is not news to the mining companies. They know some metals are having a tough time.

Aluminium is the metal most under pressure right now and market leader Alcoa is doing something about it.

It has closed two smelters in Brazil taking out 147,000 tonnes of capacity. This brings its closed capacity to 800,000 tonnes, equivalent to 21 per cent of its total.

Rather than agonising over what might happen in the future miners are dealing with the problems they face today by cutting excess capacity.

That corrects the mismatch, over time, and brings the market back into balance.

The zinc market has given us a classic demonstration of this in recent years.  When inventories surged to over one million tonnes, prices tumbled to almost $1,000 a tonne.

Now that inventories have shrunk to 777,575 tonnes the price is a much more robust $1,980 a tonne.

Right now aluminium is the metal suffering the glut, with LME inventories alone standing at 5,387,100 tonnes. Innocent observers might assume that all this metal is readily available for use almost instantly.

Alas, that is not the case and some operators are playing games and making it very difficult and time consuming to access the metal.

According to Bloomberg it takes 19.2 months to get aluminium out of the LME registered warehouse at Vlissingen in Holland and 20.7 months from the one in Detroit.

Large trading houses are using this “shortage” of metal to their advantage in trading strategies, much to the annoyance of some of the producers, notably Rusal. 

In the overall scheme of things this little game will play itself out and a more “normal” market will be restored in aluminium, whatever that might be. 

What it does powerfully demonstrate though is how the other, diversified, mining companies are now far less exposed to the vagaries of one metal. 

Alcoa produces aluminium and it lives and dies with the fortunes of that metal. 

But its major competitors produce a variety of commodities and have far more flexibility to mothball facilities when prices are too low in a way that a mono-metal company like Alcoa cannot do. 

It is hard to imagine it shutting down all its plants if prices went low enough. Yet it is possible to imagine that the others could completely stop production of one commodity if circumstances dictated. 

As has been said about investing generally, diversification is the only free lunch in town. It applies to mining as well.     


Source >>> www.minesite.com


----------



## drillinto

"Big Mick" is hungry 

>>> by Eric Reguly

One of the most aggressive deal makers in the mining industry has tapped the private equity markets to bankroll the launch of a new company in a bet that the resources industry is set to be revived.

Mick Davis, the former chief executive officer of Xstrata, and his team of Xstrata refugees on Monday announced that they had raised $2.5-billion (U.S.) for X2 Resources from five investors, each of which has contributed $500-million. The same five have have agreed to contribute another $1.25-billion in conditional equity funding, raising the potential total to $3.75-billion.
...

Source >> http://www.theglobeandmail.com/repo...mining-deals-maybe-in-canada/article17735097/


----------



## drillinto

>>> Cofco Buys Noble Agri Unit Stake as China Seeks Food Supply

>>> by Michelle Yun and Yuriy Humber  

Apr 2, 2014 

Cofco Corp., China’s largest grain trader, agreed to pay $1.5 billion upfront for just over half of Noble Group Ltd. (NOBL)’s agricultural trading unit to broaden its access to food supplies.

The purchase highlights China’s push to secure more food overseas as it juggles insufficient farming resources at home against a dependence on imports. It’s the second such deal for Cofco this year after it agreed to buy a majority stake in Dutch grain trader Nidera BV in February.

...

Source >>> Bloomberg


----------



## drillinto

Is The Great Mining Unbundling About To Begin?
6 Apr 2014 

>>> by Rob Davies <<<

For a decade or so the mining industry engaged in an orgy of consolidation.

Large companies took over medium sized companies and start-ups used the left-overs to expand and become a second tier.

Now there is speculation that the current period of commodity price weakness is about to presage a great unbundling as the behemoths disgorge unwanted assets.

This has caused the mining sector to rally 3.8 per cent over the week and gain nearly five per cent for the year to date in a period when most equity markets have struggled to make any progress at all.

True, there were other factors helping the sector on its way this week.

Aluminium gained 5.9 per cent, the most since November 2012.

As it now takes 24 months to get the light metal out of the Vlissingen warehouse in Holland consumers are beginning to anticipate the forecast 1.1 million deficit for the metal for 2014 and for 2015.

Further proof of increased demand came from the news that cancelled warrants, requests to take metal out, now stand at 2.86 million tonnes, up 12 per cent in just one week.

Nickel was in the news too as it reached a one year high and traded up to US$16,510 a tonne.

Despite these elements of good news the sector still suffers from worries about the prospects for the Chinese economy and its demand for steel in particular. So some research from SociÃ©tÃ© GÃ©nÃ©rale on this very topic last week was timely.

In a persuasive 32 page note it rebuts the three myths that depress the sector: that ore prices will fall, steel demand has peaked, and debt is too high.

Its analysis suggests that even by 2020 Chinese iron ore production at 50 per cent of current levels will still be required to balance the global market. Since this output has a cost of over US$100 a tonne it argues that this marginal capacity will act as the major factor in determining prices.

It forecasts iron ore prices to average US$105 a tonne in 2016.

In terms of steel demand SocGen remains optimistic that it is likely to rise between 35 per cent and 40 per cent before peaking. That analysis is based on the experiences of countries like South Korea, Japan and the US.

The simple argument is that China currently consumes 534 kg per head whereas South Korean consumption peaked at 1,274 kg.

Finally, SocGen is still relaxed about debt in China. While it accepts that commodity producing sectors are heavily indebted it argues that commodity consuming ones, such as government, real estate and car makers, are still less leveraged.

To back this up it states that the net debt to EBITDA ratio for Shanghai Composite listed companies, ex-financials, has increased from 1.1 in 2007 to 2.4 in 2012.

On the other hand Chinese government debt to GDP is only 55 per cent compared to 88 per cent in the US and 245% in Japan. Not that it thinks those are good numbers, but it does suggest the problem is not severe.

If the overall dynamics of the industry remain sound, as this research suggests, it is a constructive environment for restructuring the industry.

It might sound like a make-work scheme to some. Consolidating the industry in one decade then splitting apart in the next. But that is the unique skill set that capitalist investment bankers have.

How quaint of the Chinese to just carry on making things that people want.

Source >>>>> www.minesite.com


----------



## drillinto

That Was The Week That Was ... In Australia
6 Apr 2014 

>>>>> by Our Man in Oz <<<<<


Minews. Good morning Australia. Your market seems to have been exceptionally flat last week.

Oz. It was, but at least most stocks were in the black, just. Next week should be more interesting with that nice kick in the gold price after we closed on Friday and some investors started swapping their boom-time tech stocks for gold and other easier-to-understand commodities.

Minews. The feeling among Australian investors is that we might have started a rotation out of tech and bio-tech stocks back into resources?

Oz. You would have to say it looks like that. Global economic growth seems to be accelerating and even if China slows somewhat there are pleasing signs that Europe is on the mend and that means increased consumption of metals.

Another tell-tale is the timing of the BHP Billiton break-up, with a spin-off of unwanted nickel, manganese and aluminium assets timed to coincide with increased investor appetite for raw materials. Even if the spin-off is aborted because of last minute private equity offers for some of the assets the effect on sentiment will be the same.
...
Source >> www.minesite.com


----------



## drillinto

Australia, Japan agree on free trade deal

>>>>> By ELAINE KURTENBACH <<<<<

Apr. 08, 2014 

Japan and Australia have agreed on a free trade deal that both sides say will yield windfalls for their economies.

Australian Prime Minister Tony Abbott and his Japanese counterpart, Shinzo Abe, announced the pact, Japan’s first with a major agricultural economy, at a news conference Monday.

The deal calls for Japan to gradually phase out its nearly 40% tariffs on Australian exports of beef. In turn, Australia is to end its tariffs on Japanese-made vehicles, household appliances and electronics.

“I hope that thanks to this agreement that Australia can be pivotal in assuring Japan’s energy security, its resource security and its food security,” Abbott told reporters.

Abbott, who led his conservative coalition to power in September elections, is leading a mission of hundreds of people to East Asia, seeking to deepen economic ties.
...

http://www.japantoday.com/smartphone/view/politics/australia-japan-agree-on-free-trade-deal


----------



## drillinto

List of Marijuana Stocks

Following is a list of companies who have made our radar at Marijuana Stocks at one time or another. This is not a comprehensive list and should be used only as a starting point for your own research.
...

Source >>> http://marijuanastocks.com/content/list-marijuana-stocks

[Note: Marijuana called top U.S. cash crop]


----------



## drillinto

YTD Australia(EWA): silver medal

April 10, 2014

http://www.bespokeinvest.com/thinkb...ed-as-other-asset-classes-hold-their-own.html


----------



## drillinto

That Was The Week That Was ... In Australia
12 Apr 2014 

>>> by Our Man in Oz <<<

Minews. Good morning Australia, you seem to have had an exciting week without actually going anywhere.

Oz. That’s one way of describing a week when the market went up, the market came down, and we finished up within a fraction of a point at where we started, with one exception, gold.

Minews. Surely your nickel stocks did well given the sharp rise in the price of that metal.

Oz. They did, and we’ll get to them, but the overall trend, as measured by the various indices was largely neutral, perhaps influenced by the negative sentiment flowing out of the big tech-stock sell-off on Wall Street, and speculation that a wider correction is coming.

Minews. Do you believe that will affect the mining sector?

Oz. Now, that’s the interesting question because it’s my belief that money rushing out of nonsense tech stocks with their overblown valuations could find its way back into something more substantial, such as mining stocks.

There’s no evidence of that, yet, but the 6 per cent rise in the gold index on the Australian market was a timely reminder that investors appear to be seeking something more tangible than a piece of computer code for a hand-held toy.

Minews. So, the gold index up, and everything else flat, which means we should start our look at prices with gold, and any eye-catching news makers.

Oz. We’ll go to the newsworthy stocks first because we had a few interesting ones last week, with none more so than Padbury Mining (PDY) which doubled over the course of the week, but was up by 225 per cent at one stage, earning a stock-exchange speeding inquiry while raising eyebrows almost as fast as it raised its share price.

Minews. Do tell more about Padbury, a stock with a very low profile over this way.

Oz. And, I suspect destined to resume that position once the dust settles on its claim to have secured 100 per cent equity funding for a A$6 billion deepwater port and rail system for its iron ore project on the mid-west coast.

That announcement, made on Friday after a two-day self-requested trading suspension, sent Padbury into orbit as it rocketed up from A1.6 cents to A5.2 cents in heavy turnover.

The stock exchange, naturally, questioned Padbury management, but that’s unlikely to be where the matter ends because most people familiar with the Oakajee port project, which Padbury says it will develop, doubt that a company with a stock-market value of A$111 million can raise A$6 billion in equity given that it appears to have liquid assets totalling A$2 million.

Minews. It does seem a bit of a heavy lift for a small miner.

Oz. You are being kind. The point about Oakajee is that some of the world’s biggest engineering and construction companies have tried to make that project stand up during previous mining booms, and all failed.
...

Source >>> www.minesite.com


----------



## drillinto

>>>>> Index of advanced graphite projects <<<<<

>>> http://www.techmetalsresearch.com/metrics-indices/tmr-advanced-graphite-projects-index/


----------



## drillinto

This thread started on April 14, 2007.

Today is the 7th anniversary !


----------



## MARKETWINNER

http://www.bloomberg.com/news/2014-...ity-declines-amid-rally-in-bullion-crops.html

Goldman  Predicts Commodity Declines  Amid   Rally  in  Bullion, Crops

Please note that I do not endorse or take responsibility for material in the above hyper-linked site. Please do your own research.


----------



## drillinto

Copper expected to be down but not out
14 Apr 2014 

>>> by Rob Davies <<<


Even though equity markets had a rough ride last week base metals made progress as evidenced by the 2% gain in the LME Index to 3,074.  Most of that was accounted for by the 5.3% increase in the nickel price to $17,390 a tonne. The driving force behind this metal remains the concern over the ban on Indonesian exports.  That was reinforced this week by fear that Russian might be prevented from exporting nickel from Norilsk Nickel as a consequence of the continuing tension over the Ukraine.

Amongst this turbulence the experts at SociÃ©tÃ© GÃ©nÃ©rale released a note on the copper market. It was mainly focussed on equities that are exposed to copper but the overview into the copper market for the next two years is enlightening.

Essentially the analysts expect copper to trade at around $6,500 a tonne for the majority of that period. Their argument is that an oversupply of copper this year of one million tonnes will depress markets to that level, and then they will stay there or thereabouts for the next two years.

It predicts that supply will increase at an annual rate of 5.4% but that demand will only grow at 4 to 5%.  Many would argue that the current market is far too finely balanced and it will be a good thing if it accumulates some reserves.

Current LME inventories of only 250,025 tonnes indicate that there is no spare metal to speak off. Even adding in the 820,000 tonnes estimated to be held in Chinese bonded warehouses does not suggest there is a lot of unwanted metal hanging around.   More importantly the researchers at the French bank are not overly concerned, as some are, that the inventory of refined metal in China tied up in financing deals is likely to be released quickly onto the market putting further pressure on prices.

The scale of the production increase over the three year period in the review is significant. In total the analysts expect mine production to increase by 3.7 million tonnes with 20 projects set to account for 87% of the new supply. Five mines alone, Las Bambas, Sentinel, Toromocho, Morenci and Buenavista will each contribute more than 200,000 tonnes to the total.

One factor that plagues forecasting is the potential for supply disruption. This has been a perennial feature in the copper market over the last decade and is made more acute by the continuing tightness.  They point out that disruption has averaged between 4 and 6% in recent years resulting from strikes and accidents. In their model the analysts have assumed 3% initially then rising to 5%.

The other, even bigger, unknown is the level of growth in Chinese demand. Since China accounts for 40% of the market it only needs, for example, a 1% increase in disruption to roughly offset a 2% fall in Chinese demand growth.

Overall, it is a large and complex business. With so many moving parts the metal markets remain endlessly fascinating to analyse. And, for those that get it right, it can be very profitable.

Source >> www.minesite.com


----------



## drillinto

>>> Minmetals Group Buys Glencore Peru Mine for $5.85 Billion
>>> By Jesse Riseborough and Rebecca Penty  

Apr 14, 2014


China Minmetals Corp., the state-owned metals trader, led a group that agreed to pay $5.85 billion for Glencore Xstrata Plc (GLEN)’s Las Bambas copper project in Peru as China seeks greater control over material supplies.

“It’s a good price, probably toward the top end of market expectations,” Jeff Largey, an analyst at Macquarie Group Ltd. in London, said in a phone interview, adding the deal provides a good outcome for China. “This is a Chinese buyer, buying a very high quality copper asset.”
...

http://www.bloomberg.com/news/2014-...glencore-copper-project-for-5-85-billion.html


----------



## Buckfont

drillinto said:


> This thread started on April 14, 2007.
> 
> Today is the 7th anniversary !




Thanks for being such a tireless contributor to the thread you started drillinto.

Takes a lot of enthusiasm to keep the interest up.

I,m sure it has been greatly appreciated, as I do.


----------



## drillinto

Buckfont said:


> Thanks for being such a tireless contributor to the thread you started drillinto.
> 
> Takes a lot of enthusiasm to keep the interest up.
> 
> I,m sure it has been greatly appreciated, as I do.





Thank you very much Buckfont.


"Nobody can make big money on what someone else tells him to do" 
                        Edwin Lefevre - American journalist (1871-1943)


----------



## drillinto

How will the new Russia affect commodities?

>> 21 Apr 2014 

>> by Rob Davies <<


It is rather strange that prospects for the world economy, and hence commodities, are no longer dictated by the mature democracies of the West. In these countries, despite the frustrations of large parts of the electorate, economic growth follows a fairly predictable, and nowadays modest, path.

Instead the economic future is dependent on two large countries that are not democratic in the Western sense and therefore have a greater degree of uncertainty over their future. China is important as the largest commodity consumer while Russia is still a large supplier. More significant though is how Russia’s newly revealed belligerence on the world stage might change the status quo.

China’s economy grew by 7.6 per cent in the first quarter of 2014. Even though this was the lowest rate in six quarters, and still surpasses the efforts of every other major economy, it triggered hand wringing in some quarters.  Lower rates of growth persuade some experts to think the trend will continue. Judy Zhu of Standard Chartered expects iron ore prices to continue weakening this year because of this lower rate growth. She expects prices to fall from the current $129 a tonne to $114 a tonne in the third quarter and $108 a tonne in the fourth. Goldman Sachs goes further and forecast an average of $80 a tonne for 2015.

These price changes are quite large, but are unlikely to disturb the valuations of the mining companies too much as they are largely already discounted into earnings forecasts. It is the uncertainty created by President Putin’s newly emboldened Russia that is harder to assess. Nickel prices started the year firmly as the Indonesian embargo on exports of unprocessed ore reduced supply. Since then worries that metal from Norilsk Nickel may be reduced if tensions continue to increase. Together these two features have caused nickel to rise 30 per cent this year to $17,930 a tonne.

Nickel is a relatively small market so this volatility is perhaps to be expected. However, it does trigger a line of thought as to how Russia’s behaviour may affect other commodities.  In many ways the peaceful breakup of the USSR in the late eighties was the big surprise. That such a large country could suddenly dissolve into a number of smaller states without any conflict is unusual in historical terms. The main reason was the abject failure of communism to deliver economic growth and prosperity to its inhabitants who were increasingly aware of higher material benefits in the West. They didn’t fight because they couldn’t afford to and anything was better than what they had. The humiliation was accepted, but with bad grace.

A quarter of a century later a tiny proportion of the population have become hugely wealthy by obscure means and many of these have transferred what wealth they can from a kleptocratic government to property and football clubs in the West.

However, for large parts of the population of Russia and the former states of the USSR life is little changed and they know their status relative to the West has continued to diminish.  The prospect of recovering some of their lost glory is at least a modest consolation for their lack of wealth, and that plays well with the leaders.

Unfortunately none of these political developments are likely to spark the economic revolution that has been underway in China. There is no evidence that Russia and the other states of the former USSR are about to be transformed into large commodity consumers. Instead, the West is worried about the intentions of this grumpy bear intent on re-establishing its former status as world power to be taken seriously and not patronised.

Putin, like Hitler in the 1930s, wants to recover Russia’s lost empire and the West clearly has little appetite to stop him militarily. The West will impose sanctions, but these won’t affect Russian policy, just create more money making opportunities for intermediaries.  What concerns Europe, and hence the US, most is its energy dependence. That will surely change.

Politicians in Europe will undoubtedly start to look more favourably at nuclear energy, shale gas and coal. It won’t happen overnight but it must be good news in the long term for coal miners and uranium explorers and miners.

The disappointing aspect for Russians is that energy exports are its largest source of income. If these actions drive away their largest customer they will become even more impoverished relative to the West. That won’t make them any easier to live with as close neighbours.

Source >> www.minesite.com <<


----------



## drillinto

Barclays joins retreat from commodities as new rules bite

>> 04/22/2014 

>> by Steve Slater and David Sheppard


Barclays is to quit most of its commodities trading businesses, it said on Tuesday, joining a retreat prompted by falling profitability in the face of tougher regulation.

The British bank's exit means that three of the top five banks in commodities have significantly reduced or shuttered their natural resource trading arms since last summer amid falling profits regulatory demands for lenders to hold more capital to shield them against problems in the business.

Barclays said it would exit most of its metals, energy and agricultural trading but will continue trading precious metals, some oil and gas instruments and index products. The smaller business will be focused on electronic execution, it said.

The bank did not say how many jobs would be lost from its commodities team of about 160.

Barclays is due to unveil a wider reduction in the size of its investment bank next month as it attempts to cut costs and improve profitability by axing areas that have been hit hardest hit by tougher regulation.

It had already cut some of its metal, U.S. power and agricultural trading business.

Some rivals have made more dramatic retreats. JPMorgan Chase & Co is selling its vast physical commodities business to Swiss-based independent trader Mercuria for $3.5 billion (2 billion pounds), while Deutsche Bank announced late last year that it was closing its entire oil, grains and industrial metals business.

Goldman Sachs and Morgan Stanley, the two banks that pioneered commodity trading on Wall Street 30 years ago, remain as the two largest financial participants in the natural resources sector, despite a ten-year challenge from the likes of Barclays, Deutsche Bank, Citi and JPMorgan.

But commodities trading revenue for 10 of the world's biggest banks fell to $4.5 billion last year, down from more than $14 billion in 2008, according to estimates from analytics firm Coalition.


Source: Thomson Reuters
*****


----------



## drillinto

>> That Was The Week That Was … In Australia

>> 26 Apr 2014 

>> by Our Man in OZ


Minews. Good morning Australia. Your market seems to have gained a little ground last week.

Oz. It did, but only a little in what was just a three-day week. After losing Easter Monday we marched straight to the Anzac Day holiday on Friday, with those events overlapping school holidays.

The net result has been a fairly lazy time on the market, highlighted by low volumes because most people with regular jobs were able to take a 10-day break while officially only taking three days off work.

Minews. Perhaps that’s another reason for calling Australia the lucky country?

Oz. It could be, but the real reason seems to be our proximity to those huge markets in Asia which are showing no sign of diminished demand for commodities.

Last week’s star, as it has been for the past month was nickel, with the price holding comfortably above US$8.00 a pound last week, a level which helped most nickel miners trade up to fresh 12-month share-price highs, or get close to that level.

Minews. Prices soon, but first let’s wrap up our conversation about the big picture, including any movement in the stock exchange indices we follow.

Oz. All the indices were up, but not by much. The all ordinaries managed a rise of 1.3 per cent, largely because of revived interest in our banking sector. The metals and mining index crept up by very modest 0.3 per cent. The gold index rose by 1.1 per cent, but should do better on Monday because a surge in the gold price on Thursday came after we had closed for the week.

Minews. Because the index moves were so modest, and trading so thin, let’s start our call of prices by focussing initially on any newsmakers, good or bad.

Oz. Nickel was the positive newsmaker, but there was also a whiff of interest in gold stocks after investors analysed the local implications of a potential merger between the world’s top two goldminers, Barrick and Newmont.

Padbury Mining (PDY), the minnow which claimed to have access to US$6 billion for a rail and port development, was the less than good newsmaker after it failed to reveal where the money would come from, and finally earned a visit from corporate regulators who demanded to know more. Naturally, the trading in Padbury remains suspended.

Minews. We’ll leave Padbury to stew. Let’s hear about the nickel movers.
...

Source >> www.minesite.com


----------



## drillinto

>> Ukraine: This Won’t End Well

>> 27 Apr 2014 

>> by Rob Davies <<

The relaxed attitude of capital markets to the increasing tensions in the Ukraine seems complacent - as demonstrated by a 3.3 per cent increase in base metal prices over the week.

While it is impossible to say at this stage what the final outcome will be, it is probable that one side will feel disadvantaged at the conclusion.

The ideal result for any deal is for both sides to feel mildly hard done by. That conclusion looks less and less likely as the stand-off continues.

Russia is not a global superpower. It is not even Upper Volta with rockets as the old USSR was once described.

