Saturday, June 30, 2012

Gold down to $700 - or up to $7,000? - Diametrically opposed viewpoints.

Where is gold headed? Downwards to $700 or upwards to $7,000. Depending which ‘expert' you listen to there is a huge difference in opinion on the likely direction of the gold price

Author: Lawrence Williams

Bulls will be bulls and bears will be bears. Contrasting viewpoints on the likely path of the gold price abound - no wonder the investor who relies on advice from recognised ‘experts' in the field just doesn't know which way to turn - and why the huge majority have continued to ignore gold as an investment or wealth protector all the way through the yellow metal's bull run.

The latest ‘expert' to see his airs viewed on no less a website than that of U.S. based CNBC - the self styled ‘recognized world leader in business news' - is Yoni Jacobs of Chart Prophet Capital who is most definitely in the bear camp as far as gold is concerned.

"Technical levels show us when the trouble is coming. Gold struggled at $1,700 and then at $1,600. If it breaks through the next key level of $1,500, which could be approaching soon, investors would start panicking and selling hard," said Jacobs. "It appears that the market has decided on gold's fate. And it's not looking pretty. It looks like gold is about to see prices collapse and is on its way to $700"

Jacobs thus joins a number of others who have been talking down the gold price throughout the 11+ years of its current its bull run. . Indeed at some stage gold will likely go out of favour and the price could then collapse as the gold ETF holders in particular start divesting. The big question is at what level gold will be when such a sell-off becomes a rout. If it is the current level, then Jacobs could be right in his views. If, though, gold is several times higher than it is today when the cyclical top is reached, then any collapse could be to a level well above even the current gold price.

So far there is little sign of any weakness among holders of the ETFs and we would argue that as long as there is so much financial uncertainty in global economies then the major underlying gold holders will continue to sit on their gold investment purely as a true and tested safe haven.

There is, of course, much talk at the present time of gold no longer behaving as a safe haven, but again one would counter argue that it is only on the day-to-day short term trading fringe that this is true. The safe haven holders are well and truly embedded with their gold holdings and that the vast majority of the gold in private and long-term institutional hands is indeed safe-haven gold - and will remain so at least until global market uncertainty subsides, if not well beyond that. These are the holders in there for the long term and short term fluctuations up and down are largely immaterial to them. Wealth preservation and portfolio diversification is the key here.

But how about the other predictions? There are plenty of gold bulls out there looking for $7,000 gold, or even much higher over the medium to long term. For the purpose of this article we admittedly pulled the $7,000 figure out of the air as a contrast to Jacobs' $700 - we could equally well have used $10,000 - or any level between the current price and that advanced height. There are plenty of analyses and predictions covering virtually any eventuality. But taking the precise $7,000 figure - only recently Bank of America technical analyst MacNeill Curry - an Elliott Wave Theory proponent - reckoned that despite fluctuations which have taken gold down close to nearly $400 below its last-September $1920 high, this kind of volatility was nowhere near extreme enough to convince him the precious metal's long-term uptrend was nearing finality. Nothing in the gold price pattern since will have changed this technical assessment.

Curry was quoted as saying any long-term commodity advance tends to end with, "a massive speculative blow-off. They don't end quietly," he said and projected that gold will ascend to levels somewhere between $3,000 to $5,000 and potentially $7,000 per ounce before the rally comes to an end.

So there you are. Two hugely diverging viewpoints to confuse the prospective gold investor. The writer's view is to err mildly on the bullish side of the argument. There's too much uncertainty out there and gold tends to thrive on global economic uncertainties. While the West's deflationary environment may count against stock markets in general and commodities, it won't necessarily bring down the gold price - indeed gold can thrive in periods of both inflation and deflation. There is virtually certain to be more monetary stimulus in Europe and the U.S. - which should also benefit gold, while Eastern markets for the yellow metal remain strong overall and are soaking up a huge amount more gold than they used to.

As far as new mine production is concerned, any increase will be limited and the recent relatively range-bound gold price will be making prospective developers perhaps delay more marginal propositions and the banks look again at the cost of some of the horrendously high capital cost mega projects which are the only ones likely to have any significant impact on global gold output. Most of the traditional gold mining countries are seeing continuing production declines from aging mines and declining grades, while the country seeing the biggest rise in gold output, China, does not export its production to external markets.

While the writer sees the path of the gold price as likely to move upwards, albeit fairly modestly in the months ahead, it does seem to be taking a breather at the moment. However, it also seems to have found a recent floor at around the $1560 level and is back above $1600 at the time of writing. That the continuing Eurozone crisis is having a positive impact on bullion demand is seen by at least one Swiss vaulting company having to expand its secure vaulting facilities because of the inflow of privately held gold into Switzerland. Ongoing negative interest rates, which seem likely to continue in Europe and the U.S. until at least 2014 also are contributing to gold's appeal.

Re the prospect of gold ETF sales, it is interesting to note that although gold held by SPDR Gold Shares, the world's biggest gold ETF, did fall back by 5 tonnes in the past quarter - a pretty infinitesimal 0.4% drop - this has been more than countered by increases in holdings by other gold ETFs - notably that of London-based ETF Securities, which rose by 13.2 tonnes. Silver ETFs have been seeing continuing rises too. So an ETF sell-off certainly does not yet seem to be on the horizon yet.

Leading foe rejects new plan for Peru mine

A prominent regional leader who has led protests against a $4.8-billion gold and copper mining project in northern Peru said he opposed a new offer made by President Ollanta Humala and Newmont Mining.

Under the new plan, reservoirs would be built to expand by 10 times the water storage capacity of existing lakes near the proposed site of the mine. With Humala’s backing, Newmont Mining said the reservoirs would address the concerns of residents that the Conga project could endanger water supplies.

But in a telephone interview, Gregorio Santos, president of the Cajamarca region, said Humala and Newmont had both lost credibility. Santos said he and other opposition leaders in northern Peru were sticking to their demand that an independent environmental impact study be carried out before the project goes ahead.

The Cajamarca region is where Newmont operates the Yanacocha open-pit gold mine, one of the largest in the world.

“Humala says he wants dialogue, but he has not listened to the people of Cajamarca,” Santos said. “Now we don’t believe him, and he is only repeating the words of economic power groups.”

In an address to the nation Saturday, Humala said the Conga project would go forward and promised that water supplies would not be compromised.

“Water comes first, that’s the condition,” he said. “My government would never permit the development of any mining project that exposes the population to the loss of water or the lack of quality standards required for human consumption.” '

Mining has been a prime engine of Peru’s stellar economic growth over the last decade, luring billions of investment dollars amid a global commodities boom. Humala has said he needs the taxes and royalties from the Conga project, which was approved by his predecessor, to help pay for ambitious social programs.

Observers say the project is also a gauge of Humala's commitment to foreign investment despite his leftist rhetoric during his successful presidential campaign last year.

Colorado-based Newmont says the mining design is sound and there is no need for the months-long delay that would result from carrying out another environmental study. Company Vice President Carlos Santa Cruz said recently that Newmont was willing to address any mistakes of the past, reach “a new state of understanding” with residents and contribute to a $49-million social works fund.

Peasant protests over mining projects in Cajamarca in December and in Espinar province to the south in May prompted the government to declare states of emergency, suspending the right to assembly and other constitutional protections. Unlike with the standoff in Cajamarca, protesters against the $1.5-billion Espinar project proposed by Swiss-based Xstrata are negotiating with the company.

“We will not accept Conga," said Santos, the regional president. "There are projects in Peru that are just going to sit there because the people feel they would mean abandoning their natural resources. Cajamarca will continue resisting.”

Friday, June 29, 2012

McEwen Mining announces resource update at the Los Azules Copper Project

McEwen Mining is pleased to announce an updated resource estimate for its 100% owned Los Azules Copper Project in San Juan Province, Argentina.

Drilling has increased both the level of confidence associated with the mineralization and the size of the resource. The estimated contained copper metal in the Indicated Resource category has increased by 109% to 4.6 billion lbs. and the estimated contained copper metal in the Inferred Resource category increased by 4% to 10.8 billion lbs.

"Los Azules is one of the world's largest undeveloped copper deposits. We are looking forward to commencing our most ambitious drill program this November. This deposit appears to have good potential to expand in size," stated Rob McEwen, Chairman and Chief Owner.

The objective of the Company's exploration program since the last resource update in June 2010 was to test the expansion potential; and continue to infill portions of the deposit. Drilling successfully expanded the overall size of the Inferred resource while maintaining the same grade. In addition, 186 million tonnes of Inferred resource was converted to the Indicated category.

The grade of the Indicated resource decreased since the mineralization that was being upgraded was of a lower grade. Los Azules has a significant high grade core totaling 112 million tonnes at an average grade of 0.89% copper in the Indicated category and 119 million tonnes at an average grade of 0.86% copper in the Inferred category.

Despite limited drilling, approximately 8,100 meters from January 2011 to April 2012, the expansion of the resource was successfully achieved by drilling step-out holes primarily to the southwest of the known deposit which confirmed that mineralization continues laterally and at depth.

