Monday, March 18, 2013

AngloGold says power cut to cost it 20 000 oz of production

Gold miner AngloGold Ashanti on Monday warned that the fire at a substation in the West Wits region, which cut power to its Tau Tona and Mponeng operations, last week, would result in its first-quarter production being about 20 000 oz lower.

State-owned power utility Eskom reported last Thursday that a fire at a substation had resulted in supply being cut off to the Klerksdorp and Carletonville areas on Wednesday night.

All main power supply to the Tau Tona and Mponeng operations were interrupted between March 13 and 15.

While emergency procedures enabled the safe and prompt evacuation of all underground work areas, continued disruption of power to the mines, owing to the unplanned interruption of the main Eskom electricity supply, halted all but essential water pumping services on the two operations.

“There was insufficient power to run ventilation and cooling plants, hoisting infrastructure or metallurgical plants and other associated production activities,” AngloGold stated.

Eskom had partially restored power until the transformer could be repaired.

Tau Tona resumed underground mining activities on March 15, while the Mponeng operation resumed most of its operations on Monday; however, certain project and hoisting activities did not resume, to enable the gold miner to operate within current electricity supply constraints.

Edited by: Chanel de Bruyn

Gold Market Report 18 March

Gold Jumps Over $1600 as Cyprus Bail-Out Hits Bank Savers, Global Equities Fall

 

WHOLESALE GOLD leapt 1% against the Dollar and 2.3% against the Euro at the start of Asian trade Monday, as global shares sank and major-government bonds rose following the Cyprus bail-out deal announced by European politicians at the weekend.

"[German negotiators] were hand in hand with Finns," says an unnamed official quoted by the Financial Times, "who were much more dogmatic" in forcing a levy worth €7 billion on ordinary bank depositors as part of the €17bn deal.

"Scenes of
Cypriots lining up at cash machines
raised the specter of capital flight elsewhere," says Bloomberg, while Reuters claims that today's Bank Holiday may be followed by a forced shutdown on Tuesday to allow parliament to discuss and vote on the depositor levy, priced at 9.9% of savings accounts over €100,000 and 6.7% below.

"It's as if the Europeans are holding up a neon sign," writes economist Paul Krugman in his New York Times blog, "saying
'Time to stage a run on your banks!'
..."

"[This is] the first example of deposit hair-cuts during the entire Euro crisis," says forex strategist Jens Nordvig at Nomura.

The Cyprus deal "has potential to make depositors in Portugal, Spain and Italy nervous, despite likely assurances from policymakers," he writes.

Weaker Eurozone government bonds fell hard Monday morning, driving Greek interest rates half-a-percentage point higher, while base metals dropped alongside crude oil.

First hitting a 13-session high above $1608 per ounce, Dollar prices to buy gold then slipped back as European stock markets followed Asia in dropping over 1%.

The gold price in Euros jumped 2.3% at the start of Asian trade, hitting 5-week highs above €1240 per ounce as the single currency hit new 3-month lows vs. the Dollar.

Gold priced in Sterling held flat, however, as the British Pound surged nearly 2 cents to $1.51 on the foreign exchange market.

"One of the reasons gold has been coming off," says UBS analyst Tom Price, "is that there has been a view that the risk in Europe was limited and most of their financial market issues were resolved.

"This uncertainty could provide a brand new support for gold for days or even weeks."

Further ahead, "Global liquidity is rising," says London market-maker HSBC, trimming its 2013 average gold forecast from $1730 per ounce to $1700 but noting that "the Bank of Japan has joined the QE party and the Fed shows no let-up.

"Inflation tolerance and currency wars are supportive [of gold]. We expect stronger jewelry and coin demand, lower scrap supply [and] an end to ETF liquidation."

Investors in gold-backed trust funds led by the $63-billion SPDR Gold Shares cut their holdings last week for the 5th week running, reducing overall exchange-traded gold fund holdings to a new 6-month low of around 2,500 tonnes.

On the futures market, however, speculative traders grew their exposure to rising prices as a group in the week-ending last Tuesday. Latest data from US regulator the CFTC says the net long position of bullish minus bearish bets rose 7.4% from early March's 54-month low, the fastest jump since September.

"To sustain gold prices at $2000 by 2016", says analysis from investment bank Merrill Lynch, investors would need to
buy gold in quantities equal only to 2008 – almost 50% below 2011's record 1,700 tonnes – thanks to "steady increases of spending on non-essential items like jewelry in more affluent emerging markets."