Nevertheless, it is still a large economy, equivalent in economic size to Italy. So the news that the Russian central bank unexpectedly increased interest rates last week to 7.5 per cent from seven per cent is not something to be ignored, especially when interest rates in other parts of the developed world are so low.

Quite why the bank did this is unclear.

It certainly won’t help to increase GDP growth, which is currently forecast to be a desultory 0.5 per cent for 2014, substantially lower even than the anaemic 1.3 per cent achieved in 2013.

The interest rate rise is also probably not enough to stem the ongoing flight of capital from the country.

It is estimated that US$64 billion left Russia in the first quarter alone. That might help house prices in Mayfair but it won’t do anything for Russian business.

Add to that the recent downgrading of Russian debt to BBB, the lowest investment grade, by S & P, and it is clear that the prospects for this country are rapidly souring.

None of that is likely to affect the actions of Mr Putin who seems more interested in recapturing territory lost in the break-up of the USSR over two decades ago.

The problem will arise when he finds his plans frustrated by economic weakness at home.

That might encourage him to take other, more aggressive actions to maintain his domestic profile. Whatever they are they are unlikely to be as positive for world growth as the peaceful splintering of the USSR was.

That ushered in a long period of steady non-inflationary economic growth in Europe and North America as defence spending was slashed and trade blossomed.

More importantly it allowed China to flourish, a development which took the Chinese share of the commodity market from virtually nothing to 40 per cent in three decades.

It is impossible to envisage anything like that happening again.

On top of that the West is still dealing with the aftermath of the financial crash of 2007.

Europe is on the brink of experiencing deflation for the first time since the 1930s and the US is still monetizing its debt to avoid the same problem.

After five years of recovery which only generated modest growth in the West there are now real concerns that the bull market is running out of steam as these two engines start to splutter. It is still only China that is driving world economic growth, and hence commodity demand.

So perhaps the news that Barclays, J P Morgan, Chase & Co and Morgan Stanley have all decided to exit commodity trading is a signal that the supercharged returns generated by commodities over the last few decades are coming to an end.

Bloomberg quotes an unpublished United Nations report that says the departure of many large investment banks from commodity trading will reduce the correlation of commodities with other asset classes, such as equities.

In truth, part of the reason may be the application of the Volcker Rule that limits the amount of proprietary trading these banks can do.

It will certainly reduce liquidity and that will increase volatility. So the ride may become slower, but probably a lot more exciting. Depending, of course, on what Mr Putin does.

Source >> www.minesite.com


----------



## drillinto

April 28, 2014

>>> Commodities markets gird for return of the weather phenomenon known as El Niño

>>> by Alexandra Wexler

http://www.marketwatch.com/story/ma...niño-2014-04-28-234851355?link=MW_latest_news


----------



## drillinto

>>> Deutsche Bank Resigns From London Gold And Silver Fixing Panel
>>> by Commodity Trade Mantra  |  Apr 30, 2014

>>> Deutsche Bank Departs London Fixings On May 13, 2104

German banking giant, Deutsche Bank, announced yesterday that it will be resigning from both the London Gold Fixing and London Silver Fixing panels, and that it is withdrawing without having found a buyer for either of its seats on the respective panels. According to informed sources, the Bank’s last day as a member of the Fixings is Tuesday, 13th May.

While Deutsche’s resignation was expected and there had been signs that it was struggling to find  buyers, the news is noteworthy in that by giving only two weeks’ notice, the bank’s departure is now imminent, and the worst case fear for the other participants seems to have now been borne out, namely that prospective buyers of the seats have been frightened off by the growing regulatory investigations into the nature of the fixings and additionally, up to 20 commercial lawsuits which are alleging that the Fixing process is conducive to the manipulation of gold and silver prices.
...

http://www.investing.com/analysis/d...om-london-gold-and-silver-fixing-panel-211311


----------



## drillinto

Book forthcoming - June 2014

"The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders"

Kate Kelly. Penguin/Portfolio, US$27.95 (268p) ISBN 978-1-59184-546-1


CNBC reporter Kelly (Street Fighters) offers brief portraits of successful traders from the lightly regulated world of commodity trading, where deals for oil, copper, and livestock are engineered for billions in profits. Much of the action described took place during a post-2001 boom that prompted major investment banks to get in on the action, and spurred regulators to try curbing the potential fallout from wild market swings that “created kings in the trading world’s empowered class and drove other people and companies into financial ruin.” Kelly presents mostly admiring portraits of obscure but rich financiers. There’s a false familiarity with these elites, as seen in details of extravagant wedding costs, and efforts to provide balance through sketches of would-be reformers such as Gary Gensler, former head of the Commodity Futures Trading Commission, fail to round out the choppy narrative. Apart from references to $4 per gallon gasoline during speculation-fueled price spikes and rising costs to Coca-Cola after a bottleneck in aluminum supplies, Kelly does not fully demonstrate the practical costs to the rest of the world. The need for access to her subjects forces her, like much of the rest of the financial press, to pull her punches. Agent: Bob Barnett, Williams & Connolly. (June)

http://www.publishersweekly.com/978-1-59184-546-1


----------



## drillinto

>>> That Was The Week That Was ... In Australia

>>> 3 May 2014 

>>> by Our Man in Oz

Minews. Good morning Australia. Your market seems to have had a tough week.

Oz. Apart from a handful of interesting upward moves it was a case of red ink everywhere, though not what you would call a crash, or even a correction, just a week of consistent selling.

Minews. Perhaps you’ve caught the sell-in-May-and-go-away bug which normally hits the U.K. market around this time.

Oz. It’s possible, though I see you’re yet to be bitten by the bug, yet. The problem down this way is very much related to the strength of the commodity markets, which is not overly encouraging, and a new factor, the threat of a higher taxes as the government reins in social welfare spending.

Minews. Sounds like you’re about to go through the same process that has been common in parts of Europe for the past few years.

Oz. Very much so, though the tax rises and spending cuts will probably be less painful as the government’s budget is not in crisis conditions. It’s more a case of cut carefully now, or deeply and painfully later.

Minews. Interesting, but let’s stick to the market and the red ink you mentioned.

Oz. Overall, the Australian market, as measured by the all ordinaries index lost a relatively modest 1.4 per cent, whereas the metals and mining index fell a much sharper 3.1 per cent and the gold index did worst of all with a drop of 3.4 per cent.

Some of that decline by gold stocks might be reversed on Monday because a rise in the gold price to back above US$1,300 an ounce, caused by the bloodshed in Ukraine, came after we had closed for the week.
...

>>> Source >>> www.minesite.com


----------



## drillinto

>>> Metals & Minerals Investment Conference 

>>> New York | May 12-13, 2014

The agenda >>> http://www.metalsandmineralsevents.com/ehome/nymmic/agenda/?&


----------



## drillinto

The Commodities Industry Remains A Price Taker, Not A Price Maker

5 May 2014 

>>> by Rob Davies <<<


The first was that on purchasing power parity basis it is likely that China is now officially the largest economy in the world.

In part this is a simple reflection of the economic growth of its 1.4 billion inhabitants.

They are now richer in aggregate than the 312 million Americans. It is important to note that though Americans are still way ahead on a per capita basis.

The second item perhaps explains why this is.

Although the US economy added 288,000 jobs last month the participation rate, a measure of how much of the population is actually looking for work, fell to 62.9 per cent.

That is the lowest since 1978. No comparable figures are available for China but it is probably unlikely that over a third of the population in China have given up looking for work.

That low figure for the US may also help to explain why the US economy only grew 0.1 per cent in the first quarter.

These data confirm what most people in the metals business already know. China is far more important to its future than the US.

It has been some time now since China surpassed the US in terms of metal consumption.

This new information confirms that metal demand is a good indicator of emerging economic strength.

Maybe it was the weakness in the US that accounted for the 1.5 per cent drop in base metal prices last week as measured by the LME index. That fall occurred despite a slight dip in the dollar which usually triggers strength in commodity markets.

The change in ranking of the economic superpowers will affect the long term demand and supply relationship for commodities.

However, in the short term it is the growing instability in the Ukraine that threatens capital markets.

In some ways this conflict is the civil war that never happened when the USSR broke apart so suddenly in the late nineteen nineties.

Then Russia did not have the economic strength to resist dissident regions breaking away.

In part this was because it was hobbled by weak oil prices and an inefficient oil and gas sector. Better prices and increased efficiency has transformed this part of the industry and given the country more clout.

However, there are signs that the golden period is coming to an end as fracking has increased oil and gas supply in the US and helped reduce the benchmark West Texas oil price to below US$100 a barrel.

Aluminium, at US$1,736 a tonne and nickel, even with its rally this year to US$18,180 a tonne, are still depressed compared to recent years.

Consequently none of Russia’s major exportable commodities are helping to support its economy, which is still primarily that of a resource-based nation.

The contrast with China, a commodity importer that adds value by fabrication, could not be starker.   

South Africa provides further proof that countries with dominant positions in one commodity are still vulnerable.

Despite a three month strike at the three major platinum mines that platinum price remains unfazed at US$1,424 an ounce.

Commodities are important but the clear message is that the industry remains a price taker, not a price maker. 


Source >>>>> www.minesite.com


----------



## drillinto

>> Coal

For your consideration >> http://bettercoal.org/home.aspx


----------



## sydboy007

http://www.macrobusiness.com.au/2014/05/what-if-iron-ore-follows-coking-coal/

While considering potential metal and bulk commodity price direction the rest of the year, we found it useful to look through the lens of the increasingly divergent coal markets. Global seaborne metallurgical and thermal coal markets are in oversupply. According to our estimates, the met coal surplus is ~10 million tonnes (3.5% of 2014 demand) and thermal ~35Mt (4.1% global demand).

Here’s some back of the envelope calculations for you. The coking coal seaborne market is roughly 320 million tonnes (mt). So the 25 mt surplus that has driven prices down 70% from their highs was driven by a surplus a little over 7% of the total market. And check out how far down the cost curve prices have fallen too shake out production:

The total seaborne iron ore market is about 1200mt. The forthcoming surplus on existing projects is projected by Goldman and UBS to be around 250mt in 2015, in a low demand growth scenario that is a more than reasonable base case. That makes for a surplus roughly 21% of the total market.

Now, I know that there is less geographic dispersion and competition in the iron ore market. But that surplus is enormous. The numbers are rough but they’re so bowel-shakingly huge that it really doesn’t matter if they’re considerably wrong. The underlying truth remains.

So, if a 7% surplus killed the coking price by 70%, ask yourself, what does a 21% surplus do to the iron ore price? It’s down roughly 40% from its high already but if it replicates coking coal and falls 70% then it is headed for $55 where it will sit for several years.

That’s not a forecast but it is surely enough to raise a few doubts, no?


----------



## drillinto

>>> Commodity Scorecard <<<

by Jared Cummans

9 may 2014

http://commodityhq.com/2014/commodity-scorecard-may-9th-edition/


----------



## drillinto

>>> That Was The Week That Was ... In Australia

>>> 10 May 2014 

>>> by Our Man in Oz <<<

Minews. Good morning Australia. Your market seems to have gone absolutely nowhere last week.

Oz. That’s not a bad observation if you’re looking only at the key indices. But if you rummage around there was an interesting crop of outperformers, and an entire sector uplifted by a sharply higher price for its underlying commodity.

Minews. Nickel, presumably is the where the best results were achieved.

Oz. Correct, though that’s only part of an interesting week, when the metals and mining index and the all ordinaries index closed on Friday within a few points of their Monday opening. Gold was the only relatively strong performer as a sector with its index rising by two per cent.

Minews. Let’s move straight to the newsmakers to see if there are any fresh investment ideas from your part of the world for our London readers.

Oz. Most of the nickel stocks should be well-known, with the strongest performer last week being Sirius Resources (SIR) which added A45 cents (13.7 per cent) thanks to a combination of the nickel price rising above US$9 a pound, and investors giving their approval at a special meeting to a revised deal with the company’s biggest shareholder, the prospector, Mark Creasy.
...

Source >>> www.minesite.com


----------



## drillinto

>>> Recovering Steel Industry Lifts ArcelorMittal
>>> by Stanley Reed | New York Times
May 9, 2014

ArcelorMittal, the steel and mining giant, said on Friday that it had a loss of $200 million in its first quarter, less than the $345 million loss it posted for the period a year earlier. The report was taken as a sign that conditions were improving in the steel industry, considered a proxy for overall economic activity.
...


----------



## drillinto

Nickel Rises And Iron Ore Falls, But The Backdrop Is The Same: Ongoing Chinese Growth

12 May 2014 

>>>>> by Rob Davies <<<<<

Two commodities present very different stories: iron ore and nickel.

Media comment has focussed relentlessly on the negatives in iron ore to support the current zeitgeist about the Chinese economy.

Perhaps the caveat is that volumes in one commodity are a lot larger than in the other.

Much has been made of the falling price of iron ore.

Last week it fell to US$100 a tonne and many observers say this is because of a weakening Chinese economy.

It is hard to put this politely, but that argument is rubbish. China is still growing at over seven per cent.

While it is true to say that this is less than nine per cent it is patently incorrect to say the economy is slowing down.

It isn’t, it is still the powerhouse of economic growth for the world as demonstrated by the 24 per cent increase in iron ore imports last year.

It is also worth noting that while China is still the driving force for growth it is receiving some support from other parts of the world.

Arcelor Mittal, the global steel company, stated that it expects European manufacturing to pick up this year, adding two per cent or three per cent to its steel consumption.

That is an increase from the 1.5-to-2.5 per cent predicted only as recently as February.  Globally Arcelor Mittal shipped 2.4 per cent more steel in the first quarter.

What has happened in iron ore is that economics and market force have worked their magic.  New production has been added in Australia which is bringing down the full marginal cost of production.

Rio Tinto sits comfortably at the bottom of the cost curve at US$37 per tonne according to investment bank UBS. Next is BHP Billiton at US$41 a tonne.

More recently Fortescue Metals has added 100 million tonnes of capacity. Even though its costs are a relatively high US$56 a tonne, it is still acting to drive down the average marginal cost of production.

Economics tell us that will ultimately act to reduce price at which demand and supply are in balance.

These things take time and Chinese iron ore producers with costs of US$80 to US$ 90 a tonne will naturally seek to hang on as long as possible before acting to cut capacity.

There is too the complicating factor that in an economy like China that is still transitioning from a command one to one based on the market. So these painful actions may not be taken quickly.

Contrast the news coverage of weak iron ore prices with that of booming nickel markets. Last week three month nickel was quoted at over US$20,000 a tonne and its 3.6 per cent jump was the biggest in four years.

The reason for the increase was production problems at Vale’s Goro operation in New Caledonia. There is of course an oversupply of nickel at the moment with Bloomberg estimating a surplus this year of 70,000 tonnes.

But this is not a permanent feature. Next year the news agency is quoted as saying there will be a deficit of 104,000 tonnes.

Both these commodities are heavily reliant on China. Yet the bearish one is taken as an indicator for the prospects of the world’s largest economy when the complete story is far more positive, as the detail and the nickel market demonstrate.

Strangely, such positive aspects do not get much coverage in the mainstream press. But when did good news ever sell a newspaper?


Source >>>>> www.minesite.com


----------



## drillinto

>>> Nickel Rises to 27-Month High Amid Vale Plant Suspension

>>> by Jae Hur <<<

>>> May 13, 2014 

Nickel climbed for a sixth day to trade near a 27-month high as Vale SA said operations remain halted at a plant in New Caledonia, further crimping supply that’s been hit by Indonesia’s ban on ore exports.

The contract for delivery in three months on the London Metal Exchange advanced as much as 3.4 percent to $21,625 a metric ton, the highest level since Feb. 10, 2012, and was at $21,500 at 10:34 a.m. in Tokyo. The metal jumped 55 percent this year, making it the best performer on the LME.
...


Source >>> http://www.bloomberg.com/news/2014-...27-month-high-amid-vale-plant-suspension.html


----------



## drillinto

>>> Country Stock Market Performance
May 16, 2014 

>>> 2014 % Change
New Zealand:+9.48%
Australia: +2.37%

Source >>> http://www.bespokeinvest.com/thinkbig/2014/5/16/country-stock-market-performance.html


----------



## drillinto

>>>>> That Was The Week That Was ... In Australia

17 May 2014 

>>>>> by Our Man in Oz


Minews. Good morning Australia, you seem to have had a slightly better week, though that late fall in the iron ore price must be a worry.

Oz. Correct, on both points. There was increased demand for mining stocks, with a number of interesting upward moves, offset by a handful of equally interesting falls.

As for the iron ore price dipping close to the psychologically important hurdle of US$100 a tonne in Shanghai after we had closed on Friday, that could have an effect on Monday.

When we closed last week, the ASX metals and mining index was up a modest 1.2 per cent, which was comfortably above a fall of 0.3 per cent by the all ordinaries index, and also better than the flat gold index, which closed down just one point, a negligible move on a percentage basis.

Minews. Your country’s budget is also making waves. 

Oz. Yes, the big issue down this way was the release of a very tough budget by the Australian government led by Tony Abbot. The budget is making political waves across the country and could set the scene for an early election.

Mining investors will be closely watching the political posturing in Canberra because of the growing divide between the political left which wants to hit miners with higher taxes and the political right which wants to encourage business.
...

Source >>>>> www.minesite.com


----------



## drillinto

>>> Nickel Is Still Up By 39 Per Cent This Year, In Spite Of The Recent Correction

>>> 19 May 2014 

>>> by Rob Davies



Nickel has been a star performer in 2014. 

A year, so far, in which many markets have recorded lackluster returns.  So the 49 per cent gain that nickel had made by last week made it quite exceptional.  

It is therefore perhaps not surprising that it was due for a correction.  That duly happened last week and saw the price fall 11 per cent before recovering a little by the close.   

All that does is reduce the year to date gain to 39 per cent and still beats the socks of most equity and bond markets.  

Anyone thinking that this marks the top of the market needs to be aware of the research from Macquarie and Citicorp. 

The Australian investment bank recently raised its nickel price forecast for the fourth quarter of 2014 to US$23,500 tonne. That though seems tame compared to that from the US bank of an average price of US$30,000 a tonne it now expects for 2015.  

There is now widespread consensus that a recovery is underway in most parts of the developed world. It might be low key compared to recoveries in the past but it is happening all the same. A 13.2 per cent increase in US housing starts this year to an annual rate of 1.07 million is further confirmation of the trend. 

Other capital markets are taking a more cautious view. 

Equities in the developed world have, at best, trod water this year, even if they have, grudgingly, made new highs.  

Bonds have done surprisingly well which rather suggests that some investors are preparing for more subdued times, or perhaps higher volatility in the months to come.  

Either way it is clear that without a specific story, as there is with nickel, riskier assets are being shunned in favour of more defensive ones. That is most obvious in small growth companies that have suffered a large de-rating in favour of larger and less risky global mega-caps. 

The large mining companies fall into this category and they have certainly experienced a recovery in valuations. Although that may be in part due to expectations of corporate activity. 

What the action in nickel has clearly demonstrated though is the low correlation that commodity markets have with other asset classes. 

Even though base metals as a whole are virtually unchanged for the year so far, the individual dynamics of each metal are vitally important. 

Nickel is in the sweet spot of having an improving demand and supply balance that has then had an interruption to the supply chain imposed on it.  It also benefits from being a relatively small industry with only a few major suppliers. 

Finally, after many years of suffering the woes from single metal miners the industry is now mostly composed of mining conglomerates that can afford to close mines completely in order to defend prices. 

That was something the old mono-metal miners simply could never afford to do. Every company needs revenue and if your only source is selling nickel your business strategy is pre-determined. 

This dramatic evolution of the mining industry should act to reduce volatility and improve returns for investors. This year nickel has proved that point very well.    


Source >>> www.minesite.com
*****


----------



## drillinto

>>> Most of the World Overbought <<<

>>> May 19, 2014 


>>> http://www.bespokeinvest.com/thinkbig/2014/5/19/most-of-the-world-overbought.html


----------



## drillinto

>>> The Latest Commodity Snapshot <<<


>>> May 20, 2014



>>> http://www.bespokeinvest.com/thinkbig/2014/5/20/bespokes-commodity-snapshot.html


----------



## drillinto

Russia, China Sign $400 Billion Gas Deal After Decade of Talks

by Elena Mazneva and Stepan Kravchenko  

May 21, 2014 

Russia’s $400 billion deal to supply natural gas to China after more than a decade of negotiations is tilting the world’s largest energy exporter toward Asia as ties worsen with the U.S. and Europe.
...

Source >>> http://www.bloomberg.com/news/2014-05-21/russia-signs-china-gas-deal-after-decade-of-talks.html

[The article has already more than 740 comments from readers]


----------



## drillinto

Russian Gas for China

La Vanguardia - Spain

Russia and China surprise the West 

The new alliance between Moscow and Beijing has caught the West off guard, the conservative daily La Vanguardia comments: "A tremendous performance in Shanghai. ... The plot: Putin pulls off a strategic turnaround to show the world that he's not alone. And China secures part of the energy it will need to continue on its dizzying growth curve. ... A surprising turnaround that has caught the West fully unprepared. The speed with which Russia and China clinched this energy deal forces the West to correct its stance towards Moscow. Putin has demonstrated the sovereignty and diplomatic skill to break out of his international isolation and once more assume an important role in global politics. China, for its part, is on the way to taking the economic pole position." (22/05/2014)


----------



## drillinto

>>> China-Russia: A Match Made In Heaven

>>> by Anatole Kaletsky  

>>> 22 May 2014

Vladimir Putin’s trip to Shanghai could “mark the start of a strategic realignment between nuclear superpowers comparable to the tectonic shifts that began with President Richard M. Nixon’s visit to China in 1972″. The decline of American dominance opens the way for Russia and China to sink their historic differences, and to build on their common economic and political interests.



http://blogs.reuters.com/anatole-ka...ia-is-a-match-made-in-heaven-and-thats-scary/


----------



## drillinto

>>> The Bull And Bullabulling

>>> 20 May 2014 

>>> by Our Man in Oz <<<


It’s embarrassing to have the kitchen light turned on just as you dip your fingers into the biscuit jar for a midnight snack - a colourful way of describing the reaction of the Chinese-controlled Norton Goldfields to an astonishing “neither fair nor reasonable” verdict of its A7 cent-a-share takeover offer for fellow ASX-listed Bullabulling Gold, which is also listed on AIM.

Under the glare of that damning assessment by BDO Corporate Finance, the independent expert assigned with the job of assessing the bid, Norton rushed to the Australian Takeovers Panel crying foul – which is just what naughty boys do when trying to nick a bickie.

Norton’s four points of complaint to the Panel centred on a letter sent by Bullabulling to its shareholders which Norton reckons omits important information such as how Bullabulling will fund the development of its namesake project near Australia’s gold capital, Kalgoorlie and how Bullabulling management knows that 41.8 per cent of its shareholders have already said they will not accept A7 cents a share.

Without prejudging what the Panel might find, the simple answer to that final point can be found in the BDO document which values Bullabulling at A14.6c a share, with a lower price of A11.1 cents, and an upper price of A16.1 cents – with A14.6 cents chosen as a neat mid-point.

