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March 19, 2011

"That Was The Week That Was ... In Australia"
By Our Man in Oz
www.minesite.com/aus.html

Minews. Good morning Australia. You seem to have emerged relatively unscathed from a tumultuous week.

Oz. We have, though it was a week that brought to mind Melbourne’s famously fickle weather, where you get four seasons in a day. The ASX started horribly, as was expected after the triple-headed crisis in Japan, steadied, wobbled again, and then rebounded on Friday to finish roughly where it started. The indices tell the story of the week, but not of the day-to-day confusion. The all ordinaries closed on Friday down 0.4 per cent. The metals and minerals index closed up 0.9 per cent, and the gold index closed down one per cent.

Minews. In other words: all over the shop.

Oz. Very much so, though you could also say we were saved by Friday, when the indices made up most of their lost ground. The all ordinaries added 1.7 per cent on Friday. Metals and mining added 2.6 per cent, and gold rose by 3.6 per cent. Victim of the week was undoubtedly the uranium sector which was slaughtered, with all companies down by between 20 and 35 per cent. A few brave chief executives raised their voices against the sell-off, only to be whacked by the popular press, which added insult to injury. The gold sector produced a surprising number of positive moves, even if the index did end lower. Copper was the best of the base metals. Iron ore was mixed, as were the minor metals.

Minews. Let’s go straight to gold, and leave uranium for last because most investors up this way already understand what happened there.

Oz. Kingsrose (KRM) was Friday’s star. It rose a sharp A20 cents to a 12 month high of A$1.55 in its second heaviest trading day of the past 12 months. Slightly more than three million shares were traded, almost matching the previous record of 3.5 million recorded late last year. Nothing was filed by the company at the ASX, and the exchange did not hit the company with a price and volume speeding ticket. Perhaps it’s in the mail.

Another solid upward move in the gold space came from Ramelius (RMS). The shares rose A17 cents to A$1.27 after the company reported a resource upgrade at its Mt Magnet project in Western Australia. The new resource for the Galaxy area alone at Mt Magnet stands at just over one million ounces, comprised of 20.3 million tonnes grading 1.65 grams of gold a tonne. Troy Resources (TRY) also had a good week, recovering A28 cents of recently lost ground to close on Friday at A$3.70, thanks largely to the discovery of a high-grade gold vein at its Casposo project in Argentina. This could potentially add years to the mine’s life. Also on the move was Crusader (CAS), which continued to rise in the wake of fresh drill results from its Borborema project in Brazil. The best assay showed 19.65 metres at 5.33 grams per tonne, which included nine metres at 9.75 grams per tonne. The shares rose A13 cents to A$1.10.

Two other gold companies which we follow closely also deserve special mention. Gold Road (GOR) reported that it has boosted the resource base at its Central Bore project in Western Australia beyond the one million ounce mark. In response Gold Road’s shares rose A2 cents to A42 cents. And Catalpa (CAH) enjoyed a decent rub-off from Bruce McFadzean’s talk at the 77th Minesite forum last week, rising by A16 cents to A$1.74.

Minews. Which goes to show that London investors can still drive your market.

Oz. Never doubted it. We’ll wrap up the developments in the gold space with a quick call of the card. Companies on the rise included Kingsgate (KCN), up A42 cents to A$8.50, Saracen (SAR), up A4.5 cents to A64.5 cents, Silver Lake (SLR), up A5 cents to A$2.09, Medusa (MML), up A27 cents to A$6.78, and Beadell (BDR), up A3 cents to A78 cents. Gold companies that fell included Ausgold (AUC), down A17 cents to A$1.10, Perseus (PRU), down A10 cents to A$2.80, OceanaGold (OGC), down A9 cents to A$2.40, Northern Star (NST), down A1.5 cents to A34.5 cents, and Scotgold (SGZ), down A0.3 of a cent to A7.2 cents.

Minews. Base metals next, please.

Oz. Copper did best. Nickel companies slipped a little, and zinc companies slipped a little more. Best of the emerging copper producers were Sandfire (SFR) and Rex (RXM). Sandfire rose A35 cents to A$6.78 and Rex rose A15 cents to A$2.75. Other copper companies on the rise included: OZ Minerals (OZL), up A7 cents to A$1.53, Equinox (EQN), up A16 cents to A$5.31, Marengo (MGO), up A1 cent to A28.5 cents, and PanAust (PNA), up A4.5 cents to A77 cents. Bougainville Copper (BOC) was also on the move as it continues to attract speculators ahead of a possible commitment to the re-development of its mothballed mine in Papua New Guinea. Bougainville rose A20 cents to A$1.50.

Nickel movers included: Mincor (MCR), down A1.5 cents to A$1.41, Western Areas (WSA), down A26 cents to A$6.03, Panoramic (PAN), down A4 cents to A$2.05, and Poseidon (POS), down A1.5 cents to A25 cents.

Zinc movers included: Perilya (PEM), down A7 cents to A55.5 cents, Terramin (TZN), down A2.5 cents to A35 cents, Ironbark (IBG), down A1.5 cents to A22.5 cents, and Prairie Downs (PDZ), down A3 cents to A15.5 cents. The one zinc company to rise was Bass (BSM), which closed up half a cent to A39 cents.

Minews. Iron ore and coal next, please.

Oz. The trend was modestly down, although there were also some risers, and one company that fell markedly. BC Iron (BCI) dropped A51 cents to A$2.44 after the surprise withdrawal of a takeover bid from Regent Pacific. We should hear more about that in the weeks ahead because the reason for the withdrawal, a claim that Ukrainian oligarch Gennadiy Bogolyubov, the owner of Consolidated Minerals, had not spelled out his intentions to accept or otherwise, has raised eyebrows. Other companies on the move included: Atlas (AGO), down A6 cents to A$3.32, Iron Ore Holdings (IOH), down A1.5 cents to A$1.62, Territory (TTY), down A1 cent to A27.5 cents, Brockman (BRM), up A14 cents to A$6.10, and Fortescue (FMG), up A6 cents to A$5.94.

Coal companies had a mixed time of it, though there was one notable rise. Aspire (AKM) reported fresh assay results from its Ovoot coking coal project in Mongolia, and rose A7 cents to A75 cents. Other movers included: Coal of Africa (CZA), down A7 cents to A$1.24, Riversdale (RIV), up A19 cents to A$15.71, Hunnu (HUN), down A1 cent to A$1.33, Xanadu (XAM), down A5.5 cents to A50 cents, and Aston (AZT), up A28 cents to A$8.77.

Minews. Minor metals, and then finish with the call of the rather ill uranium card.

Oz. There was very little to report among the minor metals. Rare earth companies were weaker. Lynas (LYC) slipped A5 cents lower to A$1.92, and Alkane (ALK) lost the same amount, A5 cents, to A$1.35. The tin companies went in different directions. Venture (VMS) added A3.5 cents to A49 cents, while Kasbah (KAS) lost A1.5 cents to A26.5 cents. South Boulder (STB), the leading potash player, recovered a modest A4 cents to A$4.51. Nkwe Platinum (NKP) returned to trade after a period in suspension over uncertainty relating to its tenements in South Africa, and promptly dropped A9.5 cents to A35.5 cents.

Minews. Uranium, and goodbye.

Oz. As you might expect, there’s no good news to report. Just a list of share price falls. Mantra (MRU) dropped A$2.55 to A$5.29 after a Kazakh-based company dropped its proposed takeover bid. Paladin (PDN) fell A$1.13 to A$3.60, but did get as low as A$3.01 on Thursday, although there were some signs of a recovery on Friday. Extract (EXT) fell A$3.63 to A$7.00. Manhattan (MHC) fell A24 cents to A81 cents, but did touch A60 cents on Thursday. Berkeley (BKY) fell A52 cents to A90 cents, but did get as low as A74 cents on Tuesday. And Bannerman (BMN) fell A24.5 cents to A44.5 cents, but did get as low as A34.5 cents on Tuesday.

