Big fan of Xie, he is one of the few economists who actually 'get' monetary economics.
"The best place to be is in commodities"
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May 15, 2011
Cracks In Europe, Monetary Tightening In China
By Rob Davies
www.minesite.com/aus.html (free registration)
This week the financial press seems to be delighting in the continued weakness of commodities. It is certainly true that they have been sold off. Base metals, as measured by the LME index fell, 0.5 per cent to 4004.3 over the last week, although gold is a touch higher at US$1,503 an ounce and silver has stabilised at US$35 an ounce.
The main reason for the negative sentiment towards commodities has been a sharp rise in the dollar. In the last seven days the dollar has risen by 0.8 per cent against the euro, despite some robust growth figures from Germany and France. And a strong dollar usually pushes commodity prices down.
The problem is that a resurgence of economic activity in the north of the eurozone reminds people how bad things are at the fringe, especially in Greece. One year on from the Greek refinancing and it is clear that the underlying problems have not been resolved. A second rescue will be needed shortly. But should the ECB decide that further interest rate rises are needed for the euro to moderate inflation in the north, it will only add further misery to those in the south of the zone.
It is becoming increasingly obvious to even the most electorally sensitive euro-politician that the one size fits nobody interest rate policy across the zone simply doesn’t work. No one seems to have a clue, or is admitting publicly, how a European financial divorce might work, but hot money is not hanging around to find out. It is going into the dollar, and that has pushed yields on 10 year US treasuries down to 3.2 per cent.
Normally, such a low rate would signify very low risk. Unfortunately, the US economy has problems that are, if anything, worse than those pertaining in the Eurozone. Bill Miller, renowned fund manager at Legg Mason, refers to the efforts to fix these US problems as the DDT: the Dollar Destruction Trade. He seems to think US financial policy is as poisonous as pesticide. At the moment the international currencies seem to behaving like a bunch of rabbits caught in the open and finding all their potential escape routes blocked.
What hot money really wants to buy is the renminbi. But the Chinese currency is not convertible. Money is getting tighter in China, and that would drive up the renminbi if markets were allowed free rein. Last week Chinese regulators raised bank reserve ratios for the fifth time this year, taking them to 21 per cent and removing 370 billion renminbi from the economy in an effort to limit growth and restrain inflation. And this inability to buy renminbi is pushing investors into gold as a proxy for the Chinese currency.
Despite the efforts of its rulers China continues to grow and import metals, and there are no real signs that demand for base metals is likely to fall below current levels of supply. But what is encouraging now is that rising demand in Germany could help to offset slower growth in China, even if the scale of consumption is less. Inventories of metals may have risen a tad, but essentially they are still very low, so the fundamentals remain sound.
So while the politicians pontificate on what they would like to see happen, the underlying forces of economics are making their pronouncements ever less relevant. As they try and evade reality, investors continue to express their lack of faith in their proposals by sticking with things like commodities that cannot be debased.
¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤
Cracks In Europe, Monetary Tightening In China
By Rob Davies
www.minesite.com/aus.html (free registration)
This week the financial press seems to be delighting in the continued weakness of commodities. It is certainly true that they have been sold off. Base metals, as measured by the LME index fell, 0.5 per cent to 4004.3 over the last week, although gold is a touch higher at US$1,503 an ounce and silver has stabilised at US$35 an ounce.
The main reason for the negative sentiment towards commodities has been a sharp rise in the dollar. In the last seven days the dollar has risen by 0.8 per cent against the euro, despite some robust growth figures from Germany and France. And a strong dollar usually pushes commodity prices down.
The problem is that a resurgence of economic activity in the north of the eurozone reminds people how bad things are at the fringe, especially in Greece. One year on from the Greek refinancing and it is clear that the underlying problems have not been resolved. A second rescue will be needed shortly. But should the ECB decide that further interest rate rises are needed for the euro to moderate inflation in the north, it will only add further misery to those in the south of the zone.
It is becoming increasingly obvious to even the most electorally sensitive euro-politician that the one size fits nobody interest rate policy across the zone simply doesn’t work. No one seems to have a clue, or is admitting publicly, how a European financial divorce might work, but hot money is not hanging around to find out. It is going into the dollar, and that has pushed yields on 10 year US treasuries down to 3.2 per cent.
Normally, such a low rate would signify very low risk. Unfortunately, the US economy has problems that are, if anything, worse than those pertaining in the Eurozone. Bill Miller, renowned fund manager at Legg Mason, refers to the efforts to fix these US problems as the DDT: the Dollar Destruction Trade. He seems to think US financial policy is as poisonous as pesticide. At the moment the international currencies seem to behaving like a bunch of rabbits caught in the open and finding all their potential escape routes blocked.
What hot money really wants to buy is the renminbi. But the Chinese currency is not convertible. Money is getting tighter in China, and that would drive up the renminbi if markets were allowed free rein. Last week Chinese regulators raised bank reserve ratios for the fifth time this year, taking them to 21 per cent and removing 370 billion renminbi from the economy in an effort to limit growth and restrain inflation. And this inability to buy renminbi is pushing investors into gold as a proxy for the Chinese currency.
Despite the efforts of its rulers China continues to grow and import metals, and there are no real signs that demand for base metals is likely to fall below current levels of supply. But what is encouraging now is that rising demand in Germany could help to offset slower growth in China, even if the scale of consumption is less. Inventories of metals may have risen a tad, but essentially they are still very low, so the fundamentals remain sound.
So while the politicians pontificate on what they would like to see happen, the underlying forces of economics are making their pronouncements ever less relevant. As they try and evade reality, investors continue to express their lack of faith in their proposals by sticking with things like commodities that cannot be debased.
¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤
"Glencore IPO to Raise $10 Billion"
Glencore International Plc will start trading in London today after selling $10billion of stock in an initial public offering that coincided with the worst rout in commodities in two years.
http://www.bloomberg.com/news/2011-...10-billion-as-investors-defy-market-rout.html
**************
Glencore International Plc will start trading in London today after selling $10billion of stock in an initial public offering that coincided with the worst rout in commodities in two years.
http://www.bloomberg.com/news/2011-...10-billion-as-investors-defy-market-rout.html
**************
"The recent decline in global commodity prices is thus good news
for the Indian economy" (17.05.2011)
Source: www.livemint.com
India imports nearly three-fourths of its crude oil requirements. Oil accounts for about one-third of our import bill. No wonder higher global oil prices are considered a big negative for Indian share prices.
The recent decline in global commodity prices is thus good news for the Indian economy. But Nymex crude futures continue to trade way above their 200-day moving average (DMA), a key parameter used by technical analysts to assess the strength of a market. Gold futures””a proxy for commodity action””are also trading above their 200 DMA. Meanwhile, the Nifty share index is below its 200 DMA.
This is neither a plea to buy or sell shares nor a view on what will happen on Dalal Street in the next few weeks. That we leave to the brokerages. Our limited observation: the fall in commodity prices is still modest compared with the steep rise we have seen over the past year.
for the Indian economy" (17.05.2011)
Source: www.livemint.com
India imports nearly three-fourths of its crude oil requirements. Oil accounts for about one-third of our import bill. No wonder higher global oil prices are considered a big negative for Indian share prices.
The recent decline in global commodity prices is thus good news for the Indian economy. But Nymex crude futures continue to trade way above their 200-day moving average (DMA), a key parameter used by technical analysts to assess the strength of a market. Gold futures””a proxy for commodity action””are also trading above their 200 DMA. Meanwhile, the Nifty share index is below its 200 DMA.
This is neither a plea to buy or sell shares nor a view on what will happen on Dalal Street in the next few weeks. That we leave to the brokerages. Our limited observation: the fall in commodity prices is still modest compared with the steep rise we have seen over the past year.
On Strategy
"Breakdown: Commodities Tumble... For Good ?"
Liz Ann Sonders - Charles Schwab & Co - 16.05.2011
To read please click the link below
http://www.schwab.com/public/schwab...&lvl1=research_strategies&lvl2=market_insight
"Breakdown: Commodities Tumble... For Good ?"
Liz Ann Sonders - Charles Schwab & Co - 16.05.2011
To read please click the link below
http://www.schwab.com/public/schwab...&lvl1=research_strategies&lvl2=market_insight
May 21, 2011
That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Registration is free)
Minews. Good morning Australia. Another flat week?
Oz. Remarkably flat really. Mining stocks on the ASX posted two days of rises prices and three of falls prices to end up almost exactly where they started. To get an idea how flat we were the metals and mining index fell three points, which is a decline of less than one-tenth of one per cent. It was a similar picture in the gold sector which rose by less than one-tenth of one per cent. However, the all ordinaries “boomed” with a rise of 0.4 per cent.
Minews. That sounds awfully boring.
Oz. It was, and it wasn’t. In terms of overall price movements there’s no argument that there was a lot of “sell in May and go away” in the air. But in terms of individual action there was still plenty to catch the eye. The big news down this way was all about tax, again. And this time the question of how to tax miners triggered a war of words between the national government and the state government in Western Australia.
Without boring your readers with too much Western Australia has announced a plan to increase royalties paid by iron ore miners. Royalties are a state tax in Australia, but the national government was furious because it has promised to allow miners to offset royalties against its new mining resource rent tax, which means the net result is lower future national tax payments.
Minews. Presumably setting off a form of civil war between different layers of government, with mining caught in the middle.
Oz. Precisely. It is a classic example of government seeking new ways to milk the mining cow, and ending up in a fight behind the barn - while the miners look on with a mix of dismay and amusement.
Minews. Time for prices, perhaps starting with the more interesting movers before calling the card of what sounds like might be dull affair.
Oz. Good decision because there were some interesting movers, both up and down. Among the companies which posted rises that caught the eye were a few which have not been mentioned before, such as Celamin (CNL). Shares in Celamin rocketed up by 66 per cent to A70 cents on Friday thanks to interest in its Tunisian and Algerian phosphate projects. Until a recent change of focus, and name, Celamin was known as Victorian Gold Mines.
Also moving upwards nicely was Cabral Resources (CBS) which is exploring for iron ore in Brazil. Shares in Cabral popped 32 per cent higher on Friday alone, putting in a rise of A3.5 cents to A14.5 cents, taking the gain for the week to A5.5 cents, or 61 per cent. Elsewhere, Indo Mines (IDO), an Indonesian-focussed iron ore and coal miner, added A15 cents to A69.5 cents. Kagara (KZL), the zinc and copper producer, returned to favour after a few years in the sin bin, rising by A9.5 cents to A62.5 cents. Minemakers (MAK), a local potash player, was back on the radar of speculators, and rose A11 cents to A48 cents. Once-famous Bougainville Copper (BOC) produced one of its curious star turns, rising A25 cents to A$1.54, without any fresh news on when or whether Rio Tinto will move on its plans to re-develop the Panguna copper mine on Bougainville Island. And Mintails (MLI) a gold-dump re-processor, was in the news thanks to a rise of A3.5 cents in its share price to A22.5 cents. Mintails was also the subject of an appeal to the Australian Takeovers Panel by the man trying to buy the business, London investor Rex Harbour. He has a bid of A15 cents on the table, which is what might be called a country mile behind the market.
Minews. Interesting moves, but presumably there are some equally interesting falls.
Oz. Well spotted. Another failed corporate deal delivering the biggest slide of the week. Whitehaven Coal (WHC) lost A53 cents to A$5.90 after dropping an attempt to sell itself to interested Chinese and Indian suitors. Apparently the bids were just not high enough. Wolf Minerals (WLF), the Devon tin and tungsten project developer, upset supporters by announcing what seemed to be a go-slow on its Hemerdon Ball project, and promptly dropped by A15 cents to A39.5 cents. Navigator Resources (NAV) upset supporters by further downgrading production forecasts for its Bronzewing gold mine, shedding A3 cents to A15.5 cents. Finally, Chalice Gold (CHN) lost A6 cents to A34.5 cents after announcing a private placement which will raise A$9.6 million at A30 cents a share.
Minews. Time to call the card, starting as usual with gold, please.
Oz. There wasn’t a great deal else going on in gold. In the black were companies like Medusa (MML), which was up A10 cents to A$7.90, Newcrest (NCM), which rose A17 cents to A$34.47, and Adamus (ADU), which was up half-a-cent to A68 cents. Also better off were Resolute (RSG), up A4 cents to A$1.06, Integra (IGR), up A2 cents to A44.5 cents, and Perseus (PRU), up A13 cents to A$2.72. Catalpa (CAH) rose A3 cents to A$1.72 as investors tried to fathom the merger proposal submitted by St Barbara Mines (SBM), itself a faller, down A6 cents to A$1.81. Other companies that weakened included Silver Lake (SLR), down A5 cents to A$1.88, PMI (PVM), down A3 cents to A45 cents, Allied Gold (ALD), down A7 cents to A46 cents, Gold Road (GOR), down A4.5 cents to A59.5 cents, Kingsrose (KRM), down A7 cents to A$1.37, and Troy (TRY), down A5 cents to A$3.60.
Minews. Base metals next, please.
Oz. Even less to report in that sector. Copper companies held up best. Nickel and zinc trended down. Pick of the copper explorers and producers were Sandfire (SFR), up A32 cents to A$6.74, Exco (EXS), up A3 cents to A63 cents, Marengo (MGO) up A2.5 cents to A31 cents, PanAust (PNA) up A4 cents to A78.5 cents, and Rex (RXM) up A5 cents to A$2.59. OZ Minerals (OZL) slipped A4 cents lower to A$1.39. Hot Chili (HCH) shed A4 cents to A61 cents, and Metminco (MNC) closed at A38 cents, down A3 cents.