No prize for noticing that the independent expert’s value is more than double Norton’s A7 cent offer, and while there might be cause to argue with the stock market (which values Bullabulling at A7.1 cents) it is a different matter to dispute the impartial calculations of the bean-counters at BDO.

So far the Panel, which is an arm of the Australian Government, has kept itself at, dare it be said, arm’s length from the war of words which has surrounded the Norton raid on Bullabulling since it was launched on April 17, merely noting in its only comment so far that an application (complaint) has been received from Norton.

In time the Panel will have its say, and perhaps Bullabulling will be required to provide more information, including who amongst its blue-chip share register, which includes prominent resource investors such as Baker Steel and Henderson Global, has already said no to the A7 cent offer.

In truth, whatever Bullabulling says is meaningless alongside the BDO valuation which is a rare document in that not many observers of the mining scene, including Minesite’s Man in Oz over his 40 year career, can remember seeing an independent report which values a takeover target at more than double the bid on the table.

Having said that there is a need for Bullabulling’s directors to answer some of the obvious gaps in their “do not accept” argument, including the questions of where is the cash coming from to complete the feasibility study, where will the estimated A$300 million come from to re-develop the historic workings around the Eastern Goldfields mining centre of Bullabulling, and will current studies confirm that there is a way to cut the likely average cost of gold production from the current estimate of A$930 an ounce for the projected 175,000 ounces annually.

The gold price, and Australia’s high-cost environment has not been kind to Bullabulling, a company with a strong London following, but also a company with a project that has a low average gold grade of 1.45 grams a tonne.Despite the obstacle of low grade ore and a gold price which has been in retreat since Bullabulling listed in Australia in March, 2012, there is the advantage of having a handy 3.5 million ounces of gold, and the prospect of finding more.

Norton, despite being the aggressor with its low-ball A7 cent offer, is not really in a strong position itself, working the old and declining Paddington open pit on the northern outskirts of Kalgoorlie. This operation produced 38,600 ounces of gold in the March quarter at a C1 cash cost A$993 per ounce and a C3 total cost of A$1,347.

It is in the Paddington production numbers, and that C3 total cost which is alarmingly close to the current Australian dollar gold price of A$1,394 ounces that a reason for Norton’s opportunistic A7 cent offer for Bullabulling can be seen.Norton needs to find a fresh source of gold which might help it achieve greater economies of scale, and the Bullabulling project some 70 kilometres to the west could be just what the doctor ordered.

Unfortunately for Norton it has started the takeover process with an offer which is so low that it has been slammed by the independent expert which concluded that: “We have considered the terms of the offer as outlined in the body of this report and have concluded that, in the absence of a superior offer, the offer is neither fair nor reasonable to [Bullabulling] shareholders.

What now?

Until the Takeovers Panel comments on Norton’s complaints the answer is not a lot, though from past experience the government-appointed experts will probably tell Norton and Bullabulling to sort out their problems themselves before rushing to the headmaster with a story to tell.

Once that technical aspect of the matter is dealt with it will be up to Norton to address the “neither fair nor reasonable” finding by BDO.

In the meantime, Bullabulling is moving ahead with its definitive feasibility study (DFS) on its namesake project and will generate a maiden ore reserve when that study is completed.

The DFS would also allow the calculation of a discounted cash flow valuation of Bullabulling which, significantly, “may result in a higher value per share than that derived under the net asset value”, according to BDO.

In other words the current mid-point value of A14.6 cents a share could be the starting point, not the finishing point for valuing Bullabulling, and that observation alone indicates that for Norton to get any traction with its takeover offer it will have to do a lot better than A7 cents a share.

Source >>> www.minesite.com


----------



## notting

These are some of the worst articles I think I have ever had the misfortune to scan.
The Nickel price has risen due to a government ban in Indonesia (a big producer) on exportation and the fact that Russia who is the worlds biggest exporter of Nickel may incur sanctions that effect that.

Nothing to do with growth in the world etc.  

How any nitwit can write an article without mentioning that is not worth reading ever again.

Further, Russia China gas deal has been on the cards for decades and is simply Putin putting a signature down to make himself look good.  China has got a hold on him because Europe are backing out of dependency on Russian gas.  So it's likely to be a crap deal for Russia.  Putin seems a bit desperate politically at home so is invading countries and looking to be the big deal maker to distract and strengthen his hold on power in Russia.  Got nothing to do with some great tectonic shift in China/Russia relations.  They won't even disclose the price because it's BS!


----------



## drillinto

That Was The Week That Was ... In Australia

25 May 2014 

>>> by Our Man in Oz <<<

...

Minews. Time for a sector-by-sector run down, starting with nickel as that remains the hot metal of the month.

Oz.  It certainly does, but whether the Indonesian Government will stick to its ban on the export of unprocessed ores is the tricky question for investors.

After Western Areas, mentioned earlier, the trend across the nickel sector was strong, but not excessively, with a few minor falls.

Prominent moves included Sirius (SIR), up A17 cents to A$3.11, Mincor (MCR), up A5.5 cents to A94 cents, Independence (IGO), up A11 cents to A$4.26, Poseidon (POS), down half-a-cent to A7.9 cents, Cassini (CZI), down A1.5 cents to A18 cents, and Rox (RXL), down A0.2 of a cent to A4.9 cents.

Minews. Now for the other base metals, copper and zinc.

Oz. Copper was quite a mixed bag with one significant fall, that of Sandfire (SFR) which slipped A32 cents lower to A$5.74, a drop which came after it announced the replacement of its underground mining contractor.

Other copper moves were modest and included: OZ Minerals (OZL), up A4 cents to A$3.95, PanAust (PNA), down A1 cent to A$2.18, Altona (AOH), up A1 cent to A16.5 cents, and Hot Chili (HCH), up A1 cent to A23 cents.

Zinc stocks were flat. Ironbark (IBG) did not move, opening and closing at A5 cents. Terramin (TZN), slipped three-tenths of a cent lower to A3.8 cents.

Minews. Over to gold now as that remains of great interest in London.

Oz. There was very little movement in the Australian gold sector, which is hardly surprising as the metal opened and closed the week in our trading hours at US$1,293 an ounce, and the local dollar performed the same trick, opening and closing at US92.4 cents.

A sample of gold prices, some up and some down, included Silver Lake (SLR), down A2 cents to A38.5 cents, Newcrest (NCM), up A9 cents to A$10.30, Troy (TRY), down A4 cents to A97 cents, Endeavour (EVR), down A2 cents to A75.5 cents, Medusa (MML), down A4 cents to A$1.71, and Bullabulling (BAB), the takeover target we looked at last week, up one-tenth of a cent to A7.2 cents.

Minews. Iron ore next, please.

Oz. Down, but not by as much as might have been expected given the negative news around the underlying price of iron ore. Moves included: Atlas (AGO) down A3 cents to A72 cents, BC Iron (BCI), down A14 cents to A$3.66, Mt Gibson (MFX), up A3.5 cents to A78 cents, Fortescue (FMG), down A7 cents to A$4.51, and Red Hill (RHI), down A4 cents to A$1.40.

Minews. Coal and uranium next, please.

Oz. There was a weaker tone in both of the fuel sectors, but like in iron ore the falls could have been more severe given the weak price for both coal and uranium.

Coalspur (CPL), the Canadian coal hopeful hammered flat two weeks ago, kept falling last week, but only a bit. It lost A0.8 of a cent to A7.2 cents, meaning it has halved in less than a month. Other coal moves included: Atrum (ATU), down A2 cents to A$1.57, Prairie Downs (PDZ), down A2 cents to A44 cents, and Whitehaven (WHC), up A1 cent to A$1.49.

Paladin (PDN), the one-time uranium star, distinguished itself last week by hitting a 12-month low of A38 cents, before recovering to close at A39.5 cents, down A3 cents for the week. Other U-moves included: Greenland (GGG), down A1.5 cents to A12.5 cents, Berkeley (BKY), down A2 cents to A26.5 cents, and Energy and Minerals (EMA), down A0.9 of a cent to A5.8 cents.

Minews. Minor metals to close, thanks, starting with graphite.

Oz. The graphite stocks were mixed. Talga (TLG) led the way up with a rise of A1.5 cents to A27 cents. Syrah (SYR) led the graphite stocks to fall with a loss of A22 cents to A$3.45. Other graphite moves included Lincoln (LML) up A0.7 of a cent to A5.5 cents, and Valence (VXL), down half-a-cent to A41 cents.

Base led a weaker titanium sector, with Mineral Deposits (MDL) another producer of the material to lose ground, closing at A$1.39 for a loss of A6 cents.

Rare earth stocks were mixed. Lynas (LYC) clawed back A1.5 cents of its recent heavy losses to settle at A13 cents. Alkane (ALK) lost A2 cents to A30 cents.

The bauxite stocks which caught investor attention last week included Bauxite Resources (BAU), up A1.5 cents to A13 cents, and Australian Bauxite (ABZ) which shed A2 cents to A20 cents.

Minews. Thanks Oz.


Source >>> www.minesite.com <<<


----------



## drillinto

Commodities Stack Up Well Against Equities As An Asset Class, Even Allowing For Dividends And Inflation

26 May 2014 

>>> by Rob Davies <<<

Market commentators love simple stories. Last week’s headline was that Wall Street was poised to hit a new record high.

In capital-only terms that may be true, but students of economics know that is not the full story.

Once dividends are factored in, through re-investment, developed equity markets are nearly 70 per cent higher than their previous peak at the end of the last millennium.

Metals do not generate any income so, as an asset class, they suffer when comparisons are made against equities, and even bonds, over the long term.

Despite that headwind metals have done well since the start of the millennium.

Gold is the stand out winner as trust in the financial system gradually evaporated.  It has increased almost 500 per cent over the period.

However, even the less lustrous base metals have delivered pleasing gains to anyone who was far sighted enough to load up with them at the start of the century.  It has been a roller coaster ride of course, but copper is up 280 per cent in net terms from its 2000 average of US$1,814 a tonne to today’s quote of US$6,990 a tonne.

Inflation cannot be ignored and that reduces the real return to 184 per cent. Nevertheless, that is handsomely ahead of the return from equities as an asset class.

Other metals have different histories and nickel certainly wins the prize for the biggest gain this century. Its’ run from US$5,000 to US$50,000 a tonne will be hard to beat in the years to come. It has given up most of the gains to the peak but its current quote of US$19,615 a tonne is still well ahead of the depressed prices at the turn of the century.

Investing in metals directly, whether base or precious, is not easy for the retail investor.

That is why one of the big appeals of mining shares is to act as a proxy for the underlying commodity.  There is though another reason for investing in mining companies.

Unlike the metals themselves these enterprises do pay out cash as dividends.  That way the investor benefits, or suffers, from changes in the underlying metal price, and the value added by the miner in finding, developing and exploiting the resource.

The cream on top is the consequential dividend flow that can be reinvested to gain more exposure and more cash flow. The whole business of comparing relative performances between asset classes is massively complex because of the effects of inflations and assumptions made on what happens to the dividends and interest they generate, if any.

Commodities don’t generate cash but their capital returns can be large enough to surpass those from assets that do. Moreover, returns from commodities give better protection against inflation.

Finally, history tells us that past performance provides a poor guide to future returns.

Indeed, it can sometimes be the case that when the immediate past looks so lacklustre that the time is right to go back into an asset class. Few people can time that right.

At least with mining shares that pay a dividend investors get a return, even in flat markets, until the sector is back in favour.



Source >>> www.minesite.com <<<


----------



## drillinto

The Recovery Is Wobbling, And Metals Are Enjoying Mixed Fortunes As A Result

2 Jun 2014 

>>> by Rob Davies <<<

The economic recovery in the West that began in March 2009, when interest rates were slashed to minimal levels, is now quite long in the tooth.

This is despite the widespread perception by many that they have yet to experience any meaningful effects from increased prosperity.

Nevertheless, the rebound has largely been good news.

Now though there are signs on the horizon that stormier times are ahead again even though the after effects of the last storm that swept over the West are still being felt.

A report last week that the US economy only grew at an annualised rate of one per cent in the first quarter is a reminder of how financially fragile that country remains.

That perception was reinforced by the news that US consumer spending dropped in April.

Since it accounts for 70 per cent of the US economy it cannot be ignored. While a weak GDP figure was expected because of the severe winter weather, the outturn was worse than predicted.

Across the Atlantic the situation is even worse. The European Central Bank never engaged in quantitative easing because of concerns from Germany.

It never suffered as much in the crash because the relatively weak euro was enough to protect its super-efficient manufacturing industry.

Other European countries suffered the collateral damage that arose from trying to compete with the Germans on their terms and without the periodic bailouts from devaluations.

However, Europe has never really enjoyed the recovery experienced in the Anglo-Saxon economies and is now facing the prospect of deflation.

Inflation is currently running at only 0.7 per cent and is substantially lower than its target of two per cent.

Even though interest rates are only 0.25 per cent there is speculation that they could be cut by 10 or 15 basis points.

It seems this effect took priority over the weak US data and helped to push the dollar higher over the week as demonstrated by a 3.2 per cent drop in the gold price to US$1,252 an ounce.

Despite its problems the greenback still retains it safe haven status. Base metals did not suffer the same fate and, as a group, they rose 1.4 per cent over the week.

Nickel was the prime mover in this case with its 5.5 per cent jump to US$19,615 a tonne as worries about supply continue to dominate its market.

Nickel is not the only base metal with positive fundamentals though. Copper may have only added US$5.00 to US$6,990 a tonne but the strikingly low levels of inventories are hard to ignore.

Last week metal in LME warehouses declined eight per cent to 175,850 tonnes.  This low level is even more dramatic when it is viewed in the context of inventories of 915,000 tonnes last year. Current levels are now the same as five years ago.

Unfortunately the good news in base metals was not replicated in the iron ore market which saw prices decline to US$91.8 a tonne. This fall was the major factor in depressing mining shares over the week. Andrew Forrest of Fortescue does not expect any respite in the near future and he thinks prices could drift down to US$80 a tonne.

His views are echoed by Goldman Sachs which is forecasting an average price of US$109 a tonne for 2014 and US$80 in 2015. That is quite a drop from the year to date average of US$116 a tonne.

The simple reason is that supplies are projected to increase by 10 per cent but demand by only 3.7 per cent.

The details behind the forecasts are not available but presumably they rely on better growth in China than in Europe or the USA. If those last two weaken further than the forecast will need revising, downwards.



Source >>> www.minesite.com


----------



## drillinto

>>> That Was The Week That Was ... In Australia
>>> 01 Jun 2014 


>>> by Our Man in Oz <<<



Minews. Good morning Australia. Your market seems to have survived the annual May sell-off relatively unscathed.

Oz. You’re excused for thinking that’s the case if you only look at the big picture as measured by the all ordinaries index but dig a big deeper and it wasn’t such a good time for mining stocks.

Technically, the Australian market had its best May since 2010, but that’s a result of the all ordinaries creeping up by three miserable points, a rise which equates to a gain of 0.05 per cent, which is hardly a rise at all. It only looks good because in the previous years the all ordinaries fell in May.

The mining index lost three per cent in May, and gold lost eight per cent.

Minews. So, not so good after all. How about last week?

Oz. Much the same really. The all ordinaries was flat. Mining stocks slipped 1.7 per cent lower and gold stocks fell by five per cent.

Minews. Perhaps we should start our weekly look at prices by hunting out the newsmakers, good and bad.

Oz. That’s always a better approach because no-one really invests on the basis of index moves.

Unfortunately, most of last week’s newsworthy moves were down, although there was a smattering of solid upward share-price changes.

Lucapa Diamonds (LOM) caught the eye of a few traders last week after announcing a high-priced diamond sale and the award of a new licence in Angola. That helped the stock, which has just undergone a capital reconstruction, add A6.5 cents (31 per cent) to A27.5 cents. At one stage on Friday it was trading at A29 cents.
...



>>> Source >>> www.minesite.com


----------



## drillinto

>>> World Energy Investment Outlook (2014) <<<

http://www.iea.org/publications/freepublications/publication/WEIO_2014_ES_English.pdf


----------



## drillinto

Cost cutting in the mining industry

Truck Tires

BHP Billiton Ltd. (BHP), the world’s biggest mining company, has stripped out about $3.9 billion in costs and spending on exploration in the last two years. To curb costs at its Australian coal mines BHP has instructed its truck fleet to reduce downtime on shift changes and has begun refueling trucks at mining pits to avoid wear and tear on tires. The company says this has improved truck performance by 40 percent.

“It’s astounding and it does show that these companies are basically going down to the bottom level to try and drive cost cutting and that’s what shareholders want,” Jeff Largey, a mining analyst at Macquarie Group Ltd. in London, said by phone.

BHP said today it is reviewing the size of the workforce at its Australian iron ore operations, which reported about $20 billion in sales in fiscal 2013.

Anglo American Plc (AAL), the fifth-largest mining company, has reviewed contracts with suppliers of fuel, rubber for tires and removed contractors at Australian coal operations to trim costs.

...


Source >>>>> http://www.bloomberg.com/news/2014-...ng-cutbacks-as-china-cools.html#disqus_thread


----------



## drillinto

That Was The Week That Was … In Australia

08 Jun 2014 

>>> by Our Man in Oz 

>>> www.minesite.com

Minews. Good morning Australia, or wherever you are today. How did your market perform last week.

Oz. Down, again, but not substantially, and in answer to the location question, in London now ahead of a few days in the south of France.

Minews. Nice for some. There were reports of you being sighted at the Melbourne Mining Club dinner at Lord’s during the week where your countryman, Mark Cutifani, from Anglo American was the keynote speaker.

Oz. Those reports can be confirmed. Mark is an interesting man and worth the trip across from Australia, but the company he runs is even more interesting because it will either be a great recovery story under his leadership, or an easy takeover target for someone prepared to strip away its poorly-performing South African assets.

Minews. We’ll watch with interest, but for now let’s focus on the performance of the Australian stock market which you presumably have been watching while travelling.

Oz. I have, and it’s certainly a lot easier these days thanks to high-speed communications than a few years ago then we started these regular market reports.

Last week, unfortunately, was another of those “do nothing” weeks with three down days and two up to produce an end result for the five trading days which was awfully like the start.

The overall market, as measured by the all ordinaries index, closed down by around 0.5 per cent. The metals and mining index did a little worse with a fall of 1.2 per cent, and the gold index decline by 0.7 per cent.

Minews. Moves which hardly qualify as moves at all. Presumably there were some newsmakers to interest our readers in what looks to be a fairly dull affair.

Oz. There were a handful of eye-catchers, though not many and not necessarily for the right reason, with a few touching fresh 12-month price lows.

Minews. Let’s hear about those stocks first, and then call the card.

Oz. Panoramic (PAN), the nickel producer with plans to enter the platinum business, was the star of the week, putting in a rise of A7.5 cents (11.5 per cent) to A72.5 cents, a closing price which was down slightly on the 12-month high of A75 cents reached during Friday trade.

Paladin (PDN), the one-time uranium favorite of the Australian market, continued its poor showing with a loss of another A2.5 cents (seven per cent) to A36.5 cents, a closing price which was A4 cents higher than the 12-month low of A32.5 cents reached earlier in the day.

Papillon (PIR) led the gold sector as a result of the share-swap merger deal struck with Canada’s B2Gold, closing at A$1.60, a rise of A18 cents (12.6 per cent), which was well below the A$1.72 per Papillon share implied by the deal.

Base Resources (BSE) hit the headlines for the wrong reason, with a local council demanding a form of royalty payment from mining at the Kwale titanium project in Kenya, in what is the second illegitimate attempt to tax the company. The result was a share-price fall of A4 cents (10 per cent) to A34.5 cents.

Gindalbie (GBG), the troubled iron ore miner, had its best week in a long time, adding A1.5 cents (27.7 per cent) to A6.9 cents sufficient to earn a speeding inquiry from stock market regulators, and the standard company reply of “don’t now why”.
...


----------



## drillinto

>>> What Is Signal And What Is Noise?

>>> 09 Jun 2014 

>>> by Rob Davies <<<



One of the hardest tasks for investors is to differentiate true signals from the background noise of the market.

Last week provided quite a bit of noise, even though many took the noise to be signals of various sorts.

An increase of 217,000 in US employment confirmed what most people already know, which is that the US economy is still expanding, albeit not very fast.

Unemployment at a six year low and jobs back at pre-recession levels shows just how long this downturn has been in place.

In Europe there was less encouraging news as the ECB cut interest rates and introduced other, unconventional, measures to try and stimulate the economy.

But again it just reminded everyone that Europe is stagnating and, with inflation at only 0.5 per cent it could easily slip into deflation.

Mario Draghi, who runs the ECB, did was he has done before and hinted that he has additional powers up his sleeve and he will use them if needs too.

Unfortunately, it didn’t go quite to plan as the euro hardly moved. His measures are trying to achieve a fall to stimulate growth and reduce the price of BMWs.

All of these news items were noise because they told us nothing new.

Half a world away there was, however, a real signal. Thomas Keller, recently appointed chief executive of Codelco, the state owned Chilean copper miner, resigned after a clash with his board.

He wanted to invest US$20 billion in order to maintain production at the second largest copper miner in the world.  His fellow directors did not agree and he fell on his sword.

As a nationalised company the directors are appointed by the Government, and newly elected Chilean President Michelle Bachelet had recently replaced a third of them.

Without this capital injection Mr Keller says production will halve in the medium to long term.

Investors know mines are wasting assets and unless reserves are found to replace extracted ore production will fall.

Additional plant and machinery has to be renewed to keep operating costs down and remain competitive. The FT reports that since it was nationalised in 1977 the state has extracted US$100 billion from Codelco but only returned US$4 billion for investment.

If this approach is maintained it means that copper prices will stay close the full marginal cost of operation, i.e. high enough to cover depreciation, to encourage new capacity by others, rather than the marginal cash cost of production which is just wages and consumables.

On the LME copper prices reacted more to the news in Europe than from Chile and decreased 4.8 per ent over the week to US$6,660 a tonne.

That move was the main reason the LME index drifted down one per cent over the week.

In the short term speculation over the relative strengths of the European and US economies will determine moves in the copper price. Trading such short term noise is difficult.

But if the Chilean government really does not want to fund Codelco so that it can maintain production, that will be a far important driver to pushing copper prices higher in the longer term.



Source >>> www.minesite.com <<<


----------



## drillinto

>>>>> The world is overbought
June 5, 2014 

Australia(EWA) > ytd gain: 8.60%

One look at our trading range screen of the 30 largest country ETFs tells you that world markets have gotten extended recently.  As shown below, 22 of the 30 countries highlighted are now overbought (more than one standard deviation above their 50-days), and more than a handful are at extreme levels (more than two standard deviations above their 50-days).  Some of the most overbought countries include China (FXI), France (EWQ), India (PIN), Japan (EWJ), Spain (EWP), and the US (SPY).  Of the ETFs listed, India (PIN) is up the most so far this year with a gain of 24.17%.  Turkey (TUR) is in a close second with a YTD gain of 22.43%.  Russia (RSX) remains the worst performing country on the year with a decline of 10.25%, but the ETF has made a nice run higher recently and is currently 8.99% above its 50-day moving average.  Just five countries on the list are in the red this year, and just three are currently below their 50-days (Brazil, Indonesia, Vietnam).  