Minews. Thanks Oz.
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March 21, 2011

"On Recent Evidence, Living By The Sea Is More Dangerous Than Living Next To A Nuclear Power Station"
By Rob Davies
www.minesite.com/aus.html

No one really knows how many people died as a direct result of the Chernobyl nuclear disaster. It is known that 50 workers at the site were killed in, or shortly after the explosion. What is much less certain is the number of deaths that were caused among the 17 million people that were indirectly affected by the event. Estimates range from 5,000 to 220,000. A range which means that the standard deviation of the estimate is so high that the estimate itself is worthless.

What we do know, though, is how many people were killed at the nuclear meltdown at the Three Mile Island nuclear plant in the US. No one was killed there. And so far no one has been killed as a direct consequence of the problems at the Fukushima nuclear power station in Japan, even though it has had to endure an earthquake and a tsunami that were both in excess of its design parameters.

But just because no-one has yet been killed as a direct result of the Fukushima incident is not to say nuclear power is safe. It clearly isn’t, but its safety record is excellent when compared to, say coal. Coal mining has killed hundreds of thousands of miners over the last few centuries. Or oil. Only a year ago BP’s Macondo rig blew up in the Gulf of Mexico killing many of its operators. And a few decades before that the explosion on the Piper Alpha platform in the North Sea killed hundreds of its crew.

Yet the press and the chateratti would have you believe that the problems at the stricken Japanese plant mark the death knell of the nuclear power industry. This negative sentiment largely explains the recent 10 per cent fall in the spot price of uranium to US$60 a pound. A few months ago spot uranium was trading at US$75. But the long-term contract price still stands at US$155 a pound. And in such a febrile atmosphere, politicians don’t always help. Angela Merkel’s closure of geriatric nuclear power stations in Germany probably says more about her poll ratings than the technical status of the plants.

The problem that the politicians have to address is that the world cannot live without nuclear power. Nuclear already supplies 13.5 per cent of the world’s electricity and despite the airy arguments of the Greens, there is no way that renewable energy will ever do anything other than supply a few per cent of the total electrical output.

The correlation between increasing power consumption, and rising living standards and falling mortality is well established. Our future prosperity and well being depend on us being able to consume electricity at the touch of a button. And nuclear power has to be a part of that equation.

In the short term the media comment on nuclear power will undoubtedly be extremely negative. But it now seems the worst is over for the Fukushima plant and once a full account of the event is published it is likely that the episode will actually prove how safe the process is when faced with a situation outside the expectations of its designers.

In fact it will demonstrate that living beside the sea is far more dangerous than living next to a nuclear power station. In time this could be seen as the biggest buy signal ever for uranium, which should act as some small comfort for those sitting on large losses in the wake of the recent sell-down in uranium shares.

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March 25, 2011

""Atlas Iron Storms Into The ASX Top 100, As Iron Ore Production Rises""
By Our Man in Oz
www.minesite.com/aus.html [Free Registration]

Little more than two years ago canny investors were loading up with Atlas Iron shares at A45 cents a pop. Today, they’re looking down the barrel of a 600 per cent gain, as a company which started life looking for gold instead carves out a place for itself as one of Australia’s most successful iron ore exporters. The upward share price movement from Atlas, from its late 2008 low to recent trades at around A$3.26 represents recognition that Atlas is now a world-class iron ore producer. Indeed that fact is now so well recognised that the company has snatched a place among the top 100 on the ASX. And there should be more good news to come, because Atlas is one of the few Australian iron ore miners that has mastered the industry’s three key challenges: to prove up iron ore in the ground, to gain access to a port, and to secure people able to join it all up, by means of logistics and deals.

The latest of those deals was the friendly merger with another iron ore player in the Pilbara region, Giralia Resources. Like Atlas, Giralia had found plenty of iron in the ground - in one case atop the same hill as Atlas. Unlike Atlas, Giralia was struggling to achieve the equally important “infrastructure solution” of road or rail access to a port. Bringing Atlas and Giralia together is a rare example of one plus one equalling three. The merged business today has two producing mines, a resource of 444 million tonnes of direct shipping ore, two high priority development targets and a pipeline of opportunities stretching a decade and more into the future.

“The merger has gone very well,” Atlas chief executive David Flanagan told Minesite from his Perth office. “We now have the infrastructure in place, the ore reserves, and people, to execute our plans for multiple mines.” The first clear indication of what that will mean in money terms came late last month when Atlas reported a maiden half year profit of A$30.1 million from sales valued at A$201.8 million. “That was a significant milestone”, David said. “It was the culmination of the development of our first two mines, at Pardoo and Wodgina, and sets us up well for the full 2011 financial year.”

Forecasts for the likely full year profit range between A$120 million and A$150 million. Goldman Sachs comes in at the low end, with a forecast A$125 million, and a few cautionary words about the outlook. Goldman’s twin issues with Atlas are its cost structure, and the long-term iron ore demand and pricing outlook. On costs, Goldman reckons Atlas is facing higher than expected costs relating to exploration, share-based payments, and shipping expenses. “We regard Atlas as a small, but relatively high cost producer when all costs are considered”, Goldman told clients. “In a strong market the company has leverage and we expect strong markets for at least two years. In weak markets, or in markets with cost inflation (oil-related and labour) we believe the stock would disproportionately suffer.”

While not a welcome criticism, the thoughts of the research team at Goldman make it clear just exactly why Atlas has been running so hard to build its production profile, to secure corporate opportunities, and expand while opportunities abound. “We’re confident that we have costs well under control”, David said. “Cash costs for the current half are confirmed at between US$40 and US$43 a tonne, and we’re currently selling at around US$120 a tonne.” No need to be a Goldman analyst to appreciate that a margin on cash costs in the order of US$80 a tonne, or 200 per cent, is a something that most businesses dream about.

Atlas plans to grow its current annualised rate of exports from six million tonnes to 12 million tonnes by the end of 2012. By the end of 2015 the target is 22 million tonnes a year, with material flowing from a number of mines by that time, including the Daltons and Mt Webber deposits. In the longer term, Atlas’s output could grow well beyond that 2015 target as additional deposits are drilled out and the current resource of 444 million tonnes of direct shipping ore expands towards a target of 638 million tonnes. After all, the company has a whopping 26,000 square kilometres of tenements to work off - almost precisely 10 times the area of Luxembourg.

Challenges and opportunities will keep Atlas busy for years. The biggest opportunity is in maximising the profits available from access to a large resource of direct shipping ore, and excellent exposure to port capacity. With an entitlement of 15 million tonnes a year at Utah Point, part of Port Hedland, plus another 19.5 million tonnes at South West Creek, also in Port Hedland, and up to 10 million tonnes at the planned port of Anketel, Atlas has an unrivalled port profile among the smaller Pilbara miners. A secondary opportunity lies in potentially “monetising” deposits of magnetite ore which Chinese and Indian steel mills are keen to access, but which Australian miners find too capital-intensive because of the high level of upgrading that’s required to drive off impurities in the low-grade ore.

The biggest challenge, David told Minesite, is no longer infrastructure or finding sufficient ore, it’s winning environmental approvals from an often slow-moving government process. Other issues that he faces include finding the right people to join his fast-growing business in a region of Australia where skilled professionals and blue-collar workers are in high demand, and living with Australia’s proposed new tax system which will hit iron ore and coal miners with a super tax, and then layer a carbon tax on top of that.

