Showing posts with label metals. Show all posts
Showing posts with label metals. Show all posts

Friday, November 9, 2012

Scotiabank sees 2013 revival on China stimulus and political change

By: Simon Rees

Scotiabank believes 2013 will mark a measured revival across metals commodities, with Chinese stimulus and economic performance pushing global direction, Scotiabank’s VP economics and commodity market specialist Patricia Mohr told delegates at the Mine Latin America conference on November 7.

“Between April 2011 and July of this year there has been a 19% drop in overall commodity prices,” Mohr said. “But I’m glad to say that in August-September there was a nice rebound on several supply developments. [And] I’m pleased to say that China’s Purchasing Manager Index has started to move up again,” she said.

Mohr explained why the outlook was now brighter. “The most recent indicators show that things will pick up again. I think China’s gross domestic product (GDP), which had slowed through Q3 to about 7.4% year-on-year, will edge up in the fourth quarter,” she said. “We see things then picking up in 2013 to about 8% and, for 2014, about 8.3%.”

“We’ve also noticed that China’s central government would like to wean the country away from central planning. They’ve left the economy to make its own adjustments this year, which is why they’ve not been as aggressive in kick starting the economy after the slowdown,” she said.

Of particular importance to China’s future economic development is the change in political leadership, with Xi Jinping and Li Keqiang set to take over the leadership mantle. “I view this as equally important to the mining industry as the outcome of the US election was. We won’t know for a while what effects the political changeover will have for the Chinese economy, although we know from past experience that new leadership heralds enormous change.”

“In the short-term, we think there will be a considerable degree of policy continuity with the five-year plan that was unveiled in March 2011 that will be in place until 2015,” Mohr later told Mining Weekly Online. “[But] there will be various reform policies put in place. Probably they will emphasise the development of China’s financial industry and various service sectors, such as insurance. There’ll also be social objectives, such as improved medical care and pensions,” she added.

New infrastructure projects will continue to spur Chinese growth. “In September, a new infrastructure development programme for China was announced. About $160-billion will be spent on subways, roads, ports and navigation channels etc. This will boost GDP by about 2% over the next four years. We’re already beginning to see the effects of this in the steel and cement sectors,” Mohr said in her speech.

But Mohr sounded a note of caution about local government debt levels. “Back in November 2008, when China implemented a massive infrastructure spending programme, much of this was financed by local government, which now has less room to manoeuvre [because of debt incurred],” she later told Mining Weekly Online. “This debt has come down over the past year, but it remains quite high … so while many local governments have announced huge potential infrastructure projects, we’re not sure the financial resources are available to go through with a lot of them.”

Mohr’s speech then moved away from China by discussing the US. She outlined slowing growth into 2013. “We see the US economy picking up a little to 2.1% in 2012, but then slowing again into 2013 as attempts are made to tackle the fiscal situation and the high levels of government debt. We will then see, perhaps, a slow pick-up in the second half of 2013 going into 2014,” she said.

Mohr also highlighted some support signs, underlining the importance of autos. “There’s been a nice recovery in vehicle production in the USA, Canada and Mexico. In fact, the auto assembly figure for North America is up 20% in volume terms. This is good for metal demand and we expect things to improve next year, although more modestly.”

Turning her attention to specific industrial metals, Mohr highlighted the copper’s robustness. “Copper will remain exceptionally strong; stronger than many of us would have thought even a few months ago … In late 2012, copper remains in a supply-side deficit. Although some new mine expansion will come on stream next year, there’s a lot of scepticism around the world about how big that new supply will be. Also several projects in the Democratic Republic of Congo might not come on stream quite as quickly as expected.”

“Zinc has also been a surprising story this year. Refined zinc has shifted from a surplus into a deficit. But the reason has not been a positive one; it’s because Chinese zinc smelters have recently shuttered a lot of capacity on low treatment charges and poor profitability,” she said. “Miners will probably have to accept higher treatment charges for moving their concentrates into China. But in the second half of this decade, I suspect zinc will be a winner because of global mine depletion.”

Iron-ore’s run may face greater pressure as more competitive operations come on stream and increased supply weighs on prices. “Iron-ore has had quite a run in recent years. It’s going to be a more competitive environment over the next five years because of a lot of new mine supply is coming on stream. So I think they’ll be a modest drop in the coming years for iron-ore prices,” she said.

On gold, Mohr was fairly bullish, highlighting several support factors for the yellow metal, including various stimulus measures, such as the US Fed’s third phase of quantitative easing and the potential for liquidity injection in Europe. “For 2013, I have a conservative forecast for gold at $1 700. But you could quite easily see $1 800,” she said.

“It’s also noteworthy that when the Basel III banking regulations come into force in January 2013 that gold will be again reclassified as tier-one capital for bank holdings. That means it will return to being a full-fledged financial asset,” she added.

Edited by: Henry Lazenby

Wednesday, November 7, 2012

China base metal buys will hardly dent bulging stockpiles

Any buys for state reserves will take up some of the slack in China's supply chain, analysts said, rather than igniting demand.

China's plan to buy base metals for state reserves in an effort to cushion domestic smelters from slowing economic growth would support prices but would not significantly reduce bulging stockpiles, traders and analysts said on Wednesday.

China is the world's biggest consumer of base metals, but demand has faded this year as exports have weakened, pushing stocks of copper and aluminium to near-record highs and driving some smelters into loss-making territory.

Any buys for state reserves would take up some of the slack in China's supply chain, analysts said, rather than igniting demand, with purchases planned on a much smaller scale than in the wake of the 2008/09 financial crisis.

"It's a plea for some help. Obviously the smelters have requested some official assistance and we know stocks have gone up. Ostensibly it is to help the cash flow of the smelters," said analyst Robin Bhar of Societe Generale.

"On copper, it is difficult to see the move lifting prices on a sustained basis, but it probably means the downside is restricted. On aluminium, which is a much bigger market, it is neither here nor there."

Sources told Reuters this week that China's influential state planner could revive a stockpiling plan as soon as this month to buy around 400,000 tonnes of primary aluminium ingots and 165,000 tonnes of refined copper cathode for state reserves.

This volume equates to around 8 days of consumption for refined copper and nearly 7 days for primary aluminium, and compares to China's current stocks of more than one million tonnes of both copper cathode and aluminium ingots.


The stocks include metal held by Shanghai Futures Exchange warehouses, bonded warehouses, producers and end-users.

"Inventories hanging over the market are mainly bonded warehouses, estimated around 750,000 tonnes, compared with about 300,000 back in end-2011," Macquarie analyst Bonnie Liu said in a note this week, adding that fourth-quarter copper orders had been almost flat with the third quarter.

About 800,000 to 900,000 tonnes of refined copper cathode was stocked in bonded warehouses in Shanghai and the southern province of Guangdong, traders estimated last week.

The state purchase looks tiny against the market's annual consumption of more than 21 million tonnes of primary aluminium, analysts said.

"I don't think the purchase of aluminium would have a big impact," said a source at a large aluminium producer who did not want to be identified in the absence of authority to speak to the media.

"Domestic prices may rise one or two days only. The market now is over-supplied and demand is far behind supply growth."

Markets are hoping Beijing's new top rulers will announce stimulus measures following the once-in-a-decade leadership change set to be ushered in by a Communist Party congress beginning on Thursday.

