"The best place to be is in commodities"

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August 05, 2011

Diary Of A Private Investor At Diggers And Dealers: Final Day, And The Speed Dating Continues
Susie Boeckmann
www.minesite.com/aus.html (The registration is free)

And so, the frenetic activity at Diggers continued. Alacer Gold made some surprising headlines today, as Edward Dowling, the chief executive, raised concerns about safety issues at the 49 per cent-owned Frog’s Leg project, in which Alacer has a 49 per cent stake. Edward is concerned that La Mancha, which holds the other 51 per cent, is progressing too quickly, and in a highly unusual comment he suggested that an inspection would be in order. Too much development and not enough stoping. Not surprisingly, people were left wondering where these comments would lead.

Inside the event, Panoramic Resources was giving private presentations in which managing director Peter Harold explained how the company was able successfully to bring the Savannah nickel project into production and to restart the Lanfranchi nickel operation after it was acquired from WMC. Production from these two projects means that Panoramic now produces 10 per cent of Australia’s nickel output.



Talking of nickel, both Peter Harold and Julian Hanna of Western Areas are of the opinion that nickel prices will improve over the next few years as the supply chain, especially in China, is tightening. But Panoramic has interests in other areas too. Its latest venture is the Gidgee gold project, which was purchased from Apex Resources in February 2011 for A$15.5 million in cash. Gidgee has produced over a million ounces of gold historically. The current resource rings in at a modest 310,000 ounces of gold, but the area is very under explored. Panoramic believes that the reserves can be increased to 500,000 ounces gold in two years, and that the project will cost around A$40 million to put into production, at a likely rate of 100,000 ounces per year. Panoramic has A$100 million in the bank and keeps A$50 million at all times for unexpected contingencies. Strong institutional support comes from M&G, which holds 20 per cent, AMP Capital, which holds 7.4 per cent, and Eley Griffiths, which holds seven per cent. The company pays regular dividends, but is also out looking for grass roots and early projects.



Staying on the nickel theme, Western Areas continues to be the cheapest producer of nickel in Australia. The main asset is the 100 per cent-owned Forrestania Nickel project, 400 kilometres east of Perth. Western Areas is Australia’s third largest nickel miner, and produces approximately 32,222 tonnes of nickel per year from the Flying Fox and Spotted Quoll mines on Forrestania. Cash cost stand at around US$2.50 per pound of nickel produced, so the company is making healthy profits given the current nickel price of over US$11.00. Financial strength-in-depth comes from A$209 million in A$15 million in receivables. Western Areas is actively exploring in Western Australia, Canada and Finland, and has off-take agreements in place with BHP Billiton and Jinchuan, and a short term contract with Minara to treat oxide ore from the Tim King Pit.



Grange Resources had good interest at its stand and its presentation went down well too. Grange is Australia’s largest integrated iron ore mining and pellet producer. Grange owns and operates the Savage River magnetite mine in northwest Tasmania. This mine has a life of over 25 years and supplies Grange’s pellet plant and port facility at Port Latta, on Tasmania’s north coast. The overall output runs at between two million and 2.5 million tonnes of premium quality iron ore pellets per year. The company receives a premium price, with costs running at US$170 CFO China. Last quarter, though, Grange received US$220 FOB Tasmania, with operating costs at US$120. Grange is also developing a world class magnetite project at Southdown, near Albany in Western Australia. Project commissioning is expected in 2014. Southdown will be near a town so can employ locally, and avoid the issues of fly-in/fly-out. The company has A$100 million in free cash, and a A$600 million market capitalisation.



Nick Mather was very busy at D’Aguilar Gold’s stand. This company has key investments in resource companies, including stakes in Mt Isa Metals, Solomon Gold, AusNiCo, and Navaho Gold. D’Aguilar also holds stakes in three unlisted companies that are exploring for gas, iron and titanium ores and copper-gold-molybdenum systems, as well as other metals. Nick Mather, who will chiefly be known to Minesite readers and attendees of our forums through Solomon Gold, says that D’Aguilar intends to hold stakes in 20 listed companies within the next two years. Several journalists and brokers were chivvying around each other to get the best insights into this rapidly developing story.



Later, Reed Resources’ managing director, Christopher Reed, enthusiastically presented his latest company’s purchase to investors. The 2.5 million ounce Meekatharra gold project was acquired in January 2011, after the previous operator Mercator Gold got into difficulties. Reed also owns the Barrambie vanadium project which is Australia’s highest grading vanadium reserve, and for which the company is currently seeking construction finance. Another asset is the Mt Marion lithium project, which should start producing in late 2011. Reed is a three-generation Kalgoorlie family and they know every twist and turn in the histories of the mining projects in WA. Chairman father David Reed has been responsible for many local events and has created the Mining Museum, the Racecourse, with museum, and has owned many businesses in the area.



Set off with the chairman of Ausdrill, Brain Mann, and the chief executive Ron Sayer, to attend dinner (or 3) at the Palace Hotel. On arrival the venue was heaving with people and noise. BHP Billiton, Silver Lake Resources and Argonaut were entertaining with vigour. The decision was then taken to leave and go to the Miner’s Rest, which is owned by Ausdrill, there to sit down to a good bottle of wine with steak and chips.



Ausdrill does not present but has a hospitable booth which is busy all the time, given that the company continues to expand all over Africa and Australia. Many companies mention that they use Ausdrill’s equipment and drilling services. Ausdrill has been an excellent performer for shareholders, and has grown to a market capitalisation of around A$950 million, and provides a dividend yield of 3.6 per cent. The company recently undertook a substantial capital raising. One standout announcement among a recent run of many related to a contract with Fortescue Metals worth $75 million over three years. Ausdrill has never bothered with investor relations but is now becoming a force and we should be hearing a lot more from this company soon.

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August 06, 2011

That Was The Week That Was … In Australia
By Our Man in Oz
www.minesite.com/aus.html {Free registration}

Minews. Good morning Australia. That was certainly a week to forget!

Oz. There’s no doubt we packed a lot of events into five trading days. It started on Monday with American politicians making fools of themselves, and their country. Australian bankers and miners did much the same thing at the annual Diggers & Dealers bash in Kalgoorlie. European politicians and bankers then chimed in with a communal headless chicken display as Rome burned in the background, and by Saturday morning our time the US was back in the news as Standard & Poor’s downgraded US debt. That development should make for some interesting moments, when the first markets to open, in Japanese and Australia, pass judgement on that momentous event.


Minews. Good morning Australia. That was certainly a week to forget!

Oz. There’s no doubt we packed a lot of events into five trading days. It started on Monday with American politicians making fools of themselves, and their country. Australian bankers and miners did much the same thing at the annual Diggers & Dealers bash in Kalgoorlie. European politicians and bankers then chimed in with a communal headless chicken display as Rome burned in the background, and by Saturday morning our time the US was back in the news as Standard & Poor’s downgraded US debt. That development should make for some interesting moments, when the first markets to open, in Japanese and Australia, pass judgement on that momentous event.



Minews. The downgrade should serve as a wake-up call for politicians, and might not be at all bad for gold.

Oz. Yes, it’s not all been bad for gold, as a handful of Australian gold producers swam against the negative tide, aided somewhat by a very strong Australian dollar gold price. Last week was actually a double header for Aussie gold miners, as US dollar price for gold rose while the Aussie dollar fell. The net result was a rise of more than A$100 an ounce in our gold price.


Minews. Is that your attempt to put a positive spin on bad news?

Oz. Up to a point, but it was the gold sector which performed better than anywhere else, and which even produced a few share price rises. They weren’t large, and there weren’t many of them, but in a week when everything else is plunging by up to 10 per cent ,an upward price movement stands out like a dunny in the desert.

Pick of the gold pack was Silver Lake (SLR) which benefited from the gold price, a resource upgrade, and a strong presentation from its chief executive, Les Davis, at Diggers. By the close of business on Friday, Silver Lake was up A22 cents to A$2.25 in reasonably heavy turnover.



Minews. We’ll continue with the gold sector soon, but first a snapshot of how the Australian market faired overall.

Oz. As you might expect the broadest measure of the ASX, the all ordinaries index, dropped sharply. By the end of the week it was down a hefty 7.4 per cent. Meanwhile, the metals and minerals index, which is in some ways a bellwether for Chinese demand for hard commodities, lost 8.1 per cent. Gold, however, held up best. The gold index fell by 2.6 per cent, which in itself was an interesting measure of the uncertainty that’s around, given that the gold price was up about two per cent in US dollar terms, and seven per cent in Australian dollars.