Mirabela (MBN) was the best of the nickel companies, but only because it opened and closed at the same price, A$2.06. All other nickels lost ground. Mincor (MCR) dipped A5 cents to A$1.08. Panoramic (PAN), slid by A3 cents to A$2.00, and Minara (MRE), eased back by A1 cent to A77 cents.
Prairie Downs (PDZ) was the sole zinc company to rise, putting in a gain of A2 cents to A17 cents. After that it was weaker across the sector. Blackthorn (BTR) fell A1.5 cents to A54.5 cents. Terramin (TZN) fell half-a-cent to A30 cents. Ironbark (IBG) fell A1 cent to A27 cents, and Perilya (PEM) fell A1 cent to A58 cents.
Minews. Over to iron ore and coal.
Oz. One up, one down, with the tone among iron ore plays positive, and the coal tone negative. One of the iron ore companies that fell was Brockman (BRM) which is now controlled by Hong Kong’s Wah Nam following a hotly-disputed takeover raid. Brockman lost A7 cents to A$4.41. Meanwhile another Wah Nam target, FerrAus (FRS), added A3 cents to A78 cents. Other iron ore movers included Fortescue (FMG), up A16 cents to A$6.44, Sundance (SDL), up A1 cent to A37 cents, Atlas (AGO), up A10 cents to A$3.72, Gindalbie (GBG), up A2.5 cents to A98 cents, Mt Gibson (MGX), down A6 cents to A$1.93, and Grange (GRR), down A4 cents to A62 cents.
Whitehaven was the biggest loser among the coal companies, but there was a long list of followers. Coal of Africa (CZA), slipped A3 cents lower to A$1.18. Carabella (CLR) was A18 cents weaker at A$1.98, and Stanmore (SMR) lost A4 cents to A$1.22. Among the interesting upward moves was a gain of A65 cents by Riversdale (RIV) to A$17.17. That rise seems to indicate that a few hold-out investors might be seeking to extract a little bit more from Rio Tinto, which has now taken board control of Riversdale.
Minews. Uranium and minor metals to close, thanks.
Oz. Generally weaker in both sectors. The only uranium companies to rise were Mantra (MRU), up A7 cents to A$6.93, and Deep Yellow (DYL), up half a cent to A18 cents. Manhattan (MHC) lost A1 cent to A60 cents. Extract (EXT) slipped A11 cents lower to A$7.38, and Aura (AEE), fell by A6 cents to A24 cents.
Lynas (LYC) was the newsmaker among the rare earth companies as first ore entered its Mt Weld processing plant, a development which was greeted by a rise in the company’s shares of A15 cents to A$2.29. Other rare earth plays lost ground. Alkane (ALK) was down A8 cents to A$1.82, and Territory Uranium (TUC), mentioned last week, was off A2 cents at A21 cents. Kimberley Rare Earths (KRE) made a modest splash when listing on Thursday with its A20 cent shares ending the week at A21.5 cents.
Minews. Thanks Oz.
************************************
That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Registration is free)
Minews. Good morning Australia. Another flat week?
Oz. Remarkably flat really. Mining stocks on the ASX posted two days of rises prices and three of falls prices to end up almost exactly where they started. To get an idea how flat we were the metals and mining index fell three points, which is a decline of less than one-tenth of one per cent. It was a similar picture in the gold sector which rose by less than one-tenth of one per cent. However, the all ordinaries “boomed” with a rise of 0.4 per cent.
Minews. That sounds awfully boring.
Oz. It was, and it wasn’t. In terms of overall price movements there’s no argument that there was a lot of “sell in May and go away” in the air. But in terms of individual action there was still plenty to catch the eye. The big news down this way was all about tax, again. And this time the question of how to tax miners triggered a war of words between the national government and the state government in Western Australia.
Without boring your readers with too much Western Australia has announced a plan to increase royalties paid by iron ore miners. Royalties are a state tax in Australia, but the national government was furious because it has promised to allow miners to offset royalties against its new mining resource rent tax, which means the net result is lower future national tax payments.
Minews. Presumably setting off a form of civil war between different layers of government, with mining caught in the middle.
Oz. Precisely. It is a classic example of government seeking new ways to milk the mining cow, and ending up in a fight behind the barn - while the miners look on with a mix of dismay and amusement.
Minews. Time for prices, perhaps starting with the more interesting movers before calling the card of what sounds like might be dull affair.
Oz. Good decision because there were some interesting movers, both up and down. Among the companies which posted rises that caught the eye were a few which have not been mentioned before, such as Celamin (CNL). Shares in Celamin rocketed up by 66 per cent to A70 cents on Friday thanks to interest in its Tunisian and Algerian phosphate projects. Until a recent change of focus, and name, Celamin was known as Victorian Gold Mines.
Also moving upwards nicely was Cabral Resources (CBS) which is exploring for iron ore in Brazil. Shares in Cabral popped 32 per cent higher on Friday alone, putting in a rise of A3.5 cents to A14.5 cents, taking the gain for the week to A5.5 cents, or 61 per cent. Elsewhere, Indo Mines (IDO), an Indonesian-focussed iron ore and coal miner, added A15 cents to A69.5 cents. Kagara (KZL), the zinc and copper producer, returned to favour after a few years in the sin bin, rising by A9.5 cents to A62.5 cents. Minemakers (MAK), a local potash player, was back on the radar of speculators, and rose A11 cents to A48 cents. Once-famous Bougainville Copper (BOC) produced one of its curious star turns, rising A25 cents to A$1.54, without any fresh news on when or whether Rio Tinto will move on its plans to re-develop the Panguna copper mine on Bougainville Island. And Mintails (MLI) a gold-dump re-processor, was in the news thanks to a rise of A3.5 cents in its share price to A22.5 cents. Mintails was also the subject of an appeal to the Australian Takeovers Panel by the man trying to buy the business, London investor Rex Harbour. He has a bid of A15 cents on the table, which is what might be called a country mile behind the market.
Minews. Interesting moves, but presumably there are some equally interesting falls.
Oz. Well spotted. Another failed corporate deal delivering the biggest slide of the week. Whitehaven Coal (WHC) lost A53 cents to A$5.90 after dropping an attempt to sell itself to interested Chinese and Indian suitors. Apparently the bids were just not high enough. Wolf Minerals (WLF), the Devon tin and tungsten project developer, upset supporters by announcing what seemed to be a go-slow on its Hemerdon Ball project, and promptly dropped by A15 cents to A39.5 cents. Navigator Resources (NAV) upset supporters by further downgrading production forecasts for its Bronzewing gold mine, shedding A3 cents to A15.5 cents. Finally, Chalice Gold (CHN) lost A6 cents to A34.5 cents after announcing a private placement which will raise A$9.6 million at A30 cents a share.
Minews. Time to call the card, starting as usual with gold, please.
Oz. There wasn’t a great deal else going on in gold. In the black were companies like Medusa (MML), which was up A10 cents to A$7.90, Newcrest (NCM), which rose A17 cents to A$34.47, and Adamus (ADU), which was up half-a-cent to A68 cents. Also better off were Resolute (RSG), up A4 cents to A$1.06, Integra (IGR), up A2 cents to A44.5 cents, and Perseus (PRU), up A13 cents to A$2.72. Catalpa (CAH) rose A3 cents to A$1.72 as investors tried to fathom the merger proposal submitted by St Barbara Mines (SBM), itself a faller, down A6 cents to A$1.81. Other companies that weakened included Silver Lake (SLR), down A5 cents to A$1.88, PMI (PVM), down A3 cents to A45 cents, Allied Gold (ALD), down A7 cents to A46 cents, Gold Road (GOR), down A4.5 cents to A59.5 cents, Kingsrose (KRM), down A7 cents to A$1.37, and Troy (TRY), down A5 cents to A$3.60.
Minews. Base metals next, please.
Oz. Even less to report in that sector. Copper companies held up best. Nickel and zinc trended down. Pick of the copper explorers and producers were Sandfire (SFR), up A32 cents to A$6.74, Exco (EXS), up A3 cents to A63 cents, Marengo (MGO) up A2.5 cents to A31 cents, PanAust (PNA) up A4 cents to A78.5 cents, and Rex (RXM) up A5 cents to A$2.59. OZ Minerals (OZL) slipped A4 cents lower to A$1.39. Hot Chili (HCH) shed A4 cents to A61 cents, and Metminco (MNC) closed at A38 cents, down A3 cents.
Mirabela (MBN) was the best of the nickel companies, but only because it opened and closed at the same price, A$2.06. All other nickels lost ground. Mincor (MCR) dipped A5 cents to A$1.08. Panoramic (PAN), slid by A3 cents to A$2.00, and Minara (MRE), eased back by A1 cent to A77 cents.
Prairie Downs (PDZ) was the sole zinc company to rise, putting in a gain of A2 cents to A17 cents. After that it was weaker across the sector. Blackthorn (BTR) fell A1.5 cents to A54.5 cents. Terramin (TZN) fell half-a-cent to A30 cents. Ironbark (IBG) fell A1 cent to A27 cents, and Perilya (PEM) fell A1 cent to A58 cents.
Minews. Over to iron ore and coal.
Oz. One up, one down, with the tone among iron ore plays positive, and the coal tone negative. One of the iron ore companies that fell was Brockman (BRM) which is now controlled by Hong Kong’s Wah Nam following a hotly-disputed takeover raid. Brockman lost A7 cents to A$4.41. Meanwhile another Wah Nam target, FerrAus (FRS), added A3 cents to A78 cents. Other iron ore movers included Fortescue (FMG), up A16 cents to A$6.44, Sundance (SDL), up A1 cent to A37 cents, Atlas (AGO), up A10 cents to A$3.72, Gindalbie (GBG), up A2.5 cents to A98 cents, Mt Gibson (MGX), down A6 cents to A$1.93, and Grange (GRR), down A4 cents to A62 cents.
Whitehaven was the biggest loser among the coal companies, but there was a long list of followers. Coal of Africa (CZA), slipped A3 cents lower to A$1.18. Carabella (CLR) was A18 cents weaker at A$1.98, and Stanmore (SMR) lost A4 cents to A$1.22. Among the interesting upward moves was a gain of A65 cents by Riversdale (RIV) to A$17.17. That rise seems to indicate that a few hold-out investors might be seeking to extract a little bit more from Rio Tinto, which has now taken board control of Riversdale.
Minews. Uranium and minor metals to close, thanks.
Oz. Generally weaker in both sectors. The only uranium companies to rise were Mantra (MRU), up A7 cents to A$6.93, and Deep Yellow (DYL), up half a cent to A18 cents. Manhattan (MHC) lost A1 cent to A60 cents. Extract (EXT) slipped A11 cents lower to A$7.38, and Aura (AEE), fell by A6 cents to A24 cents.
Lynas (LYC) was the newsmaker among the rare earth companies as first ore entered its Mt Weld processing plant, a development which was greeted by a rise in the company’s shares of A15 cents to A$2.29. Other rare earth plays lost ground. Alkane (ALK) was down A8 cents to A$1.82, and Territory Uranium (TUC), mentioned last week, was off A2 cents at A21 cents. Kimberley Rare Earths (KRE) made a modest splash when listing on Thursday with its A20 cent shares ending the week at A21.5 cents.
Minews. Thanks Oz.
************************************
On strategy
Once bullish, Jim Grant likes cash now
To read interview, please click the link below
http://www.washingtonpost.com/natio...vice-hold-cash/2011/05/20/AFCRop7G_print.html
Once bullish, Jim Grant likes cash now
To read interview, please click the link below
http://www.washingtonpost.com/natio...vice-hold-cash/2011/05/20/AFCRop7G_print.html
June 04, 2011
That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Free Registration)
Minews. Good morning Australia. It looks like another tough week down your way.
Oz. It was, although some sectors were hit harder than others. Nickel companies suffered more than most, and a quick glance at a five-year nickel-price graph reveals some deep-seated reasons why. Back in mid 2006 nickel was selling for a shade under US$10 a pound. Today, it’s a shade over US$10 per pound. The price, however, is only part of the problem for Australian nickel miners. They have also been hit by the higher costs being felt across the mining industry, and by the rising exchange rate.
Minews. With a real squeeze on profits.
Oz. A very nasty squeeze actually, which can be measured using the exchange rate alone. Back in June, 2006, the Aussie dollar exchange rate against its US cousin was US74 cents. Today, it’s US$1.06. To put it another way, the Australian dollar price of nickel five years ago was around A$13.50 per pound. Today, it is A$9.40, a real decline of around 30 per cent for a miner with costs in Australian dollars, and perhaps a lot more after cost inflation is factored in.
Minews. Well, thanks for that piece of news - it’s just what we didn’t need to hear.
Oz. Sorry for bearing bad tidings, but that background explains why a number of nickel companies hit 12 month share price lows last week. Mincor (MCR) dropped to A98.5 cents on Friday, before closing the week at A99 cents for a loss of A10 cents. At this time last year Mincor was trading above A$2.00. Panoramic (PAN) lost A9 cents to close the week at a new low of A$1.83. Last October it traded as high as A$2.97.
Minews. Before running through more prices, perhaps a big picture snapshot.