Although China racked up annual GDP growth of 7.4 percent in the third quarter of 2012, this was its slowest pace since the depths of the financial crisis in the first quarter of 2009.

The extra demand from the state purchases might lead investors and end-users to conclude prices had bottomed and the time for restocking was near, some analysts in China warned.

"A purchase by the State Reserves Bureau would have psychological impact," said Jing Chuan, chief researcher at Citic Futures, referring to high domestic prices of copper and aluminium, which resulted in record imports in 2009.

"We saw that in 2008/09, when the SRB buying pushed up prices strongly, although it did not change the real supply and demand situations."

A sales manager at a Chinese copper smelter said the purchases could signal the domestic market that prices had bottomed, encouraging speculators and end-users to build stocks.

Unlike the launch of the inaugural stockpiling in 2008, the SRB has not officially announced current purchase plans.

In December 2008 it said it planned to buy 1 million tonnes of aluminium, 400,000 tonnes of copper and a total of 400,000 of lead and zinc from domestic smelters over three years.

But it had only bought 235,000 tonnes of copper, 590,000 tonnes of primary aluminium and 159,000 tonnes of refined zinc by the end of that round.

(Editing by Clarence Fernandez)

© Thomson Reuters 2012 All rights reserved

Tuesday, November 6, 2012

China to resume stockpiling base metals soon

Industry sources say China will soon resume stockpiling of some base metals, including copper and aluminium, buying them from local smelters hurt by weak demand

Author: Polly Yam

China is expected to soon resume stockpiling of some base metals, including copper and aluminium, buying them from domestic smelters hurt by weak demand, industry sources said on Tuesday.

China is the world's top consumer of industrial metals, but its smelters, hit by slowing economic growth, have lobbied the government to revive a state-run scheme to stockpile industrial metals, in hopes the move will prop up prices.

"The NDRC is going to do it soon," said a source with links to China's influential state planner, the National Development and Reform Commission (NDRC), who has direct knowledge of the plan.

The state-run stockpiling scheme was launched soon after the 2008/09 financial crisis, at the prodding of the country's smelters, and led to an increase in metal imports in 2009.

When the scheme resumes, the State Reserves Bureau could buy around 400,000 tonnes of primary aluminium ingots and 165,000 tonnes of refined copper cathode, industry sources said.

The sources declined to be identified because of the sensitivity of the subject.

Expectations are growing for Beijing's new top rulers to announce stimulus measures following a once-in-a-decade leadership change set to be ushered in by a Communist Party congress beginning on Thursday.

Although China racked up annual GDP growth of 7.4 percent in the third quarter of 2012, this was its slowest pace since the depths of the global financial crisis in the first quarter of 2009.

The stockpiling measure could put a floor under metals prices and benefit copper more than aluminium, analysts said.

"It's just picking up slack in the domestic system. Obviously, the data suggests the economy has stabilised but it's hardly firing on all cylinders," said Leon Westgate, an analyst at Standard Bank based in London.

Bonded stocks have been rising, and the latest data suggest domestic demand may have stabilised at low levels rather than bouncing back strongly, he added.

"(The NDRC) are not going to pay top dollar but they may help provide a floor for prices."

Stephen Briggs, a BNP Paribas analyst based in London, said,

"It's more likely to support the copper price than the aluminium price, because comparing the size of the industries, for aluminium it's a drop in the ocean but for the copper market it's a touch tighter."

Benchmark three-month London Metal Exchange copper prices have fallen more than 10 percent from the year's high in February to stand at $7,675.5 a tonne on Tuesday.

Aluminium prices on the LME have lost more than 30 percent from the year's high struck in May to stand at $1,912.


The move to resume stockpiling followed a proposal by the China Nonferrous Metals Industry Association for the state planner to complete the scheme, or even buy more supplies, so as to alleviate conditions for domestic smelters, which were harsher than in the 2008/09 crisis, the first source said.

During the last phase of buying, which expired last year, the State Reserves Bureau bought fewer metals than originally planned, which analysts said left it with scope to launch another round.

At the launch of the inaugural stockpiling in December 2008, the Bureau said it planned to buy 1 million tonnes of aluminium, 400,000 tonnes of copper and a total of 400,000 of lead and zinc from domestic smelters over three years.

However, it only bought 235,000 tonnes of copper, 590,000 tonnes of primary aluminium and 159,000 tonnes of refined zinc by the end of the round.

"The beauty of resuming this scheme is that the buying does not need approval from the central government because it was already approved few years ago," said an industry source with links to the state planning body.

"I think the buying would happen in November. It should not be later than Dec. 15 because after that time smelters won't be able to put the sales into this year's earnings."

A sales manager at a large aluminium smelter said he expected the State Reserves Bureau to buy around 400,000 tonnes of aluminium from local smelters very soon.

Source: Mineweb

Sunday, October 14, 2012


Each chapter of the 2012 edition of the U.S. Geological Survey (USGS) Mineral Commodity Summaries (MCS) includes information on events, trends, and issues for each mineral commodity as well as discussions and tabular presentations on domestic industry structure, Government programs, tariffs, 5-year salient statistics, and world production and resources. The MCS is the earliest comprehensive source of 2011 mineral production data for the
world. More than 90 individual minerals and materials are covered by 2-page synopses.

For mineral commodities for which there is a Government stockpile, detailed information concerning the stockpile status is included in the two-page synopsis.

Abbreviations and units of measure, and definitions of selected terms used in the report, are in Appendix A and Appendix B, respectively. “Appendix C—Reserves and Resources” includes “Part A—Resource/Reserve Classification for Minerals” and “Part B—Sources of Reserves Data.” A directory of USGS minerals information country specialists and their responsibilities is Appendix D. The USGS continually strives to improve the value of its publications to users. Constructive comments and suggestions by readers of the MCS 2012 are welcomed.

Source: U.S. Geological Survey

Download Report

Thursday, July 5, 2012

Global mining drives 45%-plus of world GDP – Cutifani

The global mining industry drives more than 45% of the world’s gross domestic product (GDP), either on a direct basis or through the use of products that facilitate other industries, says AngloGold Ashanti CEO Mark Cutifani.

Cutifani, who addressed this week’s Mining for Change conference, calculates that mining product revenue contributes 11.5% to global GDP; mining service industries a further 21% to 23% and fertilisers for agriculture, fuel for transport and materials for construction then take mining’s combined direct and indirect contribution beyond 45%.

The world would need to dedicate twice the amount of land to agricultural activities, which currently already occupy 40% of the earth’s surface, were it not for mining’s contribution to agricultural productivity.

Yet considerably less than 1% of the earth’s surface is dedicated to mining, which consumes less than 1% of the world’s water – and mined products also help to purify much of that water.

Furthermore, mining emits less than 3% of the world’s carbon gases.

“Mining’s the most important industrial activity in the world today and has one of the smallest environmental impact across the globe, which many people don’t appreciate.

“Instead of calling us the extractive industry I would like us to become known as the development industry,” Cutifani says, pointing out that 40% of the capital that AngloGold Ashanti is putting in place right now to develop its new Mongbwalu gold mine in the Democratic Republic of Congo is dedicated to infrastructure.