Including Silver Lake, there were three gold companies which posted rises, just, and a fair number which suffered only modest falls. Alacer Gold (AQG) was another which benefited from a positive presentation at Diggers, and rose by A11 cents to A$9.01 across the week, although it did get as high as A$9.26 on Thursday. Medusa Mining (MML) was the other rise, up A13 cents to A$7.16. Northern Star (NST) held its ground over the course of the week at A46 cents, but did trade up to A51 cents on Thursday. That pattern of a strong price on Thursday followed by weakness on Friday, was a general feature of our market. There was a bit of rush for the exit down this way following the carnage on Wall Street on Friday, in case something really nasty happened over the weekend.

Among the other gold movers Gold Road (GOR) fell A11.5 cents to A57 cents, Beadell (BDR) fell A5.5 cents to A79 cents, Troy (TRY) fell A9 cents to A$3.96, Resolute (RSG), fell A11 cents to A$1.23, Perseus (PRU) fell A7 cents to A$3.03, Adamus (ADU) fell A7 cents to A63 cents, Ausgold (AUC) fell A18 cents to A$1.55, Gryphon (GRY) fell A24 cents to A$1.63, Kingsrose (KRM) fell A16 cents to A$1.28, and Kingsgate (KCN) fell A$1.11 to A$7.87.


Minews. Let’s move quickly through the sectors because it’s probably just a long list of lower prices anyway.

Oz. Almost correct. One copper company managed a small rise, as did one iron ore company. Copper first. Anvil (AVM) posted a gain of A11 cents to A$6.45 after announcing a strategic review, which could amount to anything from an asset sale to a merger. Everything else was weaker. Marengo (MGO) fell A3.5 cents to A18.5 cents. Rex (RXM) fell A36 cents to A$1.92. Hot Chili (HCH) fell A7 cents to A62 cents. OZ Minerals (OZL) fell A$1.55 to A$12.08. Metminco (MNC) fell A4 cents to A26 cents. And Sandfire (SFR) fell A60 cents to A$7.20.

Nickel companies were all weaker, though it is worth noting that the drift into gold by the nickel companies gathering pace. Panoramic (PAN) is the latest to unveil a gold-project investment plan, though that news was not enough to save the shares from falling A29 cents to A$1.49. Mincor (MCR) which is also chasing gold while plugging ahead with its nickel assets, fell A14 cents to A75 cents, and Independence (IGO) the most advanced of the nickel companies that are migrating into gold, lost A29 cents to A$5.56. Elsewhere, Minara (MRE) was off A4 cents to A63 cents, and Mirabela (MBN) shed A16 cents to A$1.74.

Zinc companies were sold off quite heavily, as zinc is likely to be a heavy loser if global growth slows sharply, especially Chinese growth. Perilya (PEM) fell A9.5 cents to A62 cents. Kagara (KZL) dropped A7 cents to A54 cents. Blackthorn (BTR) was off by A9 cents at A46 cents, and Terramin (TZN) lost A3.5 cents to end the week at a 12 month low of A25 cents.


Minews. Iron ore and coal next, please.

Oz. The one iron ore company to rise was Cazaly Resources (CAZ) which crept up by half a cent to A35 cents following a deal to sell its Parker Range project for a possible A$180 million. Among the notable fallers were Fortescue (FMG), down A57 cents to A$5.74, Atlas (AGO), down A30 cents to A$3.75, Iron Ore Holdings (IOH), down A19 cents to A$1.15, Mt Gibson (MGX), down A30 cents to A$1.50, Gindalbie (GBG), down A8.5 cents to A70.5 cents, and Murchison (MMX), down A15.5 cents to A62 cents.

No coal company stayed in the black, unlike the stuff they produce. Whitehaven (WHC) lost A69 cents to A$5.89. Coal of Africa (CZA) fell A11 cents to A97 cents. Metro Coal (MTE) lost A22 cents to A74 cents. Aston (AZT) was A96 cents weaker at A$9.84, and Continental Coal (CCC) fell by A0.6 of a cent to A3.1 cents.



Minews. Uranium and minor metals, to end a dreadful week.

Oz. Nothing went up in the uranium sector, though one company tried awfully hard. Manhattan (MHC) dropped by the minimum amount of half a cent to A40 cents. At one stage it was well ahead at A48 cents. Extract (EXT) fell A63 cents to A$7.19, as the proposed Kalahari takeover drags on. Berkeley (BKY) shed A3.5 cents to A41.5 cents. Paladin (PDN) dropped A40 cents to A$2.22, but did get as low as A$2.16 on Friday, a 12-month low. Bannerman (BMN) ended the week at A35 cents, down A8.5 cents.

All companies in the minor metals space lost ground as would be expected during a period of such uncertainty. Lynas (LYC) celebrated the official opening of its Mt Weld rare earths mine by dropping A29 cents to A$1.86. Alkane (ALK), another sector leader, lost A30 cents to A$1.69, and Arafura (ARU) fell by A14 cents to A59.5 cents.

Tin companies weakened sharply. Venture (VMS) was off by A11.5 cents to A37 cents, and Kasbah (KAS) fell A3 cents to A20 cents.

South Boulder (STB) led the way down among the potash players, falling A39 cents to A$2.10, and Iluka (ILU) did the same in the zircon and titanium minerals sector, falling a very sharp A$2.12 to A$15.64.


Minews. Thanks Oz. Enjoy the opening trading on Monday when we’ll see how the world treats that U.S. debt downgrade.

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August 08, 2011

""Diary Of A Private Investor At Diggers And Dealers, Final Day: Friedland And Forrest, And A Host Of Others""
Susie Boeckmann >> www.minesite.com/aus.html

The last day of Diggers and Dealers started with an early mine visit to the Bullant gold project owned by the Kalgoorlie Mining Company, which is situated 45 kilometres north of Kalgoorlie. This small, high grade mine, formerly owned by Barrick, looks to be a neat operation. The company is in the process of building a processing plant at Bullant which should be in operation by this time next year. On arrival visitors were kitted out in overalls, rubber boots (always too large for this reporter), safety glasses, hard hat, and a belt with a head light and emergency breathing kit, which is very heavy. Well equipped, we drove to a pit, one of two 50 metres apart and then started underground, down tunnels the majority of which had been dug by Barrick.

Ahead of the completion of the new processing plant the company will use other mills to process a stockpile of ore which grades at between 4.8 grams per tonne and 5.9 grams per tonne. However, when mining is resumed later this year, the anticipated grades should run at nine grams per tonne.



We drove down to a depth of about 400 metres, relatively dry, to watch an ‘airlegger’ jack hammer rock drill which was strengthening the walls and the ceiling by putting in two-metre metal posts. Geologists were testing samples on the way down and we saw visible gold in the quartz rock running down the mainly basalt rock. One 10 ton truck was working, hauling ore, shortly to be joined by a second.



Back at the Conference Les Davis, the managing director of Silver Lake Resources had just finished his presentation, which included an announcement of another upgrade in gold resources. This emerging mid-tier gold company is very popular locally, partly because the management team are mostly ex-Western Mining. The company has just completed a A$5 million ventilation shaft, which should allow underground production from its Daisy Milano and Daisy East operations on the Mt Monger goldfield to increase to 400,000 tonnes per year by 2012. Meanwhile, over on the Murchison goldfield a feasibility study to investigate the viability of a 100,000 ounce per year operation with an eight-to-10 year mine life is now complete. This company continues to grow and now is in the ASX 300 with a market capitalisation of around A$370 million. It’s unhedged, has A$28 million in cash and no debt.



Then it was time for Andrew Forrest to present Fortescue. Fortescue continues to grow, but in a way the story speaks for itself, as Our Man in Oz found out when he wrote a report for Minesite on a visit to Fortescue’s operations in the Pilbara recently. So Andrew instead concentrated on blasting the government for the new taxes on mining and carbon that are now being introduced. He described the taxes as a creeping cancer and managed to hold a pretty sympathetic audience for long spells as he vented his fury at the lack of clarity and thought that has gone into the new legislation.



But Andrew Forrest was by no means a voice crying in the wilderness. He was joined by David Flanagan of Atlas Iron, Les Davis, Mike Young of BC Iron and Jonathan Shellabear, former managing director of Dominion Mining, who all vigorously attacked the proposed minerals resource rent tax. This has been a consistent theme throughout the conference and there is a lot of passionate anger that the new tax will eventually be applied to other metals.



