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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/
 
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.
 
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.
 
Must read US comment on inflation
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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/
 
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.
 
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
 
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.
 
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.
 
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
 
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.
 
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
 
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?
 
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.
 
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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