February 27, 2012

China joins Venezuela in #LasCristinas huge gold project

China joins Venezuela in huge gold project

Venezuela will develop its huge Las Cristinas gold project in partnership with Chinese state investment company CITIC, President Hugo Chavez announced on Friday.

The government last year cancelled Toronto-based Crystallex International's permit to develop the long-troubled mine project south of the Orinoco river.

Russian-Canadian miner Rusoro Mining, based in Vancouver, had hoped to partner with Venezuela in what could be Latin America's largest gold deposit. Las Cristinas has estimated reserves of 17 million ounces.

In a meeting with Chinese investors, Chavez said he was firming "an agreement with CIT-IC for the joint development of Las Cristinas." He gave no more details.

Chavez, who was speaking at his last meeting before flying to Cuba for cancer treatment, has brought Venezuela ever closer to China in terms of business and political ties during his 13-year rule of the South American OPEC member.

Development of the Las Cristinas mine, near a town bearing the name of the mythical golden city of El Dorado, has dragged for decades due to a mixture of bureaucratic, political and financing issues.

Some locals say the mine is cursed.

© Copyright (c) The Province



China joins Venezuela in huge gold project

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February 22, 2012

Jim Rogers Blog: If I Could Put All Of My Money Into Myanmar, I Would

If I could put all of my money into Myanmar, I would. Myanmar is in the same place China was in early 1979, when Deng Xiaoping said we have to do something new. Myanmar is now opening up. - at a conference in Singapore yesterday

Jim Rogers Blog: If I Could Put All Of My Money Into Myanmar, I Would

The MasterMetals Blog

February 21, 2012

Is the PBoC really gold`s mystery buyer? - INDEPENDENT VIEWPOINT | Mineweb

Here is an excerpt:


Our guess? No doubt China is buying gold direct from its miners. That metal is then lacking for retail consumption. So to ensure lots of supply for what proved another strong Chinese New Year, importers booked early and often. But following that trebling of gold imports in 2011, the timing of SAFE's move, immediately after New Year - and only two weeks after India doubled its gold and silver import duties - suggests Beijing is live to the trade-balance risks posed by Chinese households' soaring demand.

"IMF slashes forecast for China current account surplus," announced the Wall Street Journal last week.

"China's current account surplus for 2011 shrank to $201.1 billion ($187.37bn), from $305.4bn in 2010. More important, as a ratio of gross domestic product, the surplus fell to about 2.7%...close to a decade-low."

Now, "as China's trade surplus declines dramatically," reports University of Peking professor Michael Pettis, "more and more people within the country are calling for interventionist steps to halt the decline, including depreciating the [Yuan], or at least halting its appreciation."

Pettis' comment should remind us that Beijing is a big bureaucracy, with lots of divergent views and voices. Devaluing the Yuan would look a highly aggressive decision to its would-be friends in Washington, especially those US politicians talking up China's "violations" of international law. But trying to stem - or rather slow - the pace of import growth wouldn't look quite so rude.

This new rule is already frustrating those banks importing gold, but it's likely only to delay, rather than deter, the flow of bullion. Still, it's a hat-tip to the potential drain on China's foreign currency holdings which gold has become for India - still the world's No.1 consumer, and importing twice as much as bullion as China in 2011 because it has no domestic mine output to help feed its consumption, whether central-bank or private.

India's hunger for a metal it does not produce is plain to see in its trade balance. The only current-account deficit in the region as Morgan Stanley notes, this gold-heavy outflow of cash also weighed on the Rupee's exchange rate in 2011, down 15% versus the Dollar as the currency markets tried to force an adjustment.



The MasterMetals Blog

Vitol warns crude could pass $150 - FT.com

Another record year for Vitol - in revenues, if not in profits...

The Geneva-based trading house, which is owned by 360 of its employees, said that revenues rose last year to a record $297bn, up 44 per cent from $206bn in 2010, on the back of rising volumes and prices. Commodities trading houses achieve tiny margins and industry executives believe that the difficult trading conditions of last year mean that Vitol earned between $1.5bn and $2.0bn in the year, below its record high of $2.3bn set in 2006.

