Friday, March 30, 2012

India's import duty stifles diamond "round tripping"

Duties on polished diamond imports have curtailed the repeated export and import of polished diamonds leading to a sharp decline in exports, a healthy sign government says

MUMBAI - India's polished diamond trade saw a sharp decline in February following the imposition of a2% import duty by the Indian government on polished diamond imports on January 17, 2012. Imports of polished diamonds have fell by 80% to $476.2 million by value during February. The Gems and Jewellery Export Promotion Council has termed it a "very healthy'' sign, despite the fact that the volume of exports sank 55%.

An official of the Council said that polished imports have reduced significantly since India imposed the duty on cut and polished diamonds. He said the measure taken by the government to curb the "round tripping", or repeated export and import of polished diamonds, is clearly paying off.

"The sharp fall has resulted in curbing of round tripping of diamonds, wherein traders undertake a series of exports and imports of the same goods for the purpose of receiving greater bank financing through import duty levy,'' said the official. He added that India exported $1.44 billion worth of polished diamonds in February, which was a 53.7% drop as compared to February 2011.

According to data from the Gems and Jewellery Export Promotion Council, in the current financial year till January 2012, India exported diamonds worth $19.7 billion and imported rough diamonds worth $12 billion, but the country's imports of cut and polished diamonds stood at $12.9 billion. Even in the corresponding period of the previous year, the country had imported cut and polished diamonds worth $15 billion, while its rough diamond imports stood at $9 billion and total diamond exports were $21 billion.

Allegations were rife that some traders were involved in importing cut and polished diamonds and re-exporting them, resulting in a net outflow of foreign currency from the country.

India allows imports of cut and polished diamonds since some Indian diamond processors have mining licences in African countries like Botswana, where they process and polish diamonds after mining. These companies then bring their polished diamonds to India.

Officials said the volume of exports in February 2012 declined by 69% to 1.4 million carats from the 4.5 million carats imported a year before. Earlier, when the Council had released its statistical report for 2010-11, officials said the Indian government had kept the industry under close scrutiny.

What also brought on the scrutiny was the huge import of polished diamonds worth $20 billion, which was an increase of 57% as compared to the previous year, said traders.

They added that the import of polished diamonds had risen significantly after 2008 and especially when the then finance minister P Chidambaram scrapped the 3% import duty. It was then that diamond traders indulged in round ripping.

Traders added that the import of polished diamonds was likely to decrease further in the coming months since the diamond firms have now come under the direct scrutiny of the customs department. Though the governmental measures are stymieing round tripping, traders have also voiced concern over the fact that the high tax regime could destroy India's role as a primary diamond trading hub.

B2Gold profit up on higher gold prices

Canadian miner B2Gold Corp reported a 68 percent rise in fourth-quarter adjusted profit, helped by increased output and higher gold prices.

B2Gold, which has two mines in Nicaragua -- La Libertad and Limon, posted adjusted net income of $23.3 million, or 7 cents per share, compared with $13.9 million, or 4 cents a share, last year.

Gold revenue for the fourth quarter rose 42 percent to $66.9 million. Gold production rose 5 percent to 38,808 ounces.

Vancouver, British Columbia-based B2Gold shares, which have gained more than 40 percent in the last three months, were up marginally at C$4.02 in early trade on Thursday morning on the Toronto Stock Exchange.

Rio Tinto follows Vale and joins Chinese Metals Exchange Market

Rio Tinto PLC (NYSE:RIO) became today the second iron giant to join the new China Beijing Metals Exchange (CBMX). The move will allow the London-based miner to sell non-contracted iron ore directly into China through the electronic trading platform.

‘‘We welcome the development of CBMX as it gives us a new option for selling any available tonnes to China, over and above those already contracted,’’ said Alan Smith, Rio’s iron ore president for Asia in a statement. “We look forward to the Exchange developing into a transparent, independent, efficient and sustainable iron ore trading platform supported by broad market participation.‘‘

Rio’s announcement comes just a day after Brazilian miner Vale, signed a memorandum of understanding with the state-backed CBMX yesterday. Both iron exporters have joined Fortescue Metals Group, which signed on last week.

The news leaves BHP as the only giant iron ore producer that has not signed up to the Beijing-based platform.

According to Brisbane Times, it is widely believed that BHP is supporting the Singapore-based Global Ore and that the competition with China for customers is fiery.

Combined BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade.

The China Beijing Metals Exchange starts operations on May 8.

Anglo American opens $517m colliery in S. Africa

UK-headquartered Anglo American (LON:AAL) cut the ribbon today on a new coal mine in South Africa.

The fifth-largest mining company in the world by market capitalization has spent half-a-billion dollars since 2008 constructing the Zibulo Colliery in Mpumalanga, South Africa. The project is the first to be completed under Anglo’s black empowerment company Anglo American Inyosi Coal Pty Ltd. Coal will be produced for both local and domestic markets.

Anglo says the operation will deliver 8 Mtpa of thermal coal over a minelife of 20 years, with 7 Mtpa from its underground mine and the remaining 1 Mtpa from its opencast pit. Saleable production will be approximately 6 Mtpa, split evenly between domestic and export product.

The Zibulo mine, formerly known as the Zondagsfontein project, has been operational since 2009, producing about 6.2 Mtpa. The mine is expected to ramp up to 8Mtpa by the third quarter, Norman Mbazima, CEO of Anglo American Inyosi Coal Pty Ltd., told media Thursday.

Zibulo is also part of a 16 Mtpa run of mine joint venture washing plant, known as the Phola Coal Processing Plant, a 50:50 joint venture between Anglo American Inyosi Coal (Pty) Ltd and BHP Billiton Energy Coal South Africa Limited (BECSA). The plant, which is already operational, will be fed equally from Zibulo and BECSA’s Klipspruit Colliery, Anglo said.

ABB wins major grinding drive systems order for Cerro Verde expansion in Peru

ABB, a power and automation technology group was recently contracted to supply gearless mill drives (GMDs) for six ball mills and twin-drive systems for eight high pressure grinding rolls (HPGRs) at Cerro Verde copper mine in Peru. The two contracts were awarded in the first quarter of 2012. Deliveries are scheduled for Q4 2013 and Q1 2014.

ABB?s scope of supply includes six 22 MW GMD systems for 27-foot ball mills comprising of transformers, ring motors and complete containerized electrical houses as well as eight 2x2500kW twin-drive systems for HPGRs that include squirrel cage induction motors, transformers and ACS1000 frequency converters.

Known as the most efficient systems for grinding mills, ABB?s powerful, state-of-the-art GMDs help mine operators improve overall productivity while providing reliable equipment performance and flexibility.

Each of the six GMDs will be equipped with two of ABB’s unique rotating air gap sensors, which together with the 12 standard air gap sensors on the stator will give a true 360 degree overview of the stator and rotor. Whereas the HPGR drive systems work in accordance with the high demanding requirements for such machines without using tachometers or encoders.

ABB already supplied mine electrification and various drive systems, also including GMDs and HPGR drives, for the previous greenfield Cerro Verde project in 2006.

ABB (www.abb.com) is a leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 135,000 people.

Goldman Sachs forecasts $1,940/oz gold, cuts commodities traders

Subdued U.S. growth in 2012 will likely support gold prices, "although risks to our constructive view are rising," say Goldman Sachs commodities analysts.

Goldman Sachs has reiterated its constructive outlook for gold prices this year and its 3-month, 6-month, and 12-month forecasts of $1,785 per ounce, $1,840/oz and $1,940/oz respectively.

"We acknowledge, however, that continued strong US economic data poses growing risk to our forecast for rising gold prices," said commodities analysts Damien Courvalin, David Greely, and Jeffrey Currie.

The analysts stressed they expected gold prices to climb "as subdued US growth reduces the market's expectation of real rates. Consequently, we recommend near-dated consumer hedges in gold through 2012."

"With gold prices expected to continue to climb through 2012, we find hedging opportunities less attractive for gold producers at this time," they advised.

Goldman Sachs also continued to recommend a long gold position. "Buy December 2012 COMEX Gold (initial value of $1,800.5/toz, current gain $318.13/toz)," the analysts suggested.

Meanwhile, Reuters has reported that at least 20 commodities traders have left Goldman Sachs in the past months. Goldman said the departures will not have an impact on its standing in commodities.

"We are not downsizing our commodities business, it remains a core part of our franchise," a Goldman spokesman told Reuters.

Goldman is believed to employ around 400 traders in its commodities division, which generated $1.6 billion last year, Reuters reported.

Gold Blossoming in Colombia

Impressed by Colombia as a country and as a setting for exciting mining and geological opportunities, Paul Harris relocated from England, by way of Chile, and hasn't looked back. In an exclusive interview with The Gold Report, the publisher of the Colombia Gold Letter offers hope for the near future.

The Gold Report: Colombia's mining and energy sectors received about $12 billion (B) in foreign direct investment (FDI) in 2011, making it the largest recipient of FDI relative to gross domestic product of any country in Latin America. Although there are excellent geological potential and dozens of junior mining companies exploring Colombia, not one of those juniors has successfully permitted a mine. Does the country risk losing some of that free-flowing capital if it doesn't start to permit mines?

Paul Harris: No. The majority of that $12B you mentioned is in the oil and coal sectors. Gold is still in its infancy. Colombia enacted a mining code in 2001, so the mine permitting provisions within that code haven't been tried and tested before, but there is apprehension about how those provisions will perform when companies do put them through their paces. A couple of projects are rapidly approaching permitting. Continental Gold Ltd.'s (CNL:TSX) Buriticá is one of those as is the AngloGold Ashanti Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE)/B2Gold Corp. (BTO:TSX; BGLPF:OTCQX) Gramalote joint venture.

Thursday, March 29, 2012

Rio takes Indian partner in further developing its Mine of the Future programme

Mega miner Rio Tinto has inaugurated a strategic state-of-the-art Innovation Centre with iGATE Patni in Pune. India to "play a crucial role in facilitating and leveraging next generation automated technologies for mining operations."

