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That Was The Week That Was ... In Australia
23 Mar 2014

by Our Man in Oz


Minews. Good morning Australia. Your market seems to have taken one step back and then another forward last week to end up where it started.

Oz. That would be true if not for the gold sector which took one step back and then another to end up down a thumping 9.5 per cent.

Minews. Ouch! Obviously the drop in the gold price towards the end of the week was a shock to investors.

Oz. It certainly was, but so too was the late fall in the nickel price which had been rising strongly until Thursday. Interestingly, the modest recovery in the nickel price on Friday helped most stocks in that sector gain a little ground over the week.

Minews. Let’s wrap up the big picture discussion and move along to prices, please.

Oz. Before doing that - and we will start the market review with a look at any outstanding price moves - it’s worth noting that the overall change in the Australian market was negligible.

The all ordinaries actually added one-tenth of a percentage point, which is about as flat as you can get, but that was due to a rise of almost one per cent on Friday, while the metals and mining index slipped 1.1 per cent lower over the course of the week.

Now for the news-making moves which included a continued burst of buying for stocks exposed to graphite. Top of that list was the Swedish-focussed explorer, Talga Resources (TLG). It shot up by A5.3 cents (58 per cent) to A14.5 cents in heavy trade all week but without reporting anything new apart from a small capital raising of A$1.7 million.

Other stocks to participate in the graphite rally included Uranex (UNX), a company perhaps best known as a uranium explorer but which also has graphite interests. It added A4.5 cents (45 per cent) to A15 cents. Archer (AXE) rose by A2.5 cents (16 per cent) to A18 cents. Valence (VXL) gained A5.5 cents (15 per cent) to A42 cents. Bora Bora (BBR), the Sri Lankan-focussed graphite stock, added A7 cents (27 per cent) to A33 cents, and Syrah (SYR), the sector leader also rose, but modestly, with a gain of A6 cents to A$3.61.

Minews. That is interesting to see a graphite revival. Let’s carry on with any more exceptional moves before calling what should be a fairly dull card.
...

Source >>> www.minesite.com
 
Russian oil... Gunvor and Timchenko

Gennady Timchenko denies Putin links made him one of Russia's top oligarchs.
US sanctions target friend of Putin who became one of Russia's richest men through oil firm Gunvor and Sochi construction deals.

Alec Luhn, in Moscow

Source:theguardian.com
 
Will The Mining Shorts Get Caught Out On China?
24 Mar 2014

>>> by Rob Davies <<<

Metal and mining markets are suffering a double whammy on Chinese issues. A lower rate of growth has already resulted in a reduction in the increase of commodity demand from China.

On top of that, perceptions that the economic situation in China will worsen has encouraged some market participants to use metal markets and mining shares as vehicles to take even bigger negative positions.

Normally traders who think an economy will have a worse outcome than the consensus opinion can hope to monetise that by shorting stocks that are exposed to it.

In the case of China that is difficult because the domestic equity market is virtually closed to foreigners.

There is some limited connection through the Hong Kong exchange. And last week a record US$1.3 billion in ETFs flowed out of there. That helped depress some equities to single digit multiples of earnings.

Others though have extended their activities to shorting mining stocks as proxies for the Chinese economy, making it one of the worst performing sectors this year.

There are dangers in this approach though. For a start the large mining companies are still exceedingly profitable and throwing off huge amounts of cash which they are paying out as dividends.

The other worry for the shorts is that the supply side of the equation is not so clear cut. Nickel has risen 15 per cent this year and has now experienced its seventh week of rising prices taking it to US$15,935 a tonne.

The main reason for this is the Indonesian ban on exports of unprocessed raw material. That has resulted in Indonesian exports of nickel ore to China falling from 6.1 million tonnes in January to 3.1 million tonnes in February with expectations that it will drop to zero in March.

As a consequence Chinese nickel pig iron production is down 26 per cent this year to 380,000 tonnes.

The negative view on the market is also at risk from actions the authorities might take.

Last week the People’s Bank of China widened the trading band for the renminbi to two per cent above and below the daily fixing rate.

Encouraged by this the currency fell to a 13 month low against the dollar of 6.22 renminbi.