Vitol said that its total trading volumes reached 457m tonnes, up roughly 14.5 per cent from 399m tonnes in 2010, as the trading house boosted some of its non-oil businesses, including emissions and coal. Vitol traded 135m tonnes of crude oil, equal to roughly 2.8m barrels a day, little changed from 134m tonnes in 2010.

Vitol warns crude could pass $150

The world’s largest independent energy trader has warned that oil prices could surge this year to a record high due to growing geopolitical tensions in the Middle East.

Ian Taylor, chief executive of Vitol, said on Tuesday as he released results for the commodities trading house that his main scenario envisaged oil prices remaining at “around current levels for the balance of 2012”, but he warned: “Geopolitical risk, especially in the Middle East, creates potential material risk to the upside.”

In a separate interview with the Financial Times, Mr Taylor said that oil prices could even surpass the record high of nearly $150 a barrel set in mid-2008. “It is unlikely, but it is possible,” he said when asked whether prices would surge to a fresh record.

Even if oil prices remain just at current levels, as Vitol is predicting, it would mean that 2012 would set a record annual average. Brent crude oil averaged $109 a barrel last year, setting an all-time high above the previous average record of $98.4 a barrel in 2008.

The comments came as the Switzerland-based trading house reported record revenues and volumes in 2011. Vitol, which is privately owned, does not disclose profitability.

...

“The supply side of the market is a mess,” Mr Taylor said. “Demand, even if not great, continues to grow. So its difficult to see much price downside from current levels.”

Moreover, oil inventories remain at historically low levels, particularly in Europe, due to the impact of the civil war in Libya on oil supplies. The International Energy Agency earlier this month said that crude oil inventories in Europe fell in December to a 15-year low.

...

The forecast by Vitol comes as oil executives, traders and policymakers gather for International Petroleum Week, the annual meeting of the industry this week in London. For the second year in a row, the risk of supply disruption is the dominant theme for IP Week. In 2011 Libya was the main worry. This year it is Iran.

...

The Geneva-based trading house, which is owned by 360 of its employees, said that revenues rose last year to a record $297bn, up 44 per cent from $206bn in 2010, on the back of rising volumes and prices. Commodities trading houses achieve tiny margins and industry executives believe that the difficult trading conditions of last year mean that Vitol earned between $1.5bn and $2.0bn in the year, below its record high of $2.3bn set in 2006.

Vitol said that its total trading volumes reached 457m tonnes, up roughly 14.5 per cent from 399m tonnes in 2010, as the trading house boosted some of its non-oil businesses, including emissions and coal. Vitol traded 135m tonnes of crude oil, equal to roughly 2.8m barrels a day, little changed from 134m tonnes in 2010.

read the whole story online here: Vitol warns crude could pass $150 - FT.com

February 17, 2012

Singapore to exempt gold, other precious metals from 7% tax - FAST NEWS | Mineweb

Everyone wants a piece of the coming gold mania...

Singapore to exempt gold, other precious metals from 7% tax

The move brings Singapore's tax treatment of investment-grade gold and other precious metals in line with the practices of countries such as Australia and Switzerland.

Posted: Friday , 17 Feb 2012

SINGAPORE (REUTERS) -

Singapore will exempt investment-grade gold and other precious metals from a seven percent goods and services tax to spur the development of gold trading, Finance Minister Tharman Shanmugaratnam said on Friday.

The change brings Singapore's tax treatment of investment-grade gold and other precious metals in line with the practices of other developed countries such as Australia and Switzerland, he said.

"We will facilitate the development of gold trading, which can draw on Singapore's strengths as a financial and trading hub, to meet strong demand for investment-grade gold in Asia," Tharman said in a budget speech.

"It should add greater incentive for asset managers, especially those in the alternative investments space, to seriously consider Singapore as a location for their operations," Tan Tay Lek, a tax partner at PwC Services LLP (Singapore), said in a statement.

(Reporting by Charmian Kok; Editing by Anshuman Daga)

© Thomson Reuters 2012 All rights reserved


Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning, and concluding, 24 hours later, in the Vancouver evening. If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com


Mineweb.com - The world's premier mining and mining investment website Singapore to exempt gold, other precious metals from 7% tax - FAST NEWS | Mineweb

February 16, 2012

China central bank in gold-buying push - FT.com

China central bank in gold-buying push

The World Gold Council believes China’s central bank made significant gold purchases in the final months of 2011, contributing to a surge in the country’s imports.