LONDON - Rio Tinto and iGATE Corporation, the first integrated Technology and Operations (iTOPS) company, which provides business outcomes-based solutions under the brand iGATE Patni, have announced an innovation partnership that will exclusively focus on creating next generation technologies, which Rio Tinto believes will contribute to the global growth and development of its Mine of the Future program. The two companies believe this to be a first-of-its-kind innovation partnership in the mining industry where Rio Tinto will leverage iGATE Patni's technical capabilities to accelerate technologies globally in the mining industry.

Rio Tinto expects to spend approximately $60-80 million over the next five years proportional to the outcomes delivered out of the partnership. iGATE Patni's share of the deal is to provide engineering research and development services, including industrial automation and control, software and embedded design and development expertise to Rio Tinto to facilitate the Mine of the Future program. The partnership envisions "demonstrating improvements to mining processes that include unprecedented levels in automation, and remote operations that will revolutionise the way mining has been conducted so far."

Rio Tinto has just inaugurated a strategic state-of-the-art Innovation Centre in iGATE Patni's facility in Pune. Managed by iGATE Patni, the Rio Tinto Innovation Centre (RTIC) will "play a crucial role in facilitating and leveraging next generation automated technologies for mining operations." The innovation centre will have about 300 skilled engineers focusing on disciplines such as image processing, advanced data mining and analytics, automation and control systems, human factors design and logistics. RTIC will build on the work of Rio Tinto's established Centres of Excellence in Australia, Canada and the UK "to deliver the technologies they have developed to Rio Tinto operations across the globe."

Rio Tinto Head of Innovation, John McGagh; Rio Tinto India Managing Director Nik Senapati, iGATE Patni Chief Executive Officer Phaneesh Murthy; and iGATE Patni Executive Vice President and Head of Product Engineering Services, Satish Joshi presided over an inauguration ceremony in Pune to officially open the RTIC. Phaneesh Murthy said: "We are truly delighted that Rio Tinto has chosen iGATE Patni as its exclusive partner for this landmark innovation engagement. I am particularly pleased that our capabilities in product engineering services have gained increased acceptance among global companies to bring about innovation in their business and this partnership is an important step in our journey to deliver high-impact business outcomes. With Rio Tinto and iGATE Patni having invested close to $3 million in the infrastructure for the RTIC, we are geared to partnering with Rio Tinto in achieving its vision of providing unprecedented automation in mining." John McGagh said "iGATE Patni's credentials and business capability fits our need for a strong outcomes-driven innovation partner. RTIC will allow us to take a specific technology developed at our Centres of Excellence, such as the mine automation system currently in use at our Pilbara iron ore operations in Western Australia, and adapt it for broader application across our network of mines."

John Chadwick is Editorial Director/Publisher of International Mining magazine - www.im-mining.com

Gold slips below $1,680/oz as commodities retreat

The gold price slipped $1,680/oz on Wednesday as the expectations for further U.S. monetary easing faded after the metal stayed below key resistance.

LONDON (Reuters) - Gold prices slid below $1,680 an ounce on Wednesday, extending the previous day's retreat from two-week highs as the momentum sparked by expectations for further U.S. monetary easing faded after the metal stayed below key resistance.

Traders cashed in gains in the yellow metal after it stalled beneath the $1,700 an ounce level on Tuesday, with selling accelerating late in the day after a COMEX options expiry. Traders are now awaiting fresh U.S. data for direction.

Spot gold was down 0.2 percent at $1,676.69 an ounce at 0931 GMT. It is still on track for its best weekly performance since late February, however, after the Federal Reserve suggested a continuation of easy monetary policy will be necessary to support growth and bring down unemployment.

"The Fed comments have given much-needed stimulus to an otherwise lackluster, rangebound gold market," Richcomm Global Services analyst Pradeep Unni said. "Resistance at 1694-1700 is formidable, but in the coming sessions, we (could) see that being scythed very convincingly."

Dollar weakness is likely to be the catalyst for such a move, he said.

The dollar recovered from early lows against a basket of other currencies but remained under pressure after Fed chief Ben Bernanke reiterated his commitment to low interest rates. Dollar weakness makes assets priced in the U.S. unit cheaper for other currency holders.

Early losses in the U.S. currency failed to benefit most commodities, as oil prices came under pressure from talk of a release of strategic oil reserves by the United States, and industrial metals eased.

But activity on the wider markets suggested appetite for assets seen as higher risk was firm. European stocks inched higher and safe-haven German bund futures eased.

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Asset returns in 2012: link.reuters.com/muc46s

Commodity returns in 2012: link.reuters.com/faz36s

Gold correlation with dollar: r.reuters.com/ryx52s

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PRICES STRUGGLE

Physical gold demand has come under pressure this week from an ongoing strike among jewelers in India, the world's largest bullion consumer, who are protesting against a hike in import duty for bullion.

India's Finance Minister said on Tuesday that the country won't cut import duty on gold, which it doubled to 4 percent this month, although it is considering jewelers' demands for the removal of a 0.3 percent excise duty on unbranded jewelery.

"The removal of the excise tax may be a step towards meeting some of the grievances listed by Indian jewelers in the wake of the government budget," said HSBC in a note.

"Until the Indian jewelers reopen their shops, Indian gold demand will remain weak. The dip in Indian demand may be partly offset by better Chinese physical demand as Shanghai premiums remain high."

Gold prices are up 7.5 percent this year, but have struggled to make new headway after failing to break through the $1,800 an ounce level earlier this month. They remain well off the record high of $1,920.30 an ounce they hit in 2011.

Goldman Sachs said in a report on Wednesday that, as gold prices are closely linked to U.S. real interest rates, they may have been suffering from expectations for stronger growth.

"The gold market may have been expecting that real rates would soon be rising along with improving economic growth, leading to a sharp decline in net speculative length in gold futures," it said.

"As we look forward, our U.S. economists forecast subdued growth and further easing by the Fed in 2012, which should push the market's expectations of real rates back down near zero basis points and gold prices back to our six-month forecast of $1,840 an ounce," it added.

Among other precious metals, silver was flat at $32.48 an ounce, spot platinum was down 0.8 percent at $1,634.25 an ounce, and spot palladium was down 0.6 percent at $648.40 an ounce.

Primero gold-silver reserves, resources drop heavily after review

While reserves and resources fell, there was a silver lining to hope for: improved mine planning at San Dimas in Mexico.

HALIFAX, NS - A bid to improve predictability between resource model and active mining has lost Primero Mining (TSX: P) a hefty tally of gold and silver ounces.
Earlier this year Primero engaged an independent contractor, AMC Mining Consultants, to review its resource estimate of the San Dimas gold-silver mine in Mexico, which it bought from Goldcorp about two years ago.

The issue was a persistently spotty reconciliation between active mine and resource model. For Primero, which logged its first full year as a mine operator in 2011, that has meant lower than expected grades, which in part forced a revision to production guidance last year.
The review is now finished and, with a new system for calculating resources, Primero reports a major shake-up of its resources and reserves.
Before the review, Primero had counted in early 2011 proven and probable reserves of 886,000 ounces gold and 63 million ounces silver and inferred resources of 2 million ounces gold and 179 million ounces silver.
The new reserve and resource is considerably smaller: Primero now says there are 505,000 ounces gold and 32 million ounces silver in probable reserves, 577,000 ounces gold and 36.5 million ounces silver in indicated resources and 505,000 ounces gold and 32 million ounces silver in inferred resources. The resources include reserves.
Notably absent, are proven reserves and measured resources. To explain, Primero said, "The quality control and data verification review performed as part of the 2011 mineral resource and reserve estimation at San Dimas noted poor quality data. For this reason there are currently no measured resources, nor proven reserves stated."
The new resource - which uses block modeling instead of polygons - is "more tightly constrained," Primero says. In other words it should reflect the reality of the myriad veins at San Dimas better than the old resource model.
This is to be, it is hoped, the silver lining in the new, albeit smaller, resource. Primero, which acknowledged at the outset of the resources review exercise that it might lose resources and take a drop in resource and reserve categories, ultimately wants better mining control of its deposit rather than more ounces in theory but unwelcome surprises at the mine and mill.

In January Primero stated the review was "being driven by a desire to determine if greater operating predictability and improved mine planning can be achieved."
Primero President and CEO Joseph Conway hit the same chord in releasing the reduced reserves and resources. "While the new resource estimation has resulted in a reduction in and reclassification of resources and reserves, our improved understanding and the advancements in underground development should position (Primero) to convert resources and exploration potential into reserves in the near term," said Conway in a prepared statement.
Meanwhile, Primero also announced fourth quarter and full year financial and production results on Wednesday. Annual earnings were $67.8 million, while adjusted net earnings were $28.3 million. Primero produced 102,220 ounces gold in 2011.

And Primero said that with the new reserve and resource in hand, it would do detailed engineering on mill expansion scenarios from 2,050 tonnes per day to 2,500 or 3,000 tonnes per day. Primero said to expect a decision on whether it would proceed with the expansion during the third quarter this year.

Sunday, March 25, 2012

Peru’s gold output hits 6-month high on gains by Newmont

Peru’s gold production reached 6-month highs on gains by Newmont Mining, one of the country’s top miners, Bloomberg reports.

Gold production climbed 13% to 15,116 kilograms according to a statement by the Energy & Mines Ministry; the data on other mined commodities was mixed:

Copper output fell 4.8 percent to 97,765 metric tons, a nine- month low, on declines at mines operated by Freeport-McMoRan Copper & Gold Inc. (FCX) and Xstrata Plc. (XTA) Zinc, tin, iron and molybdenum production all fell, while silver and lead gained.

Colorado-based Newmont (NYSE:NEM) is majority owner of Minera Yanacocha, which operates South America’s largest gold mine and owns the Minas Conga project, Peru’s biggest mining development requiring an investment of up to $4.8 billion.

Peru’s Prime Minister said in January that Conga will be developed as the government could end up with a “huge” compensation payment if the $4.8 billion mine does not go ahead.

