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"The best place to be is in commodities"

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"Economy [US] improving, stocks cheap"
Brian Wesbury, Chief economist, First Trust
5 DEC 2011
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Remember the big fat “zero” jobs reports back in August? The Pouting Pundits of Pessimism reported it as the end of the world. The US was supposedly teetering on the brink of another recession, or maybe depression. Democrats wanted more government spending “stimulus.” Republicans said President Obama was the equivalent of a “zero.” With all this negative sentiment, the Dow fell 250 points that day.
But something happened on the way to the bank. One month later, that big fat zero was revised up to a +57,000, the next month it was revised up again to +104,000. All that recession talk in early September was highly misleading.
Private payrolls are up 157,000 per month in the past year and that’s happening even though the “labor-intensive” construction industry is still in the doldrums.
Unemployment is now 8.6%, way down from 9.8% last November. Many are saying that the lower unemployment rate was caused by a 315,000 drop in the labor force (people looking for work). These pessimists say, “everyone is discouraged, so falling unemployment rates are actually a bad thing.” But this is a Chicken Little view of the world.
In the past four months, civilian employment (calculated by canvassing households), has jumped by 1.28 million – an average of 321,000 new jobs each month. During the same four months, the labor force has expanded by an average of 164,000 new entrants per month. In other words, the labor market is getting better, on all fronts, not worse. We may see unemployment tick up next month, but this would be a correction for an exaggerated one month drop.
Meanwhile, reports on consumer spending and manufacturing production keep signaling growth. Auto sales – big-ticket items people shy away from when they anticipate recession – hit 13.6 million in November, the best pace since early 2008 (except for “cash for clunkers,” when the government was cutting checks of $4,000 each to buy a vehicle). Industrial production is up 4.5% from a year ago.
Even the housing market is starting the long path back to normalcy. So far this year, multi-family builders have started 45% more homes than they did in the same time frame in 2010. And permits to build single-family homes are up 5% from a year ago.

And yet the stock market is more undervalued today than it was at the very bottom of the panic in March 2009.

We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.1%), but corporate profits are at a record high. As a result, the model says fair value for the Dow is currently 45,000.

But this result is largely due to artificially low interest rates. If we use a more realistic discount rate of 5% for the Treasury, we get a fair value of 19,500 on the Dow and 1,980 for the S&P 500.

As we’ve said before, there are many moving parts to this model. Interest rates could go higher than 5%, profits could fall or both could happen. Profits, for example, are now 13% of GDP, the highest in measured history (back to 1947) except for one quarter in 1950.

So what does our model say if profits revert to the historical mean of about 9.5% of GDP? Even in that scenario, and assuming a 5% yield on the 10-year Treasury, fair value is 14,200 for the Dow and 1450 for the S&P 500.

Back at the peak of the stock market in 2000, an ounce of gold could get an investor fewer than 4 shares of Intel (INTC). Today it is trading for about 70 shares. Meanwhile, Intel yields around 3.4% and gold yields zilch. Stocks are dirt cheap, relative to bonds and relative to gold.

Of course, it would be great to know the exact moment that all the bad news from Europe finally at long last blows over. But no one knows. Investors have a simple choice. Do they want to own stocks when they are dirt cheap, or will they wait and pay more when the fear disappears?
 
December 10, 2011

That Was The Week That Was … In Australia
Mining News Australia Junior
Source >> www.minesite.com/aus.html (( Free registration ))


Minews. Good morning Australia, how did your market react to Europe’s week of great decisions?



Oz. With an increasing degree of disbelief, verging on disinterest. Asia and the U.S. are squarely in our sights, with Europe seen as an important, albeit increasingly irrelevant sideshow. Monday will be the real test of our reaction to what happened in Brussels on Friday night because the fireworks which followed Britain using its veto on changes to the European treaty came after we had closed another topsy-turvy week which saw all of the key indices on the ASX lose ground. The metals and mining index shed 2.8 per cent. The all ordinaries did slightly better with a 1.9 per cent decline, while the gold index suffered the biggest fall, with a loss of 5.8 per cent.

Minews. Looking north to Asia certainly seems to be in your best interest.