Complex as the future looks, the key points about Atlas today is that cash flows are high, and still growing. The company is debt free and has A$230 million cash in the bank. Annual production will double from six million tonnes of direct shipping ore a year to 12 million tonnes by the end of 2012. New mines are planned, and magnetite deposits are a sleeper that could add further value. “We have the right combination of assets and people to continue growing rapidly”, David said. Which sums it up nicely.

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March 26, 2011

"That Was The Week That Was ... In Australia And Hong Kong"
By Our Man in Oz, in Hong Kong
www.minesite.com/aus.html [[ Free Registration ]]


Minews. Good morning Australia. Or should be that be good morning Hong Kong?

Oz. Bit of both really. Much of the past week was spent at the Mines & Money conference in Hong Kong while also keeping a watchful eye on the home market. The mood in both places was equally positive, and the 2,000 delegates who made it to the Hong Kong edition of Mines and Money certainly came away feeling pretty optimistic especially after being revved up by the like of Robert Friedland on the outlook for copper, Andrew Forrest on iron ore, Rob McEwen on gold and David Morgan on silver.

Minews. Not a bad team of keynote speakers, and certainly a big turn up compared with last year.

Oz. Roughly triple the head count of the 650 who were at the 2010 conference, which isn’t a bad measure of the ultra-positive mood in this part of the world towards commodities. Morgan and McEwen in particular played to the audience, with Morgan tipping a future silver price of more than US$100 an ounce, and McEwen tipping gold to go to US$5,000 per ounce. Wild and hairy-chested as those forecasts look, both men have the credentials to make them. Morgan runs Silver-Investor.com and has forgotten more about his favourite metal than most people know. McEwen is the founder of the very successful Canadian gold company, Goldcorp.

Minews. They picked a good week to spruik their wares with gold and silver continuing their relentless upward charge. Time’s short, let’s switch to the Australian market.

Oz. It was an up week on the ASX. The all ordinaries index added 2.6 per cent. The metals and mining index was slightly behind, up 2.3 per cent, and the gold sector starred with a gain of 5.7 per cent. The rise in local gold shares was especially commendable as the Australian dollar also surged to fresh heights, closing the week at its highest since it was allowed to float freely in 1983, at US$1.02.

Minews. Prices now, but perhaps keep it brief as you have a plane to catch.

Oz. Thanks. Gold is the obvious starting point for a shortened market review. The challenge is to find any gold company that fell in such an up week. Among the top performers was the Brazilian focussed gold and iron ore explorer, Beadell Resources (BDR), which confirmed that it might produce both products, given the unique nature of its orebody. That news helped the shares add A12 cents to A90 cents. Several of the Aussies attending Mines and Money also did well. Gold Road (GOR) put on A5.5 cents to A47.5 cents. Cobar Consolidated (CCU), the silver specialist, added A11 cents to A97 cents. Kingsgate (KCN) gained A49 cents to A$8.99. Medusa (MML) rose by A43 cents to A$7.21. And Kingsrose (KRM) added A7 cents to A$1.62, but did hit an all-time high of A$.68 during Friday trade. Other movers included Troy (TRY), up A12 cents to A$3.82, Resolute (RSG), up A13 cents to A$1.25, Allied (ALD), up A4 cents to A66 cents, Adamus (ADU), up A6 cents to A77 cents, Perseus (PRU), up A30 cents to A$3.10, and Ausgold (AUC), up A7 cents to A$1.18.

Minews. Uranium companies next, please, given the rebound which seems to have started.

Oz. There was a solid recovery, although not back to the pre-Japan tsunami level. Mantra (MRU) was one of the best thanks to a revived, albeit lower, takeover offer. It added A$1.43 to A$6.72. Extract (EXT), another company in the middle of a corporate shuffle, was also better off, closing up A$1.43 at A$8.43. Other uranium movers included Berkeley (BKY), up A17 cents to A$1.07, Uranex (UNX), up A5 cents to A38 cents, Bannerman (BMN), up A3.5 cents to A48 cents, and Paladin (PDN), up A25 cents to A$3.85. Manhattan (MHC) was also stronger, up A19 cents to A$1.00, as its chief executive, Alan Eggers, took every opportunity in Hong Kong to spread the uranium story.

Minews. Over to the base metals now, starting with copper to see whether Mr Friedland’s talk helped the market.

Oz. He seems to have done his job, as the copper companies were up, as were, the zinc and nickel companies. One of the best copper moves came from Hot Chili (HCH) which caught the attention of Mines and Money delegates after a presentation by its chief executive, Christian Easterday. Hot Chili’s shares added A7 cents A75 cents. Rex (RXM) was another copper player making itself visible in Hong Kong, and it duly rose by A14 cents to A$2.89. Other copper movers included Marengo (MGO), up A3 cents to A31.5 cents, Sandfire (SFR), up A21 cents to A$6.99, and Equinox (EQN), up A6 cents to A$5.37. Metminco (MNC) was one of the few to fall last week, down A3 cents to A38 cents.

Nickel companies attracted an increased level of interest, perhaps aided by a tip from a presenter at Mines and Money. Warren Gilman, deputy chairman of the Canadian investment bank CIBC, said nickel was set for an upward run in the next 12-to-18 months. Across the seas to the south, on the ASX, Panoramic (PAN) was the strongest of the nickel miners, adding A31 cents to A$2.31. Western Areas (WSA), another Aussie in Hong Kong, rose by A63 cents to A$6.66. Mincor (MCR) reversed a little of its recent slide with a rise of A2 cents to A$1.43. Independence (IGO) added A30 cents to A$6.56, and Minara (MRE) put on A6 cents to A78 cents.

The zinc moves were generally modest, but there was evidence of a stronger overall upward trend, although that might well have been a rub-off from the strengthening price of lead. Blackthorn (BTR), a zinc player we used to hear a lot about, was the pick of the sector after it announced a fresh deal with Glencore regarding its Perkoa project in Africa. Blackthorn added A12 cents to A66 cents. Meridian (MII) rebounded after a painful slide, rising by A2.2 cents to A12 cents. Kagara (MZL) gained A6 cents to A63 cents, and Perilya (PEM) added A6.5 cents to A62 cents.

Minews. Iron and coal next, please.

Oz. Both coal and iron ore were mixed, but trending up. Pick of the better known coal companies were two Mines and Money attendees, Hunnu (HUN) and Xanadu (XAM). Both are busy in Mongolia. Hunnu added A15 cents last week to A$1.48 and Xanadu rose A7 cents to A57 cents. Coal of Africa (CZA) went against the trend with a fall of A11 cents to A$1.15, but Carabella (CLR) continued its strong upward run, rising by A70 cents to A$2.75. Good as all that looks, the star of the coal sector was a new player, Newland Resources (NRL), which reported promising coking coal assays from its tenements in the Bowen Basin of Queensland, and effectively doubled on the news to close at A15.5 cents.

Iron ore companies were led higher by Fortescue (FMG) which added A30 cents to A$6.28 after an upbeat talk from Andrew Forrest in Hong Kong and a revised resource estimate of 10 billion tonnes of ore. Elsewhere, Atlas (AGO) added A20 cents to A$3.52. Iron Ore Holdings (IOH) attracted plenty of interest in Hong Kong as Ocean Equities analyst, Sam Spring, did a good job talking up the company. The shares gained A29 cents to A$1.91, but did pop up as high as A$2.04 earlier in the week. Other movers included Gindalbie (GBG), up A1.5 cents to A$1.06, and BC Iron (BCI), up A10 cents to A$2.54. However, Sundance (SDL) lost support after a big share shuffle which saw the estate of the late Ken Talbot exit the company. That knocked A3 cents off the price which ended at A46 cents. Elsewhere, Brockman (BRM) eased back by A20 cents to A$5.90, while Murchison (MMX) tumbled a sharp A17 cents to A$1.06 amid doubts about plans for a new port on the west coast.