Robert Friedland, founder of Ivanhoe Mines, then gave an update on progress on the company’s massive projects in Mongolia. Ivanhoe’s assets include the Oyu Tolgoi copper project which also hosts gold and molybdenum and which is projected to produce 1.7 billion tons of copper in 2015. The 2011 budgeted spend is US$2.3 billion, but the project is currently running under budget and ahead of schedule. Meanwhile, Ivanhoe’s 57 per cent-owned coal miner SouthGobi Resources is due to bring its Ovoot Tolgoi project into production in 2013. This, says Friedland, is the biggest construction project in the world. By way of a comparison, he claimed that the construction of the World Trade Centre in New York took 300 workers, but that this coal project is using 14,000 workers. He also reminded listeners that General Motors is selling more vehicles in China now than it is in the US. Ivanhoe Australia is developing according to plan, too, and first copper and gold production from the Osborne Mine in northwestern Queensland is due in 2012. That’ll be followed by first ore from the nearby Merlin molybdenum-rhenium mine by 2013.



A much smaller company is recently-floated Sihayo Gold. The chairman, Peter Bille, who is also chairman of Independence Group, gave Minesite the lowdown on Sihayo’s recent progress with its definitive feasibility study into the viability of a potential mine at its Sihayo Pungkut gold project in Sumatra. The indicated resource at the Sihayo deposit as at March 2011 tallied at 13.2 million tonnes grading 2.8 grams per tonne gold for 1,195,600 ounces of gold, with additional inferred ouces totalling 106,500 ounces of gold. That gives a projected mine life of over seven years, although further exploration could well push that further out. The capital costs for development are estimated at US$80 million, plus a 10 per cent contingency allowance.



Not far away, in the Bismarck Sea off the coast of Papua New Guinea (PNG), Nautilus Minerals is working away at its Solwara 1 seafloor massive sulphide project. The company was granted a mining lease by the PNG government in January, and indeed the government itself is so keen on the project that it’s contributing capital to acquire a 30 per cent interest. Minesite chatted to the company’s board and got the latest on the construction of the production support vessel, which is being managed by German shipbuilding company Harren & Partner.



The day went only too quickly and then it was time for the Gala Dinner. Ahead of this event the hall is emptied of stands in double quick time and is then transformed into an elegant dining venue for 2,000 people at tables for 10. This is the biggest event for networking at Diggers, and smart dress is required. After the entertainment the Diggers and Dealers Awards are given out, and first up was the Media Award which went to Peter Klinger. Peter started his professional career at the Kalgoorlie Miner, spent a period with The Times in London, where he became well known and widely respected, and is now Deputy Business Editor for the West Australian newspaper.



Next was the Digger Award, which recognises a company that has had lots of success, is well managed and innovative. Chris Bonwick accepted this award on behalf of Independence Group. Next was the award for Best Emerging Company, which went to an old Minesite favourite, Gold Road Resources. This award goes to companies with a market capitalisation of under A$250 million, and which have a strong and sustainable future.



Dealmaker Award was given to Ivanhoe Capital Corporation. Robert Friedland has been a frequent visitor to Diggers and Dealers over the years. The GJ Stokes Award was given to George Jones for recognition of his positive contribution to the development of the resource industry. He was especially commended for his leadership in taking the reins of Sundance Resources after the entire board was lost in a plane crash last year.



That was the end of Diggers and Dealers for another year. The standout impression was of the increasing anger at Julia Gillard’s government. Many companies are looking for assets in other parts of the world to mitigate the impact of the Gillard government’s policies. But even so, many companies, especially in the gold and silver spaces, are making good profits in spite of increasing costs and a strong Australian dollar.

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[drillinto]

STRATEGY

Looking for Market Bottom ?

Please check here >> http://www.cnbc.com/id/44061398

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[drillinto]

Commodity Snapshot

To view the charts of ten major commodities, please click the link below

http://www.bespokeinvest.com/thinkbig/2011/8/9/bespokes-commodity-snapshot.html

 

[drillinto]

Strategy

Rosenberg: How to prepare for the coming recession


"We are believers that gold and gold mining stocks will prove to be profitable investments as the economic downturn inevitably prompts more money printing, not just out of the Fed, but other major central banks as well.

Commodities in general, energy and raw food in particular, should be a core position, as they are behaving less cyclically and more as a secular growth theme linked to the rapidly rising incomes in the emerging market economies."

Source >> http://business.financialpost.com/2011/08/09/how-to-prepare-for-the-coming-recession-rosenberg/

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[drillinto]

Gold Now Costs More Than Platinum

To see the chart, please click the link below
http://www.bespokeinvest.com/thinkbig/2011/8/10/gold-now-costs-more-than-platinum.html

 

[drillinto]

August 13, 2011

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

Minews. Good morning Australia. How did your market manage a choppy week?


Oz. It ended in the black, but that’s the most positive thing that can be said. Like every other market in the world we seemed to be up one minute and down the next. Gold was the most consistent winner of the week, though it ended on a down note. Admittedly though, the softness in the gold price came after it had scaled another mountain, this time the once unthinkable height of US$1,800 an ounce. In Australian dollar terms we also came close to that price because our dollar briefly fell below parity with its US cousin and then recovered to close the week around the US$1.03 mark.

Minews. How did the key indices on the ASX perform?



Oz. All up, but with a big hole in the middle. The all ordinaries added 1.6 per cent over the week. But, if measured from the mid-week low point which occurred around 11am on Tuesday to the close on Friday there was actually a rise of 10.6 per cent. It was a similar story with the metals and mining index which ended with an overall gain of 0.7 per cent. The gold index added 4.3 per cent for the week, but came off sharply on Friday afternoon, shedding 1.4 per cent as the gold price retreated from its all-time peak price of US$1,817.60 per ounce, which was reached on Thursday.



Like London, the news event driving our market was the European debt crisis. In the case of Australia, the impact was softened slightly by our proximity to Asia, which of all the regions of the world seems to be the one riding out this current economic storm with the least discomfort. Chinese demand for bulk commodities is now expected to slide somewhat, but not like it did in 2008 when a genuine banking crisis brought global trade to its knees. This time around the bulk carriers are still sailing, and the Baltic Dry Index, which measures ship hire costs, has only registered a modest decline recently. Further evidence that demand for bulks is likely to remain relatively strong can be seen in the higher share prices for most Australian iron ore and coal stocks.



Minews. With that good news, it’s time for prices, starting with gold.



Oz. Trending up is the best that can be said about ASX-listed gold companies. There were no stand-out winners, and even a few falls this week, which was perhaps a sign that investors are wary of the volatility factor in equities. Chalice Gold (CHN), which we took a look at on Thursday, was among the better performers on Friday when it added A2.5 cents. That took its rise for the week to A5 cents and a closing price of A33.5 cents. Troy (TRY), which we also looked at last week, was another solid performer, as the market continues to digest its steady flow of exploration and financial news. Troy’s shares closed up A20 cents to A$4.16 on the week, although they did go higher, hitting a 12 month high of A$4.42 on Wednesday. St Barbara (SBM) was another company that caught investor’s attention. St Barbara’s shares rose A18 cents to A$1.96, partly because it has ensured ongoing production from its high-cost Southern Cross operations by locking in a high-priced forward selling program.



Minews. Is there much evidence of other gold miners locking in the gold price with renewed hedging?



Oz. Not yet, but it must be tempting with the Aussie gold price at around A$1,680 per ounce. Other share price movers last week included Resolute (RSG), up A11 cents to A$1.34, Kingsgate (KCN), up A63 cents to A$8.60, Kingsrose (KRM), up A11 cents to A$1.39, Perseus (PRU), up A21 cents to A$3.24, Ramelius (RMS), up A14 cents to A$1.48, Allied (ALD), up A39 cents to A$2.80, OceanaGold (OGC), up A14 cents to A$2.09, and Silver Lake (SLR), up A8 cents to A$2.33. Offsetting those rises were a surprising number of falls - mostly modest - but falls nonetheless in a week when the gold price rocketed higher. Medusa (MML) slipped A2 cents lower to A$7.14, although it did trade as high as A$7.43 on Friday, indicating some pretty heavy selling as the market came to a close. Azumah (AZM) lost A4.5 cents to A49.5 cents, and Ausgold (AUC) fell A10 cents to A$1.45.



Silver companies all weakened as the silver price refused to follow gold. Cobar (CCU) lost A2.5 cents to A83 cents. Cerro (CJO) slipped A1 cent lower to A18 cents, and Alcyone (AYN) closed at A9.6 cents, down A0.4 of a cent.



Minews. Iron ore and coal next, so we can see how that comment on bulk commodities and the shipping index translates into actual prices.