Marcus Grubb, managing director for investment at the WGC, a lobby group for the gold mining industry, told the Financial Times that buying by the People’s Bank of China could explain a large discrepancy between Chinese imports and the WGC’s estimates of consumer demand in the country.

“There is absolutely a discrepancy in the import figures,” said Marcus Grubb. “The obvious inference is that the central bank is buying.”

His comments mark the first public statement from a senior gold industry executive pointing to purchases by the Chinese central bank, a trend that many others have highlighted privately. The PBOC did not respond to questions on Thursday.

China’s imports from Hong Kong, which account for the majority of its overseas buying, soared to 227 tonnes in the last three months of 2011, according to data published by Hong Kong. Mine production in the country, the largest gold producer, stood at about 100 tonnes in the quarter, implying total supply of at least 330 tonnes.

That compares to demand of 191 tonnes for gold jewellery, bars and coins – which account for the vast majority of Chinese demand – reported by the WGC on Thursday.

Most industry executives believe China has been quietly accumulating gold produced in its domestic market for years, but it rarely publishes details of its holdings. In 2009, Beijing revealed it had almost doubled its gold reserves since 2003, making it the fifth-largest holder of bullion with 1,054 tonnes.

Philip Klapwijk, head of metals analytics at Thomson Reuters GFMS, the consultancy that produced the data underlying the WGC report, agreed that the so-called “official sector” of the central bank and other sovereign institutions may have bought gold in the final quarter of the year. “It could be that the apparent surplus in the domestic market due to the scale of imports reflects official sector purchases,” he said.

However, he added that some of the apparent surplus could be accounted for by stockbuilding by Chinese banks ahead of the lunar new year holiday.

Mr Grubb added that the Hong Kong trade data could yet be subject to revisions, or that other players, such as Chinese sovereign wealth funds or other financial institutions, could have accumulated stocks of gold during the quarter.

But he added: “In the medium term we do know the Chinese central bank and other Asian central banks with large foreign exchange reserves have been increasing their holdings of gold. This is consistent with that.”

Central banks bought about 440 tonnes of gold last year on a net basis, the WGC said, the highest level of buying since 1964. Large buyers included Mexico, Russia and South Korea.

China’s State Administration of Foreign Reserves, which manages China’s $3.2tn in foreign reserves under the Central Bank, has said publicly that it views gold and other commodities as having limited relevance for its investments because of price fluctuations, storage costs and limited transaction volumes.

However, advisers to the central bank have been urging China to diversify its holding of foreign reserves, which is held mostly in US Treasuries and other governments’ bonds.

Demand from Chinese consumers is also rising rapidly, as they pour new-found wealth into gold. The WGC on Thursday predicted that China would this year overtake India as the world’s top gold consumer for the first time.

