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Cost cutting in the mining industry

Truck Tires

BHP Billiton Ltd. (BHP), the world’s biggest mining company, has stripped out about $3.9 billion in costs and spending on exploration in the last two years. To curb costs at its Australian coal mines BHP has instructed its truck fleet to reduce downtime on shift changes and has begun refueling trucks at mining pits to avoid wear and tear on tires. The company says this has improved truck performance by 40 percent.

“It’s astounding and it does show that these companies are basically going down to the bottom level to try and drive cost cutting and that’s what shareholders want,” Jeff Largey, a mining analyst at Macquarie Group Ltd. in London, said by phone.

BHP said today it is reviewing the size of the workforce at its Australian iron ore operations, which reported about $20 billion in sales in fiscal 2013.

Anglo American Plc (AAL), the fifth-largest mining company, has reviewed contracts with suppliers of fuel, rubber for tires and removed contractors at Australian coal operations to trim costs.

...


Source >>>>> http://www.bloomberg.com/news/2014-...ng-cutbacks-as-china-cools.html#disqus_thread
 
That Was The Week That Was … In Australia

08 Jun 2014

>>> by Our Man in Oz

>>> www.minesite.com

Minews. Good morning Australia, or wherever you are today. How did your market perform last week.

Oz. Down, again, but not substantially, and in answer to the location question, in London now ahead of a few days in the south of France.

Minews. Nice for some. There were reports of you being sighted at the Melbourne Mining Club dinner at Lord’s during the week where your countryman, Mark Cutifani, from Anglo American was the keynote speaker.

Oz. Those reports can be confirmed. Mark is an interesting man and worth the trip across from Australia, but the company he runs is even more interesting because it will either be a great recovery story under his leadership, or an easy takeover target for someone prepared to strip away its poorly-performing South African assets.

Minews. We’ll watch with interest, but for now let’s focus on the performance of the Australian stock market which you presumably have been watching while travelling.

Oz. I have, and it’s certainly a lot easier these days thanks to high-speed communications than a few years ago then we started these regular market reports.

Last week, unfortunately, was another of those “do nothing” weeks with three down days and two up to produce an end result for the five trading days which was awfully like the start.

The overall market, as measured by the all ordinaries index, closed down by around 0.5 per cent. The metals and mining index did a little worse with a fall of 1.2 per cent, and the gold index decline by 0.7 per cent.

Minews. Moves which hardly qualify as moves at all. Presumably there were some newsmakers to interest our readers in what looks to be a fairly dull affair.

Oz. There were a handful of eye-catchers, though not many and not necessarily for the right reason, with a few touching fresh 12-month price lows.

Minews. Let’s hear about those stocks first, and then call the card.

Oz. Panoramic (PAN), the nickel producer with plans to enter the platinum business, was the star of the week, putting in a rise of A7.5 cents (11.5 per cent) to A72.5 cents, a closing price which was down slightly on the 12-month high of A75 cents reached during Friday trade.

Paladin (PDN), the one-time uranium favorite of the Australian market, continued its poor showing with a loss of another A2.5 cents (seven per cent) to A36.5 cents, a closing price which was A4 cents higher than the 12-month low of A32.5 cents reached earlier in the day.

Papillon (PIR) led the gold sector as a result of the share-swap merger deal struck with Canada’s B2Gold, closing at A$1.60, a rise of A18 cents (12.6 per cent), which was well below the A$1.72 per Papillon share implied by the deal.

Base Resources (BSE) hit the headlines for the wrong reason, with a local council demanding a form of royalty payment from mining at the Kwale titanium project in Kenya, in what is the second illegitimate attempt to tax the company. The result was a share-price fall of A4 cents (10 per cent) to A34.5 cents.

Gindalbie (GBG), the troubled iron ore miner, had its best week in a long time, adding A1.5 cents (27.7 per cent) to A6.9 cents sufficient to earn a speeding inquiry from stock market regulators, and the standard company reply of “don’t now why”.
...
 
>>> What Is Signal And What Is Noise?

>>> 09 Jun 2014

>>> by Rob Davies <<<



One of the hardest tasks for investors is to differentiate true signals from the background noise of the market.

Last week provided quite a bit of noise, even though many took the noise to be signals of various sorts.

An increase of 217,000 in US employment confirmed what most people already know, which is that the US economy is still expanding, albeit not very fast.