Oz. Overall, both the base metals and the gold markets weakened by around 1.5 per cent. That was a better performance, moderately, than that delivered by the all ordinaries index on the ASX, which lost two per cent. And for our superstitious readers we have a few numbers which might send a chill through their spines. The all ordinaries index closed on Friday at 4666.6, which is the Devil’s triple 6, plus an extra 6 for good measure. And, if that doesn’t catch your eye the official exchange rate on Friday, as published by the country’s central bank, the Reserve Bank of Australia, was 1.0666.
Minews. Let’s leave all that sort of stuff for someone else to worry about, and focus on share prices.
Oz. Certainly, but you must admit it was an interesting coincidence. Still, moving on, and given that the trend was down across most sectors, it might lighten our readers’ days to hear first about companies which did not fall. There were a few interesting upward moves too that are worth talking about, thanks largely to discovery and production news.
Top of the list was Navarre Minerals (NML), a company not mentioned here before. The company seems to have drilled through a few gold nuggets at its Bendigo North project in Victoria, sending the gold bugs in its home state into a frenzy. The official rise over the week was a gain of A20 cents to A31.5 cents, which translates to a rise of 173 per cent, though that tells only part of the story. On Friday alone, after a management requested trading suspension, Navarre rose by A17.5 cents, or 125 per cent on the day, with 17 million shares exchanged out of an issued capital of 25 million shares. Put another way, 68 per cent of the shares in issue were swapped in a trading flurry on a single day.
Even so, and interesting as those market numbers are, it is worth pointing out that at its Friday closing price Navarre is still only capitalised at A$7.9 million, and while the top assay of 161.2 grams a tonne looks fabulous, the historic Bendigo goldfield is rich in nuggets, which will make it hard to ever prove a resource that satisfies modern banking or reporting requirements.
Minews. That really is a rather silly state of affairs, isn’t it?
Oz. Could not agree more. The gold is obviously there, but it’s in nuggets which do not fit comfortably into the code constructed by the Joint Ore Reserves Committee (JORC).
There were some other eye-catching moves in gold too. Northern Star (NST), a company we will be hearing more about at our June 23rd forum, closed A10 cents higher at A50 cents, a 12 month high. Gold Road (GOR), which we took a closer look at last week, rose by A4 cents to A64 cents, but did get as high as A71 cents early in the week. And Kingsrose (KRM) recovered recently lost ground by adding A5 cents to A$1.43. Resolute (RSG) put on A6 cents to A$1.11.
Best of the copper companies was Sandfire (SFR) which released a very positive feasibility study, adding A11 cents A$7.20. Metro Coal (MTE) was the strongest among the coal companies, putting in a rise of A12.5 cents to A63 cents. Alkane (ALK) led the way among the rare earth stocks with a gain of A21 cents to A$2.05.
Minews. Time to call the card, starting with gold, and then roam across the other sectors, as you please.
Oz. Notwithstanding the risers in gold that we’ve already mentioned, the trend was weaker. Among the handful of other companies that rose was Gryphon, up A4 cents to A$1.61, and Troy (TRY), up A1 cent higher to A$3.47. The fallers included Medusa (MML), down A17 cents to A$8.07, Integra (IGR), down A2.5 cents to A42.5 cents, Focus (FML), down A0.6 of a cent to A6.7 cents, Silver Lake (SLR), down A16 cents to A$1.71, and Kingsgate (KCN), down A27 cents to A$7.67. Beadell (BDR) was also weaker, down A4.5 cents to A78.5 cents, despite announcing a decision to mine its Tucano project in Brazil.
After Sandfire, the best of the copper companies was OZ Minerals (OZLDA), which rose by A6 cents to A$13.61. Incidentally, the new code is a result of its recent one-for-10 share consolidation. Metminco (MNC) climbed a modest A1 cent to A36.5 cents, and Hot Chili (HCH) also managed a rise of A1 cent to A60 cents. Then came a long list of small fallers. Among them were Marengo (MGO), down half a cent to A29.5 cents, Horseshoe Metals (HOR), down half a cent to A24 cents, and Rex (RXM), down by A1 cent to A$2.66.
Nickel companies were weaker across the board, as we’ve said. Only Mirabela (MBN) managed to rise, adding A4 cents to A$2.05. It was a mixed picture in the zinc space. Perilya (PEM) rose A5.5 cents to A64.5 cents. And Terramin (TZN) rose by A3.5 cents to A33.5 cents on news of a boardroom spill and speculation that former Normandy Mining boss, Rob de Crespigny, might be mixed up in the fracas.
Minews. Iron and coal next, please.
OZ. It was generally down in both of those areas. BC Iron (BCI) was the best of the iron ore companies, putting in a rise of A14 cents to A$3.00. Fortescue Metals (FMG) added A6 cents to A$6.46 after its founder, Andrew Forrest, shuffled the deck chairs and swapped the chief executive’s office for the chairman’s suite, in what most observers down this way see as a spot of window dressing ahead of a final legal decision on his future as a director. Among the fallers were Atlas (AGO), down A2 cents to A$3.58, Mt Gibson (MGX), down A7 cents to A$1.78, and Murchison (MMX), down A4 cents to A95 cents.
In coal, Metro was the star, as we’ve said, but also on the rise were Carabella (CLR) and Aston (AZT). Carabella rose A6 cents to A$2.04 and Aston rose A10 cents A$10.00. Fallers included Macarthur (MCC), down A41 cents to A$11.25, Coal of Africa (CZA), down A1 cent to A$1.17, and Stanmore (SMR), down A13 cents to A$1.14.
Minews, Uranium and minor metals to close.
Oz. It takes a lot of finding, but there was one uranium company in the black. Extract (EXT) added A4 cents to A$7.76, even as it awaits the next instalment of its takeover travails. Berkeley (BKY) continued its slide, losing another A9.5 cents to A39 cents. Manhattan (MHC) dropped A15 cents lower to A42 cents, and Paladin (PDN) shed A18 cents to A$3.03.
In potash, Potash West (PWN) caught the attention of a few punters after it put out a positive report on its west coast exploration program. Its shares hit a 12 month high of A31 cents, before closing the week at A25.5 cents, an overall gain of A6.5 cents.
In minor metals, Metallica (MLM) released a positive report on its nickel, cobalt and scandium project, and also traded up to a A38 cents 12 month high, before closing at A37 cents for a rise on the week of A6.5 cents. Tin companies were weaker. Among the fallers was Venture (VMS), down A3.5 cents to A40.5 cents. Lithium companies also fell. Galaxy (GXY) slipped half a cent lower to A85.5 cents, and Orocobre (ORE) lost A1 cent to A2.15.
Minews. Thanks Oz.
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That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html (Free Registration)
Minews. Good morning Australia. It looks like another tough week down your way.
Oz. It was, although some sectors were hit harder than others. Nickel companies suffered more than most, and a quick glance at a five-year nickel-price graph reveals some deep-seated reasons why. Back in mid 2006 nickel was selling for a shade under US$10 a pound. Today, it’s a shade over US$10 per pound. The price, however, is only part of the problem for Australian nickel miners. They have also been hit by the higher costs being felt across the mining industry, and by the rising exchange rate.
Minews. With a real squeeze on profits.
Oz. A very nasty squeeze actually, which can be measured using the exchange rate alone. Back in June, 2006, the Aussie dollar exchange rate against its US cousin was US74 cents. Today, it’s US$1.06. To put it another way, the Australian dollar price of nickel five years ago was around A$13.50 per pound. Today, it is A$9.40, a real decline of around 30 per cent for a miner with costs in Australian dollars, and perhaps a lot more after cost inflation is factored in.
Minews. Well, thanks for that piece of news - it’s just what we didn’t need to hear.
Oz. Sorry for bearing bad tidings, but that background explains why a number of nickel companies hit 12 month share price lows last week. Mincor (MCR) dropped to A98.5 cents on Friday, before closing the week at A99 cents for a loss of A10 cents. At this time last year Mincor was trading above A$2.00. Panoramic (PAN) lost A9 cents to close the week at a new low of A$1.83. Last October it traded as high as A$2.97.
Minews. Before running through more prices, perhaps a big picture snapshot.
Oz. Overall, both the base metals and the gold markets weakened by around 1.5 per cent. That was a better performance, moderately, than that delivered by the all ordinaries index on the ASX, which lost two per cent. And for our superstitious readers we have a few numbers which might send a chill through their spines. The all ordinaries index closed on Friday at 4666.6, which is the Devil’s triple 6, plus an extra 6 for good measure. And, if that doesn’t catch your eye the official exchange rate on Friday, as published by the country’s central bank, the Reserve Bank of Australia, was 1.0666.
Minews. Let’s leave all that sort of stuff for someone else to worry about, and focus on share prices.
Oz. Certainly, but you must admit it was an interesting coincidence. Still, moving on, and given that the trend was down across most sectors, it might lighten our readers’ days to hear first about companies which did not fall. There were a few interesting upward moves too that are worth talking about, thanks largely to discovery and production news.
Top of the list was Navarre Minerals (NML), a company not mentioned here before. The company seems to have drilled through a few gold nuggets at its Bendigo North project in Victoria, sending the gold bugs in its home state into a frenzy. The official rise over the week was a gain of A20 cents to A31.5 cents, which translates to a rise of 173 per cent, though that tells only part of the story. On Friday alone, after a management requested trading suspension, Navarre rose by A17.5 cents, or 125 per cent on the day, with 17 million shares exchanged out of an issued capital of 25 million shares. Put another way, 68 per cent of the shares in issue were swapped in a trading flurry on a single day.
Even so, and interesting as those market numbers are, it is worth pointing out that at its Friday closing price Navarre is still only capitalised at A$7.9 million, and while the top assay of 161.2 grams a tonne looks fabulous, the historic Bendigo goldfield is rich in nuggets, which will make it hard to ever prove a resource that satisfies modern banking or reporting requirements.
Minews. That really is a rather silly state of affairs, isn’t it?
Oz. Could not agree more. The gold is obviously there, but it’s in nuggets which do not fit comfortably into the code constructed by the Joint Ore Reserves Committee (JORC).
There were some other eye-catching moves in gold too. Northern Star (NST), a company we will be hearing more about at our June 23rd forum, closed A10 cents higher at A50 cents, a 12 month high. Gold Road (GOR), which we took a closer look at last week, rose by A4 cents to A64 cents, but did get as high as A71 cents early in the week. And Kingsrose (KRM) recovered recently lost ground by adding A5 cents to A$1.43. Resolute (RSG) put on A6 cents to A$1.11.
Best of the copper companies was Sandfire (SFR) which released a very positive feasibility study, adding A11 cents A$7.20. Metro Coal (MTE) was the strongest among the coal companies, putting in a rise of A12.5 cents to A63 cents. Alkane (ALK) led the way among the rare earth stocks with a gain of A21 cents to A$2.05.
Minews. Time to call the card, starting with gold, and then roam across the other sectors, as you please.
Oz. Notwithstanding the risers in gold that we’ve already mentioned, the trend was weaker. Among the handful of other companies that rose was Gryphon, up A4 cents to A$1.61, and Troy (TRY), up A1 cent higher to A$3.47. The fallers included Medusa (MML), down A17 cents to A$8.07, Integra (IGR), down A2.5 cents to A42.5 cents, Focus (FML), down A0.6 of a cent to A6.7 cents, Silver Lake (SLR), down A16 cents to A$1.71, and Kingsgate (KCN), down A27 cents to A$7.67. Beadell (BDR) was also weaker, down A4.5 cents to A78.5 cents, despite announcing a decision to mine its Tucano project in Brazil.
After Sandfire, the best of the copper companies was OZ Minerals (OZLDA), which rose by A6 cents to A$13.61. Incidentally, the new code is a result of its recent one-for-10 share consolidation. Metminco (MNC) climbed a modest A1 cent to A36.5 cents, and Hot Chili (HCH) also managed a rise of A1 cent to A60 cents. Then came a long list of small fallers. Among them were Marengo (MGO), down half a cent to A29.5 cents, Horseshoe Metals (HOR), down half a cent to A24 cents, and Rex (RXM), down by A1 cent to A$2.66.
Nickel companies were weaker across the board, as we’ve said. Only Mirabela (MBN) managed to rise, adding A4 cents to A$2.05. It was a mixed picture in the zinc space. Perilya (PEM) rose A5.5 cents to A64.5 cents. And Terramin (TZN) rose by A3.5 cents to A33.5 cents on news of a boardroom spill and speculation that former Normandy Mining boss, Rob de Crespigny, might be mixed up in the fracas.
Minews. Iron and coal next, please.
OZ. It was generally down in both of those areas. BC Iron (BCI) was the best of the iron ore companies, putting in a rise of A14 cents to A$3.00. Fortescue Metals (FMG) added A6 cents to A$6.46 after its founder, Andrew Forrest, shuffled the deck chairs and swapped the chief executive’s office for the chairman’s suite, in what most observers down this way see as a spot of window dressing ahead of a final legal decision on his future as a director. Among the fallers were Atlas (AGO), down A2 cents to A$3.58, Mt Gibson (MGX), down A7 cents to A$1.78, and Murchison (MMX), down A4 cents to A95 cents.
In coal, Metro was the star, as we’ve said, but also on the rise were Carabella (CLR) and Aston (AZT). Carabella rose A6 cents to A$2.04 and Aston rose A10 cents A$10.00. Fallers included Macarthur (MCC), down A41 cents to A$11.25, Coal of Africa (CZA), down A1 cent to A$1.17, and Stanmore (SMR), down A13 cents to A$1.14.
Minews, Uranium and minor metals to close.
