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July 13, 2012
That Was The Week That Was … In Canada
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed over the past week.

CC. Worries about a faltering global economy put sell pressure on commodities, and that in turn impacted the resource-rich Canadian markets. And there was plenty of other negativity about, to go alongside the weak macroeconomic picture. Certain Canadian-listed miners are also grappling with political interference, production issues and angry shareholders. In addition, regulators are raising questions about a recently reported 10.6 million ounce gold resource which appears to have technical shortfalls. Once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had dropped 2.01 per cent, while the TSX Gold Index had plunged 4.92 per cent.
...
Source >> www.minesite.com
 
July 14, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like it was another tough week for your market but with a brighter ending.

Oz. That’s stretching it a bit. The week was down all the way with the tiniest of upticks on Friday. China’s softer-than-expected landing, so far, was the reason for the Friday recovery, though the recovery here was much more modest than on other international markets. On the ASX, all of the major indices crept a few points higher on Friday, but not enough to offset the solid falls of the first four days of the week.
While the London and New York markets were up by around one per cent on Friday, the ASX rose by 0.3 per cent. Among the mining companies the reaction to China’s surprisingly strong June quarter growth rate was even more muted. The metals and mining index added just 1.5 points on Friday, which is too small to even measure as a percentage rise, and meaning it still ended the week down a thumping seven per cent, beaten only by the gold index which lost 10 per cent.

Minews. With so much of the economy exposed to Chinese demand that modest reaction must have been a surprise.

Oz. It was, but the Australian market is being held back by the uniquely Australian factors which we’ve discussed in the past. The heavier tax regime that’s being imposed on miners, and on the broader economy through the new carbon tax, is weighing heavily on investors who seem to have decided that not much is going to happen while a deeply unpopular government serves out its term.

Last week, the big news down this way was a cat fight between the ruling Labor Party and the Green Party which is keeping it in power through a loose alliance. Some observers hope the name-calling is a precursor to an early election, but it’s more likely that we’ll limp along for another 12 months with a deeply-divided minority government trying to run the country through a hung Parliament.

Minews. A process which seems to have sidelined investors. Time for prices now, with any good news first, and then a call of the card.

Oz. Well, the good news will be short and not very sweet because there is virtually none to report. Of the companies I track on a weekly basis, and that’s about 100 of the smaller to medium explorers and miners, six managed to gain ground last week, which must be the worst result since the global financial crisis of 2008.

As far as can been seen, three iron ore companies managed small rises, along with two gold companies and one copper explorer. Iron Road (IRD) added A4 cents to A40.5 cents in thin trading, on no fresh news from its South Australian projects. Mindax (MDX), which has a mixed bag of uranium and iron ore assets, continued its curious upward run, adding A2 cents to A12.5 cents, meaning the shares have now nearly doubled over the past month. And Cape Lambert (CFE), another favourite of local speculators, crept up by half-a-cent to A12.5 cents.

The copper company in the black was Hot Chili, which also rose by the smallest possible amount, half-a-cent, to A43 cents. In the gold space, CGA (CGX) rose A4 cents to A$1.88, after reporting record gold production of 50,813 ounces for the June quarter, while Burey Gold (BYR) rose by half-a-cent to A4 cents in heavy trading, as interest continues to grow in its Mansounia project in Guinea.
...

Source >> www.minesite.com
*****
 
July 2012
Kevin Rudd: The west isn’t ready for the rise of China
Distracted by economic crisis, social unrest and slipping influence, the west is completely unprepared for China’s imminent global dominance. Australia’s ex-prime minister says we must act to build new bridges.

www.newstatesman.com
 
July 16, 2012

"Rising Costs And Falling Demand May Put Mining Company Margins Under Increasing Pressure In The Months And Years Ahead"
Rob Davies

Over the last decade miners have enjoyed fat margins as a result of the confluence of two factors. First, because there’s been no spare capacity in the industry metal prices have moved to, and stayed at, the full marginal cost of production.