Unemployment at a six year low and jobs back at pre-recession levels shows just how long this downturn has been in place.

In Europe there was less encouraging news as the ECB cut interest rates and introduced other, unconventional, measures to try and stimulate the economy.

But again it just reminded everyone that Europe is stagnating and, with inflation at only 0.5 per cent it could easily slip into deflation.

Mario Draghi, who runs the ECB, did was he has done before and hinted that he has additional powers up his sleeve and he will use them if needs too.

Unfortunately, it didn’t go quite to plan as the euro hardly moved. His measures are trying to achieve a fall to stimulate growth and reduce the price of BMWs.

All of these news items were noise because they told us nothing new.

Half a world away there was, however, a real signal. Thomas Keller, recently appointed chief executive of Codelco, the state owned Chilean copper miner, resigned after a clash with his board.

He wanted to invest US$20 billion in order to maintain production at the second largest copper miner in the world. His fellow directors did not agree and he fell on his sword.

As a nationalised company the directors are appointed by the Government, and newly elected Chilean President Michelle Bachelet had recently replaced a third of them.

Without this capital injection Mr Keller says production will halve in the medium to long term.

Investors know mines are wasting assets and unless reserves are found to replace extracted ore production will fall.

Additional plant and machinery has to be renewed to keep operating costs down and remain competitive. The FT reports that since it was nationalised in 1977 the state has extracted US$100 billion from Codelco but only returned US$4 billion for investment.

If this approach is maintained it means that copper prices will stay close the full marginal cost of operation, i.e. high enough to cover depreciation, to encourage new capacity by others, rather than the marginal cash cost of production which is just wages and consumables.

On the LME copper prices reacted more to the news in Europe than from Chile and decreased 4.8 per ent over the week to US$6,660 a tonne.

That move was the main reason the LME index drifted down one per cent over the week.

In the short term speculation over the relative strengths of the European and US economies will determine moves in the copper price. Trading such short term noise is difficult.

But if the Chilean government really does not want to fund Codelco so that it can maintain production, that will be a far important driver to pushing copper prices higher in the longer term.



Source >>> www.minesite.com <<<
 
>>>>> The world is overbought
June 5, 2014

Australia(EWA) > ytd gain: 8.60%

One look at our trading range screen of the 30 largest country ETFs tells you that world markets have gotten extended recently. As shown below, 22 of the 30 countries highlighted are now overbought (more than one standard deviation above their 50-days), and more than a handful are at extreme levels (more than two standard deviations above their 50-days). Some of the most overbought countries include China (FXI), France (EWQ), India (PIN), Japan (EWJ), Spain (EWP), and the US (SPY). Of the ETFs listed, India (PIN) is up the most so far this year with a gain of 24.17%. Turkey (TUR) is in a close second with a YTD gain of 22.43%. Russia (RSX) remains the worst performing country on the year with a decline of 10.25%, but the ETF has made a nice run higher recently and is currently 8.99% above its 50-day moving average. Just five countries on the list are in the red this year, and just three are currently below their 50-days (Brazil, Indonesia, Vietnam).

>>>>> http://www.bespokeinvest.com/thinkbig/2014/6/5/the-world-is-overbought.html
 
Lenders Fear Spread of Chinese Commodities Fraud Case

by PETER EAVIS and NEIL GOUGH

June 11, 2014

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.

Citigroup and several other large Western banks are concerned that large amounts of their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port.
The banks have inspectors on the ground who are trying to assess whether enough of the metals are there.

...


Source >>> http://dealbook.nytimes.com/2014/06...lbkam_20140611&nl=business&nlid=27377416&_r=0

[Note: The article has also three comments from readers, worth reading]
 
That Was The Week That Was … In Australia

15 Jun 2014

>>> by Our Man in Oz


Minews. Good morning Australia. You seem to have had a fairly flat week.

Oz. It was, with the indices moving a few percentage points and with most of the big moves being down.

Iron ore stocks were hit hard. Gold stocks did best on the positive side and as in recent weeks there were a number outperformers on either side of the ledger.

Minews. Let’s start with the interesting moves before calling the card and keep everything short because I understand you are still travelling.

Oz. That’s right. Still on the road, this time suffering the hardships of southern France where the weather is balmy and the local most agreeable.

Minews. Lucky you. Now for a quick spot of market talk and then back to your cocktails in the sun.