Minews. Minor metals and then off you go back to Oz.

Oz. A mixed bag among the lesser metals. Tin companies were mixed. Venture (VMS) lost A1.5 cents to A47.5 cents. Kasbah (KAS) added A1.5 cents to A28 cents. Lithium was also a mixed bag. Galaxy (GXY) lost A9 cents to A$1.24, but Orocobre (ORE) added A27 cents to A$2.76. Iluka Resources (ILU), the biggest of the zircon miners, put in a star turn, rising by A98 cents to A$11.75.

Minews. Thanks Oz.
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March 28, 2011

"The Arab Spring May Be Bullish For Metals In The Long Term"
By Rob Davies
www.minesite.com/aus.html (The registration is free)

“Buy or sell?” It’s the question investors continually ask themselves. There is, of course, no universal correct answer. It depends too much on an individual’s, or a corporation’s, specific circumstances. In theory everyone acknowledges the veracity and wisdom of buying when there is blood in the streets, or straw hats in winter. But in practice it is extremely difficult to do because everyone is concerned that bad things can get worse. And when the sun is shining no one can conceive of things being anything other than bright and shiny.

In part these attitudes can be put down to age. Once you’ve lived through a few crises another one just seems par for the course. Youngsters find each new drama unsettling which is one reason perhaps that contrarian investing is always so unpopular. Few people have the sagacity of Warren Buffet, who recommends investing in Japan now. But the reassuring factor about wars, insurrections, earthquakes and tsunamis is that they are not monetary. They were not caused by financial speculation.

It might be fair to say that many insurrections in the Arab world were, ultimately, caused by the greed of their despotic rulers. And if that is the case, and if the era of the greedy despot is passing, then the changes that are now underway will have far reaching and deep rooted consequences. What every country needs before its economy can really take-off, as China’s and India’s have done, is a burgeoning middle class.

Such a class was never allowed to develop in Tunisia, Egypt, Libya or Syria. The elite did not want to share their wealth with their countrymen. But if these revolutions succeed, and it is hard to envisage the populace being content with the old order now, it could mark the start of a massive surge of growth in countries that historically have had no significant economic footprint. Like the Indians and the Chinese, Arabs are famous for their trading and entrepreneurial skills. Ally that with oil resources, and the potential for creating wealth is phenomenal.

This global uncertainty has unsurprisingly triggered a correction in some growth correlated asset classes, such as equities and commodities, in recent weeks. Base metals in contrast, as measured by the LME index, continue to make good progress. A gain of 2.9 per cent on the week takes the rise over the year to date to six per cent. It might not be dramatic, but it puts the asset class in a healthy situation relative to others.

What is interesting is the rotation within the sector. Copper led the way initially and breached the US$10,000 a tonne barrier but has since drifted back and is essentially flat on the year at US$9,700. In contrast, aluminium has made steady progress over that period and is up 5.7 per cent at US$2,595 a tonne. Like copper, nickel has drifted back from its peak but unlike the red metal is still showing an eight per cent gain on the year. Lead has been a bit more subdued but is still 5.4 per cent to the good over the year. It is only zinc that has let the side down with its 2.4 per cent slide but a modest 20,000 tonne increase in LME inventories to 735,000 tonnes provides a reasonable explanation.

It would be easy to us the current news flow as an excuse to sell out of growth assets like metals and mining shares. But if these changes in the Maghreb become embedded and allow the region properly to join the democratic capitalist world, then the scope for growth and increased metal demand must be positive. Even today the bulk of metal demand comes from a handful of countries like the USA, China, Germany and Japan. Anything that allows that list to grow is good news, even if it doesn’t feel like it at the time.
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Stick to OZ !
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March 29, 2011

""Things Fall Apart For Zimbabwe’s Miners""
Tawanda Karombo in Harare
www.minesite.com/aus.html

Chinua Achebe is probably one of Africa’s most renowned and decorated literary figures. He has written more than half a dozen novels, most of them bordering on satire and caricature, some exploring corrupt tendencies and populist policies by African governments. His classic English novels Things Fall Apart and A Man of the People are regarded as his best. A Man of the People is a fictional account of the effects of a corrupt and populist government on the daily lives of its nation’s people.

There are two protagonists to the novel’s plot, Odili Samalu, an ordinary teacher who leaves his profession to pursue partisan politics. As the plot thickens, Chief Nanga, the other protagonist, disregards sound economic advice from his minister of finance because it is an election year and derides what he regards as westernized intellectuals. Achebe uses irony to portray a corrupt government through the eyes of Odili. And, although he does not bring out the theme of forced nationalization of mines in A Man of the People, Achebe clearly sets out some of the same problems that are dogging Zimbabwe at the moment.

This week, President Robert Mugabe’s Zanu PF part of the inclusive government disregarded advice from concerned investors and educated economists by publishing the final provisions for the country’s controversial indegenisation law, first promulgated in 2007. Over the past few years, the law has been the subject of intense debate and concern, and was last year shelved pending a review of the provisions which initially set a 51 per cent mandatory shareholding in foreign companies to be held by local Zimbabweans.

Since then, it has all been empty talk and hollow threats. But now the threats are beginning to sound somewhat serious. Last Friday, empowerment minister Saviour Kasukuwere, who has been described by local media as a “Super Minister”, said the government had passed the provisions of the oft-condemned law, and that these would be published before the end of this month. And indeed they have been.

A government gazette dated March 28 2011 states that the new legislation applies to: "Every mining business, in respect of which 51 per centum of the shares or a controlling interest is not held by indigenous Zimbabweans, and whose net asset value is of or above one United States dollar (US$1)”. The provisions, it appears, are now targeted specifically at the mining sector. The significance of the US$1 threshold is that it catches small businesses that might have hoped to escape indigenization under the previous threshold of US$500,000. Some local businessmen had planned to split larger concerns into smaller operating units with a net asset value of less than US$500,000. The announcement also states that each non-indigenous mining company must submit an "indegenisation plan" within 45 days, and dispose of 51 per cent of its shares to a "designated entity" within six months, a period which can be extended by a period of no more than three months. There is none of the long-term strategic thinking which underlay the South African empowerment programme in evidence here. South African empowerment, for all its other problems, did at least give businesses plenty of time to adjust.

There’s also uncertainty as to how the valuations of the stakes that look set to change hands will be calculated. Last Friday, a government notice that preceded Monday’s official gazetting of the new provisions said: “The value of the shares or other interests required to be disposed of to a designated entity … shall be calculated on a basis of valuation agreed to between the Minister and the non-indigenous mining business concerned, which shall take into account the State’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited by the non-indigenous mining business concerned”.

President Mugabe, whose health has become the subject of increasing speculation, amidst unconfirmed reports that the army is now running the country, has also in the last two days reiterated his government’s desire to have other foreign companies surrender majority stakes to black Zimbabweans. He said locals should be “senior partners” in all business ventures in the country.

“Companies”, said Mugabe, that “want to work in our mining sector, they are welcome to come and join us, but we must have our people as the major shareholders". He particularly singled out mining firms, Rio Tinto and Anglo American, whose Anglo Platinum subsidiary has significant platinum mining interests in the country. Prior to this singling out of the two majors, Mugabe has previously instructed empowerment minister, Saviour Kasukuwere to nationalize global foodstuffs concern, Nestle, and Impala Platinum’s Zimbabwe subsidiary, Zimplats.

What has particularly worried mining sector stakeholders is the way the disposals of the majority shareholdings look likely to be made. These, it seems, will only go to state-controlled entities such as the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ).