On its own that move is probably not enough to assuage all the worries, but it will certainly help to boost exports.

And it does demonstrate that the authorities are prepared to do what it takes to maintain economic growth.

Maybe the real sell signal for China is when it finally allows foreigners to buy domestic equities.

Elsewhere in the developed world economic news continues to be mildly positive for metals.

Most significant was the statement from Janet Yellen, Chairwomen of the US Federal Reserve, that interest rates could rise to one per cent by the end of 2015.

While that is still a long way off anything that could be regarded as normal it does at least mark a step in the right direction.

Miners just have to hope that the West fixes its economy before the ones in the East fall over.

Source >>> www.minesite.com
 
New Metals-Backed ETFs Help Push Palladium Prices to $800
March 21, 2014

>>> by Tom Lydon


With two new physically backed palladium exchange traded funds on the way, palladium prices spiked to $800 Friday as traders anticipate increased demand for the metal on top of supply concerns out of South Africa and Russia, the two largest producers.
...

Source >>> http://www.etftrends.com/2014/03/new-metals-backed-etfs-help-push-palladium-prices-to-800/
 
Energy Department gives conditional approval for Oregon coast liquefied natural gas terminal

>>> March 24, 2014

>>> By Gosia Wozniacka

...

In recent days, House Speaker John Boehner and other congressional Republicans have urged the Obama administration to speed up natural gas exports and send more liquefied natural gas to Eastern Europe and Ukraine in light of its conflict with Russia over Crimea. Ukraine relies heavily on Russian natural gas shipments.

Boehner has called on President Barack Obama to "do everything possible to use American energy to reduce the dependency on Russia for our friends in Europe and around the globe."
...

http://www.usnews.com/news/business...y-department-oks-lng-terminal-on-oregon-coast
 
Mines & Money Hong Kong: Gold Veterans Argue That The Dollar's Days As The Currency Reserve Of Choice Are Numbered

>>> 27 Mar 2014

>>> by Axel Blackrod <<<


The Mines & Money conference at the waterfront convention centre in Wan Chai in Hong Kong attracted 2,500 delegates with a fair split between the Chinese/Asians with the money, and westerners with the mines to finance.

There were more Australians than Canadians in the latter category.

It all meant the one-on-one meeting area and the bars of the Hyatt hummed as representatives of each category went from one meeting to the next.

There is no doubt that despite brief courtships arranged marriages will take place.

There was little evidence here that China was going to experience a serious slow down. And neighbour Mongolia, which was heavily represented, was making a major pitch for new mining investment to serve Chinese, Russian and Korean demand.

But, perhaps surprisingly, the first issue that came to the forefront of audience discussions was gold.

The keynote speaker on Day One was noted financial author and pundit Jim Rickards. He unsettled the massed ranks with his geopolitical view that Russia and China were working together to replace the US dollar as a reserve currency and bring the era of the petrodollar to an end.

The President Obama legacy will be leaving a nation with astronomic debt levels created by a Federal reserve that has made up policy on the run and not been in control.

In this context, Rickards considers that gold will have key role to help restore some confidence before Chinese and Russia sales of US bonds take the dollar to record lows.

Jim was followed by the famous gold veteran Jim Sinclair, chairman of the Singapore Gold Exchange. Jim Sinclair went even further. Russia intends to sell oils and gas in other currencies as an economic weapon and with Chinese support will challenge the supremacy that the dollar has enjoyed since the end of the Second World War.

The only certain store of value is gold, Sinclair argued, and that gold has to be physical gold. Paper gold will have no value other than cash. Sinclair sees a future where banks will collapse and customer deposits will be assets of the collapsed bank not of the individual.

A catalyst will be when COMEX cannot settle in gold but only in cash as then its role will be over.Fortunately the messiah then arrived before lunch turned into a wake.

Fresh from great success in creating value from the deserts of Mongolia, Robert Friedland confirmed that Ivanhoe Mines is creating the world's largest new platinum mine in South Africa to make Asia a cleaner place.