Oz. Overall, the Australian market, as measured by the all ordinaries index, eased back by 1.1 per cent but would have fallen further if not for a strong showing among the oil and gas stocks which, in turn, could thank the latest trouble in Iraq for a higher oil price.

Mining stocks, as measured by the metals and mining index lost 2.8 per cent. Gold stocks were the exception with the gold index rising 2.9 per cent, and with more likely to come next week as the gold price continued to rise after we had closed on Friday.

Minews. Now for those eye-catching moves, please, starting with the rises.

Oz. Prize for the best rise of the week, albeit not on a percentage basis, went to Lucapa Diamonds (LOM) which shot up by A13 cents (54 per cent) to A37 cents thanks to a significant discovery of diamonds in the testing of river gravels on its tenements in Angola.

Malagasy Minerals (MGY), a graphite explorer with its best assets on the island of Madagascar, was the percentage winner with a rise of A1.5 cents (107 per cent) to A2.9 cents.
...


Source >> www.minesite.com
 
>>> The Last Thing The Global Economy Needs Now Is Another Oil Shock

>>> 16 Jun 2014

>>> by Rob Davies

The VIX index on the Chicago Options Exchange hit a five year low of 12.18 on Friday.

This index is a measure of volatility, and in 2012 it got as high as 47. The current low level reminds us that the financial world has enjoyed a remarkable period of stability in recent years.

That this has been achieved despite political tensions in Ukraine, simmering antagonism between China and Japan and amazingly high levels of unemployment in the Western world is remarkable.

That none of these events have triggered upsets in capital markets is due more to the overwhelming influence of central banks than the relaxed attitude of capitalists.

The old aphorism of “Don’t fight the Fed” has now become “Don’t fight the Fed, the BoE, the ECB and the BoJ”.

However, this complacency cannot last. The most obvious signal that the market is schizophrenic is the contrast between the record high levels of equity markets, which are anticipating more growth, and the record high levels of the bond markets which is predicting another recession.

This mutually contradictory view of the future now has to cope with a fresh input.

The rapid spread of the ISIS insurgency in Iraq, the second largest oil producer, has already caused oil prices to spike up to US$106 a barrel. And one thing we know about modern economies - and that now includes China - is that they don’t like high energy costs.

Despite de-industrialising, developed economies are still heavily reliant on energy to fuel growth.

The prime source of that energy is oil but other forms, like gas and coal, are priced off that primary market. Right now the last thing the slow recovery in the West needs is another oil price shock.

So far capital markets have reacted calmly. Base metals, as measured by the LME index, decreased 1.3 per cent over the week to 3,066 after a modest rally on Friday.

Mining equities reacted more strongly and dropped nearly three per cent over the period. It may well be that as trading decreases over the summer that investors will prefer to stand on the side-lines to see how the situation develops.

Certainly news that US PPI fell 0.2 per cent in May shows that the threat of deflation in America remains potent.

That reminds us that the world economy is becoming more reliant on the single motor of China for its growth.

While that is better than no growth it is hard to interpret. For a start China does not provide the regular updates that are the routine economic commentary the market is used to from the US, or Europe.

More important though is that interpreting the actions of the Chinese government and its central bank is even more difficult.

At best markets can hope that the overriding interest of the authorities is to maintain strong economic growth to ensure maximum employment. As such China will pursue whatever policies are needed to ensure that goal will be achieved.

As long as capitalists believe it doesn’t make sense to fight the Fed, the BoE, the ECB, the BoJ and now the PBC everything will be fine. The panic will start when investors think this group has got it all wrong and can no longer impose its will on free markets.



Source >>> www.minesite.com
 
Jun 22 -23, 2014

Australia’s GrainCorp Still Takeover Target – Broker

by Isabella Steger and Ross Kelly (MoneyBeat)

Chatter that a takeover of GrainCorp Ltd. (GNC.AU +3.44%) could still be in the stars continues to give a lift to the Australian grain handler’s share price.

On Monday, Bell Potter, a brokerage, upgraded the stock to “hold” from “sell,” as it thinks the stock will continue to incorporate a takeover premium in its price even though the company itself is “overvalued.”

GrainCorp shares jumped more than 3% in Sydney Monday afternoon.
 
In The Case Of Iron Ore, The Workings Of Chinese Capitalism Have Much To Teach Europe
23 Jun 2014

>>> by Rob Davies <<<


The contrast between the economies of Europe and China become more bizarre every day.