Oz. The best of the iron ore companies was Brockman (BRM), which seems to be learning how to work with its Hong Kong masters, and which rose A32 cents to A$3.20. Mt Gibson (MGX) pleased the market with a maiden dividend, a payout which helped lift the shares by A10.5 cents to A$1.60. Fortescue (FMG) recovered from a bout of weakness earlier in the month, and rose last week by A20 cents to A$5.94. Iron Ore Holdings (IOH) added A11 cents to A$1.26, and BC Iron (BCI) rose A7 cents to A$2.47. There were two interesting areas of weakness in the iron ore sector. The magnetite hopefuls continued to slide lower. Gindalbie (GBG), lost A4 cents to A66.5 cents, and Grange (GRR) was down A1.5 cents to A47 cents. The other point worth noting is that Sundance (SDL), which says it has a bid of A50 cents a share on the table from a Chinese company, continued to trade below the suggested bid price at A46.5 cents, perhaps an arbitrage situation if you believe that the Chinese A50 cent bid will ever materialise.



Most coal companies rose, although a handful falling. Strongest performer was perennial takeover target Whitehaven (WHC), which added A34 cents to A$6.23. Aston (AZT) put on A59 cents to A$10.35. Bathurst (BTU) gained A4.5 cents to A99.5 cents, and Carabella (CLR) rose A20 cents to A$2.05. Coal companies that traded against the trend included Metro (MTE), down A7.5 cents to A67 cents, Continental (CCC), down A0.2 of a cent to A2.9 cents, and Coalspur (CPL), down A1 cent to A$1.44.



Minews. Base metals next, please.



Oz. The base metals companies didn’t trade quite as robustly as the bulk commodities companies. There was a mixed trend evident among copper, nickel and zinc companies. Best of the copper stocks included Sandfire (SFR), which we wrote about on Thursday, and which rose A50 cents to A$7.70 over the week. Another Minesite favourite, Marengo (MGO), was also better off, rising A1.5 cents to A20 cents. CuDeco (CDU) was also stronger, up A14 cents to A$3.22. Among the fallers were Hot Chili (HCH), down A3.5 cents to A58.5 cents, Metminco (MNC), down A3.5 to A22.5 cents, and OZ Minerals (OZL), down A30 cents to A$11.86.



Mincor (MCR) was the best of the nickel companies, rising by A8 cents to A83 cents. Minara (MRE) added A5 cents to A68 cents, but Western Areas (WSA) slipped A6 cents lower to A$5.37. Independence (IGO) closed at A$5.54, down A6 cents.



Zinc companies were equally mixed. Kagara (KZL) added A4 cents to A58 cents. Perilya (PEM) fell A3.5 cents to A59.5 cents, and Blackthorn (BTR) lost A2 cents to A44 cents.



Minews. Uranium and minor metals to close, please.



Oz. There was one reasonable rise among the uranium companies, but nothing to write home about among the minor metals. Extract (EXT), which will move back onto the takeover list if the Chinese re-launch their proposed offer for its major shareholder, London-listed Kalahari, added A17 cents to A$7.36. Bannerman (BMN) was the only other uranium company to rise, just. It put on half a cent to A35.5 cents. Berkeley (BKY) fell A3.5 cents to A38 cents. Deep Yellow (DYC) lost A1.5 cents to A14.5 cents. Manhattan (MHC) shed a sharp A9 cents to A31 cents.



Lynas (LYC) led the way among the rare earth companies, putting on A12 cents to A$1.98. But the other players in the space barely moved. Arafura (ARU) lost A1 cent to A58.5 cents while Alkane (ALK) was steady at A$1.69. South Boulder (STB), the potash leader, added A2 cents to A$2.12.



Minews. Thanks Oz.

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[drillinto]

August 15, 2011

"Uncertainty Is Likely To Trump The Prospects For Growth And Base Metals In The Near Term"
By Rob Davies >> www.minesite.com/aus.html (((Free Registration)))

In the last three weeks base metal prices, as measured by the LME index, have fallen 8.5 per cent. Over the same period the price of gold has risen by 8.4 per cent. Does this apparent symmetry tell us anything other than that the short base metal and long precious metal trade that was suggested at the beginning of the year has been vindicated? Indeed, over 2011 to date base metals are down 5.6 per cent, while gold is up a net 29 per cent.

In marked contrast to the stability enjoyed by capital markets for most of the first half of the year, the past few weeks have been especially volatile. To some extent it must be true that the earlier calm period lulled investors into a fall sense of security and persuaded some that all was well in the world, in spite the many voices pointing out the rising dangers.



One such was Bill Gross of Pimco. His concerns, and that of others, have been proved correct by the unprecedented downgrading of US debt by Standard & Poor’s and by the continuing farce that passes for European financial governance. It is frightening that US politicians can make even European elected representatives look good.



The events of the last few weeks have at last brought to the surface some of the issues that hitherto have been too embarrassing to discuss in polite company. Unfortunately, that does not make resolution of the problems any more likely. More probable is that the situation will fester for the next few months before some kind of denouement in the autumn, the traditional time for proper crises. In August, after all, everyone is on the beach. And how can you panic when you don’t have Wi-Fi?



The world’s biggest financial problem is the inability of the US to meet its US$66 trillion of unfunded - but walking and voting - liabilities, if growth averages less than three per cent a year. It’s the biggest problem because the dollar is still the world’s reserve currency. However, the proximate issue is that of Europe.



Capital markets are already moving in to discount an “Irish” solution to the problems of Spain, Italy, and France, namely that these countries will become full or partial shareholders of their major banks. And so traders’ counterparty risk moves from Soc Gen to President Sarkozy. Or from Unicredit to Mr Berlusconi. That is in the price of the relevant shares and bonds, or it soon will be.



What is not yet priced in is the realisation that German debt is simply a AAA wrapper for a lot of sub-investment grade debt. This debt, issued by Greece, Ireland, Portugal and now Spain and Italy has been bought by the ECB to underwrite a per cent yield cap on European sovereign debt. Since Germany is main source of funds for the ECB it is only matter of time before the markets realise that Germany’s long stop position as the ultimate financer for all of Europe is unsustainable.



There is also the small matter of German voters agreeing to the largesse being shown by the ECB and Mrs Merkel on their behalf. True enough, the ECB and the chancellor were bounced into a course of action they didn’t want to take. But that unpleasant truth won’t make it any easier to sell to the electorate. The test will be on September 23rd when the Bundestag votes on the bailout measures adopted by Mrs Merkel.



If the US is any guide, German lawmakers won’t take tough decisions until forced to by the markets. So, while the coming few months could be a fun ride for all asset classes the chances are events will still favour precious metals, as uncertainty trumps the prospects for growth and base metals.

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[drillinto]

Strategy

"Gold's climb is perfectly rational"


http://finance.fortune.cnn.com/2011/08/16/golds-climb-is-perfectly-rational/

 

[drillinto]

"Metals & Mining Analysts' Rating & Estimates - Juniors"
Bill Matlack

To view the tables, please click the link below
http://www.kitco.com/ind/matlack/aug162011_juniors.html

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[drillinto]

Strategy

Keep an eye on the gold bull market

http://www.bespokeinvest.com/thinkbig/2011/8/18/gold-bull-market-crosses-the-1000-day-mark.html

 

[drillinto]

August 19, 2011

Gold At $1,800: Central Banks Remain The Major Buyers, And Key To Setting The Price
By Our Man in Oz >> www.minesite.com/aus.html ""Free Registration""

So many factors influence the price of gold, from interest rates to economic instability, that sometimes investors forget to ask the most important question of all – what are central banks, the biggest owners of the metal, doing? But that’s not something that Mark Creasy, arguably Australia’s most important player in the gold market, has ever forgotten. And if investors had acted on the assessment of the gold market Mark delivered a little over two years ago they would be considerably richer today.

Back in May, 2009, when the gold price was around US$950 an ounce, Mark laid out a scenario which has unfolded to the letter. “Gold is a bit like a company which has a dominant shareholder”, he said. “If everyone believes the dominant shareholder is selling, the price drops like you wouldn’t believe. A major influence is how people see the biggest shareholders handling their gold. The best way to look at gold is not on the peripheral - say the scrap market or even mine supply. It’s to ask what are the big shareholders doing. In the past we’re seen big holders such as the Bank of England and the Swiss National Bank selling, and people think we’re out of this. When they see a big new buyer, people want in.”



The big new buyer emerging in the gold market back then was China, with India not far behind. Starting from a relatively small amount of gold as a proportion of its estimated US$2 trillion in reserves, China has since then been a steady buyer of gold, and is sitting today on an estimated 1054.1 tonnes of the metal. That’s a stack that ranks China as the world’s sixth biggest owner of gold. Having said that, and perhaps much more significantly, gold still represents just 1.6 per cent of China’s reserves.