At the same time Ivanhoe will build the world's largest new zinc mine in the Democratic Republic of Congo because the world is short of zinc. No gloom or recession here. The sun will rise tomorrow and it will be business as usual for the world's leading mining entrepreneur.

In the afternoon the ebullient Frank Holmes looked to accentuate the positives by stressing the ongoing benefits from technological innovation and Asia's drive for urbanisation.

The Bible calls us to go forth and multiply: we should not be gloomy while babies consume over a million tons of commodities each before reaching adulthood. If we take a positive view we will deliver all these goods and we will see that the mining stocks which are oversold today will be the leaders again tomorrow, albeit there will need to be a new generation of business leaders to replace the accountants and regulators who are holding back progress today.

Then just as investors were recovering poise, Mines and Money veteran Rod Whyte chaired a gold panel of many talents. On it, Jim Sinclair and Egon Von Greyerz (Gold Switzerland) began to duet that gold was the only thing of assured value and David Tice, the US fund manager made it a trio with Chris Powell excoriating the central banks for continuing manipulation.

Sinclair sees gold at US$2,000 per ounce this year, but the surprising thing is that the consensus of this veterans panel was that the dollar will inevitably be replaced by a new reserve currency which will be trade-related (including renminbi and Euro) and be anchored by gold.

The new order will require gold to be rebased and gold will in due course be priced at many thousands of dollars. So gold will be restored to its rightful role and the world will get back on its axis.

The welcome drinks provided by ANZ Bank was much needed as groups of Chinese engaged each veteran gold panellist with their list of questions. It seems that the sun will continue to rise in the east and set in the west while the physical gold and economic power transfer from the West to the East each day.

Source: www.minesite.com
 
That Was The Week That Was ... In Australia
29 Mar 2014

>>> by Our Man in Oz <<<


Minews. Good morning Australia. Your market seems to have held up quite well last week despite the big hit taken by gold stocks.

Oz. It was a tough week for everyone in the gold market, especially some of the louder speakers at the annual Mines and Money conference in Hong Kong who resorted to personal abuse of Janet Yellen, the new head of the U.S. central bank.

Michael Belkin, a man who is always good for a headline, went as far as to call Yellen a “goofball” for her policies, which he reckons will eventually lead to a boom in the gold price.

Unfortunately for Michael and the rest of the gold bugs on parade in Hong Kong the gold price did exactly the opposite of what they’re been predicting for more than two years and fell sharply, taking share prices with it, and knocking 8.3 per cent off the Australian stock exchange gold index.

Minews. You sound as if you’re tiring of hearing from the gold crusaders?

Oz. You could say that. They’re entitled to their opinion but when their argument descends into conspiracy theories and personal abuse they do become rather boring.

The simple fact with gold, which the bugs refuse to acknowledge, is that last week there were more sellers of the metal than buyers. Why that was so is anybody’s guess, but to rant and rave about the market being illogical is a pointless exercise because the market does what the market wants to do.

Minews. I think we get the point about gold. Presumably the rest of the Hong Kong conference was more positive.

Oz. It was, and more importantly it was more positive than Mining Indaba in Cape Town held about six weeks ago, and more positive than the London edition of Mines and Money held late last year, which leads to a few interesting conclusions. Firstly, that (a) we have hit the bottom of the down cycle, and (b) we might have started an upward swing.

Minews. Let’s not get carried away, you are talking about big changes that always take longer than most of us imagine.

Oz. True, but last week provided an interesting glimpse into the mood of investors with the graphite sector racing away without anyone seeming to notice.

Minews. We’ll get to graphite soon, but first let’s finish with your market.

Oz. Overall, the Australian market was flat, as it has been for most of March. The all ordinaries index added 0.4 per cent, the metals and mining index rose by 1.2 per cent, and gold fell by the 8.3 per cent mentioned earlier.

Graphite stocks were the pick of the market with some impressive rises. The Sri Lankan explorer, Bora Bora (BBR) effectively doubled, with a rise of A31 cents (up 94 per cent) to A66 cents after announcing a fund-raising placement to professional investors at A28 cents.

Kibaran (KNL) was another graphite stock to move sharply, adding A6.5 cents (43 per cent) to A21.5 cents.