The most important bulk traded commodity these days is iron ore. Its price has been slipping steadily since it peaked in February 2013 at US$158 a tonne and it is now down 44 per cent at US$89 a tonne.

Unsurprisingly this has had a pretty negative effect on the large mining companies and their share prices have drifted lower accordingly.

However, economics is on their side. Bloomberg has pointed out that 80 per cent of Chinese iron ore mines have costs of between US$80 to US$90 a tonne. One reason is that grades in these mines are about half those of their international competitors producing seaborne grade iron ore of 67% Fe.

As a consequence between 20 per cent and 30 per cent of Chinese iron ore mines have closed, along with 70 per cent of the companies that process the material.

It is heartening to see Chinese companies reacting with such vigour to these changing prices. They know that Rio Tinto has a production cost of US$44 a tonne, BHP Billiton US$53 a tonne, Vale US$68 a tonne and Fortescue US$77 a tonne.

The communists understand capitalism very well. They know the lowest cost producers will always survive and they know that there is no point in selling metal at a loss. Price is a very clear signal to tell iron ore producers what to do.

Compare that market-friendly approach to the situation in Europe. Here, the ECB has imposed a “one size fits nobody interest rate” across the whole Eurozone.

In fact all the disparate countries that go to make up the zone actually require different interest rates.

Using the Taylor Rule (a standard method of estimating appropriate interest rates for countries) Germany should actually have an interest rate of 4.65 per cent while that for Spain should be minus 10.75 per cent and that for Greece minus 19.25 per cent.

The ECB does not believe in setting interest rates appropriate for individual countries. Instead, one interest rate is imposed by central command for everybody, like it or not.

No matter, it seems the individuals must suffer for the greater good of the community. No wonder China is growing far more rapidly than Europe is.

Last week was a good one for commodities, partly due to oil prices increasing to US$106 a barrel on the back of worries about the unrest in Iraq. Base metals, as measured by the LME index, increased 2.4 per cent to 3,141.

One of the major contributing factors is the underlying fundamental strength of these commodities as demonstrated by falling inventories. Zinc inventories in LME warehouses are down 28% this year to date to 676,275 tonnes, and copper inventories of 159,425 tonnes are the lowest since 2008.

Knowing there is an additional 75,729 tonnes in Shanghai doesn’t make much difference to the overall position in that market of 20 million tonnes.

Given the current state of understanding of economics it is likely that the Chinese will appreciate the gravity of this situation long before the Europeans do.


Source >>> www.minesite.com
 
notting said:
Putin putting a signature down to make himself look good. China has got a hold on him because Europe are backing out of dependency on Russian gas. So it's likely to be a crap deal for Russia. Putin seems a bit desperate politically at home so is invading countries and looking to be the big deal maker to distract and strengthen his hold on power in Russia. Got nothing to do with some great tectonic shift in China/Russia relations. They won't even disclose the price because it's BS!
Click to expand...

Why Putin Is in Trouble With 86% Approval
Click to expand...

http://www.bloomberg.com/news/2014-06-26/why-putin-is-in-trouble-with-86-approval.html
 
Negative US Data Is Brushed Aside, But The Issue Of Commodities Fraud In China Raises Far More Searching Questions
30 Jun 2014

>>> by Rob Davies

It’s been becoming clear for some time that the US economy is not doing well.

Even so, the revision to the data showing that the US economy contracted at an annualised rate of 2.9 per cent in the first quarter was a body blow and will result in reductions in the growth rate for the year as a whole from all and sundry.

But the reaction to the news in capital markets was surprisingly muted.

Wall Street ignored it, bonds firmed a bit, taking the yield on the 10 year down to 2.5 per cent and the dollar hardly moved. Base metals, counter-intuitively, firmed a little, rising 1.4 per cent and taking the LME index up to 3,181.

Nevertheless, this development does rather take the gloss off the story of a gentle US recovery.

The lack of market reaction is largely a recognition that the US is no longer the driving force in the metals business it once was.

Another factor in the strength of some metals was upwards revisions to price forecasts by Standard Bank. According to Bloomberg the bank has increased its 2015 price forecast for zinc by 8.8 per cent to US$2,240 a tonne.

Its estimate for nickel for 2014 is now 12 per cent higher at US$17,536 a tonne, while the forecast for 2015 is now 9.1 per cent higher at US$18,000 a tonne.