And more metal has only been available if prices have gone high enough to cover production costs and development and exploration costs.

Second, production costs have been contained by an astonishing round of consolidation that involved the disappearance of long standing companies like Inco, Falconbridge, Western Mining, Mt Isa, Phelps Dodge, Asarco, Ashanti and many others into the maw of a handful of truly global miners.

The cost savings generated from this rationalisation more than compensated for higher input costs for fuel, tyres and labour.

That game is over and more fundamental cost issues are beginning to surface. A straightforward enough example involves the cost of electricity in Zambia. Currently priced at six or seven cents per kW hour, Zambia’s existing 1,585 MW of installed capacity now falls short of demand by 54 MW. To bridge that gap and supply the additional power that forecasters say well be needed, implies a doubling in the price of electricity to 10 to 12 cents a kW hour by 2015, according to Bloomberg.

More worrying even than cost inflation is the outlook for demand. In the last decade demand grew faster than supply, and that has helped keep prices up at the full marginal cost of production. Now it seems global economic activity is set for a prolonged period of slower growth.

Bill Gross is boss of Pimco, the world’s largest bond fund manager. He knows about economics from the sharp end and he reckons that the US, still the world’s largest economy, is set for a decade when it will, on average, expand by 1.5 per cent a year.

One reason for that rate of growth is the ballooning government obligations. Gross estimates that total US debt stands at 800 per cent of GDP when all its future obligations are included. Economic history tells us growth suffers when debt exceeds 100 per cent of GDP.

The US is a developed economy so it doesn’t need much metal to generate wealth. It is more about services than building stuff so a 1.5 per cent rise in GDP will probably translate into just 0.75 per cent additional demand for metal. That modest expansion should be easy for the world mining industry to supply.

The optimists of course point to China where not only is growth still strong, but where the economy is highly metal intensive. That’s why it is the largest consumer of metals despite being the second largest economy. According to official data released on Friday China is still growing at 7.5 per cent a year.

This might be less than the eight or nine per cent recorded last year or the 10 per cent reached in one quarter in 2010 but it is still an extremely healthy figure.

Yes, but. Chinese data is best described as soft. What concerns some analysts is that this expansion has been achieved with no measurable increase in electricity generation. It seems unfeasible to get a 9.5 per cent increase in industrial production, which accounts for 40 per cent of the economy, without any more power being needed. Even with energy saving programmes in place. Maybe Chinese growth is not that robust.

If demand does slow, causing metal prices drift back to match cash operating costs at the same time as those costs are rising, margins for the miners are going to come under pressure. Instead of widening, the two sides of the pincers will be starting to close.

Source >> www.minesite.com
*****
 
Fertilizers strong at NYSE (July 17)

Fertilizer names are seeing strong gains after Mosaic Co. (MOS 57.56, +2.19) reported solid second quarter results. Today’s advance has the stock trading at its best level since the end of March as bears look to defend resistance near the $58.00 level. Competitors Potash Corp. (POT 45.21, +1.13) and Agrium (AGU 92.59, +1.04) are piggybacking gains with respective advances of 2.6% and 1.1%.

[Incitec Pivot, IPL.AX, on July 17: +0.00%]
 
drillinto said:
Fertilizers strong at NYSE (July 17)

Fertilizer names are seeing strong gains after Mosaic Co. (MOS 57.56, +2.19) reported solid second quarter results. Today’s advance has the stock trading at its best level since the end of March as bears look to defend resistance near the $58.00 level. Competitors Potash Corp. (POT 45.21, +1.13) and Agrium (AGU 92.59, +1.04) are piggybacking gains with respective advances of 2.6% and 1.1%.

[Incitec Pivot, IPL.AX, on July 17: +0.00%]
Click to expand...

Incitec Pivot, IPL.AX, advanced +2.867%(July 18)
 
July 21, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. Your market seems to have performed well last week.