Newmont stopped construction of the copper-gold project in November after violent protests in the poor Cajamarca region of northern Peru.

Chile’s Codelco to expand to the rest of South America

It’s Ecuador and Colombia next for Chilean copper giant Codelco, as the company proceeds with plans to become more international by exploring mining opportunities in neighbouring countries.

At the recent Metal Bulletin International Copper conference in Hamburg, Rodrigo Toro, Codelco’s Vice-President of Business Development, said his company will establish a subsidiary operation later this year to advance this work, reported this week Metalbulletin.com.

“We will not have spare capacity to do massive investment elsewhere, but we will look at nearby countries,” Toro was quoted as telling conference delegates.

One of Codelco’s strategic priorities is to expand its international presence and more actively increase its copper reserves, as stated by CEO Diego Hernandez earlier this month. On March 6, Hernandez announced Codelco would invest US$4.3 billion in various projects in 2012, including its projects in Ecuador and Colombia.

Last November, Codelco and the National Mining Company of Ecuador (ENAMI EP) signed an agreement to explore that country’s copper potential, which could be as high as US$200 billion in untapped deposits. Under the agreement, Codelco will invest between US$10 million and US$30 million in Ecuador over the next four years. This is in addition to the US$3.5 million Codelco has already spent since 2008 in basic exploration of 20 prospects, including in El Palmar, an area located north of the capital, Quito.

At the agreement’s signing, Angelo Aguilar, ENAMI EP’s manager of International Exploration, said “Codelco will continue exploring options in Ecuador, as a leading mining company that respects the communities where it operates, adheres to local legislation and applies the same standards and values it does in Chile.”

Over the past 15 years, mining in Ecuador’s north has been strongly opposed by the local communities, with several international mining companies failing to establish a foothold in the area.

Meanwhile, in January, Colombia’s minister of Mines and Energy Mauricio Cardenas invited Codelco to visit his country with a view to reaching an agreement on copper exploration.

“Coldelco doesn’t have much activity outside of Chile,” Cardenas said to El Mercurio, a Chilean newspaper. “So it would be significant if in its first ventures abroad it came it came to Colombia to develop our copper mining.”

Colombia’s copper production is virtually non-existent, Cardenas added. Instead, the country is known for its coal and gold production.

The areas the Colombian government has designated as high potential for copper production are in Tolima, Antioquia and an area between Cundinamarca and Boyaca.

China on the prowl for mining investments in Africa, S.America and Asia

Chinese investors are turning their focus to emerging economies as they look to expand their demand for commodities and switching away from Australia and Canada, which are getting too expensive.

HONG KONG (Reuters) - Chinese firms are on the prowl for mining investments in Africa, South America and central Asia as they look to feed ever expanding domestic demand for key commodities, but are switching away from Australia and Canada, which are getting too expensive.

Iron ore and copper have been the hot targets over the past few years, but more recently, China Guangdong Nuclear Power Corp has gone after uranium in Africa, and firms are now seeking gold, nickel, tin and coking coal, too.

They used to prefer Australia and Canada for their political stability, but state-owned and private Chinese investors say assets in those countries are becoming too expensive.

"Those traditional markets that are developed, while being more stable - the likes of Australia and Canada - the competition to gain good resources is actually very, very intense," said Leong Eng Kiat, Managing Director of CCB International Capital.

"Because of that, the prices tend to be bid up. So Chinese investors are looking outside of these countries and going into emerging markets - the likes of Africa, Latin America, central Asia."

Long project approval processes have also put off some Chinese investors, spurring the search for assets in emerging markets instead.

"It's easier to get approvals in African countries. There are no big headaches, like with Canada and Australia," Liliang Teng, chief marketing officer at the China-Africa Development Fund, told Reuters.

The fund has invested $1 billion in a range of projects, including iron ore, in Africa and has a further $4 billion to invest.

AFFLUENT POPULATION

All the commodities being targeted are needed to satisfy an increasingly affluent population that is buying more cars, televisions, fridges, and apartments, using more and more electricity, and buying more jewellery.

Gold is in demand not just for jewellery but also as a hedge against inflation, making the country a huge consumer of gold.

"So the private sector, state-owned enterprises, even companies like us, try to look for gold resources, because the demand is strong, while supply in China is getting more and more difficult," said CITIC Dameng Holdings Chief Executive Charlie Tian told a conference in Hong Kong.

Uranium is needed to fuel 26 nuclear plants under construction in China, with more on the way, but only three or four companies are mandated to buy uranium assets.

"It's too politically sensitive," Tian said.

China Guangdong Nuclear Power Corp (CGNPC) is about to snare control of Namibia's Husab uranium project, potentially the world's second-largest uranium mine, with the takeover of Kalahari Minerals and Extract Resources for about $2.3 billion.

Private investors who bought stakes in junior miners in places like Canada are now keen to reap profits by selling to state-owned companies, a senior executive at a Canadian-listed Chinese company said, declining to be named due to the sensitivity of the issue.

He said large, state-owned Chinese companies were interested in lead, zinc and iron ore projects.

The chase for iron ore continues, despite setbacks on multibillion dollar iron ore investments in Australia, such as Sinosteel's Midwest project and CITIC Pacific's Sino Iron project in Western Australia, hit by slow government approvals, soaring construction costs and lack of rail and port space.

Chinese firms held off on deals in the second half of last year as they anticipated iron ore prices would come off and weaken valuations on potential targets, advisers say, but interest is starting to perk up again.

One adviser to Chinese companies said investors were looking more closely at political risk and ensuring projects make returns, and are not just focusing on the quality of assets.

"Chinese investors are being smart," Jamon Alexander Rahn, vice president of Emerging Asia Capital, told Reuters on the sidelines of the conference.

In all cases the key criteria are whether projects have enough scale, whether the products can be shipped back to China to meet demand and at a reasonable cost, said Leong.

"It's always about managing the resource security of China," he said.

Australia, Canada, Chile, Brazil and Mexico the top five mining projects’ destinations

In its annual ranking of countries in terms of political risks for mining investment, the mineral industry advisory firm Behre Dolbear, has ranked Australia, Canada, Chile, Brazil and Mexico as the top five nations in which to locate mining projects.

The five lowest-scoring nations were Russia, Bolivia, the Democratic Republic of Congo and Kazakhstan with Papua New Guinea being the worst in terms of political risk for mining projects.

Surprisingly, the United States was the worst ranked nation in terms of mining permitting delays by the Denver-based mining business consultant.

For the study, 25 nations were ranked on seven criteria including economic system, political system, degree of social issues affecting mining, delays in receiving permits, degree of corruption, stability of the country’s currency, and the competitiveness of the nation’s tax policy.

Due to their inherently low ranking the firm decided not to rank Venezuela and Zimbabwe on the list, despite the significant mineral wealth that both contain .

“Behre Dolbear advises clients to exercise notable caution when considering investments in these countries. The political and social situation in Zimbabwe continues to warrant exceptional consideration in risk mitigation while in Venezuela, Hugo Chavez’s nationalization of gold mines and other mineral resource assets severely limits investment return potential. Significant political reform must occur in both countries prior to the restoration of investor confidence.”

In the report, Behre Dolbear noted State-owned enterprises (SOE) and sovereign wealth funds (China, Korea, Russia, India, Singapore, Saudi Arabica, and elsewhere) are continuing to invest in mineral resource development and production as their parent countries consume more mineral products correlated to economic growth.

Gold-stock panic levels

The beleaguered gold stocks have spiraled lower this month, heaping misery on poor fools like me naive enough to invest in them. Dwindling interest and capital has left this realm a desolate wasteland, I’ve rarely seen anything so deeply out of favor. In fact, relative to gold the gold stocks are now back down to levels only seen briefly during 2008’s epic stock panic! Are they dying, gasping their last breath?

This question has enormous implications for speculators and investors. If gold stocks are doomed to never rally again, we ought to cut our losses and move on. But if this embattled sector is likely to return to favor in the near future, then its current extreme malaise is an incredible contrarian buying opportunity. The more any sector is loathed and forgotten, the more potential its stock prices have for massive rallies.

As I ponder this vexing puzzle, my mind keeps returning to how the stock markets in general work. Any stock is ultimately a fractional share of its underlying company’s future profits stream. If those profits are high or rising relative to the stock price, investors bid up the stock to reflect its underlying economic reality. Over the long term, the markets eventually price all stocks to fairly represent their profits.

And despite the many challenges of mining gold, profits are rising dramatically. My business partner Scott Wright recently updated his fascinating research thread proving this. By painstakingly analyzing detailed data from individual major gold miners collectively representing nearly half of global mined production, it is apparent gold-mining profits are amazing. Last year the average gross margin of this elite group ran $915 per ounce, or an astounding 58%! Gold miners are making money hand over fist.

As long as such fat profit streams continue, the immutable law of long-term stock pricing guarantees gold stocks will eventually be bid up to reflect their earnings. The only way today’s brutally-cheap prices make sense fundamentally is if gold is on the verge of a serious collapse. The price of gold is everything for the gold-mining business, strictly controlling the profitability limits of mining this scarce metal.

Thursday, March 22, 2012

Mining plans in Ecuador face indigenous backlash

Mediaworks reports hundreds of indigenous people in Ecuador opposed to planned mining projects are marching towards the country’s capital of Quito. There have already been clashes with police and criminal charges laid.

The marchers, led by the Confederation of Indigenous Nationalities, say the 10% royalties on mining that contracts specify should benefit local communities will not be enough to compensate for harm done to Amazon forests and important watersheds:

“The activists point to the damage oil drilling has done to Ecuador’s northern jungles, resulting in last year’s $US17.8 billion judgment against Chevron Corp.”

Ecuador’s government and Canada’s Kinross Gold could sign an agreement in June to develop the long-delayed “Fruta del Norte” gold project, the country’s largest mine.