>>>>> http://www.bespokeinvest.com/thinkbig/2014/6/5/the-world-is-overbought.html


----------



## drillinto

Lenders Fear Spread of Chinese Commodities Fraud Case

by PETER EAVIS and NEIL GOUGH  

June 11, 2014

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.

Citigroup and several other large Western banks are concerned that large amounts of their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port.
The banks have inspectors on the ground who are trying to assess whether enough of the metals are there.

...


Source >>> http://dealbook.nytimes.com/2014/06...lbkam_20140611&nl=business&nlid=27377416&_r=0

[Note: The article has also three comments from readers, worth reading]


----------



## drillinto

EY: Capital Confidence Barometer - Mining and Metals

>>> M&A - deal volume expected to increase <<<

http://www.ey.com/Publication/vwLUAssets/Capital_Confidence_Barometer:_Mining_and_metals,_April_2014/$FILE/EY-ccb-mining-and-metals-apr-2014.pdf

http://www.ey.com/GL/en/Industries/Mining---Metals/EY-ccb-mining-and-metals-april-2014#.U5k1F_mSxfc


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## drillinto

Shanghai then and now

This animated GIF shows the dramatic transformation of Shanghai since 1987. 
Most of what you’re seeing in that picture is concrete, steel, and glass.



http://www.theatlantic.com/infocus/.../100569/?_ga=1.51315561.1906550590.1398968098


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## drillinto

>>> Mine 2014 <<<

Realigning expectations

Review of global trends in the mining industry



http://www.pwc.com.au/industry/energy-utilities-mining/assets/Mine-Jun14.pdf


----------



## drillinto

That Was The Week That Was … In Australia

15 Jun 2014 

>>> by Our Man in Oz


Minews. Good morning Australia. You seem to have had a fairly flat week.

Oz. It was, with the indices moving a few percentage points and with most of the big moves being down.

Iron ore stocks were hit hard. Gold stocks did best on the positive side and as in recent weeks there were a number outperformers on either side of the ledger.

Minews. Let’s start with the interesting moves before calling the card and keep everything short because I understand you are still travelling.

Oz. That’s right. Still on the road, this time suffering the hardships of southern France where the weather is balmy and the local most agreeable.

Minews. Lucky you. Now for a quick spot of market talk and then back to your cocktails in the sun.

Oz. Overall, the Australian market, as measured by the all ordinaries index, eased back by 1.1 per cent but would have fallen further if not for a strong showing among the oil and gas stocks which, in turn, could thank the latest trouble in Iraq for a higher oil price.

Mining stocks, as measured by the metals and mining index lost 2.8 per cent. Gold stocks were the exception with the gold index rising 2.9 per cent, and with more likely to come next week as the gold price continued to rise after we had closed on Friday.

Minews. Now for those eye-catching moves, please, starting with the rises.

Oz. Prize for the best rise of the week, albeit not on a percentage basis, went to Lucapa Diamonds (LOM) which shot up by A13 cents (54 per cent) to A37 cents thanks to a significant discovery of diamonds in the testing of river gravels on its tenements in Angola.

Malagasy Minerals (MGY), a graphite explorer with its best assets on the island of Madagascar, was the percentage winner with a rise of A1.5 cents (107 per cent) to A2.9 cents.
...


Source >> www.minesite.com


----------



## drillinto

>>> The Last Thing The Global Economy Needs Now Is Another Oil Shock

>>> 16 Jun 2014 

>>> by Rob Davies

The VIX index on the Chicago Options Exchange hit a five year low of 12.18 on Friday.

This index is a measure of volatility, and in 2012 it got as high as 47. The current low level reminds us that the financial world has enjoyed a remarkable period of stability in recent years.

That this has been achieved despite political tensions in Ukraine, simmering antagonism between China and Japan and amazingly high levels of unemployment in the Western world is remarkable.

That none of these events have triggered upsets in capital markets is due more to the overwhelming influence of central banks than the relaxed attitude of capitalists.

The old aphorism of “Don’t fight the Fed” has now become “Don’t fight the Fed, the BoE, the ECB and the BoJ”.

However, this complacency cannot last. The most obvious signal that the market is schizophrenic is the contrast between the record high levels of equity markets, which are anticipating more growth, and the record high levels of the bond markets which is predicting another recession.

This mutually contradictory view of the future now has to cope with a fresh input.

The rapid spread of the ISIS insurgency in Iraq, the second largest oil producer, has already caused oil prices to spike up to US$106 a barrel. And one thing we know about modern economies - and that now includes China - is that they don’t like high energy costs.

Despite de-industrialising, developed economies are still heavily reliant on energy to fuel growth.

The prime source of that energy is oil but other forms, like gas and coal, are priced off that primary market. Right now the last thing the slow recovery in the West needs is another oil price shock.

So far capital markets have reacted calmly. Base metals, as measured by the LME index, decreased 1.3 per cent over the week to 3,066 after a modest rally on Friday.

Mining equities reacted more strongly and dropped nearly three per cent over the period. It may well be that as trading decreases over the summer that investors will prefer to stand on the side-lines to see how the situation develops.

Certainly news that US PPI fell 0.2 per cent in May shows that the threat of deflation in America remains potent.

That reminds us that the world economy is becoming more reliant on the single motor of China for its growth.

While that is better than no growth it is hard to interpret. For a start China does not provide the regular updates that are the routine economic commentary the market is  used to from the US, or Europe.

More important though is that interpreting the actions of the Chinese government and its central bank is even more difficult.

At best markets can hope that the overriding interest of the authorities is to maintain strong economic growth to ensure maximum employment. As such China will pursue whatever policies are needed to ensure that goal will be achieved.

As long as capitalists believe it doesn’t make sense to fight the Fed, the BoE, the ECB, the BoJ and now the PBC everything will be fine. The panic will start when investors think this group has got it all wrong and can no longer impose its will on free markets.



Source >>> www.minesite.com


----------



## drillinto

Jun 22 -23, 2014 

Australia’s GrainCorp Still Takeover Target – Broker

by  Isabella Steger and  Ross Kelly (MoneyBeat)

Chatter that a takeover of GrainCorp Ltd. (GNC.AU +3.44%) could still be in the stars continues to give a lift to the Australian grain handler’s share price.

On Monday, Bell Potter, a brokerage, upgraded the stock to “hold” from “sell,” as it thinks the stock will continue to incorporate a takeover premium in its price even though the company itself is “overvalued.”

GrainCorp shares jumped more than 3% in Sydney Monday afternoon.


----------



## drillinto

June 2014

Jim Grant: Buy Gold

https://www.youtube.com/watch?v=E_zkysr1cu4
(Grant's comments on gold begin at the 7:12 minute mark)


----------



## drillinto

In The Case Of Iron Ore, The Workings Of Chinese Capitalism Have Much To Teach Europe
23 Jun 2014 

>>> by Rob Davies <<<


The contrast between the economies of Europe and China become more bizarre every day.

The most important bulk traded commodity these days is iron ore. Its price has been slipping steadily since it peaked in February 2013 at US$158 a tonne and it is now down 44 per cent at US$89 a tonne.

Unsurprisingly this has had a pretty negative effect on the large mining companies and their share prices have drifted lower accordingly.

However, economics is on their side.  Bloomberg has pointed out that 80 per cent of Chinese iron ore mines have costs of between US$80 to US$90 a tonne. One reason is that grades in these mines are about half those of their international competitors producing seaborne grade iron ore of 67% Fe.

As a consequence between 20 per cent and 30 per cent of Chinese iron ore mines have closed, along with 70 per cent of the companies that process the material.

It is heartening to see Chinese companies reacting with such vigour to these changing prices. They know that Rio Tinto has a production cost of US$44 a tonne, BHP Billiton US$53 a tonne, Vale US$68 a tonne and Fortescue US$77 a tonne.

The communists understand capitalism very well.  They know the lowest cost producers will always survive and they know that there is no point in selling metal at a loss.  Price is a very clear signal to tell iron ore producers what to do.

Compare that market-friendly approach to the situation in Europe. Here, the ECB has imposed a “one size fits nobody interest rate” across the whole Eurozone.

In fact all the disparate countries that go to make up the zone actually require different interest rates.

Using the Taylor Rule (a standard method of estimating appropriate interest rates for countries) Germany should actually have an interest rate of 4.65 per cent while that for Spain should be minus 10.75 per cent and that for Greece minus 19.25 per cent.

The ECB does not believe in setting interest rates appropriate for individual countries. Instead, one interest rate is imposed by central command for everybody, like it or not.

No matter, it seems the individuals must suffer for the greater good of the community.  No wonder China is growing far more rapidly than Europe is.

Last week was a good one for commodities, partly due to oil prices increasing to US$106 a barrel on the back of worries about the unrest in Iraq. Base metals, as measured by the LME index, increased 2.4 per cent to 3,141.

One of the major contributing factors is the underlying fundamental strength of these commodities as demonstrated by falling inventories. Zinc inventories in LME warehouses are down 28% this year to date to 676,275 tonnes, and copper inventories of 159,425 tonnes are the lowest since 2008.

Knowing there is an additional 75,729 tonnes in Shanghai doesn’t make much difference to the overall position in that market of 20 million tonnes.

Given the current state of understanding of economics it is likely that the Chinese will appreciate the gravity of this situation long before the Europeans do.


Source >>> www.minesite.com


----------



## notting

notting said:


> Putin putting a signature down to make himself look good.  China has got a hold on him because Europe are backing out of dependency on Russian gas.  So it's likely to be a crap deal for Russia.  Putin seems a bit desperate politically at home so is invading countries and looking to be the big deal maker to distract and strengthen his hold on power in Russia.  Got nothing to do with some great tectonic shift in China/Russia relations.  They won't even disclose the price because it's BS!






> Why Putin Is in Trouble With 86% Approval




http://www.bloomberg.com/news/2014-06-26/why-putin-is-in-trouble-with-86-approval.html


----------



## drillinto

Negative US Data Is Brushed Aside, But The Issue Of Commodities Fraud In China Raises Far More Searching Questions
30 Jun 2014 

>>> by Rob Davies

It’s been becoming clear for some time that the US economy is not doing well.

Even so, the revision to the data showing that the US economy contracted at an annualised rate of 2.9 per cent in the first quarter was a body blow and will result in reductions in the growth rate for the year as a whole from all and sundry.

But the reaction to the news in capital markets was surprisingly muted.

Wall Street ignored it, bonds firmed a bit, taking the yield on the 10 year down to 2.5 per cent and the dollar hardly moved.  Base metals, counter-intuitively, firmed a little, rising 1.4 per cent and taking the LME index up to 3,181.

Nevertheless, this development does rather take the gloss off the story of a gentle US recovery.

The lack of market reaction is largely a recognition that the US is no longer the driving force in the metals business it once was.

Another factor in the strength of some metals was upwards revisions to price forecasts by Standard Bank. According to Bloomberg the bank has increased its 2015 price forecast for zinc by 8.8 per cent to US$2,240 a tonne.

Its estimate for nickel for 2014 is now 12 per cent higher at US$17,536 a tonne, while the forecast for 2015 is now 9.1 per cent higher at US$18,000 a tonne.

Offsetting this positive news were downward revisions to the Standard Bank estimates for iron ore prices. The bank now expects these to average US$108 a tonne, 20 per cent lower than its previous forecast for 2014. The estimate for 2015 has been trimmed 2.6 per cent to US$105 a tonne.

Once again the slowly increasing disconnection between commodity markets and the US economy is becoming more evident.  Which, given the news from the US last week, is clearly a good thing.

Source >>> www.minesite.com <<<

Instead commodities are become increasingly reliant on China. But here too not everything is as good as it might first appear.

For some time now there has been increasing concern over the use of commodities to act as security in the shadow Chinese banking system.

Those fears were confirmed last week when China’s chief auditor discovered that loans worth 94.4 billion yuan (US$15.2 billion) were backed by falsified gold transactions.

The Financial Times reports that the Dezheng Resources had pledged base metals as collateral for several different lenders.  The concept of using metal that was sitting doing nothing in a warehouse as a source of funding in a country desperate for new investment makes some sense.

But pledging the metal to more than one borrower does not.

It raises the question of what else is going on in the grey world of the Chinese shadow banking system.

It is good that a robust Chinese economy is maintaining demand for commodities while other regions, such as the USA, struggle.

But if that growth is dependent on a fragile commodity-based shadow banking sector there must be serious doubts about how it would survive any kind of financial stress of the sort that undid the US mortgage backed securities market.

For now it looks as if the Chinese economy can cope with these strains. But investors should not assume that all is rosy underneath.


----------



## drillinto

>>> What Mick Wants
http://www.miningmx.com/page/specia...ook-2014/1643685-What-Mick-wants#.U7MGSfmSxfc


>>> X2 boss Davis calls next supply deficit
http://www.miningmx.com/page/specia...-Davis-calls-next-supply-deficit#.U7MHMfmSxfd


----------



## drillinto

First Half Asset Class Performance
July 1, 2014 

June returns were mixed in international markets.  Countries like Brazil (EWZ), Canada (EWC), India (INP), Japan (EWJ) and Russia (RSX) posted solid gains, while big Euro-area countries like France (EWQ), Germany (EWG) and the UK (EWU) were in the red.  Year-to-date, the India (INP) ETF is up the most out of the country ETFs highlighted with a gain of 20.91%.  Italy (EWI), Spain (EWP) and Canada (EWC) were all up more than 10% in the first half as well.

>>> http://www.bespokeinvest.com/thinkbig/2014/7/1/first-half-asset-class-performance.html


----------



## drillinto

Recovery Beats Back The Bears In Metals And Equities
07 Jul 2014 
>>> www.minesite.com <<<

by Rob Davies

It is human nature to looks for things to worry about when everything appears rosy. Despite equity markets marking new highs and base metals, as measured by the LME index, adding 3.1 per cent last week, financial commentators can’t seem to stop finding things to fret over.

The news that the US economy added 280,000 jobs in June fuelled the rally in risk assets like shares and commodities but the press likes to remind us of the contraction of the US economy in the first quarter of the year.

Indeed, it is not hard to find quite a few items of news to support the bear case.

A surprise cut in Swedish interest rates of 0.5 per cent to 0.25 per cent was apparently justified by the strength of the krone against the weak euro.

That weakness was reinforced by a fall in Germany factory orders of 1.7 per cent in May. In Australia the Governor of the Reserve Bank muses that the Aussie dollar is too high: it promptly fell 1.6 per cent after his comments.

No one, it seems, wants a strong currency because of the damage it does to their economy. But not everyone can devalue.

Yet despite these worrying news items there is no indication that economies and markets are about to roll over and crash dive. Worriers of course can cite this complacency as being exactly the sort of signal that should concern investors. But pushing this negativity back is a steady drip of positive developments.

Iron ore prices rallied 1.7 per cent last week to take them up to US$96.5 a tonne. A welcome relief after the 28 per cent fall this year to date.

It is also worth reminding ourselves that iron ore prices have fallen not because of a reduction in demand but because of an increase in supply as miners raised production in anticipation of rising demand.

That has happened but it is difficult to exactly match increases in output with growing demand.

Another metal now being squeezed up after a long period of weakness is nickel. Bloomberg says production will exceed supply by 50,000 tonnes this year but there will be a deficit in 2015. That is why its price is up 36 per cent this year so far to a relatively healthy US$19,845 a tonne.

Look too at the fall in zinc inventories. They now stand at 664,650 tonnes. Compare that to the 910,025 tonnes they started the year at.

A 10 per cent increase in the zinc price since then to US$2,233 a tonne seems entirely rational.

Finally, bears continue to fret over the role of metals, especially copper, in the Chinese shadow banking system. But a 20,000 tonne fall in copper inventories in bonded warehouses in Quingdao from 50,000 tonnes does not indicate the problem is that large. After all, US$213 million is not a huge amount of money in an economy as large as China’s.

Far more significant is that copper inventories in LME warehouses have now dropped to 156,500 tonnes, which is incredibly low for a commodity that has an annual consumption of 20 million tonnes a year.

Miners, and their customers, are confident that more supply is coming on stream quite rapidly which is why prices are not reacting.

So, sure there are lots of things to worry about in terms of politics and economics. But for fabricators the most important thing might just be as simple as securing raw materials at a decent price next year.


----------



## MARKETWINNER

As I expected grain prices are falling rapidly now. What a week was for commodity market. Soybean futures posted the longest slump in 41 years. Corn fell to a four-year low. Other grains such as wheat, oat, rice and canola etc also slumped last week. Global soya bean and corn supply will climb in the coming years. The grain entered a bear market this month. Among commodities selected soft commodities such as Tea and Cocoa and live stocks will maintain their uptrend. 

http://www.livemint.com/Companies/n...sees-profit-reviving-on-rally-in-tea-pri.html

McLeod Russel India sees profit reviving on rally in tea prices

http://in.reuters.com/article/2014/07/08/bangladesh-tea-auction-idINL4N0PJ38120140708

Bangladesh tea prices up on strong demand for quality leaf

Currently we can see strong tea prices for high quality tea in Sri-Lanka. Tea prices have picked up even at the Mombasa Tea auction in Kenya.

http://online.wsj.com/articles/emerging-markets-chocolate-lovers-boost-cocoa-prices-1404849640

Emerging Markets' Chocolate Lovers Boost Cocoa Prices

After recent spike both Crude oil (wti) and Crude oil (Brent) too had a sell off. They are trading around USD 100 and 106 respectively.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites. Please do your own research.


----------



## drillinto

Portuguese Banking Problems Set The Markets A-Jitter
14 Jul 2014 

>> by Rob Davies


The official script says that the banking crisis in the Western world has been resolved, recovery is underway, albeit slowly, and that normal service will be resumed shortly.

Unfortunately that story becomes slightly suspect when something like the problem at Banco Espirito Santo suddenly shows something the authorities would rather keep hidden.

The holding company of this bank, the second largest in Portugal, missed a payment on commercial paper last week that triggered a dive in the share price, a trading suspension than another slump that left the shares down 36 per cent and its bond yielding 8.85 per cent.

This reminder that not all financial institutions can be trusted was enough to push the gold price up by 1.1 per cent to US$1,335 an ounce, and to push equity markets down two per cent.

The reaction in base metals was more subdued with only a 0.2 per cent decline in the LME index to 3,275.

This tepid response is largely due to the strong fundamentals of the sector.

Investment bank Natixis says there will be a 476,000 tonne shortfall in the zinc market this year and that undoubtedly helped the metal increase by 2.4 per cent over the week to US$2,286 a tonne. A further fall in zinc inventories in LME warehouse to 660,800 tonnes reinforces that argument.

Copper too was another metal to make progress. It gained 0.5 per cent to US$7,150 a tonne.

This was despite Bloomberg reporting that an additional seven million tonnes of capacity is due to come on stream by 2020.

In addition there is a further 6.7 million tonnes of uncommitted capacity that could be brought into production. That the copper market has not dived in anticipation of this supply of new metal is a measure of how tight it is.

Unlike the other metals it is in backwardation meaning that prices for prompt delivery are higher than for future months.

Three month metal, for example, is trading at US$7,139 a tonne and the 15 month quote is US$7,100 a tonne.

With LME inventories standing at only 158,475 tonnes it is not surprising there is a premium for metal available now.

A fabricator is not very interested in a possible glut of metal in six months’ time when his concern is to get product out the door next week.

The events in Portugal combined with other evidence of fundamental weaknesses in the world economy tell us is that the short term economic outlook is still very mixed.

Everyone would like to believe the problems of the financial crisis are behind us but now and again the harsh reality manages to pop through the fog of complacency and remind us that they are not.

A good example of that is the way equity markets have made no real progress this year so far. But, encouragingly, one of the best performing sectors has been mining.

Last year’s gloom about its prospects has been replaced by recognition that the bearishness was overdone and that actually it is still churning out prodigious amounts of cash, even at lower prices for the bulk commodities.

Unlike many of the banks, the attractive yields on the mining stocks make them worth holding even when everything else looks a bit uncertain. And there is no reason to believe that this uncertainty is about to change.

***********************
Source >> www.minesite.com

***********************


----------



## drillinto

>>> How to Vet Graphite Investments: Stephen Riddle <<<

http://www.theaureport.com/pub/na/how-to-vet-graphite-investments-stephen-riddle


----------



## drillinto

2014 Ranking of Countries for Mining Investment

Australia: Silver Medal

Papua New Guinea is 21 out of 25 countries


http://www.dolbear.com/news-resources/documents


----------



## drillinto

>>> That Was The Week That Was … In Australia

17 Aug 2014 

>>> by Our Man in Oz


Minews. Good morning Australia. Your market seems to have performed quite well last week.

Oz. It did, but it was very much a case of what seems to be the new normal: one step back and then one step forward without really getting anywhere.

Minews. You mean it’s rather boring.

Oz. That’s a bit strong, but when you look at the overall trend it is hardly inspiring. Take the ASX metals and mining index which went up last week by 1.9 per cent. That’s the good news, but it did little more than cancel out the one per cent fall in the previous week.

Looked at over a longer time period it gets flatter. Since the start of 2014 the metals and mining index has moved all the way up from 3,381 points to last week’s close of 3,403, a most unspectacular rise of 22 points, or 0.65 per cent.

Minews. Your point is made. Let’s find something more interesting than index-watching by looking for stocks which stood out from the crowd last week.

Oz. There were a few specials which outperformed in one way or the other.

Robust Resources (ROL), which has an assortment of exploration projects in Indonesia and the Kyrgyz Republic, rocketed up by A15.5 cents (53.5 per cent) to A44.5 cents after announcing that it had received a takeover offer priced at A49 cents, with the gap between the indicative bid and the closing price a sign that the market has doubts about the proposed deal.

Xanadu Mines (XAM), which went to Mongolia to look for coal, delivered a fresh set of encouraging copper and gold assays from its Kharmagtai exploration project, including 312 metres grading 0.5% copper and 0.4 grams of gold a tonne starting at a depth of 274 metres. That news lifted the stock by A3.5 cents (41 per cent) to A12 cents, though it did touch a 12-month high of A14 cents on Tuesday.

Crusader Resources (CAS) attracted interest in its mix of iron ore and gold projects in Brazil, adding A9.5 cents (26.7 per cent) to A45 cents.

Valence Industries (VXL), one of the local emerging graphite stocks was another to hit a 12-month high after announcing a fresh sales agreement for material from its Uley project in South Australia. After peaking at A55 cents in early Friday trade it closed at A53 cents for gain over the week of A8 cents (17.7 per cent).

Atrum Coal (ATU), reported successful ship-loader trials for its Groundhog anthracite project in Canada, news which lifted the stock by A18 cents (12 per cent) to A$1.64.