 

Adrian Ash

 

(c) BullionVault 2013

 

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tuesday, March 12, 2013

Peru’s gold, silver and copper output fall in January 2013—Mining Ministry

Peru’s Ministry of Energy and Mines reported increased production of iron, lead and zinc in the first month of this year.

Author: Dorothy Kosich

Peru’s Ministry of Energy and Mines reported Monday the country’s gold production plunged 25.12% in January, as total silver production declined 7.27% and total copper output dipped 4.41% during the same period.

However, the ministry also noted that iron ore production was up nearly 13%, while zinc output increased 8.83% and lead was up 6.15% during the first month of this year.

In the first month of this year, Peru’s gold production was 11,762,163 grams (378,162 troy ounces), down from 15,708,384 grams (505,036 troy ounces) in January 2012. Minera Yanacocha reported a 25% decrease in gold production in January 2013.

The country’s silver production was 266,981 kilograms (8,583,638 troy ounces) during the first month of the year, 7.27% lower than the 287,918 kilograms (9,256,778 ounces) of silver production reported in January 2012.

Peru’s copper production was reported at 93,469 metric tons in January of this year, a 4.41% drop from the same period of 2012.

The Directorate of Mining Promotion of the ministry’s mining department noted that zinc production in January 2013 was 111,308 metric tons, up 8.83% from 102,280 metric tons of zinc output in January 2012.

Peru’s lead production was 19,837 metric tons in January 2013, a 6.15% increase compared to January 2012 lead output total of 18,689 metric tons.

The ministry reported that the country’s iron ore production for the first month of this year was 589,902 long tons, up 12.91% from 522,433 long tons for January 2012.

Source: Miniweb

Vale suspends $6 billion Argentine potash project

The Brazilian miner has put its Rio Colorado potash project in Argentina’s Mendoza province under review for suspension in December

Brazilian miner Vale SA said on Monday it has suspended a $6 billion potash project in neighboring Argentina that has been plagued by cost overruns, a decision that could renew trade tensions between South America's two largest economies.

    Vale said its Rio Colorado potash project in Mendoza province was no longer "in line with Vale's commitment to discipline in capital allocation". The company had put the project under review for suspension in December.

    Vale left the door open to restarting the project, however, if terms were to improve. It said more than 4,000 of the project employees would have preference in rehiring "if construction resumed," setting the stage for more negotiations with Buenos Aires over terms that would make it viable.

    Vale has invested $2.2 billion in Rio Colorado to date, one of the biggest foreign capital investments in Argentina, and has completed work on 40 percent of the mine, railway and port.

    If Vale eventually exits Rio Colorado, it would be a blow to Argentina's president, Cristina Fernandez, during a legislative election year. The project would have made Argentina one of the world's leading suppliers of potash, an essential fertilizer component in food production.

    Argentina's government said in a statement it "regretted Vale's unilateral decision to abandon (the project) despite the efforts of the government and provincial and municipal authorities to guarantee the project's continuation."

    The government said Vale was demanding a series of concessions including advance rebates of value-added tax, export tax waivers and a reduction in investment commitments that would have cost the state some $3 billion over the course of two years.   

     TRADE TENSIONS

    The failure to find middle ground on the project complicates relations between Brazil and Argentina at a time when growth in global trade is slowing and tension between the two countries is already growing.

    New barriers in Brazil chilled the regional trade in auto parts last year, contributing to a contraction in Argentina's auto industry. The two countries also exchanged accusations over trade obstructions after Argentina started slowing its import process, helping to prop up local industry and its trade balance.

    Brazil's state-run oil company Petrobras is in talks to sell off some $400 million worth of Argentine refineries and other assets, Reuters reported last month.

    If Rio Colorado does not go ahead, the farm sectors in Brazil and Argentina will remain dependent on potash imports from a small cartel of global suppliers in Canada, Russia and Jordan. Brazil imports 90 percent of its potash.     

    STAKES

    Analysts said Rio Colorado likely will not have a major financial impact on Vale, no matter whether the project is sold or resumed, considering that 90 percent of the company's revenues and much of its investments are still in iron ore.

    "This change was already well-defined," said Aluisio Lemos, an analyst at Agora Corretora in Rio de Janeiro. "The tone set by the current management has already been about prioritizing certain projects and exiting others that are not considered strategic."