McEwen Mining has signed a contract with Major Drilling to provide four core drills and one reverse-circulation drill for the 2012-13 drill season. These core rigs are considerably more powerful than the ones used during the 2011-12 season and the Company believes this will increase the likelihood of reaching target depths, where high-grade copper mineralization has been encountered. McEwen Mining anticipates starting the upcoming drill season in November and plans a total of 15,000 meters of drilling.

Source: http://www.marketwatch.com

Qatar iron man faces off with Glencore on Xstrata deal

Bankers who have dealt with Ahmad al-Sayed, the Qatari investment manager holding the fate of Glencore's takeover of Xstrata, all agree he is a tough negotiator, someone who will cut the deal at the terms he wants.

Ahmad al-Sayed, the Qatari investment manager holding the fate of Glencore's $26 billion takeover of Xstrata in his hands, is known as an aggressive negotiator who relishes the big deal.

The lawyer was formerly general counsel at Qatar Investment Authority (QIA), the sovereign wealth fund of the gas-rich Gulf state, before taking the helm as chief executive of Qatar Holding in 2008.

Well-liked and trusted by Sheikh Hamad bin Jassim al-Thani, the Qatari prime minister who is also chief executive of QIA and chairman of Qatar Holding, he has significant influence at the top level where decisions are made.

"An iron man, and a hedge fund manager in disguise, he can easily kill a deal if it doesn't suit him," said one banker who knows him personally.

"And why not? Don't the Qataris have the money? There could be a compromise but it's ultimately their way or no way."

"We respect him for his smartness but we dreadfully fear him for his aggressiveness. One day you're closing a deal and the next you're flushed away."

Commodities trader Glencore is fighting to save its deal after Qatar Holding, QIA's investment arm which has built a stake of around 11 percent in Xstrata since February, issued a late demand for better terms, forcing them to push back the timing of the deal.

Sayed, who is in his late thirties and studied law and business in Qatar, Paris and Boston, is leading talks with Glencore about the deal.

UNFOLDING DRAMA

"I'm enjoying watching the soap opera from a distance," said British deal broker Amanda Staveley, who helped orchestrate Abu Dhabi's 2008 investment in Barclays and knows Sayed, describing him as bright, utterly professional and very diligent.

"Qatar has been using decent strategies lately and I kind of assume he's the man behind it."

Qatar's unexpected intervention - an unusually aggressive step for a fund that has hitherto been content with a less muscular role in its portfolio - has set off a new round of negotiations, putting in doubt a deal that would create the world's fourth-biggest mining company.

Signs of Qatar's new stance may have been evident in April. Speaking on the sidelines of a Doha conference, Sayed outlined his ambitions for Qatar Holding.

"We should always be active. To be passive is not healthy. Our intention will always be to add as much value as possible and to improve the company we invest in," he said.

Bankers who have dealt with Sayed all agree that he is a hard negotiator, someone who will cut the deal at the terms he wants.

In the last four to five years, every deal done by Qatar Holding - which controls an investment fund of at least $100 billion - has had his stamp on it, said a Dubai-based banker.

"He is tough and you know where you stand with him once he makes a decision," said one London real estate source who knows him by reputation.

"He has taken (Qatar Holding) to a level of sophistication and confidence that helps them to make the kind of calls they have taken in the Glencore/Xstrata merger," said another banker.

MISSTEPS

Qatar, well known for trophy investments like London's Harrods department store, Canary Wharf, and stakes in Hochtief, the German construction group, Porsche and Volkswagen, which owns Audi and Lamborghini, and has invested in Barclays and Credit Suisse, is shifting its sovereign wealth fund assets into commodities like gold and oil.

Sources told Reuters last month that QIA has bought a stake in Royal Dutch Shell, while also reportedly eyeing a chunk of Italian oil major ENI (ENI.MI).

"The Qataris in general don't do a deal unless the terms are right. It doesn't matter how many deals they do as long as they are profitable. And they are making money on most of the deals, including Goldfields," said a banker from London.

Qatar's investment fund had to sit on the side late last year waiting for the outcome of European Goldfields's C$2.5 billion ($2.4 billion) takeover by Canadian group Eldorado Gold despite an earlier agreement to provide a $600 million project financing loan to European Goldfields.

The banker said Sayed Ahmad was not happy with how the Goldfields deal unfolded but ended up making money on the deal.

"He is tough like a rock but makes compromises when least expected. He even backs off when needed."

Source: Reuters

Wednesday, June 27, 2012

Illegal mining in Peru destroying Amazon rainforest

Illegal gold miners in Peru are destroying thousands of hectares of the Amazon forest, home to some of the world's most important biodiversity.

Biologists are working to save wildlife in the area, as their habitats are destroyed or endangered by the gold diggers.

At the same time, stopping the mining is presenting a tough challenge for the government.

In the final instalment of a three-part series, Al Jazeera's Mariana Sanchez reports from Madre de Dios in Peru.

Source: AlJazeera-English

Illegal mining in Peru destroying Amazon rainforest Part I

 

Illegal mining in Peru destroying Amazon rainforest Part II

Sundance Mobilises $40 million for Mbalam Iron Ore Project in Cameroon

The exploration of iron ore reserves in Mbalam, East Region by Cam Iron will in the days ahead receive a boost following additional $40 million funding pumped in by the mother company, Australian-based Sundance Resources.

According to a release posted on the company's website, the money raised through a placement with a 0.345 dollars interest rate per share; will be used to assist Sundance Resource Limited to undertake early works at the port and rail areas to help maintain the construction timeline, continue drilling on the previously announced exploration targets as well as help to provide general working capital for the company.

Commenting on the fundraising, Sundance's Managing Director and Chief Executive Officer, Giulio Casello, is quoted to have expressed gratitude with the amount. "The strong demand from institutional investors resulted in the placement being significantly oversubscribed. Funds raised allow Sundance to continue to develop the Mbalam Project which will further Sundance's progress towards becoming a world-class producer," he reportedly said.

The equity raising is said to be consistent with Sundance's rights under the Amended and Restated Scheme Implementation Agreement signed with Hanlong (Africa) Mining Limited last May 2012. While waiting for a mining license, Sundance and Hanlong; the release further states continue to expect the scheme of arrangement to be implemented by mid November 2012.

Government, Sundance Resources Limited and Hanlong Group officials on April 26, 2012 at the Prime Minister's Office signed the Joint Statement on the key terms and principles of the convention on Mbalam Iron Ore mining project with hopes that the Mining Convention would be signed in August 2012.

Information from Cam Iron says the Mbalam Iron Ore Project that straddles the border of the Republic of Cameroon and the Republic of Congo proposes development of mines in both countries which together will produce 35 million tonnes per annum. Within the framework of the project, Cam Iron will construct a 510-km rail line dedicated to the transport of iron ore from the Mbarga mine to the Cameroon coast with a 70-km rail spur line to connect to the Nabeba mine in Congo as well as build a deep water iron ore export terminal in Lolabe- Kribi which will be capable of taking bulk "China Max" iron ore carriers.

Source: http://allafrica.com

Asante Gold unveils "positive" early results from at Fahiakoba concession, Ghana

Asante Gold this week unveiled "positive" early drill results from the first phase of its maiden drill program at the company’s Fahiakoba concession in Ghana.

The company said that drilling has confirmed the discovery of narrow zones of gold mineralization in three of the 14 initial widely spaced drill holes targeting just 1.5 kilometres of the over 20.0 kilometres of "favourable shear zones" that have been outlined on the concession.

Asante noted that these discoveries are generally along strike of mineralization noted at Perseus Mining's Edikan mine, which is adjacent and to the southwest of the concession.

Significant results from the remaining assays of the 14 diamond drill holes totaling 2,437 metres, include hole FAH12-004 from 24 metres to 24.65 metres intercepting 0.65 metres of 11.1 grams per tonne average uncut gold.

Additionally, from 37.90 metres to 38.45 metres, intercepting 0.55 metres, hole FAH12-004 yielded 3.24 g/t average, uncut gold.

"The initial drill results have confirmed that the Akropong and Edikan shear zones locally contain anomalous to highly anomalous gold mineralization where they cross our Fahiakoba concession,” said Asante Gold president Douglas MacQuarrie.

"The positive early results from the drilling, auger soil sampling and ground geophysical programs suggest that numerous high priority drill targets will be outlined. These targets will be drill tested once the ground programs are completed.

"Additionally, in order to expand the company's footprint in Ghana, Asante is also evaluating other concessions for possible acquisition."

Asante noted that results have also been received from 399 auger soil holes, part of a planned 1,200 auger drill hole program to outline additional drill targets for the balance of the company’s 5,000 metre diamond drill program announced in March.

The auger samples are testing saprolite for gold mineralization at depths to seven metres under widespread river gravel and alluvium cover.

The company said that values to 650 parts per billion gold have been noted, with 19 anomalous samples forming two 500 to 650 metre-long new target areas.