Oz. It takes a lot of finding, but there was one uranium company in the black. Extract (EXT) added A4 cents to A$7.76, even as it awaits the next instalment of its takeover travails. Berkeley (BKY) continued its slide, losing another A9.5 cents to A39 cents. Manhattan (MHC) dropped A15 cents lower to A42 cents, and Paladin (PDN) shed A18 cents to A$3.03.
In potash, Potash West (PWN) caught the attention of a few punters after it put out a positive report on its west coast exploration program. Its shares hit a 12 month high of A31 cents, before closing the week at A25.5 cents, an overall gain of A6.5 cents.
In minor metals, Metallica (MLM) released a positive report on its nickel, cobalt and scandium project, and also traded up to a A38 cents 12 month high, before closing at A37 cents for a rise on the week of A6.5 cents. Tin companies were weaker. Among the fallers was Venture (VMS), down A3.5 cents to A40.5 cents. Lithium companies also fell. Galaxy (GXY) slipped half a cent lower to A85.5 cents, and Orocobre (ORE) lost A1 cent to A2.15.
Minews. Thanks Oz.
************************************
June 06, 2011
It’s Only A Matter Of Time Before The Chinese Monkey Usurps The American Organ Grinder
By Rob Davies
www.minesite.com/aus.html (The registration is free)
Over the last century there has been little doubt which country has been the dominant force in the world economy. If there was any uncertainty in 1914, then the economic annihilation of the European economies in the First World War ensured that by 1918 the USA was supreme. It took another world war for it to consolidated its position, of course, and then the Russians put up a good show of providing serious rivalry. But it’s been China that’s ended up providing what looks like the most sustainable challenge. And since global financial crisis that began in 2008, the Chinese monkey has been able to chip further away at the authority of the American organ grinder.
Data released on Friday showed that the US economy is not creating the jobs in this recovery that it needs to. Unemployment now stands at 9.1 per cent, and despite a US$600 billion injection from the Fed in the form of QEI and QE2, the economy is limping along at an annualised growth rate of just 1.8 per cent. Consumers feel poorer because house prices are 33 per cent below their peak. But in truth the US has been struggling for decades to maintain its economic leadership. For a long period its competitive weakness was hidden by increasing debt. Then the crash of 2008 swept away the pretence that more borrowing had no downside.
And the impact of this recession on the US has been made worse by the changing shape of the world economy. When the US was the single major force in the global economy a recession there had a direct and quick impact on the demand for commodities. Falling consumption pretty rapidly resulted in lower prices, which then stimulated demand and domestic recovery followed in short order.
But that mechanism has not worked this time because commodities - and especially petrol to which the American consumer has an unbreakable addiction - have continued to rise during the recession. And money spent on petrol cannot be spent on anything else now that the US credit binge is over.
The reason this dynamic no longer works is because Chinese appetite for commodities is keeping demand high and prices up. No longer can the US enjoy the unhindered benefits of the self-correcting forces of the market economy. It now plays second fiddle to China.
A case in point comes from the most recent analysis published by the International Lead and Zinc study Group. It estimates that total lead consumption will rise by 5.5 per cent this year to 10.04 million tonnes. That level of growth does not come from the anaemic activity in the US but is driven by the likelihood that Chinese growth will run at around 10 per cent, and that there will be a boom in the manufacturing of fleets of electric bicycles, all using lead acid batteries. That is the main reason lead is trading at US$2,484 a tonne, up by more than 25 per cent on the year.
This level of activity is keeping commodity prices high, and is not allowing the natural price cycles of boom and bust to give the US economy a helping hand by putting pricing power back into the pocket of consumers. To make matters worse, the impact of high commodity prices is more severe in the US than elsewhere because of the weak dollar.
Since metals are priced in dollars the US buyers have to take the full increase on the chin whereas consumers in other parts of the world find that higher prices are ameliorated by the rise of their currencies so they don’t suffer quite so much. This is yet another dynamic working in the favour of China and the emerging economies and against the US. And if we continue in this vein, it can only be a matter of time before the monkey ends up replacing the organ grinder.
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It’s Only A Matter Of Time Before The Chinese Monkey Usurps The American Organ Grinder
By Rob Davies
www.minesite.com/aus.html (The registration is free)
Over the last century there has been little doubt which country has been the dominant force in the world economy. If there was any uncertainty in 1914, then the economic annihilation of the European economies in the First World War ensured that by 1918 the USA was supreme. It took another world war for it to consolidated its position, of course, and then the Russians put up a good show of providing serious rivalry. But it’s been China that’s ended up providing what looks like the most sustainable challenge. And since global financial crisis that began in 2008, the Chinese monkey has been able to chip further away at the authority of the American organ grinder.
Data released on Friday showed that the US economy is not creating the jobs in this recovery that it needs to. Unemployment now stands at 9.1 per cent, and despite a US$600 billion injection from the Fed in the form of QEI and QE2, the economy is limping along at an annualised growth rate of just 1.8 per cent. Consumers feel poorer because house prices are 33 per cent below their peak. But in truth the US has been struggling for decades to maintain its economic leadership. For a long period its competitive weakness was hidden by increasing debt. Then the crash of 2008 swept away the pretence that more borrowing had no downside.
And the impact of this recession on the US has been made worse by the changing shape of the world economy. When the US was the single major force in the global economy a recession there had a direct and quick impact on the demand for commodities. Falling consumption pretty rapidly resulted in lower prices, which then stimulated demand and domestic recovery followed in short order.
But that mechanism has not worked this time because commodities - and especially petrol to which the American consumer has an unbreakable addiction - have continued to rise during the recession. And money spent on petrol cannot be spent on anything else now that the US credit binge is over.
The reason this dynamic no longer works is because Chinese appetite for commodities is keeping demand high and prices up. No longer can the US enjoy the unhindered benefits of the self-correcting forces of the market economy. It now plays second fiddle to China.
A case in point comes from the most recent analysis published by the International Lead and Zinc study Group. It estimates that total lead consumption will rise by 5.5 per cent this year to 10.04 million tonnes. That level of growth does not come from the anaemic activity in the US but is driven by the likelihood that Chinese growth will run at around 10 per cent, and that there will be a boom in the manufacturing of fleets of electric bicycles, all using lead acid batteries. That is the main reason lead is trading at US$2,484 a tonne, up by more than 25 per cent on the year.
This level of activity is keeping commodity prices high, and is not allowing the natural price cycles of boom and bust to give the US economy a helping hand by putting pricing power back into the pocket of consumers. To make matters worse, the impact of high commodity prices is more severe in the US than elsewhere because of the weak dollar.
Since metals are priced in dollars the US buyers have to take the full increase on the chin whereas consumers in other parts of the world find that higher prices are ameliorated by the rise of their currencies so they don’t suffer quite so much. This is yet another dynamic working in the favour of China and the emerging economies and against the US. And if we continue in this vein, it can only be a matter of time before the monkey ends up replacing the organ grinder.
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Disaster Not Averted
The latest jobs numbers and the very real chance of another Great Depression.
Dean Baker (USA)
June 6, 2011
When the financial system was on the edge of melting down back in the fall of 2008, there was much talk in the punditocracy of a second Great Depression. The story was that we risked repeating the mistake at the onset of the first Great Depression: allowing a cascade of bank failures that both destroyed much of the country’s wealth and left the financial system badly crippled. Instead, however, we acted, and these days the accepted wisdom is that the TARP and other special lending facilities created by the Federal Reserve Board prevented a similar collapse that saved us from a second Great Depression. But this view badly misunderstands the nature of the first Great Depression””and may, in fact, result in the country suffering the second Great Depression that the pundits claim we have averted.
To read the full article, please click the link below:
www.tnr.com/article/politics/89460/jobs-may-umemployment-second-great-depression
The latest jobs numbers and the very real chance of another Great Depression.
Dean Baker (USA)
June 6, 2011
When the financial system was on the edge of melting down back in the fall of 2008, there was much talk in the punditocracy of a second Great Depression. The story was that we risked repeating the mistake at the onset of the first Great Depression: allowing a cascade of bank failures that both destroyed much of the country’s wealth and left the financial system badly crippled. Instead, however, we acted, and these days the accepted wisdom is that the TARP and other special lending facilities created by the Federal Reserve Board prevented a similar collapse that saved us from a second Great Depression. But this view badly misunderstands the nature of the first Great Depression””and may, in fact, result in the country suffering the second Great Depression that the pundits claim we have averted.
To read the full article, please click the link below:
www.tnr.com/article/politics/89460/jobs-may-umemployment-second-great-depression
China Holds the World Hostage in Rare Earth Metals
June 06, 2011 • Tanuj Khosla
Not many people in the world, especially in the West realize the crisis that is confronting all the countries, with the exception of China, due to rare earth metals that, despite their name, are fairly abundant in the Earth's crust. However, due to their geochemical properties rare earth minerals are typically dispersed and not often found in concentrated in economically exploitable forms. These minerals contain one or more rare earth elements as major metal constituents.
To read the full article, please click the link below:
http://www.institutionalinvestor.co...rth-Metals.html?ArticleId=2843334&single=true
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June 06, 2011 • Tanuj Khosla
Not many people in the world, especially in the West realize the crisis that is confronting all the countries, with the exception of China, due to rare earth metals that, despite their name, are fairly abundant in the Earth's crust. However, due to their geochemical properties rare earth minerals are typically dispersed and not often found in concentrated in economically exploitable forms. These minerals contain one or more rare earth elements as major metal constituents.
To read the full article, please click the link below:
http://www.institutionalinvestor.co...rth-Metals.html?ArticleId=2843334&single=true
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Ugh, reading that level of economic illiteracy leaves a bad taste in ones mouth.
Please, drillinto, I enjoy you commodities news posts much more
.June 11, 2011
That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free registration)
Minews. Good morning Australia. It looks like the price correction continues?
Oz. Yes, but not dramatically so. The slide in share prices we’ve seen over May and June has been more like a slow melting process, as each week has produced slightly lower numbers. The outlook for next week is not much better, given that the Dow Jones index on Wall Street closed below 12,000 points for the first time since March.
All of the key indices on the ASX lost ground last week, but not substantially. The all ordinaries index had four modestly down days and one up, to shed a relatively painless 0.7 per cent overall. The metals and mining index did even better, losing just 0.5 per cent, while the gold index suffered the biggest decline, at 2.3 per cent, though that didn’t tell the whole story because a reasonable number of gold companies also rose.
Minews. Shall we start with gold, then? Because while the world worries, gold often performs at its best.
Oz. There two things that are more certain than gold: death and taxes, and the issue of taxes was again in the news this week. The Australian Government seems to have two tax surprises in store. The resource rent, or super-tax, has reached the draft legislation phase with the release of a review which, surprise-surprise, further complicates an already complex proposal. What the government wants to do is force miners to value individual mining leases inside their projects. Naturally, some of those leases will be of lesser value because they contain less ore. The upshot is expected to be a decline in allowable depreciation and an increase in tax.
Minews. How horribly convoluted.
Oz. Couldn’t agree more, but it’s an indication of the determination of the government to tax anything that moves, or burns, because the new carbon tax is also moving down the legislation runway, speeding up to catch the coal miners. Until now, the coal companies thought they would get a reprieve for being exporters. Not so. So from next year, or the year after, coal companies will have two new taxes to contend with, the resources super tax and a carbon tax.
Minews. Enough boring tax talk. Let’s have some prices.
Oz. We’ll start with gold, but also toss in a few of the outperformers in other sectors to provide our readers with a few fresh names. Best of the gold explorers was one we’ve never heard of before, Alloy Resources (AYR). It doubled in price last week, rising from A3.2 cents to a peak on Thursday of A7.6 cents in massive turnover. More than 113 million shares changed hands on the day, out of an issued capital of 146 million shares. Sanity returned on Friday and Alloy closed at A5.9 cents for a gain over the week of A2.7 cents, or 84 per cent. Driving the shares was a fresh gold discovery called Warmblood at the company’s Horsewell project in Western Australia. Best intersection was 32 metres at 3.9 grams a tonne from the surface, and 8 metres at 4.4 grams per tonne from 12metres.
Minews. Nor particularly high grades, but presumably they link up with earlier drill results.
Oz. That seems to be the theory. By the way, Alloy’s chairman is a well-known mining character down this way, Peter Harold, chief executive of the nickel miner, Panoramic.
Minews. Let’s keep going with prices please.
Oz. Also up in a down week was Troy Resources (TRY) which is showing the benefits of a management marketing tour of North America. It added A21 cents to A$3.68. Azumah (AZM), one of the Aussie gold companies busy in West Africa which we took a look at last week, added A3.5 cents to A56 cents. Allied Gold (ALD) continued to recover lost ground, putting in a rise of A4 cents to A55 cents. Kingsgate (KCN) released an optimistic production forecast and was rewarded with a share price rise of A57 cents to A$8.20. Ausgold (AUC), the company which thinks it is on to something big near the wheat-belt town of Katanning in WA, rose by A10 cents to A$1.48, and might be worth a site visit soon.
Among the other gold movers was Beadell (BDR), up 1.5 cents to A80 cents. St Barbara (SBM) rose A3 cents to A$1.85, while its takeover target, Catalpa (CAH) was steady at A$1.72. Perseus (PRU) posted one of the biggest falls of the week, shedding A21 cents to A$2.36. Crusader (CAS) was also sold off quite heavily, losing A20 cents to A$1.00. After that most falls were modest. Kingsrose (KRM) lost A6 cents to A$1.37. Silver Lake (SLR) slipped A4 cents lower to A$1.67, and Adamus (ADU) eased back by A3 cents to A60 cents.