On March 2, Chinese-owned mining company Ecuacorriente signed a contract to invest US$1.4 billion over five years for extracting copper in country’s southern Amazon.

The deal was the first of its kind in Ecuador, which has no large-scale mining to speak of.

The government of leftist President Rafael Correa sees mining as a way to counter-balance the impact on the economy of oil, which accounts for more than 50% of the country’s exports.

Contracts for several other high-profile deposits, requiring a total investment of more than US$3 billion, could be signed by the end of the first quarter once the issue of royalty payments is resolved.

Projects up for negotiations include China’s Tongling Nonferrous Metals Group for the Mirador and San Carlos copper deposits, Canada’s International Minerals (TSE:IMZ) for the Rio Blanco gold mine and IAMGold’s (TSE:IMG) Quimsacocha gold-copper-silver mine.

Glencore-Xstrata merger won’t happen this year

The Wall Street Journal (sub required) is reporting that industry regulators in the European Union are stepping up scrutiny of the mooted $90 billion merger of Swiss commodities trader Glencore and coal giant Xstrata.

This after steelmakers and other European players “raised fears that the deal could create too powerful a player” in the market for zinc, nickel and coal.

The whole vetting process could take until early 2013 the paper says. That is if the deal goes ahead at all.

Glencore is offering 2.8 shares for every one of Xstrata, but Xstrata shareholders have threatened to block the deal.

They accuse Ivan Glasenberg, chief of Glencore, and Xstrata CEO Mick Davis of negotiating “a cosy stitch-up” without consulting them about getting a better offer rather than a ‘merger of equals.’

Those holding out for a sweetener – something Glasenberg has repeatedly rejected – point to the fact that growth prospects for Xstrata is much healthier than Glencore.

Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer and in the decade under Davis has gone from having a fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.

A combined Xstrata and Glencore would have revenues in excess of $100 billion with as much as 80% of sales earned from mining.

Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.

Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.

Glasenberg is no slouch when it comes to buying up companies either. Earlier this week Glencore snapped up Canada’s grain handler and agricultural retailer Viterra for $6 billion.

Advanced Explorations ups its iron-ore ambitions

TORONTO – Toronto-based Advanced Explorations has decided to increase the proposed scope of its iron-ore project in Roche Bay, Nunavut, to eight-million tons a year and potentially 20-million tons yearly in the longer term.

The company had previously planned a five-million ton a year operation at start-up with an expansion scenario to 10-million tons.

The TSX V-listed junior said it decided to make the change “in response to expanding interest” in the projects.

Advanced Explorations has Chinese firm XinXing Ductile Iron Pipes Co. as a partner at Roche Bay, which it said has advantages owing to its proximity to a natural deepwater port, reducing capital costs required to build railways and ports.

Two of the world's biggest iron-ore producers, BHP Billiton and Rio Tinto, this week cautioned that demand growth in China the biggest user of the steelmaking ingredient, might be tapering off.

Gold from Thailand, China flood Indian markets

India's duty hike has made domestic gold jewellery more expensive than imported jewellery, with retailers stocking up on cheap imports from Thailand and China to quell demand

MUMBAI -There will soon be a new gold rush in India, never mind the doubling of duties on gold from 2% to 4% in the Union Budget. Savvy Indians have already managed to circumvent the hike and are keen on accumulating gold jewellery pieces from Thailand and China, which are glittering anew on Indian retail shelves.

Though physical buying in India has almost evaporated for the last five days, with bullion markets remaining closed to protest the increase in import duties on gold, most jewellery houses have shored up their import of gold jewellery directly from select countries making it a cheaper proposition than buying gold in India.

Duty on gold jewellery imported from Thailand, for instance, is just 1% due to India's free trade agreement with the country. Traders said Thailand also seemed to have taken advantage of the recent duty hikes in India to push through its long term gold programme.

"Thailand is not a known jewellery producer and most of the imports taking place are from China and Malaysia, routed through Thailand. However, Thailand is an emerging export market as it seeks to diversify its growing foreign exchange reserves and mitigate risk against the backdrop of rising US and European debt concerns,'' said an analyst.

He added that the country had already made three significant purchases in the last year. The Thai government added another 500,000 ounces of gold to its reserves in September 2011, raising its total gold reserves to 4.9 million ounces.

Traders said exports of gems and jewellery from Thailand in 2009 were worth $9.4 billion, far below the projection of $10 billion due to the global recession. The next year though, this improved by 10%. Traders said demand from Indian jewellery houses this year is expected to further propel the sector's exports.

The 49th Bangkok Gems and Jewellery fair held between February 9 to 13 this year also was a roraring success, according to Indian traders. More than 100,000 foreign buyers, many of them from India, participated and viewed the products from 3,900 Thai traders.

"Though India has been the world's largest gold market for decades, in the final quarter of 2011 there was a 50% decline as compared to the same period in the previous year. This is a significant decline in the demand for gold. The collapse in the value of the rupee also made gold more expensive for Indian consumers,'' said Raghu Rajan, bullion expert.

In comparison, gold imports from Hong Kong to China rose from 118,904 kilo in 2010 to 427,877 kilo in 2011, an increase of 259% as compared to the previous year.

Traders confirmed that the sharp increase in the import duty on gold in India had created the possibility of a flood of cheap import of gold jewellery from Thailand. ``It is not just 4%. With education cess, the figure comes to 4.12%. If jewellers pay 4.12% import duty on gold which is a raw material and 0.3% excise on jewellery which is a finished product, jewellery manufacturing itself cannot remain viable. At this time, importing gold jewellery from Thailand is much cheaper,'' said Manish Bahl, bullion dealer at Mumbai's famed Zaveri Bazaar.

Added Sanjay Kothari, vice chairman of the Gems and Jewellery Export Promotion Council, ``The discrepancy is huge. It should be corrected, lest it sets a wrong precedent. The government has been notified of the matter.''

A trader pointed out that even if some of the jewellery design imported from Thailand did not gell with Indian consumers taste, melting that into gold and selling it in the domestic market would still make it a viable option.

Traders added that country's with which India has such treaties stand to benefit if differential duties persist and that Thailand's jewellery associations had already made arrangements to take advantage of the situation in India.

Glencore offers $6.2bn cash for Viterra

Glencore plans to lighten the burden of buying Viterra by selling the majority of its Canadian assets and some others to Richardson International and Agrium for roughly C$2.6 billion in cash.

LONDON/WINNIPEG, Manitoba (Reuters) - Glencore , already the world's No. 1 diversified commodities trader, has agreed to buy Canada's largest grain handler in a C$6.1 billion ($6.2 billion) deal that will shake up an industry that has thrived on surging global demand for food and fuel.

Glencore will acquire Viterra Inc and then sell off some parts to Canada's Richardson International and Agrium Inc . By divesting some grain elevators, mills and farm-supply dealers, the Swiss-based trader aims to allay concerns that Ottawa might block the deal on national sovereignty or competition grounds.

Viterra will give Glencore a powerful position in the Canadian market, which will become more open to competition this year with the disbanding of the world's last major marketing monopoly. The company is also big in South Australia, a second grain-growing center.

Cementing Glencore's status as a commodity-trading powerhouse, the deal will give it a huge new presence in grains, an area now dominated by Archer Daniels Midland, Cargill and Bunge, complementing its current strength in metals, minerals and oil.

The trader, already in the throes of a $36 billion takeover of miner Xstrata, wants to round out its portfolio in anticipation of a coming squeeze on global supplies of grains as the populations of China, India and other emerging economies soar and diets improve.

"Canada as the second leg of the huge North American bread basket is going to be increasingly called upon to produce (crops) for the world," said Rich Feltes, vice-president of research at R.J. O'Brien in Chicago. "What seems to be a lot of money for this investment right now will over the long term, prove to yield handsome returns on the dollar."

The deal, in the works for months, may not be the last to reshape the global farm sector. Gavilon Group, a U.S. energy and grain trader, is also accepting bids for a possible sale, and Glencore's name has come up as a potential bidder.

Indeed, Glencore is already planning to expand its North American ag business, through acquisitions in the United States and organic growth in Canada, said Chris Mahoney, Glencore's head of agricultural products, during a conference call. But he refused to comment on potential interest in Gavilon.

Glencore is offering C$16.25 for each Viterra share, a price that is in line with market expectations after days of speculation. The deal represents a 48 percent premium over Viterra's closing price on March 8, the day before it announced it had received expressions of interest.

The friendly deal, which has the endorsement of Viterra's board, must pass regulator reviews in Canada and Australia. Glencore said it expects no problems.

Shareholders accounting for 16.5 percent of Viterra's stock, including its largest investor, Alberta Investment Management Corp, have pledged their support. The rest will vote on the deal at a special meeting expected in May.

To pay for the deal, Glencore will use existing cash resources and credit facilities, while lightening the burden by selling the majority of Viterra's Canadian assets and some others to closely held Richardson and Agrium for roughly C$2.6 billion in cash.

Agrium will acquire the majority of Viterra's retail agri-products business, including its 34 percent stake in Canadian Fertilizer, for which it will pay C$1.8 billion. Richardson will acquire 23 percent of Viterra's grain-handling assets as well as certain processing assets in North America for C$800 million.

Glencore has been thinking about the deal's three-way structure for about six months, an industry source said. It beat out rival bidders - Archer Daniels Midland identified itself as one of them - by offering a slightly higher price and more certainty around the regulation process.

OTHERS INTERESTED IN VITERRA

A host of prospective buyers aggressively pursued Viterra for months, said Viterra CEO Mayo Schmidt. A rival bid could still surface, likely a hostile offer, but Schmidt downplayed that possibility.

"It would be my view that the process came to a conclusion with the best buyer of the assets emerging," Schmidt told reporters, adding that Viterra didn't solicit bids.

On Tuesday, Viterra shares dipped 0.4 percent in Toronto, while Agrium stock climbed 2.2 percent with other fertilizer companies. Glencore shares in London slipped 1.6 percent.