In addition to creating employment opportunities for the near-mine Mongbwalu community, the company is putting in place transportation, commercial and energy infrastructure that will enable local farmers to produce more and also to start transporting it to market.

“If we can get it right and benefit 80% of the people in that community instead of only maybe 3% who are given jobs, then the conversation around the mining industry will change and when people hear the word mining, they will think about development, jobs and social infrastructure. That’s the vision we have for our mining industry,” he adds.

By coordinating the involvements of developmental finance institutions, governments and mines, a strategy can be adopted for Africa that will be no different to the way pioneering industries helped to open up North America, South America, Europe and Russia.

Further, as the now-returned Chamber of Mines of South Africa senior executive Roger Baxter has often pointed out, the modern world would not have smart phones, wind turbines, toothpaste without mined minerals.

While minerals like oil, gas, coal and uranium energise the modern world, voguish gadgets are unable to function without copper, silver, gold, palladium, platinum, ceramics, titanium dioxide and lesser-known tongue-twisters like indium tin oxide.

The average car contains a ton of iron and steel, 100 kg of aluminium and 19 kg of copper and the more environment friendly hybrid vehicle requires double the copper, roughly 34 kg.

A 2 MW wind turbine contains some 300 t of steel, 5 t of copper, 3 t of aluminium and requires the casting of about 1 200 t of concrete, the cement for which requires limestone that is mined and stone that is quarried.

Replacing a single 3 000 MW coal-fired power station – which is half the size of South Africa’s many six-pack stations –15 000 MW of wind turbine capacity needs to be provided, which would require the equivalent a 2 MW wind turbine being sited every 240 m between Durban and Cape Town.

The modern compact energy-efficient fluorescent light bulb needs bauxite, lead, copper, limestone, nickel and phosphorous; toothpaste contains silica, limestone, aluminium, phosphate, fluoride and titanium; and women’s make-up mica and talc.

The minerals in greatest demand globally are coal, copper and iron-ore.

Edited by: Creamer Media Reporter

Tuesday, June 12, 2012

From mine to finished magnets: Molycorp closes US$1.3 billion acquisition of Neo Materials

US-based rare earth miners, Molycorp (NYSE:MCP), gets a foothold in Asia after completing its US$1.3 billion acquisition of Canadian-based Neo Material Technologies Inc. (TSX:NEM).

Neo Material is a worldwide company that makes parts for micro motors, precision motors, sensors, LEDs, solar panels and other applications.

Molycorp's goal was to become vertically-integrated so it can push itself into value-added specialty products. The deal will also give Molycorp access to the China market through Neo Material's operations in Asia.

Neo Materials is headquartered in Toronto, Canada and has 1,570 employees in 10 countries. In 2011 Neo Material has revenues of 322 million and earnings per share of $1.69. Neo Material will use the Molycorp corporate logo.

“We now have the broadest global coverage in the industry, and we can immediately access highly specialized niche markets that were not available to us prior to the Neo acquisition,” said Mark A. Smith, Molycorp’s President and Chief Executive Officer.

The Neo Materials acquistion is expected to be accretive to Molycorp’s 2012 earnings and cash flow.

Monday, May 28, 2012

Metals Economics Group Pipeline Activity Index, May 2012

Metals Economics Group (MEG) Pipeline Activity Index (PAI) reached its highest 2012 level in March before declining again in April on lower financings and drilling. The number of initial resource announcements continues to be strong in 2012, increasing in both March and April. Drilling activity remains lower than the highs of 2011 as adverse markets continue to make financing very difficult for early-stage explorers. Many junior explorers are reporting sufficient cash on hand to continue work, but some will likely scale back their programs to conserve cash.

The industry’s aggregate market cap dropped in March and again in April, after showing good gains in the first two months of 2012. Market caps finished April at an aggregate $1.82 trillion, the lowest total since December 2011.

MEG Pipeline Activity Index (PAI), March 2012

Pipeline Activity Index, May 2012

Although still relatively strong, the number of significant drill results appears to be stalling. Gold drilling has remained flat since peaking in November 2011, while base metals results appear to have settled at levels similar to late 2010-early 2011 after a moderate spike in February. As long as adverse markets continue to make equity funding scarce, particularly for early-stage explorers, drilling activity will likely remain below the highs of late 2011.

The number of initial resource announcements in both March and April is easily the bright spot for the period. It is the first time since early 2009 that there were 15 announcements in a single month, and the two-month total of 30 is the highest since July-August 2008.

Significant Drill Results Announced

Significant Drill Results PAI May 2012

Junior and intermediate companies completed 137 significant financings (US$2 million minimum) in March-April for a total of $2.6 billion—up 17% from the previous two-month period. Gold financings remained relatively steady, although the $712 million in debt secured during the period is almost quadruple January-February and is the highest two-month debt total in the Industry Monitor’s four-year history. Debt accounted for three of the four largest gold raisings, including $302 million of senior notes issued by New Gold to repay higher interest debt due in 2017. The almost $800 million raised for base metals is up, but more than half was debt, including $200 million for intermediate copper-producer Capstone Mining.

The MEG Pipeline Activity Index (PAI) measures the level and direction of overall activity in the supply pipeline, incorporating significant drill results, initial resource announcements, project development milestones, and significant financings into a single comparable index. The PAI is featured in the MEG Industry Monitor—a series of comprehensive graphs and charts, with related commentary, illustrating MEG's analysis of monthly changes and emerging trends in the base and precious metals pipelines. Using information only available from MEG through MineSearch, Exploration Activity Services, and Acquisitions Services, the Industry Monitor tracks developments based on announcements over the past 26 months of significant drill results, initial resources, project development milestones, significant financings, and acquisitions.

To purchase a copy of this month’s edition of the Industry Monitor visit MEG's online store.

Related MEG services

Tuesday, May 22, 2012

Peru's Mining Investment Estimated At More Than $53 Billion

Peru's mining sector continues to attract robust investment interest, with an estimated $35.6 billion currently committed to new projects, of an expected $53 billion-plus forecast to be spent there in the next few years, the nation's deputy minister of mines said Tuesday.

"Peru still has enormous potential," Guillermo Shinno said at a mining conference in Sydney, about South America's largest producer of gold, silver, zinc and lead.

"Currently Peru has an estimated investment portfolio of more than $53 billion," Mr. Shinno said, adding there are "many opportunities of investment that Peru offers the world."

Sustainable development is a key pillar of the government's strategy, he said.

"This is a task that must be undertaken by both government and the private sector," Mr. Shinno said.

These latest comments, however, follow more cautious remarks from Miguel Palomino, the head of the Peruvian Economic Institute, who last month said there had been a sharp slowdown in private-sector investments in Peru.

A number of companies, particularly in the mining sector, are having difficulty advancing projects due to community opposition, he said. Newmont Mining's $4.8 billion Minas Conga copper and gold deposit, in particular, has been delayed by strong opposition from residents and local politicians in Cajamarca region, where the project is located.

Finance Minister Luis Miguel Castilla at the time said the government was working to resolve the disputes in the mining sector and that he was confident private-sector investments can post double-digit growth again in the near future.