Asante said the auger program is ongoing in conjunction with 60 line kilometres of ground geophysics. Drilling will resume as soon as further targets are defined.

Asante Gold is a Vancouver-based gold exploration company, exploring the Fahiakoba concession, a 22.07 square kilometre prospecting license located on strike with and between Perseus Mining's 4.32 million ounce Edikan Mine and AngloGold Ashanti's 60 million ounce Obuasi mine.

Asante said the latter mine is the longest producing, highest grade and largest gold resource in West Africa.

In May, the company said that airborne geophysical surveys outlined some 20 kilometres of northeast-trending shear and fold zones, some of which have associated VTEM conductors. Asante noted targets were on strike with mineralization seen at Perseus Mining's Edikan mine, which is adjacent and southwest of the Fahiakoba concession.

Partial results were received from four of the 14 diamond drill holes completed since March of this year.

Asante said reported drill holes FAH12-001, 2, 3 and 5 were drilled in the area of a small-scale alluvial pit, where a previous grab sample gave 2.05 grams per tonne gold.

Drilling under the pit gave long intersections of quartz stockwork in "a quartz-rich greywacke", Asante added.

In hole FAH12-005, 0.50 metres at 289.50 g/t gold was returned. Visible gold was noted in a 1.5 centimetre quartz vein, at a down hole depth of 201.8 metres, associated with strong pyrite mineralization, the company said.
Asante also noted that the gold found in hole FAH12-005 is "coarse...and appears related to late stage foliation as noted at many West African gold deposits."

Drill hole FAH12-005 was drilled 200 metres to the east of the other drill holes to test the southwest end of a previously outlined airborne conductor.

A graphitic shear zone was intersected at 175.0 metres, the company said, which "correlates with the extension of the VTEM anomaly to the southwest."

Other notable intercepts in May were 1 metre of 7.34 g/t gold at a depth of 41.5 metres in hole FAH12-003.

Anomalous gold was noted in eight other intervals in the first three holes, at depths from 34.0 to 175.0 metres - with values ranging from 0.28 to 0.85 g/t gold.

Asante Gold holds a 100 percent interest in the Fahiakoba gold concession through an option agreement with Goknet Mining Company of Accra, which holds the prospecting license. The deal is subject to a five percent government and a three percent underlying net smelter royalty interest.

The Fahiakoba property covers a part of the former Dunkwa Continental Mining Lease, where large-scale gold dredging activities were active from 1930 for nearly 70 years on the Ofin River and its tributaries.

Asante’s shares dipped 2.44 percent in early morning trading, to 20 cents.

Source: http://www.proactiveinvestors.co.uk

Carmen Copper starts mining higher-grade copper ore

Carmen Copper Company reported on Monday the first production of copper ore from its high-grade ore deposits.

In a disclosure to the Philippine Stock Exchange, the company said the transition of operations is part of its expansion plans, which went two months ahead of schedule, to improve its mining efficiencies and potential.

Carmen Copper vice-president Adrian Ramos said: “As we establish steady production from the Carmen ore body, we will continue to work towards achieving expansion goals through cost reduction measures and process improvements.”

Carmen Copper is wholly owned by Atlas Consolidated Mining and Development Corporation and has been successfully rehabilitated to become the country’s largest copper exporter.

The mine site is located in Toledo City, Cebu Province, at the western slope of a central highland in the middle of the province. It is approximately 17 km from Toledo City and about 45 km from Cebu City.

Brazil's Vale sells Columbia Coal mines to GS-led group

Brazilian mining giant Vale said on Monday it closed the sale of its coal assets in Colombia for $407 million in cash to a unit of Colombian Natural Resources, a mining company controlled by U.S. investment bank Goldman Sachs.

Vale, the world's second-biggest miner, is shifting focus away from thermal coal mining to concentrate on its operations in coking coal, a type of coal used by steel mills,

Under an agreement signed last month, Vale said it would sell 100 percent of its coal mines El Hatillo and Cerro Largo in the department of Cesar, and its port terminal Sociedad Portuaria Rio Córdoba on the Caribbean coast.

Vale also planned to sell its 8.43 percent stake in the Ferrocarriles Del Norte de Colombia, which operates the railway between the mines and the terminal. Colombian Natural Resources already owns a stake in the railway and mines in the region.

Rio de Janeiro-based Vale bought the assets in 2008 for about $306 million.

Vale is selling the mines because thermal coal, used to generate electricity, is not part of the company's "core business," Roger Downey, head of Vale's coal operations, said last month. Vale, the world's largest iron-ore miner, is keeping coal mines that produce coking coal, he said.

Source: Reuters

Tuesday, June 26, 2012

Rio Tinto exec sees moderation in iron-ore prices

Rio Tinto expects a moderation in iron-ore prices going forward as additional supply comes on stream, and sees no going back to annual pricing, a senior company executive said on Tuesday.

"The demand outlook is strong but supply is responding as well," Alan Davies, president of international operations for Rio Tinto told Reuters in an interview on the sidelines of a Metal Bulletin iron ore conference.

"Iron-ore prices are high from historic standards now but as supply comes on we would expect a moderation in the price in the medium term."

In response to recent comments by the CEO of steelmaker Posco and by that of competing iron-ore miner Vale about a possible return to annual iron-ore pricing, Davies said he did not see that happening.

"I don't see a turnaround," he said. "I'd personally be surprised if it went back to a longer term pricing regime because our customers wanted a shorter term prices regime and that's exactly what we have got."

The big three iron-ore miners: Vale, Rio Tinto and BHP Billiton started to price iron ore on a quarterly, monthly and spot market system after the 2008/9 financial crisis, when many steelmakers, especially in China, defaulted on annual contracts to take advantage of falling spot market prices.

Rio Tinto is currently selling iron ore to Korean, Japanese and Taiwanese buyers on a quarterly-lagged mechanism.

Its sales to China, which represent about 60% of the company's sale, are made on a mix of spot, monthly and quarterly prices.

Rio, the world's second-largest miner of iron ore after Brazil's Vale is continuing to invest heavily in iron ore, which it sees as one of the most profitable commodity in its portfolio as prices remain historically high although lower than a peak of almost $200 per ton hit in 2011.

Rio said last week it will spend $3.7-billion to increase iron-ore output in Australia by a further 25% to 353-million tons a year tonnes by 2015.

"Iron ore is a great commodity we are heavily investing in it, the margins are good and we expect margins to be good because we only invest in lowest cost projects," Davies said.

He added iron ore production cost at its main projects, in the Pilbara, Australia, and in Simandou, Guinea, would be cheap compared with other projects.

"We expect there will be 700-million tons of supply opportunity for producers to actually meet demand over the next seven to eight years and we expect to bring on about 25% to 28% of that."

Edited by: Reuters

Aluminium prices low but Indian companies getting high premiums

Even as Vedanta and Nalco bagged higher premiums for the lightweight metal, signalling a tightening market and limited metal availability, Novelis' new $100 million plant in China is set to boost demand.

London-listed mining group Vedanta Resources said it has sold 3,000 tonnes of aluminium ingots at a premium of $220 a tonne over the London Metal Exchange (LME) price in the Asian market.

India's state-run National Aluminium Company (Nalco) has also sold 8,000 tonnes of aluminium ingots at a premium of $202.80 per tonne premium over the LME price.

Earlier this month, the company had sold 4,500 tonne of aluminium ingots at about $180 per tonne premium over the average LME cash price. Buyers tend to pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.

Last Thursday (June 21), aluminum prices on the LME hit a two-year low. But for Indian firms, the time has been ripe to ink new deals.

Novelis Inc, the world's leading producer of premium aluminum rolled products, signed an agreement with the Changzhou National Hi-Tech District to build the company's first automotive sheet manufacturing facility in China. With a capacity of 120,000 metric tonnes per year, the plant will cater to the rapidly expanding Chinese automobile industry.

Novelis expects demand for aluminium in the global automotive sector to grow at a compound annual rate of 25% over the next five years.

In 2007, Novelis was acquired by Hindalco Industries and became part of the Aditya Birla Group in India. The latter already has announced investments of $1.3 billion (Rs 70 billion) to set up new facilities and expand the capacity of existing units.

The Novelis deal in China is especially significant since the top five alumina producers in China, including Aluminium Corp of China, said they would cut production by 10% from June due to the changes in the supply of bauxite imports.

Chalco has an alumina capacity of 14 million tonnes a year, making it the country's top producer of the material used for the production of primary aluminium.

Chalco is to cut alumina capacity by 1.7 million tonnes because the change in Indonesia's bauxite policy has affected the supply of imported bauxite for the company, Shandong Nanshan Group, Nanchuan Minerals Group, Xinfa Group and Gaoxin Aluminum and Power Companu, which has been the sole alumina supplier since January 2010 to aluminium producer China Hongqiao Group, have all decided to cut output.

Analysts say that aluminium smelters in China's Xinjiang province, which is aiming to become a key production hub of the metal, have been hobbled by costly power rates and are set to add only about a third to half of the capacity expansion originally planned for 2012.