Oz. There’s no doubt about that, because all of the major Asian countries have policies focussed on growth rather than austerity. That’s not to so that Europe’s woes will not affect us, especially when it comes to the provision of project development capital, though it seems fairly obvious that a Chinese or Japanese bank is more likely to provide funds for new mines in Australia than struggling factories in Germany or France.



Minews. Time for a few prices, preferably starting with some good news.



Oz. Before switching to prices it will be interesting to see whether the break-down in relations between the U.K. and the E.U. leads to a revival of interest in the rest of the world by British investors. It remains a mystery to a lot of people in Australia why the U.K. took its eye off the opportunities in Asia in preference for closer ties to slow-growth Europe. Last week’s break-down in relations could be the spark which revitalises interest in opportunities in countries such as Australia and Canada which are plugged directly into parts of the global economy which are growing quite rapidly.



Minews. Those special relationships of the past could prove to be very useful in London’s future. Enough of the chit-chat, over to prices now, starting with gold.



Oz. It was a difficult week for gold, as shown in the fall of the ASX gold index, and the decline in the underlying price of the metal. However, the major cause of that big drop in the index was a hefty decline by the local sector leader, Newcrest (NCM), which lost A$2.90 to A$33.05. That single move masked a number of useful rises, including Intrepid (IAU) which added A18 cents to A$1.41 thanks to a resource increase at its Tumpangpitu copper/gold project in Indonesia. Kingsrose (KRM), another Indonesian-focussed stock, did almost as well with a rise of A14 cents to A$1.52 after upbeat presentations to investors in London.



Other gold stocks to defy the decline in the index included Silver Lake (SLR) which added a modest A3 cents to A$3.75. Regis Resources (RRL), also up A3 cents to A$3.53. Gold Road (GOR), up A1.5 cents to A34 cents. Northern Star (NST), up A2.5 cents to A93 cents. Castle (CDT), up A2.5 cents to A25 cents, and Troy (TRY), up A10 cents to A$4.57 after its chief executive, Paul Benson, delivered a well-received talk at Mines & Money in London.



Most of those upward moved were small, but significant nevertheless in a down week. The list of gold stocks to lose ground is significantly longer, but there were not any seriously damaging declines. Stocks to fall included: St Barbara (SBM), down A9 cents to A$2.27. Perseus (PRU), down A23 cents to A$2.90. Gryphon (GRY), down A8 cents to A$1.29. Azumah (AZM), down A8 cents to A43 cents. Kingsgate (KCN), down A22 cents to A$6.88, and Evolution (EVN), down A8 cents to A$1.74.



Minews. Base metals next, please.



Oz. Copper stocks were mixed. Nickel and zinc stocks were down. Best of the copper companies was one we hear little about, Horseshoe Metals (HOR) which joined the copper rush in Western Australia after reporting high-grade assays from drilling at its Kumarina project. The stock added A6 cents to A30.5 cents over the week, but did trade as high as A41 cents on Wednesday. Ivanhoe (IVA) continued its upward run with the addition of another A6 cents to A$1.63, and Sandfire (SFR) recovered a little of recently lost ground with a rise of A2 cents to A$6.75, but did rebound to a mid-week peak of A$6.97 before the whole Australian market headed south ahead of the European show-down. Other copper moves included: OZ Minerals (OZL), down A16 cents to A$10.88. Rex (RXM), down A1 cent to A$1.33. Sumatra (SUM), up A1 cent to A16.5 cents, and PanAust (PNA), down A7 cents to A$3.32.



Nickel stocks continued to suffer from the low price for their metal, though we might see a reversal of that trend thanks to Friday’s encouraging rise in the nickel price to around US$8.43 a pound. That recovery came too late for Independence (IGO) which warned of a loss in the current half-year, a management comment which helped knock A31 cents off the stock which ended the week at A$4.35. Western Areas (WSA) was also weaker despite resolution of a long-running legal dispute, shedding A18 cents to A$5.53. Mincor (MCR) slipped A5.5 cents lower to A73.5 cents, and Panoramic (PAN) lost A9.5 cents to A$1.38.



Most zinc losses were minor, which meant that Blackthorn’s (BTR) ability to open and close at A50 cents was the “winner” for the week. Kagara (KZL) eased back by A1.5 cents to A34 cents. Perilya (PEM) shed the same amount to close at A38 cents, and Ironbark (IBG) fell by A2.5 cents to A22.5 cents.