Source: Fox Business

Friday, May 18, 2012

Silvercorp Reports Record Silver Production of 5.6 Million Ounces, Record Revenue of $238.0 Million, Record Net Income of $73.8 Million, & Record Cash Flows of $123.8 Million for Fiscal Year 2012

Silvercorp Metals Inc. ("Silvercorp" or the "Company") (TSX:SVM)(NYSE:SVM) reported today its financial and operating results for the fourth quarter and fiscal year ended March 31, 2012. The following financial results are expressed in US dollars (US$) unless stated otherwise.

For the year ended March 31, 2012 ("fiscal 2012"), highlights included:
  • Record net income attributable to equity holders of the Company of $73.8 million, or $0.43 per share, an increase of 9% compared to net income of $67.7 million, or $0.40 per share, in year ended March 31, 2011 ("fiscal 2011");
  • Record revenue of $238.0 million, an increase of 42% compared to $167.3 million in fiscal 2011;
  • Record cash flows from operations, excluding non-cash working capital, of $123.8 million or $0.72 per share, an increase of 34%, compared to $92.2 million or $0.55 per share in fiscal 2011;
  • Record production of 5.6 million ounces of silver, or 6.06 million ounces of silver equivalent (including 8,800 ounces of gold), being the sixth consecutive year of production growth with an increase of 6% in silver production compared to 5.3 million ounces in fiscal 2011;
  • Total production costs of negative $3.25 per ounce of silver and cash costs of negative $5.13 per ounce of silver;
  • Commenced mine development and mill construction at the GC mine. In fiscal 2012, 717 metres ("m") of the 2,210m main access ramp, 42m of the 618m main shaft and 400m of a 3.7m by 4m water diversion tunnel were completed. The construction of mill, office building and lab facilities are also well underway;
  • Completed XBG and XHP project acquisitions, further consolidating mines in the high-grade silver, gold and base metal belt in the southwest Luoyang City district region;
  • Increased quarterly dividend by 25% to $0.025 per share, and declared $15.6 million, or $0.09 per share, of dividends in aggregate; and
  • Repurchased and cancelled 4.5 million shares under a normal course issuer bid, at an average cost of $7.90 per share, totaling $35.4 million.
Highlights from the fourth quarter ended March 31, 2012 ("Q4 2012") included:
  • Net income attributable to equity holders of the Company of $9.7 million, or $0.06 per share, compared to net income of $12.0 million, or $0.07 per share, in the fourth quarter of fiscal 2011 ("Q4 2011");
  • As in every fourth quarter, production stopped for 28 days due to the Chinese New Year holiday;
  • Revenue of $44.3 million, an increase of 4% compared to $42.4 million in Q4 2011;
  • Quarterly cash flows from operations, excluding non-cash working capital, of $20.9 million, or $0.12 per share, compared to $20.3 million, or $0.12 per share, in Q4 2011;
  • Produced 1.1 million ounces of silver in the quarter, compared to 1.0 million ounces in Q4 2011;
  • Total production costs of negative $1.84 per ounce of silver and cash costs of negative $4.22 per ounce of silver; and
  • Payment of $4.2 million, or CAD$0.025 per share, in quarterly dividends to shareholders.
1. Q4 2012 vs. Q4 2011

In Q4 2012, the Company recorded net income attributable to equity holders of the Company of $9.7 million or $0.06 per share, a decrease of 19% compared to net income of $12.0 million or $0.07 per share, in Q4 2011. The lower net income was mainly due to (i) $1.5 million of forensic audit and legal fees incurred to fight short sellers' attack (excluding this item, EPS would be $0.07 per share), (ii) higher production costs, partially offset by higher sales revenue, and (iii) higher general and administrative costs as the Company has three projects under development compared to only one last year.
Sales in Q4 2012 rose to $44.3 million, an increase of 4% compared to $42.4 million in Q4 2011, due to higher silver and gold production and prices, offset by slightly lower base metal production and prices.
Realized selling price is calculated using the Shanghai metal prices, less smelter charges, recovery and a 17% value added tax ("VAT") (except for gold). The following table is a reconciliation of the Company's realized selling prices in Q4 2012 with the Shanghai metal prices, and a comparison to the London Metal Exchange ("LME") prices:

Friday, May 4, 2012

METALS OUTLOOK: European Elections, U.S. Dollar Action May Influence Gold Next Week

European elections and the direction of the U.S. dollar should influence gold prices next week, market watchers said, as many are split on the direction for the metal after Friday’s lackluster trade following lower-than-expected U.S. employment figures.

Prices were higher on Friday and down on the week. The most-active June gold contract on the Comex division of the New York Mercantile Exchange rose Friday, settling at $1,645.20 an ounce, down 1.17% on the week. July silver rose Friday, settling at $30.432 an ounce, down 3.12% on the week.

In the Kitco gold survey out of 33 participants, 22 responded this week. Of those 22 participants, 10 see prices up, while eight see prices down, and four are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Gold had only a modest reaction to the lower-than-expected jobs data, showing some slight gains while equity markets sold off sharply and yields on 10-year U.S. Treasury notes set a three-month low, suggesting safe-haven demand. Crude oil prices slumped on the news, with West Texas Intermediate crude oil traded at the Nymex falling under $100 a barrel. Mike Daly, precious metals strategist at PFGBEST, attributed the weakness in crude oil for capping gold.

According to the U.S. Department of Labor, 115,000 jobs were added in April, under the roughly 163,000 expected. The unemployment rate fell to 8.1%, but that was because of people not actively looking for work, rather than finding jobs. February and March employment rolls were revised higher. February was bumped up to 259,000 from 240,000 and March was revised up to 154,000 from 120,000.

Briefing Research analysts said when including discouraged and underemployed workers, the unemployment rate remained at 14.5% for a second consecutive month.

Several market watchers said there was more disappointing news than upbeat news in the report.

“This definitely highlights the challenges for monetary policy,” said Nomura analysts.

They said the report will heighten discussion of third round of quantitative easing into the June Federal Open Market Committee meeting, particularly if May’s report is weak, too. Still, they added that they haven’t changed their baseline expectations of modest 2%-plus growth for the U.S. economy this year.

PFGBEST’s Daly said considering jobs growth has not gone “the way it should,” the Fed might come out with another quantitative easing measure later this year, which would be supportive for gold. “If that happens gold will be closer to $1,800 than $1,500,” he said.

Friday’s jobs data did not do much to push gold out of its recent trading range, something market analysts had hoped would occur. Deutsche Bank analysts said for the past six weeks, gold prices have been fairly stable at $1,650, following similar calm in the currency markets.

This calm has led to lower realized volatility in gold – and the same low volatility has been seen in many asset markets, they said, but that may come to an end if the U.S. dollar breaks out of its trading range. Since the jobs data didn’t provide the impetus, this weekend’s European elections in Greece and France may do so. The elections “will be important as to how it affect the euro and the spill-over effects this could have on the gold price and gold (volatility),” they said.

In France, polls show that socialist candidate Francois Hollande is keeping his lead over incumbent Nicolas Sarkozy.

“We should have an interesting day on Monday, as markets will have a chance to assess how exactly the European landscape will change in light of any changes. We suspect that in the weeks ahead there will be pressure on the Europeans to ease up on austerity measures and introduce more in the way of stimulus, something that theoretically should weaken the euro in the short-run. In the meantime, ECB (European Central Bank) head Mario Draghi said yesterday that he would not rule out further easing if the regional economy continues to deteriorate,” said Ed Meir, commodities consultant for INTL FCStone.