And unsurprisingly, these developments have adversely hit share prices. Aquarius, which has a joint venture platinum mining project in Zimbabwe, was the worst performing stock on Australia’s S&P/ASX 100 index on Monday after it said that it would strive to comply with the empowerment rules. Aquarius shares dropped by 6.87 per cent, to A$5.42 on Monday, and then drifted further on Tuesday to A$5.39. Shares in Zimplats Holding Ltd, which is reviewing the progress of a mine expansion in Zimbabwe, fell 8.32 per cent, to US$13.00.

Meanwhile, New Dawn Mining Corporation, which has gold mining projects in Zimbabwe said on Monday that it was reviewing the potential impact of the gazetting of the provisions governing the implementation of the indigenization law. “New Dawn is reviewing these new regulations in order to understand their potential impact on the company's Zimbabwe-focused mining operations and business plans, and will report to shareholders as more information becomes available," the company said in a statement.

Achebe’s other novel, Things Fall Apart, has a prologue equally relevant to what is happening in Zimbabwe’s mining sector at the moment. He quotes the Yeats poem, The Second Coming, which begins with the following lines:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world…
The best lack all conviction, While the worst
Are full of passionate intensity
 
By Andy Xie[economist] - 11.03.30
"How Japan's Earthquake Will Shake the World"
The destructive event is stoking global inflation, threatening the yen's value and, we hope, burying nuclear power

Japan's 9.0 earthquake will increase global inflationary pressure through means such as the Bank of Japan's monetary expansion policy, disruptions for automobile and electronics industrial supply chains, and rising demand for fossil fuels.

To read the full article, please click the link below >>
http://english.caing.com/englishNews.jsp?id=100243128&time=2011-03-30&cl=111&page=all
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March 31, 2011

""Good Times For Gold, But Will It Last? The World Gold Council Is Cautiously Optimistic""
By Alastair Ford
Source >> www.minesite.com/aus.html (Free Registration)

“You’ve never had it so good.” With gold riding high at well over US$1,400 per ounce, most industry participants would acknowledge that times are good. Indeed, given that the price has been regularly smashing records, there’s an argument to be made that they’ve never been better. Silver has its adherents too, but the silver price is still some way short of the record hit back in the 1980s, when the Hunt brothers tried to corner the market. No-one’s ever been mad enough to try to corner the gold market, although the conspiracy theorists out there continue to argue that banks and other government agencies exert an undue malign influence. But the truth is that gold doesn’t need speculators like the Hunts, or hidden agendas to rise in value. All it needs is human frailty and uncertainty.

Still, now is a particularly good time for gold bugs, and the famous phrase “You’ve never had it so good” seems particularly apt. It was coined by the UK conservative politician Harold MacMillan in 1957, and helped him go on to win a general election in 1959. But then as now there were hidden tensions beneath the surface of the apparently rosy picture. MacMillan won the election, and indeed gained the epithet “Supermac” for the immense influence and success he had in British politics. JFK consulted him in times of uncertainty. Many Minesite readers will know him for his “Winds of Change” speech which was seismic in importance for Africa.

But just ahead were rocky waters. In 1961 he was forced to institute a wage freeze, and he spent much of his foreign capital on fruitless attempts to join the EEC. Then there was the famous sex scandal involving Christine Keeler and one of Supermac’s ministers, and the great man decided to chuck in the towel not long after.

Some things change, some things stay the same. In the gold space the idea of a wage freeze doesn’t look unattractive at the moment in the light of recent comments from Paul Burton, the managing director of the World Gold Council. Mr Burton addressed Australia’s Paydirt 2011 gold conference earlier this week and noted that while the strong gold price had created what he called a “lucky” environment, there was a continuing danger that increased costs would erode much of the gains.

Indeed, the idea that one of the bull cases for gold is dollar weakness seems almost self defeating from the word go. Or to put it another way - tautological. Is it bullish for gold that the dollar is weak? Or is it simply a statement of the same fact, expressed in two different ways. In a world where quantitative easing is seen as a cure-all, it takes more US dollars to buy oil, steel, copper, concrete, bulldozers, tyres, and, yes gold. No surprise there. But gold has an ability to keep ahead of the inflation spiral because, it also has attractions other than as a hedge against currency weakness. It’s also a safe haven in the event of political turmoil, as recent events in the Middle East have demonstrated.

But it also takes time for costs to catch up. Over in Canada the chaps at Casey Research have noted that metal prices have been increasing much faster than mining costs. And that chimes with Mr Burton’s talk of a “lucky” environment. On data that ran to towards the end of 2010, Casey worked out that while the gold price had risen by 75.9 per cent and the silver price by over 60 per cent over the past three years, the corresponding rise in wages was only five per cent. The wage freeze is already on. And that’s partly why producers have been enjoying a real uplift since the dust from the financial crisis finally settled.

But will it continue? Well, the other side of the gold coin is supply. In his address to the Paydirt conference, Mr Burton pointed out that recently the industry had been going through a lean period in terms of major finds. In the short-term, he reckoned, production will rise as a direct response to the strong price. Thereafter, though, it will decline, as there will be less supply available because new discoveries are just not being made. That’ll lead to more corporate activity, although Mr Burton noted that some valuations are already looking a bit toppy. As to the price, Mr Burton wouldn’t put a ceiling on it, but he did put a floor at US$900. Which, for those of us who remember US$250 gold, should at least be some comfort.
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Going up: food prices set to soar
Richard Webb
April 3, 2011

http://www.smh.com.au/business/going-up-food-prices-set-to-soar-20110402-1csgs.html

"Higher world prices for commodities such as wheat and sugar will place pressure on related food prices", says the Reserve Bank of Australia.

With global food prices at record highs, a supermarket war isn't enough to keep prices down.

DON'T kid yourself, the cost of food in Australia is rising, not falling. The recent supermarket price wars over milk, beer, wine, beef, chicken - you name it - may have caught the public attention, but the overall price of basic foodstuffs is on the up. Not anything like overseas, but heading higher nonetheless.

While food price inflation is still to emerge as a big issue in Australia, rising food prices are a major problem across many parts of the world right now.

Food price inflation is said to be a big factor behind the civil turmoil in the Middle East and North Africa that has led to leaders in Egypt and Tunisia being dumped. In Uganda it was behind an almost doubling in inflation to an annual 11.1 per cent in March.

AND another inconceivable article :rolleyes:

For Fed's Dudley, iPad comment falls flat in Queens

http://www.reuters.com/article/2011/03/11/usa-fed-dudley-ipad-idUSN1124415220110311

NEW YORK, March 11 (Reuters) - The president of the New York Federal Reserve Bank doesn't normally face a raucous crowd.

But in Queens, New York, on Friday, William Dudley was bombarded with questions about food inflation, and his attempt to put rising commodity prices into a broader economic context only made things worse.

"When was the last time, sir, that you went grocery shopping?" one audience member asked.

Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. The Fed looks at core inflation, which strips out volatile food and energy costs, to get a better sense of where inflation may actually be heading. :iamwithst

So, Dudley sought an everyday example of a price that is falling.

"Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said referring to Apple Inc's (AAPL.O) latest handheld tablet computer hitting stories on Friday.

"You have to look at the prices of all things," he said. :topic

This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment "tone deaf."

"I can't eat an iPad," another quipped.

 
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Commodities morphing into an investment class - Murenbeeld
By: Liezel Hill - 5th April 2011

TORONTO (miningweekly.com) – Dundee Wealth economist Martin Murenbeeld continues to believe that gold and other commodities are headed towards being a separate asset class, and expects to see increased levels of managed money being invested in commodities, he told an audience in Toronto on Monday.

Murenbeeld also commented that the gold market has come full circle, with the focus shifting away from jewellery demand and back to investment demand and central bank purchases of the precious metal.