Minews. Over to the bulk commodities, iron ore and coal, please.



Oz. Mainly down in both sectors, but with a handful of interesting rises. Pick of the coal stocks was Aston (AZT) which added A65 cents to A$9.76 as interest grows in its multiple corporate deals that could lead to the creation of a major, new, independent Australian coal producer. Whitehaven (WHC), which is discussing a “merger of equals” with Aston, added A18 cents to A$5.82, but after that it was all downhill. Moves included: Stanmore (SMR), down A7.5 cents to A76 cents. Coalspur (CPL), down A12 cents to A$1.66. Carabella (CLR), down A9.5 cents to A$1.30, and Bathurst (BTU), down A4 cents to A66 cents.



Brockman (BRM) was the best of the iron ore stocks with a rise of A22 cents to A$2.26, though most investors remain wary of the stock and its close connections to Hong Kong investors. Iron Ore Holdings (IOH) was one of the handful of other stocks to gain ground with a rise of A3 cents to A$1.25. Grange (GRR) gained A1.5 cents to A49 cents, and BC Iron (BCI), added A8 cents to A$2.44. Losses were posted by Fortescue (FMG), down A14 cents to A$4.72. Atlas (AGO), down A8 cents to A$2.98. Cape Lambert (CFE), down A4.5 cents to A43.5 cents, and Mt Gibson (MGX), down A8 cents to A$1.25 after the early departure of its chief executive, Luke Tonkin.



Minews. Uranium and minor metals to close, please.



Oz. Extract (EXT) was the story of the uranium sector after the latest Chinese bid for its close associate, and London-listed, Kalahari Minerals. More than seven million Extract shares changed hands on Friday, a record for the stock as it rose by A32 cents to A$8.47. Toro (TOE), was also in the news after a series of deals and a stock exchange “speeding” inquiry thanks to a run up from A8.1 cents to a mid-week high of A12 cents. Slower Friday trade saw Toro retreat to close at A10.5 cents. Other moves were mixed. Paladin (PDN) shed A5 cents to A$1.62. Bannerman (BMN) added A2 cents to A28 cents, and Manhattan (MHC) fell A6 cents to A22 cents.



Titanium and zircon stocks led the way up among the minor metals. Iluka (ILU) added A79 cents to A$16.85 after a report of a big uplift in the titanium price. Gunson (GUN) put on 1.5 cents to A18 cents, and Base (BSE) gained A1 cent to A48 cents. Rare Earth stocks also rose, Lynas (LYC) by A3 cents to A$1.30, and Alkane (ALK) by A7 cents to A$1.09. Tin stocks were steady and lithium stocks weakened, led by Galaxy (GXY) which lost A7 cents to A88 cents.



Minews. Thanks Oz.
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December 12, 2011

"Debt Fuelled Growth Is Over, What Comes Next ?"
Rob Davies
Source >> www.minesite.com/aus.html (( Free Registration ))

Europe has successfully identified that its house is on fire. Rather than putting the fire out it has decided to build a new one where no one will be allowed to use matches thus making it safer than the existing one. The fact that the no-smoking rules in the old dwelling were broken by pretty much everybody will be ignored.

In economic terms the conflagration in Europe is bad and nothing that has been achieved over the last week suggests that there is any imminent prospect of it changing. What makes the prospects even worse is that the rules on Europe 1.1 will act to restrict growth by preventing governments from running deficits in excess of 3 per cent. This proposed fiscal tightening, if followed, will do nothing to restore growth to Europe and is one reason why the OECD is forecasting a paltry expansion of just 0.2 per cent in Europe.



To be fair it is not expecting much more from the United States or Japan and its overall growth forecast for member countries is an anaemic 1.6 per cent in 2012. All is not lost though for the outlook for metal consumption because non-OECD countries are expected to grow by over 4 per cent taking world growth to over 5 per cent. Whatever happens in Europe, and it won’t be much, the global outlook remains positive, which is probably why base metal prices, as measured by the LME index only fell 0.9 per cent over the week to 3371.