There’s some debate on what that outcome may mean for gold. The metal has fared poorly lately when European woes grab headlines, falling with other risk assets and not acting like a safe haven. Further, other analysts said if the euro falls the U.S. dollar will rally and that can put pressure on gold – and all commodities – because they are dollar-denominated.

Longer-term, gold could benefit if Europe veers from austerity toward more stimulus, particularly if the ECB cuts interest rates and buys government bonds as some economists are suggesting. “When that happens, gold price should push higher,” said Sharps Pixley.

One sign of changing views toward austerity may come next week following the meeting of the Bank of England. Nomura analysts said it’s possible the BoE may institute another round of quantitative easing. They said the BoE’s previous 50 million-pound program is coming to an end and they said the British central bank may announce a 25-million pound program because of disappointing demand data out of the U.K.

Source: Kitco News

Halcyon days fading for Asia-Pacific mining companies-S&P

Standard and Poor's warns if China's slowdown proves to be severe, it could take the wind out of commodities prices sails. Even with a soft landing, steel and aluminum producers will still weaken.

A key threat to the stable outlook of the mining sectors is a rise in inputs costs," Standard & Poor's credit analysts warned in a recent industry report card on Asia-Pacific metals and mining companies.

"A tighter labor supply and likely higher energy prices will pressure the profitability of many commodity producers. Metal producers will also be wrestling with more expensive raw materials," the analysts advised."

"For Asia-Pacific steel and aluminum companies, we forecast a negative outlook. Margins in this subsector will struggle with softening demand due to a global slowdown and abundant supply."

"On the other hand, we expect the credit prospects of producers of copper, high grade minerals sands, seaborne iron ore, and coking coal to remain steady," the analysts predicted. "Although prices of these commodities have come down, producers still enjoy reasonable margins. In addition we believe prices of these commodities have bottomed out because growing, albeit slower, demand and supply-side constraints will underpin prices at current levels."

S&P analysts say they believe prices of coking coal, copper and seaborne iron ore likely bottomed in the first quarter of this year. Meanwhile, further industrial actions, delays in production ramp-up and the impact of weather events could disrupt supply.

Nevertheless, S&P believes thermal coal prices could further soften, especially if exports from the U.S. to Asia due to a sluggish domestic market consolidate its momentum.

Meanwhile, S&P warns, "Further bouts of weakness could also materialize for nickel because of the metal's demand sensitivity to industrial usage and substitution risks."

Australia, in particular, is facing risks in the persistence of increased input costs. "The country's tight labor and contractor market, as well as the strong Australian dollar have pushed up the cash production costs of local miners," the analysts observed.

"Indonesian and Mongolian miners are also feeling the heat from steep fuel costs," they added.

In their report, the credit analysts said mining regulatory or taxation changes have no immediate rating impact. However, they added, "We believe the mining sector is braced for increasingly negative regulatory developments throughout Asia Pacific over the 18-24 months. Still, we do not expect the adverse regulatory rulings to immediately affect our ratings on mining companies in the region."

"Increasing regulation in the mining sector is not specific to Asia Pacific," the analysts observed. "Peru and Chile in South America have temporarily or permanently increased royalties or income taxes in 2011 and South Africa is considering the application of a super-profit tax. Environmental regulation is also becoming increasingly costly in the U.S."

Despite the aforementioned risks, S&P foresees capital spending remaining firm within the next two years for commodities with a more favorable supply-demand balance, including iron ore coking coal and gold.

Meanwhile, S&P analysts observed, "Large producers and state-owned enterprises will continue to have strong access to capital markets in 2012, in our view. This is despite increasing commodity price volatility and an uncertain global environment."

"We believe smaller miners with undeveloped assets, significant capital spending requirements or a marginal cost position will face a tougher time raising financing," they suggested.

Currently, 17 or 63% of the Asia-Pacific metals and mining companies rated by S&P have stable outlooks, nine (33%) have negative outlooks, and one company (4%) with a positive outlook.

Thursday, May 3, 2012

Rio Tinto CEO warns of growing risks to global supply of metals

Tom Albanese warned investors Thursday that rising costs and calls for buybacks and special dividends eat away at incentives to build new mines.

Global miner Rio Tinto warned on Thursday of risks to keeping up the global supply of metals as increasing demands from governments, rising costs and calls for buybacks and special dividends eat away at incentives to build new mines.

"It is getting harder and harder to find supply, harder and harder to find resources. And resources are in places where stakeholder activism is tough and resource nationalism is tougher. It takes longer to get permits approved, if they get approved at all," Rio Chief Executive Tom Albanese told investors at a Sydney conference.

"So the next five years is going to be a supply story; the last five years has been a demand story. I am not sure the economic forecasters have cottoned on to that observation yet."

Soaring prices for labour, materials and power have dented profits and forced miners to review some potential growth projects. They are also facing increased demands from governments that want a larger share of the resources pie.

Meanwhile, investors have begun to fret over miners' ever larger and more capital intensive projects, demanding that companies do a better job of balancing growth with the need to compensate shareholders with dividends and buybacks.

Rio, a day after BHP Billiton reassured investors at the same conference, said it was listening to concerns over spending discipline. But warned that would mean fewer projects across the sector. [ID:nL5E8G2HWZ ]

"Each of you in this room want more money back. You want buybacks, you want dividends, you want special dividends. You don't want us spending as much money," he said.

"We recognise that. We respect that. But what that means, and we are hearing it, we know our peers are hearing it, (is) there is going to be less supply coming in."

Rio has more than $33 billion of major capital projects underway, including Oyu Tolgoi in Mongolia, one of the world's largest copper-gold mines.

Albanese said operating conditions for coal miners in Australia were difficult but stopped short of confirming a report that Rio was reviewing its coal expansion plans there, largely due to capital costs and investor pressure to return more cash.

The Australian Financial Review had said Rio's proposed $2 billion Mount Pleasant coal project in New South Wales State looked likely to be shelved.

He said separately the miner had no shortage of suitors interested in its diamond business, put up for sale earlier this year.

Sunday, March 4, 2012

Silver stocks building for breakout in 2012: Sean Rakhimov


rakhimov_revSilver price volatility provides some exciting profit opportunities for investors who develop the right strategies to take advantage of the action. In this exclusive interview with The Gold Report, Sean Rakhimov, publisher of the website, talks about how the global forces of monetary policy and fear are expected to push investment demand for silver much higher and highlights some companies he expects to profit most from the coming silver boom

Sean Rakhimov


The Gold Report: You last talked with The Gold Report in January 2011 and at that time you gave us your view on the prospects for silver for 2011. What’s your analysis now as to what happened in 2011?

Sean Rakhimov: 2011 was a breakthrough year for silver. Last time we talked I think the title of the interview was “Silver Going Mainstream,” which I believe it did last year. The silver price did run up to $50/ounce (oz). It settled back slightly under $30/oz, and sometime around the end of last year and the beginning of this year I believe we put in a major bottom in both gold and silver. The markets have been looking up since then.

There’s been a bit of consolidation going on largely based on geopolitical events. It’s been my long-standing theory that the action in the metal prices is not necessarily determined on a day-to-day basis by the fundamentals of the metals themselves. It’s more of a reaction to the external news, whether it’s in financial areas, geopolitical or some other areas.