KGL Resources (KGL) reported fresh high-grade copper and gold assays from its Jervois project in the Northern Territory, news which initially lifted the stock by A8 cents to A42 cents before late selling knocked it back to a close of A36.5 cents, reducing the week’s rise to a more modest A2.5 cents (seven per cent).

Berkeley (BKY), one of the Australian stocks looking for uranium in Spain, went for a ride on the higher uranium price, adding A4.5 cents (15 per cent) on Friday to close the week at A34.5 cents

Minews. It’s time to look at the sectors, starting with uranium for a change, because last week’s rise of US$1.25 a pound in the uranium price to US$30 per pound was encouraging.

Oz. It was, but the reaction among the U-stocks was modest, Berkeley aside. Some of the more interesting price changes included: Greenland (GGG), up A1.5 cents to A12.5 cents, Bannerman (BMN), up half-a-cent to A7.5 cents, Paladin (PDN), up A2 cents to A39 cents, and Energy and Metals (EMA), up two-tenths of a cent to A6.5 cents. That latest move means EMA has doubled since February.

Minews. There is obviously growing interesting in EMA. Let’s get a move on and call the rest of the card with gold stocks next, followed by the base metals, please.

Oz. The trend in the gold sector was mixed, trending down. Moves included: Northern Star (NST), down A3 cents to A$1.81, Papillon (PIR), also down A3 cents to A$1.81, Perseus (PRU), up A1.5 cents to A46.5 cents, St Barbara (SBM), down half-a-cent to A11 cents, and Kingsrose (KRM), down A2.5 cents to A51 cents.

KGL, mentioned earlier, was one of the better copper stocks in a week of mixed trading. Other copper moves included: OZ Minerals (OZL), down A20 cents to A$4.27, Hot Chili (HCH), up A4 cents to A27.5 cents, Stavely (SVY), down A6 cents to A54 cents, and Rex (RXM), up A2 cents to A31 cents.

Nickel stocks were a little firmer, as were zinc stocks. Nickel moves included: Panoramic (PAN), up A1.5 cents to A87 cents, Western Areas (WSA), up A4 cents to A$4.86, and Sirius (SIR), up A13 cents to A$3.97. Zinc moves included: Ironbark (IBG), up A1 cent to A11.5 cents, Aurelia (AMI), up A3.5 cents to A42 cents, and KBL (KBL), up A1.7 cents to A6.6 cents.

Minews. Iron ore next, please, followed by graphite.

Oz. After Crusader’s sharp rise, mentioned earlier, the iron ore sector was mixed, trending down. BC Iron (BCI) fell by A17 cents to A$3.14 after announcing a share-swap takeover of Iron Ore Holdings (IOH) which in turn rocketed up by A38 cents (40 per cent) to A$1.33. Fortescue (FMG) slipped A5 cents lower to A$4.51, while Atlas (AGO) added A5 cents to A70 cents.

Valence, mentioned earlier, was the best of the graphite stocks. The rest of the sector was quiet. Syrah (SYR) put on A3 cents to A$5.08, and Talga (TLG) added A2 cents to A35.5 cents.

Minews. Coal and minor metals to close, thanks.

Oz. Atrum was the coal mover of the week. Most other coal stocks barely moved. New Hope (NHC) lost A5 cents to A$2.88, and Prairie Downs (PDZ) was A2 cents weaker at A40 cents.

Vanadium hopeful TNG (TNG) was the pick of the minor metals with a rise of A5 cents to A25.5 cents. Wolf (WLF), another tungsten specialist lost half-a-cent to A29.5 cents.

Rare earth stocks firmed. Lynas (LYS) added A1 cent to A15.5 cents, and titanium stocks weakened, with Base (BSE), down half-a-cent to A28.5 cents.

Minews. Thanks Oz.
***************

Source >>> www.minesite.com


----------



## drillinto

That Was The Week That Was … In Australia

24 Aug 2014 

>>> by Our Man in Oz

Minews. Good morning Australia, your market seems to have been hit hard by the sell-off in BHP Billiton shares.

Oz. That was undoubtedly the big event of the week with a 3.5 per cent fall in the value of the world’s biggest mining company a major drag on the rest of the Australian market.

Not surprisingly, the metals and mining index lost 2.2 per cent over the course of the week with the fall in BHP Billiton shares offset by reasonable rises across the rest of the mining sector.

The all ordinaries index managed a 1.5 per cent rise thanks to strong profit results and even stronger dividends while the ASX gold index slipped 2 per cent lower thanks to the weaker price of the metal.

Minews. Sticking with BHP Billiton for a little longer, is the plan to split seen as a positive proposal by Australian investors?

Oz. Perhaps is the only answer to that question with the creation of a new business out of the aluminium, manganese, nickel and some coal assets a welcome addition to the mining sector.

What will be most interesting to watch is whether the spin-off can match, or perhaps even outperform the parent, which should be possible at different stages of the commodity price cycle.
...

>>> Source >>> www.minesite.com


----------



## drillinto

Commodity Trading Range Charts

August 21, 2014 

http://www.bespokeinvest.com/thinkbig/2014/8/21/commodity-trading-range-charts.html


----------



## drillinto

>>> Asset Class Performance <<<

Commodities got hit leaving them down big for the second quarter: Natural Gas was down -9.51%.

http://www.bespokeinvest.com/thinkbig/2014/8/30/august-qtd-and-ytd-asset-class-performance.html


----------



## drillinto

>> The Goldman Sachs Aluminum Conspiracy
>> by Matt Levine 
>> 3 Sep 2014

http://www.bloombergview.com/articl...man-sachs-aluminum-conspiracy-lawsuit-is-over

[Note: All financial journalism should be like this]


----------



## drillinto

Iron ore prices approaching 5-year low

>>> by Cecilia Jamasmie <<<

August 29, 2014


http://www.mining.com/iron-ore-prices-hit-lowest-in-five-years-93008/


----------



## drillinto

Andrew John Hall, one of the most successful oil traders alive thinks America's shale renaissance will prove to be a dud and that crude prices will hit $150 within five years.

>>> by ROB WILE <<<
Sep 3, 2014


http://www.businessinsider.com/andrew-john-hall-predicts-150-oil-2014-9


----------



## drillinto

>>> 4 September 2014 

>>> Abbott in India over uranium deal


http://www.bbc.com/news/world-asia-29057677


----------



## drillinto

What Australians Are Saying About Mining Investment In Africa

>>> By Dana Sanchez <<<

September 4, 2014,



Source >>> http://afkinsider.com/71214/australians-saying-mining-investment-africa/


----------



## drillinto

drillinto said:


> >>> 4 September 2014
> 
> >>> Abbott in India over uranium deal
> 
> 
> http://www.bbc.com/news/world-asia-29057677





India's nuclear deal with Australia

http://qz.com/260506/indias-nuclear...tics-and-only-marginally-about-nuclear-sales/


----------



## drillinto

>>> Graphite space is still hot <<<

>>> "Graphite resurgence tempts investors" by Jemima Whyte

>>>  Video: Old commodity finds new markets

Link for article and video:
http://www.afr.com/p/business/sunday/graphite_resurgence_tempts_investors_IErSw6Ej7vB4UNrjMAkCtM


----------



## drillinto

That Was The Week That Was ... In Australia

7 Sep 2014 

>>> by Our Man in Oz <<<


Minews. Good morning Australia, or should that be good morning Africa after a week at the African Down Under conference?

Oz. A bit of both really, with an influx of Africans bringing a splash of light to an otherwise sombre Perth, which is even more sombre this morning as it battens down for stormy change to the weather.

Minews. Your stock market also seems to have had its own storms with iron ore and gold prices in retreat.

Oz. It has been tough going for investors, which is why the Africa Down Under conference was a welcome break.

Attendance at the event was down about 10 per cent on last year, though at 1,800 delegates it is not far behind the Australian conference leader, Diggers and Dealers.

In a way, both events have their own magic which is linked to the location. Diggers because it is the only global mining talkfest held in a genuine mining city, with working mines all around, and Africa Down Under because it pulls together two different cultures which have a common aim, mining, and a lot to offer each other.

Minews. Good to hear that it was a success, but let’s get down to business and talk about the market.

Oz. If you insist, though there isn’t much good news to share around. The ASX mining and metals lost three per cent and the gold index was down by seven per cent.

Gold and iron ore stocks were hit hardest thanks to the falls in their underlying commodity.

The odd item of positive news could be found, if you looked hard enough.

Minews. We’ll get to the bad news later but first let’s hear whatever you’ve got to brighten our day.

Oz. Uranium stocks had a reasonable week after months of decline thanks to another US$1 per pound rise in the uranium price. And some nickel stocks did well, along with a smattering of minor metal explorers.

Most uranium rises were modest, though a stand-out success was Toro (TOE) which jumped by A2.7 cents (42 per cent) to A9.1 cents as the company’s chief executive, Vanessa Guthrie, joined a high-powered Australian Government trade mission to India, which is an emerging market for Australian uranium. At one stage on Friday Toro touched a 12-month share price high of A9.5 cents.
...

Source >>> www.minesite.com <<<


----------



## drillinto

>>> Country Trading Range Screen <<<

Sep 5, 2014

Australia, Brazil and Canada, commodities countries, are overbought




http://www.bespokeinvest.com/thinkbig/2014/9/5/country-trading-range-screen.html


----------



## drillinto

Milk futures rose to a record as exports by the U.S. climbed amid shrinking inventories of cheese and butter, signaling higher costs for pizza and pastries.

>>> By Lydia Mulvany <<<
Sep 8, 2014 





http://www.bloomberg.com/news/2014-09-08/milk-costs-most-ever-to-signal-higher-prices-for-pizza.html


----------



## drillinto

New Zealand: Dairy prices drop to new two-year low

>>> by Jamie Gray <<<
Sep 3, 2014




http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11318178


----------



## drillinto

Global Oil Glut Brings Back an Old Trade

>>> By  CHRISTIAN BERTHELESEN <<<

Faced with copious amounts of crude oil in the global market, traders are dusting off an old playbook. 
The strategy: put oil into storage rather than sell it.




http://blogs.wsj.com/moneybeat/2014/09/08/global-oil-glut-brings-back-an-old-trade/


----------



## drillinto

Leaders of Thai rubber farmers threaten protests as prices slide
Sep 10, 2014 

>>> By Apornrath Phoonphongphiphat <<<

More than 10,000 rubber farmers in Thailand, based mostly in the south, are preparing to launch protests against the government and demand it announce measures to help them counter a slump in prices to five-year lows, farmers' leaders said on Wednesday.
...




http://www.reuters.com/article/2014/09/10/thailand-rubber-protests-idUSL3N0RB2RQ20140910


----------



## drillinto

>>> Long Term Economic Growth

Sep 10, 2014 

Overall, prosperity today is relatively dependent on where prosperity sat in 1870.






http://www.bespokeinvest.com/thinkbig/2014/9/10/long-term-economic-growth.html


----------



## rimtas

I just read the title of the thread  "The best place to be is in commodities" and thought that people are probably miss leaded a bit as commodities registered the countertrend top in early 2011 after the 2008 crash and now are in a phase of acceleration down to new lows. How can this be the best place to be if it is generating(and probably further will) only losses?


----------



## burglar

rimtas said:


> ... How can this be the best place to be ...




I see so many pennants in your chart!


----------



## drillinto

>>> Why King Coal Will Keep Its Crown

>>> by Andrew Topf | 17 September 2014 | 







http://oilprice.com/Energy/Coal/Why-King-Coal-Will-Keep-Its-Crown.html


----------



## drillinto

Coal industry's turn to feel the effects of Chinese downturn

September 17, 2014

>>> by Brian Robins <<<





http://www.smh.com.au/business/coal...ects-of-chinese-downturn-20140916-10ht35.html


----------



## drillinto

Fraud in the mining world

The Bre-X Scandal Is Now Just US$9 Million Away From Making It To The Hollywood Big Time
29 Sep 2014 
by Alastair Ford 

http://minesite.com/news/the-bre-x-...away-from-making-it-to-the-hollywood-big-time

Find out more >>> http://en.wikipedia.org/wiki/Bre-X

[Note: Don't miss your chance to experience this production in a cinema near you, next year]


----------



## drillinto

rimtas said:


> I just read the title of the thread  "The best place to be is in commodities" and thought that people are probably miss leaded a bit as commodities registered the countertrend top in early 2011 after the 2008 crash and now are in a phase of acceleration down to new lows. How can this be the best place to be if it is generating(and probably further will) only losses?
> 
> View attachment 59388




rimtas,

This thread was started long, long time ago, on 14th April 2007.
Below is the first post. You ought to read the interview with Jim Rogers.

Interview with Jim Rogers: "The best place to be is in commodities"
http://seekingalpha.com/article/31835?source=feed


----------



## rimtas

I just read the title and thought that why this topic is escalated...it should be renamed or started new one as some newbies can mistakely take the idea that all markets are still in a bull run...


----------



## drillinto

Rout in agricultural prices 'drawing to a close' - Deutsche Bank
1st Oct 2014

The rout in agricultural commodity futures, led by grains and oilseeds, is "drawing to a close", Deutsche Bank said, even as broker mulled the potential for corn falling below $3 a bushel, and soybeans below $9 a bushel.




http://www.agrimoney.com/news/rout-in-ag-prices-drawing-to-a-close---deutsche--7548.html


----------



## drillinto

>>>Hello, Oversold World
Oct 2, 2014 






http://www.bespokeinvest.com/thinkbig/2014/10/2/hello-oversold-world.html


----------



## drillinto

>>> A Poor End to a Bad Month <<<
Sep 30, 2014 


The Brazil ETF (EWZ) was by far the worst with a decline of 19.09% for the month.  
Australia (EWA) fell the second most at -11.86%.







Source >>> http://www.bespokeinvest.com/thinkbig/2014/9/30/a-poor-end-to-a-bad-month.html


----------



## drillinto

Asian market hubs move into gold
OCT-13-2014 

By Biman Mukherji and Ese Erhereine

Asians buy most of the world's gold, but nearly all of it trades in London. Now, with Western investors souring on the metal, the region is making a bid for some of the action.

Three big financial hubs in Asia are separately launching trading in a gold contract, each backed with physical gold.

If they draw enough investors, the contracts could influence the price of gold, which is set by a daily fix in London.

"You now have a market that's driven by Asia," says Catherine Raw, who manages BlackRock Inc.'s (BLK) $7 billion global mining fund.

The Shanghai Gold Exchange was launched in September inside the city's free-trade zone, offering yuan-denominated contracts backed by gold held in Shanghai. This week, Singapore will offer its own contract, and later this year, CME Group Inc. (CME), which operates exchanges in Chicago and New York, plans to start a U.S. dollar-denominated contract in Hong Kong.

In the U.S. and Europe, gold is often bought as a hedge against higher consumer prices. But with few signs of inflation, the price of gold has fallen 10% since March and is down by a third since the end of 2012.

Holdings by gold-backed exchange-traded funds fell to 53.5 million ounces in October, the lowest level in five years, according to U.S-based ETF Securities.

In Asia, where the metal remains popular as a store of wealth, demand for gold jewelry, bars and coins is robust. The World Gold Council, an industry body, says demand in China rose to almost 1,300 tons in 2013, up 160% from five years ago, although it expects demand to be flat, at best, this year. In India, buying was 50% higher over the same period at 975 tons.

China is now the world's largest producer and consumer of gold, and the biggest importer, as domestic demand has outstripped supply. India also is a major buyer and importer. Two-thirds of global gold purchases come from Asia, the World Gold Council says.


Source >>>>> Dow Jones Newswires


----------



## notting

The last two months have seen bank lending in China kick back into top gear after slowing was setting up a dead tiger. They have gone back full throttle into the only thing they know.

Yeah, the best place to be is IN commodities right about now!


----------



## drillinto

Oil & Energy News

For your consideration >> http://oilprice.com/


----------



## drillinto

What A Week It Was
October 12, 2014 

Australia (EWA) was down 3.50%

http://www.bespokeinvest.com/thinkbig/2014/10/12/what-a-week-it-was.html


----------



## drillinto

52-Week Lows in the US Energy Sector Exceed 40%
Oct 15, 2014 







http://www.bespokeinvest.com/thinkbig/2014/10/15/52-week-lows-in-the-energy-sector-exceed-40.html


----------



## drillinto

The Best-Performing CEOs in the World (2014)

CEOs 10, 16, 42, 49 & 95 are from the commodities sector







http://hbr.org/2014/11/the-best-performing-ceos-in-the-world/ar/1


----------



## drillinto

How much gold is there in the entire world ?






http://www.labmate-online.com/assets/docs/breaking-news/how-much-gold-is-there-in-the-world.pdf


----------



## drillinto

Mick Davis Pulls In Another US$1 Billion For X2, But Where Will All The Money Actually Go ?

Oct 17, 2014











http://minesite.com/2014/10/17/mick...-x2-but-where-will-all-the-money-actually-go/


----------



## Wysiwyg

drillinto said:


> The Best-Performing CEOs in the World (2014)
> 
> CEOs 10, 16, 42, 49 & 95 are from the commodities sector
> 
> http://hbr.org/2014/11/the-best-performing-ceos-in-the-world/ar/1



 Spot the Aussie at 97. The workers get more slice of the pie in Australia.


----------



## drillinto

Mining Force Mick Davis Digs In Again
With Xstrata Veterans, He Looks to Build Another Powerhouse

By A. Flynn
Oct. 19, 2014 

LONDON””After building two mining giants in the past two decades, can Mick Davis start from scratch and do it again?








http://online.wsj.com/articles/mining-force-mick-davis-digs-in-again-1413751393


----------



## drillinto

Larry Summers explains why the world is too optimistic about China’s economic future

>>> by Gwynn Guilford










http://qz.com/281609/larry-summers-...-too-optimistic-about-chinas-economic-future/


----------



## drillinto

That Was The Week That Was … In Australia
Oct 19, 2014

By Our Man in Oz

Minews. Good morning Australia. Your market seems to have emerged in reasonable health after an early scare last week.

Oz. It was a remarkable few days which started with red lights flashing and warnings about over-valued assets from normally cautious institutions, including the Australian central bank, but by the time we sloped off to the pub on Friday night the numbers weren’t too bad.

Some sectors did better than others but it’s hard to overlook a three per cent rise in the metals and mining index, which almost made up for the loss of the previous week, or a 1.8 per cent rise in the gold index, which made a small dent in the losses of the past two weeks.

Minews. Is the mood down there one of confidence that we’ve had the correction and now we’re in recovery mode?

Oz. Not really. There is still a fair amount of concern about China and its future demand for minerals and metals, and Europe also features on the list of concerns given its well-proven capacity to produce nasty surprises.

Offsetting those negatives is increasing optimism about the recovery of the U.S. economy and signs that India might deliver on its promise to replace China as Asia’s growth engine.
...







Source >> www.minesite.com


----------



## drillinto

Zinc Prices Rises Most in Two Months on Shrinking Supply
By Joe Deaux and Claudia Carpenter  

Oct 22, 2014 











http://www.bloomberg.com/news/2014-10-22/copper-holds-gains-near-one-week-high-before-china-pmi.html


----------



## drillinto

Asset Class Performance Since the October 15th Short-Term Low
OCT 21, 2014

Australia (EWA) is up +2.81%








http://www.bespokeinvest.com/thinkb...nce-since-the-october-15th-short-term-lo.html


----------



## drillinto

Commodities
Africa’s Sugar Ambitions Turn Sour
Producers Struggle in a Once-Promising Market Amid Cheap Imports, Falling Prices

By Nicholas Bariyo
Oct. 20, 2014 







http://online.wsj.com/articles/africas-once-promising-sugar-market-struggles-1413821598


----------



## tradernor

I would say that the best place to be now in commodities is in oil. Both Brent and WTI will rise from the current levels, according to this well-written and timely analysis below from Seeking Alpha:


http://seekingalpha.com/article/258...the-current-low-oil-price-is-not-here-to-stay


----------



## drillinto

Australia wins best Merino wool bale
16 October 2014

Two New Zealand farmers have lost to their Australian counterparts in the search 
for the world's finest bale of Merino wool.








http://www.radionz.co.nz/news/regional/257020/australia-wins-best-merino-wool-bale


----------



## drillinto

Cutrale-Safra wins takeover battle for fruit producer Chiquita
by GUILLERMO PARRA-BERNAL AND SRUTHI RAMAKRISHNAN

Chiquita Brands International Inc (CQB.N) agreed on Monday to a $682 million takeover by Brazilian juice maker Grupo Cutrale and investment firm Safra Group, with the U.S.-based banana producer going private early next year at the latest.











http://www.reuters.com/article/2014/10/27/us-chiquita-brands-m-a-cutrale-safra-idUSKBN0IG16J20141027


----------



## drillinto

That Was The Week That Was … In Australia
Oct 27, 2014
By Our Man in Oz
...
Minews. If it was a quiet news week perhaps we should shuffle along to prices, starting with any significant movements.

Oz. Good idea, but before we get there, the indices mentioned earlier included a one per cent rise in the metals and mining index. The gold index was down by 1.1 per cent, whereas the bank-heavy all ordinaries index was up 2.6 per cent.

In keeping with those small index changes there were very few eye-catching price moves, and not a lot of corporate news to encourage buyers or sellers into the market.

Kibaran (KNL), the emerging graphite producer, enjoyed strong support after announcing a sale of material to ThyssenKrupp. The stock closed the week at A27 cents for a gain of A7 cents (35 per cent), but did get as high as A34 cents on Thursday.

Lincoln (LML) was another graphite stock on the move, after it announced that it was close to receiving a mining lease for its Kookaburra Gully project in South Australia. The stock added A1.4 cents (37 per cent) to A5.2 cents.
...





Source >>> www.minesite.com


----------



## drillinto

Africa Energy Outlook (IEA, 2014)

In the IEA’s first comprehensive analysis of sub-Saharan Africa, it finds that the region’s energy resources are more than sufficient to meet the needs of its population, but that they are largely under-developed. The region accounted for almost 30% of global oil and gas discoveries made over the last five years, and it is already home to several major energy producers, including Nigeria, South Africa and Angola. It is also endowed with huge renewable energy resources, including excellent and widespread solar and hydro potential, as well as wind and geothermal.








http://www.iea.org/newsroomandevents/pressreleases/2014/october/name-127248-en.html


----------



## drillinto

11 Aussie Oil & Gas Stocks to Ride the Rising Tide in African Oil

By Bob Kohut | 28.10.2013

Africa is well on its way to becoming the next “lucky” continent with an abundance of as yet untapped natural resources.  Perhaps the most promising is the rising number of discoveries of oil reserves in Sub-Saharan Africa.  The following map of international exploration companies with a presence in Africa is already a bit out of date, but it shows that the big players are committed to African exploration.









http://www.thebull.com.au/premium/a...s-to-ride-the-rising-tide-in-african-oil.html


----------



## drillinto

>>> Crude Inventories* Keep Piling Up
OCT 29, 2014 









http://www.bespokeinvest.com/thinkbig/2014/10/29/crude-inventories-keep-piling-up.html

*http://www.yourdictionary.com/crude-oil-inventories


----------



## drillinto

How to Play the M&A Mining Mania
Oct 31, 2014	  
>>> by Tim Maverick

“What will Mick buy?”








http://www.wallstreetdaily.com/2014/10/31/mining-assets-mick-davis/


----------



## drillinto

Mick is back !