But if China is serious about diversifying its reserves away from an excess reliance on the shrinking US dollar, it has a lot of gold still to buy. That is if it wants to match other countries, at any rate. Japan’s 765.2 tonnes of gold represents 3.3 per cent of its reserves. To match that percentage, China needs to acquire at least another 1000 tonnes.



A Brit by birth, Mark has been a gold bug most of his working life. He took his Royal School of Mines degree in mining engineering to Australia, but quickly dumped any thoughts of a corporate life, preferring the simple life of gold prospecting. His big pay day came in 1991 when he sold two gold discoveries for a tax-free A$120 million, using a depression-era tax break extended to prospectors by the Australian Tax Office, but originally intended for small prospectors. After he had banked his cheque, the tax man closed that 60 year-old loophole, but by then Mark was launched, using his windfall to amass a fortune now estimated at more than A$300 million.



Looking back, his 2009 assessment that gold would behave like a company with a dominant shareholder has proved remarkably accurate. Over the past 12-months, as the gold price has risen to record levels, the world’s central banks have been the biggest buyers, matched only by newly-emerged exchange-traded funds. But the funds, with their estimated 2,244 tonnes, hold just a fraction of the amount of gold held in central banks. To be precise, the ETF holding of gold amounts to just 7.3 per cent of the 30,700 tonnes (and growing) that central banks are sitting on.



It is stretching Creasy’s point a little, but even if world ETFs were suddenly swamped with sell orders that would be unlikely to break the resolve of the central banks which are reported to have soaked up around 450 tonnes of gold in each of the past two years. ETFs have been buying at an estimated rate of 325 tonnes per year.



The past six months, as gold has risen from around US$1,388 per ounce to over US$1,800, has been especially useful in demonstrating the central bank “gold shareholder” rule. That’s because the recent US$400 price rise occurred as central banks bought 219.6 tonnes of gold and sold just 12.1 tonnes. The biggest buyers, according to data collated by the World Gold Council, were Mexico, which acquired 99 tonnes, South Korea, which acquired 25 tonnes, Russia, which acquired 48 tonnes, and Thailand, which acquired 28 tonnes.



Central bank sellers were thin on the ground. What was significant was the non-appearance central banks which are signatories to CBGA3 – the third phase of the Central Bank Gold Agreement, part of a five-year plan to permit orderly gold sales which do not destabilise the market, as Britain’s high profile sales did in the mid-1990s.



Under CBGA3 a total of 11 countries, plus the European Central Bank and the International Monetary Fund, can sell up to 400 tonnes of gold a year between them. Last year, the first of CBGA3, the signatories sold 136.2 tonnes, meaning that they hung on to 263.8 tonnes of their notional 400 tonnes. So far this year, which runs to September 26th, the signatories have sold 53.3 tonnes, with a notional 346.7 tonnes of gold sales still possible in the next six weeks. Possible, but highly unlikely.



Lack of selling by CBGA signatories, plus fresh buying by a variety of central banks sits comfortably inside Mark’s theory that the most important players in the gold market are the world’s central banks, and that these are buying gold at a faster rate than the new players in the game, ETFs.



As for the future, well a look back shows that Mark’s views of May 2009, are as pertinent today as they were then. On quantitative easing (printing money) he said: “I don’t think the world has ever seen a worse situation. The reaction of governments in the 1970s oil crises was to splatter money all over the place. This time around, you can add a nought to the number.”



And on the outlook, again comparing it with the 1970s, he said this: “We had a recovery in 1976, and everything looked okay for about a year. Then along came the second oil shock, and along came massive inflation. That’s when people realised it hadn’t been sorted and that’swhen the gold price went berserk.”

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[drillinto]

August 20, 2011

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


Minews. Good morning Australia. Have you any good news to report, because we’re somewhat tired of bad news.



Oz. There was a bit to cheer about on the ASX last week, and not surprisingly it came from the gold sector where we a number of companies hit 12 month share price highs. But before we get too excited about that fistful of winners it’s also worth noting that a surprising number of gold companies fell too, which was perhaps the oddest thing of all as the gold price headed for the stratosphere.


Minews. Now that is interesting, and might perhaps call for a spot of bargain hunting if the metal price keeps rising.



Oz. Best leave that to investors to figure out as life’s not always straightforward in the sector. For example, as the gold price rose by six per cent in US dollar terms to around US$1,850 an ounce, and by five per cent in Australian dollar terms, Australia’s biggest gold producer, Newcrest (NCM) fell by three per cent. A lazy answer to questions about that disconnection is that Newcrest has risen a long way over the past year, and that’s an explanation that’s been used by local stockbrokers. But it’s not one that holds up under close scrutiny, as Newcrest’s closing price of A$39.54 on Friday was only 10.5 per cent higher than it was 12 months ago, while the gold price has risen by 50 per cent.



More on prices later. First a snapshot of the overall Australian market where all major indices ended the week in the red, even gold. The all ordinaries fell 1.5 per cent, thanks mainly to a 3.4 per cent drop on Friday. The metals and mining index fell 2.5 per cent, with Friday delivering a 3.7 per cent drop, and the gold index fell 1.6 per cent, despite a 1.3 per cent rise on Friday.



Minews. Enough of the big picture, time for prices. And that means back to the gold sector and those companies which set fresh share price highs.



Oz. Troy Resources (TRY) led the record-breakers when it traded up to A$4.63 on Thursday, at which point it was up A47 cents, or 11 per cent, on the week. Late selling on Friday trimmed the rise to A42 cents, and the shares closed at A$4.58. Northern Star Resources (NST) performed a similar trick, rising to a 12 month high of A58.5 cents during Friday trade, but weakening towards the close to end the week at A57.5 cents for an overall gain of A4.5 cents. Ramelius (RMS) also peaked and slid, briefly touching a fresh high of A$1.66 on Friday, but closing at A$1.61 for a gain of A13 cents.



Other solid risers among the gold companies came from Silver Lake (SLR), up A19 cents to A$2.52, Kingsgate (KCN), up A53 cents to A$9.03, Medusa (MML), up A15 cents to A$7.29, Norseman (NGX), up A3.5 cents to A34 cents, Alacer (AQG), up A50 cents to A$9.95, and Integra (IGR), up A3.5 cents to A52.5 cents.



Fallers, however, were as widespread as rises among the gold companies, The biggest concentration was to be found among the Australian gold companies working in Africa - a sign that cash was being repatriated rapidly in the face of global uncertainties. But it wasn’t only the Africans. Among the gold companies that lost ground in a week of record-high gold prices were Perseus (PRU), down A7 cents to A$3.17, Gryphon (GRY), down A7 cents to A$1.56, Mt Isa Metals (MET), down A3.5 cents to A35 cents, PMI (PVM), down A2 cents to A47 cents, Castle (CDT), down A1.5 cents to A33 cents, Gold Road (GOR), down A4 cents to A53 cents, and Kingsrose (KRM), down A5 cents to A$1.34.



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



Oz. There was very little movement in any of the base metal sectors last week, which is probably not bad news. One copper company, Marengo (MGO), managed to rise, adding A2.5 cents to A22.5 cents. That was an interesting move in itself, as there are rumblings in Papua New Guinea, where Marengo has its best assets, that control of all mines will be passed to traditional landowners. But after the rise from Marengo it was all down, or flat. Sandfire (SFR) lost A40 cents to A$7.30. OZ (OZL) fell A65 cents to A$11.21. Rex (RXM) was A15 cents weaker at A$1.79. Metminco (MNC) slipped A2.5 cents lower to A20 cents, and Talisman (TLM) ended the week at A47 cents, down A6 cents. Unchanged were Sabre (SBR) at A10.5 cents, Hot Chili (HCH) at A58.5 cents, and Syndicated at A12 cents.



All nickel companies weakened, as did all zinc companies, bar one. The zinc explorer that moved up was Meridian (MII), which added A2.5 cents to A13 cents solely because it received a takeover bid from a Chinese company at A14 cents. And that A1 cent gap between the closing market price and the proposed bid price tells a story in itself. Other zinc moves included Terramin (TZN), down A1.5 cents to a fresh 12 month low of A21 cents, Kagara (KZL), down half a cent to A57.5 cents, and Perilya (PEM), down half a cent to A59 cents. Nickel movers included Mincor (MCR), down A1 cent to A82 cents, Mirabela (MBN), down A15 cents to A$1.56, Western Areas (WSA) down A9 cents to A$5.28, and Minara (MRE) down A3.5 cents to A64.5 cents.



Minews. Iron ore and coal next, please.