That is not to say investors should be complacent. The weakness in European banks, especially German and French ones, has the potential to destabilise world trade far beyond the borders of Europe. More significant than the travails of European member states is the downgrading of the banks. Commmerzbank, the second largest in Germany, has fallen to e1.3 a share capitalising it at just e6.8 billion. This weakness at the core of the system will inhibit growth until a long term solution is put in place. Simply borrowing from the ECB at 1 per cent to lend to Italy at 6 per cent does nothing to lubricate the commercial world other than keep Italy afloat.



What worries observers, and the OECD, is that if things go badly wrong there is a lot of downside in Europe. It estimates the economy could contract by 2 per cent in each of the next two years if things go wrong. The downside in China is growth slowing from 8 per cent to 7 per cent and that would have a bigger impact on metal demand. On the other hand if things go well in Europe the upside is only 1 per cent growth in 2012 and 3 per cent in 2013.



Although Europe is gradually becoming a smaller part of the global economy, and even less important in terms of metal consumption, its key role in so many activities still gives it a leading part. Unfortunately, the measures proposed this week are unlikely to reverse its relative decline. On the other hand the imminent inclusion of Polymetals and Evraz into the FTSE Indices shows that London has been able to adapt to a fast changing world and remains a key player in raising money for the mining industry.

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I tend to agree, the best place to be is in commodities, with all this global money printing going on all commodities are going to hit the roof.

Glad I found a stock like AXT with a basket of commodities such as gold, iron ore, uranium and copper.;)
 
Jim Rogers is a legend in the investment world, and if there is one person to listen to, it is him. So what has Rogers been doing?

Rogers remains broadly bullish on commodities for the long term, he told CNBC/US (Dec 2011):

"I'm long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money; if the world economy doesn't get better, I'd rather own commodities because they're going to print money."

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December 17, 2011

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

Minews. Good morning Australia, you seem to have survived another tough week?



Oz. Just, though it did feel a bit like living on the edge of a cyclone which could suddenly turn your way and blow the house down. In this case the cyclone is called Europe, but the winds coming off that part of the world remind people in Australia of the seasonal damage inflicted every Christmas as tropical storms brew in northern waters, with the most infamous being cyclone Tracy which flattened Darwin on Christmas Day in 1974.

Minews. An interesting comparison, but is there really such a sense of foreboding in Australia?



Oz. Perhaps. There is certainly a feeling that the Europeans, with the possible exception of you Brits who are only pretend Europeans, have completely lost their way and risk inflicting a global downturn on everyone, even China. It’s cold comfort for London but there was a round of applause down this way when the U.K. vetoed the proposed changes to the E.U. treaty and you said you would sail your own race. Not being locked into a common currency, and able to make decisions which suit Britain and not Berlin, puts you in a similar position to Australia and the U.S. where the equity, currency and bond markets can adjust without political interference.



Minews. Interesting to hear that Australia welcome that veto decision though it does sound a little like the pupil applauding the teacher.



Oz. As I’ve said many times, the sooner the U.K. realises what it left behind when it swapped its historic ties to Canada, Australia and the rest of the countries it helped create, for a false friendship with European countries that it dislikes, the better for everyone. It would, however, be appreciated if you stopped playing cricket quite so well.



Minews. Enough philosophy. Time to look at the market, and a call of prices.



Oz. If you insist, though as you might expect it took a bit of digging to extract any good news. Overall, the Australian market as measured by the all ordinaries index fell a relatively modest 1 per cent thanks to the banks holding up quite well. Unlike Europe our banks remain well capitalised though the Reserve Bank, our central bank, last week ordered a stringent stress test using these parameters; a contraction in gross domestic product (recession), a more than doubling of the unemployment rate from 5-to-12 per cent, a 30 per cent decline in the residential property market, and a 40 per cent fall in commercial property values.



Minews. Tough test, indeed. But let’s stick to our part of the market.



Oz. The metals and mining index, as might be expected, fell further than the all ordinaries, shedding 2.8 per cent, and the gold index doubled-up on that with a fall of 5.7 per cent as the gold price contracted sharply, and the Australian dollar managed to stick close to parity with its U.S. cousin.