Minews. Iron ore next, because there seems to have been a bit of action there.
Oz. Territory (TTY) was the star of the week as its long-term trading partner, Noble Group from Hong Kong, weighed in with an all cash A50 cent-a-share bid to try and knock South Africa’s Exarro out of contention. On the market, Territory added A5.5 cents to A52 cents, a price which indicates that some investors expect Exarro to counter bid. Elsewhere, Atlas (AGO) rose by A7 cents to A$3.65. Haranga (HAR), a company we rarely hear anything about, attracted interest with a rise of A4 cents to A30 cents as its makes progress at its Mongolian iron ore exploration projects. After that most moves were minor. Fortescue Metals (FMG) slipped A14 cents lower to A$6.32. Mt Gibson (MGX) shed A2 cents to A$1.76. Gindalbie (GBG) lost A4.5 cents to A89 cents, and Sherwin (SHD) was A1 cent lighter at A14 cents.
Minews. The base metals next, starting with copper, please.
Oz. A mixed bag, but without any significant moves up, or down. Sandfire (SFR), which is worth a closer look next week, added A16 cents to A$7.17, as investors continue to digest its very positive feasibility study into the DeGrussa project. OZ Minerals (OZL), Sandfire’s biggest shareholder, added A7 cents to A$13.70. Anvil (AVM) was one of the only other copper companies to rise, putting on A5 cents to A$5.67. After that came a list of declines. PanAust (PNA) lost A4 cents to A$3.77. Rex (RXM) was down A14 cents to A$2.52. Metminco (MNC) dropped a fairly sharp A6.5 cents to A30 cents, and Hot Chili (HCH) was A2 cents weaker at A58 cents.
All nickel companies lost ground. Most zinc companies rose, marginally. Among the nickels Mincor (MCR) fell by A10 cents to A89 cents. Panoramic (PAN) was A4 cents weaker at A$1.79, and Western Areas (WSA) fell by the same amount, A4 cents, to A$5.99. Best of the zinc companies was Perilya (PEM) which rose by A1.5 cents to A66 cents. Blackthorn (BTR) gained A1 cent to A53 cents, and Ironbark (IBG) firmed by A2 cents to A29 cents.
Minews. Coal and uranium next.
Oz. There were only a few risers, but lots of fallers. Whitehaven (WHC) was the lone coal company to rise, just. It added A8 cents to A$5.59. Falls were posted by Aquila (AQA), down A42 cents to A$7.75 as it continues to have joint venture problems, Coal of Africa (CZA), down A1 cent to A$1.16, Carabella (CLR), down A8 cents to A$1.96, and Coalworks (CWK), down A6.5 cents to A65 cents.
The three uranium companies rise were Extract (EXT) which added A3 cents to A$7.79, Berkeley (BKY) which rose by A5 cents to A44 cents, and Forte (FTE), perhaps thanks to our midweek report, which managed a rise of A0.4 of a cent to A7.2 cents. Then come the falls, led by Paladin (PDN) which was hit by rumours about funding issues, and which dropped A24 cents to A$2.79 on the week, but did get as low as A$2.68 at one stage on Thursday. Bannerman (BMN) lost A1 cent to A29.5 cents. Toro (TOE), sold down to A7.6 cents, off by A0.7 of a cent, and Energy and Minerals (EMA) fell by A2 cents to A13.5 cents after reporting fresh legal problems.
Minews. Minor metals to close, please.
Oz. Much like the rest of the market. A handful of rises and plenty of small falls. Alkane (ALK) was the pick of the rare earth companies, putting in a rise of A30 cents to A$2.35. Iluka (ILU) was in demand thanks to sky-high zircon prices. It added A$1.64 to A$17.49. Lithium stocks firmed. Galaxy (GXY) put on A1.5 cents to A86 cents, and Orocobre (ORE) added A3 cents to A$2.18. Potash stocks weakened. South Boulder (STB) fell A2 cents to A$3.13 and Minemakers (MAK) was off by A1 cent to A45 cents. Biggest fall of the week was freshly listed Kimberley Rare Earths (KRE) which dropped A4.5 cents to A16.5 cents after being stopped from completing a related party asset purchase ASX regulators.
Minews. Thanks Oz
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That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free registration)
Minews. Good morning Australia. It looks like the price correction continues?
Oz. Yes, but not dramatically so. The slide in share prices we’ve seen over May and June has been more like a slow melting process, as each week has produced slightly lower numbers. The outlook for next week is not much better, given that the Dow Jones index on Wall Street closed below 12,000 points for the first time since March.
All of the key indices on the ASX lost ground last week, but not substantially. The all ordinaries index had four modestly down days and one up, to shed a relatively painless 0.7 per cent overall. The metals and mining index did even better, losing just 0.5 per cent, while the gold index suffered the biggest decline, at 2.3 per cent, though that didn’t tell the whole story because a reasonable number of gold companies also rose.
Minews. Shall we start with gold, then? Because while the world worries, gold often performs at its best.
Oz. There two things that are more certain than gold: death and taxes, and the issue of taxes was again in the news this week. The Australian Government seems to have two tax surprises in store. The resource rent, or super-tax, has reached the draft legislation phase with the release of a review which, surprise-surprise, further complicates an already complex proposal. What the government wants to do is force miners to value individual mining leases inside their projects. Naturally, some of those leases will be of lesser value because they contain less ore. The upshot is expected to be a decline in allowable depreciation and an increase in tax.
Minews. How horribly convoluted.
Oz. Couldn’t agree more, but it’s an indication of the determination of the government to tax anything that moves, or burns, because the new carbon tax is also moving down the legislation runway, speeding up to catch the coal miners. Until now, the coal companies thought they would get a reprieve for being exporters. Not so. So from next year, or the year after, coal companies will have two new taxes to contend with, the resources super tax and a carbon tax.
Minews. Enough boring tax talk. Let’s have some prices.
Oz. We’ll start with gold, but also toss in a few of the outperformers in other sectors to provide our readers with a few fresh names. Best of the gold explorers was one we’ve never heard of before, Alloy Resources (AYR). It doubled in price last week, rising from A3.2 cents to a peak on Thursday of A7.6 cents in massive turnover. More than 113 million shares changed hands on the day, out of an issued capital of 146 million shares. Sanity returned on Friday and Alloy closed at A5.9 cents for a gain over the week of A2.7 cents, or 84 per cent. Driving the shares was a fresh gold discovery called Warmblood at the company’s Horsewell project in Western Australia. Best intersection was 32 metres at 3.9 grams a tonne from the surface, and 8 metres at 4.4 grams per tonne from 12metres.
Minews. Nor particularly high grades, but presumably they link up with earlier drill results.
Oz. That seems to be the theory. By the way, Alloy’s chairman is a well-known mining character down this way, Peter Harold, chief executive of the nickel miner, Panoramic.
Minews. Let’s keep going with prices please.
Oz. Also up in a down week was Troy Resources (TRY) which is showing the benefits of a management marketing tour of North America. It added A21 cents to A$3.68. Azumah (AZM), one of the Aussie gold companies busy in West Africa which we took a look at last week, added A3.5 cents to A56 cents. Allied Gold (ALD) continued to recover lost ground, putting in a rise of A4 cents to A55 cents. Kingsgate (KCN) released an optimistic production forecast and was rewarded with a share price rise of A57 cents to A$8.20. Ausgold (AUC), the company which thinks it is on to something big near the wheat-belt town of Katanning in WA, rose by A10 cents to A$1.48, and might be worth a site visit soon.
Among the other gold movers was Beadell (BDR), up 1.5 cents to A80 cents. St Barbara (SBM) rose A3 cents to A$1.85, while its takeover target, Catalpa (CAH) was steady at A$1.72. Perseus (PRU) posted one of the biggest falls of the week, shedding A21 cents to A$2.36. Crusader (CAS) was also sold off quite heavily, losing A20 cents to A$1.00. After that most falls were modest. Kingsrose (KRM) lost A6 cents to A$1.37. Silver Lake (SLR) slipped A4 cents lower to A$1.67, and Adamus (ADU) eased back by A3 cents to A60 cents.
Minews. Iron ore next, because there seems to have been a bit of action there.
Oz. Territory (TTY) was the star of the week as its long-term trading partner, Noble Group from Hong Kong, weighed in with an all cash A50 cent-a-share bid to try and knock South Africa’s Exarro out of contention. On the market, Territory added A5.5 cents to A52 cents, a price which indicates that some investors expect Exarro to counter bid. Elsewhere, Atlas (AGO) rose by A7 cents to A$3.65. Haranga (HAR), a company we rarely hear anything about, attracted interest with a rise of A4 cents to A30 cents as its makes progress at its Mongolian iron ore exploration projects. After that most moves were minor. Fortescue Metals (FMG) slipped A14 cents lower to A$6.32. Mt Gibson (MGX) shed A2 cents to A$1.76. Gindalbie (GBG) lost A4.5 cents to A89 cents, and Sherwin (SHD) was A1 cent lighter at A14 cents.
Minews. The base metals next, starting with copper, please.
Oz. A mixed bag, but without any significant moves up, or down. Sandfire (SFR), which is worth a closer look next week, added A16 cents to A$7.17, as investors continue to digest its very positive feasibility study into the DeGrussa project. OZ Minerals (OZL), Sandfire’s biggest shareholder, added A7 cents to A$13.70. Anvil (AVM) was one of the only other copper companies to rise, putting on A5 cents to A$5.67. After that came a list of declines. PanAust (PNA) lost A4 cents to A$3.77. Rex (RXM) was down A14 cents to A$2.52. Metminco (MNC) dropped a fairly sharp A6.5 cents to A30 cents, and Hot Chili (HCH) was A2 cents weaker at A58 cents.
All nickel companies lost ground. Most zinc companies rose, marginally. Among the nickels Mincor (MCR) fell by A10 cents to A89 cents. Panoramic (PAN) was A4 cents weaker at A$1.79, and Western Areas (WSA) fell by the same amount, A4 cents, to A$5.99. Best of the zinc companies was Perilya (PEM) which rose by A1.5 cents to A66 cents. Blackthorn (BTR) gained A1 cent to A53 cents, and Ironbark (IBG) firmed by A2 cents to A29 cents.
Minews. Coal and uranium next.
Oz. There were only a few risers, but lots of fallers. Whitehaven (WHC) was the lone coal company to rise, just. It added A8 cents to A$5.59. Falls were posted by Aquila (AQA), down A42 cents to A$7.75 as it continues to have joint venture problems, Coal of Africa (CZA), down A1 cent to A$1.16, Carabella (CLR), down A8 cents to A$1.96, and Coalworks (CWK), down A6.5 cents to A65 cents.
The three uranium companies rise were Extract (EXT) which added A3 cents to A$7.79, Berkeley (BKY) which rose by A5 cents to A44 cents, and Forte (FTE), perhaps thanks to our midweek report, which managed a rise of A0.4 of a cent to A7.2 cents. Then come the falls, led by Paladin (PDN) which was hit by rumours about funding issues, and which dropped A24 cents to A$2.79 on the week, but did get as low as A$2.68 at one stage on Thursday. Bannerman (BMN) lost A1 cent to A29.5 cents. Toro (TOE), sold down to A7.6 cents, off by A0.7 of a cent, and Energy and Minerals (EMA) fell by A2 cents to A13.5 cents after reporting fresh legal problems.
Minews. Minor metals to close, please.
Oz. Much like the rest of the market. A handful of rises and plenty of small falls. Alkane (ALK) was the pick of the rare earth companies, putting in a rise of A30 cents to A$2.35. Iluka (ILU) was in demand thanks to sky-high zircon prices. It added A$1.64 to A$17.49. Lithium stocks firmed. Galaxy (GXY) put on A1.5 cents to A86 cents, and Orocobre (ORE) added A3 cents to A$2.18. Potash stocks weakened. South Boulder (STB) fell A2 cents to A$3.13 and Minemakers (MAK) was off by A1 cent to A45 cents. Biggest fall of the week was freshly listed Kimberley Rare Earths (KRE) which dropped A4.5 cents to A16.5 cents after being stopped from completing a related party asset purchase ASX regulators.
Minews. Thanks Oz
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The Gas Is Greener
Robert Bryce, New York Times, 06-07-11
In April, Gov. Jerry Brown made headlines by signing into law an ambitious mandate that requires California to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020.
Please click the link below to read the full article
http://www.nytimes.com/2011/06/08/opinion/08bryce.html?_r=3
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Robert Bryce, New York Times, 06-07-11
In April, Gov. Jerry Brown made headlines by signing into law an ambitious mandate that requires California to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020.
Please click the link below to read the full article
http://www.nytimes.com/2011/06/08/opinion/08bryce.html?_r=3
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June 13, 2011
Metals Don’t Offer Income, But Holding Them Is A Far More Attractive Option Than Holding IOUs From Politicians
By Rob Davies
www.minesite.com/aus.html (Free registration)
You don’t have to read much financial commentary to realise that the degree of uncertainty in global financial markets is probably as big now as it has ever been. The looming iceberg that is the impending Greek default, or whatever name it’s given, is the first obstacle the markets have to clear. Unfortunately right behind that are the even bigger hurdles of Ireland, Portugal and Spain. And what is really scary is that all these are just the warm-up act to the catastrophe that is the US economy.
The powers that be are in a pickle and no elected politician wants to take the tough decisions that are needed for the long-term, when they have to face their electorates in a matter of months or even a few years. Businessman, by contrast, usually do all they can as soon as they can to resolve a problem, rather than kicking it into the long grass as our elected representatives do.