TGR: Do you think people are trying to figure out what they think other people are going to do, and then somehow profit from it?

SR: Yes, but in the case of gold and silver, I don’t believe the reasons or the information pertaining to the metals themselves are as dominant in the conversation as it is in some other assets. Gold and silver are the only markets driven by fear, and fear usually does not emanate from the metals, but from other areas. A lot of the other assets are driven by greed.

TGR: I know you don’t like to make specific price predictions, but you published an article at the end of October 2009 where you said that silver was going to hit a high somewhere between $30/oz and $50/oz. We did see the $50/oz price last year. At this point, what do you think it’s going to take for silver to break through that $50/oz barrier for good and establish that as a new base price?

SR: The catalyst, I believe, will probably be somewhere in the currency space, whether it’s in Japan, Europe, the U.S. or maybe even some other region that we don’t think of on a day-to-day basis. I view gold and silver as monetary instruments, at least at this stage, although silver has a great degree of industrial uses. I also think that we probably will see a new high in both gold and silver this year. For silver, that would be over $50/oz and for gold that would be somewhere in the $1,800–1,900/oz range.

TGR: How closely tied are gold and silver as far as price performance goes? Is gold going to drag silver up with it or can you see any kind of catalyst that would make silver go up on its own?

SR: As a rule, they move together. Silver does display a high degree of volatility and I believe its fundamentals are far superior to those of gold due both to its industrial usage as well as price. Silver is far cheaper than gold and a lot of investment has been switching over to silver. For instance, Sprott says it sells equal amounts of silver (in dollar terms) to gold, which means in today’s numbers, silver is selling 50 times more in ounces than gold.

So, I think silver has far superior fundamentals, and it’s definitely more affordable. It will take on a life of its own, and at some point, outperform gold significantly.

TGR: Lots of people out there have all kinds of opinions about where it may ultimately go. Do you have any outer limit expectations for it?

SR: I don’t, but if you look back at some of the early interviews I did with The Gold Report, I think I was among the first to say that I expect three-digit silver. That was when silver was definitely below $15/oz and maybe even below $10/oz. So, I was one of the early people who thought silver had far higher to go. Today, I believe that silver has at least a 10x appreciation potential from the current level. Again, being a monetary instrument, an awful lot is going to depend on what happens to other monies elsewhere. For the cycle, I don’t have a number target, but I do think that the gold:silver ratio will get below 20, probably closer to 10:1. It’s over 50:1 right now; so, that should be a good guideline.

TGR: That really gives it some upside potential from here. So, from a monetary standpoint, do you see the possibility that governments are gradually going to get serious about somehow making silver a part of the monetary system if gold goes in that direction also?

SR: I think some governments will at least attempt to. In Mexico, there’s been a long-standing movement at high levels of government to bring silver into the currency equation. I don’t know how that will shake out for several reasons. One, silver is not as plentiful as we think. I also don’t know how gold will come into that equation. I believe that if gold does take on the currency role again, it will be more in inter-government relations rather than day-to-day uses.

I don’t think we have enough silver, basically, to use it as a currency. With the paper currencies facing all these challenges, a new and better financial system will have to be developed. For a while, gold and silver may play that bridge refuge role until they sort out what the new system is going to look like.

TGR: So tell us what sort of strategies you’re using at this point to benefit from the current silver market and what you think is going to be coming up here in the next couple of years.

SR: Well, in terms of investment I have always advocated that silver metal is a good investment; so is gold for that matter, but I think you get a wide variety of experts on your website discussing the metals. I think investors would do better and will be better served if they spend some time figuring out exactly what their personal take or expectations or intentions are. I think the majority of investors don’t spend enough time on figuring out their strategy. Am I a long-term investor? Am I a trader? Am I looking for a tenbagger in the next year? Am I a high-risk taker? Do I want some stability (in my portfolio)? Do I want to be in blue chips?

I think those are very important questions and should be part of their thinking. A couple of years ago I made the case that we were entering the second phase of the bull market. This is the institutional phase, where investors would be better off if they followed the money, so to speak, and positioned themselves in companies and investments that institutions will come into.

The case I made was for companies that have established operations or assets and are kind of “out of the woods” in terms of if they’re going to make it, but their full potential has not yet been realized. The article is available on my website, and there’s a flow chart there that shows money flows the way I expect them to flow around. So, I think the midtiers or the up-and-coming producers or producers that are expecting a bump in their production would perform well in the current period. And I still hold that view.

The other strategy I employ is to find stories early, and then you either bet on the team or the asset or both.

TGR: Would you like to talk about some of these that you like at this point and tell us where they are in the hierarchy?

SR: For companies that are out of the woods and poised for significant appreciation, I look at a company like SilverCrest Mines Inc. (SVL:TSX.V; STVZF:OTCQX). It’s a profitable silver and gold producer in Mexico. The company has a decent share structure, plenty of cash and is looking to double its production from the current operations. It just made a brand new discovery where the first resource came out at 100 million ounces (Moz) of silver equivalent. Its target for the deposit is 200 Moz plus. That deposit alone should be valued by the market at roughly the current market cap of the company today.

It seems that whatever the SilverCrest management team touches turns into gold, so to speak. SilverCrest went into El Salvador initially and made some discoveries. Ultimately things did not work out in that country for political reasons. Then, it came to Mexico, made a discovery and put a mine into production. Now, it has another project and has made another discovery.

The same people had another company called Goldsource Mines Inc. (GXS:TSX.V) that was operating in Saskatchewan, and there they made a huge coal discovery. So, those are the people that one should track closer than usual because they deliver. They don’t have big names; they don’t speak on TV every week, but they do deliver.

I recently became a consultant to the company, though I have been following and writing about the company for several years. I don’t normally talk about companies that I am involved with, but in this particular case, the upside of the La Joya project can be spectacular.

Another company that I like these days is Huldra Silver Inc. (HDA:TSX.V). This is also an emerging producer with a very high-grade silver project near Merritt, British Columbia, a couple of hours drive east of Vancouver. This is an historic mine that Huldra should have back in production some time later this year. The company has a very attractive share structure, around 35 million (M) shares. It trades around $1.30/share, which gives it about a $45M market cap. Now, if it does get into production with the current share structure, or anything close to it, and it hits the target of, say, 2 Moz annualized production, it holds tremendous potential and the shares should appreciate several-fold over time.

TGR: Can it get there without too much dilution from here?

SR: I think it can; it did the financing for the current production preparation with debt. I believe it has about a $10M facility, which it’s working through. Even if it did tap the equity market for additional financing, I still believe there’s plenty of upside there because it’s very close to production and the bulk of the money has been spent. It even has some stockpiles of ore already that will be used to fine-tune the mill.

On the other end of the spectrum there are some of these junior exploration companies. One that I’ve been recently looking at closer is Minaurum Gold Inc. (MGG:TSX.V). It’s been around a couple of years, and the attractive thing about this company is that it employs two of the top geologists in Mexico—David Jones and Peter Megaw. These people have a proven track record and no problem raising money. The stock is trading around $0.40 with a market cap right now of about $16–17M. It has about $4M in the bank, and it’s going to be drilling some 11,000 meters this year. With a company like this, a discovery is sort of a matter of time, and I think it doesn’t have to be all that long and could become a big story overnight.