Other graphite stocks to respond to the revitalised interest in the commodity included: Talga (TLG), up A5 cents (35 per cent) to A19.5 cents after a strong showing in Hong Kong, Lincoln (LML), up A2.5 cents (36 per cent) to A7.5 cents, Valence (VXL), up A10 cents (24 per cent) to A52 cents, Syrah (SYR), up A24 cents (6.6 per cent) to A$3.85, and Archer (AXE), up A1 cent (5.5 per cent) to A19 cents.

Minews. Looks like a return of interesting times for graphite investors.
...

Source : www.minesite.com
 
Mines & Money Hong Kong: Financiers With Deep Pockets Are Ready To Spend
28 Mar 2014

>>> by Axel Blackrod <<<


The essential question at Mines and money was: would the Mines attract the project finance (money) to go into production?

Many worthy exploration companies need to know the answer before nervous investors lose hope as retail investors and banks to sit on the fence watching share prices go down to the floor.

Fortunately there were a lot of fund managers and banker ready to address that very question.

Rob Brierley of Paterson Securities set the ball rolling by drawing attention to the low level of retail investor confidence. There were only nine IPOs on the Australian stock exchange for mining companies last year, and merger activity is now increasing as the weak companies with good projects are not getting financed.

Give us the mandate he said and we will get the money.

Bett Koth of Denham capital then led a panel of private equity investors who went a step further. This panel agreed that there was US$10 billion to US$15 billion available now for the right project.

Bert Koth implied that Denham is currently evaluating investment opportunities and that several billion more could readily be found if needed, and companies did not need to be listed on stock exchanges to attract finance.

A French investment banker, Didier Lamarche then brightened up proceedings by saying that the real money available exceeded US$100 billion, as when momentum builds as the mining recovery starts, generalist investors will be boarding the moving bus.

Ah the relief, as help was now near at hand.

The Mongolian deputy mines minister then took the stand and assured the audience that a new and rational Mongolian mining code is imminent and is designed to attract and retain foreign investment. He also said that US$57 billion was needed to provide the infrastructure needed for the next generation of mines.

Then the representative of Greenland, with a tiny population of 60,000 persons, informed the conference that Greenland has four world class projects needing US$1 billion each to develop plus infrastructure.

Clearly new investment opportunities appear when money is available. The bell then rang as the dynamic David Harquail of the US$ 7 billion Franco Nevada royalty company came onto the stage like a bull not a bear.

This is not the time to be sitting on your hands you bankers and private equity investors. What are you doing? You should be investing now!

In the past six months Franco has invested US$250 million in five companies and Franco has over a US$1 billion in cash to invest in mining and shale gas projects. You should not waste time waiting for the bottom and allowing hedge fund investors get rich by shorting mining stocks that announce the need for finance, David continued. Investing in good projects would guarantee performance and financiers should stay with the project and not be butterflies flitting between projects that are all in need.

Taking his cue from Harquail who was offering royalty finance, David Awram of Sandstorm Gold announced that he was ready to offer US$100 million in streaming finance to help get multi-commodity projects under way.

This is the joy of mines and money! It’s not a giant conference like PDAC with 30,000 attendees.

It is a forum where the miners meet the money face to face. The fact is that the royalty companies and the private equity guys have to spend the money. It is their job to invest and not to sit on the fence.

Next year in Hong Kong some worthy companies will be near to production from finance committed this week. Did you want a country forecast too? Next year Mongolia will not be a no go zone anymore, but an investment destination of choice!

Source >>> www.minesite.com
 
>>> Base Metals Strengthen But Bears Continue To Watch Chinese Data Intently

>>> 31 Mar 2014

Markets always want something to worry about.

Indeed, the situation markets like the most is when there is something obvious that that they can focus attention on and fret about how much worse things can get.

Usually, they find it difficult to worry about two things at once - that just makes life too complicated.

Right now metal markets are glued to every morsel of data from China, looking for evidence to prove the bear case.

In fact last week Chinese manufacturing data did come in weaker than expected.

But that did not stop base metal prices, as measured by the LME index, gaining 1.8 per cent over the week. That move was reflected in mining equities as well with a 4.9 per cent gain in the FTSE350 Mining Index.