Knowing that defaulting on their obligations to capitalists has some pretty harsh penalties many governments, and particularly the US, are defaulting by stealth, using inflation as their tool. Last week the yield on the US 10 year Treasury bond dropped below three per cent to 2.9 per cent. Since this is 0.3 per cent below the April inflation figure investors are clearly being robbed. Why are they allowing themselves to be fleeced like this?
But the truth is that the only sizeable buyer of new US debt is the US Government in the form of QE 1 and 2. And as the deadline for the end of that programme nears, and the euro crisis worsens, there are real fears about what happens when it does. While the bond markets seem to be reacting like The Road Runner going over a cliff and ignoring gravity, equity markets have been slipping gently down for several weeks.
But commodity markets are not quite sure which what to make of the terrors that lie ahead. Last week commodities traders ignored the fears spooking equities, and base metals, as measured by the LME index, rose by 1.9 per cent to 4086.2. Copper, though, declined to join the rally and dropped back below US$9,000 to US$8,950 a tonne. In fact lead was the only base metal to make forward progress but its 3.5 per cent gain was enough to override the losses from others in the group.
Even though you get no income from holding metal, being long of it is fine if the alternative is holding an IOU from a politician, since the politician is likely to print a lot more of them over the next few years. But although it is true that no one can suddenly dramatically increase the supply of metal it is also true that industrial demand for them could slow quite abruptly if one of the impending crises erupts.
Having said that, base metals markets are still tight, as evidenced by amazingly low inventory levels. Low interest rates, in real and nominal terms, also mean that it doesn’t cost much to hold metal just in case things do improve. So, while governments carry on picking the pockets of the savers who voted them in, owning metal is not a bad insurance policy.
********
Metals Don’t Offer Income, But Holding Them Is A Far More Attractive Option Than Holding IOUs From Politicians
By Rob Davies
www.minesite.com/aus.html (Free registration)
You don’t have to read much financial commentary to realise that the degree of uncertainty in global financial markets is probably as big now as it has ever been. The looming iceberg that is the impending Greek default, or whatever name it’s given, is the first obstacle the markets have to clear. Unfortunately right behind that are the even bigger hurdles of Ireland, Portugal and Spain. And what is really scary is that all these are just the warm-up act to the catastrophe that is the US economy.
The powers that be are in a pickle and no elected politician wants to take the tough decisions that are needed for the long-term, when they have to face their electorates in a matter of months or even a few years. Businessman, by contrast, usually do all they can as soon as they can to resolve a problem, rather than kicking it into the long grass as our elected representatives do.
Knowing that defaulting on their obligations to capitalists has some pretty harsh penalties many governments, and particularly the US, are defaulting by stealth, using inflation as their tool. Last week the yield on the US 10 year Treasury bond dropped below three per cent to 2.9 per cent. Since this is 0.3 per cent below the April inflation figure investors are clearly being robbed. Why are they allowing themselves to be fleeced like this?
But the truth is that the only sizeable buyer of new US debt is the US Government in the form of QE 1 and 2. And as the deadline for the end of that programme nears, and the euro crisis worsens, there are real fears about what happens when it does. While the bond markets seem to be reacting like The Road Runner going over a cliff and ignoring gravity, equity markets have been slipping gently down for several weeks.
But commodity markets are not quite sure which what to make of the terrors that lie ahead. Last week commodities traders ignored the fears spooking equities, and base metals, as measured by the LME index, rose by 1.9 per cent to 4086.2. Copper, though, declined to join the rally and dropped back below US$9,000 to US$8,950 a tonne. In fact lead was the only base metal to make forward progress but its 3.5 per cent gain was enough to override the losses from others in the group.
Even though you get no income from holding metal, being long of it is fine if the alternative is holding an IOU from a politician, since the politician is likely to print a lot more of them over the next few years. But although it is true that no one can suddenly dramatically increase the supply of metal it is also true that industrial demand for them could slow quite abruptly if one of the impending crises erupts.
Having said that, base metals markets are still tight, as evidenced by amazingly low inventory levels. Low interest rates, in real and nominal terms, also mean that it doesn’t cost much to hold metal just in case things do improve. So, while governments carry on picking the pockets of the savers who voted them in, owning metal is not a bad insurance policy.
********
Crude Oil: Brent-WTI spread blows out to record levels
To read the comment please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/13/brent-wti-spread-blows-out-to-record-levels.html
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To read the comment please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/13/brent-wti-spread-blows-out-to-record-levels.html
***********************
June 17, 2011
"High-frequency trade sparks flash fires in commodities"
David Sheppard And Jonathan Spicer
NEW YORK (Reuters) - When natural gas prices dropped by 8 percent in a matter of seconds in the early hours of Asian trade last week, one New York-based hedge fund manager said he didn't have to think twice.
"The moment I heard, I ran, literally ran, to my computer and started buying," he said. "It was clear it was an HFT algo gone bad and I could profit on the rebound off the lows."
He wouldn't have been the only one.
Since the infamous "flash crash" in equity markets in May 2010, that was exacerbated by high-frequency trading (HFT), seasoned traders say that violent, often inexplicable price moves are becoming more common, and allow those who are fast enough to book a quick profit as prices bounce straight back up.
In commodity markets, which have been hit by a series of mini flash crashes over the last 18 months, experts say there could now be an influx of more high-speed computer-based traders that have honed their techniques in the cut-throat equities markets -- the fastest and most electronic on earth.
Though such firms have traded commodities for years, some traders and experts say they are now applying new and more aggressive strategies that have stunned traditional players.
Such high-frequency trading -- in which rapid-fire machines place thousands of very short-term bets, making markets and profiting on tiny price imbalances -- could double from around 15 percent in two to three years, leaving commodity exchanges and regulators running to catch up.
Jeffrey Sprecher, CEO of commodity futures powerhouse IntercontinentalExchange Inc <ICE.N>, told reporters last week exchanges are working on ways to target "unintended" price spikes, without losing the benefits -- and volumes -- HFT firms bring.
"I think it's incumbent on the exchanges to solve this. I think customers are going to lose faith in us if we don't."
HFT AND THE MAY 5 OIL CRASH
Commodity traders are increasingly blaming computer-driven activity for a series of anomalous price movements ranging from quick blips in natural gas and cocoa to deeper, longer-lasting jolts like the one that shook oil on May 5.
On that day, traders were shocked by the speed and violence of a record $13 intraday plunge, as sell-stop after sell-stop was triggered, despite the absence of a major news event.
"I think there are some new algorithms in commodities that we've seen in currency markets before that are designed to sniff out the stops," said Paul Rowady, a senior analyst at TABB Group, a firm that specializes in capital markets research.
"Whenever there is an event that causes prices to move they try to sniff out the stops in both directions. The market can suddenly shoot up, and then back down again after an event and it leaves traders disoriented, wondering what happened."
High-frequency traders are frustrated by the criticism and what they call mischaracterizations. Several told Reuters they reduce volatility by quickly bringing prices back in line after larger, long-term players place their bets.
"May 5 was a price discovery process influenced by real fundamental changes in people's views on the oil market. It wasn't a liquidity blip," said an oil-market high-frequency trader who requested anonymity.
And yet some of the world's biggest oil hedge funds appeared to have been victims of the slide, not catalysts.
SEEKING NEW PASTURES
All signs point to continued growth of HFT in commodities.
It is partly in response to increased competition and narrowing profit margins in U.S. equities, where high-frequency trade is estimated to have declined from a year ago, along with lower volumes and volatility. It is still, however, thought to be involved in more than half of all trading in the market.
Additionally, for HFT, there is an allure in playing in markets where heightened volatility is becoming the norm.
"Whenever there are spikes in markets, high-frequency traders gather data on it," said Louis Liu, founder of Matrix Trading Technologies LLC, a New York-based high-frequency trading technology firm. The May 5 oil crash "could encourage them to enter" energy futures trading, he said.
William McNeill, managing director of trading at HTG Capital Partners, a Chicago-based proprietary HFT firm echoed that view: "I think you'll definitely see an increase in people market-making in the oil product set. If there's moderate volatility ... there's probably ample opportunity to take risk."
Rowady at TABB Group said he wouldn't be surprised to see HFT volumes double in energy markets in the next two to three years, saying oil and natural gas "fit the bill" for HFT firms.
But the growth of HFT, while undoubtedly bringing some benefits to the wider market like lower trading fees, won't be without risk.
"When you have highly complicated automated systems operating in highly complex markets then there is the risk that the permutations of what can occur are beyond what you're able to model," Rowady said. "Sometimes the only way to find that problem is to stumble over it."
HFT firms in commodity markets have found themselves under intense scrutiny before.
In 2009, the U.S. Commodity Futures Trading Commission charged traders in the Chicago office of Netherlands-based HFT firm Optiver with attempting to move oil prices to their advantage with a rapid-fire trading tool they nicknamed the "Hammer."
And in 2010, HFT firm Infinium Capital Management found itself under investigation after its newest trading algorithm ran amok, sparking a brief surge in oil prices that racked the firm with a million dollar loss as the program sent up to 3,000 buy orders a second.
While experienced high-frequency traders agree that causing sudden movement in prices is not in their collective interest, the Optiver case is a reminder that HFT firms can shift prices either by practice or design.
GETTING FASTER
CME Group Inc <CME.O>, which runs the New York Mercantile Exchange (NYMEX), home of the world's most actively traded crude oil contract and the natural gas contract where last week's 8 percent crash occurred, said automated trading, including both HFT and slower computer-generated trades, accounted for almost a third of energy futures volume in the fourth quarter of 2010, in a report published on its website.
The Aite Group consultancy estimates that specifically high-frequency trade in energy futures already accounts for around 15 percent of all volume.
But illustrating the controversial nature of growing HFT trade, CME Group told Reuters it had decided not to make its first-quarter report available to the public.
Regulators are desperately trying to keep up with the fleet-footed traders that always seem one step ahead, but so far haven't indicated any major plans to restrict their practices. Short of a major change in stance from regulators and exchanges, traditional traders may just need to learn to adapt.
"Ultimately what they're doing is within the rules," said Tim Quast at ModernIR, which advises many S&P 500 companies on the impact speculation, HFT and fund flows can have on their stock price. "They're just faster and better at operating within the rules than others."
(Reporting by David Sheppard and Jonathan Spicer; additional reporting by Janet McGurty in New York; editing by Jonathan Leff, Marguerita Choy and Lisa Shumaker)
****************************
"High-frequency trade sparks flash fires in commodities"
David Sheppard And Jonathan Spicer
NEW YORK (Reuters) - When natural gas prices dropped by 8 percent in a matter of seconds in the early hours of Asian trade last week, one New York-based hedge fund manager said he didn't have to think twice.
"The moment I heard, I ran, literally ran, to my computer and started buying," he said. "It was clear it was an HFT algo gone bad and I could profit on the rebound off the lows."
He wouldn't have been the only one.
Since the infamous "flash crash" in equity markets in May 2010, that was exacerbated by high-frequency trading (HFT), seasoned traders say that violent, often inexplicable price moves are becoming more common, and allow those who are fast enough to book a quick profit as prices bounce straight back up.
In commodity markets, which have been hit by a series of mini flash crashes over the last 18 months, experts say there could now be an influx of more high-speed computer-based traders that have honed their techniques in the cut-throat equities markets -- the fastest and most electronic on earth.
Though such firms have traded commodities for years, some traders and experts say they are now applying new and more aggressive strategies that have stunned traditional players.
Such high-frequency trading -- in which rapid-fire machines place thousands of very short-term bets, making markets and profiting on tiny price imbalances -- could double from around 15 percent in two to three years, leaving commodity exchanges and regulators running to catch up.
Jeffrey Sprecher, CEO of commodity futures powerhouse IntercontinentalExchange Inc <ICE.N>, told reporters last week exchanges are working on ways to target "unintended" price spikes, without losing the benefits -- and volumes -- HFT firms bring.
"I think it's incumbent on the exchanges to solve this. I think customers are going to lose faith in us if we don't."
HFT AND THE MAY 5 OIL CRASH
Commodity traders are increasingly blaming computer-driven activity for a series of anomalous price movements ranging from quick blips in natural gas and cocoa to deeper, longer-lasting jolts like the one that shook oil on May 5.
On that day, traders were shocked by the speed and violence of a record $13 intraday plunge, as sell-stop after sell-stop was triggered, despite the absence of a major news event.
"I think there are some new algorithms in commodities that we've seen in currency markets before that are designed to sniff out the stops," said Paul Rowady, a senior analyst at TABB Group, a firm that specializes in capital markets research.
"Whenever there is an event that causes prices to move they try to sniff out the stops in both directions. The market can suddenly shoot up, and then back down again after an event and it leaves traders disoriented, wondering what happened."
High-frequency traders are frustrated by the criticism and what they call mischaracterizations. Several told Reuters they reduce volatility by quickly bringing prices back in line after larger, long-term players place their bets.
"May 5 was a price discovery process influenced by real fundamental changes in people's views on the oil market. It wasn't a liquidity blip," said an oil-market high-frequency trader who requested anonymity.
And yet some of the world's biggest oil hedge funds appeared to have been victims of the slide, not catalysts.
SEEKING NEW PASTURES
All signs point to continued growth of HFT in commodities.
It is partly in response to increased competition and narrowing profit margins in U.S. equities, where high-frequency trade is estimated to have declined from a year ago, along with lower volumes and volatility. It is still, however, thought to be involved in more than half of all trading in the market.