In India, Vedanta Resources has said the increase in premiums over the LME was an outcome of global ``tightness in the physical market due to closure of smelters in recent quarters in the wake of low LME prices''.

In a statement, the company said aluminium premiums were also increasing because of ``highly profitable financing deals and business consumers have to compete with warehouses to get hold of metal from producers.''

South Korea too has purchased a total of 4,000 tonnes of aluminium at premiums ranging from $207.2 to $242 a tonne.

Analysts added that LME prices have remained subdued because of the current economic situation in Europe, but record high premiums are helping Indian companies. The say that an acute shortage of supply has prompted buyers to speed up settlements, since producers were cutting back output.

As demand remains strong, supply of accessible metals has been reduced considerably. Buyers are targeting ingots due to worries about short supply. However, growth in May shipments of aluminium have reportedly accelerated in both the US and Canada, an improvement from the smaller growth levels shown in April. Inventory positions improved slightly in both countries.

According to the US Service Center activity, 136,100 tonnes of aluminum products were shipped by US Service Centers in May, an increase of 6.8% from the same month in 2011. For 2012 year to date, aluminum shipments were 664,200 tonnes, an increase of 5.6% from the same period in 2011.

Inventories of aluminum products were 385,700 tonnes at the end of May 2012 an increase of 6.3% over May 2011 and an increase of 2.3% from April 2012.

Similarly, according to the Canadian Service Center activity, 14,600 tonnes of aluminum products were shipped by Canadian Service Centers in May, an increase of 17.2% from the same month in 2011. Year to date, aluminum shipments were 69,800 tonnes an increase of 14.2% from the same period in 2011.

Vedanta Group, India's largest aluminium producer, said premiums in the US and Japan have already reached their record-high levels and the scenario is expected to continue unless there is an increase in interest rates or reduction in LME spreads.

Aluminium prices are hovering around $ 1,878.50 to 1,920.50 a tonne on the LME.

Australia gold output declines for third consecutive quarter

Gold production in Australia declined by 5% quarter-on-quarter and by 4% year-on-year in the first three months of 2012, mining consultant Surbiton Associates reported over the weekend.

Australia produced 62 t of the precious metal in the first quarter.

Surbiton said in its quarterly review that this was the third consecutive quarter that gold production had declined, with lower output attributed to a number of factors, including the effects of wet weather.

“The March quarter often has lower gold production and this year was no exception,” said Surbiton director Dr Sandra Close.

“As well as the usual ups and downs, wet weather caused access problems in several mines, particularly in New South Wales and the Northern Territory, so there was greater reliance on treating lower-grade stockpiles, which reduced gold output.”

Also, the March quarter was one day shorter than the December quarter and Close said that this alone accounted for about two-thirds of a ton of gold output.

“Several of Australia’s largest operations, including Boddington, Cadia Hill and the Super Pit had lower output in the March quarter. Although, on the positive side, there are a number of new or redeveloped operations coming on stream,” she added.

At Newmont Mining’s Boddington mine, gold production fell by 43 000 oz, or well over a ton of gold, owing to lower grades being mined and fewer tons of ore being processed.

Ground slippage problems and heavy rain affected gold output at Newcrest Mining’s Cadia Hill operation in New South Wales, where production fell by 27 000 oz compared with the previous quarter.

The Super Pit, operation, which is 50% held by both Newmont Mining and Barrick Gold, regained its place as the largest Australian producer for the quarter, even though its output was down 16 000 oz owing to mill maintenance, which reduced the amount of ore processed.

“Some new or recycled operations have already commenced production in 2012, such as Ramelius Resources at Mount Magnet, while others will join the list of producers by the end of the year. Among these are a number of copper/gold producers including Osborne, DeGrussa and Kanmantoo,” Close said.

In Queensland, Ivanhoe Australia produced the first copper/gold concentrates from its reopened Osborne mine, near Cloncurry. Sandfire Resources shipped the first high-grade copper ore from its new DeGrussa copper/gold mine in Western Australia, while Hillgrove Resources’ Kanmantoo mine in South Australia, which was commissioned late last year, continued to ramp up production.

“In the near-term, output from these new copper/gold operations is offset by the closure of the openpit at Xstrata’s Ernest Henry operation in Queensland, which has been one of Australia’s largest gold by-product producers,” Close said.

“However, Ernest Henry is currently being redeveloped as an underground mine.”

She noted that by far the most significant new operation was Newcrest’s Cadia East gold/copper mine, near Orange, in New South Wales, which was slated to come into production around the end of this year.

“The Cadia East underground mine will replace the worked out Cadia Hill openpit and when it reaches full production around 2016, it will produce about 700 000 oz to 800 000 oz of gold and 100 000 t of copper annually,” Close said.

“It will be one of the largest underground mines in the world and by far the largest in Australia.”

Close added that there was also a string of medium to small gold operations that should begin production later this year. These include Regis Resources’ Garden Well operation in Western Australia, which should produce over 200 000 oz/y of gold and Millennium Minerals’ Nullagine plant, scheduled to produce about 100 000 oz of gold yearly.

“Each is not large but taken together they amount to a steady supply of new projects that replace those that are worked out and closed.”

Despite the decline in output, Close noted that there was still considerable focus on the gold price.

“Despite its volatility in US dollar terms since the start of the year, it has been much less variable in Australian dollar terms, due to exchange rate variations,” she said.

The US dollar gold price rose early in the year to peak at near $1 800/oz in late February and has now fallen to below $1 600/oz. By comparison, since the start of the year, the Australian dollar price has fluctuated in a narrower range, averaging around A$1 600/oz over the period. Over the same period the Australian dollar has varied some 10c against the US currency.

“Irrespective of the vagaries of the gold price and exchange rate variations, uncertainty remains on world markets,” Close said.

“While the European financial crisis is the current concern, many of the other factors affecting global financial, economic and political uncertainty remain and these problems are not going to be solved quickly.”

Royal Nickel starts formal search for project partner

With the revised prefeasibility study (PFS) for the Dumont nickel project completed, TSX-listed Royal Nickel on Monday said it would now focus on securing a partner to develop the project in Québec.

The company said it would start formal discussions with interested parties and that it would invite prospective partners to submit proposals.

"The hard work continues as our team has turned its full attention to key near-to-mid-term milestones, such as the project partnership and finance process and advancing the feasibility study, which is already under way,” CEO Tyler Mitchelson said.

Royal Nickel recently announced the results of its updated PFS for the Dumont project, boosting its net present value by 31% to $1.4-billion.

The improved study also lifted its after-tax internal rate of return to 19.5%, from 17% in the November PFS.

Yearly nickel production would average 108-million pounds during Dumont’s 19-year mine life. It would then produce 63-million pounds a year for the subsequent 12 years from processing the lower-grade stockpile.

Edited by: Mariaan Webb

Iron-ore spot rally may stall on weak China steel market

Spot iron-ore prices may struggle to stretch gains this week, as supply out paces demand
with China's steel market staying sluggish, raising the risk for traders hoping to resume a recent 10-day rally.

Price offers for imported iron-ore cargoes in China, the world's biggest buyer of steel's raw material, were steady on Monday, although major miners Vale and BHP Billiton are slated to sell cargoes via tenders, traders
said.
"It seems we are in an oversupplied market but there are some people out there who have a lot of cargoes and are trying to keep the market artificially up," said a Singapore-based iron-ore trader.

"If you're a trader and you have 3-million tons which you bought at $135/t, you have an interest to try and keep the market up to be able to sell those 3-million tons at a higher level."

Benchmark iron-ore with 62% iron content was unchanged on Friday at $137.40 a ton, with
China away on a public holiday, after a 10-day rally that pushed up the price to a six-week high on Thursday, based on data from Steel Index.

The 10-day rise was iron-ore's longest winning streak since mid-November, when it climbed for 14 days in a row. Behind the rally were traders betting that high steel output in China will push mills back into the spot market to restock.

Iron-ore prices usually rise along with steel prices in China. But the recent rally transpired even if Chinese steel prices remained largely weak amid soft demand in the world's top steel market, suggesting prices of the raw material may struggle to build on recent gains.

"If it's up to the mills, I don't think they're going to be very excited at the moment," said another trader in Singapore. "It's still hand-to-mouth for a lot of them. So sooner or later, fundamentals will prevail and the market will inevitably come down."

The most-traded steel rebar contract for October delivery on the Shanghai Futures Exchange was down 0.2% at
4 112 yuan ($650) a ton by the midday break. It hit a session trough of 4 095 yuan, its lowest since June 14.
Physical iron-ore prices were largely flat, said a Hong Kong trader, ahead of sale tenders by Vale and BHP Billiton.
Brazil's Vale is offering 250 000 t of 60% grade iron-ore, while BHP Billiton will sell a combined 170 000 t of 62.7% grade Australian Newman iron-ore fines and 57.7% grade Yandi fines, traders said.