Viterra will pay Glencore a C$185 million break fee if it accepts a better offer from another party, or if its board withdraws or modifies its recommendation. Glencore would have to pay Viterra a C$50 million reverse break fee if the deal does not close for regulatory reasons.

NO IMPACT ON XSTRATA DEAL SEEN

Analysts have said the deal is unlikely to disrupt Glencore's blockbuster tie-up with Xstrata - a prize that the commodity trader has worked for years to bring to fruition.

By contrast, Viterra reflects Glencore's willingness to jump at a promising opportunity. The grain handler wants to take advantage of Viterra's prime position to pick up business when the Canadian Wheat Board's monopoly on marketing Western Canadian wheat and barley ends in August.

Glencore's Mahoney said the Viterra deal would have "no impact" on the company's plans for Xstrata.

"Grain trading is a reasonably small part of the (Glencore) business. It's an area where they probably want a larger market share -- and it's one of the areas of their trading business where they can grow," analyst Nik Stanojevic at Brewin Dolphin in London said.

Glencore's bid faces an automatic review by the Canadian government. Any proposed takeover of a large Canadian company by a foreign entity is subject to scrutiny under a law that requires it to carry a "net benefit" to the country. Canada's Competition Bureau will also review the deal.

In 2010, Ottawa blocked a hostile bid by Anglo-American miner BHP Billiton for Potash Corp, the world's largest fertilizer maker, raising concern about whether the government would allow Viterra to fall under foreign control.

But Mahoney said he expected no snags with regulators in either Canada or Australia.

Glencore plans to consolidate Viterra's executive offices in Regina, Saskatchewan, which could sway the support of Saskatchewan Premier Brad Wall, who led opposition to the proposed Potash takeover.

COMPETITION CONCERNS

Mahoney also said that Glencore's global marketing and distribution reach would benefit Canadian farmers.

Canadian farmers have said they are mostly concerned about the prospect of less competition resulting from a Viterra takeover, either in grain handling or the sale of crop supplies.

"What you're seeing happen here is further consolidation of the industry," said Saskatchewan farmer Kyle Korneychuk, a former director of the Canadian Wheat Board, speaking on BNN TV. "Farmers will have fewer and fewer choices, and the cost to move product and handling costs will increase."

Helping allay anti-trust concerns, the Canadian grain-handling businesses of Glencore and Richardson would be roughly equal in size after the deal, he said.

Instead concern may focus on Agrium - already the biggest U.S. farm retailer of seed, chemical and fertilizer. It will take over Viterra's leading retail position in Canada.

But involving Canadian companies likely reduces the risk of Canada rejecting Glencore, said BMO Capital Markets analyst Kenneth Zaslow, in a note to clients.

Glencore describes itself as one of the leading exporters of grain from Europe, the former Soviet Union and Australia. It commanded almost 9 percent of the global market for grains at the time of its public share offering last May.

Bank of America Merrill Lynch and RBC Capital Markets advised Glencore. Canaccord Genuity advised Viterra, and TD Securities worked for the company's

Zimbabwe accepts Implats/Aquarius JV ownership plan

The proposal comes more than a week after Impala Platinum bowed to Harare's demands that it transfers a similar stake in its Zimplats operation to locals.

HARARE (Reuters) - Zimbabwe has accepted a proposal by Impala Platinum's joint venture with Aquarius Platinum to turn over a majority stake to locals, a government minister said on Thursday.

Empowerment minister Saviour Kasukuwere said Mimosa mine outside Harare, a 50-50 partnership between Implats and Aquarius, will transfer 10 percent each to workers and local communities, 6 percent to state employees and 25 percent to a state fund.

"They have submitted a compliant 51 percent plan. It has since been submitted to the ministry which has been accepted," Kasukuwere told reporters on the sidelines of an investment conference.

The proposal comes more than a week after Implats bowed to Harare's demands that the world's second largest platinum miner transfer a similar stake in its Zimplats operation to locals.

Implats has said the Zimbabwean government would have to pay for the shares it wants.

On Thursday Kasukuwere said the agreement with Implats should include an evaluation of assets and resources owned by Zimplats but he did not give further details.

"At the end of the day we want a win-win situation. We need a fair share of what is due to us," he said.

Kasukuwere has previously said the cash strapped government would not pay for shares in mines, arguing that it already owned the mineral resources in the ground.

Zimbabwe, with the second-largest known platinum deposits in the world after South Africa, is seen as a growth area for the platinum sector.

BHP keeps investing in iron-ore despite Chinese slowdown

PERTH – Mining giant BHP Billiton said on Tuesday that it had no intention of scaling back its iron-ore expansion plans, despite a slow-down in China’s growth rates.

BHP president for iron-ore, Ian Ashby, told reporters on the sidelines of the Global Iron and Steel Conference, in Perth, that there was a significant gap in the Chinese capital stock, compared to other economies, such as the US.

“The best statistic I have is that of the US economy, which has a capital stock of 20 t of steel per population. China is currently at 3 t. This is the amount of steel needed to support individuals,” Ashby said.

Ashby predicted that China’s steel capacity was likely to increase from the current 700-million tons to between 1-billion and 1.1-billion tons by 2025, to support the changing demand of its economy.

“China is moving to a more mature economy focused on consumers, and for us, that relates to the steel being used more in equipment and machinery that supports that transition,” Ashby said.

BHP predicted that some 170-million people in China were expected to urbanise in the next decade.

“Urbanisation drives construction build, people are more productive and generate higher gross domestic product, and are slowly moving up the income and quality of the living curve, meaning higher consumer spending.”

However, Ashby noted that looking beyond 2025, Chinese steel demand would likely soften, with the steel industry intensity per capital reaching its expected peak while steel scrap availability would increase.

“This will impact and soften global demand,” Ashby told delegates at the conference.

During the last decade, BHP has invested some $10-billion in expanding its Western Australian and Brazilian iron-ore assets, with a further $10-billion in planned committed capital to grow its capacity to 220-million tons in the Pilbara, and to 30-million tons of pellet capacity in Brazil.

Ashby said that Australia and Brazil would continue to dominate the seaborne iron-ore export sector for the foreseeable future, as these countries offered established port and rail infrastructure, large resource bases and political stability.

“We don’t expect a new supply basin like the Pilbara to emerge in the short term,” Ashby said.

He added that new projects, in less established districts like West Africa, were often faced with a lack of infrastructure and political instability, making the development of these projects more difficult.

Edited by: Mariaan Webb

High iron-ore price unsustainable in long term - CRU

PERTH - The high iron-ore prices achieved during recent times would prove unsustainable in the long run, consulting firm CRU told the Global Iron Ore and Steel Conference, in Perth.

CRU’s steelmaking and raw materials consultant Laura Brooks told delegates that while steel prices were unlikely to revert to pre-2003 levels, there would be a persistent decline, as demand from China eased and projected projects come on-stream.

“Tight supply conditions will ease as the project pipeline is gradually realised,” she said.

Underpinning the demand-side forecast, China’s gross domestic product (GDP) growth was expected to show consistent deceleration between now and 2025, and while India’s GDP was expected to grow between 2015 and 2020, it would not reach similar heights to China's.

China’s declining demand for iron-ore imports would be driven by three key points, including the overall slowdown in GDP growth, the fall of steel use intensity near the end of 2025, and the expanding pool of available scrap material, which would provide a cheaper alternative to iron-ore imports.

China’s demand for iron-ore was expected to peak at some 1.3-billion tons a year by 2030, and would then begin to fall.

Meanwhile, India has been identified as the fastest-growing economy past 2015, but Brooks said that GDP growth would likely peak at around 8%, rather than the 10% achieved in China.

The country would also likely have a less iron-ore-intensive growth pattern, as it was less focused on manufacturing.

“So, demand in India will be strong, but will not compensate for the slowdown expected in China,” Brooks said.

Another factor influencing the long-term outlook for iron-ore pricing was the significant number of projects being earmarked for development. CRU has identified some 300 iron-ore projects in the pipeline, which Brooks noted would ease supply conditions.

Brazilian and Australian iron-ore exports would still account for some 75% of the market, while West Africa was expected to emerge as the next hub in iron-ore production in the longer run, specifically when larger projects were initiated.

Brooks said that the project pipeline was - theoretically - enough to satisfy demand until 2025, and would be sufficient to support a global demand of 3.5-billion tons a year by early 2020.

By 2035, however, global supply would be required to grow by a 1.5-billion tons to meet demand, with between 50% and 75% of the new supply to be met by new projects.

Edited by: Creamer Media Reporter

Gold Fields secures 40% stake in Philippines project

JOHANNESBURG – The world’s fourth-largest bullion producer, Gold Fields, has exercised its 40% option in the undeveloped gold-copper Far Southeast project in the Philippines, the miner said on Thursday.

The Johannesburg- and New York-listed firm acquired the interest from private holding company Liberty Express Assets, after making a $110-million down payment.

It retained a second option to a further 20%, which it could buy from Philippine-listed Lepanto Consolidated Mining.

In September 2010, Gold Fields entered into two option agreements with Lepanto, 60% owner of Far Southeast, and Liberty, 40% owner of the project, granting the gold producer an option to acquire a 60% interest for a total consideration of $340-million.

The company said it had brought forward its decision to exercise its 40% option in the Far Southeast project, owing to encouraging exploration results and owing to the Philippine authorities being expected to grant the foreign company permission to own a majority stake in the project in the second quarter of this year.

“The positive drilling results have given us the confidence to show our commitment to the project and the Philippines,” CEO Nick Holland said in a statement.

On the Gold Fields website, the company describes the Far Southeast project as one of its “best greenfields growth opportunities”.

The project is located in an existing mining camp and is near two other mines historically operated by Lepanto, one of which is currently in production.

Gold Fields is aiming to produce some 60% of its gold from mines outside South Africa by 2015.

Edited by: Mariaan Webb

China no threat to foreign commodities - analyst

PERTH  Data analysts Raw Materials Group on Wednesday defended Chinese investment in foreign resources projects, stating that the Asian major’s effect on the resources industry was less than popularised.