TGR: There’s a lot of action in silver in Mexico. Any more names you like there?

SR: One company that investors should take another look at is Avino Silver & Gold Mines Ltd. (ASM:TSX.V; ASM:NYSE.A; GV6:FSE), which has been around for about three decades and only has about 27M shares out. It has a mill and recently did a bulk sample worth over a few million dollars and is getting ready to put its Avino mine into production. It’s just very attractive, trading at less than a $50M market cap and ready to go into production sometime later this year. I think the story is very compelling.

TGR: How about some of the bigger companies that have more established production?

SR: I like Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) a lot. I visited Fortuna’s newest mine in Oaxaca, Mexico, last year, and it’s a fantastic operation. Unfortunately, it seems to be having some trouble with the local population not liking its presence there. As an operating company, I think it’s an excellent company. I like the management a lot; they’re very good operators. Its Caylloma mine in Peru has fantastic production and cash flow. It was divested by a bigger silver company and Fortuna turned it completely around. Assuming the local issues in Oaxaca will be resolved, I think it’s still undervalued.

Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE) expects in excess of 4.5 Moz of silver production this year, and it’s certainly performed very well. It’s not a cheap stock, but that doesn’t mean it’s not going higher. I think it’s done extremely well, and if it does succeed in adding another producing asset to its portfolio, I think that’s going to make a big difference.

One of my favorites is First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE). I’ve known and followed the company practically from inception. It’s a company that I’ve been pounding the table on in previous interviews. Now it’s a $2 billion company that trades around $20/share and it’s probably going to get bigger. It has an excellent pipeline of projects and it’s expanding one of its mines (La Parilla) right now, which should increase its production by about 50%. It’s also building another operation called Del Toro, which will be its highest grade mine and has at least one more sizable project in the pipeline. It has plenty of cash and excellent management. That’s how you go from a penny stock to a $20/share stock. I don’t see why it can’t go much, much higher.

TGR: Anything else that you’d like to comment on?

SR: In the exploration space, where I like to get in early, there’s a company that I do have shares in. It’s an Argentinean story called Netco Silver Inc. (NEI:TSX.V; NTCEF:OTCBB). Netco is a very cheap stock with a good project that’s advancing with some very good grades. The rest remains to be seen, but it’s still early.

There’s also a company called Andover Ventures Inc. (AOX:TSX.V). It’s a $0.50/share stock with about 100M shares out. This is the type of situation that I like to be involved in because it has tremendous assets. This company is the second largest landholder in the state of Utah, where the largest landholder is the Mormon Church.

TGR: How can it afford to keep up its assessment work every year?

SR: Well, Andover owns the land outright, not just the mineral rights, and I think it did a great job putting together the projects. This company is absolutely loaded with assets. The land package it controls in Utah hosted something like 50-odd companies in the last cycle, and it has the entire land package to itself. It also has a joint venture with Rio Tinto’s (RIO:NYSE; RIO:ASX) Kennecott subsidiary and they’re hunting for elephants. Andover also has a major volcanic massive sulphide (VMS) deposit in Alaska. The market cap is very cheap.

Now, I will say that the market has not been all that kind to the mineral sector in general of late; so, there are a lot of cheap companies out there. Sooner or later the market will have to pay up for assets like these. In the case of something like Andover, at least the perceived geopolitical risk is minimal because both of the assets are in the U.S.

TGR: Is there anything else you would like to mention or just leave some parting thoughts?

SR: One company I should have mentioned is Esperanza Resources (EPZ:TSX.V), which is run by another one of those groups that whatever it touches, it comes up with something good. Next time we can get into the reasons why I like that company.

Generally speaking, though, with silver, we are probably somewhere midway through the cycle and have another 10 years to go. Investors should constantly revisit their reasons for being in this space and what exactly they are looking to get from it. I think there’s nothing to worry about in the volatile price action. Silver is about the most volatile asset that you can be in. Other than that, I think it is up and up from here.

TGR: That’s a good, positive outlook, and I think you’ve given us some good stocks to look at and research further. Thanks for speaking with us.

Sean Rakhimov launched his website,, in 2004. His writing has appeared on such Internet portals as Le Metropole Café, 24hGold, 321gold, Kitco, Gold Seek, Gold Seiten and The Gold Report. He previously designed financial systems for the investment banking business, learning about options trading, securities lending, payments processing, clearing and settlement, fixed income securities and margin transactions. Rakhimov is constantly looking for value opportunites in new and established stories.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

1) Zig Lambo of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: SilverCrest Mines Inc., Avino Silver & Gold Mines Ltd., Fortuna Silver Mines Inc., Endeavour Silver Corp. Streetwise Reports does not accept stock in exchange for services.
3) Sean Rakhimov: I personally and/or my family own shares of the following companies mentioned in this interview: Silvercrest Mines Inc., Huldra Silver Inc., Andover Ventures Inc., Netco Silver Inc. I personally and/or my family am paid by the following companies mentioned in this interview: SilverCrest Mines Inc. I was not paid by Streetwise Reports for participating in this story.

Source: Zig Lambo of The Gold Report

Thursday, March 1, 2012

Dia Bras authorized to list on Lima stock exchange

Toronto-based Dia Bras Exploration (TSX-V: DIB) has been authorized to list its common shares on Lima stock exchange BVL, state news agency Andina reported.

The company filed an application to list on the exchange on January 19.

Dia Bras is focused on precious and base metals in Peru and Mexico. The company owns and operates the Yauricocha polymetallic mine in Lima region and the Bolívar mine in Mexico's Chihuahua state, as well as other properties in the two countries.

Mining output up 5.4% in Dec, 17.6% in 2011

Mexico's mining and metals output in December 2011 increased 5.4% year-on-year, according to national statistics bureau Inegi.
Non-coking coal output soared 49.3% year-on-year to 1.59Mt, copper jumped 39.2% to 36,983t, sulfur rose 19.2% to 85,828t and gypsum increased 6.4% to 382,179t, Inegi said in a statement.

Gold output fell 8.7% to 6,688kg (215,024oz) but silver rose 5.4% to 349,572kg.
Pellet production plummeted 26.6% to 491,552t, lead plunged 23.8% to 11,625t, zinc dropped 14.7% to 38,513t, coke declined 1% to 140,298t and fluorite fell 0.4% to 93,735t.


Overall mining and metals output in 2011 rose 17.6% compared to the prior year.
Copper (+68.3%), non-coking coal (+55.8%) and gypsum (+19.5%) showed the largest increases in 2011. The only declines in the period were posted by sulfur (-3.6%), zinc (-3.5%) and pellets (-2.6%).

To read the full statement, in Spanish, go to this link

Tuesday, February 28, 2012

Speculators Increase Appetite For Precious Metals –CFTC

Speculators raised their appetite for precious metals by increasing their exposure to U.S. futures and options contracts traded on the Comex division of the New York Mercantile Exchange and on the Nymex, according to U.S. government data released Friday.
For the week ended Feb. 21, speculators in the Commodity Futures Trading Commission’s weekly commitment of traders report added to their net-long positions in all precious metals markets for both the disaggregated and legacy reports. Speculators’ positions in copper were pared back.