Additional reporting by Leslie Hook in Beijing


China central bank in gold-buying push - FT.com

The MasterMetals Blog

Special report: For Iran oil trader, Western ties run deep | Reuters

Special report: For Iran oil trader, Western ties run deep

Photo
9:16am EST
By Emma Farge, Chris Vellacott and Stephen Grey
LONDON (Reuters) - The newspaper notice sat next to advertisements for tarot-card readings, Alcoholics Anonymous meetings and children's tap-dancing lessons. The Naftiran Intertrade Company, an oil-trading firm owned by the Iranian government, announced plans to close its registered headquarters in the British tax haven of Jersey and move to a tax haven in Asia.
That advertisement, in a Jersey newspaper last September, came as Iranian companies were stepping up efforts to get around Western sanctions designed to slow or stop Iran's nuclear program. But the Iranian oil trader's retreat from the West has been only a partial one.
Reuters has learned that on February 1, Naftiran Intertrade increased its holding in British oil giant BP Plc by 1.85 million shares. It now holds a stake worth more than $190 million.
In addition to the shareholding, the Iranian company's ties to BP include the Rhum gas field in the North Sea, a venture that's now suspended due to sanctions. It also has active projects like a gas field with BP in Azerbaijan, and an investment with Royal Dutch Shell in fuel distribution in Senegal.
An examination of the operations of Naftiran Intertrade, or NICO as it is known, shows just how difficult it is for Western companies to untangle their ties with Iran. NICO is under pressure to leave Europe, but it has a web of assets, joint ventures and relationships with Western firms that will likely prove difficult and expensive for either side to break.
A spokesman at BP said the company would not comment on individual shareholders. "However we regularly review and take legal advice to ensure our compliance with sanctions legislation. We remain confident that BP is in full compliance with all applicable sanctions regimes including UN, EU regulations and US law, and will remain in compliance," he said. "We continue to monitor the situation closely."
NIOC and NICO did not respond to requests for comment.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPECIAL REPORT-Iran's cat-and-mouse game on sanctions: link.reuters.com/daf66s
SPECIAL REPORT-For Iran oil trader, Western ties run deep in PDF: link.reuters.com/vyj66s
Graphic showing changes to IRISL fleet over past four years: link.reuters.com/faf66s
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
"A BIT TOO CLOSE"
NICO jumped from Jersey before it was pushed. The firm, which is essentially the offshore arm of the National Iranian Oil Company (NIOC), dissolved its base on the Channel isle on January 8 with a "certificate of continuance" that indicated it would move to the tax haven of Labuan, an island off the coast of Malaysia.
"The company decided it would be best to move their business elsewhere," said a person close to the Jersey government. "They were aware of government concerns. They had very close links to the Iranian regime, a bit too close."
A spokesman for Jersey's financial regulator JFSC declined to comment.
NICO has been under U.S. sanctions since 2008, deemed an entity "owned or controlled by the Government of Iran." It had moved its headquarters to Jersey from London in 1991, after decades of operations in Britain in the days before Iran's Islamic revolution and "long before the days when (Britain) grew a conscience," as one veteran oil trader put it.
The National Iranian Oil Company relies on NICO as an important source of foreign exchange. If NICO was to shut altogether, analysts say, it would starve the NIOC of cash and put it at the mercy of Iran's squabbling political elites and clerics.
"NICO is a way for the National Iranian Oil Company to raise capital without having to rely on budget allocations approved by the Iranian government," said Valerie Marcel, an associate fellow at think tank Chatham House and an expert in nationally owned oil companies.
To get around the sanctions, NICO uses offshore financial havens and a web of asset and industrial holdings in the West. While it was based in Jersey, the firm operated through a "service company" based in Switzerland. But even there, in a country that has not yet signed up to the trade sanctions against Iran, the company's future could be in doubt.
LAKESIDE OUTPOST
Tucked behind a pebble beach on Lake Geneva in Pully, a chic suburb of Lausanne, NICO's remaining active European base is housed in a five-storey glass and marble office block. The office was set up in 2002 after the company moved its oil trading and energy investment activities to Switzerland from London.
A profile page on professional networking website LinkedIn states that NICO's Swiss office has between 11-50 employees; one of those workers posted that the firm's annual trading profit was $23 billion, although this figure could not be independently verified.
NICO's Swiss base has played a key role in maintaining an international presence beyond the reach of Western powers seeking to choke it, say oil traders familiar with its operations.
Switzerland is neutral and not a member of the European Union. It is also divided into semi-autonomous 'cantons' which compete with each other to attract companies and are often reluctant to interfere in their affairs.
Officials in the canton of Vaud, which contains Lausanne, said they saw no reason for NICO to leave.
"It's not because of cowardice or indifference, it's just that we don't have the authority or the right to have a position on foreign policy," said an official in the canton's department for economic development.
That could change. Switzerland tends to copy sanctions passed by its largest trade partner, the European Union, and trade experts think that it will eventually pass a law aimed at curtailing the "import, purchase or transport" of Iranian oil.
But even then, pressure on NICO's Swiss hub could be blunted by the realities of Switzerland's special status as a neutral nation in international affairs, as well as a variety of loopholes.
A former Swiss diplomat now working in Brussels said that "the general plan has been for Switzerland to try to converge on what the EU does, but Iran is a case of its own."
Historically, Switzerland has helped the U.S. in its relations with Iran, he said. "I think the Swiss will be extremely careful about taking any decision on this matter. The overriding concern is the representation of U.S. interests and Switzerland's role as a go-between although this has been a difficult undertaking for years."
To avoid creating a loophole in the EU sanctions regime "the trading functions (of Iranian companies) could be moved elsewhere," he said.
LONDON HEYDAY
NICO's roots in Europe are deep. Its former European hub in London is a sparsely occupied seven-floor building a few doors down from New Scotland Yard and within sight of Westminster Abbey. It still belongs to parent company NIOC, according to Land Registry documents.