Oz. It did, as China’s release of surprisingly strong economic growth data boosted confidence. But having said that, the overall mood remained deeply cautious. All of the key indices rose last week, but so did stockpiles of Australia’s major mineral exports, iron ore and coal. The all ordinaries rose by 2.7 per cent. The gold index added 3.2 per cent, while the metals and mining index crept up by 1.8 per cent, the weaker rise perhaps reflecting the stockpile issue, and the lower iron ore price.

The best performing sector down this way was oil and gas, a result of the rising oil price and never ending Middle East tensions. You can measure the progress of oil in a number of ways.

Obviously there are the higher prices of oil producers, but for followers of mining companies, it’s also worth considering the gap that opened up between Rio Tinto (RIO), which does not have an oil division, and BHP Billiton (BHP), which does. Rio Tinto fell by A69 cents last week to A$53.39. BHP rose by A88 cents to A$31.36.

The falling price of iron ore, which accounts for close to 75 per cent of Rio Tinto’s profit, dragged its share price down, just as it did a number of other iron ore stocks. It was also a possible contributor to a surprise “man overboard” event. Russell Clark, the hard-driving chief executive of Grange Resources (GRR), made a sudden exit on Friday, just as Grange attempts to put the finishing touches on a big capital and debt package for its Southdown magnetite processing venture.
...

Source >> www.minesite.com
 
July 23, 2012
Prospects For Global Growth Drive Up Metals Prices, In Spite Of The Gloomy Prognostications Of Western Commentators
Rob Davies

If the mass media were to be believed the world is an economic train smash that is about to get a lot worse.

So it was pleasant to read the latest economic forecast from the IMF. First off, this august body stated that world growth in the dim and distant past that was the first quarter of this year was 3.6 per cent.

As that was 25 basis points more than it forecast there was rejoicing all round.

Except that the IMF then said it had edged down its forecasts for 2012 and 2013 to 3.5 per cent and 3.9 per cent respectively. Even so, although these figures are not fantastic, they are not horrific either.

And this expression of confidence was enough to push the LME base metal index up 2.7 per cent to 3275.1. That is good going in anyone’s language, especially with equity markets going nowhere and bond prices for any country without a Latin base to its language in the stratosphere.

It has become commonplace now to write off commodities. Surely, many analysts and fund managers say, it must be right to short them if the prospects are so weak?

Well, only if you can get the metal to sell. True, inventories of zinc in LME warehouses did rise above one million tonnes last week. In a small market that is quite a lot of surplus metal.

But even so the zinc price climbed from US$1,832 to US$1,882 a tonne over the week, so most people seem fairly relaxed about it.

Meanwhile, LME inventories of copper rose 0.5 per cent to 252,550 tonnes. So, even adding in the disclosed 160,973 tonnes in the Shanghai warehouse there is really very little excess copper visible to the trader’s eye.

And even if there are massive undisclosed stocks of copper in China the chances of getting hold of it to short look pretty remote. That was why copper prices gained 3.5 per cent to $7,764 a tonne last week.

Because if the IMF is right, and China grows at eight per cent this year and 8.5 per cent next year, that copper will be needed by the Middle Kingdom to help construct its infrastructure.

The overwhelming tone of gloom in the press is undoubtedly because the developed world, where most commentators reside, is only forecast to grow at 1.4 per cent and 1.9 per cent this year and next.

These data from the IMF remind us that the metal markets are still an emerging market story, from the demand side even more than the supply side.

And production figures last week from the two big miners reminded the market just how strong that demand remains. BHP Billiton has delivered its twelfth consecutive year of increased iron ore production. The previous day Rio Tinto had set the scene with its production data which recorded increases across the board.

This is rather at odds with the comment in the Financial Times that demand is sagging in China. Most journalists still seem unable to distinguish between lower rates of growth and markets that are actually shrinking.

Despite the commentators’ wish for the bad news of a train smash, the IMF and the miners make it clear that the world is still growing. But when did good news ever sell a newspaper?

Source >> www.minesite.com
 

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