Base and minor metals were the weakest sector of the mining market thanks to worries about Chinese commodity demand. Uranium stocks, on a pro-rata basis, did best thanks to a modest rise in the price of uranium, while the other sectors produced a handful of rises, in an otherwise dreary week.



Minews. Start with gold because it is the hot news in the metals space and once the Europeans finish selling the family silver, so to speak, it ought to be back in favour.



Oz. Agreed, in fact you could see a bit of that after we had closed on Friday with the price moving back close to the US$1600 an ounce mark. Among gold equities, as would be expected with a 5.7 per cent fall in index, rises were rare, but there were some. Evolution (EVN), which you took a look at mid-week, managed a rise of A4 cents to close at a week’s high A$1.78. Chalice (CHN), which is considering the sale of its Koka project in Eritrea, also added A4 cents to A30 cents. Azumah (AZM) crept A1 cent higher to A44 cents, and Gold Anomaly (GOA), a stock we rarely hear from, excited speculators when it reported the discovery of what could be a big copper/gold porphyry system in Papua New Guinea. That announcement about the Crater Mountain project sent the stock up from A1.8 cents to a high of A3.4 cents on Thursday, before it closed at A2.9 cents.



After the rises, there is a long list of gold stocks in the red. A sample looks like this. Troy (TRY), down A9 cents to A$4.48, a modest loss by what remains one of our market’s better-placed producers. Newcrest (NCM), the sector leader, down a sharp A$1.45 to A$31.60. Resolute (RSG), down A15 cents to A$1.79. Silver Lake (SLR), down A58 cents to A$3.17 after a big capital raising. Kingsgate (KCN), down A81 cents to A$6.09. Kingsrose (KRM), down A17 cents to A$1.35, and Perseus (PRU), down A33 cents to A$2.57.



Minews. Base metals next, as we might as well get the bad news out early in this chat.



Oz. Three copper stocks, one nickel and one zinc stocks rose last week. Ventnor (VRX) led the copper sector with a rise of A10 cents to A84 cents. Talisman (TLM) was second best, adding A2 cents to A39 cents. Horseshoe Metals (HOR) scratched out a gain of half-a-cent to A31 cents. Poseidon (POS) was the sole nickel stock in the black, just, with the addition of half-a-cent to A19.5 cents. Terramin (TZN) was the only zinc stock to gain ground, also up by the smallest margin, half-a-cent to A13.5 cents.



After that the base metals look like this, starting with copper. Sandfire (SFR), down A5 cents to A$6.70. OZ Minerals (OZL), down A33 cents to A$10.55. PanAust (PNA), down A12 cents to A$3.20. Ivanhoe (IVA), down A14 cents to A$1.49, and Rex (RXM), down A7 cents to A$1.26.



Western Areas (WSA) led the way down among the pure nickel stocks, shedding A35 cents to A$5.18. Mincor (MCR), lost A3.5 cents to A70 cents. Panoramic (PAN) fell A16 cents to A$1.22, and Mirabela (MBN) dropped A22 cents to A$1.29. Independence (IGO) was off a sharp A46 cents to A$3.89, but that was largely thanks to a big capital raising to help meet its share of the development costs of the Tropicana gold mine.



Zinc remained a flat as ever, with little hope of a recovery while global industrial production contracts. Kagara (KZL) lost A5 cents to A29 cents after a capital raising which caused more questions to be asked about its future. Perilya (PEM), slipped A2 cents lower to A36 cents. Blackthorn (BTR) held up well, shedding just half-a-cent to A49.5 cents, and Ironbark (IBG) did ever better by holding steady at A22.5 cents.



Minews. Iron ore and coal next, please.



Oz. Surprising strength in both of those sector given the bad news flowing out of Europe, and concern about contagion in Asia. Iron Ore Holdings (IOH) was the pick of the iron ore stocks thanks to a proposed 10 per cent share buy-back which helped the stock add A13 cents to A$1.38. Brockman (BRM) rose A5 cents to A$2.31 after its new Hong Kong masters unveiled a mopping up takeover bid. BC Iron (BCI) and Latin Resources (LRS) added A1 cent each to A$2.45 and A24 cents respectively. Going the other way were Fortescue Metals (FMG), down A12 cents to A$4.60. Atlas (AGO), also down A12 cents to A$2.86, and Mt Gibson (MGX), down A8 cents A$1.17. Cape Lambert (CFE) was an unusual “iron ore” mover, adding A3.5 cents to A47 cents, but largely because of the sale of a gold asset in Greece.