Speaking at the second day of the Global Iron Ore and Steel Conference, in Perth, Raw Materials Group chairperson Magnus Ericsson said that Chinese investment accounted for only 1% of all the minerals produced around the world.

“Australia and Canada account for much higher ownership in foreign projects, but no one is claiming that they are taking over the supply of commodities,” Ericsson said.

Looking at iron-ore supply specifically, China currently had ownership of only some 30-million tons globally, of which 20-million tons came out of Australia, seven-million tons from Peru, 1.7-million tons from Brazil and a further 800 000 t from Canada.

When developing projects were taken into account, China’s share of world iron-ore production rose to 110-million tons.

However, Ericsson noted that when compared with the country’s target of owning 50% if its imports by 2015, which translated to between 300-million and 400-million tons a year, China was still lagging behind.

“They will not reach that goal, its completely impossible.”

Ericsson noted that China’s foreign expansion was slow for several reasons, including the country’s inexperience with large scale openpit mining.

“Chinese mines are often small and deep, so there is no Chinese model to bring to whatever country is of interest. There is also the problem of cultural problems and the suspicion with which a lot of African countries are viewing Chinese interest.”

Ericsson predicted that Chinese interest in global exploration would increase in the future, creating interesting opportunities for countries which did not perceive China as a threat.

Meanwhile, Ericsson noted that China was spending some $4-billion on in-country exploration, however, he noted that exploration success, especially in the iron-ore sector, was limited.

He estimated that there were currently between 5 000 and 10 000 iron-ore mines in China, with most of the operations being small, artisanal type projects.

Considering the low iron content of the ore, as well as the small volumes produced by the mines, iron-ore operations in China were also considerably more expensive than their western counterparts.

“With lower grades and deeper underground operations, as well as more emphasis on health and safety and environmental concerns, I’m convinced that production costs in China will increase,” he added.

Edited by: Creamer Media Reporter

Billions hacked off mining majors after BHP’s China comments

Mining’s top companies were all marked down significantly on Tuesday after BHP Billiton said that China’s steel growth rates “will flatten, and they have flattened.”

“The big infrastructure build clearly will come to some end,” Ian Ashby, the Australia-based company’s chief of iron ore, told reporters today in Perth according to Bloomberg.

China’s ferocious demand for iron ore has been a central feature of the global mining industry over the past decade and the driving force behind the spectacular profit growth at mining’s big three.

BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and even though the price of iron ore has come down by more than a fifth from record highs of $180/tonne touched in September last year, it’s still a very profitable commodity.

Benchmark iron ore import prices at China’s Tianjin port was last quoted at $144/tonne by Steel Index, a level it has spent most of 2012 at, recovering from a $116/tonne low set in November.

Ashby did temper his comments by saying that he thought prices will hold up over the medium term and that only in 2025 will it “soften markedly.”

Word from the world’s number one miner, nevertheless gave an excuse to investors to take chunks out of the majors and by midday in New York, BHP Billiton’s ADRs were down 3.7%.

Valuations of Rio Tinto and Brazil’s Vale, both of which are more exposed to iron ore than BHP, were also slashed with Rio losing 3.7% and Vale shedding an even 3%. Combined, the globe’s biggest listed mining companies are worth some $330 billion.

$52 billion Anglo-American was hammered down 4% by lunchtime in New York, while Swiss-based met coal giant Xstrata curbed losses to 2.3% on the LSE.

Canada’s Teck Resources gave up 3% in Toronto, Fortescue’s ADRs bled 2.7% and further down the scale losses were even more pronounced with $23 billion Kumba Iron Ore’s ADRs giving up 3.9% and US number one coal producer Peabody losing 5.7%.

China dominates the global trade in just about every commodity including iron ore (representing almost half of world trade), copper (38%), coal (47%), nickel (36%), lead (44%) and zinc (41%).

Earlier this month China forecast that it will grow by 7.5% this year. China recorded GDP growth of 9.2% in 2011 and annual growth has averaged 10.4% since 2001, peaking in 2007 at 13%. The last time expected growth was pegged at below 8% was 2004.

China eyes Canadian uranium mines

Takeover activity is poised to heat up in the Canadian uranium sector as energy-hungry China hunts for feedstock to fuel its growing family of nuclear reactors.

The state-controlled China Daily recently reported that the country plans to buy more uranium mines abroad, and is looking in Canada. China also expects to import more uranium this year as its nuclear program resumes after being halted following Japan’s Fukushima nuclear disaster.

China has 15 reactors in operation and 25 under construction, and plans to build another 50. It imports nearly all its uranium from Kazakhstan, Uzbekistan, Namibia and Australia.

“It comes as a surprise” that China is showing its hand by publicly targeting this country’s miners, which could boost the prices of potential acquisitions, said Versant Partners analyst Rob Chang. But he said the country’s announcement deserves to be taken seriously in the wake of Prime Minister Stephen Harper’s decision last month to overturn previous trading bans and permit uranium sales to China for civilian use.

China would most likely focus on buying Canadian “exploration companies with high-quality assets” because there are no ownership restrictions on early-stage firms, Mr. Chang said. However, Ottawa bars foreigners from owning more than a 49-per-cent stake in a company that is mining the metal.

China has already been on the acquisition trail for explorers in Africa. China Guangdong Nuclear Power Corp., its nuclear agency, recently struck a $2.4-billion (U.S.) deal to snap up Australia-based Extract Resources Ltd. (EXT-T8.97----%), which owns a huge uranium deposit in Namibia.

In Canada, uranium juniors such as Fission Energy Corp. (FIS-X0.67-0.02-2.90%), which has a property in Saskatchewan’s Athabasca Basin, Kivalliq Energy Corp. (KIV-X0.50----%), which has a deposit in Nunavut, and Strateco Resources Inc. (RSC-T0.50-0.03-4.81%), which is developing the Matoush project in northern Quebec, could be of interest, Mr. Chang said.

There is industry speculation that the Conservative government will relax its foreign ownership laws on uranium mines. Throne speeches since 2010 have talked about lifting regulations that inhibit the growth of Canada’s uranium industry.

Foreigners are already snapping up Canadian exploration companies. Last year, British mining giant Rio Tinto PLC (RIO-N54.59-0.56-1.02%) trumped Cameco Corp. (CCO-T22.81-0.44-1.89%) to buy Hathor Exploration for about $625-million (Canadian). Paladin Energy Ltd. (PDN-T1.97-0.01-0.51%), Australia’s second-biggest uranium miner, acquired the Michelin uranium project in Labrador for $261-million from Fronteer Gold Inc.

Euro Pacific Canada analyst Merrill McHenry, who is bearish on the uranium sector because Japan’s 52 reactors are still shut down, agrees that Fission Energy could be a strategic acquisition for China. If ownership rules don’t change, China could comply by partnering with a player like Cameco when it comes time to extract uranium, he said.

Macusani Yellowcake Inc. (YEL-X0.15----%), which has acquired Southern Andes Energy Inc. and merged their uranium properties in Peru, is also a potential takeover candidate, Mr. McHenry suggested. But those deposits would need to be combined with another project for the play to become economically viable, he added.

The Chinese could buy Macusani Yellowcake and also acquire an additional nearby deposit in Peru from Fission Energy through an outright purchase or joint venture with that company, he said.

“You would then not have a foreign-ownership problem with the Canadian assets [because they are not in Canada].”

China could also become involved with Canadian uranium projects through joint ventures in properties like Paladin’s Michelin project, he said. A three-year moratorium on uranium mining on Inuit lands was lifted this month and the Chinese could help finance the next phase, he said.

“They [Paladin] would need a mill so we are talking about a substantial amount of capital expenditures.”

Crocodile Gold reports revenue of $108 million on the sale of 68,601 ounces gold in the year ewnded December 31, 2011

Crocodile Gold Corp. (TSX:CRK)(OTCQX:CROCF)(FRANKFURT:XGC) ("Crocodile Gold" or the "Company") today announces its financial and operating results for the year ended December 31, 2011. All figures are in U.S. dollars, unless stated otherwise.
Crocodile Gold milled 510,268 tonnes and achieved an excellent gold recovery rate of 93.9% at the Union Reefs production facility in the three months ended December 31, 2011. Good progress was made with the development of the Cosmo underground mine with completion of the permanent ventilation raise, escape ladder ways and installation of the main ventilation fans in December 2011.
In the year ended December 31, 2011, the Company produced 68,020 ounces of gold and sold 68,601 ounces of gold at an average cash cost of $1,460 per ounce of gold sold (see non-GAAP Measures below).
In reporting these results, Chantal Lavoie, Chairman, President and Chief Executive Officer, commented: "Crocodile Gold faced considerable challenges throughout 2011, especially earlier in the year. As a result, the Company readjusted its short and medium term operational plans and we currently look back on 2011 as a transitional year. We have now reached an important turning point in the Company's growth with the initiation of the Cosmo ramp-up and the success of our exploration program at Union Reefs."
Financial Discussion
During the year ended December 31, 2011, Crocodile Gold recorded a net loss of $33,568,803, or $0.12 per share, compared to a net loss of $21,680,285, or $0.11 per share, in the year ended December 31, 2010.
During the fourth quarter of 2011, the Company recorded $19,116,232 in impairment charges primarily as a result of the Company entering into a non-binding agreement for the sale of its Tom's Gully and Mt. Bundy properties.

The mine operating loss in the year ended December 31, 2011 was $1,111,882. On a cash basis, mine operating earnings were $7,263,876, net of depletion and depreciation of $7,813,276 and share-based compensation of $562,482. The cash cost per ounce of gold sold in 2011 was $1,460 per ounce (refer to non-GAAP measures below). This cash cost was about $290 per ounce higher than projected as a result of the lower than expected average head grade from the open pits. Also, costs were affected by a strong Australian Dollar (an increase of $45 per ounce) and higher diesel prices (an increase of $28 per ounce).
The net loss includes exploration expenditures of $2,542,928 for the year ended December 31, 2011, in respect of properties where mineral resources have not yet been identified or the Company has not yet made a development decision. Care and maintenance expenses included were $586,997.