Oz. There was one rise among the iron ore companies and four among the coals. After that, it was all down. The only iron ore company to rise was one we hear very little about, Red Hill Iron (RHI). It rose by A5 cents to A$2.25 amid a flurry of publicity about legal action related to its push to become part of a new port development. But Red Hill is run by two veterans of booms past, Neil Tompkinson and Joshua Pitt, and might be worth keeping an eye on. Elsewhere, Fortescue (FMG) fell A19 cents to A$5.75 despite reporting a record profit. Iron Ore Holdings (IOH) fell A10 cents to A$1.16. Murchison (MMX) fell A3.5 cents to A61.5 cents, and Mt Gibson (MGX) fell A11 cents to A$1.49. Unchanged, but worth noting, were Brockman (BRM) at A$3.20 and Gindalbie (GBG) at A66.5 cents.



The four coal companies to rise were: Continental (CCC), Metro (MTE), Coalspur (CPL), and Macarthur (MCC). Continental is making headway with its Penumbra project in South Africa, and will list on London’s Aim market next month, news that lifted the shares by A0.4 of a cent to A3.3 cents. Elsewhere, Metro Coal rose by A6.5 cents to A73.5 cents, Coalspur added A1 cent to A$1.45, and takeover target Macarthur gained A8 cents to A$15.32. Heading down were Bandana (BND), which shed a sharp A28 cents to A96 cents after announcing a big capital raising, and Aston (AZT), down A29 cents to A$10.06.



Minews. Uranium and minor metals to close, please.



Oz. It was mainly up among the uranium companies, mainly down among the minor metals. Interest in the uranium sector was surprisingly strong, given the continued slide in the short-term uranium price to around US$50.50 a pound. But that decline was shrugged off by Extract (EXT) which added A46 cents to A$7.82, following the return of takeover speculation. Meanwhile, Toro (TOE) rose by A1 cent to A8.1 cents after an optimistic report on its Wiluna project in Western Australia. Bannerman (BMN) put on A1.5 cents to A37 cents. Paladin (PDN) was the heaviest uranium loser, putting in a fall of A25 cents to A$1.97, which is just A1 cent above its 12 month low.



Rare earth companies weakened. Lynas (LYC) fell A24 cents to A$1.74, and Alkane (ALK), fell A4 cents to A$1.65. Tin companies also lost ground, with Venture (VMS) down A1.5 cents to A35.5 cents, and Kasbah (KAS), down A1.5 cents to A16.5 cents. Some of the potash companies moved against the downward trend. South Boulder (STB) added A3 cents to A$2.15, and Minemakers (MAK) rose by A1 cent to A34.5 cents.



Minews. Thanks Oz.

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[drillinto]

August 22, 2011

Crisis? What Crisis? The Future Still Looks Bright For Base Metals
By Rob Davies >> www.minesite.com/aus.html >> free registration

Last week the levels of anguish in commentaries relating to the financial markets reached new heights. To listen to or read some of the opinions you could be forgiven for thinking the world was about to end. It can be a little deflating to ruin an argument with data, especially when it does not paint such a catastrophic picture. But, hey, the world hasn’t ended.

It is true that most major equity markets have experienced significant falls over the last few weeks – to the tune of 15 per cent or so. But over one year equity markets are virtually unchanged. Base metals have fared much better. The 1.8 per cent fall in base metals last week was much less dramatic than the five per cent fall that occurred in the equities space. And the divergence over the space of the past year is even more marked. In contrast to share prices, base metals, as measured by the LME index, are up by 16 per cent. True, that rise has been completely outshone by the 54 per cent rise in the gold price over that period. But even so, boring old base metals have not done badly.



But just because base metals didn’t fall as much as some other assets over the past week doesn’t mean the unfolding economic crisis is any the less grave. However, what that relative strength does demonstrate is that alternative assets do have a role in a situation where no one knows which institution or state to trust. While the state of the US economy is not good, the country’s sovereign debt problem would be easy to solve if the political will could be found to raise taxes and cut spending. The country certainly has the ability to raise more tax revenue, if the political system can make the case for doing so. Warren Buffett has had a try. But so far the lack of political leadership on this has been disappointing, if not unexpected.



In Europe the situation is wholly different. The only similarity is the lack of political leadership. If it’s possible to summarise the US position as “won’t pay”, then the European problem is very definitely“can’t pay”. No amount of reform and financial black magic will ever enable a country like Greece, the economy of which is contracting at five per cent, to repay, or even service its debt load, which is equivalent to 140 per cent of GDP.



No one knows how to resolve the problem of over-indebtedness in Europe. What is clear, though, is that like any company that has generated growth by expanding its balance sheet the subsequent period of debt repayment means lower growth. Whatever Europe does, whether it be debt write-off or debt repayment, growth in future years will be lower than when debt accretion helped generate rising wealth.



Low growth is bad for base metals. What is unclear is whether it will just be Europe that suffers from this slowdown or if other regions, like North America, will join it. Since these two together constitute over 60 per cent of global metal demand the outcome is pretty fundamental to commodity prices.



And given that scenario the obvious question then might be why haven’t base metals fallen further? Simply put the answer to that lies in continuing robust demand from China, and inventory levels that are still amazingly low. Some asset classes might be in mid-crisis, but base metals are certainly not.

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[drillinto]

Baltic Dry Index is up 16% in a week !

http://www.bespokeinvest.com/thinkbig/2011/8/22/baltic-dry-index-up-16-in-a-week.html

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[drillinto]

August 27, 2011

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


Minews. Good morning Australia. How did your market manage in another interesting week?

Oz. Quite well, all things considered. We rode through the sharp mid-week gold sell-off comfortably, and all the key indices on the ASX closed higher. Record profits posted by two of the big boys of mining, BHP Billiton and Glencore, reinforced the positive mood and takeover action in several sectors showed that there is still a strong belief that demand for commodities will continue to grow in Asia, despite the financial and political problems of Europe.


On the market the all ordinaries index recovered some recently lost ground and added 2.4 per cent. The metals and mining index rose by about the same amount, 2.2 per cent, and the gold index added 0.5 per cent, despite a 4.5 per cent decline in the gold price.



Minews. How are the valuation differences between physical gold and gold shares being explained in Oz?

Oz. It seems there are two distinct types of gold investor. The risk-averse who buy gold as financial protection against governments doing something really silly, such as inflating away their debt problems; and those with a higher risk tolerance, who want the leverage offered by shares in a gold mining company, plus the added kick which comes with any discovery. Last week provided a fascinating insight into the two-tier nature of the gold market, as the physical price fell during our trading time, but most gold company shares rose.



Also making the news down this way was the iron ore price. This hit a three-month high of US$190 a tonne as Chinese demand continues strong and bottlenecks continue to impede supply. There was also a mopping up takeover bid in the nickel sector which added a small amount of spice to a fairly depressed part of the market.



Minews. Start with gold, but hold that thought about the iron ore price.

Oz. The gold index rise of 0.5 per cent did not really reflect what was a reasonably strong week for gold companies. The ratio of rises to falls was around two-to-one and while most rises were modest, so were the falls. The start of business next week should be interesting because the gold price was around US$1,770 an ounce when we went to the pub on Friday night. But by Saturday morning our time it was back up to $1,827 an ounce.



Among the best gold performers were Alacer (AQG), which includes the old Avoca, and which rose A51 cents to A$10.46, Perseus (PRU), which rose A28 cents to A$3.45, Resolute (RSG), which rose A13 cents to A$1.50, Norton (NGF), which rose A3.5 cents to A20 cents, Azumah (AZM), which rose A5.5 cents to A49.5 cents, OceanaGold (OGC), which rose A21 cents to A$2.20, Gryphon (GRY), which rose A8 cents to A$1.64, and Kingsgate (KCN), which rose A18 cents to A$9.21. Among the fallers were Ausgold (AUC), down A8 cents to A$1.45, Ramelius (RMS), down A7 cents to A$1.54, and Chalice (CHN), down A1.5 cents to A30.5 cents. Troy (TRY) was also down, as it suffered from profit taking after a couple of strong weeks, closing A22 cents lower at A$4.36.



Minews. Over to iron ore because that US$190 per tonne price appears to be out of step with how we’re seeing the world in London.