Edited by: Reuters

Coeur assessing alternatives for Argentina mine

New York- and Toronto-listed Coeur d'Alene Mines said it would evaluate strategic and operational alternatives for its Martha mine, in Santa Cruz, Argentina, to reduce its high operating costs during the remainder of the mine’s short expected mine life.

The US-based precious metals producer also planned to maximize cash flows from the underground silver and gold mine by reducing operating costs and increasing the processing of above-ground stockpile material during the remainder of 2012.

The company expected an impairment charge, which would be recognized during the second quarter of the year.

Meanwhile, Coeur said it also aimed to raise $350-million through the sale of senior notes.

The proceeds from the notes, which would be sold to qualified institutional buyers, would be used to fund internal and external growth initiatives and for general corporate purposes.

Earlier in June, the company authorised a share buyback programme of up to $100-million of the company’s common equity, representing about 5.3-million, or nearly 6% of the company’s outstanding shares.

The company also agreed to buy 10.75-million shares at 28c a share, worth $3-million, in silver explorer International Northair Mines.

Coeur d'Alene Mines operates the San Bartolomé silver mine, in Bolivia, the Palmarejo silver and gold mine, in Mexico, the Martha silver and gold mine, in Argentina, and the Kensington gold mine, in Alaska.

Edited by: Mariaan Webb

Monday, June 25, 2012

Oro Verde delivers further broad copper, gold mineralisation at Chuminga

Oro Verde continues to receive confirmation of the widespread copper and gold mineralisation at its Chuminga project in Chile.

The fourth drill hole, SD-2, returned an assay of 48 metres at 0.78% copper and 0.09 grams per tonne gold.

It targeted the same copper-iron oxide breccia mineralisation seen in the first diamond core hole, which had returned 61 metres at 0.90% copper and 0.15g/t gold and was noted to be thickening down dip from surface to the east.

Oro Verde is testing around 300 metres of mineralised breccia in the current first phase 12-hole, 2,140 metre drilling program.

Chuminga progress
Four key holes have now been drilled at Chuminga as vertical holes on four sections with assay results returned on all four holes.

A further two angle holes are planned on each of these sections subject to a change out of the current drilling rig to achieve this.

An infill stream sediment program is currently following up previously delineated anomalies and the alteration features delineated by ASTER satellite imagery. This will delineate targets for further detailed evaluation.

Chuminga, in which Oro Verde holds a 20% interest, has an exploration target of 50 to 60 million tonnes of between 1% and 1.1% copper, 0.3 to 0.4 grams per tonne gold and 0.5 to 1% zinc, suitable for bulk mining.

It is strategically located in a region hosting several world class copper mines including Mantos Blancos, Chuquicamata and BHP Billiton’s Escondida.

Source: http://www.proactiveinvestors.co.uk

Anglo and Codelco like the boy who cried wolf: dispute deadline moved to July 17

London-based Anglo American (LSE:AAL) and Chile's state-owned Codelco did not come to an agreement on Friday, as they had previously announced, regarding disputed copper assets that has had the miners engaged in a bitter legal confrontation for months. Instead they have agreed to extend the talks until July 17.

Anglo said today that both parties requested the continued suspension of their legal proceedings at the 14th Civil Court of Santiago to extend the period for exploring an agreement in relation to Anglo American Sur.

Investors are closely watching this case to see if the parties can finally achieve a deal before the new self-imposed deadline expires. If not, then they will go back to court and extend the dispute for years, damaging their reputation and likely affecting their respective business.

As a State-owned company, Codelco’s potential defeat would be a bitter political blow with uncertain ramifications.

Anglo, on the other hand, faces pressure from its shareholders as it needs to prove the recent $2.8 billion invested in the Los Bronces copper mine, one its Sur division’s operations, won’t be in vain. If Codelco wins Anglo would lose its 100% ownership as a consequence.

Since 2011, the world's largest copper producer and Anglo are fighting over contracts affecting the diversified miner’s division in the South of Chile, home for the world’s fifth largest copper mine.

In late May, the parties agreed to put their legal battle on hold until June 22 to explore the chance of reaching an agreement. A day after this announcement, Codelco CEO Diego Hernandez resigned claiming “personal reasons,” which gave room for speculations.

The clash between Anglo American and Codelco goes back to November last year, when the copper giant decided to exercise an option and Anglo American responded by selling a 24.5% stake in its southern Chilean division to Japan’s Mitsubishi Corp. for $5.39 billion. By doing this, Anglo undermined Codelco plans to exercise its option, something that the copper miner could only have done in January.

A failed attempt by Codelco to force Mitsubishi to hand over the particulars of the deal in December drove the Chilean company back to the courts by formally informing Anglo American that it was “exercising its legal option” to buy the contested 49% in Anglo Sur.

If an agreement is not possible, then Chilean courts will have to settle the conflict.

Anglo American is one of Chile’s largest foreign investors.

Asian demand for diamonds set to boom

While in the short term, demand for diamonds globally is struggling, analysts say demand from China and India is set to far outpace the annual 2.8% supply growth.

India's diamond exports crashed by more than 44% in May as compared to a year ago period, sparking off panic in the diamond cutting and polishing industry. Though imports of rough diamonds also fell 20% in May, the country's rough diamond imports had jumped 20.3% the month before, in April.

The ``unexpected increase'' in April came under intense scrutiny from government officials, especially since the polished diamond trade was flat at that time. Diamantaires told the visiting regulatory officials that demand for diamonds in India and China is set to far outpace supply, which is limited to production at a small number of mines worldwide.

"The demand for diamonds is set to boom. There is no doubt about this. It will be driven primarily by the growth of the markets in China and India,'' said Maneesh Dhukaje from Hare Krishna Exports, a diamond trading firm.

In India alone, he noted, the market for diamonds is expected to grow faster than that for gold over the next five years, with some estimates pegging it at 1 trillion rupees. During the same time, India and China are expected to represent half the global growth in demand for diamonds.

Meanwhile, at the Hong Kong Jewellery and Gem Fair that concluded last week, some strain was evident in the business community, with most Indian dealers speaking about the external factors that had influenced the market. Traders also referred to the `silence' from the US market, which remains the biggest market for diamond jewellery in the world.

However, demand for light-weight diamond jewellery by China and India's rapidly expanding middle class consumers could counterbalance the expected drop in demand from key markets, traders added.

Consulting firms also have predicted that prices of rough diamonds are set to rise between 3% and 10% due to demand from emerging markets like China, India, Hong Kong and UAE, given the gradual decrease in global production of rough diamonds.

Traders said demand for diamonds is on the rise in India with the affluent class wearing more of them as a style statement and the middle class consumer shifting to the 16-18 carat gold diamond studded jewellery style that is most preferred in the major metros.

Diamond jewellery with low carat gold also appears to have found pride of place in smaller areas and districts of India, especially in Tier-II and Tier-III cities.

"People in these smaller cities are going for 14 carat diamond jewellery sets and even 12 carat sets to suit their shoe-string budgets instead of the usual 18 carat diamond studded jewellery pieces,'' said Dhukaje.

He added that the demand for diamond necklaces and bangles was especially on the rise in smaller cities.

The Indian diamond industry imports rough stones which are cut and polished within the country before they are exported. This part of the business took a major hit in May this year. According to data released by the Gems and Jewellery Export Promotion Council, exports of cut and polished diamonds fell from 51,22,000 carats in May 2011 to 25,74,000 carats in the corresponding period of this year.

In value terms, the fall in exports was from $2,240 million to $1,245 million in the same period. The decline in May was steeper than in April this year, which saw exports decline 35% in terms of value as compared to April 2011.

Diamond traders are blaming the fall in exports to the imposition of a 2% import duty on cut and polished diamonds on January 17 this year, which most traders say has resulted in a dramatic reduction. India's polished diamond exports for fiscal 2011-12 slipped by 17.3% immediately thereafter, say traders.

"At the start of January this year it was a completely different scene. Net polished diamond exports, which is the excess of exports over imports, was recorded at $828.35 million in January 2012, which was a considerable increase considering that the there was a deficit of $84.17 million in January 2011. Net rough diamond imports, which is imports less exports, also rose by 3% to $940.82 million,'' said Shashi Jariwala, diamond trader and exporter.

"Though margins are lower, cut and polished diamonds are imported for the purpose of value addition,'' he added. India imported $1.58 billion worth of roughs in April, up 8.4% as compared to March. The volume of imports also increased, up 42.2% to 14.2 million carats. The average value of imports totalled $111.41 per carat.

Newmont accepts stricter conditions for Peru mine

Newmont Mining said on Friday it has accepted a stricter environmental mitigation plan for its $4.8-billion Conga gold mine and could resume work on the massive project.

Conga, the biggest mining project ever proposed in Peru, has been stalled since November because of ongoing protests by community groups who say it would hurt water supplies and cause pollution.

Newmont said that before the mine is built it will first build reservoirs that will guarantee year-round water supplies in towns that currently suffer shortages.

In an attempt to quell protests, the government had hired outside experts to recommend improvements to the company's own environmental impact plan.