Coal stocks remained in the grip of takeover interest as Whitehaven (WHC), Aston (AZT) and Coalworks (CWK) moved closer to the creation of a new mid-tier sector leader. On the market, the three stocks went in different directions. Whitehaven fell A10 cents to A$5.62. Aston added A4 cents to A$9.80, and Coalworks did best with a rise of A8 cents to A65 cents. Other coal moves included Zyl (ZYL), one of the Aussies in South Africa, which announced a possible takeover deal, jumping A7 cents to A19 cents. Coal of Africa (CZA) added A5 cents to A85 cents. Carabella (CLR) lost A11 cents to A$1.19, and Coalspur (CPL) slipped A2 cents lower to A$1.64.



Minews. Uranium and minor metals to close, which should give you one up, one down.



Oz. It does, to make a neat finish. Uranium stocks did well thanks to both a modest price rise in the metal, and ongoing takeover interest as the fate of Extract (EXT) and its London-listed associate, Kalahari, moves into its final phase. On the market, Extract added A3 cents to A$8.50. Manhattan (MHC) staged an overdue recovery, rising by A4 cents to A22 cents. Havilah (HAV) caught to eye of local speculators with a gain of A10 cents to A60 cents and Uranex (UNX) clawed back half-a-cent from its recent losses to close at A29.5 cents. Paladin (PDN) lost ground with a fall of A10 cents to A$1.52, and Berkeley (BKY) slipped A1.5 cents lower to A41.5 cents.



Very few of the minor metal stocks gained ground, which is to be expected in a risk averse market. The rare earth leaders, Lynas (LYC) and Alkane (ALK) lost A13 cents and A14 cents respectively to A$1.17 and A95 cents. Titanium and zircon stocks eased back. Base (BSE) was down A3.5 cents to A44.5 cents, and Gunson (GUN), down A1 cent to A17 cents. Phosphate stocks were weaker. South Boulder (STB) shed A12 cents to A$1.15, while Minemakers (MAK) lost the minimum, half-a-cent, to 28 cents. Lithium and tin stocks all weakened.



Minews. Thanks Oz.
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December 19, 2011

A Slow Motion Train Crash
Rob Davies
>> www.minesite.com/aus.html (( Free registration ))

Train crashes are, thankfully, rare. Slow motion ones even more so. Yet there is one happening in Europe right now that has the whole world transfixed. It seems as if every other form of business activity is in suspended animation until the European train finally hits the buffers. In true Hollywood style the 25 of the 27 passengers on the train have started squabbling among themselves as to whose fault it is and who will end up being hurt the most. While it adds to the drama it doesn’t solve the problem.

Although most Europeans would reject the idea, market forces will eventually impose a solution on the problem. But the process will probably not be allowed to start until the traditional right of the disenfranchised to riot is exercised. That will be the only signal that the unelected bureaucrats now running Europe will recognise. But don’t expect that to happen until the weather gets warm enough for street level insurrection. The Prague Spring, the Arab Spring all have a common seasonality to them. The European Spring of 2012 will just have to wait its turn.



In the meantime capital markets remains trendless, the only exception perhaps being the slow decline of the euro. Good for Germany, but not nearly enough to help the rest of industrial Europe. A stronger dollar had the predictable effect on metal prices and pushed finally aluminium below the US$2,000 a tonne mark to US$1,890 a tonne. It now joins lead and zinc in this price band as they trade at US$1,990 and US$1,864 a tonne respectively. How long will it be before lead and zinc producers join their peers in aluminium and start reducing capacity?



Nickel too has continued its slow decline and this week fell to US$17,825 a tonne. Not that anyone really cares about tin but its premium to nickel is shrinking rapidly and it now trades at US$18,650 a tonne.



It is really only copper that is sustaining the base metal market with its elevated price of US$7,285 a tonne. As one veteran mining analyst explained over a pizza last week it looks as if this year and next the metal gurus will calculate a substantial shortfall between demand and supply for the red metal.