Offsetting this positive news were downward revisions to the Standard Bank estimates for iron ore prices. The bank now expects these to average US$108 a tonne, 20 per cent lower than its previous forecast for 2014. The estimate for 2015 has been trimmed 2.6 per cent to US$105 a tonne.

Once again the slowly increasing disconnection between commodity markets and the US economy is becoming more evident. Which, given the news from the US last week, is clearly a good thing.

Source >>> www.minesite.com <<<

Instead commodities are become increasingly reliant on China. But here too not everything is as good as it might first appear.

For some time now there has been increasing concern over the use of commodities to act as security in the shadow Chinese banking system.

Those fears were confirmed last week when China’s chief auditor discovered that loans worth 94.4 billion yuan (US$15.2 billion) were backed by falsified gold transactions.

The Financial Times reports that the Dezheng Resources had pledged base metals as collateral for several different lenders. The concept of using metal that was sitting doing nothing in a warehouse as a source of funding in a country desperate for new investment makes some sense.

But pledging the metal to more than one borrower does not.

It raises the question of what else is going on in the grey world of the Chinese shadow banking system.

It is good that a robust Chinese economy is maintaining demand for commodities while other regions, such as the USA, struggle.

But if that growth is dependent on a fragile commodity-based shadow banking sector there must be serious doubts about how it would survive any kind of financial stress of the sort that undid the US mortgage backed securities market.

For now it looks as if the Chinese economy can cope with these strains. But investors should not assume that all is rosy underneath.
 
First Half Asset Class Performance
July 1, 2014

June returns were mixed in international markets. Countries like Brazil (EWZ), Canada (EWC), India (INP), Japan (EWJ) and Russia (RSX) posted solid gains, while big Euro-area countries like France (EWQ), Germany (EWG) and the UK (EWU) were in the red. Year-to-date, the India (INP) ETF is up the most out of the country ETFs highlighted with a gain of 20.91%. Italy (EWI), Spain (EWP) and Canada (EWC) were all up more than 10% in the first half as well.

>>> http://www.bespokeinvest.com/thinkbig/2014/7/1/first-half-asset-class-performance.html
 
Recovery Beats Back The Bears In Metals And Equities
07 Jul 2014
>>> www.minesite.com <<<

by Rob Davies

It is human nature to looks for things to worry about when everything appears rosy. Despite equity markets marking new highs and base metals, as measured by the LME index, adding 3.1 per cent last week, financial commentators can’t seem to stop finding things to fret over.

The news that the US economy added 280,000 jobs in June fuelled the rally in risk assets like shares and commodities but the press likes to remind us of the contraction of the US economy in the first quarter of the year.

Indeed, it is not hard to find quite a few items of news to support the bear case.

A surprise cut in Swedish interest rates of 0.5 per cent to 0.25 per cent was apparently justified by the strength of the krone against the weak euro.

That weakness was reinforced by a fall in Germany factory orders of 1.7 per cent in May. In Australia the Governor of the Reserve Bank muses that the Aussie dollar is too high: it promptly fell 1.6 per cent after his comments.

No one, it seems, wants a strong currency because of the damage it does to their economy. But not everyone can devalue.

Yet despite these worrying news items there is no indication that economies and markets are about to roll over and crash dive. Worriers of course can cite this complacency as being exactly the sort of signal that should concern investors. But pushing this negativity back is a steady drip of positive developments.

Iron ore prices rallied 1.7 per cent last week to take them up to US$96.5 a tonne. A welcome relief after the 28 per cent fall this year to date.

It is also worth reminding ourselves that iron ore prices have fallen not because of a reduction in demand but because of an increase in supply as miners raised production in anticipation of rising demand.

That has happened but it is difficult to exactly match increases in output with growing demand.

Another metal now being squeezed up after a long period of weakness is nickel. Bloomberg says production will exceed supply by 50,000 tonnes this year but there will be a deficit in 2015. That is why its price is up 36 per cent this year so far to a relatively healthy US$19,845 a tonne.

Look too at the fall in zinc inventories. They now stand at 664,650 tonnes. Compare that to the 910,025 tonnes they started the year at.

A 10 per cent increase in the zinc price since then to US$2,233 a tonne seems entirely rational.

Finally, bears continue to fret over the role of metals, especially copper, in the Chinese shadow banking system. But a 20,000 tonne fall in copper inventories in bonded warehouses in Quingdao from 50,000 tonnes does not indicate the problem is that large. After all, US$213 million is not a huge amount of money in an economy as large as China’s.