President Ollanta Humala said on Thursday that Newmont had "finally identified" with the recommended changes that urged the company to build larger reservoirs that would replace two or more in a string of alpine lakes..

Humala is slated to address the issue on Saturday in a nationwide address where he is expected to call for more mediation to calm dozens of social conflicts over the spoils of natural resources.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said in a statement.

"We share the government's call for dialogue, for the vast majority of civil society in Peru," Santa Cruz said in reference to local political leaders in the northern Andean region of Cajamarca who are leading protests to halt the mine. Gregorio Santos, the president of Cajamarca, did not immediately react to Newmont's announcement.

Conga, which is partly owned by local miner Buenaventura , would produce between 580 000 oz/y and 680 000 oz/y of gold.

Peru, which has vast mineral resources, is the second largest producer of copper and sixth of gold, but many mining communities suffer from widespread poverty and complain Peru's decade-long economic boom has passed them by.

Source: Reuters

*************************************************************************************************************

Minas Conga Project:

Conga Project - Water First, mine later

Australian gold output falls for 3rd straight quarter

The Australian Gold Quarterly reported gold production in the country dropped 4% during the March quarter, compared to a year ago, due to a number of factors.

Australian gold production fell for the third consecutive quarter with 62 tonnes reported for the first quarter of this year, a 5% drop from the fourth-quarter 2011.

In the most recent issue of Surbiton Associates' Australian Gold Quarterly, Managing Director Dr. Sandra Close said, "As well as the usual ups and downs, wet weather caused access problems at several mines, particularly in the NSW and the NT, so there was greater reliance on treating lower grade stockpiles which reduced gold output."

"Several of Australia's largest operations, including Boddington, Cadia Hill and the Super Pit had lower output in the March quarter," Close said.

At Newmont's Boddington mine, gold production fell by 43,000 ounces (or more than a tonne of gold), due to lower grades being mines and fewer tonnes of ore processed.

Meanwhile ground slippage problems and heavy rain affected gold output at Newcrest Mining's Cadia Hill operation in New South Wales, where production fell by 27,000 ounces.

Although production at Newmont and Barrick's Super Pit at Kalgoorlie was down 16,000 ounces during the first quarter due to mill maintenance, Close noted the operation regained its spot as the top Australian gold producer during the quarter.

The top five gold producers for the March 2012 quarter were: Newmont Mining/Barrick Gold's Super Pit JV, 182,000 ounces; Newmont's Boddington Mine at 162,000 ounces; Newcrest Mining's Telfer Mine at 135,684 ounces; Gold Fields' St. Ives Mine at 120,340 ounces; and Newmont's Jundee Mine at 91,000 ounces.

"The March quarter often has lower gold production and this year was no exception," Close observed. The March quarter is also one day shorter than the December quarter, which she said alone accounts for about two-thirds of a tonne of gold output.

In her analysis, Close noted a number of copper-gold producers have already commenced or will go into production this year.

In Queensland, Ivanhoe Australia produced the first copper-gold concentrates from its re-opened Osborne mine, near Cloncurrey. Sandfire Resources shipping the first high-grade copper ore from its new DeGrussa copper-gold mine in Western Australia. Commissioned last year, Hillgrove Resources' Kanmantoo mine in South Australia continues to ramp up production.

Close said that by far the most significant new operation is Newcrest Mining's Cadia East gold-copper mine, near Orange, New South Wales, which is scheduled to come into production at the end of this year.

"The Cadia East underground mine will replace the worked-out Cadia Hill open pit and when it reaches full production around 2016, it will produce about 700,000 to 800,000 ounces of gold and 100,000 tonnes of copper annually," Close noted. "It will be one of the largest underground mines in the world and by far the largest in Australia.

"There is also a string of medium to small gold operations which should begin production later this year," she added. They include Regis Resources' Garden Well operation in WA, which should yield more than 200,000 ounces of gold annually and Millennium minerals' Nullagine plant, scheduled to produce about 100,000 gold ounces annually.

In her analysis, Close advised, "There is still considerable focus on the gold price. Despite its volatility in US dollar terms since the start of the year, it has been much less variable in Australian dollar terms, due to exchange rate variations."

The U.S. gold price peaked near US$1,800 per ounce in late February and now has dropped to below US$1,600 per ounce. By comparison, the Australian dollar has fluctuated in a narrower range, averaging around A$1,600/oz since the start of this year. During the same period the Australian dollar has varied some 10 cents against the U.S. currency.

"Irrespective of the vagaries of the gold price and exchange rate variations, uncertainty remains on world markets," Close observed. "While the European financial crisis is the current concern, many of the other factors affecting global financial, economic and political uncertainty remain and these problems are not going to be solved quickly."

To obtain a copy of the most recent issue of the Australian Gold Quarterly Review, go to www.subiton.com.au

The Gold Forecast Special Report The Fed Speaks June 20, 2012

"Let's twist again like we did last summer, Let's twist again like we did last year."Chubby Checker

Perhaps it is fitting that the Twist is the solution that issued from the latest FOMC meeting. It is rooted in action taken during the Kennedy administration of the early 1960s, an administration that also sought to tamp down high long term rates.
Net result? Today gold slipped by $10 and silver by 30 cents, or 1%.

The Twist is designed not so much to insulate the government from its own profligacy, but to convince the poor, timid banks - who lent a huge helping hand in creating the mess we're in - to lend money to private-sector borrowers such as businesses and prospective buyers of homes. Well, you can bet the financiers are laughing all the way, well, um, to the bank on the Fed move. Citigroup economists dissent from the consensus: "There are greater doubts now about the net benefits from the usual." (Usual courses of action.)

We are in an era of paralysis. The left wants more direct stimulus and the right more budget cutting and tax cutting. But, when either side somehow seizes momentum, they come up with half-baked measures. (Hint to the left: you can only underwrite so many social programs. Hint to the right: you can't cut the budget without cutting defense and raising the retirement age for Gen X and Gen Y.)

The effect on gold is to buffet it (no pun intended) from safe haven to risk play, to hedge against the euro, to hedge against U.S. Treasury paper. So even when we have a rally, you can almost feel the ropes thrown around the bull. Insecurity is bad for business. Fear is not the proper environment for growth. We are out to sea. Let's hope gold provides us at least a compass or even better, the anchor the economy is looking for.

Source: The Gold Forecast

Sunday, June 24, 2012

Gold Market Review - 22 Jun 2012

This week: The Fed extends Operation Twist but goes no further. Gold and silver both fall, with silver registering a new low..

Source: Bullion Vault

Miners have made a gold ETF monster: Jon Nadler

The uninterrupted rise in gold ETFs has created an untested investment vehicle that could turn against the people holding it, said Kitco economist Jon Nadler in an interview with Bloomberg.

"The problem is this instrument has not experienced a sideways—let alone a downward phase—in prices after 12 years of non-stop gains," said Nadler.

He says the the effect of ETFs has been to accelerate the price movement of gold.

Physical gold demand from jewellers used to create a brake on prices. Nadler says the high prices of gold have decimated the jewellry sector. Tonnage demand is at a 25-year low.

"I think the gold miners have created a Frankensteinian monster," says Nadler. "I get a lot of email from jewellers, not only from India, pleading when will be able to make a living again."

Nadler believes gold could breakdown around the $1,526 support area, which has been touched four times recently.

"If that is shattered on a closing basis for several days, I think we are looking in very short order to the mid-1400s or 1300 target."

Nadler still recommends a 10% insurance position in gold but cautions investors not to obsess about gold performance. Rather, try to treat gold like a central bank and save it for a rainy day.

"If it doesn't come, terrific. Enjoy the rest of your investment life."

Junior mining company executive compensation in 2011-2012

Jack Caldwel

Jack Caldwell, P.E. has a B.Sc. in Civil Engineering, an M.Sc. (Eng.) in Geotechnical Engineering and a post-graduate law degree. He has over 35 years engineering experience on mining, civil, geotechnical and site remediation projects. He has worked on numerous projects throughout southern Africa, Europe, Canada and the United States. You can follow his blog at I THINK MINING.

Yesterday I blogged about the compensation of CEOs of major mining companies in Canada and the United States. Today let us turn to the stalwarts of the industry, namely the executives of junior mining companies. They are the entrepreneurs who find, prove, promote, and generally sell promising ore bodies to mid and major mining companies. Do they get the remuneration they deserve for the risks they take?

For CostMine and their 2011 Surveys of Salaries, Wages and Benefits in Canadian and US Mining Companies here are some numbers—all in thousands of US dollars for the year 2011.