Xstrata founder Davis bids for Anglo American assets: Sunday Times
LONDON | Nov 2, 2014 












http://www.reuters.com/article/2014/11/02/us-angloamerican-m-a-davis-idUSKBN0IM0EN20141102


----------



## drillinto

That Was The Week That Was … In Australia
Nov 3, 2014

>>> by Our Man in Oz

Minews. Good morning Australia. It looks like your market missed a lot of the action last week.

Oz. It did, but largely because so much happened after we closed on Friday. If it wasn’t the U.S. market hitting a fresh all-time high it was gold slipping to a four-year low.

Minews. With neither event doing much for your mining stocks.

Oz. Well, certainly not the gold miners, that’s obvious, but the continued recovery in the U.S. is sending a pretty positive signal to the rest of the world and that should eventually flow back into mining.

Minews. Let’s focus on what happened last week, starting with the indices and then any newsmakers.

Oz. Gold stocks had a rough time, obviously, with no help coming from the exchange rate as the Australian dollar rose fractionally. That meant our gold stocks copped the initial blast of the falling gold price with more to come next week, potentially adding to the eight per cent fall in the ASX gold index.

Other miners did better leaving the metals and mining index down by just one per cent, while bank and industrial stocks lifted the all ordinaries index by two per cent.
...









Source >> www.minesite.com


----------



## drillinto

>>> Asian buyers line up for Mozambican LNG with new deals

by O. VUKMANOVIC and J. GRONHOLT-PEDERSEN
Oct 30, 2014 

Countries across Asia are quietly reaching deals to import liquefied natural gas (LNG) from Mozambique, which could transform its economy and give it a front-row seat in tapping rising global gas demand.

The unannounced agreements, five in total, show how war-scarred Mozambique is elbowing past rivals from the United States to Australia by offering flexible contract terms on 20-year deals.
...













http://www.reuters.com/article/2014...-anadarko-petrol-exclus-idUSKBN0IJ1V320141031


----------



## drillinto

>>> Platinum

Russia, Zimbabwe to Develop Nation’s Biggest Platinum Mine
By G. Marawanyika and B. Latham  
Sep 15, 2014 


Russia and Zimbabwe will jointly mine platinum in the African country’s Darwendale district, Russian trade minister Denis Manturov and Zimbabwean foreign minister Simbarashe Mumbengegwi said in a joint statement.
...






http://www.bloomberg.com/news/2014-...ntly-operate-platinum-mine-in-darwendale.html


----------



## drillinto

>>> Commodity Prices Down in ISM Manufacturing Report <<<
NOV 3, 2014

In this month's survey, manufacturers noted price increases in six commodities (Aluminum*, Electrical Components, MRO Supplies, Polyethylene, Polypropylene, and Stainless Steel) and declines in eight (Aluminum*, Carbon Steel, Copper, Corn based products, Diesel, Galvanized Steel, Gasoline, and Silver).  This was the first time that more commodities were down in price in a given month than up in price since November of last year, and only the eleventh month in the entire recovery (since June 2009).
...












http://www.bespokeinvest.com/thinkb...-prices-down-in-ism-manufacturing-report.html


----------



## drillinto

October 2014: Asset Class Performance

Australia (EWA): +6.22%
Brazil (EWZ): -0.48%
Canada (EWC): -2.51%









http://www.bespokeinvest.com/thinkbig/2014/11/4/october-asset-class-performance.html


----------



## drillinto

These countries are getting killed by cheap oil
by Jesse Solomon 
October 31, 2014

The price is not right for many oil rich nations.
Oil is selling for roughly $83 a barrel on the global market. That's bad news for Iran, Nigeria, Venezuela, Russia, and Saudi Arabia, among others. They need the black stuff to trade at far loftier levels in order to balance their budgets.
...






http://money.cnn.com/2014/10/30/investing/cheap-oil-prices-hurt-iran-venezuela-saudi-arabia/


----------



## drillinto

Australian Agricultural Company Limited (ASX:AAC) is an Australia-based company, engaged in the operation of grazing and farming properties, beef cattle breeding, growing, feed lotting and trading and beef value-add businesses relating to wholesale meat marketing. The Company’s business segments include finished and store cattle group produces beef cattle that are either exported or sold for meat; farming operations include growing and harvesting of cotton, wheat, sorghum and other crops; wholesale beef group markets and distributes branded beef both internationally and domestically, and meat processing operations are based in Darwin. The Company operates an integrated cattle production system across 18 cattle stations, five agisted properties, two owned feedlots, five external feedlots, and two owned and two external farms located throughout Queensland and the Northern Territory, covering approximately 6.9 million hectares.





>>> http://www.aaco.com.au/


----------



## drillinto

>>> Cattle, coffee, cotton prices vulnerable in index rejig
>>> 4th Nov 2014

Prices of futures in coffee, cotton and live cattle look particularly vulnerable to distortion from the annual commodity index reweighting process, which will "likely have a material impact" on values, Societe Generale said.











http://www.agrimoney.com/feature/cattle-coffee-cotton-prices-vulnerable-in-index-rejig--319.html


----------



## drillinto

Democratic Republic of Congo(DRC) gold production set to quadruple

October 26, 2014


The amount of gold produced by the Democratic Republic of Congo is on track to be four times the amount produced last year, thanks largely to the opening of the Kibali gold mine in May.

Reuters reported the country's mines minister, Martin Kabwelulu, as saying that DRC's gold output this year is targetted at 18 tonnes.
...











http://www.mining.com/drc-gold-production-set-to-quadruple-66720/


----------



## drillinto

>>> Ivory

Demand for ivory from China is stripping Tanzania of its elephants and causing the East African state to lose more of the giant beasts to poaching than any other African country, according to a scathing report on the country’s illegal wildlife trade.

The Selous reserve in the country’s south has been the hotspot for ivory poaching, with elephant numbers there falling from around 70,000 in 2006 to 13,000 in 2013, according to a report by the Environmental Investigation Agency (EIA).

***











http://www.theguardian.com/environm...-is-devastating-tanzanias-elephant-population


----------



## drillinto

USA Expands Its Market Dominance
Nov 6, 2014

Australia is Top 11









http://www.bespokeinvest.com/thinkbig/2014/11/6/us-expands-its-market-dominance.html


----------



## drillinto

ICE to Run Replacement for Century-Old London Gold Fixing
By Nicholas Larkin  

Nov 7, 2014

ICE Benchmark Administration will run the replacement for the 95-year-old London gold fixing, as benchmarks for other precious metals were overhauled this year.
...









http://www.bloomberg.com/news/2014-...ement-for-century-old-london-gold-fixing.html


----------



## Wysiwyg

drillinto said:


> >>> Ivory
> The Selous reserve in the country’s south has been the hotspot for ivory poaching, with elephant numbers there falling from around 70,000 in 2006 to 13,000 in 2013, according to a report by the Environmental Investigation Agency (EIA).



Obviously no one in the world has the "power" to stop this blatantly ugly human activity. I can picture those fat officials sitting there with toothy grins and zero conscience for this.


----------



## drillinto

>>> COAL

Nov 7, 2014

National King Coal?

Perhaps the most common explanation you’ll hear of Britain’s success in the Industrial Revolution is that it was all down to the presence of easily accessible coal deposits.
...











http://antonhowes.tumblr.com/post/102001277904/national-king-coal


----------



## drillinto

Russia Inks Second Gas Deal with China, Lessening Dependence on Europe
Nov 10, 2014
>>> by Nick Wells

Russia signed a second energy deal with China on Sunday in a move aimed at lessening its dependence on European business partners. Thought to be worth roughly $400 billion, it makes China the nation’s largest client 
for natural gas.
...










http://resourceinvestingnews.com/77936-china-russia-lng-europe-bc-gazprom.html


----------



## Smurf1976

drillinto said:


> Perhaps the most common explanation you’ll hear of Britain’s success in the Industrial Revolution is that it was all down to the presence of easily accessible coal deposits.




It's hard to imagine how Britain would have done it if they hadn't had cheap energy. That said, their coal production peaked back in 1913 or thereabouts and declined from that point onward - all Thatcher did in the 1980's in a "big picture" sense was slightly accelerate what was inevitable. Britain still has plenty of coal as such, but not much left that's economically extractable.


----------



## drillinto

Gold Bulls Accelerate Retreat to This Year’s Fastest Pace
>>> by Luzi Ann Javier and Joe Deaux  

Nov 10, 2014 
...

“There’s just not one typical investment idea that’s supportive to gold right now,” George Zivic, a New York-based portfolio manager at OppenheimerFunds Inc., which oversees $245 billion, said by phone Nov. 5. “With the potential of rates increasing, dollar appreciation, it becomes synthetically expensive to hold gold as some sort of a portfolio hedge. And then you have the reality of no real concerns of inflation.”

...










http://www.bloomberg.com/news/2014-...rate-retreat-to-this-year-s-fastest-pace.html


----------



## drillinto

US Now the Most Overbought
Nov 10, 2014

In terms of year-to-date performance, India (PIN) is up the most at +27.19%, followed by the Phillipines (EPHE) at +20.89% and Thailand (THD) at +19.34%.  Australia (EWA) is up +2.54%.









http://www.bespokeinvest.com/thinkbig/2014/11/10/us-now-the-most-overbought.html


----------



## drillinto

Top 100 Futures Trading Blogs
>>> AUG 21, 2012 <<<
by J. Cummans

Futures investing was the original means of establishing exposure to commodities. It was first utilized by farmers and other commodity producers in order to hedge against poor crop yields among other things. Now, futures contracts can be utilized by anyone with an account, allowing a number of active traders to open positions in their favorite hard assets. 
...






http://commodityhq.com/2012/top-100-futures-trading-blogs/


----------



## drillinto

Severe buttter shortage in Japan
Nov 11, 2014 

Japanese shoppers are up in arms over a serious butter shortage that has forced Tokyo to resort to emergency imports, as some grocers limit sales to one block per customer.
...









http://www.ctvnews.ca/business/japan-s-butter-refugees-up-in-arms-over-severe-shortage-1.2096967


----------



## drillinto

Keystone XL Pipeline: Lame-Duck Congress Fast-Tracks Legislation
>>> by Daniel Arkin
14 Nov 2014


The tortuous six-year fight over a controversial proposal to funnel oil from Canada to the Gulf Coast took another turn this week after both houses of the lame-duck Congress moved to vote on the Keystone XL pipeline.

As the legislation barrels through Congress and heads to the Oval Office, President Barack Obama may soon settle one of the most politically charged debates of the decade. The White House appeared to downplay the congressional maneuvering Wednesday, saying it takes a "dim view of these kinds of legislative proposals."
...






http://www.nbcnews.com/news/us-news...duck-congress-fast-tracks-legislation-n247761


----------



## drillinto

Time for a ‘melt-up’: the coming global boom
>>> by Anatole Kaletsky 
November 14, 2014

Get ready for a “melt-up.”

Back in mid-October, as stock markets around the world plunged faster than at any time since 2011, many investors and economists feared a meltdown. But with the U.S. economy steadily expanding, monetary and fiscal policies becoming more stimulative in other parts of the world and the autumn season for financial crises now over, a melt-up seems far more likely.
...






http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/


----------



## drillinto

Gina Rinehart to milk China’s dairy fix
THE AUSTRALIAN 
NOV 14, 2014 

>>> by Rick Wallace

MINING magnate Gina Rinehart plans to join forces with a Chinese industrial giant in a $500 million joint venture to export infant milk powder from Queensland to China.
...











http://www.theaustralian.com.au/bus...chinas-dairy-fix/story-e6frg8zx-1227122350476


----------



## drillinto

18 NOV 2014

Trading firm commits to commodities sector revenue transparency.

Trafigura Beheer B.V., one of the world’s leading commodity trading firms, today announced its commitment to a new policy designed to encourage the disclosure of payments to governments by commodities traders under the auspices of the Extractive Industries Transparency Initiative (EITI), the global standard for improving transparency of revenues from natural resources.
...








http://www.trafigura.com/media-cent...ns-eiti-transparency-initiative/#.VGxYIfldVs8


----------



## drillinto

U.S. banks grilled over commodities trading practices

U.S. Senate calls Goldman Sachs to account for warehouse 'merry-go-round' to manipulate aluminum

>>> CBC News <<<

Nov 20, 2014 










http://www.cbc.ca/news/business/u-s-banks-grilled-over-commodities-trading-practices-1.2843784


----------



## drillinto

US Crude Oil Production

This Is The Chart Of The Year

>>> By Myles Udland <<<

NOV. 20, 2014







http://www.businessinsider.com/us-crude-oil-production-the-chart-of-the-year-2014-11


----------



## drillinto

GOLDMAN: Here Are The 10 Big Market Stories That'll Dominate 2015

>>> By Akin Oyedele <<<

NOV. 20, 2014













http://www.businessinsider.com/goldman-top-market-themes-for-2015-2014-11?op=1


----------



## drillinto

Major cotton producers rush to support falling prices

The governments of India, China and Pakistan are intervening to prop up prices 
by way of subsidies or by buying cotton

>>> by Rajesh Bhayani <<<

November 18, 2014 








http://www.business-standard.com/ar...es-business-standard-news-114111800676_1.html


----------



## drillinto

Surprise End to India Gold Controls Boosts Wedding Demand

>>> By Swansy Afonso <<<

Dec 1, 2014 









http://www.bloomberg.com/news/2014-...ndia-gold-controls-boosts-wedding-demand.html


----------



## drillinto

Aluminium challenges in Europe: the energy costs

On the unique challenges facing the industry, EAA chairman Roeland Baan concluded “Aluminium sees a growing demand but decreasing production, this is the European paradox. And for what reason? Essentially due to regulatory costs. It is necessary to implement policies at EU level that offset the burden of costs for the most exposed energy-intensive industries that cannot pass through the cost of climate and energy policies. Equally important is to reduce the increasing exports of aluminium scrap that have to be considered as leakage of Europe’s energy bank. This is crucial for Europe to achieve energy independence.“










http://www.alu-web.de/nc/home/branc...dustry-ready-to-drive-industrial-renaissance/


----------



## drillinto

That Was The Week That Was … In Australia
Dec 1, 2014

By Our Man in Oz

Minews. Good morning Australia, gold seems to have been the brightest spot on your market for the third week in a row.

Oz. Gold was the sector which saw its index add a few percentage points, but the flat performance of the broader minerals and metals index, and the all ordinaries index, was more a case of one bad session on Friday wiping out the good work of earlier in the week.

The gold recovery is becoming quite interesting and while most of the 3.7 per cent rise in the index was caused by a single stock, Newcrest (NCM), the latest rise means the index has risen over the past three weeks by around 13.5 per cent.

Minews. Is that a case of reviving interest, or just a recovery from being over-sold.

Oz. A bit of both really, but whatever the explanation three-weeks of steadily rising prices can’t be a bad thing.

Minews. Let’s move along quickly now because you’re on your way to London for next week’s Mines and Money conference.

Oz. An event which could either be the final word in the downturn we’re enduring, or the first word in a recovery which must eventually start after what’s been a pretty horrid year.

Before going through a quick call of the overall market card let’s stick to the structure of the past few weeks by looking at any eye-catching moves, starting with Duketon Mining (DKM) which reported what seems to be a significant nickel and copper hit from drilling at its Nariz prospect in Western Australia.

No assays were released but the company appears to have encountered thick and rich mineralisation which excited investors who pushed Duketon up by A29 cents (207 per cent) to A43 cents.

Cassini, another base metals explorer best known for its nickel search efforts, also reported encouraging drilling results with the stock rising by A2.5 cents (18.5 per cent) to A16 cents.

Newcrest was the pick of the gold companies, adding A69 cents (13 per cent) to A$10.34 cents, and Fortescue (FMG) was the surprise performer among the iron ore stocks, adding A25 cents to A$2.94 in a week when a big fall might reasonably have been expected because of a further fall in the iron ore price.
...





Source >>> www.minesite.com


----------



## drillinto

Fewer and Fewer Commodities Rising in Price
Dec 3, 2014 












http://www.bespokeinvest.com/thinkbig/2014/12/3/fewer-and-fewer-commodities-rising-in-price.html


----------



## drillinto

Recent Asset Class Performance
DEC 5, 2014 

Along with international equities, commodities have just had a brutal 2014, 
led by oil (USO) with a huge drop of 30%. 











http://www.bespokeinvest.com/thinkbig/2014/12/5/recent-asset-class-performance.html


----------



## drillinto

From Russia, with love, the diamond connect
Dec 10, 2014












http://timesofindia.indiatimes.com/...-the-diamond-connect/articleshow/45445741.cms


----------



## drillinto

>>> Nothing Going Right For Crude Oil
DEC 10, 2014 










http://www.bespokeinvest.com/thinkbig/2014/12/10/nothing-going-right-for-crude-oil.html


----------



## DeepState




----------



## drillinto

>>> Fonterra slashes milk payout - down 60c to $4.70
by Jamie Gray 

Dec 10, 2014









http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11371209


----------



## drillinto

Commodity prices













http://www.indexmundi.com/commodities/


----------



## drillinto

Kenya: Tea Prices Hit Rock Bottom As Production Peaks
4 Dec 2014
>>> By James Waithaka

Average auction prices for tea dipped to a historical low of $2.01 per kilogramme in September [Sh178.32 at an average exchange rate of 89.16 in the month], according to fresh data.











http://allafrica.com/stories/201412040777.html


----------



## drillinto

Low milk price takes toll on New Zealand output
12/12/2014

Fonterra ditched ideas of a rise in its New Zealand milk collections this season, despite a strong start, cautioning of the dent to production potential from the slump in prices to an eight-year low.

The Auckland-based co-operative, the world's top milk exporter, cut by 32m kilogrammes of milk solids to 1.584bn kilogrammes of milk solids its forecast for collections in 2014-15.

The downgrade left the figure "consistent with", in fact identical, to its supplies last season - which represented an 8% jump on volumes in 2012-13.

The slowdown to a halt in output reflects the reduced incentive for farmers to boost productivity, given the slump in world dairy prices, which prompted Fonterra earlier this week to cut to an eight-year low of NZ$4.70 per kilogramme of milk solids its forecast for its milk payout this season.
...








Source >>> http://www.agrimoney.com/printnews.php?id=7789&area=n


----------



## drillinto

The Energy Sector Crash
Dec 11, 2014 











http://www.bespokeinvest.com/thinkbig/2014/12/11/more-on-the-energy-sector-crash.html


----------



## drillinto

Alfalfa
China market closed | U.S. exporters blacklisted because of GM presence in the crop

BROMONT, Que. ”” The discovery of Roundup Ready alfalfa in global hay exports should be on Canadian farmers’ radar, says a Canadian hay exporter.

Ed Shaw, who exports forage around the world, including to China, said three American hay exporters have been blacklisted from exporting hay to China, and hundreds of container loads of hay have been turned away after Roundup Ready alfalfa was found in the loads.

“In the export market, it has be-come a really hot topic item with the Chinese market. The Chinese have zero tolerance for GMO,” Shaw said during a discussion about the introduction of Roundup Ready alfalfa in Canada at a recent forage conference. “It’s catastrophic.”
...











http://www.producer.com/2014/11/roundup-ready-in-alfalfa-exports-catastrophic/


----------



## drillinto

>>> Oil Volatility and Correlation with Equities

Dec 17, 2014 













http://www.bespokeinvest.com/thinkbig/2014/12/17/oil-volatility-and-correlation-with-equities.html


----------



## drillinto

Weekend read

The Conventional Wisdom On Oil Is Always Wrong
Dec 18, 2014

By Ben Casselman











http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/


----------



## drillinto

Most Countries Still Oversold; China and US Overbought
Dec 23, 2014 

Australia(EWA) is currently oversold.











http://www.bespokeinvest.com/thinkb...s-still-oversold-china-and-us-overbought.html


----------



## drillinto

US Stocks
S&P 500 Sector Trading Range Charts
DEC 22, 2014 


The trading range charts help to identify both short and long-term trends, and they also give you an idea of how extended (to the upside or downside) a stock or index is at any given time.









http://www.bespokeinvest.com/thinkbig/2014/12/22/sp-500-sector-trading-range-charts.html


----------



## drillinto

The reason oil could drop as low as $20 per barrel

>>> by Anatole Kaletsky <<<

Dec 19, 2014












http://blogs.reuters.com/anatole-ka...eason-oil-could-drop-as-low-as-20-per-barrel/


----------



## drillinto

The Economist commodity-price index

Nov 29th 2014










http://www.economist.com/news/econo...tors/21635036-economist-commodity-price-index


----------



## drillinto

The Economist commodity-price index

Dec 20th 2014 












http://www.economist.com/news/econo...tors/21636769-economist-commodity-price-index


----------



## drillinto

Byron Wien Announces Predictions for Ten Surprises for 2015

05 January 2015











http://ir.blackstone.com/news-and-v...tions-for-Ten-Surprises-for-2015/default.aspx


----------



## drillinto

>> Most Countries Still Oversold <<
JAN 7, 2015 











http://www.bespokeinvest.com/thinkbig/2015/1/7/most-countries-still-oversold.html


----------



## drillinto

>>> S&P 500, Treasury Yields, Oil - Trading Range Patterns <<<
JAN 6, 2015











http://www.bespokeinvest.com/thinkb...easury-yields-oil-trading-range-patterns.html


----------



## drillinto

Oil glut spurs rush for supertankers to store excess at sea
by J. SAUL, C. MILHENCH, D. SHEPPARD

12 Jan 2015 / Reuters











http://www.japantimes.co.jp/news/20...-rush-for-supertankers-to-store-excess-at-sea


----------



## baby_swallow

Copper has to be the "Chart of the Day"...
It will be interesting to see how the XMM will react today when crude had a big rally overnight...
.


.

London (AFP) - The price of copper tumbled Wednesday to the lowest level for more than five years after the World Bank slashed its global economic forecasts.

Copper for delivery in three months plunged in Asian trading hours to $5,353.25 per tonne, a level last seen in July 2009. That marked an 8.0-percent slide from Tuesday's close.

Copper, which is used in plumbing, heating, electrical and telecommunications wiring, clawed back ground in late morning deals in London to stand at $5,564.50 per tonne.

"Unease over the global economy engulfed commodities," said analyst David Papier at trading firm ETX Capital.

Copper "is often considered a barometer of industrial demand, so the slump leant extra gravitas to news that the World Bank had cut its 2015 growth forecasts blaming sluggishness in the eurozone, Japan and some major emerging economies", Papier noted.

The World Bank on Tuesday predicted that global economy would grow by 3.0 percent in 2015.