Even that gain still leaves them yielding 3.6 per cent which is a fairly good measure of how pessimistic investors are about the sector.

This is not news to the mining companies. They know some metals are having a tough time.

Aluminium is the metal most under pressure right now and market leader Alcoa is doing something about it.

It has closed two smelters in Brazil taking out 147,000 tonnes of capacity. This brings its closed capacity to 800,000 tonnes, equivalent to 21 per cent of its total.

Rather than agonising over what might happen in the future miners are dealing with the problems they face today by cutting excess capacity.

That corrects the mismatch, over time, and brings the market back into balance.

The zinc market has given us a classic demonstration of this in recent years. When inventories surged to over one million tonnes, prices tumbled to almost $1,000 a tonne.

Now that inventories have shrunk to 777,575 tonnes the price is a much more robust $1,980 a tonne.

Right now aluminium is the metal suffering the glut, with LME inventories alone standing at 5,387,100 tonnes. Innocent observers might assume that all this metal is readily available for use almost instantly.

Alas, that is not the case and some operators are playing games and making it very difficult and time consuming to access the metal.

According to Bloomberg it takes 19.2 months to get aluminium out of the LME registered warehouse at Vlissingen in Holland and 20.7 months from the one in Detroit.

Large trading houses are using this “shortage” of metal to their advantage in trading strategies, much to the annoyance of some of the producers, notably Rusal.

In the overall scheme of things this little game will play itself out and a more “normal” market will be restored in aluminium, whatever that might be.

What it does powerfully demonstrate though is how the other, diversified, mining companies are now far less exposed to the vagaries of one metal.

Alcoa produces aluminium and it lives and dies with the fortunes of that metal.

But its major competitors produce a variety of commodities and have far more flexibility to mothball facilities when prices are too low in a way that a mono-metal company like Alcoa cannot do.

It is hard to imagine it shutting down all its plants if prices went low enough. Yet it is possible to imagine that the others could completely stop production of one commodity if circumstances dictated.

As has been said about investing generally, diversification is the only free lunch in town. It applies to mining as well.


Source >>> www.minesite.com
 
"Big Mick" is hungry

>>> by Eric Reguly

One of the most aggressive deal makers in the mining industry has tapped the private equity markets to bankroll the launch of a new company in a bet that the resources industry is set to be revived.

Mick Davis, the former chief executive officer of Xstrata, and his team of Xstrata refugees on Monday announced that they had raised $2.5-billion (U.S.) for X2 Resources from five investors, each of which has contributed $500-million. The same five have have agreed to contribute another $1.25-billion in conditional equity funding, raising the potential total to $3.75-billion.
...

Source >> http://www.theglobeandmail.com/repo...mining-deals-maybe-in-canada/article17735097/
 
>>> Cofco Buys Noble Agri Unit Stake as China Seeks Food Supply

>>> by Michelle Yun and Yuriy Humber

Apr 2, 2014

Cofco Corp., China’s largest grain trader, agreed to pay $1.5 billion upfront for just over half of Noble Group Ltd. (NOBL)’s agricultural trading unit to broaden its access to food supplies.

The purchase highlights China’s push to secure more food overseas as it juggles insufficient farming resources at home against a dependence on imports. It’s the second such deal for Cofco this year after it agreed to buy a majority stake in Dutch grain trader Nidera BV in February.

...

Source >>> Bloomberg
 
Is The Great Mining Unbundling About To Begin?
6 Apr 2014

>>> by Rob Davies <<<

For a decade or so the mining industry engaged in an orgy of consolidation.

Large companies took over medium sized companies and start-ups used the left-overs to expand and become a second tier.

Now there is speculation that the current period of commodity price weakness is about to presage a great unbundling as the behemoths disgorge unwanted assets.

This has caused the mining sector to rally 3.8 per cent over the week and gain nearly five per cent for the year to date in a period when most equity markets have struggled to make any progress at all.

True, there were other factors helping the sector on its way this week.

Aluminium gained 5.9 per cent, the most since November 2012.