    Vale posted its first quarterly loss in 10 years last month, taking a $5.7 billion hit from money-losing operations. Though the world's second largest mining company says it remains committed to the fertilizer sector, it is part of a broader shift among miners away from less profitable assets in the face of lackluster metals prices.

    Preferred shares of Vale reversed losses in Sao Paulo trading after the announcement, to gain 1.4 percent at close.

    Brazil's Folha de S.Paulo newspaper reported over the weekend without naming sources that Rio Colorado's cost overruns had jumped 86 percent since the initial estimate to $11 billion.

Part of the problem has been inflation in Argentina, which according to private estimates has surpassed 25 percent per year and driven up labor and materials costs.

    Vale said in response to questions about the Folha report that it was seeking no changes to Argentine labor or tax law.

    In his last call with analysts in February, Vale Chief Executive Murilo Ferreira said the project "needs to remain attractive and have a foreseeable cash flow," adding that the company was still open to talks with the Argentine government.

Gold Market Report 12 March

Gold Breaches $1590 after Weidmann Says "Eurozone Crisis Not Over", Chinese Physical Demand "Supporting Gold Right Now"

AFTER trading sideways for several sessions, gold bullion jumped above $1590 an ounce for the first time this month Tuesday morning in London, in what analysts called a "technical" move after gold broke through a key level following remarks from Bundesbank president Jens Weidmann.

"We see support at the bottom of the sideways range at $1561 and resistance at the top at $1586," said yesterday's technical analysis note from Scotiabank.

Gold rose above that level however shortly after Weidmann told reporters that the Eurozone crisis "is not over" and said that the Eurozone has "declining inflation risks".

Weidmann was presenting the German central bank's 2012 results, which show it more than doubled the amount it holds in reserve for what Weidmann called "risk provisioning".

Silver meantime rose to $29.25 an ounce this morning, still below last week's high, as other commodities were broadly flat on the day and US Treasuries gave up earlier gains.

European stock markets were also flat, a day after US markets rallied and the Dow Jones set another new record, having beaten its 2007 nominal peak last week.

Gold in Sterling meantime hit a five-week high above £1070 an ounce as the Pound fell this morning, while gold in Euros rose to a two-week high above €1225 an ounce.

"We still doubt a sustained rebound [in gold] is warranted at this point while the market is set to remain depressed," says Andrey Kryuchenkov, analyst at VTB Capital.

"Strong physical demand in China is the main reason behind gold's resilience," one trader in Beijing told newswire Reuters this morning.

"But the overall sentiment in prices is still weak. If demand from China weakens and we continue to see good US [economic] data and a stronger Dollar, gold has the chance to test $1500 this year."

On February 18, the first trading after Lunar New Year, volumes on the Shanghai Gold Exchange for its most popular gold contract, The Au9999, set a new record of just over 22 tonnes. Since then, daily Au9999 volumes have been more than double last year's average.

China was the world's second-biggest gold consuming nation in 2012, according to the latest data from the World Gold Council.

In world number one India meantime "there is no demand [for gold right now] due to financial year closing," according to Haresh Acharya at bullion wholesaler Parker Bullion in Ahmedabad.

Holdings of bullion backing gold exchange traded funds tracked by Bloomberg meantime continued to fall yesterday, the fifteenth straight day of net outflows.

In Washington, Congressman Paul Ryan is campaigning for the support of his fellow House of Representatives Republicans for his plan to balance the federal budget in a decade. Even if the plan is passed by House however it is not expected to win a vote in the Democrat-controlled Senate.

Senate Democrats meantime, who are expected to unveil an alternative budget plan this week, yesterday put forward plans to prevent a so-called government shutdown currently scheduled for 27 March, Reuters reports

The bill contains adjustments to spending aimed at ensuring government agencies are funded to the end of September, but does not seek to make up for the $85 billion in government spending cuts known as the sequester that came into effect March 1 and was originally agreed as part of the 2011 debt ceiling deal.

Across the Atlantic, UK manufacturing production fell 3% in the year to January, more than analysts were expecting, according to official data published Tuesday.

"Unless we have a stellar performance from the services sector, we're almost certainly in a triple dip [recession]," says London-based Scotiabank economist Alan Clarke.

Sterling fell to a fresh low against the Dollar this morning, touching $1.4831, its lowest level since July 2010.

The Bank of England's Funding for Lending scheme, which seeks to lend to banks at low rates so that they can provide credit to small and medium enterprises, should be put "on steroids" according to Britain's deputy prime minister Nick Clegg.

Ben Traynor

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.