That marked a downgrade from the previous forecast of 3.4 percent that was given in June.

Source:
https://au.news.yahoo.com/a/26000513/copper-price-crashes-on-world-bank-growth-outlook/


----------



## drillinto

Freeport Leads Plunge in Mining Stocks After Copper Slump

by Jesse Riseborough and Firat Kayakiran  
Jan 14, 2015










http://www.bloomberg.com/news/2015-...ecord-after-copper-joins-commodity-slump.html


----------



## drillinto

China building bubble

Think about this for a second. Between 1901 and 2000, the U.S. built an entire interstate highway system, the Golden Gate Bridge, the Hoover Dam and just about all of its skyscrapers -- to name just a few concrete-intensive things. China did all that, and almost half again, in just three years.









http://www.huffingtonpost.com/2014/06/13/china-building-bubble_n_5491527.html


----------



## drillinto

BHP Cuts U.S. Shale Rigs as Oil to Iron Ore Prices Slip
by David Stringer | Jan 21, 2015









http://www.bloomberg.com/news/2015-...ending-as-oil-to-iron-ore-prices-decline.html


----------



## drillinto

That Was The Week That Was … In Australia
Jan 19, 2015

By Our Man in Oz

Minews. Good morning Australia, you seem to have had quite a week with gold stocks leading the way once again.

Oz. It was a good week for gold, but not for much else. Iron ore stocks lost much of their hard-won gains and copper stocks were hit hard by the sharp fall in the price of their metal.

One of the big surprises of the week was a modest increase in the value of the Australian dollar, almost in defiance of predictions that it is destined to drop sharply.

Minews. Is the currency move related to what happened with the Swiss franc?

Oz. Perhaps, though the big winner from the Swiss cutting the connection of their franc to the euro appears to be gold thanks to its status as a currency that governments find hard to manipulate.

Last week’s US1 cent rise in the Australian dollar to US82.2 cents negated some of the rise in the U.S. dollar gold price but when business here on Friday closed the local gold price had moved up to around A$1,550 an ounce, a price that prompted comments long the lines of “if a goldminer can’t make money at that price it should quit”.

Minews. Let’s start our price check with your gold stocks, but first we should hear about the key ASX indices.

Oz. The gold index led the way, as would be expected, adding another eight per cent which extends its gain to almost 27 per cent over three weeks. The metals and mining index, weighed down by stocks exposed to copper and iron ore fell seven per cent, wiping out the gains of the previous three weeks, and the all ordinaries index shed three per cent, also wiping out hard earned gains.

Northern Star (NST) was the gold stock everyone was watching down this way after it reported strong cash flow, heightening speculation that it might use its spare cash to acquire additional assets. On the market, the stock added A28 cents to A$1.98 but did touch a 12-month high of A$2 during the day.

Troy (TRY) was another stock attracting attention as it rose by A13 cents to A68 cents, and St Barbara (SBM) had its best week in a long while with a rise of A5 cents to A18.5 cents. Other gold moves worth noting included Silver Lake (SLR), up A6.5 cents to A30.5 cents. Newcrest (NCM), up A75 cents to A$12.93. Perseus (PRU), up A5 cents to A33.5 cents. Evolution (EVN), up A9 cents to A89 cents. Beadell (BDR) up A7.5 cents to A36.5 cents, and Resolute (RSG), up A5.5 cents to A38 cents.
...




Source >> www.minesite.com


----------



## drillinto

Five ways drones could change the way America [Australia] eats

by Mary C. Jalonick, Associated Press, January 25, 2015 











http://www.pbs.org/newshour/rundown/5-ways-unmanned-drones-change-american-food-supply/


----------



## drillinto

That Was The Week That Was … In Australia
Jan 25, 2015


Minews. Good morning Australia, it seems to have been another good week for your market with gold again leading the way.

Oz. It wasn’t a bad week, but much of what happened down this way was a direct result of events in Europe, especially the after-shocks of the Swiss going deeper into negative interest rate territory, followed by the European Central Bank’s big bazooka of monetary stimulus.

The net result, apart from driving the euro to a 11 year low against the U.S. dollar, was to further bolster the case for gold as one of the world’s last safe haven investments, and to act as a trigger for the next big fall of the Australian dollar.

Minews. The fall of your dollar must be doing wonders for the local cash flows of gold miners.

Oz. And the rest of the sector because virtually everything the Australian mining industry sells is denominated in U.S. dollars and last week that fact seemed to have drawn local investors back into nickel and copper stocks despite the underlying prices of those metals slipping further on the London Metal Exchange.

Minews. We’ll get to prices in a little while but first let’s hear about the movements in key ASX indices and then go back to our routine of singling out any noteworthy movers from any sector.

Oz. The gold index, as you might expect, had another good week thanks to the local gold price hitting A$1,630 an ounce as the exchange rate fell to US79 cents. Last week’s 5.5 per cent rise in the gold index takes the increase over the past month to 32.4 per cent.

However, while gold was continuing to rise the wider metals and mining index did better with an increase of 7.3 per cent, thanks to strong performances by the two big boys, BHP Billiton and Rio Tinto, and solid performances by smaller nickel and copper stocks.

Both of the most closely watched mining indices, gold and metals, outperformed the all ordinaries index though that index also managed to gain a reasonable 3.5 per cent.
...



>>> www.minesite.com


----------



## drillinto

"Cannabis is the next great American industry"












http://arcviewgroup.com/


----------



## drillinto

Commodity Shipping Measure Falls to 28-Year Low on China Demand
by Naomi Christie | January 29, 2015

A measure of global shipping costs for commodities fell to a 28-year low as slowing growth in China’s demand for cargoes compounds the effect a fleet glut.
...







http://www.bloomberg.com/news/artic...s-to-28-year-low-as-china-demand-growth-slows


----------



## drillinto

**************
So Long, January
Jan 30, 2015

Markets really could have gone either way this afternoon, but they ended up taking a decidedly negative turn over the final 90 minutes of trading, and it left market bulls licking their wounds for the month of January.
... 











http://www.bespokeinvest.com/thinkbig/2015/1/30/so-long-january.html


----------



## drillinto

That Was The Week That Was … In Australia
Feb 1, 2015

By Our Man in Oz

Minews. Good morning Australia, your market seems to have run out of steam after a strong start to the year.

Oz. That was the case with the mining sector last week, particularly gold stocks, though the overall trend as measured by the all ordinaries index remained positive.

Minews. Gold continues to look interesting from an Australian perspective if your dollar keeps falling.

Oz. There’s no doubt about that, after the ASX closed on Friday you could see the effect of the double-barrelled move with gold rising modestly and the Aussie dollar retreating to around US77.6 cents, producing a local gold price of more than A$1,650 an ounce.

The rise above A$1,650 will probably be reflected in Monday trading when the market has a chance to make up the four per cent fall in the gold index last week, a correction probably caused by profit taking after some strong rises since mid-December.

While gold stocks were losing ground the rest of the mining sector was effectively steady, slipping by an insignificant 0.3 per cent, while the bank-heavy all ordinaries rose by 1.5 per cent.

Minews. Let’s move along to prices, starting with any news-making moves, please.

Oz. There were a few of those, some up, some down, and some making a return after a few years in the wilderness.

Fortescue Metals (FMG), the biggest of the pure play iron ore stocks, surprised the market with a better than expected December quarter result which saw it recoup A23 cents to A$2.36, after hitting a multi-year low of A$1.92 on Tuesday.

On the other side of the ledger the one-time copper darling, Tiger Resources, disappointed its supporters with a poor December quarter report, and immediately suffered a heavy A6.1 cent (55 per cent) fall to A4.9 cents, but that was up on the 12-month low of A3.4 cents reached in early Friday trade.

Another interesting move came from a gold explorer which has been flying beneath the radar screen for some time. Central West Gold (CWG) which is exploring in the Lachlan Fold Belt of New South Wales rose by A6 cents (32 per cent) to A25 cents, but did get to a 12-month high of A26.5 cents, earning itself a stock exchange speeding inquiry – which produced the standard “know of no reason” response.
...






Source >> www.minesite.com


----------



## drillinto

Baltic Dry Index drops to lowest level since 1986
by Pete Evans
CBC News
Feb 02, 2015

 The Baltic Dry Index, an obscure economic indicator that monitors the health of the world's economy by tracking the price of shipping dry goods over oceans, has fallen to its lowest level in 29 years.
...












http://www.cbc.ca/news/business/baltic-dry-index-drops-to-lowest-level-since-1986-1.2940711


----------



## drillinto

Oil demand outlook for 2015
9 February 2015










http://www.opec.org/opec_web/static...downloads/publications/MOMR_February_2015.pdf


----------



## drillinto

IEA SAYS OIL PRICES WILL REMAIN LOW UNTIL 2020
11 FEB 2015

The International Energy Agency predicts that American energy will remain in the game for at least another five years and as a result oil prices will remain below their traditional level over the period, Alex Lawler of Reuters reports.  “ 'The United States will remain the world's top source of oil supply growth up to 2020, even after the recent collapse in prices, the International Energy Agency said, defying expectations of a more dramatic slowdown in shale growth...The agency also said in its Medium Term Oil Market report that oil prices, which slid from $115 a barrel in June to a near six-year low close to $45 in January, would likely stabilize at levels substantially below the highs of the last three years.  Oil prices deepened their decline after the Organization of the Petroleum Exporting Countries in November shifted strategy and declined to cut its own output, choosing to retain market share that has been eroded by rival supply sources such as US shale oil.  But IEA Executive Director Maria van der Hoeven, launching the report in London, said while OPEC may win back some customers while prices are low, it would not regain the market share it held before the 2008 financial crisis. 'This unusual response to lower prices is just one more example of how shale oil has changed the market,' she said in a statement. 'OPEC's move to let the market rebalance itself is a reflection of that fact.' "  The good news maybe long-term, then.


----------



## drillinto

Cheap predictions 
Oil price predictions are conditional on too many variables to allow for a reasonable estimate

in Livemint, 18. 02. 2015












http://www.livemint.com/Opinion/JnugmmbpVdyEEuUmxSW5MJ/Cheap-predictions.html


----------



## drillinto

Happy Birthday Bull ?
March 6, 2015 

Since March 9, 2009: 
Australia(EWA) is up 119.92%
Brazil(EWZ) is down 2.63%
Canada(EWC) is up 97.82%








http://bespokeinvest.com/thinkbig/2015/3/6/happy-birthday-bull.html


----------



## drillinto

That Was The Week That Was … In Australia
Mar 8, 2015

By Our Man in Oz

Minews. Good morning Australia. Your mining market seems to have taken a bit of a battering last week.

Oz. It looks like that, but most of the serious damage was confined to a handful of stocks with sharp falls by BHP Billiton, Rio Tinto and Fortescue Metals dragging the ASX mining index down by four per cent, while two of the leading gold stocks, Newcrest (NCM) and Regis (RRL), were mainly to blame for a seven per cent fall in the gold index.

Two factors spooked investors in mining and gold stocks: a reduced growth target in China which will limit demand for steel-making materials such as iron ore and metallurgical coal, followed by the latest slide in the price of gold, which dropped even further after we closed on Friday.

Minews. Whatever the cause – and don’t forget the strengthening U.S. dollar – those are big index falls which must have rattled investor confidence.

Oz. They are, but another factor which caused a re-think about the overall market was the re-balancing of the ASX top 200 index which saw three once-prominent iron ore miners kicked off.

Atlas (AGO), BC Iron (BCI) and Mt Gibson (MGX) have all suffered heavy losses as a result of the sharp fall in the iron ore price, and will be feeling even more pain today as a result of the latest drop in the price to less than US$60 a tonne.

Minews. Iron ore seems to be resuming its traditional position as product only suitable for large-scale miners.

Oz. Precisely, and it would not be a surprise if we see more mine closures over the next six-to-12 months.
...



Source >> www.minesite.com


----------



## drillinto

Unprecedented Sugar Glut Expanding as World Output Soars

by Marvin Perez, Luzi Ann Javier, Gerson Freitas Jr
March 17, 2015

The world has never been so awash in sugar.
Just as cane harvests expand in India and Thailand, farmers in Brazil, the world’s largest producer, are ramping up exports to take advantage of a tumble in the exchange rate that has swelled their profit margins. And crops that were hurt by drought last year have been revived by rain. Global output is set to exceed demand for a fifth straight year, leaving the biggest stockpiles on record, the International Sugar Organization said.
...







http://www.bloomberg.com/news/artic...ed-sugar-glut-expanding-as-world-output-soars


----------



## drillinto

Anadarko Petroleum to make decision on investment [Natural gas] in Mozambique.
April 16, 2015    

US group Anadarko Petroleum (APC is listed at NYSE) will soon sign the sales contract allowing it to advance in the natural gas exploration project in northern Mozambique, said Wednesday in Maputo John Peffer, director of the group in Mozambique.

Peffer said that if the sales contracts are signed “in the coming months” and the government permits come in time the group can make a decision and “production can begin in 2019,” according to financial news agency Bloomberg.

The Area 1 block, in which the US group is the operator, has natural gas reserves estimated at 75 trillion cubic feet, enough to make Mozambique the world’s third largest supplier of natural gas, after the Qatar and Australia.

A final investment decision depends on the conversion of non-binding agreements into binding ones that the Anadarko Petroleum group has closed to export 8 million tons of natural gas per year to customers in Japan, China, Thailand and Singapore. (macauhub/MZ)


----------



## drillinto

The green switch.

In 2013, the world added 143 gigawatts of renewable energy capacity compared with 141 gigawatts of capacity to create energy by burning fossil fuels.







http://www.livemint.com/Opinion/HWCkFMw8dxwlCM5I9ZmGGN/The-green-switch.html


----------



## notting

A la contraire my dear Watson  

[video]http://www.cnbc.com/2015/07/16/cramer-why-copper-gold-are-ready-to-shine.html[/video]


----------



## drillinto

Financial Times: Shares in Noble Group plummeted to a six-year low on Friday(July 31) as short-selling funds stepped up their assault on the commodities trader, which has seen almost a third of its value wiped out this week.


----------



## drillinto

BARRON'S COVER

Time to Buy Commodities
Sentiment on energy and gold -- and oil and metals stocks -- may be nearing capitulation. Now is a good time to lean against the wind and start to buy.

By ANDREW BARY
Aug. 8, 2015 1:52 a.m. ET

It’s time to consider commodities. While the Standard & Poor’s 500, Nasdaq Composite, and other key equity indexes are near record levels, commodity stocks, including energy shares, are way below their peaks. Commodities are probably the most out-of-favor industry group in the stock market.








http://online.barrons.com/articles/time-to-buy-commodities-1439013162


----------



## drillinto

The Troubled Oil Business

Hitting peak oil will come faster than any of us think. But don’t blame dwindling supply ”” it’s all about disappearing demand

By Amory Lovins
July 28, 2015








https://medium.com/@amorylovins/the-troubled-oil-business-21ad430eff10


----------



## drillinto

Oil price slides to lowest level since 2009 amid demand worries, higher OPEC production

Alex Veiga, 
The Associated Press, August 11, 2015.

The price of U.S. crude oil has tumbled to its lowest level in more than six years.

Benchmark U.S. crude fell $1.88, or 4 per cent, to settle at $43.08 a barrel in New York on Tuesday, its lowest close since March of 2009.

The latest slide came as OPEC said its production rose to a three-year high. China also devalued its currency, suggesting economic growth there was softer and could cause lower crude demand.

U.S. crude has been declining since reaching a high this year of $61.43 on June 10.

Crude is under pressure on several fronts. Big increases in production in the U.S. and Canada, along with sizable gains in Iraq and elsewhere, have helped increase supplies. Saudi Arabia and other OPEC nations kept pumping crude at high levels and Iranian oil could soon return to the market after being kept off by sanctions.

Meanwhile, worldwide demand is not as strong as expected because China's growth has cooled and other economies have become more energy efficient.

While drivers, shippers and airlines are enjoying the lower fuel prices spurred by crude's slump, the oil industry is responding to lower profits with sharp cuts in spending and employment.

In other futures energy trading, Brent crude, a benchmark for international oils used by many U.S. refineries, declined $1.23, or 2.4 per cent, to $49.18 a barrel in London. Wholesale gasoline closed unchanged at $1.694 a gallon, while heating oil fell 2.9 cents to close at $1.563 a gallon. Natural gas rose 0.2 cents to close at $2.844 per 1,000 cubic feet.


----------



## drillinto

Day of reckoning postponed as global recovery builds

Monetary expansion in Europe, America and China all point to stronger growth this year, signalling another leg to the global expansion

By Ambrose Evans-Pritchard || 04 Aug 2015


http://www.telegraph.co.uk/finance/...ning-postponed-as-global-recovery-builds.html


----------



## drillinto

The world’s most powerful central bank will signal that it is still on course to raise its interest rates this year, despite the market turbulence of recent weeks.
By Peter Spence, Economics Correspondent, The Telegraph, 12 SEP 2015


http://www.telegraph.co.uk/finance/...t-rate-rise-despite-Black-Monday-turmoil.html


----------



## drillinto

Investors in Hong Kong and mainland China await central bank move on rates

by Jing Yang

13 September, 2015

http://www.scmp.com/business/market...rs-hk-and-china-await-central-bank-move-rates


----------



## drillinto

>>> Annual Stock Market Returns

ON OCTOBER 8, 2015 

BY MICHAEL BATNICK

After a strong year for stocks, does it make sense for investors to dampen their expectations? That’s what many investors, professional or otherwise, were saying heading into 2014, following a year when stocks made new all-time highs and gained ~30 percent.
...



https://theirrelevantinvestor.wordpress.com/2015/10/08/annual-stock-market-returns/


----------



## drillinto

October 14, 2015

The End of the Oil Major?

By James Stafford

http://oilprice.com/Energy/Oil-Prices/The-End-Of-The-Oil-Major.html


----------



## drillinto

BHP CEO Says Commodities May Have Bottomed, Australian Reports
by Garfield Clinton Reynolds (Bloomberg)

April 9, 2016 

BHP Billiton Ltd. Chief Executive Officer Andrew Mackenzie expressed optimism that the slump in commodity prices may be close to bottoming out, in an interview published Saturday by the Australian newspaper.

Any turnaround in raw materials prices would be gradual, and bumpy, with supply expanding faster than demand, MacKenzie told the newspaper. He also said BHP’s moves to reduce costs and improve productivity left it well placed for a rebound or a renewed slump.

“We’re not looking at the screens and things continue to go down, down and down. And yet we are able to look at our numbers to see costs going down, down, down,’’ Mackenzie was quoted as saying. “If you look at the basket of commodities that we deal with, the numbers are self-evident: the fall has stopped.”

BHP cut its dividend for the first time in 15 years in February as the collapse in commodity prices spurred a 92 percent tumble in first-half profit for the world’s biggest mining company.


----------



## hamli

drillinto said:


> BHP CEO Says Commodities May Have Bottomed, Australian Reports
> by Garfield Clinton Reynolds (Bloomberg)
> 
> April 9, 2016
> 
> BHP Billiton Ltd. Chief Executive Officer Andrew Mackenzie expressed optimism that the slump in commodity prices may be close to bottoming out, in an interview published Saturday by the Australian newspaper.
> 
> Any turnaround in raw materials prices would be gradual, and bumpy, with supply expanding faster than demand, MacKenzie told the newspaper. He also said BHP’s moves to reduce costs and improve productivity left it well placed for a rebound or a renewed slump.
> 
> “We’re not looking at the screens and things continue to go down, down and down. And yet we are able to look at our numbers to see costs going down, down, down,’’ Mackenzie was quoted as saying. “If you look at the basket of commodities that we deal with, the numbers are self-evident: the fall has stopped.”
> 
> BHP cut its dividend for the first time in 15 years in February as the collapse in commodity prices spurred a 92 percent tumble in first-half profit for the world’s biggest mining company.




I don't even know why what he says matters. Commodities have been on a rally in last few weeks, closing your eyes and clicking buy on commodities in last few weeks would have made you a tonne of money... he is a bit late to the picture.


----------



## drillinto

WORLD ECONOMIC OUTLOOK (WEO)
Too Slow for Too Long
April 2016


http://www.imf.org/external/pubs/ft/weo/2016/01/


----------



## drillinto

Commodities aiming to end 5-year streak of annual declines

http://www.marketwatch.com/story/commodities-are-crushing-it-in-2016-heres-why-2016-06-30


----------



## drillinto

Graphite >> https://miningwealth.com/why-i-dont-cover-graphite-stocks-anymore/


----------



## drillinto

James Grant: "The FED is now hostage to Wall Street".

http://www.fuw.ch/article/the-fed-is-now-hostage-to-wall-street/


----------



## drillinto

Bull Market [US] Has Further to Run

Brian S. Wesbury – Chief Economist / First Trust (USA)
Robert Stein, CFA – Dep. Chief Economist
Strider Elass – Economist

http://images.realclear.com/files/2016/08/328_9c51b4ce-b720-44dc-a147-c93a2df697dd.pdf


----------



## drillinto

Exxon ignores near-term glut to play liquefied gas long game

BLOOMBERG | Monday, Sept. 5, 2016

http://triblive.com/business/headlines/11078805-74/exxon-gas-lng


----------



## drillinto

Australia‘s resource-rich economy expanded at its fastest annual pace in four years last quarter, 
clinching a remarkable run of 25 years without recession as surging exports more than made up 
for a patchy performance at home.


http://fortune.com/2016/09/07/australia-economic-growth/


----------



## drillinto

IEA Changes View on Oil Glut, Sees Surplus Enduring in 2017
By Grant Smith
13 SEP 2016

http://www.bloomberg.com/news/artic...n-oil-glut-sees-oversupply-persisting-in-2017


----------



## drillinto

>>> What Is Stopping Global LNG Growth? <<<

By Zainab Calcuttawala - Sep 16, 2016



>>> http://oilprice.com/Energy/Energy-General/What-Is-Stopping-Global-LNG-Growth.html


----------



## priya0710

Traders can sustain with long term profitability  by investing in commodities. This market is least correlated with all the other markets and therefore it is less riskier to invest as well.


----------



## drillinto

>>> Survey Reveals Projections for Lower Wind Energy Costs

        September 13, 2016



>>> http://www.nrel.gov/news/press/2016/37738


----------



## drillinto

US: Rate Hike Looks Set for December

Brian S. Wesbury – Chief Economist
First Trust Advisors L. P. (USA)

>>> http://www.ftportfolios.com/Commentary/EconomicResearch/2016/9/21/rate-hike-looks-set-for-december


----------



## drillinto

>>> The Oil Glut Will Bleed Into 2017, Says IEA Chief <<<

By Tsvetana Paraskova - Sep 27, 2016, 


http://oilprice.com/Latest-Energy-N...Glut-Will-Bleed-Into-2017-Says-IEA-Chief.html


----------



## drillinto

Commodities stumble, but still on track for first yearly gain since 2010

by Myra P. Saefong / MarketWatch / 1 OCT 2016

Lean hogs, soybeans and crude oil all lost ground in the third quarter, but the commodities market held its grip on the first yearly gain since 2010.