In 2011, Crocodile Gold earned interest income of $3,293,317 on the cash and cash equivalents and restricted cash on hand. Professional, consulting and management fees, and general corporate and administration expenses amounted to $6,103,341 and $1,723,754 respectively in 2011 and included the management and administration of the Company's activities in both Canada and Australia.

Source: Marketwire

Guyana Frontier receives notice of option exercise for Sardine Hill Project

VANCOUVER,  Guyana Frontier Mining Corp. ("Guyana Frontier") is pleased to announce it has received notice from Mulgravian Ventures Corporation ("Mulgravian") that Mulgravian has exercised its option (the "Option") in respect of the Sardine Hill property ("Sardine Hill"), located in Guyana, South America. Under the terms of the option agreement (the "Option Agreement") between Guyana Frontier and Mulgravian dated May 14, 2010, Mulgravian has earned its 51% interest inGuyana Frontier's rights to Sardine Hill, with Guyana Frontier retaining a 49% interest, and a joint venture has commenced between the two parties.

Mulgravian earned its 51% working interest in Sardine Hill by incurring exploration expenditures and by making share purchases in Guyana Frontier, as follows:

  • Exploration expenditures and property acquisition payments on Sardine Hill of US$3.0 million;
  • Investing CDN$1.5 million in the purchase of common shares of Guyana Frontier by way of a non-brokered private placement (the "Sardine Hill Private Placement") and the subsequent exercise of warrants issued in the Sardine Hill Private Placement.

The Sardine Hill Private Placement was closed on February 2, 2010 and received TSX-V approval onFebruary 9, 2010. Mulgravian fulfilled its final warrant exercise related to the Sardine Hill option agreement in February 2012 by purchasing 312,500 common shares of Guyana Frontier at a price of $1.60 per share, for gross proceeds to Guyana Frontier of CDN$500,000.

Under the terms of the Option Agreement, Mulgravian will act as operator of Sardine Hill work programs. An inaugural joint venture meeting is planned for early April 2012 to discuss and finalize programs and budgets for upcoming exploration at Sardine Hill.

For more information regarding the Option Agreement and the Sardine Hill Private Placement, please see Guyana Frontier's news releases dated June 8, 2010 and April 6, 2010.

About Sardine Hill

Sardine Hill is a gold exploration project that consists of one Large Scale Prospecting Licence totaling 10,427 acres (4,219 hectares) located approximately 90 kilometres from the capital city of Georgetown. InJanuary 2010, Guyana Frontier signed an agreement (the "Underlying Option Agreement") with Mariwa Mining Inc. ("Mariwa"), a private Guyanese corporation, and has the right to earn a 100% interest in Sardine Hill from Mariwa subject to a 3% net smelter returns royalty (the "Underlying Option"). In 2011, Guyana Frontier completed a diamond drilling program totaling 3,076 metres at Sardine Hill (see GuyanaFrontier news release dated June 16, 2011).

Following the exercise of the Option by Mulgravian, Mulgravian and Guyana Frontier will work on a joint venture basis to complete the exercise of the Underlying Option on Sardine Hill pursuant to the terms of the Underlying Option Agreement. Further information regarding the Underlying Option Agreement can be found in Guyana Frontier's news release dated April 6, 2010.

About Guyana Frontier

Guyana Frontier is a public mineral exploration company listed on the TSX Venture Exchange (TSX-V: GYG), and is focused on the exploration, discovery and development of precious metals deposits located within Guyana, South America. Guyana Frontier began acquiring interests in Guyanese exploration properties in 2007, and now holds various rights to obtain working interests in approximately 342,000 acres (138,400 hectares) of prospective lands. Guyana Frontier's goal is to develop a significant gold resource at the Marudi Mountain Gold Project in southern Guyana, and to explore its other Guyanese projects using funding from exploration partners.


SOURCE Guyana Frontier Mining Corp.

Golden Hope Intersects 1.33 g/t Au Over 29 Metres and 1.05g/t Au Over 33 Metres at Bellechasse-Timmins, Quebec

MONTREAL, Golden Hope Mines (TSX VENTURE: GNH)(Pink Sheets: GOLHF) - Golden Hope Mines Limited is pleased to announce further significant results from its 2011 drill campaign in southeastern, Quebec. The company is pleased to present the following highlights from holes BD2011-178, 179 and 180.

Hole BD2011-178 intersected 48 metres of 0.48 g/t Au including 5 metres of 0.73 g/t Au and also intersected 63 metres of 0.51 g/t Au including 7 metres of 1.45 g/t Au and 7 metres of 1.62 g/t Au. Hole BD2011-179 intersected 29 metres of 1.33 g/t Au including 5 metres of 2.13 g/t Au and 10 metres 2.08 g/t Au. Hole BD2011-179 also intersected 33 metres of 1.05 g/t Au including 8 metres of 2.80 g/t Au. Hole BD2011-180 intersected 58 metres of 0.85 g/t Au including 9 metres of 1.68 g/t Au and 6 metres of 3.22 g/t Au. Hole BD2011-180 also intersected 41 metres of 0.62 g/t Au including 12 metres of 1.03 g/t Au.

"We are very pleased with the drill data generated so far from the 2011 campaign. The near surface significant results are also extremely encouraging. These latest results will continue to contribute to the calculation of our first resource estimate. Our team in Ste Justine is working diligently to process the core for assaying as quickly as possible" states Frank Candido, President, Golden Hope Mines.

Bellechasse-Timmins Exploration Update:

There are currently 5 holes at the SGS Labs in Toronto (BD2011-181, 182, and BD2012-183,184, and 185).

There are also 10 holes or approximately 3300 metres of drill core that are in different stages of being logged, cut and prepared for shipping to the lab at our St-Magloire facility. These holes include BD2012-186, 187, 188, 189, 190, 191, 192, 193, 194 and Béland 05).

The drill crew has left the property as the company is taking a small break from drilling to catch up to the data generated to date and focus on processing the core currently outstanding for assaying. The near term plan includes the publication of the company's first resource estimate as well as preparing an extensive Spring 2012 drill campaign at Bellechasse-Timmins and throughout our property in southeastern, Quebec.

Samples were prepared and analyzed at SGS Minerals Services of Toronto, Ontario (Don Mills laboratory). Analysis for gold was done on one half of core samples following FAI525 fire assay routine. SGS introduced standards and blanks in the sequence.

Claude Duplessis, Eng and Claude Bisaillon, Eng. are qualified persons (QP) in compliance with National Instrument 43-101 and have reviewed the technical contents of this press release.

James E. Tilsley, P.Eng is acting as the qualified person (QP) for Golden Hope in compliance with National Instrument 43-101 and has reviewed the technical contents of this release.

SOURCE Golden Hope Mines Limited

Next week’s Canadian budget will be good for mining, oilsands

The Canadian federal budget due to be released next week will please miners and the oil patch and is likely to make environmental groups see red, not green.

The Canadian Press reports that the budget will propose a streamlined environmental assessment process and reforms to the Fisheries Act ending federal oversight of much of Canada’s fresh water:

The package will eventually see Ottawa pay far less attention to small projects, impose time limits on major environmental hearings and pull out of the process altogether if a province is ready to step in with similar standards.

The latter became an issue with Taseko Mines’ Prosperity project in northern BC, when the provincial government approved the mine after conducting an environmental assessment process, only to have the mine rejected by the federal government based on its own environmental review. That project is currently undergoing a second environmental review.

CP quotes Natural Resources Minister Joe Oliver saying ”Clearly, we need to focus our attention and reviews where they really matter — on big projects with the potential for the greatest economic and environmental impact.” The minister notes $500 billion of new energy and mining projects are at stake in the next 10 years.

Oliver came under fire from environmentalists recently when he said that green groups opposing the Northern Gateway pipeline are taking foreign money to undermine the project. Regarding reform of the Fisheries Act contained in the upcoming budget, CP reports “environmentalists and a large network of environmental scientists are furious about the idea and say Ottawa is ready to abdicate its national and international obligations to protect waterways.”

Australia’s mining boom to generate $225 billion in exports by 2017

Australia’s resources and energy commodity export earnings will continue to grow over the medium term to reach a record $225 billion in 2016-17, said today the Bureau of Resources and Energy Economics (BREE).

In the Resources and Energy Quarterly—March quarter 2012 report, released today, the entity says that despite the softening in commodities prices, earnings from exports will keep rising, as Australia ships larger volumes of minerals and energy products to overseas buyers.

“The growth in resources and energy export earnings over the next five years is forecast to be underpinned by increases in export earnings for most commodities, including LNG, iron ore and thermal coal,” said Professor Grafton, BREE’s Executive Director and Chief Economist, on releasing the report.

A large proportion of increases in export earnings are expected to come from LNG, with eight projects (including the almost complete Pluto project) under construction. Export volumes are forecast to increase from 20 million tonnes in 2011–12 to over 60 million tonnes in 2016–17, while export earnings for LNG are also forecast to treble over the same period to $30 billion.

“The growth in Australia’s LNG industry over the next five years is underpinned by over $175 billion worth of investment to expand capacity in Western Australia, Queensland and the Northern Territory,” said Professor Grafton.

Between 2011–12 and 2016–17 export volumes are forecast to increase for iron ore (62 per cent), metallurgical coal (47 per cent), thermal coal (65 per cent), copper ores and concentrates (77 per cent) and alumina (29 per cent).

“The increase in Australia’s export volumes for most commodities reflects commitments by the industry to increase production and expand infrastructure capacity over the medium term,” added Professor Grafton.

Tuesday, March 20, 2012

Yesterday's Top Story: Cost overruns, write downs leave Kinross Gold priced for takeover

With the miner's stock having fallen by nearly half since September, bankers see it a target for bigger players who are always on the hunt for deposits to replenish their reserves

TORONTO - Cost overruns and a massive writedown have knocked Kinross Gold's stock so low that some bankers see it as Canada's biggest potential takeover play, though obstacles to a bid for the senior gold producer may be too big to surmount.