Far more significant is that copper inventories in LME warehouses have now dropped to 156,500 tonnes, which is incredibly low for a commodity that has an annual consumption of 20 million tonnes a year.

Miners, and their customers, are confident that more supply is coming on stream quite rapidly which is why prices are not reacting.

So, sure there are lots of things to worry about in terms of politics and economics. But for fabricators the most important thing might just be as simple as securing raw materials at a decent price next year.
 
As I expected grain prices are falling rapidly now. What a week was for commodity market. Soybean futures posted the longest slump in 41 years. Corn fell to a four-year low. Other grains such as wheat, oat, rice and canola etc also slumped last week. Global soya bean and corn supply will climb in the coming years. The grain entered a bear market this month. Among commodities selected soft commodities such as Tea and Cocoa and live stocks will maintain their uptrend.

http://www.livemint.com/Companies/n...sees-profit-reviving-on-rally-in-tea-pri.html

McLeod Russel India sees profit reviving on rally in tea prices

http://in.reuters.com/article/2014/07/08/bangladesh-tea-auction-idINL4N0PJ38120140708

Bangladesh tea prices up on strong demand for quality leaf

Currently we can see strong tea prices for high quality tea in Sri-Lanka. Tea prices have picked up even at the Mombasa Tea auction in Kenya.

http://online.wsj.com/articles/emerging-markets-chocolate-lovers-boost-cocoa-prices-1404849640

Emerging Markets' Chocolate Lovers Boost Cocoa Prices

After recent spike both Crude oil (wti) and Crude oil (Brent) too had a sell off. They are trading around USD 100 and 106 respectively.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites. Please do your own research.
 
Portuguese Banking Problems Set The Markets A-Jitter
14 Jul 2014

>> by Rob Davies


The official script says that the banking crisis in the Western world has been resolved, recovery is underway, albeit slowly, and that normal service will be resumed shortly.

Unfortunately that story becomes slightly suspect when something like the problem at Banco Espirito Santo suddenly shows something the authorities would rather keep hidden.

The holding company of this bank, the second largest in Portugal, missed a payment on commercial paper last week that triggered a dive in the share price, a trading suspension than another slump that left the shares down 36 per cent and its bond yielding 8.85 per cent.

This reminder that not all financial institutions can be trusted was enough to push the gold price up by 1.1 per cent to US$1,335 an ounce, and to push equity markets down two per cent.

The reaction in base metals was more subdued with only a 0.2 per cent decline in the LME index to 3,275.

This tepid response is largely due to the strong fundamentals of the sector.

Investment bank Natixis says there will be a 476,000 tonne shortfall in the zinc market this year and that undoubtedly helped the metal increase by 2.4 per cent over the week to US$2,286 a tonne. A further fall in zinc inventories in LME warehouse to 660,800 tonnes reinforces that argument.

Copper too was another metal to make progress. It gained 0.5 per cent to US$7,150 a tonne.

This was despite Bloomberg reporting that an additional seven million tonnes of capacity is due to come on stream by 2020.

In addition there is a further 6.7 million tonnes of uncommitted capacity that could be brought into production. That the copper market has not dived in anticipation of this supply of new metal is a measure of how tight it is.

Unlike the other metals it is in backwardation meaning that prices for prompt delivery are higher than for future months.

Three month metal, for example, is trading at US$7,139 a tonne and the 15 month quote is US$7,100 a tonne.

With LME inventories standing at only 158,475 tonnes it is not surprising there is a premium for metal available now.

A fabricator is not very interested in a possible glut of metal in six months’ time when his concern is to get product out the door next week.

The events in Portugal combined with other evidence of fundamental weaknesses in the world economy tell us is that the short term economic outlook is still very mixed.

Everyone would like to believe the problems of the financial crisis are behind us but now and again the harsh reality manages to pop through the fog of complacency and remind us that they are not.

A good example of that is the way equity markets have made no real progress this year so far. But, encouragingly, one of the best performing sectors has been mining.

Last year’s gloom about its prospects has been replaced by recognition that the bearishness was overdone and that actually it is still churning out prodigious amounts of cash, even at lower prices for the bulk commodities.

Unlike many of the banks, the attractive yields on the mining stocks make them worth holding even when everything else looks a bit uncertain. And there is no reason to believe that this uncertainty is about to change.

***********************
Source >> www.minesite.com

***********************
 

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