During the timeframe measured, most-active April gold futures contract on Comex rose $40.80 an ounce and settled at $1,758.50 on Feb. 21. Comex March silver gained $1.081 an ounce to settle at $34.429. April Nymex platinum rose $56.90 an ounce to settle at $1,684.90 and June Nymex palladium gained $23.60 an ounce to settle at $712.55. Comex March copper increased 2.2 cents a pound to $3.8365.

“Over that week, precious metals prices rose strongly across the board, driven by high risk appetite, notably on the back of the Greek restructuring agreement, geopolitical risks related to Iran and PGM (platinum group metal) supply issues in South Africa. Open interest rose in all precious metals, with the exception of palladium,” said Anne-Laure Tremblay, senior precious metals strategist at BNP Paribas.

Managed-money accounts significantly raised their net-long position in gold, lifting it to 179,132 contracts. Managed-money accounts added 16,612 gross longs and added 437 gross shorts. Producers and swap dealers raised their net-short positions. Producers added many more gross shorts than gross longs and swap dealers cut gross longs and added shorts.

Citigroup Futures Perspective said while the managed money position in gold is the “largest and most overbought since Sept. 13, there is also still ample room for further buying relative to the record of 253,653 set Aug. 2.”

Non-commercials in the legacy report also sharply increased their net-long gold position, having added 18,871 gross longs and added 1,035 gross shorts. They are now net-long 201,637 contracts. Commercials are net short, having added heavily to gross shorts and only slightly added to gross longs, lifting their net short position.

The silver net-long position for the managed-money accounts increased to 28,025 contracts. The growth came from adding 2,851 gross longs and adding 300 gross shorts. Producers remain net-short, increasing that position as they added more gross shorts than longs. Swap dealers are net long but trimmed back on exposure, having added to more gross shorts than gross longs.

In the legacy report, the silver net-long for non-commercials mirrored the disaggregated report. They added 2,146 gross longs and added 675 gross shorts. They are now net long 29,751 contracts. Commercials added to their net-short position by slicing gross long positions and adding gross shorts.

Managed-money accounts in platinum increased their net-long position to 20,970 contracts, having added gross longs and cut gross shorts. Non-commercials continued to build their net-long position, which now is 28,567 contracts, having added more gross longs than gross shorts.

In palladium the managed-money accounts lifted their net-long position to 9,540 contracts. They cut gross shorts and added gross longs to raise their net-long position. In the legacy report, non-commercials left gross longs essentially flat, but decreased shorts, ultimately raising their net-long to 10,788 contracts.

Barclays Capital said the rise in the net fund length in the platinum group metals came on the back of a combination of fresh long positions being established as well as short-covering activity. “Speculative positions in platinum are now at their highest in one year … representing 64% of open interest, thus should the supply disruptions ease in South Africa, prices could be subject to price corrections,” they said, adding that palladium positions are at their highest since September.

Further, the firm said it while short-term traders are buying up PGMs on a worsening of supply losses -- even though the market remains in a supply surplus -- net demand from the exchange-traded fund community needs to start rising as “speculative positioning … is closing in on its peak,” they added.

The copper net-long position for the managed-money accounts slipped to 13,260 contracts as they have cut gross longs and hiked gross shorts. Funds also lowered their net long position in the legacy report, having added more gross shorts than gross longs. They are net-long 9,430 contracts. Commercials are net short but cut more gross shorts than gross longs.

For further information, see the CFTC’s website:

Saturday, February 25, 2012

Southridge Plans Mill Expansion Program at Cinco Minas to 500 Tons Per Day

Southridge Enterprises Inc. (Pinksheets: SRGE.PK - News) ("Southridge" or the "Company") announced today that the Company has initiated a program to increase future output of the Cinco Minas mill in Jalisco, Mexico, to 500 tons per day (tpd). The Company is currently negotiating a contract with an engineering firm based in Mexico City to perform an assessment of the mill site at the Cinco Minas as a basis for the planned expansion to 500 tpd mill. As part of the previously announced Mill Production Program, Mr. Juan Eduardo Lopez Romero, the Company's geologist and advisory board member, will be coordinating the finalization of the engineering contract for the Cinco Minas mill expansion program.

"We are excited to announce our plans to increase the output of our Cinco Minas mill. This is a major step forward for both the Company and shareholders," says Southridge President Michael Davies, "as it has always been our goal to implement a production schedule that would increase both revenues and add to shareholder value. Our focus is to turn Cinco Minas into a world-class precious metals mining operation."

Currently, Cinco Minas hosts a 60 tpd mill and has a significant confirmed gold and silver resource of 235,000 oz. gold, and 23.3 million oz. silver with 80% of the known vein system at Cinco Minas has yet to be tested. Recently, Southridge announced rock sampling and testing of the surface ore at Cinco Minas. In 2007, International mining consulting firm Behre Dolbear released a report on gold and silver ore stock piles and waste dumps at Cinco Minas. The Behre Dolbear report recommends the expansion of Cinco Minas and suggests that there is 2 year supply of ore production currently on surface at Cinco Minas.

To the north of Cinco Minas is First Majestic Silver Corp.'s San Martin Mine, which hosts a major production operation in a 900 tpd cyanide mill with a Proven & Probable reserve of 6,790,782 Ag, a Measured and Indicated resource of 7,435,823 oz. Ag and a further 48,900,000 oz. Ag Inferred resource.
Additionally, Mathers Research has initiated research coverage of Southridge, with a 'Speculative BUY" Opinion and a near term price target of $0.20 cents per share.

Friday, February 24, 2012

Usiminas' board approves changes designed to improve management focus - Brasil

Brazilian steelmaker Usiminas' (Bovespa: USIM5) new management structure will allow the company to better organize and direct its management focus, a company press official told BNamericas.
The new structure will contribute to a continuous increase in efficiency and competitiveness, the official said.

Usiminas' board recently approved the new executive structure, involving a CEO and six VPS.
Argentine Marcelo Chara, from Luxembourg-based steel group Ternium's (NYSE: TX) subsidiary Ternium Siderar, was appointed VP of industry, and Sergio Andrade, the previous business and steel VP is now commercial VP.

ndrade will expand Usiminas' markets, regain market share and increase exports. The executive will also be responsible for the company's service and distribution center (Soluções Usiminas).
Ronald Seckelmann remained as finance and investor relations VP.
Usiminas' pension fund (CEU) president, Erwin Romel de Souza, will take over as quality and technology VP.

The company also created two VP positions. Italian Paolo Basseti, who was the director of Ternium's Brazilian subsidiary - will manage the iron ore business (Mineração Usiminas), capital goods (Usiminas Mecânica) and auto parts (Automotiva Usiminas).
Japanese executive Nobuhiro Yamamoto will lead the corporate planning division. The company also appointed Vanderlei Schiller as VP of HR and organizational development.

In early January, Usiminas' board appointed Argentine Julián Eguren as CEO. Eguren - who replaced Wilson Brumer - was previously in charge of Ternium's North American operations and CEO of the company's Mexican subsidiary.

Following share purchase agreements in November, Usiminas' main controllers are now Japanese group Nippon Steel and Ternium.

Minas Gerais state-based Usiminas is the largest fully integrated flat steel manufacturer in Latin America, with crude steel capacity of 9.5Mt/y. Usiminas also has iron ore mines, steel distribution subsidiaries and operates downstream facilities in Brazil.