Until the Bretton Woods system collapsed in around 1968, central bank buying and holdings of gold were the main source of gold demand, he pointed out.

When central bank purchases fell away, the natural result was that jewellery consumption became the dominant source of demand, until the establishment of gold exchange-traded funds meant that investors could put money directly into gold, often as a haven from riskier investments or during periods of economic uncertainty.

Investment demand actually exceeded jewellery manufacturing demand for gold in 2010 for the first time, according to market watchers at GFMS, and some analysts have suggested this puts the market in a precarious position, as prices could fall sharply if investor demand growth slows or reverses.

But Murenbeeld, who also dismisses the notion that gold is in a bubble as a "myth", said he is "quite positive" on investment demand for gold.

“Gold is coming back to its historical roots,” he said at an event hosted by the Toronto Chartered Financial Analysts society.

“This isn't a new type of demand for gold, this is the old demand for gold. Back in history, gold was kept for precautionary investment reasons, and we're going back to that time.”

Murenbeeld also commented that new supply of the metal will continue to be constrained and likely “relatively inelastic”.

“Today it can take well over ten years for gold production to react to higher gold prices,” he said.

He also suggested that gold prices and the levels of global liquidity are historically closely correlated, which implies higher gold prices if governments around the world continue to print money.

Gold, which reached a record $1 448,60/oz on March 24, was trading around $1 435/oz on Monday.

INVESTMENT CLASS

If it is true that commodities are “morphing” into a new asset class, it follows that money managers would want to have at least three percent of their portfolios in commodities, if not more, he commented.

Based on rough 2009 and 2010 numbers, that would equate to about $1,5-trillion going into commodities, about 3,5 times the current position, Murenbeeld said.

“I think over time we are going to go in that direction, [although] it's not going to be a straight line,” he said.
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April 02, 2011

""That Was The Week That Was ... In Australia""
By Our Man in Oz
www.minesite.com/aus.html [ Free Registration ]


Minews. Good morning Australia. Your market seems to have continued its upward trend.

Oz. It was another solid week of gains. Nothing spectacular, just a rock solid rise of 2.3 per cent from the metals and mining index. And that, interestingly, was the same percentage improvement as the index enjoyed the previous week. Gold slowed a little, as the gold index added 3.5 per cent compared with 5.7 per cent in the previous week, and the all ordinaries added 2.4 per cent as against 2.6 per cent previously.

Minews. Added up, you have had quite a strong market over the past two weeks.

Oz. Surprisingly strong really. In just 10 trading days we’ve made up most of the ground lost because of the troubles in Libya and Japan. The metals index is now just one per cent short of its 2011 high, and the gold index is less than one per cent short.

Minews. What drove your market last week?

Oz. There were no dominant news events, apart from speculation about a rising tide of takeover activity. The big one, which has been about 20 years in the making, is a rumoured move from BHP Billiton on Woodside Petroleum, Australia’s top exporter of liquefied natural gas. If that occurs it would be easily the biggest ever Australian takeover, as Woodside is currently valued at A$37 billion, or US$36 billion on conversion to North American pesos. Yep, our currency has been on the rise too, and hit a new high last week of US$1.038. But some of the best rises came from the minor metals where interest continues to grow in commodities such as zircon and rare earths.

Minews. Your currency comment is interesting because a high currency is hardly good for your exporters.

Oz. Very much not. The high exchange rate is hurting all exporters, especially manufacturers, but including miners. And currency could become an even bigger factor next week, as investors digest the latest news on iron ore and coal prices. Thermal coal, as even your Financial Times reported yesterday, has hit an all-time high of US$130 a tonne in the wake of the Japanese nuclear problems. And spot iron ore has also been sneaking higher. On Friday Goldman Sachs noted that the seaborne price added 3.2 per cent last week to trade at US$175 a tonne. That latest iron ore price means that most producers, including companies we follow such as Atlas Iron (AGO), are now enjoying a profit per tonne of between US$120 and US$130.

Minews. Are you inferring that last week’s commodity price movements are not yet reflected in share prices?

Oz. Perhaps. It’s a fool who suggests the market is mispricing any asset, but it was interesting to see only minimal movement in most coal and iron ore companies last week. Coal in particular had a curious week, as most of the better-known companies were flat or lower, while a number of newcomers rose quite sharply. Iron ore showed a similar trend with a few good rises, but not what you might have expected with the iron ore price surging into record territory.

Minews. That might be your dollar at work, or your threatened super-tax on coal and iron ore. But enough of the chit chat, time for prices, starting with coal and iron ore.

Oz. Most iron ore companies rose, but not by a lot. Best of the iron ore companies was a newcomer to the industry, Legacy Iron (LCY). It is exploring the Mt Bevan deposit near Leonora in Western Australia and released promising assay results in late March. Speculators discovered the shares on Friday, running it up by A2.3 cents, or 30 per cent, to A10 cents, which took the gain for the week to A3.7 cents. Small, but indicative of the percentage gains still available in iron ore. Atlas was another company that performed well, adding A18 cents to A$3.70. But after that most moves were modest. On the plus side of the ledger were: Fortescue Metals (FMG), up A19 cents to A$6.47, Mt Gibson (MGX), up A4 cents to A$2.01, and Brockman (BRM), up A9 cents to A$5.99. Gindalbie (GBG) was also better off, up A6 cents to A$1.12 after it announced its first shipment of high-grade ore. On the negative side were BC Iron (BCI), down A8 cents to A$2.46, and Grange (GRR), down A1.5 cents to A65 cents. Murchison Metals (MMX) was also a notable faller, down A9 cents to A97 cents, a 12 month low as a result of rising costs.

Hunnu (HUN) was the pick of the coal sector, rising by A17 cents to a 12 month high of A$1.65, as interest grew in all the coal companies exploring in Mongolia. Guildford Coal (GUF), a new player in that space, attracted even more attention, putting in an A18 cent rise to close at A90 cents, also a 12-month high. Other Aussies in Mongolia that did well last week included Aspire (AKM), up A9 cents to A96 cents, and Xanadu (XAM), up A5.5 cents to A62.5 cents. Closer to home, perhaps because of the weight of the rising Australian dollar, most of the rest of the movement was down. Coalworks (CWK) slipped A4 cents lower to A80 cents. Carabella (CLR) lost A40 cents to A$2.55, and Aston (AZT) eased back by A5 cents to A$9.70.

Minews. Gold next, please.

Oz. Not a lot to get excited about in a gold sector that put in a mixed performance over the week. The best rise came from the Scandinavian specialist, Dragon Mining (DRA), which reported a strong rise in reserves. That translated into a A26 cent gain on the market for Dragon, which closed at A$1.68. Newcrest (NCM), the local sector leader and perennial takeover target, added a very strong A$1.44 to A$40.20. Meanwhile Kingsrose (KRM), one of our own favourites, put on A9 cents to close at A$1.73, but did trade A1 cent higher at a 12 month peak of A$1.74 earlier in the day. Other gold movers included Gryphon (GRY), up A8 cents to A$1.98, Perseus (PRU), up A4 cents to A$3.14, Silver Lake (SLR), up A9 cents to A$2.12, Ausgold (AUC), up A8 cents to A$1.26, Adamus (ADU), down A3 cents to A74 cents, Allied (ALD), down A1.5 cents to A64.5 cents, Kingsgate (KCN), down A15 cents to A$8.84, and Troy (TRY), down A2 cents to A$3.80.

Minews. Base metals now please, starting with copper.

Oz. It was a mixed picture in copper, too. The best performer was Equinox (EQN), which added A34 cents to A$5.71 following reports that it is making headway with its takeover bid for Lundin Mining. Other moves were less marked. Sandfire (SFR) added A10 cents to A$7.09. Rex (RXM) lost A4 cents to A$2.85. OZ Minerals (OZL), added A1.5 cents to A$1.59. PanAust (PNA) slipped A1 cent lower to A77.5 cents.