February 10, 2012

Ghana sets up committee to review mining contracts - FAST NEWS | Mineweb

Ghana sets up committee to review mining contracts

The country has set up a committee to review and renegotiate stability investment agreements with mining companies, a senior government official said Thursday.

Posted: Thursday , 09 Feb 2012

CAPE TOWN (Reuters) -

Ghana, Africa's second-largest gold mining state, has set up a committee to review stability investment agreements with mining houses, a senior government official said on Thursday.

"It will include all companies that have stability agreements," Benjamin Aryee, the chief executive of Ghana's Minerals Commission, told Reuters on the sidelines of an industry conference in Cape Town.

"Ghana believes in the sanctity of contracts. But in all contracts there are review provisions," he said.

Ghana's Finance Minister initially unveiled the plan to review mining stability agreements in October. The government has since detailed plans to raise the corporate mining tax to 35 percent from 25 percent and introduce a 10 percent windfall tax as well to boost the state share of revenues.

The country set up a committee to review and renegotiate mining contracts last week.

Mining companies that have had stability agreements in Ghana include South African-based AngloGold Ashanti, the world's third largest gold producer.

Gold Fields, the world's fourth largest gold producer company, has said such a move might kill planned projects that could bring $1 billion of investment into the West African nation.

Ghana's review comes against the backdrop of a surge of resource nationalism across Africa as governments aim to extract move revenue from a sector that has failed to translate mineral wealth into broad prosperity.

(Reporting by Ed Stoddard, editing by Richard Valdmanis)

© Thomson Reuters 2012 All rights reserved

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning, and concluding, 24 hours later, in the Vancouver evening. If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com



Mineweb.com - The world's premier mining and mining investment website Ghana sets up committee to review mining contracts - FAST NEWS | Mineweb

The MasterMetals Blog

February 9, 2012

Ben Bernanke is Every Gold Bug's Best Friend - Money Morning

Ben Bernanke is Every Gold Bug's Best Friend

After prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam.

That was before Federal Reserve Chairman Ben Bernanke swooped in with a "red cape" and fired the bulls back up.

Since the Fed reassured the world that interest rates will remain at "exceptionally low levels" for another two years, gold has jumped more than 3%.

UBS AG (NYSE: UBS) described the situation simply, "if investors needed a (further) reason why they should be long gold now, they got it yesterday ... a more accommodative policy is a very good foundation for gold to build on the next move higher."

To gold bugs, two more years of near-zero, short-term interest rates means negative real interest rates are here to stay, and this has historically been a strong driver for higher gold prices.

Bernanke and the Fed aren't the only central bankers in the fiscal and monetary bullring.

Brazil has cut its benchmark interest rate a few times and China lowered its reserve rate for banks in December. According to ISI Group, 78 "easing moves" have been announced around the world in just the past five months as countries look to stimulate economic activity.

One of the main weapons central bankers have employed is money supply, which has created a ton of liquidity in the global system. Global money supply rose 8% year-over-year in December, or about $4 trillion, according to ISI. I mentioned a few weeks ago how China experienced a record increase in the three-month change in M-2 money supply following China's reserve rate cut.

Together, negative real interest rates and growing global money supply power the Fear Trade for gold. The pressure these two factors put on paper currencies motivates investors from Baby Boomers to central bankers to hold gold as an alternate currency.

Central Banks are Loading Up on Gold
Adrian Ash from Bullionvault says global central banks are on a buying spree and they have been since the Fed cut interest rates by 25 basis points in 2007. Central bankers' shift to buying gold was a significant sea change for the yellow metal.

You can see from the chart below that official gold reserves have historically been much higher, averaging around 35,000 tons. In the 1990s, central banks began selling, with reserves hitting a 30-year low right around the time the Fed began cutting rates. Ash says that gold holdings are now at a six-year high with the current amount of gold reserves just less than 31,000 tons.