Precious metals have not escaped the sell-off either, although the dollar correlation here is higher. Even so, anyone who thinks that gold is selling at US$1,591 an ounce because all the economic problems in the US have been solved is a real optimist.



So far bulk commodities have fared surprisingly well and it looks as if Chinese steel production in 2011 is going to be about 750 million tonnes, up from 700 million tonnes last year. That though, has not stopped Rio and Kobe agreeing an 18 per cent price cut to US$235 a tonne in coking coal for the next quarter.



As the slow trading period of Christmas approaches, with associated low volumes, all professional operators will be hoping that the Great European Train Crash will evolve even more slowly over the next few weeks. If, on the other hand, some trader, somewhere, anywhere in the world, sometime in the next few weeks says he wants any currency except euros from a European bank in settlement for the bargain he has just executed in might just finally precipitate the last act of the drachma drama.

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December 25, 2011
"That Was The Week That Was … In Australia"
By Our Man in Oz
>>> www.minesite.com/aus.html


Minews. Good morning Australia, as Christmas is upon us perhaps just a short run down of last week’s market will do the job today.

Oz. That shouldn’t be too difficult because though it was a busy four-and-a-half days on the ASX we basically finished up where we had started with three down days neatly matched by two up days. The short trading on Friday saw most of the key indices add 1 per cent, or more. Gold led the way with a 2.6 per cent rise on Friday alone. However, even after that strong finish the net result was one of modest overall decline.
Minews. Better news from the Eurozone should have helped sentiment down your way.

Oz. It did, but no-one in Australia believes that Europe has fixed its problems of excess debt by creating more debt. It seems from the other side of the world that Europe’s banks and governments are locked in a very unpleasant downward spiral with one side creating debt to lend to the other, without anyone creating the fresh wealth to service the debt.

Minews. That is a subject we could discuss endlessly, but we’re here to talk about prices on the ASX so let’s get on with it.

Oz. Most share-price moves were modest, either way. So, as a Christmas treat for our readers we’ll start this abbreviated report with the handful of stars, some of which a speculator might note for future reference. Biggest move of the week was an ultra-small gold explorer, Rubianna Resources (RRE) which bolted up an eye-catching A8 cents on Friday with sales at A17 cents, and a closing spread of buyers offering A17 cents and sellers asking A22 cents. It sounds good, and appears to have been driven by encouraging drilling results from the company’s Bloodstone project near the old Peak Hill mine in the Murchison district of Western Australia, though trading volumes were incredibly thin. Friday’s 89 per cent rise was accomplished on a handful of trades totalling 58,214 shares worth a grand total of A$7030 which is roughly a round of drinks at one of your posh London clubs.

Minews. Where the drill results worth the excitement?

Oz. Best appears to have been a 4 metre slice at 16.4 grams of gold a tonne, with a 1 metre core at 61.5 grams per tonne. Good enough to put Rubianna in the black book for future reference and a watch on future drilling. Most other gold stocks were mixed, and while the gold index ended down 1 per cent for the week much of that was caused by a handful of bigger miners losing ground. After Rubianna’s solo run the bulk of the stocks to rise did so by a few cents. Perseus (PRU) reported an extra one million ounces of gold at its Edikan project in Ghana which added A8 cents to the stock on Friday, though the full week’s result was a rise of A1 cent to A$2.58. Vector Resources (VEC) announced an expanded resource at its Gwendolyn project in Western Australia, adding A1.2 cents to A7.5 cents. Silver Lake (SLR) recovered some of its recently lost ground with a rise of A10 cents to A$3.27, and Alacer (AQG) regained favour with a rise of A63 cents to A$10.73.

Other gold-stock moves included: Troy (TRY), down A14 cents to A$4.34. Kingsrose (KRM), up A3 cents to A$1.38. Northern Star (NST), down A3 cents to A84 cents. Evolution (EVN), down A18 cents to A$1.60, and Kingsgate (KCN), up A2 cents to A$6.11.

Minews, Iron ore and coal next, please, as the bulk commodities still seem to be attracting interest.