Oz. It is interesting, and perhaps Europe’s woes will flow into Asia at some stage, but we’re not there yet. As you would expect, most iron ore companies were better off, although admittedly not by much. Atlas (AGO) confirmed its status as a rising star of the Australian resources sector by delivering a record profit and a maiden dividend, news which lifted the shares by A21 cents to A$3.75. Iron Ore Holdings (IOH) added A3 cents to A$1.19. Latin (LRS), one of the newcomers to the sector, recovered A2 cents of the loss it incurred in the previous week to close at A20 cents. Mt Gibson (MGX) added A3 cents to A$1.52. Other moves, all small, came from Sundance (SDL), up A1 cent to A46 cents, Gindalbie (GBG), also up A1 cent to A67.5 cents, and Grange (GRR), up A1.5 cents to A45. Brockman (BRM), suffered the biggest fall of the week, down A15 cents to A$2.95. African Iron (AKI) lost A1 cent to A29 cents, and Red Hill Iron (RHI) shed A10 cents to A$2.15.



Minews. Base metals next, starting with nickel, where you mentioned some takeover action.

Oz. There was, with a touch of bitter history attached. Glencore finally moved to mop up minorities in Minara (MRE), the old Anaconda Nickel. Anaconda caused a lot of investors a lot of pain in the 1990s when it struggled to get the Murrin Murrin nickel processing plant to perform as advertised. Late last week Glencore lobbed a bid pitched at A87 cents a share for the 27 per cent of Minara it doesn’t already own. On the market, Minara added A23 cents to close at A87.5 cents, a fairly good sign that the price is right. And other nickel companies reacted moderately well to the vote of confidence in nickel by Glencore. Western Areas (WSA) added A34 cents to A$5.62. Independence (IGO) added A33 cents to A$5.50, and Poseidon (POS) put on A1 cent to A17 cents. But Mincor (MCR) slipped half a cent lower to A81.5 cents, and Mirabela (MBN) continued to lose ground, shedding A6 cents to A$1.50.



Copper companies were mixed, but generally trended weaker. Best of the copper producers was Discovery (DML), which added A12 cents to A$1.35, after positive exploration news from its Boseto mine in Botswana. Elsewhere, Resource and Investment (RNI) rose by A3 cents to A88 cents, and OZ (OZL) rose by A23 cents to A$11.46. Among the fallers were Sandfire (SFR), down A9 cents to A$7.21, Rex (RXM), down A2 cents to A$1.77, and Hot Chili (HCH), down A1.5 cents to A56 cents.



Zinc companies were also generally weaker, although there was a handful of rises. Terramin (TZN) rose A2 cents to A23 cents, but Ironbark (IBG) slipped A1 cent lower to A22 cents, Perilya (PEM) lost half a cent to A58.5 cents, and Kagara eased back by A1.5 cents to A56 cents, despite the start of a public relations push to revive interest in the stock.



Minews. Coal and uranium next, please.

Oz. There were reasonable gains in both spaces. Aston (AZT) was the pick of the coal companies, as it traded up to a 12 month high of A$11.58 during Friday, before closing at A$11.40 for a gain over the week of a very impressive A$1.34. Macarthur Coal (MCC) moved above the A$15.66 offer price from Peabody of the US to close at A$15.80, a gain of A48 cents driven by speculation that it will attract a rival bid from Anglo American. Coal of Africa (CZA) rose by A8.5 cents to A$1.01. Carabella (CLR) crept A2 cents higher to A$1.91, and New Hope (NHC) added A18 cents to A$5.12.



Extract (EXT) attracted most interest among the uranium companies, as tension built ahead of a possible revival of a takeover bid from China. Potentially in play are both Extract, and its British-listed majority shareholder, Kalahari. On the ASX, Extract added A20 cents to A$8.02. Meanwhile, Energy Resources (ERA), Rio Tinto’s Australian uranium subsidiary, rose by A42 cents to A$3.98 as speculation grew that it would receive a mopping up takeover from its parent company. Elsewhere, Uranex (UNX) continued its rise with a A2 cent gain to A42 cents, and Berkeley (BKY) rose by the same amount, A2 cents, to A40 cents.



Minews. Minor metals to close, please.

Oz. Rare earth companies were flat. Alkane (ALK) added A1 cent to A$1.66. Lynas (LYC) slipped A3 cents lower to A$1.70. Potash plays firmed modestly with South Boulder (STB) up A2 cents to A$2.17 and Minemakers (MKR) up A2.5 cents to A36.5 cents. Tin companies gained a little ground, with Venture (VMS) and Kasbah (KAS) up half a cent each. Venture closed at A36 cents and Kasbah at A17 cents.


Minews. Thanks Oz.

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[drillinto]

August 30, 2011

Creative Destruction In The Global Economy May Be Good For Metals In The Long Term
By Rob Davies
www.minesite.com/aus.html ((( The registration is free )))

The world seems to have decided that the US is going to have a double dip recession and that the appropriate response is to sell everything cyclical. Mining stocks are regarded as deeply cyclical so they were in the front line last week and took a six per cent hit as measured by the FT Mining index. Bizarrely though, the UK equity market actually rose 1.8 per cent over that period and - get this - so did base metal prices.

As measured by the LME base metals index, prices gained two per cent over the five days. Even more significant was that the gains were made in the face of a rising dollar, and that normally depresses metal prices. To be fair, gold did come off by 1.3 per cent.



But Ben Bernanke’s speech at Jackson Hole seemed to confirm some fairly widely-held opinions that he and his fellow Central Bankers can do little of significant to change the course of economic activity in the short term. Bernanke passed the buck nicely, though. He said it was now up to politicians. No wonder the market was depressed. Consensus opinion now assumes that US economic activity will slow and, historically, that means the whole world slows.



Still, this time things are a little different. For a start, the US has had an exceptionally weak recovery from the 2008/9 recession. There really isn’t a lot to lose if things are only ticking over in the first place. So perhaps it is less a double dip, and more just a very long combination of recession and low growth.



Another big difference this time is that although many fund managers have expected metals prices to go down as economic growth eases back, those price movements have resolutely refused conform to expectations.



Exceptionally low inventory levels simply frighten fabricators into buying whatever they can get hold of. If nothing else, the Japanese earthquake demonstrated the risk many global manufacturers faced by relying too much on a “just-in-time” supply line for components. As an increasing amount of metals, and most especially copper, are now sourced from politically unstable parts of the world, the danger of being left without raw material is far higher than the cost of holding stock. Besides, with interest rates so low everywhere, well except Greece, the financing costs are not too onerous.



It is possible that the bears who outline scenarios of economic stasis will be proved right. But in some ways that would be good. It would clear out a lot of the walking wounded and leave the survivors in a much healthier position. Competition would be sharply reduced. That would then engender its own profit-led recovery and in turn rekindle demand for metals.



Alas, that brutal inclination of capitalism to destroy in order to refresh the economy, as first propounded by Joseph Schumpeter, will be fought by politicians everywhere. While most of them seem happy to be free market-orientated when times are good, it is disappointing, if predictable, to see so many become socialist when times get tough. Unfortunately, to enjoy the good times you have to endure the bad times. That’s the hard part.

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[drillinto]

September 01, 2011

The Africa Down Under Conference Kicks Off With A Bang In Perth
By Our Man in Oz
www.minesite.com/aus.html (Free registration)

If anyone in London dares tell you that the resources boom is running out of puff, tell them to jump aboard a jumbo and jet their way immediately to Perth, on Australia’s west coast, where they might catch the tail end of the world’s most interesting mining conference. Africa Down Under, as the name says, is all about African mining and investment opportunities. Even so, it’s being held in the wrong country: Australia. Despite its mislocation more than 2,000 delegates, some wearing traditional African robes, are currently wandering the halls of two adjoining hotels, peering at 170 exhibitions and company booths or listening, in an over-crowded auditorium, to presentations from a line-up which includes many of the most active explorers and miners in Africa, plus 11 senior African government ministers. It is, to Minesite’s Man in Oz, bizarre and fascinating at the same time.

The man who kicked off proceedings at the three-day event, and the person who came closest to explaining why so many Africans have made the long march to Perth to market their homeland, was one of Australia’s canniest politicians, and perhaps a Prime Minister in waiting, Gary Gray. Once a senior executive with the oil and gas producer, Woodside Petroleum, Gray noted that Africa is “the continent most off-track in reaching its Millennium Development Goal targets”. For anyone who’s forgotten, the Millennium Development targets are a grab bag of worthy objectives to which 193 countries have signed up, including the elimination of extreme poverty, fighting disease, and reducing child mortality. And that blunt talk from Gray was a breath of fresh air when compared to the nonsense contained in a speech delivered on behalf of South Africa’s controversial Mines Minister, Susan Shabangu, a last minute drop-out because of problems at home - where nationalisation of the mining industry remains a burning topic. Not that the nationalisation issue got much of public airing at the Perth conference.