Kinross, the world's seventh-largest gold miner, owns some huge, largely unexploited assets spread across four continents, making it an appealing target for bigger players who are always on the hunt for deposits to replenish their reserves.

Despite a huge reserve base its stock, which traded for nearly C$19 at the start of 2011, closed at C$9.90 on Friday as mounting concerns about the cost of developing its flagship project sapped investor confidence.

"We haven't seen anyone make a move on Kinross yet, but to me, I would think that for anyone who wants a company with a lot of growth assets, this makes a lot of sense," said Stifel Nicolaus analyst George Topping. "It's the cheapest senior by a long shot."

Bankers point to Barrick Gold and Goldcorp, Canada's top two gold miners, as companies with the means to consider an acquisition. U.S.-based gold mining giant Newmont Mining Corp was also named as a possible buyer.

On an in situ basis, the proven and probable gold reserves of Kinross are being valued by the market at less than $200 an ounce, well under Barrick's reserves at some $325 per ounce and even Newmont and Goldcorp at about $275 and $580 an ounce. Although this does not factor in capital and operating costs, it highlights the appeal for potential bidders.

At the BMO Global Metals and Mining Conference in Hollywood, Florida, last month, the future of Kinross was the subject of much speculation, from the meeting rooms to the bars.

Kinross Chief Executive Tye Burt got the ball rolling early, saying the company may consider selling its 50 percent stake in the Crixas underground gold mine in Brazil and its 25 percent stake in the Cerro Casale gold-silver-copper project in Chile.

"It was insane how many people were talking about a Kinross breakup at that conference," said one U.S. investment banker focused on the resource sector who spoke off the record because of company policy.

BLESSING TO BANE

But despite these selling points, bankers and analysts said that the factors keeping the stock appetizingly cheap may also drive prospective buyers away.

The main obstacles are the Tasiast gold mine in Mauritania and Chirano mine in Ghana, brought into the Kinross fold with considerable fanfare in its blockbuster $7.1 billion acquisition of Red Back Mining in 2010.

The assets have gone from being a blessing to a bane for the company, which has seen its market capitalization shaved nearly by half since September as concerns have mounted over the cost of developing Tasiast and other projects.

Kinross earlier this year said it would take a massive $2.94 billion non-cash goodwill impairment charge related to its acquisition of the Tasiast and Chirano mines.

"On a per ounce basis of reserves, they paid through the nose for Tasiast," Morningstar analyst Min Tang-Varner said of the asset, which now accounts for over 20 percent of the miner's combined gold reserves and resources.

"Time has passed and the market is just getting antsy," she said. "They've paid a steep price for it and we haven't seen anything that really justifies the acquisition price paid out."

Bankers said any acquisition approach for Kinross would likely have to be friendly because prospective buyers will want to see data on Tasiast before tabling an offer.

Kinross declined to comment about the takeover speculation.

"We would note that these rumors result from our share price being undervalued, which in turn suggests that Kinross currently presents a significant buying opportunity," said Steve Mitchell, the miner's head of corporate communications.

BIG SHAREHOLDERS COULD SPUR DEAL

Potential suitors for Kinross also have their own situations to consider before making a bid.

Barrick, the world's top gold miner, is still integrating the assets of copper miner Equinox, which it acquired for more than $7 billion less than a year ago. Another major takeover may not be well received by shareholders.

While some like Goldcorp's prospects as a buyer, skeptics note that the current assets of Kinross have much higher average operating costs. This means an acquisition would move Goldcorp up the cost curve, an unattractive prospect in a sector that is fighting to keep costs in check.

Goldcorp Chief Executive Chuck Jeannes has also stressed that his company intends to focus on growth in low-risk mining jurisdictions. The most promising Kinross assets are in more politically risky places like Ecuador and Russia.

Newmont, the world's second-largest gold miner, could be a more likely suitor, as the company may want new assets to sink its teeth into given setbacks on projects like Hope Bay in the Canadian Arctic and Conga in Peru.

Barrick, Goldcorp and Newmont all declined comment for this story, or were not immediately reachable.

In the end, the fate of Kinross may be decided by a handful of big institutional shareholders, who together control 20 to 30 percent of the stock in each of the four miners. If the Kinross share price stays depressed these investors could nudge management toward a deal.

Kinross typically holds its annual shareholder meeting in the first week of May. It has yet to set a date for this year.

"You can expect some shareholder activism in this case," said one Toronto-based investment banker, who declined to be identified because of company policy.

Source: Reuters

First Uranium shareholders object to AngloGold, Gold One asset sales

A group of First Uranium's shareholders sent a letter to the boards of AngloGold and Gold One explaining its objections to the planned sales of its South African assets, saying the deals are being done too cheaply.

TORONTO  - A group of First Uranium Inc. shareholders said the mining company's planned sales of South African assets to AngloGold Ashanti Ltd. and Gold One International Ltd. for a combined $405 million are being done too cheaply.

The group sent a letter to the boards of First Uranium, AngloGold and Gold One explaining its objections, Nicholas Betsky, head of equities at Russia's Olma Investment Firm in Moscow, and Mikhail Pak, a spokesman for Stratton Enterprises Inc. in Moscow, said yesterday in separate interviews.

The investor group comprises Olma, Stratton, Sprott Asset Management Inc. and Patto Corporate Services Ltd. and collectively holds more than 41 million shares, or 17 percent, of Toronto-based First Uranium, and may vote against both deals, Betsky said.

First Uranium's board "has not exhausted all its options," Betsky said by telephone from Montpellier, France. "We're trying to tell the board they should go back to the drawing board."

First Uranium said March 2 it agreed to sell its Mine Waste Solutions unit to Johannesburg-based AngloGold for $335 million and that Gold One International Ltd. would buy its Ezulwini Mining Co. unit for $70 million. If the deals aren't completed, First Uranium won't have enough funds to pay the outstanding principal on about C$150 million ($152 million) of convertible debentures that are due June 30, the company also said March 2.

Related Parties

The group of investors said in the letter that Mine Waste Solutions has a so-called net present value of C$700 million while just Ezulwini's infrastructure is worth C$150 million, Betsky said.

First Uranium Chief Executive Officer Deon Van Der Mescht and Gail Strauss, a spokeswoman for the company in Johannesburg, weren't immediately available to comment. Alan Fine, a spokesman for AngloGold, and Maria Smirnova, an associate portfolio manager at Sprott in Toronto, declined to comment. No number or e-mail address could immediately be found for Patto.

The AngloGold and Gold One deals will be voted on separately by First Uranium investors at a meeting to be held in mid-May. The Mine Waste Solutions acquisition requires 50.1 percent or more of the votes cast by shareholders excluding AngloGold and certain related parties, First Uranium said March 2. The Gold One deals needs 66.7 percent.

AngloGold owns 20 percent of First Uranium, according to data compiled by Bloomberg. Franco Nevada Corp. and Village Main Reef Ltd., which hold stakes of 7.4 percent and 5.7 percent respectively, are considered related parties.

"We are planning to vote ‘no' and we think enough shareholders will join us," Betsky said.

Source: Bloomberg

Rio Tinto accepts Chinese offer for Extract stake

TORONTO  - Global miner Rio Tinto has accepted China Guangdong Nuclear Power Corp's (CGNPC's) offer for its 14% stake in Extract Resources, owner of the giant Husab uranium project in Namibia.

Monday's move had been expected after Rio accepted CGNPC's bid for its separately held stake in Extract's 42% shareholder, Kalahari Minerals, in January.

Australian-listed Extract's board backed the $2.4-billion Chinese offer earlier this month.

The bid, worth A$8.65 a share, valued Rio's Extract stake at roughly $330-million.

Husab is potentially the second-largest uranium mine in the world, and Rio Tinto has been in talks with Extract to combine its neighbouring Rossing mine, the world's longest-running openpit uranium mine, with Husab.

"Rossing remains interested in pursuing a joint development with the new owners of Husab," its managing director Chris Salisbury said.

"A joint development of the Husab deposit with Rossing would bring benefits to the shareholders of both Rossing and Husab, the local community and Namibia."

CGNPC, which has bid alongside the China-Africa Development Fund, is hoping to boost access to uranium supplies.

Edited by: Creamer Media Reporter

Coxe: Never been so good for gold

TORONTO – Gold may have taken a pounding since the end of February, falling from $1 787/oz to $1 660, “we have entered the most favourable era for gold prices in our lifetime”, BMO Financial Group strategy advisor Don Coxe said at the weekend.

“The next time that gold really starts to make a run, it’s got nothing to stop it,” he said on a conference call.

Coxe reasons that the amount of money governments in the US, Europe and Japan are printing has led to the highest ratio of gold production versus fiat currencies since paper money was invented.

In the March issue of his Basic Points bulletin, he goes on to say that its only a matter of time before shares in “the great mining companies” start to outperform the price of their product, echoing his previous view that investors should buy the producers' stock instead of the metal.

Much ink has been spilled over the past couple of years regarding the dramatic underperformance of gold mining stocks compared with gold prices, as investors gravitate towards the less-risky exchange-traded funds.

“Governments are running deficits beyond the forecasts of all but the hardiest gold bugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid gold bugs a year ago,” Coxe wrote.

Having topped a record $1 900/oz in August last year, the yellow metal has had a highly volatile ride, plunging to as low as $1 540/oz in late January.

Gold, seen as a place for fearful investors to park their money, has suffered most recently after Greece managed to avoid defaulting on its debt, and the US Federal Reserve signalled another round of quantitative easing is not immediately around the corner.

Also last week, Aurizon Gold CEO George Paspalas expressed similar sentiments to Coxe.

Speaking in an interview, he commented that things had "not changed overnight in Europe".

"There is so much uncertainty out there...there's nothing that anyone is really willing to hang their hat on," he said when asked for an opinion on the recent weakness in the gold price.