Additionally, for HFT, there is an allure in playing in markets where heightened volatility is becoming the norm.
"Whenever there are spikes in markets, high-frequency traders gather data on it," said Louis Liu, founder of Matrix Trading Technologies LLC, a New York-based high-frequency trading technology firm. The May 5 oil crash "could encourage them to enter" energy futures trading, he said.
William McNeill, managing director of trading at HTG Capital Partners, a Chicago-based proprietary HFT firm echoed that view: "I think you'll definitely see an increase in people market-making in the oil product set. If there's moderate volatility ... there's probably ample opportunity to take risk."
Rowady at TABB Group said he wouldn't be surprised to see HFT volumes double in energy markets in the next two to three years, saying oil and natural gas "fit the bill" for HFT firms.
But the growth of HFT, while undoubtedly bringing some benefits to the wider market like lower trading fees, won't be without risk.
"When you have highly complicated automated systems operating in highly complex markets then there is the risk that the permutations of what can occur are beyond what you're able to model," Rowady said. "Sometimes the only way to find that problem is to stumble over it."
HFT firms in commodity markets have found themselves under intense scrutiny before.
In 2009, the U.S. Commodity Futures Trading Commission charged traders in the Chicago office of Netherlands-based HFT firm Optiver with attempting to move oil prices to their advantage with a rapid-fire trading tool they nicknamed the "Hammer."
And in 2010, HFT firm Infinium Capital Management found itself under investigation after its newest trading algorithm ran amok, sparking a brief surge in oil prices that racked the firm with a million dollar loss as the program sent up to 3,000 buy orders a second.
While experienced high-frequency traders agree that causing sudden movement in prices is not in their collective interest, the Optiver case is a reminder that HFT firms can shift prices either by practice or design.
GETTING FASTER
CME Group Inc <CME.O>, which runs the New York Mercantile Exchange (NYMEX), home of the world's most actively traded crude oil contract and the natural gas contract where last week's 8 percent crash occurred, said automated trading, including both HFT and slower computer-generated trades, accounted for almost a third of energy futures volume in the fourth quarter of 2010, in a report published on its website.
The Aite Group consultancy estimates that specifically high-frequency trade in energy futures already accounts for around 15 percent of all volume.
But illustrating the controversial nature of growing HFT trade, CME Group told Reuters it had decided not to make its first-quarter report available to the public.
Regulators are desperately trying to keep up with the fleet-footed traders that always seem one step ahead, but so far haven't indicated any major plans to restrict their practices. Short of a major change in stance from regulators and exchanges, traditional traders may just need to learn to adapt.
"Ultimately what they're doing is within the rules," said Tim Quast at ModernIR, which advises many S&P 500 companies on the impact speculation, HFT and fund flows can have on their stock price. "They're just faster and better at operating within the rules than others."
(Reporting by David Sheppard and Jonathan Spicer; additional reporting by Janet McGurty in New York; editing by Jonathan Leff, Marguerita Choy and Lisa Shumaker)
****************************
June 18, 2011
That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free Registration)
Minews. Good morning Australia. It seems that the slow meltdown of the markets continues, or can you see a light on the hill?
Oz. There are glimmers, though that might only be Greeks fleeing Athens. On a more serious note, there were hints last week that some investors remain confident of better times ahead once Europe owns up to the fact that it’s a failed experiment, and China emerges from its latest, government-ordered, slowdown. There were a number of positive share price moves in the section of the Australian market we follow, even if these were drowned out by the headlines of an inevitable Greek default, and the running commentary of the flailing about of other members of the European Union, as they either seek to avert trouble in their own back yards, or call for an end to the pointless bail-outs of chronically failed member states.
Minews. You’ve been predicting a European crisis for some time. Perhaps it’s finally arrived?
Oz. It has been frustrating to sit at the other end of the world and watch the positive changes that are underway in Asia, compare to a continued insistence in Europe that it can continue with its old ways of comfortable pension schemes for people who don’t work while others produce stuff that can’t compete with Chinese imports.
Minews. And while Australia sells the raw materials to both sides.
Oz. Precisely. That’s why a surprisingly large number of small companies rose last week despite an overall downward trend displayed by the ASX indices. The major index, the all ordinaries, lost 1.8 per cent, which is a relatively modest decline. Even when the all ordinaries is tracked back to the start of May, when this current correction started, the decline totals just seven per cent. Not what you would call a major event. It’s the same story with the metals and mining index. Down three per cent last week, taking the total six week slide since early May to eight per cent.
The big surprise is the gold index - and these numbers might provide food for investors to digest. Last week the ASX gold index lost two per cent, taking the fall since early May to 10 per cent. But over the same time period the gold price barely moved, when measured in US dollars, hit an all-time high when measured in a range of non-US currencies, and even rose in Australian dollars. What we are now looking at is the ASX gold index down by 10 per cent over the past six weeks, and the Australian dollar gold price up by 3.6 per cent, a fascinating disconnection between the physical metal and man-made paper.
Minews. Surely some of that value gap is being reflected on the Australian stock market?
Oz. It could be, but you have to dig beyond the bare statistics. In fact during this week just gone, half the gold companies on our market did rise in price, while half fell. But the index decline was almost entirely attributable to an A88 cent fall from the dominant local gold miner, Newcrest (NCM) which closed the week at A$36.57, despite its involvement in a three-way deal involving Catalpa (CAH) and Conquest (CQT).
And that deal, which seems to knock St Barbara (SBM) out of the running, produced some interesting share price moves, none of them particularly positive. In fact, St Barbara was the only player to rise, as it added a modest A2 cents to A$1.87. Catalpa fell back to around where it was before St Barbara launched its bid, dropping by A19 cents to A$1.53, and Conquest was flat at A44 cents.
Elsewhere, there were much better performances. Ausgold (AUC) was one that stood out, as the company which reckons it’s onto a major discovery in the south-west of Western Australia. It hit an all-time high of A$1.78 on Friday, before closing at A$1.75 for a week’s gain of A27 cents. Beadell (BDR), another developing gold story, also hit an all-time high on Friday of A99.5 cents, before closing the week at A91 cents, for a gain of A11 cents.
Minews. They are impressive moves, which seem to underline the point that the index is not really reflecting the mood of the market. More gold prices now, please, before moving through the other sectors.
Oz. Gryphon (GRY) led the way among the Aussies in Africa with a rise of A19 cents to A$1.80. Crusader (CAS) was the best of the Aussies in South America, also posting a rise of A19 cents to A$1.19. Other gold companies on the rise included Castle Minerals (CDT), up A4 cents to A34 cents, Noble (NMG), up A1.5 cents to A60 cents, Perseus (PRU), up A12 cents to A$2.48, Adamus (ADU), up A2.5 cents to A62.5 cents, and Resolute (RSG), up A2 cents to A$1.11.
Offsetting those rises were an equal number of falls. Among the fallers were Gold Road (GOR), down A14 cents to A47 cents, Medusa (MML), down A79 cents to A$7.16, Troy (TRY), down A19 cents to A$3.49, Allied (ALD), down A5.5 cents to A49.5 cents, and Kingsrose (KRM), down A17 cents to A$1.20.
Minews. Right. Let’s start the rest of the price call with iron ore, because that seems to be a sector encountering interesting times.
Oz. You could call it that, if you are talking in the sense of the famous old curse. The perils of being a magnetite miner hit home again this week, and several miners were hit. For non-geologists, magnetite is a lower-grade of iron ore which requires processing before it can be used to make steel. That makes it a more expensive than its traditional rival, haematite, and other direct shipping ores, which conform more to the classic model of dig and deliver. Last week we saw three magnetite hopefuls hit new 12 month share price lows as China wobbled and investors ducked for cover. Gindalbie (GBG) sold down to A82.5 cents on Friday before recovering slightly to close at A83.5 cents for a loss of A5.5 cents. Murchison Metals (MMX) dropped to A71 cents, before ending the week at A72 cents, for a loss of A15.5 cents. And Grange Resources (GRR) touched a low of A46.5 cents, before closing at A47.5 cents for a loss of A4.5 cents.
Other iron ore moves were more modest, with one other exception. Cape Lambert (CFE), one of our more controversial companies, fell an interesting A7 cents to A38.5 cents. After that the card looked like this: Atlas (AGO) down A12 cents to A$3.53, Fortescue (FMG) down A26 cents to A$6.06, and BC Iron (BCI) down A5 cents
to A$2.80.
Iron Ore Holdings (IOH) fell a sharp A16 cents to A$1.27. Brockman (BRM) was also weaker, down A2 cents to A$3.93, after Hong Kong’s Wah Nam formally took control of the company.
Minews. Base metals next, please.
Oz. All weaker, with one stand-out loser. Mirabela (MBN) led the way down in the nickel sector. Last week it shed A23 cents to A$1.67, in what was perhaps a delayed catch-up with its nickel cousins. Mincor (MCR) touched a 12 month low last week of A83 cents before edging up to close at A87 cents, a fall on the week of A2 cents. Panoramic (PAN) lost A6 cents to A$1.73 and Western Areas (WSA) fell A28 cents to A$5.71.
Copper companies weakened, although there were also a handful of risers. Exco (EXS) added half a cent to A66 cents, and CuDeco (CDU) put on A1 cent to A$3.23. Falls were posted by Sandfire (SFR), down A4 cents to A$7.13, OZ Minerals (OZL), down A71 cents to A$12.99, Hot Chili (HCH), down A1 cent to A57 cents, Syndicated (SMD), down half-a-cent to A16 cents, and Metminco (MNC), down A1 cent to A29 cents.
It was a similar story in zinc. There was one rise and a fistful of small falls. Prairie Downs (PDZ) added A1 cent to A19 cents, while Perilya (PEM) lost A6 cents to A60 cents. Blackthorn (BTR) shed A3 cents to A50.5 cents, and Ironbark (IBG) was A1 cent weaker at A26 cents.
Minews. Coal, uranium and minor metals to wrap things up.
Oz. More of the same, with no redeeming rises for the coal and uranium sectors. There was one among the minor metals, though, so we might cover your final request in reverse order. Alkane (ALK) was the minor metal winner, rising by A5 cents to A$2.40 thanks to growing interest in its Dubbo rare earths project. Lynas (LYC), the rare earth leader, fell by A21 cents to A$1.84, and Arafura (ARU) lost A11.5 cents to A91.5 cents.
In tin, Venture (VMS) fell A5 cents to A34 cents. In potash, South Boulder (STB) was A33 cents weaker at A$2.80.
Among the coal movers were Macarthur (MCC), down A47 cents to A$10.75, Coal of Africa (CZA), down A8 cents to A$1.08, Bathurst (BTU), down A18 cents to A$1.02, and Carabella (CLR), down A16 cents to A$1.80.
Uranium companies continued their retreat in the face of a lower metal price. Paladin (PDN), the local leader, fell another A37 cents to A$2.42, but did touch a 12 month low of A$2.34 on Thursday. Bannerman (BMN) dropped by A6 cents to A23.5 cents. Berkeley (BKY) shed A4.5 cents to A39.5 cents. Manhattan (MHC) was A3 cents weaker at A39 cents, and Energy and Minerals (EMA) lost A1.5 cents, to A12 cents, and its long-serving chief executive, Chris Davis, departed, abruptly, on Friday.
Minews. Thanks Oz.
*************************
That Was The Week That Was … In Australia
By Our Man in Oz >> www.minesite.com/aus.html (Free Registration)
Minews. Good morning Australia. It seems that the slow meltdown of the markets continues, or can you see a light on the hill?
Oz. There are glimmers, though that might only be Greeks fleeing Athens. On a more serious note, there were hints last week that some investors remain confident of better times ahead once Europe owns up to the fact that it’s a failed experiment, and China emerges from its latest, government-ordered, slowdown. There were a number of positive share price moves in the section of the Australian market we follow, even if these were drowned out by the headlines of an inevitable Greek default, and the running commentary of the flailing about of other members of the European Union, as they either seek to avert trouble in their own back yards, or call for an end to the pointless bail-outs of chronically failed member states.
Minews. You’ve been predicting a European crisis for some time. Perhaps it’s finally arrived?
Oz. It has been frustrating to sit at the other end of the world and watch the positive changes that are underway in Asia, compare to a continued insistence in Europe that it can continue with its old ways of comfortable pension schemes for people who don’t work while others produce stuff that can’t compete with Chinese imports.
Minews. And while Australia sells the raw materials to both sides.
Oz. Precisely. That’s why a surprisingly large number of small companies rose last week despite an overall downward trend displayed by the ASX indices. The major index, the all ordinaries, lost 1.8 per cent, which is a relatively modest decline. Even when the all ordinaries is tracked back to the start of May, when this current correction started, the decline totals just seven per cent. Not what you would call a major event. It’s the same story with the metals and mining index. Down three per cent last week, taking the total six week slide since early May to eight per cent.
The big surprise is the gold index - and these numbers might provide food for investors to digest. Last week the ASX gold index lost two per cent, taking the fall since early May to 10 per cent. But over the same time period the gold price barely moved, when measured in US dollars, hit an all-time high when measured in a range of non-US currencies, and even rose in Australian dollars. What we are now looking at is the ASX gold index down by 10 per cent over the past six weeks, and the Australian dollar gold price up by 3.6 per cent, a fascinating disconnection between the physical metal and man-made paper.
Minews. Surely some of that value gap is being reflected on the Australian stock market?