These are countries large and small. In December, Russia, which has been routinely adding to the country's gold reserves since 2005, purchased nearly 10 tons; Kazakhstan purchased 3.1 tons and Mongolia bought 1.2 tons. UBS says "although reported volumes are not very large, it is still an extension of the official sector accumulation trend."

Record Increase in China's M-2 Money Supply

Not all central banks are recent buyers, though. The "debt-heavy West" has sold its gold holdings, while emerging markets increased their gold reserves 25 % by weight since 2008, says Ash.

Reserves as a percent of all the gold mined has also declined, with "a far greater tonnage of gold ... finding its way into private ownership," says Adrian. Since 1979, you can see the percentage of reserves to total gold has declined at a much faster pace as individuals increasingly perceived gold as a financial asset.

Ash points to China's Gold Accumulation Plan as a recent example of this trend. A joint effort between the Industrial & Commercial Bank of China (ICBC) and the World Gold Council (WGC), the program allows Chinese citizens to buy gold in small increments as a way to build up their gold holdings over time. The WGC reported in September that the program had established 2 million accounts during its first few months in operation and the amount is growing by the day.

These programs open the door for gold as an investment to a whole new class of people in China but that's only a fraction of the tremendous demand for gold that we are seeing from China.

Gold and the "Love Trade"

In addition to the Fear Trade, gold is driven by the Love Trade, which is the strong cultural affinity the East, namely China and India, has to the precious metal.

In 2010, the Indian Sub Continent and East Asia made up nearly 60% of the world's gold demand and 66% of the world's gold jewelry demand, according to the WGC.

Indian jewelry demand has historically increased during the Shradh period of the Hindu calendar, but last year, high prices and a volatile rupee kept many Indian buyers on the sideline.

If you thought $1,900 was too much to pay for an ounce of gold, imagine how Indians felt when the rupee fell against the U.S. dollar, causing a gold price spike in rupees. Gold in Indian rupee terms rose more than 35% from July to November, roughly three times the magnitude of gold priced in U.S. dollars, yuan or yen.

This currency swing significantly impacted Indian gold imports, which dropped 56% in the fourth quarter, according to data from the Bombay Bullion Association.

Record Increase in China's M-2 Money Supply

"Indian buyers will be back" after they adjust to the higher prices, says Fred Hickey. In one of his latest editions of "The High-Tech Strategist," he cites late 2007 as a recent example when the Indian gold market experienced a similar rough patch.

That year, gold demand in India fell off a cliff after prices spiked more than $1,000 an ounce in one quarter, tarnishing the country's love affair with gold for a "brief period." Fred says their cultural affinity for gold as an important store of wealth and protection against inflation will drive Indian buyers back into the market.

The trend was already changing in 2012, as UBS reported that the first day of trading saw physical sales to India were twice what they usually are, according to Hickey. Although this is a very short time frame, I believe the buying trend will continue in this gold-loving country.

In China, "just as in India, gold is seen as a store of wealth and a hedge against inflation," says Hickey. Demand has been growing, especially in the third quarter, when China's gold purchases outpaced India. "Physical demand for gold from the Chinese has been voracious all year," says Hickey. As of the third quarter, China had already obtained 612 tons, eclipsing its total 2010 demand, according to the WGC.

Across the Chinese retail sector, gold, silver and jewelry demand was the strongest performing segment in 2011, says JPMorgan Chase & Co. (NYSE: JPM) in its "Hands-On China Report."

Growth in this segment far outpaced clothing and footwear, household electrical appliances, and even food, beverage, tobacco and liquor, all of which experienced more modest growth.

China Copper Inventories Bouncing Off Two-year Low

JPMorgan says the bulk of the increase came from lower-tier cities "where income levels are rising the fastest and improvements in retail infrastructure have allowed for rapid store expansion."

Increasing incomes coupled with government policies that support growth have been the main drivers for rising gold prices. Take a look at the chart below, which shows the strong correlation between incomes in China and India and the gold price. As residents in these countries acquire higher incomes, they have historically purchased more gold, driving gold prices higher.

The 'China Effect' on Commodities

We anticipated that the Year of the Dragon would spur an increase in the buying of traditional gifts of gold dragon pendants and coins. Gold buying did hit new records, says Mineweb, with sales of precious metals jumping nearly 50% from the same time last year, according to the Beijing Municipal Commission of Commerce.