Commodities typically underperform in the third quarter, but they logged their strongest third quarter since 2013, analysts at Citi Research said in a recent note.

The Bloomberg Commodity Index  is down nearly 4% for the quarter, but remains up about 8.6% year to date. The index hasn’t posted a calendar-year gain since 2010, when the index saw a nearly 17% climb. It lost almost 25% in 2015, but gained nearly 13% in the second quarter of this year.

It was “not a hot summer for commodities, but the winter is unlikely to be as cold to investors,” Citi analysts said.

For the quarter ended Sept. 30, the largest commodity gainers included palladium, up nearly 21% according to FactSet data, and cotton , up roughly 6%. On the downside, lean hogs , down a whopping 47%, and soybeans , off 17%, suffered the biggest losses.


----------



## drillinto

Cobalt Mining in Congo

Story by Todd C. Frankel
Photos by Michael Robinson Chavez
Video editing by Jorge Ribas
September 30, 2016


[At the end of the article there are already 145 comments by readers of the Washington Post]




https://www.washingtonpost.com/grap...-table-main_cobaltflipper-916a:homepage/story


----------



## drillinto

IN YOUR PHONE, IN THEIR AIR

A trace of graphite is in consumer tech.

In these Chinese villages, it’s everywhere.

Story by Peter Whoriskey; Photos by Michael Robinson Chavez; Videos by Jorge Ribas
October 2, 2016

[At the end of the article there are already 49 comments from WP's readers]



>>> https://www.washingtonpost.com/graphics/business/batteries/graphite-mining-pollution-in-china/


----------



## drillinto

>> Australia Stands Pat on Rates as Commodity Rebound Gathers Pace <<

by Michael Heath
October 4, 2016

Australia’s central bank kept the cash rate unchanged Tuesday as an unexpectedly strong rebound in commodity prices boosts an economy already growing at an above-average pace.
...


http://www.bloomberg.com/news/artic...at-on-rates-as-commodity-rebound-gathers-pace


----------



## drillinto

>> Boone Pickens On Natural Gas: It’s The Way To Defeat OPEC <<

by Lincoln Brown - Nov 04, 2016




>> http://oilprice.com/Energy/Energy-G...n-Natural-Gas-Its-The-Way-To-Defeat-OPEC.html


----------



## drillinto

>>> ETF Trends: US Sectors & Groups <<<
Nov 10, 2016


>>> https://www.bespokepremium.com/etf-trends/etf-trends-us-sectors-groups-111016/


----------



## drillinto

ETF Trends: Hedge 
Nov 23, 2016

Metals and steel-related ETFs have performed well over the last few days, after pausing briefly last week. 
Energy also continues to perform well ahead of EIA data on the petroleum market today. 
Duration continues to underperform with EDV, TLT, and VCLT all on the list of worst performers. 
Parts of Health Care also continue to underperform as do solar stocks and gold.

>> https://www.bespokepremium.com/etf-trends/etf-trends-hedge-112316/


----------



## drillinto

ETF Trends: International 

EWA (Australia) is among the best perfomers.

[All ETFs listed at NY]

Nov 29, 2016

>> https://www.bespokepremium.com/etf-trends/etf-trends-international-112916/


----------



## drillinto

Heavy metal

Nov 29 2016

Donald Trump’s promise of increased infrastructure spending in the US is fueling the spike 
in industrial metal prices despite weak growth in the global economy.


>>> http://www.livemint.com/Opinion/t9N6YwkbJJHIaWk2PNipKM/Heavy-metal.html


----------



## drillinto

Trump Sets The Stage For A Huge Gold Rally In 2017

By James Burgess - Dec 02, 2016



>>>>> http://oilprice.com/Metals/Gold/Trump-Sets-The-Stage-For-A-Huge-Gold-Rally-In-2017.html


----------



## drillinto

ETF Trends: US Sectors & Groups 
Dec 5, 2016

Energy, steel, and banks continue to outperform while Italy is the best performing country ETF of the past week – a surprising outcome given the vote against government reform in the referendum held by Italy over the weekend. Laggards include coffee, Brazil, Turkey, and rate sensitive US Utilities along with other bond proxies and gold.



>>>>> https://www.bespokepremium.com/etf-trends/etf-trends-us-sectors-groups-12516/


----------



## Porper

drillinto said:


> Trump Sets The Stage For A Huge Gold Rally In 2017
> 
> By James Burgess - Dec 02, 2016
> 
> 
> 
> >>>>> http://oilprice.com/Metals/Gold/Trump-Sets-The-Stage-For-A-Huge-Gold-Rally-In-2017.html




You did realise that this was a paid advertisement? It had to be with the amount of rubbish in that article. Not saying I am bearish gold at all...but that spiel is all hype.

"Legal Disclaimer/Disclosure: This piece is an advertorial and has been paid for"


----------



## drillinto

Porper said:


> You did realise that this was a paid advertisement? It had to be with the amount of rubbish in that article. Not saying I am bearish gold at all...but that spiel is all hype.
> 
> "Legal Disclaimer/Disclosure: This piece is an advertorial and has been paid for"




Thank you Porper.

What interested me was the title of the article:

"Trump Sets The Stage For A Huge Gold Rally In 2017"


----------



## drillinto

drillinto said:


> Thank you Porper.
> 
> What interested me was the title of the article:
> 
> "Trump Sets The Stage For A Huge Gold Rally In 2017"





Will the "huge gold rally" take place in 2017 ?


----------



## drillinto

ETF Trends: US Sectors & Groups 
Dec 12, 2016


Oil-related ETFs have paced the pack over the last week with massive gains over the weekend thanks to additional cuts agreed by non-OPEC countries. 
Spain, Italy, and Mexico all continue to move higher, while small cap US equities (especially Value) have surged. Biotech, bonds, and gold miners are the worst performers over the past week. 



>>> https://www.bespokepremium.com/etf-trends/etf-trends-us-sectors-groups-121216/


----------



## drillinto

drillinto said:


> ETF Trends: US Sectors & Groups
> Dec 12, 2016
> 
> 
> Oil-related ETFs have paced the pack over the last week with massive gains over the weekend thanks to additional cuts agreed by non-OPEC countries.
> Spain, Italy, and Mexico all continue to move higher, while small cap US equities (especially Value) have surged. Biotech, bonds, and gold miners are the worst performers over the past week.
> 
> 
> 
> >>> https://www.bespokepremium.com/etf-trends/etf-trends-us-sectors-groups-121216/


----------



## drillinto

JAN 03, 2017
*>>> Byron Wien Announces Ten Surprises for 2017*

https://www.blackstone.com/media/press-releases/article/byron-wien-announces-ten-surprises-for-2017


----------



## drillinto

*Oil Drillers Are Expanding Again After Losing Half-Million Jobs*
by David Wethe
9 jan 2017 



>>> https://www.bloomberg.com/news/arti...nding-after-half-million-job-cut-during-crash


----------



## Userman

I like gold esp high grade.

fyi,


*Nexus Identifies High Grade Gold Mineralization at Niangouela*

*Reports 2,950 g/t Gold and Plans More Drilling*



*Nexus Gold Corp. TSX-V: NXS, OTC: NXXGF, FSE: N6E* announced it has received geochemical results from Actlabs Burkina Faso SARL, an ISO 9001:2008 certified independent lab, from its initial exploration program at the Niangouela Gold Concession located 60 kilometres north of Ouagadougou, Burkina Faso, West Africa.

The highlights of the program include sample NG005 taken from the primary quartz vein at 46 metres below surface which returned a value of* 2,950 g/t gold*. In addition, sample NG006 was collected from the artisanal dumps of the sheared intrusive which returned a value of *23.9 g/t gold*. These results indicate the presence of high-grade gold occurring within the primary quartz vein and the sheared intrusive envelope. These samples were selected and may not be representative of the mineralization hosted on the concession.



http://tsxpennystocks.ca/mining/201...ws-drill-reports-2-950-g-t-gold-at-niangouela


----------



## drillinto

*Recent Asset Class Performance — International Markets Bounce *
Jan 17, 2017

Outside of the US, many countries have already posted nice gains in 2017.  Brazil (EWZ) is up 7.8% YTD after posting a big gain in 2016 as well.  Hong Kong (EWH) and Australia (EWA) are both up more than 5%, while Canada (EWC), China (ASHR), India (PIN), and Japan (EWJ) are all up more than 3%.  Mexico (EWW) is the only country on our matrix that is down year-to-date, and that follows a very weak Q4 as well.
Looking at commodities, gold (GLD) and silver (SLV) have both gotten off to good starts to 2017, while oil (USO) and natural gas (UNG) are in the red.  

Source >>> www.bespokepremium.com


----------



## Valued

drillinto said:


> Will the "huge gold rally" take place in 2017 ?




I highly doubt it. Obviously, there could be a major virus outbreak or a war but you can't be afraid of monsters under the bed. Trump could start a nuclear war yet but aside from that, a major gold rally is unlikely. Gold rallies can happen temporarily like the terrorist attacks in France but it did not last long before people realise actually that even though it's not cool when people die it doesn't really make much difference economy unless there is a war consequently. Air bombings in the middle east don't really count as a war, unfortunately that is a standard way of life.


----------



## drillinto

*Biggest gold mining scandal in history gets Hollywood treatment*

https://www.thestar.com/business/2016/12/30/bre-x-tale-rich-with-hollywood-drama-jennifer-wells.html


----------



## drillinto

*ETF Trends: US Sectors & Groups – 1/25/17*
Jan 25, 2017

Who would have thought that in the week surrounding an executive order pulling out of NAFTA, Mexican equities would dramatically outperform in USD terms? Brazil and Poland have also done well while the homebuilders have been the strongest stocks in the US following very solid existing home sales data yesterday (which we discussed in _The Closer_ last night). On the losing side over the last 5 days, biotech, Pharma, and long-term Treasuries continue to decline. Precious metals and the USD have also declined; interestingly GLD and UUP have identical performance over the last five sessions, an unusual correlation. (Source: Bespoke Investment Group - USA)


----------



## drillinto

*The world’s top 10 highest-grade copper mines*
These mines are benefitting the most from the recent copper price wave

Vladimir Basov | February 20, 2017

http://www.mining.com/the-worlds-top-10-highest-grade-copper-mines/


----------



## drillinto

*Bespoke’s Global Equity Markets Trading Range Screen — Russia Falters*
Feb 28, 2017

Learn more about Bespoke’s research and wealth management services_*.*_

Below is a look at our trading range screen for the 30 largest country stock market ETFs traded on US exchanges.  While nearly all countries remain above their 50-day moving averages, we’ve seen a steady drift lower in most parts of the world over the last week.  Even the US (SPY) has ticked lower, but it’s still the most overbought country in the world right now — trading at 2 standard deviations above its 50-DMA.

The country that stands out the most on the screen is Russia (RSX).  While Russia is still the best performing country since the election last November, it’s now just barely ahead of the US and Sweden.  Over the last week, RSX has moved from trading just above its 50-day to trading well into extreme oversold territory.


https://www.bespokepremium.com/think-big-blog/bespokes-global-equity-markets-trading-range-screen/


----------



## drillinto

*ExxonMobil takes stake in Eni’s block off Mozambique for $2.8B*
*Offshore Energy Today, March 9, 2017*

Oil major ExxonMobil and the Italian oil company Eni have signed a sale and purchase agreement to enable ExxonMobil to acquire from Eni a 25 percent indirect interest in the natural gas-rich Area 4 block, offshore Mozambique.

http://www.offshoreenergytoday.com/exxonmobil-takes-stake-in-enis-block-off-mozambique-for-2-8b/


----------



## drillinto

*Global Equity ETF Performance Since March 1st*
Apr 17, 2017

The S&P 500-tracking SPY ETF is down 2.49% since its March 1st high.  Below is an updated look at our country ETF trading range screen to highlight how the rest of the world has been trading over this time period.  In terms of overbought/oversold levels, 13 of 30 countries remain overbought, while none are oversold.  But the US is one of just a few countries trading below their 50-day moving averages (the black vertical “N” line in the screen).  Just 5 of 30 countries are down since March 1st, with Brazil (EWZ) down the most followed by the US (-2.49%).





Source >>> www.bespokeinvest.com <<<


----------



## drillinto

*Statistical Review of World Energy*
*The BP Statistical Review of World Energy provides high-quality objective and globally consistent data on world energy markets. In our at-a-glance overview, growth in global primary energy consumption remained low in 2016; and the fuel mix shifted away from coal towards lower carbon fuels.*

http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html


----------



## drillinto

*Bespoke’s Asset Class Performance Matrix *
Jun 23, 2017

Outside of the US, the Chinese equity market (ASHR) is the only area of the world that saw nice gains this week at +2.85% following the announcement that they will be included in the MSCI EM indices.  Brazil (EWZ), Australia (EWA), Spain (EWP), and the UK (EWU) all saw declines of more than 1%.

https://www.bespokepremium.com/think-big-blog/bespokes-asset-class-performance-matrix-62317/


----------



## drillinto

*Miners to tighten their belts for the remainder of the year – BMI*

http://www.miningweekly.com/article...en-belts-for-remainder-of-the-year-2017-06-27


----------



## drillinto

Recent report on Mustang Resources Ltd.

http://www.mustangresources.com.au/irm/PDF/2518_0/BakerYoungStockbrokersOctober2017Report


----------



## drillinto

How African oligarchs steal from their countries

An investigation by the African Investigative Publishing Collective in partnership 
with Africa Uncensored and ZAM.

https://www.zammagazine.com/images/pdf/documents/African_Oligarchs.pdf


----------



## drillinto

Author: Alan Brochstein, CFA.  14 JAN 2018* 

*
​Friends,

Large inflows into two exchange-traded funds (ETFs) reflect substantial interest in the cannabis sector. We have written extensively about the first to begin trading, Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ), which has seen assets swell to C$633mm as of Friday after its debut in early April. Perhaps even more impressive has been the quick increase in the assets of ETFMG Alternative Harvest ETF (MJX), which rose from just $6mm going into its debut the last week of the year to $339m as of Thursday. Ironically, while there isn't a single name particularly leveraged to California legalizing, the driver of investor interest was likely related to the historic event. We suspect that many of the buyers of MJX had no idea what they were buying.

As we described last week, these ETFs are distorting the market in Canada. We pointed to three names in particular that were benefitting from the inflows, and they were among the worst performers of the week. For those who are investing in cannabis stocks, we believe it will be increasingly important to stay on top of developments at these funds. Beyond paying attention to inflows and outflows and being aware of the names that are particularly heavily weighted relative to the size of their shares outstanding or, better, their float, investors should be aware of the quarterly rebalancing dates.

This week, two more ETFs in Canada filed preliminary prospectuses, including Horizons. Their second fund, the Horizons Junior Marijuana Growers Index ETF, which will trade on the NEO Exchange with the symbol "HMJR", will be focused on smaller companies ($50-500mm market cap) and, unlike HMMJ, it will include companies with operations in the United States (primarily cultivation, production and/or distribution). The fund will invest up to 20% of its assets outside of North America. A fourth fund, The Marijuana Fund, is planned by Evolve. "SEED"  will be actively managed and is expected to include both Canadian and U.S. companies. The preliminary prospectus was light on details.

While we were critical of HMMJ initially, we note that it has improved, with better diversification and less reliance upon names that aren't particularly leveraged to cannabis. MJX, on the other hand, is exceptionally poorly constructed. It may also face an issue with its custodian, as it converted its failed Latin American Real Estate fund, allowing it to at least temporarily bypass what has been a challenge for competitors in getting a custodian on board. We recall highlighting BNY Mellon signing on to be the custodian for First Trust in late May only to see them drop the fund two days after we published. For now, expect ETFs to be focused primarily on Canadian companies, as federal illegality scares off the trustees.


----------



## drillinto

*Goldman touts best commodity investing environment in a decade*
*by MYRA P. SAEFONG*

https://www.marketwatch.com/story/g...nvironment-in-a-decade-2018-02-01?siteid=nbch


----------



## rederob

drillinto said:


> *Goldman touts best commodity investing environment in a decade, by MYRA P. SAEFONG*
> https://www.marketwatch.com/story/g...nvironment-in-a-decade-2018-02-01?siteid=nbch



Goldman might have been a wee bit early, but they got their principal themes right. 
Heading into 2109 their oil price forecast is now overly optimistic, but otherwise all is on track and even in better shape across the metals complexes.
I found these links the other day, and the information on offer provides an excellent starting point to reviewing equities which fit you investing preferences:
*– Lithium stocks on the ASX: The Ultimate Guide*
*– Cobalt stocks on the ASX: The Ultimate Guide
– Graphite stocks on the ASX: The Ultimate Guide
– Nickel stocks on the ASX: The Ultimate Guide
– Vanadium stocks on the ASX: The Ultimate Guide
– Uranium stocks on the ASX: The Ultimate Guide
– High Purity Alumina stocks on the ASX: The Ultimate Guide
– Tin stocks on the ASX: The Ultimate Guide
– Oil and gas stocks on the ASX: The Ultimate Guide*


----------



## rederob

Asymmetric markets become the norm when major global surprises kick in, as covid has.
Stimulus responses to economic woes benefit infrastructure spend, and this usually benefits metal prices.
To begin, there is likely to be a tendency to a weaker US dollar which adds to metals prices over and above increased demand.
For a number of Oz miners who price in US dollars, this is not the best outcome as it diminishes profits.  However, the trend has been for metal price rises to more than compensate.
Here's the latest state of play:



According to the RBA, over the past year, the index has increased by 19.7 per cent in SDR terms, led by higher iron ore prices. The index has increased by 11.4 per cent in Australian dollar terms.
As can be seen from the above chart, we are a fair way off the previous peak, so our bigger miners should continue to do ok until this bull run wanes.  That's suggests a 2-year time frame, as beyond that and the ramped up supply of metal crashes the price curve.


----------



## rederob

*Looking at nickel first, recent price increases are not based on shortage as LME warehouses are bountiful:*









*Meanwhile copper prices look driven by supply constraints as LME warehouses are at their lowest levels in many years:*


*Over the past fortnight, copper is up by around 15%:*



*As the USA will be pouring trillions into their proposed recovery over coming years, the USD is likely to continue to weaken and sustain metals prices over the medium term.*


----------



## Dona Ferentes

Just looking at the options to get exposure to commodities, both hard and soft (and the underlying prics, not commpanies that have exposure to sectors), and it seems the options are few and far between. 

For ETFs, all that is available, locally listed, in AUD, are the Gold, Silver and assorted PM offerings.
The more comprehensive ETF offering, QCB, was withdrawn in Nov 2020 - not enough uptake??


----------



## rederob

Last week investors sold off Treasuries at a faster rate than the Fed (and banks) were buying, fearing higher real interest rates would accelerate capital losses.  One outcome was a rapid depreciation of the AUD against the greenback.  The other big one related to various commodity prices being hit hard, especially precious metals.
There's only so much selling that can be done, and when it's over capital will be looking for a better home.  After the GFC, that was in commodities and precious metals (despite a massive price increase some years earlier on the back of the mining boom).
I see history repeating.  Except that this time it seems more in conjunction with already tight commodity markets.


----------



## rederob

A really good read on the present commodity boom is here.
My favourite chart from the article is this one, showing how early we are in the cycle:




*By way of the previous bull market in commodities, the RBA has us here:*



So, plenty more lead in the pencil.


----------



## over9k

Remember your economics though:




This makes china export-led. Without the ability to export (shipping lane security, tariffs, whatever), then you need to look at who is producing stuff closer to/actually able to get to the end consumer. 

BHP & RIO have actually partnered in a massive copper mine in the U.S for example: https://www.smh.com.au/business/com...he-land-faces-fresh-blow-20210302-p576zy.html 

Just obviously having the usual native title problems etc.


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## rederob

over9k said:


> Remember your economics though:
> 
> View attachment 120816
> 
> 
> This makes china export-led. Without the ability to export (shipping lane security, tariffs, whatever), then you need to look at who is producing stuff closer to/actually able to get to the end consumer.
> 
> BHP & RIO have actually partnered in a massive copper mine in the U.S for example: https://www.smh.com.au/business/com...he-land-faces-fresh-blow-20210302-p576zy.html
> 
> Just obviously having the usual native title problems etc.



Can you please explain your last post?

Just an FYI: Europe and Asia are one land mass, and China sends massive cargoes to Europe by train. Europe is already a larger trading partner than the USA, while China's belt & Road initiative is increasing it's market penetration elsewhere, especially Africa.

On topic proper, as nations come out of the pandemic mode, they will gear up their industrial output in conjunction with stimulus spending, and that boost should carry well into 2022.


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## over9k

Young people do all the consuming - no young people means nobody to sell to. 

Europe's had as much of a baby bust as china/asia has. Only india & the 'states have demographic profiles worth noting.


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## rederob

over9k said:


> Young people do all the consuming - no young people means nobody to sell to.
> 
> Europe's had as much of a baby bust as china/asia has. Only india & the 'states have demographic profiles worth noting.



It varies nation to nation, but baby boomers in the USA for example have more than twice the spending power of millennials.  So your thinking needs decent data to back it.

On topic proper, the RBA index continues to rise for commodity prices:




The very high probability of inflation in coming years is likely to push this trend as high as the index reached post GFC.


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## over9k

For anyone reading: Spending power is not the same as who actually spends the money. This guy doesn't have a clue what he's talking about as he wouldn't be pointing to "data" if he did. 

I'm blocking this moron and you'd do well to do the same.


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## rederob

@over9k said "Spending power is not the same as who actually spends the money."
His evidence was based on his *opinion*.
I referenced America, so *this *link shows, by way of example, that people aged 45-54 years *spend *almost twice as much as people under 25 years.  So it proves that you do not necessarily need a young population to derive spending power (or consumption).
With specific reference to China @over9k is absolutely mistaken.
Boston Consulting Group estimated that the share of total consumption by the young generation (ie aged 18-35 years) is projected to reach 69% by 2021, versus 31% by those older.  And that the spending growth pattern will increase for those younger.
But that's not necessarily the point.  China already enjoys the highest PPP of any nation, and it's the spending of the nation as a whole that counts, irrespective of which age sector is responsible.
So consumption (via spending) will be exceptionally strong in nations with high PPP and large populations, and continue to drive this commodity cycle. 
Understanding the difference between facts and opinions provides a better basis for analysis.


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## rederob

*The commodity price index continues to surge:*




It has actually been held back by our stronger dollar - a trend I expect will continue throughout this year. 
The linked article does not pick up on gold prices as they have been subdued, although relatively high.  Diversified miners with gold will be the big winners should gold reclaim in its previous record high over the coming year.  The $20/oz bounce overnight is another step in the right direction.


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## rederob

Post-pandemic recovery across the base metals sector has been consistent:


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## rederob

The RBA index peaked recently, then dipped a tad, and is likely to bounce to a new high as the year progresses:


Base metal prices (accompanied by strong warehouse drawdowns) have rocketed upwards in the past week:


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