First the total compensation of executives of Canadian junior mining companies- I give the maximum, average, and minimum:

  • CEO = 2,637/1,376/103
  • President = 2,637/1,376/103
  • Vice-President = 2,637/873/124
  • CFO = 1,442/873/124
  • COO = 1,733/1,187/342

These compensation packages include salary, share-based awards, option-based awards, non-equity incentive plans, and “all other compensation.” Actual salaries are less. Here are the numbers:

  • CEO = 631/324/89
  • President = 631/343/89
  • Vice-President = 404/245/114
  • CFO = 310/208/60
  • COO = 400/336/200

Here are the salaries for executives of American junior mining companies—for metal and industrial mineral mines:

  • CEO = 631/505/38
  • President = 900/493/30
  • Vice-President = 367/253/37
  • CFO = 367/292/128
  • COO = 500/330/183

The US highs are higher; the lows are lower; and the averages just about the same. There really are no junior coal mining companies, so no comparable numbers.

None of these high-up mining folk needs be ashamed of what they get—except perhaps those below the $100,000 mark. The point is that but few would qualify as one percenters, and most are normal middle-classers. We wish them success with their searches.

By Jack Caldwell

Peru's Humala says water guaranteed near Newmont mine

Peruvian president Ollanta Humala said on Saturday Newmont Mining would ensure ample water for towns near its proposed Conga gold mine, and that his government would not allow new mines to open if they hurt water supplies.

U.S.-based Newmont on Friday accepted a stricter environmental mitigation plan for its mine, which will now require total investments of $5 billion, making it the most expensive mine in Peruvian history.

Newmont said that before the mine is built it will first build larger reservoirs that will guarantee year-round water supplies in towns currently suffering shortages. The bigger reservoirs are expected to add up to $200 million to the project's original $4.8 billion price tag and take up to two years to build.

"We can and will make sure the company guarantees water supplies. This is my promise to Cajamarca," Humala said on Saturday. "My government won't permit the development of any mining project that exposes the local population to water shortages or to water that doesn't meet quality standards for human consumption."

The larger-capacity reservoirs were recommended by outside experts hired to improve upon Newmont's own environmental impact plan in an attempt by the government to quell protests that have stalled work on the mine since November. The water project would replace two or more in a string of alpine lakes.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said on Friday.

"We share the government's call for dialogue, for the vast majority of civil society in Peru," Santa Cruz said in reference to local political leaders in the northern Andean region of Cajamarca who are leading protests to halt the mine.

Gregorio Santos, the president of Cajamarca, criticized Humala on Saturday and reiterated that Conga "isn't viable." Santos' term ends in 2014.

Conga, which is partly owned by local mining company Buenaventura , would produce between 580,000 and 680,000 ounces of gold annually.

Humala also said he would lift emergency rules that several weeks ago banned freedom of assembly in the southern region of Cusco over protests against Xstrata's Tintaya copper mine. All sides in that dispute over voluntary contributions to the municipality of Espinar are now in settlement negotiations.

Peru, which has vast mineral resources, is the second-largest producer of copper and sixth-largest of gold, but many mining communities are poor and complain Peru's decade-long economic boom has passed them by.

Source: Reuters

Newmont 'identifies with' Peru mine requests -Humala

Peruvian President Ollanta Humala said on Thursday Newmont Mining has "finally identified" with stricter environmental mitigation plans the government requested for the Conga gold mine project.

Humala did not say if the company had specifically told the government that it would accept calls for a more demanding environmental plan and move forward with the $4.8 billion project, which would be Peru's largest mining investment ever.

Conga has been stalled since November over protests by community groups who say it would hurt water supplies and cause pollution. The government has sought to mitigate the conflict by asking Newmont to make slight changes to its proposal.

"We welcome the fact that they have finally identified with our proposal," Humala told reporters when asked if Newmont had accepted recommendations to build larger reservoirs that could replace two or more alpine lakes.

Newmont, which says the project would guarantee year-round water supplies in towns that currently suffer shortages, declined to immediately comment on Humala's statement.

In an attempt to quell the protests against the mine, the government hired outside experts to recommend improvements for the project's environmental impact plan.

Conga, which is partly owned by local miner Buenaventura , would produce between 580,000 and 680,000 ounces of gold annually.

Newmont said last month that it would take a decision in late June on whether to push ahead with the project.

Peru, which has vast mineral resources, is the second largest producer of copper and sixth of gold, but many mining communities suffer from widespread poverty and complain Peru's decade-long economic boom has passed them by.

Source: Reuters

Saturday, June 23, 2012

Colombia reserves 17.6m hectares for mining in east

Colombia has put aside 17.6-million hectares of land for future use by the mining industry, mainly in precious metal- and oil-producing eastern regions, to bring more order to the licensing process, the government said on Thursday.

The world's No 4 coal exporter has seen an investment boom in oil and mining since a US-backed security offensive began a decade ago, but accidents, allegations of corruption, permit delays and inefficiency have plagued the industries.

The government of President Juan Manuel Santos is trying to reform the sector, streamlining licenses, consolidating oversight and strengthening institutions.

Energy Minister Mauricio Cardenas said 17.6-million hectares - an area larger than Greece - were designated "Strategic Mining Areas" in Vichada, Guainia and Vaupes provinces as well as in Guaviare, Amazonas and Choco.

Cardenas said, however, that the majority of the land is in areas rich in biodiversity and protected zones, but officials would pick specific regions and auction them off for mining.

It was unclear how many hectares would be auctioned off.

The areas, mainly in the east along the border with Venezuela, are not major mining zones like Antioquia or other central provinces, and are unlikely to have a large impact on national output in the coming years.

Security in some of the zones is also tricky due to new criminal gangs, born partly out of demobilisation in the 2000s of paramilitary groups that operated in many of the departments.

Colombia has seen a surge in oil and mining investment thanks to a decade-long US-backed crackdown against leftist rebels and illegal armed groups.

A flood of new players has emerged to profit from government policies aimed at luring foreign investors to the country.

Source: Reuters

Glencore protests at Bolivia mine nationalisation

Angered by the nationalisation of a tin and zinc mine in Bolivia, global commodities firm Glencore said on Friday it may seek compensation domestically or abroad.

Bolivia's leftist government, headed by Evo Morales, took over operations at the Colquiri mine on Wednesday after weeks of violent protests.

Morales, who has already nationalised the Andean country's natural gas and electricity industries, said the decree brought the local operating company Sinchi Wayra - which has been owned by Glencore since 2005 - back into state hands, resolving the dispute between employees and independent miners that has left 18 injured.

Glencore said on Friday that it would seek an orderly handover of control of the mine but condemned the government's action.

"Glencore strongly protests the action taken by the government of Bolivia and reserves its rights to seek fair compensation pursuant to all available domestic and international remedies," the company said in a statement.

Liberum Capital analyst Dominic O'Kane said the mine was "tiny" in the context of Glencore's international operations.

"It's a tiny, tiny mine. It's not particularly significant. It's a small negative," he said.

However, Glencore queried the effect the move would have on foreign investment in Bolivia, where Morales is seeking to capitalise on high metals prices with sweeping mining reforms.

"The action taken by the government of Bolivia will pose a number of serious questions relating to the government's future policy towards foreign investment in the mining sector," Glencore said.

It said it had paid over $300-million in fees to Bolivia, including over $70-million for Colquiri, and would have invested over $160-million over the next five years in the country.

Glencore shares were down 2.4% to 315 pence at 11:54 GMT, compared to a European mining index down 1.7%.

Source: Reuters

Anglo, Codelco seek negotiation extension

Analysts suggest that the request to a local courtby the two companies to extend the negotiation window to July 17th suggests they two parties are close to resolving a bitter dispute

Global miner Anglo American Plc and world No. 1 copper producer Codelco have asked a local court to extend their negotiation window to July 17 from June 22, the companies said in separate statements on Friday.

The mining titans requested the extension "to allow talks to continue," suggesting they may be close to a deal to end a bitter dispute over coveted copper assets.

"Anglo American and Codelco have agreed to extend the period for exploring the possibility of negotiating an agreement in relation to Anglo American Sur," the companies said.

A source who is close to Codelco's legal team told Reuters earlier on Friday the companies requested a July 17 conciliation session. Reuters had exclusively reported on Thursday that the companies would seek more time to talk.

Investors have been watching to see if Chile's state-owned copper giant Codelco and Anglo will hash out a deal or whether they return to a courtroom for a showdown that could drag on for years.

"This means they're well on their way to a deal," said Juan Ignacio Guzman, mining professor at the Universidad Catolica.

The contract conflict between Codelco and Anglo centers on an option agreement dating to 1978.

Codelco said in October it would exercise the option to buy a 49 percent stake in Anglo American Sur (AAS) when the option window opened in January.

But weeks later, Anglo surprised everyone with the pre-emptive sale of a 24.5 percent stake in AAS to Mitsubishi Corp, in a $5.4 billion deal that dented Codelco's ambitions but which it says secured better value for investors.

Since then, the firms have been tussling for the properties, which include the promising Los Bronces mine that used to be called La Disputada, "the disputed one," in Spanish.

"Mitsubishi and Mitsui are also at the table negotiating," Guzman said. "(They) also have to give their opinion. Any deal affects them."

Codelco said in October it had secured a $6.75 billion bridging loan from Japan's Mitsui & Co to allow it to exercise its option.