Nickel companies fared worse, with more falls than rises, though once again the moves were small. Panoramic (PAN), which had been showing signs of a steady recovery, was hit with solid selling and slid A17 cents lower to A$2.19. Mincor (MCR) reported further encouraging news from its Tottenham copper-gold project in New South Wales, but failed to impress the market. Its shares dropped A8.5 cents to A$1.35. Elsewhere, Minara (MRE) eased back by A1 cents, while Western Areas (WSA) outperformed everyone else with a tiny rise of A4 cents to A$6.70.

Zinc companies keep trying to break-out of a gloomy phase, but never seem to quite get there. Most zinc plays added a few cents last week but there were no star performances. Blackthorn (BTR) was the pick of the pack with a rise of A4 cents to A70 cents. Perilya (PEM) added A1.5 cents to A63.5 cents, and Prairie Downs (PDZ) gained A2 cents to A18.5 cents. Terramin (TZN) slipped half a cent lower to A36.5 cents, and Kagara (KZL) dropped A1 cent to A62 cents. Even so, Kagara is starting to attract fresh interest following the appointment of a new managing director.

Minews. Uranium and minor metals to close, please.

Oz. No rises to report among the uranium companies, which continue to be buffeted by stiff headwinds blowing off the leaking Japanese nuclear reactor. Falls were posted by Paladin (PDN), which fell A17 cents to A$3.68, Manhattan (MHC), down A20 cents to A80 cents, and Extract (EXT), down A57 cents to A$7.86. Also worse of was Berkeley (BKY), which fell A8 cents to A99 cents, Uranex (UNX), which fell A4 cents to A34 cents, and Bannerman (BMN), which fell A4 cents to A44 cents.

Alkane (ALK) was the star of the minor metals, following a fresh burst of optimistic reports about its Dubbo zirconia and rare earths project. It shot up by A33 cents to A$1.95, and briefly touching A$2.00, a 12-month high which was enough to cop a speeding ticket from the ASX. Lynas (LYC), the leading rare earth play, added A13 cents to A$2.27 after it announced a loan and share placement deal with two Japanese companies. Arafura (ARU) rose by A8.5 cents to A$1.32.

Potash companies were mixed. South Boulder (STB) announced a fresh discovery in Eritrea, but slipped A14 cents lower to A$4.26. Reward Minerals (RWD) announced a land access deal with Aboriginal groups at its Lake Disappointment discovery in Western Australia, and added a very sharp A38 cents to A$1.16. At one stage on Friday, though, it did get as high as A$1.40, a 12 month high.

Zircon and titanium companies also attracted attention, following positive broker comment in the US on the sector leader, Iluka Resources (ILU). Iluka rose by A$1.46 to A$13.21, but did trade as high as A$13.39, a 12 month high. Gunson (GUN) went for a ride on Iluka’s coat-tails, rising by A4.5 cents to A28 cents, and Base Resources (BSE) put on A3.5 cents to A56.5 cents after reporting a funding deal for its Kwale mineral sands project in Kenya.

Minews. Thanks Oz.
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April 04, 2011

The US Economy Is In A Hole, But Miners May Be Able To Help Dig It Out
By Rob Davies
www.minesite.com/aus.html

There can be few times in recent history – call it the last half century - when the outlook for the next few decades is so fraught. But it’s not the recent headline-grabbing news which is creating the uncertainty. Events like the Sendai earthquake and its associated tsunami are tragic but just part of the hazards on living on planet earth. It doesn’t really impact on the way we live our lives or our plans for the future. In the short term there will be angst over the role over nuclear power but the sight of eco-warriors like George Monbiot advocating atomic energy on TV is probably the most positive development to come out of the tragedy.

Equally, events in the Maghreb and the Middle East could have dramatic long term geopolitical consequences, but at this early stage it is hard to predict if those consequences make for a better or a worse world. The 1979 revolution in Iran is a reminder that not all change is good.

But what’s much more worrying is the dire position of the US economy. Commentator John Maudlin points out that real median incomes there have not grown for 14 years. The only growth in the economy has come from government spending, which is why US debt now accounts for 380 per cent of the economy, up from the 140 per cent that was run up in the socialist Sixties. That, though, is not the really scary part.

US debt only accounts for US$9 trillion of the US$65 trillion of liabilities that are sitting on Uncle Sam’s balance sheet. The bulk is accounted for by unfunded Medicare, Medicaid and Social Security. It’s a big obligation, to say the least. And Bill Gross, chief executive of Pimco the world’s biggest bond fund manager, thinks there are only four exit routes, all unpalatable.

The first option is straightforward default, which he thinks is impossible. The second option is inflation. The third is dollar depreciation, and the fourth is keeping interest rates below their true rate. All the alternatives are unpleasant, and unpleasant not just for Americans.

Faced with such a daunting prospect it would be easy to understand if major industries, like mining, simply sat back and waited for the world to end. Fortunately, miners are more forward thinking than that and, collectively, have committed themselves to probably the largest mining expansion programme in history.

According to Bloomberg, the respected mining analyst Paul Galloway of Sanford Bernstein estimates that the industry has plans to spend US$135 billion on new projects in the coming years. He estimates that US$33 billion is coming from majors like Rio Tinto, BHP Billiton, Xstrata and Kazakhmys and that half will be spent in Australia. For its part, HSBC has recently estimated that Australia is the target for a total of US$777 billion worth of resource investment. That sum is equivalent to 60 per cent of Australia’s GDP. It is indeed the lucky country.

The implications of this surge in investment, and eventually production, could be vast, although analysts will spend years crunching the numbers and still produce different results. On the face of it there could be an almighty train crash if increased supply meets a US economy that faces decades of retrenchment as it deals with its debt.

Alternatively, maybe, just maybe, the optimism of the miners will encourage others to go out and make, buy and consume all the artefacts that will be made from the commodities which the miners will be mining. Let’s hope so.
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April 09, 2011

""That Was The Week That Was … In Australia""
By Our Man in Oz
www.minesite.com/aus.html (The registration is free)

Minews. Good morning Australia. Another solid week?

Oz. Very much so. The overall market, as measured by the all ordinaries index, closed on Friday at a seven week high, with metals leading the way, and gold topping everything, as you might have expected, given the record US dollar bullion price.

Minews. You sound like you have currency on your mind.

Oz. It’s hard to avoid questioning what the real price of anything is when the yardstick keeps shrinking. Last week saw US dollar continued its slide as the US government staggered towards a budget and constitutional crisis. The big US dollar sell-off helped push the Australian currency up to a fresh 30 year high of US$1.05, a gain of US2 cents made in a matter of days. The effect on the Australian gold price, and on all other metals traded in US dollars, is significant, and is causing a fair degree of anxiety to the Australian Government which is finally waking up to the reality that the country is about to catch a dose of Dutch disease, that condition where a high currency pushes exporters out of the market. In the case of gold, the currency change cut the price rise in gold from US$41 an ounce to just A$13 an ounce for domestic producers.

Minews. That’s what happens when you’re a central player in a commodity boom.

Oz. It is, but there are industries in Australia that are being hurt quite severely. Manufacturing and tourism are high on the list of victims. And the flipside is that you’re going to see a lot more Aussies wandering around London in your summer, shopping with dollars that have doubled in value against the pound over the past few years.

Minews. Oh dear! Thanks for the warning. Now back to the market.