Oz. It could be, but you have to dig beyond the bare statistics. In fact during this week just gone, half the gold companies on our market did rise in price, while half fell. But the index decline was almost entirely attributable to an A88 cent fall from the dominant local gold miner, Newcrest (NCM) which closed the week at A$36.57, despite its involvement in a three-way deal involving Catalpa (CAH) and Conquest (CQT).
And that deal, which seems to knock St Barbara (SBM) out of the running, produced some interesting share price moves, none of them particularly positive. In fact, St Barbara was the only player to rise, as it added a modest A2 cents to A$1.87. Catalpa fell back to around where it was before St Barbara launched its bid, dropping by A19 cents to A$1.53, and Conquest was flat at A44 cents.
Elsewhere, there were much better performances. Ausgold (AUC) was one that stood out, as the company which reckons it’s onto a major discovery in the south-west of Western Australia. It hit an all-time high of A$1.78 on Friday, before closing at A$1.75 for a week’s gain of A27 cents. Beadell (BDR), another developing gold story, also hit an all-time high on Friday of A99.5 cents, before closing the week at A91 cents, for a gain of A11 cents.
Minews. They are impressive moves, which seem to underline the point that the index is not really reflecting the mood of the market. More gold prices now, please, before moving through the other sectors.
Oz. Gryphon (GRY) led the way among the Aussies in Africa with a rise of A19 cents to A$1.80. Crusader (CAS) was the best of the Aussies in South America, also posting a rise of A19 cents to A$1.19. Other gold companies on the rise included Castle Minerals (CDT), up A4 cents to A34 cents, Noble (NMG), up A1.5 cents to A60 cents, Perseus (PRU), up A12 cents to A$2.48, Adamus (ADU), up A2.5 cents to A62.5 cents, and Resolute (RSG), up A2 cents to A$1.11.
Offsetting those rises were an equal number of falls. Among the fallers were Gold Road (GOR), down A14 cents to A47 cents, Medusa (MML), down A79 cents to A$7.16, Troy (TRY), down A19 cents to A$3.49, Allied (ALD), down A5.5 cents to A49.5 cents, and Kingsrose (KRM), down A17 cents to A$1.20.
Minews. Right. Let’s start the rest of the price call with iron ore, because that seems to be a sector encountering interesting times.
Oz. You could call it that, if you are talking in the sense of the famous old curse. The perils of being a magnetite miner hit home again this week, and several miners were hit. For non-geologists, magnetite is a lower-grade of iron ore which requires processing before it can be used to make steel. That makes it a more expensive than its traditional rival, haematite, and other direct shipping ores, which conform more to the classic model of dig and deliver. Last week we saw three magnetite hopefuls hit new 12 month share price lows as China wobbled and investors ducked for cover. Gindalbie (GBG) sold down to A82.5 cents on Friday before recovering slightly to close at A83.5 cents for a loss of A5.5 cents. Murchison Metals (MMX) dropped to A71 cents, before ending the week at A72 cents, for a loss of A15.5 cents. And Grange Resources (GRR) touched a low of A46.5 cents, before closing at A47.5 cents for a loss of A4.5 cents.
Other iron ore moves were more modest, with one other exception. Cape Lambert (CFE), one of our more controversial companies, fell an interesting A7 cents to A38.5 cents. After that the card looked like this: Atlas (AGO) down A12 cents to A$3.53, Fortescue (FMG) down A26 cents to A$6.06, and BC Iron (BCI) down A5 cents
to A$2.80.
Iron Ore Holdings (IOH) fell a sharp A16 cents to A$1.27. Brockman (BRM) was also weaker, down A2 cents to A$3.93, after Hong Kong’s Wah Nam formally took control of the company.
Minews. Base metals next, please.
Oz. All weaker, with one stand-out loser. Mirabela (MBN) led the way down in the nickel sector. Last week it shed A23 cents to A$1.67, in what was perhaps a delayed catch-up with its nickel cousins. Mincor (MCR) touched a 12 month low last week of A83 cents before edging up to close at A87 cents, a fall on the week of A2 cents. Panoramic (PAN) lost A6 cents to A$1.73 and Western Areas (WSA) fell A28 cents to A$5.71.
Copper companies weakened, although there were also a handful of risers. Exco (EXS) added half a cent to A66 cents, and CuDeco (CDU) put on A1 cent to A$3.23. Falls were posted by Sandfire (SFR), down A4 cents to A$7.13, OZ Minerals (OZL), down A71 cents to A$12.99, Hot Chili (HCH), down A1 cent to A57 cents, Syndicated (SMD), down half-a-cent to A16 cents, and Metminco (MNC), down A1 cent to A29 cents.
It was a similar story in zinc. There was one rise and a fistful of small falls. Prairie Downs (PDZ) added A1 cent to A19 cents, while Perilya (PEM) lost A6 cents to A60 cents. Blackthorn (BTR) shed A3 cents to A50.5 cents, and Ironbark (IBG) was A1 cent weaker at A26 cents.
Minews. Coal, uranium and minor metals to wrap things up.
Oz. More of the same, with no redeeming rises for the coal and uranium sectors. There was one among the minor metals, though, so we might cover your final request in reverse order. Alkane (ALK) was the minor metal winner, rising by A5 cents to A$2.40 thanks to growing interest in its Dubbo rare earths project. Lynas (LYC), the rare earth leader, fell by A21 cents to A$1.84, and Arafura (ARU) lost A11.5 cents to A91.5 cents.
In tin, Venture (VMS) fell A5 cents to A34 cents. In potash, South Boulder (STB) was A33 cents weaker at A$2.80.
Among the coal movers were Macarthur (MCC), down A47 cents to A$10.75, Coal of Africa (CZA), down A8 cents to A$1.08, Bathurst (BTU), down A18 cents to A$1.02, and Carabella (CLR), down A16 cents to A$1.80.
Uranium companies continued their retreat in the face of a lower metal price. Paladin (PDN), the local leader, fell another A37 cents to A$2.42, but did touch a 12 month low of A$2.34 on Thursday. Bannerman (BMN) dropped by A6 cents to A23.5 cents. Berkeley (BKY) shed A4.5 cents to A39.5 cents. Manhattan (MHC) was A3 cents weaker at A39 cents, and Energy and Minerals (EMA) lost A1.5 cents, to A12 cents, and its long-serving chief executive, Chris Davis, departed, abruptly, on Friday.
Minews. Thanks Oz.
*************************
June 20, 2011
There’s No Exit Route Out Of The Eurozone, But That Only Means It’ll Be Much, Much Messier When Greece Leaves
By Rob Davies
www.minesite.com/aus.html (The registration is free)
Anyone who has ever entered into a business deal knows that you pay far more attention to how to get out of it if you need to than you do to all the starry benefits of going into the relationship in the first place. Unfortunately, the men and women who created the eurozone were politicians not businessmen and they are not conditioned to accept the possibility that things might not work out as planned. So when they drew up the agreement for joining the euro they never bothered to add clauses to explain the procedure for getting out. No one ever considered that might happen so they didn’t plan for it. Maybe they thought that that not planning for it would ensure it didn’t happen.
Unfortunately it now looks highly likely that Greece will be forced out of the euro but, with no procedure to follow, the process is likely to be messy and to have unexpected consequences. In some ways this could be the sovereign equivalent of the Lehman collapse which was rapidly followed by the sale of Merrill Lynch and the implosion of AIG, to name but a few of the corporate casualties.
It might be reasonable to ask what this has to do with commodity prices. The answer is a lot.
After Lehman folded interest rates were cut to zero in the US and that was followed by a massive injection of liquidity in order to restore confidence in capital markets. These moves worked and revitalised commodity prices, even though industrial demand in the west was very weak. China was the only growth market for the next few years.
The problem is that if Greece does fold there are precious few levers left for the authorities to pull in order to recover the situation. Interest rates are already low and the ECB is on record as saying it does not favour a form of quantitative easing, or printing money.
So what will happen when the Greek crisis finally breaks? No one knows, of course, which is why risk markets like equities and industrial commodities have been selling off. Base metals, as measured by the LME index fell two per cent last week. Nickel led the way with a 3.6 per cent drop to US$21,700 a tonne, but was closely followed tin, which slid by 3.5 per cent to US$21,740. With so much uncertainty around it is perhaps not surprising that pro-growth assets like commodities have gone down.
What is perhaps more surprising is where this money is going. US Treasury bonds are once more in favour, as the yield on the 10 year has come down again, this time to 2.95 per cent. Yet look at the following little list, and then try to look for the connection: Greece, Ireland, Japan and the USA. Not obvious? The common thread is that Jose Vinals, the Director of Monetary and Capital Markets at the IMF puts these four countries in the same group when he said that they were not taking enough action to address their budget deficits. So selling metals to buy US bonds looks like jumping out of the euro frying pan into Uncle Sam’s fire. Maybe it is simply the least bad alternative. The IMF has trimmed its growth forecasts for 2011 by 0.1 per cent to 4.3 per cent, and it’s worth noting that the reductions related to likely activity in the US and Japan that use a lot of metal.
It did upgrade growth for Germany, which also has a high metal intensity. This country has benefitted from the relative weakness of the euro caused by is profligate southern neighbours. However, If the profligate southern neighbours were to leave it would result in the formation of a new “core euro” made up of Germany and its satellites. This would be a much stronger currency and that would have an immediate, and negative, impact on German-made products which would reduce German growth and hence metal demand.
Arch pessimistic economist Nouriel Roubini gives the euro five years in its current form and accepts that the logic for the breakup of the euro is inescapable. The lack of a procedure for execution won’t stop it happening, it will just make it messier and more complicated. Those hoping for safety in the US may be over-optimistic and the actual ramifications of the event are probably too hard for anyone to forecast. How metals will fare in the aftermath is, quite frankly, anyone’s guess.
====================================
There’s No Exit Route Out Of The Eurozone, But That Only Means It’ll Be Much, Much Messier When Greece Leaves
By Rob Davies
www.minesite.com/aus.html (The registration is free)
Anyone who has ever entered into a business deal knows that you pay far more attention to how to get out of it if you need to than you do to all the starry benefits of going into the relationship in the first place. Unfortunately, the men and women who created the eurozone were politicians not businessmen and they are not conditioned to accept the possibility that things might not work out as planned. So when they drew up the agreement for joining the euro they never bothered to add clauses to explain the procedure for getting out. No one ever considered that might happen so they didn’t plan for it. Maybe they thought that that not planning for it would ensure it didn’t happen.
Unfortunately it now looks highly likely that Greece will be forced out of the euro but, with no procedure to follow, the process is likely to be messy and to have unexpected consequences. In some ways this could be the sovereign equivalent of the Lehman collapse which was rapidly followed by the sale of Merrill Lynch and the implosion of AIG, to name but a few of the corporate casualties.
It might be reasonable to ask what this has to do with commodity prices. The answer is a lot.
After Lehman folded interest rates were cut to zero in the US and that was followed by a massive injection of liquidity in order to restore confidence in capital markets. These moves worked and revitalised commodity prices, even though industrial demand in the west was very weak. China was the only growth market for the next few years.
The problem is that if Greece does fold there are precious few levers left for the authorities to pull in order to recover the situation. Interest rates are already low and the ECB is on record as saying it does not favour a form of quantitative easing, or printing money.
So what will happen when the Greek crisis finally breaks? No one knows, of course, which is why risk markets like equities and industrial commodities have been selling off. Base metals, as measured by the LME index fell two per cent last week. Nickel led the way with a 3.6 per cent drop to US$21,700 a tonne, but was closely followed tin, which slid by 3.5 per cent to US$21,740. With so much uncertainty around it is perhaps not surprising that pro-growth assets like commodities have gone down.
What is perhaps more surprising is where this money is going. US Treasury bonds are once more in favour, as the yield on the 10 year has come down again, this time to 2.95 per cent. Yet look at the following little list, and then try to look for the connection: Greece, Ireland, Japan and the USA. Not obvious? The common thread is that Jose Vinals, the Director of Monetary and Capital Markets at the IMF puts these four countries in the same group when he said that they were not taking enough action to address their budget deficits. So selling metals to buy US bonds looks like jumping out of the euro frying pan into Uncle Sam’s fire. Maybe it is simply the least bad alternative. The IMF has trimmed its growth forecasts for 2011 by 0.1 per cent to 4.3 per cent, and it’s worth noting that the reductions related to likely activity in the US and Japan that use a lot of metal.
It did upgrade growth for Germany, which also has a high metal intensity. This country has benefitted from the relative weakness of the euro caused by is profligate southern neighbours. However, If the profligate southern neighbours were to leave it would result in the formation of a new “core euro” made up of Germany and its satellites. This would be a much stronger currency and that would have an immediate, and negative, impact on German-made products which would reduce German growth and hence metal demand.
Arch pessimistic economist Nouriel Roubini gives the euro five years in its current form and accepts that the logic for the breakup of the euro is inescapable. The lack of a procedure for execution won’t stop it happening, it will just make it messier and more complicated. Those hoping for safety in the US may be over-optimistic and the actual ramifications of the event are probably too hard for anyone to forecast. How metals will fare in the aftermath is, quite frankly, anyone’s guess.
====================================
"Gold gets hit with the ugly stick"
To view the chart, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/23/gold-gets-hit-with-the-ugly-stick.html
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To view the chart, please click the link below:
http://www.bespokeinvest.com/thinkbig/2011/6/23/gold-gets-hit-with-the-ugly-stick.html
::::::::::::::::::::::::::
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