Oz. Takeover activity is driving coal. Iron ore activity seems to be the result of the price holding up better than expected. Gloucester (GCL) was the star in the coal sector last week after announcing a merger with China’s Yanzhou Coal, adding A$1.48 to A8.55. That deal cut into the other proposed merger of Whitehaven (WHC) and Aston (AZT) which both lost ground last week. Whitehaven fell A26 cents to A$5.36 and Aston was A35 cents weaker at A$8.45. Other coal moves included: Coal of Africa (CZA) up A1 cent toA86 cents. Stanmore (SMR), down A1 cent to A74 cents. Bathurst (BTU), up A3 cents to A63.5 cents, and New Hope (NHC), down A20 cents to A$5.64.

South America was the hot address for Australian iron ores stocks last week. Leading the way was South American Ferro Metals (SFZ) which reported a maiden 230 million tonne resource at its Ponto Verde project in Brazil good enough to lift the stock by A6.5 cents to A21 cents. Latin Resources (LRS) was also in favour after our mid-week report on developments at its iron sands project in Peru. It added A4 cents to A28 cents. Closer to home, IronClad Mining (IFE) said it was making progress with government approvals for its Wilcherry Hill mine in South Australia, news which boosted the stock by A10.5 cents to A63 cents. Most other iron ore moves were down, with Mt Gibson (MGX) slipping A2 cents to A$1.15 despite announcing the start of production at its third mine. Atlas (AGO) shed A3 cents to A$2.83. Fortescue (FMG) lost A11 cents to A$4.49 and Iron Road (IRD) fell a sharp A12 cents to A57 cents.

Minews. Base metals next, please.

Oz. Generally weaker, but all moves were minor. Among the copper stocks Rex (RXM) added A4 cents to A$1.38. Hot Chili (HCH) lost A6 cents to A57 cents. PanAust (PNA) rose A4 cents to A$3.24, but Finders (FND) fell A2 cents to A35 cents despite announcing a funding deal on its Wetar copper project in Indonesia. Other copper moves included: Sandfire (SFR) up A1 cent to A$6.71. OZ Minerals (OZL), down A16 cents to A$10.39, and Talisman (TLM) down a sharp A7 cents to A32 cents.

Nickel stocks barely moved. Mincor (MCR) lost A1 cent to A69 cents. Panoramic (PAN) fell by the same amount, A1 cent, to A$1.21. Western Areas (WSA), added A11 cents to A$5.29, and Independence (IGO) slipped A9 cents lower to A$3.80.

Zinc was a similar story, small moves either way, with KBL Mining (KBL) doing best after reporting an expanded resource at its Sorby Hills project, news which lift the stock by A1.5 cents to A24.5 cents. Blackthorn (BTR) also attracted some support, rising by A1.5 cents to A51 cents. Perilya (PEM) fell A3.5 cents to A33.5 cents. Kagara (KZL) lost another A1 cent to close at A28 cents, and Ironbark (IBG) shed A3 cents to A19.5 cents.

Minews. Uranium and minor metals to close, please.

Oz. Very little news from either sector. Paladin (PDN) led the way down among the uranium stocks with a fall of A8 cents to A$1.40. Uranex (UNX) went to other way with a rise of A2.5 cents to A32 cents. Other moves included: Extract (EXT), down A1 cent to A$8.49. Manhattan (MHC) also down A1 cent to A25 cents, and Berkeley (BKY), down A2 cents to A39 cents.

Rare earth stocks eased. Alkane (ALK) slipped A2 cents lower to A93.5 cents, and Lynas (LYC) was A1 cent weaker at A$1.16. Venture (VMS) led the way down among the tin stocks, shedding A3.5 cents to A27.5 cents. Wolf (WLF) attracted support for its Hemerdon tungsten project, adding A4 cents to A28 cents. Atlantic (ATI) gained A10 cents to A$1.20 as it nears completion with the redevelopment of the Windimurra vanadium mine, and South Boulder (STB) was heavily sold off as it seeks to raise fresh capital for the next phase of studies into its Colluli potash project in sanction-hit Eritrea, losing A26 cents to A89 cents.

Minews. Thanks Oz, and Merry Christmas.
*********************
 
One thing is for sure. Commodities in the new year will continue to offer investors the opportunities they long for.

Myra Saefong (MarketWatch - USA; 30 DEC 2011)
 

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