Oz. The key indices all gained. The all ordinaries added 1.6 per cent. Metals and Mining added 3.1 per cent, and gold gained five per cent. There were a number of sharp upward moves as far as gold equities were concerned, and a fistful hit fresh 12 month share price highs. Copper companies also moved up strongly, inspired by multiple takeover moves. Equinox (EQN) was at the centre of the action, playing a dual role as predator and prey. Nickel showed signs of life, led by discovery news from Mincor (MCR), and uranium companies showed signs of shaking off the worst of the Japanese triggered sell-down.

Minews. Right. Where do you want to start?

Oz. It might be fun to run a few new names past your readers, and to flag up one of the more interesting ways we do business down this way.

Minews. Fire away.

Oz. Amex Resources (AXZ) is not a company named after a credit card. It is a small iron ore explorer, shares in which added A11 cents to a 12 month high of A47 cents last week after it won a prime iron ore tenement in a raffle. Well, it’s not quite a raffle. It’s more bizarre than that. It was a ballot conducted by government regulators who had to settle multiple claims on the same piece of country, adjacent to Rio Tinto’s big Paraburdoo mine in the Pilbara region of Western Australia. The ballot, which is as simple as drawing names from hat, much like a pub game, saw Amex get the first, and only, prize.

Minews. No doubt the pub was the next port of call for Amex management. Are there any more new names which moved on the market last week?

Oz. Perhaps not new, but interesting. Kula Gold (KGD) caught the eye of a few investors with a report of a new style of gold mineralisation on its Woodlark Island project in Papua New Guinea. Kula rose A16 cents to A$1.81, and some trades went through as high as A$1.84 early on Friday, a 12 month high. Azimuth Resources (AZH) also set a new high of A31.5 cents as optimism grows at its gold projects in the South American country of Guyana. It closed the week at A30.5 cents, up A6.5 cents. Cerro Resources (CJO), the Mexican silver explorer once known as Kings Minerals, and still run by Norm Seckold, rose by A8.5 cents to A34.5 cents.

Minews. Time to go through the sectors, with gold the obvious starting point.

Oz. Most up, with a couple of small falls. Kingsrose (KRM), which we wrote about recently, and which is becoming more of a market darling by the week, closed at a fresh all-time high of A$1.77, though the actual rise on the week was a modest A4 cents. Perseus (PRU), which we also took a look at over the past week, added A25 cents to A$3.39. Better gains came from Silver Lake (SLR), up A22 cents to A$2.34, Resolute (RSG), up A9.5 cents to A$1.34, Integra (IGR), up A7.5 cents to A55 cents, Ausgold (AUC), up A19 cents to A$1.45, Gold Road (GOR), up A7 cents to A51 cents, Gryphon (GRY), up A10 cents to A$2.08, and Medusa (MML), which rose an eye-catching A95 cents to A$8, a fraction short of its all-time high of A$8.07. Azumah (AZM) was also A11.5 cents better off at A71 cents, after it reported bonanza gold assays from its Wa project in Ghana. Silver companies also performed well, as the silver price scaled the US$40 per ounce barrier. Alcyone (AYN) reached a fresh high of A11 cents, before closing at A10.5 cents, up A2.7 cents. Silver Mines (SVL) added A6.5 cents to A38 cents, and Cobar Consolidated (CCU) put on A6 cents to A98 cents.

Minews. Uranium next, so we can see how strong the recovery has been.

Oz. The easy answer is that it’s been quite strong. Some companies are almost back to their pre-crisis level. Energy and Metals (EMA) was the best percentage performer, putting in a rise of A5 cents to A23 cents after it reported on its latest legal win in a long-running dispute. Extract (EXT) rose by A69 cents to A$8.55, as a Chinese takeover bid for Kalahari Minerals got back on track. Uranex (UNX) was another strong performer, rising A10 cents to A44 cents. Greenland (GGG) put on A5.5 cents to A$1.01. Aura Energy (AEE) added A4 cents to A33.5 cents, and Berkeley (BKY) closed at A$1.03, also up A4 cents. There were a couple of falls, but nothing major. Toro (TOE) slipped A1 cent lower to A10 cents, and Bannerman (BMN) lost A2 cents to A42 cents.

Minews. Across to the base metals, starting with copper, please.

Oz. Equinox starred, naturally. It added A$1.73 to A$7.44, a price which says investors are expecting more shots to be fired in what’s become a complex game of bid and counter bid. The rest of the copper sector rose in sympathy, but not excessively so. Some of the better movers included Sandfire (SFR), up A21 cents to A$7.30, OZ Minerals (OZL), up A6 cents to A$1.65, Metminco (MNC), up A1.5 cents to A39.5 cents, Rex (RXM), up A11 cents to A$2.96, and Marengo (MGO), up A2.5 cents to A33.5 cents. Hot Chili (HCH) was also a strong riser, closing out the week up A6.5 cents to A80.5 cents after it briefly peaked at a new 12 month high of A85 cents during early Friday trade.

Nickel companies were led by Mincor (MCR) which reported excellent assays from drilling at its Mariners mine, and added A13 cents to A$1.48. Western Areas (WSA) continues to impress with results from its Spotted Quoll project, and rose by A46 cents to A$7.16, although a few trades went through even higher, at a new all-time share price peak of A$7.21. Mirabela (MBN) added A10 cents to A$2.10 after completing a big capital raising. Panoramic rose A14 cents to A$2.33, and Minara (MRE) gained A6.5 cents to A83.5 cents.

Zinc companies were flat, with no outstanding moves either way. Kagara (KZL) gained A1.5 cents to A63.5 cents. Perilya (PEM) added A2 cents to A65 cents, and Blackthorn (BTR) added A2 cents to close at A72 cents.

Minews. Iron ore, coal and minor metals to close, please.

Oz. All up, bar one among the iron ore companies. The odd man out was Iron Ore Holdings (IOH), which announced a fresh capital raising, and lost A6.5 cents to close at A$1.82. Then comes a long list of risers. Among the best were: Atlas (AGO), up A14 cents to A$3.84, Mt Gibson (MGX), up A20 cents to A$2.21, Murchison (MMX), up A20 cents to A$1.17, Grange (GRR), up A12 cents to A77 cents, and Fortescue (FMG), up A25 cents to A$6.72. BC Iron (BCI) was also a riser, up A38 cents to A$2.84 after it won a fresh legal round against its reluctant bidder, Regent Pacific.

Coal companies had a mixed time of it. The trend was up, though, with Aussie explorers working in Mongolia leading the way. Guildford Coal (GUF) was the pick of that pack, putting in a rise of A16 cents to an all-time high of A$1.16. Aspire (AKM) added A9.5 cents to A$1.05. Hunnu (HUN) gained A5 cents to A$1.70, while Xanadu (XAM) went against the trend with a fall of A5 cents to A57.5 cents. Other movers included Coal of Africa (CZA), up A16 cents A$1.34, and Bathurst (BTU), down A5 cents to A$1.19.

Rare earth companies dominated the minor metals. Alkane (ALK) hit a 12-month high of A$2.30 before easing to close at A$2.25 for a gain of A30 cents over the week. Lynas (LYC) did almost as well, rising A28 cents to A$2.55. Wolf Minerals (WLF), the company planning to redevelop the Hemerdon Ball tin and tungsten mine in Devon, added A3 cents to A41.5 cents. Shares in the lithium companies went in difference directions. Orocobre (ORE) lost A16 cents to A$2.63, but Galaxy (GCY) added A$10 cents to
A$1.37.

Minews. Thanks Oz.
*************
 
drillinto said:
In the case of gold, the currency change cut the price rise in gold from US$41 an ounce to just A$13 an ounce for domestic producers.
Click to expand...

We know the strengthening dollar its having some detrimental effects but the figures here seem a bit askew ?

At AU$13, tell me where to stand at the gate for some?
 

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