As it now takes 24 months to get the light metal out of the Vlissingen warehouse in Holland consumers are beginning to anticipate the forecast 1.1 million deficit for the metal for 2014 and for 2015.

Further proof of increased demand came from the news that cancelled warrants, requests to take metal out, now stand at 2.86 million tonnes, up 12 per cent in just one week.

Nickel was in the news too as it reached a one year high and traded up to US$16,510 a tonne.

Despite these elements of good news the sector still suffers from worries about the prospects for the Chinese economy and its demand for steel in particular. So some research from Société Générale on this very topic last week was timely.

In a persuasive 32 page note it rebuts the three myths that depress the sector: that ore prices will fall, steel demand has peaked, and debt is too high.

Its analysis suggests that even by 2020 Chinese iron ore production at 50 per cent of current levels will still be required to balance the global market. Since this output has a cost of over US$100 a tonne it argues that this marginal capacity will act as the major factor in determining prices.

It forecasts iron ore prices to average US$105 a tonne in 2016.

In terms of steel demand SocGen remains optimistic that it is likely to rise between 35 per cent and 40 per cent before peaking. That analysis is based on the experiences of countries like South Korea, Japan and the US.

The simple argument is that China currently consumes 534 kg per head whereas South Korean consumption peaked at 1,274 kg.

Finally, SocGen is still relaxed about debt in China. While it accepts that commodity producing sectors are heavily indebted it argues that commodity consuming ones, such as government, real estate and car makers, are still less leveraged.

To back this up it states that the net debt to EBITDA ratio for Shanghai Composite listed companies, ex-financials, has increased from 1.1 in 2007 to 2.4 in 2012.

On the other hand Chinese government debt to GDP is only 55 per cent compared to 88 per cent in the US and 245% in Japan. Not that it thinks those are good numbers, but it does suggest the problem is not severe.

If the overall dynamics of the industry remain sound, as this research suggests, it is a constructive environment for restructuring the industry.

It might sound like a make-work scheme to some. Consolidating the industry in one decade then splitting apart in the next. But that is the unique skill set that capitalist investment bankers have.

How quaint of the Chinese to just carry on making things that people want.

Source >>>>> www.minesite.com
 
That Was The Week That Was ... In Australia
6 Apr 2014

>>>>> by Our Man in Oz <<<<<


Minews. Good morning Australia. Your market seems to have been exceptionally flat last week.

Oz. It was, but at least most stocks were in the black, just. Next week should be more interesting with that nice kick in the gold price after we closed on Friday and some investors started swapping their boom-time tech stocks for gold and other easier-to-understand commodities.

Minews. The feeling among Australian investors is that we might have started a rotation out of tech and bio-tech stocks back into resources?

Oz. You would have to say it looks like that. Global economic growth seems to be accelerating and even if China slows somewhat there are pleasing signs that Europe is on the mend and that means increased consumption of metals.

Another tell-tale is the timing of the BHP Billiton break-up, with a spin-off of unwanted nickel, manganese and aluminium assets timed to coincide with increased investor appetite for raw materials. Even if the spin-off is aborted because of last minute private equity offers for some of the assets the effect on sentiment will be the same.
...
Source >> www.minesite.com
 
Australia, Japan agree on free trade deal

>>>>> By ELAINE KURTENBACH <<<<<

Apr. 08, 2014

Japan and Australia have agreed on a free trade deal that both sides say will yield windfalls for their economies.

Australian Prime Minister Tony Abbott and his Japanese counterpart, Shinzo Abe, announced the pact, Japan’s first with a major agricultural economy, at a news conference Monday.

The deal calls for Japan to gradually phase out its nearly 40% tariffs on Australian exports of beef. In turn, Australia is to end its tariffs on Japanese-made vehicles, household appliances and electronics.

“I hope that thanks to this agreement that Australia can be pivotal in assuring Japan’s energy security, its resource security and its food security,” Abbott told reporters.

Abbott, who led his conservative coalition to power in September elections, is leading a mission of hundreds of people to East Asia, seeking to deepen economic ties.
...

http://www.japantoday.com/smartphone/view/politics/australia-japan-agree-on-free-trade-deal
 

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