For Australians, who rarely welcome politicians at mining conferences (once famously banning any of that species from the annual Diggers & Dealers forum in Kalgoorlie), the high profile treatment of the pollies is an amusing sideshow, albeit one that’s quickly forgotten. Much more interesting was the whiff of deal flow on the floors of the Pan Pacific and Novotel, where company bosses mingled with investment bankers. Prominent among the crowd were people such as Peter Landau from Continental Coal, who was dashing between appointments, Tim Goyder from Chalice Gold who was beaming as delegates gathered around his booth, and John Borshoff from Paladin Energy, who was holding court in the media room after delivering one of the early talks.



In that speech Borshoff spoke of the third-stage of expansion of his company’s Langer Heinrich uranium mine in Namibia, and of the need for an overhaul in the way uranium is sold. Whether he’s right about uranium marketing or not, his talk was a classic example of what Africa Down Under is all about. Here was a career Aussie explorer, who did it tough for 30 years with his unsuccessful attempts to mine uranium in Australia, before he struck it lucky and mad his overdue fortune in Namibia and Malawi where uranium mining is legal, and welcome. Borshoff’s beef about uranium marketing is that electricity utilities have too much say in the pricing. “They haven’t got a clue about mining and they say we think US$50 a pound is enough”, he said. “In all other commodities, the end user never talks to the miner in terms of the price. A car manufacturer doesn’t go to BHP Billiton and say I think steel should be US$70 a tonne. The uranium market has to separate from both the supplier and the consumer.”



Despite Borshoff’s annoyance about the low spot-market price for uranium, his talk did serve as a reminder that most commodity prices, if not mining company share prices, remain remarkably robust. Gold explorers were certainly in the spotlight with the gold price holding above US$1,830 an ounce. Four of the best presentations of the first day came from gold explorers. Steve Parsons from Gryphon talked about the recently-finalised engineering study at his company’s Banfora project in Burkina Faso. Here the target is 180,000 ounces of gold a year at a cash cost of US$430 an ounce. Paul Kitto talked up the Batie West project of Ampella Mining, which is heading towards a three million ounce resource. Mark Calderwood from Perseus Mining reported on a fresh set of high-quality drill hits at his Sissingue project, including 78 metres at 4.7 grams a tonne gold. And Rick Yeates from Middle Island Resources reported new drill hits at his Reo project in Burkina Faso, including four metres at 16.2 grams a tonne.



Other minerals were not ignored either, and brought back to mind the wisdom contained in Rob Davies’ contribution to Minesite a couple of days ago, in which he noted that even though the world economy appears to be double dipping, or just bouncing along the bottom, metal prices are staying high. Why this is so is a bit of mystery, as Rob discussed. But some of the strange factors at work include Japan’s shake-up, which brought into question the wisdom of just-in-time manufacturing in the context of a transport break down, and that a lot of the world’s raw materials now come from “politically unstable parts of the world”.



Political instability, and failure to achieve millennium development goals are two of the reasons why Africans have travelled to Australia to encourage investment back home. Offsetting the negatives of political risk and economic backwardness - politely ignored so as to not embarrass the visitors - is the marvellous geology of Africa which Europeans have been plundering for centuries. Australians, on the other hand, are not burdened with Europe’s baggage, or scarred by South Africa’s era of apartheid. They are in it for the simplest of reasons, making a quid, and having fun at the same time.



As if to underline this point, Gary Gray pointed out in his opening talk that seven out of the top 10 growth companies in Perth over the past decade have assets in Africa. In effect, Perth has now become the stepping-off point for Aussies heading for Africa as much as a bolt-hole for South Africans fleeing their homeland. Gray said that 230 Australian companies now have mining and energy assets in Africa, covering 650 projects in 42 countries. Since the start of the year, 20 companies and 100 projects have been added to the list, facts that Gray delivered flatly without appearing to realise the irony in what he was saying - that some of the Australian companies heading for Africa are doing so because the Australian Government’s high-tax policies risk making his country a financial no-go zone.

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[drillinto]

September 02, 2011

Africa Down Under, Day Two: Consolidating The Australian Beachhead In Africa
By Our Man in Oz
>> www.minesite.com/aus.html

Mining is rarely seen as a friend of government, but on day two of Africa Down Under, the mis-located conference about African resource development being held in Australia, it was kiss and make-up time for some traditional enemies. Bill Turner, former chief executive of Congo-focussed copper miner, Anvil Mining, told the conference that Australian mining companies could play a role in assisting the Australian Government expand its role in Africa. Describing mining investment so far as “a beachhead”, Bill said Australia had a “first mover” advantage in a number of technical and corporate areas which could see the Australian mining companies work closely with government to form private-public partnerships.

Far-fetched as that sounds - and readers with long memories might suspect that they’re reading a script from the television comedy classic, Yes Minister - Bill’s suggestion went down well with his audience. Whether anything comes of it will be another thing entirely, but the positive reaction was a reflection of the prevailing mood, at an event which seems to have captured the early stages of an emerging relationship with the Indian Ocean at its centre. Although it’s unlikely to ever rival the 20th century’s focus on trade around the Atlantic, nor the focus on the Pacific in the early years of the 21st century, there is unquestionably something emerging around the Indian Ocean, what with a fast-growing mega economy to the north in the shape of India, and two resource-supply specialists at different stages of development, to the east and the west.



Growing something significant out of the link-ups around the Indian Ocean has kept academics at the University of Western Australia busy over the past 20 years, as they’ve organised seminars and tried to encourage industry to pick up the ball. And this week in Perth it has been the mining industry which has emerged as the catalyst for change, with Australian mining companies filling technical and commercial service roles that ought to have fallen into the lap of South African industry. Perhaps history has a lot to do with why that has never happened, but whatever the reason for past failure, there was certainly a sea-change evident at Africa Down Under - a sea-change which investors would be wise to note. Australian listed mining companies are becoming proxies for African investment.



According to Bill Turner there are more than 220 ASX-listed Australian companies active in mineral exploration in Africa. Australians operate 17 mines, and have an interest in a total of 28 mines. That established track record prompted Moses Asaga, chairman of Ghana’s Parliamentary committee on Mines and Energy, and head of the delegation from Ghana to the conference, to ask for Australian companies to assist in the “scaling up” of an estimated 600 small mines in his country. He said local mining companies lack the capital and expertise to handle expansion: “We would welcome a higher level of involvement in this development opportunity”, Mr Asaga said. “We are the second largest gold producer in Africa and the eight largest in the world, but we can also offer Australian investors exposure to large scale diamond, manganese and bauxite opportunities.”



With government creeping into the conference, this will be the final report on the event from Minesite’s Man in Oz who prefers the analysis of less murky corporate matters. On that score, though, there were a few items of interest on the second day. The Adamus/Endeavour merger was the lead-off talk of substance, with Mark Connelly keen to market the creation of a new mid-tier goldminer which is targeting annual output of 250,000 ounces a year from 2013. “The larger company de-risks our operations as standalone companies, delivers production at between US$575 an ounce and US$625 per ounce this year, and allows full repayment of a US$60 million project dent on Adamus’s Nzema mine”, Mark said. He added that documentation on the deal was moving swiftly and could be wrapped up as early as November.



Other presentations of interest included that from Lindsay Reed of emerging Botswana coal miner, Aviva Corporation. Lindsay said studies into the company’s Mmamantswe thermal coal project should be finalised early in 2012, with the aim being to develop a mine producing 10 million tonnes of coal a year. “Mmamantswe already has a defined water resource and a JORC-code resource of 895 million tonnes of coal, and is on a main infrastructure corridor,” Lindsay said. Chalice Gold, Resolute Mining, Sundance Resources, Legend Mining, Discovery Metals, Kasbah Resources and Azumah Mining were also on the day two agenda.



If there was one flat spot on the day it was delivered by Rio Tinto. David Joyce, managing director of Rio Tinto Iron Ore Expansion Projects, gave a reading from the official rule book on iron ore, and then declined to answer media questions. Now, why would that be so? Perhaps it has something to do with Rio Tinto’s troubles in Guinea where the mining giant thought it had majority control of the giant Simandou deposit, only to find a Chinese partner inserted into the deal, amid lurid reports of cash-stuffed brown paper bags and bouncing cheques. Surely he didn’t expect cheeky media hacks to inquire about that?



With that slightly sour note delivered, courtesy of the silent man from Rio, it’s time to sign off from Africa Down Under with a few observations for next year. Firstly, the organisers must book a bigger conference centre, because dashing between two hotels, across a busy road, is not just tiresome, it’s dangerous. Secondly, ease up on the government chaps. They are killing Mining Indaba in Cape Town as a must-attend event, and it would be a shame to see same thing happen with such a special conference as Africa Down Under.

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