"The best place to be is in commodities"

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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

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

 

[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

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

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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 €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.

 

[drillinto]

Trading range charts for ten major commodities:
http://www.bespokeinvest.com/thinkbig/2010/9/22/bespokes-commodity-snapshot.html

 

[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.

 

[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.

 

[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.