Los Bronces, which could at its peak be the world's fifth-biggest copper mine, stands out in a red metal market defined by its lack of new deposits.

Anglo expects its ramped-up mine to more than double annual copper output from 2010 levels in its first three years of full production, before ebbing on dwindling ore grades. It could produce a peak of 490,000 tonnes of copper annually.

A slice of the prized properties would be a major boost for Codelco, which is battling stubbornly dwindling ore grades in its tired deposits as it seeks to boost its annual output to 2.1 million tonnes by 2020.

Source: Reuters

Thursday, June 21, 2012

OPINION: Politicians will prop up the fiat system no matter the cost

David Levenstein believes that the world's current policy makers are going to make sure that the fiat monetary system remains intact, at any cost.

Thanks to all the media hype about the Greek elections, many people around the world were beguiled into believing that this small country had the power to decide the fate of the euro itself as well as the financial state of the entire world. But, in reality, nothing could be further from the truth. This tiny county has the thirty-fifth largest economy in the world and an exit from the Eurozone would not have caused a global meltdown. However, a default on its debt would have certainly caused some large losses for bond holders of Greek sovereign debt. Nevertheless the narrow margin win by the New Democracy party gave the some relief to the Eurozone. In response to the news, there was brief rally that did not last long as investors and traders realised that the Greek election results have little to do with resolving the underlying problems in the Eurozone. Greece is merely a small part of a much broader crisis whose epicentre has now moved to Spain and Italy.

Many voters found themselves in a total quandary as they wondered who to vote for after years of being lied to by their political leaders. It is like having to choose the best of a bad bunch of grapes. But, for now, the leaders of the Eurozone have some breathing space as the Greek people voted for pro-austerity party New Democracy.

The conservative New Democracy (ND) which supports the current terms of the bailout package agreed to between Greece and the so-called "Troika" of the European Union (EU), International Monetary Fund (IMF) and the European Central Bank (ECB) eked out a victory in Greece's parliamentary elections on Sunday, edging out the leftist Syriza party, which is strongly opposed to the austerity measures imposed as part of the country's bailout. The margin was less than 3 points.

In the meantime Spanish bond yields have risen to a euro-era record, well north of 7% after the Eurozone partners agreed to extend up to 100 billion euros ($125 billion) to rescue Spain's banking sector that crashed in 2008. While the bailout eased concerns about the risk of a total collapse it didn't restore any confidence from markets as the yield on Spain's 10-year government bond jumped sharply by 25 bps to 7.13%, for the first time ever and thus increasing the risks that the Spanish government will need a full bailout of 350-450 billion euros rather than just up to 100 billion euros for its banks.

The Bank of Spain reported that bad loans as a percentage of total Spanish lending rose to 8.72% in April from 8.37% in March, the highest since 1994.

Moody's recently downgraded Spain to one notch above junk status. Moody's also downgraded the credit rating of Cyprus to Ba3 from Ba1 and is on review for further downgrade. It noted that its' banking sector is heavily exposed to Greece.

Last week, another rating agency, Fitch slashed Spain's sovereign credit rating by three notches to BBB. Fitch rating managing director Ed Parker warned that Spain could miss the deficit by a "substantial margin" next year. Parker also said that if they see "further worsening or more general intensification of the Eurozone crisis, then further negative news could lead to further negative rating action."

In the meantime, Spain's Prime Minister Mariano Rajoy told reporters that the deal ensured "the credibility of the euro" and insisted that rather than buckling to pressure for the rescue, he had sought it all along.

His government has vowed to slash Spain's public deficit from 8.9% of total economic output last year to just 5.3% this year and 3.0% in 2013.

But, economists say Spain faces a daunting task achieving those goals in a period of recession, which reduces tax income, and with unemployment at 25% which raises welfare costs.

A US independent rating agency, Egan-Jones warned that Spain and Italy could need a full-scale bailout within six months. Founding Partner and President Sean Egan said that "it makes little sense to separate the banks' credit quality from the governments' credit quality". He predicted that Spain will be "back at the table" and ask for more than the EUR 100b they sought.

Last Thursday, U.K. Chancellor, George Osborne, said at the annual Mansion House address that the Bank of England will activate an emergency lending program. The UK Treasury and the central bank have agreed to launch a scheme to stimulate bank lending by offering to loan banks funds at below market rates for a period of perhaps 3 to 4 years. The BOE will also activate the Extended Collateral Term Repo facility which provides 6-month liquidity against a wide range of collateral. Governor, Mervyn King, stated that "the other effect of the euro area crisis has been to create a large black cloud of uncertainty hanging over not only the euro area but our economy too, and indeed the world economy as a whole... With signs of a deterioration in the outlook, especially in world markets, the case for a further monetary easing is growing". His statement to suggest that further asset purchases would probably be announced at the upcoming BOE meetings.

As mainstream economists, central banks, politicians, or bureaucrats fail to identify the root cause of the current financial and economic crisis and as the moronic masses continue to have faith in our current leaders, the prudent few, who see how today's fiat money regime is causing seriously harmful economic problems that will ultimately end in a depression on a grand scale, will take the appropriate action to protect themselves.

While weak economic data plagues headlines in Europe and the U.S. especially, and as our political and financial leaders find new controls to ring fence individuals in an attempt to stem potential capital flight, investors who see this, understand that gold and silver offer the only glimmer of hope these days.

TECHNICAL ANALYSIS

Gold prices are trading above the 50 day MA which is a positive sign. However, prices will need to break through $1625 an ounce to confirm that this up trend has resumed.

About the author

David Levenstein began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients. www.lakeshoretrading.co.za

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.

Molycorp shares rise as China denies interfering with rare earth prices

The lingering uncertainty around Chinese exports sent Molycorp's shares as much as 12.8% higher to $23.29 on Wednesday morning on the NYSE, with the stock later trading up 8.9% at $22.50.

Shares of Molycorp Inc rose more than 12 percent on Wednesday after China denied it was interfering with rare earth prices, saying increases reflected higher customs costs and demands by foreign companies for better-quality products.

China, which exports most of the world's rare earth supplies, also challenged foreign estimates of its resources, saying it has just 23 percent of world totals, not the 36 percent that the United States has estimated.

China's state economic planners are considering ways to reshape the country's program of stockpiling strategic materials and could include metals such as rare earths in the program, according to sources.

The lingering uncertainty around Chinese exports sent Molycorp's shares as much as 12.8 percent higher to $23.29 on Wednesday morning on the New York Stock Exchange, with the stock later trading up 8.9 percent at $22.50.

Molycorp is in the process of modernizing and reopening the Mountain Pass rare earth mine in California, which is expected to come online later this year.

Smaller companies developing rare earth projects in the United States and Canada also climbed, with Rare Element Resources Ltd and Quest Rare Minerals Ltd both soaring more than 10 percent.

China currently produces more than 90 percent of the world's supply of rare earths, essential for everything from smartphones to LED screens. Prices for the group of 17 metals skyrocketed last year as China imposed quotas in what it says is an effort to curtail environmental pollution and resource exhaustion.

"It's remarkable how when they need additional supply, they suddenly find reserves, but when they don't want there to be supply around and it supports their argument, then suddenly the reserves are shrinking," said Jon Hykawy, an analyst with Byron Capital Markets in Toronto.

In March, the European Union, the United States and Japan complained to the World Trade Organization that Beijing had illegally choked off rare earth exports while holding down prices for domestic manufacturers.

Despite a 30,184 tonne export quota in 2011, China says it shipped only 18,600 tonnes last year. The government has said the quota will remain steady in 2012.

Source: Reuters

Wednesday, June 20, 2012

China takes up India's gold buying slack

Consumers made the most of the dip in the price of bullion and mainland China's gold purchases via Hong Kong hit a record 101.7 tonnes in April, up 62%, according to figures released by the Hong Kong government and reported by Reuters.

Quarterly data from the Hong Kong census and statistics office showed the Middle Kingdom also exported much more gold – 34.3 tonnes of the yellow metal found its way back to Hong Kong bringing the net imports to 67.4 tonnes.

China's imports hit a record of 102.5 tonnes in November 2011 and for the whole of last year net imports were 380 tonnes, up from the roughly 120 tonnes in 2010.

The Wall Street Journal explains why gold is such a popular investment in China:

“Inflation [in China] is high and there is a low chance to invest in property and little desire to participate in the stock market. But disposable income is rising and people want to protect their wealth,” said Helen Lau, a senior metals and mining analyst at securities firm UOB Kay Hian.

China's renewed appetite for gold is in contrast to India, historically the number one global importer of the metal. The number one reason for the drop-off in demand is a rapidly weakening currency.

This year the rupee has devalued sharply lifting gold in the local currency to record highs of over 30,000 rupees per 10 grams.

India’s gold demand is expected to fall by 4% in volume in 2012 according to a new Morgan Stanley survey. India imports between 800 to 1000 tonnes of gold each year.

Indians already own 20,000 tonnes of gold worth $1 trillion – that's about half the GDP of the nation.