This should serve as a warning to all of gold's naysayers.

Gold bullfighters beware - you now have to fight the gold bull while fending off a golden Chinese dragon.

[Editor's Note: Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of "The Goldwatcher: Demystifying Gold Investing."

He has been profiled by Fortune, Barron's, The Financial Times and other publications.

If you want commentary and analysis from Holmes and the rest of the U.S. Global Investors team delivered to your inbox every Friday, sign up to receive the weekly Investor Alert at www.usfunds.com.]


Ben Bernanke is Every Gold Bug's Best Friend - Money Morning

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February 7, 2012

‘African risk’ – political or managerial? - #Randgold Resources

Comments from Mark Bristow at the Indaba in Cape Town. 

"What is the ultimate aim of any business?  To be big?  Or, to create value?  The answer should be obvious, yet if you look at the structures and returns of many of the major gold companies, it's all too clear that they would be more profitable if they were smaller and more focused."


'AFRICAN RISK' – POLITICAL OR MANAGERIAL?

Cape Town, 7 February 2012  –  The primary risk in building a business in Africa lies not in the continent's socio-political environment but in the need to structure a business model and a management team capable of dealing effectively with the dynamics of an emerging market, Randgold Resources chief executive Mark Bristow said at the African Mining Indaba today.

"The first step in doing that is to recognise that the big global corporation approach with its sophisticated systems and risk analysis is simply not appropriate to this environment," he said. "For a business to operate successfully in Africa, it should be focused on the pursuit of real value; performance-based and sustainable growth; and the fostering of productive people and mutually beneficial relationships."

Bristow said Randgold was founded 16 years ago on the platform of an African-focused growth strategy.  Driven by this, it had since risen to the top tier of the gold mining industry and ranked in the FTSE 100 and Nasdaq 100 indices.

"From Day One, it's been our creed that you only create real value in the gold mining industry when you discover and develop your own world-class deposits, instead of paying premium upon premium to get more ounces through mergers and acquisition transactions.  It's all about discovery.  Everything else  –  mining, processing, production  –  are merely links in the chain that transforms gold in the ground to money in the bank to benefit all stakeholders," he said.

"What is the ultimate aim of any business?  To be big?  Or, to create value?  The answer should be obvious, yet if you look at the structures and returns of many of the major gold companies, it's all too clear that they would be more profitable if they were smaller and more focused."


February 2, 2012

Japanese trading houses set for record profits - FT.com

Japan’s trading houses are on course to deliver record profits for the current fiscal year in spite of fluctuating commodity prices.

Mitsubishi Corp – the largest of the big five trading companies – on Tuesday reported solid third- quarter earnings, and stuck with its bullish full-year net profit forecast of Y450bn ($6bn), despite lingering damage on its auto and coal businesses from last year’s floods in Thailand and Australia.

The other four trading companies – Mitsui & Co, Sumitomo Corp, Itochu and Marubeni – will report on Thursday. Analysts expect the quintet to post a combined Y1.62tn of net income in the year to March – almost a quarter of the total profit of non-financial companies in the Nikkei 225. “The others should be as good, if not better than Mitsubishi,” said Penn Bowers, a Tokyo-based analyst at CLSA.

...

At Mitsubishi Corp, metals accounted for two-fifths of net profit in the first nine months, with energy just over a quarter. However, a general buoyancy in commodities meant that it made money in each of its six main segments, spanning logistics to “living essentials” such as sugar, rice and cement. Of the dozens of business divisions run by the big five, Nomura expects just two of them – real estate development at Marubeni and consumer services at Mitsui – to lose money this year.

Yet, despite projections of combined net income about 10 per cent better than the previous record in the year to March 2008, the big five are trading at the five lowest forward price to earnings multiples among non-financial companies on the Nikkei.

...

However, they are yet to prove they are as good at operating assets as they are at booking profits from them, said Yasuhiro Narita, an analyst at Nomura. “You have to ask whether active investment policies will, upon implementation, lead to earnings growth.”

Read the whole story online here: Japanese trading houses set for record profits - FT.com

Glencore and Xstrata close to $80bn merger

It seems like its finally coming!!
Glencore and Xstrata close to $80bn merger
Financial Times, 8:20am Thursday February 2nd, 2012
--
By Javier Blas, Commodities Editor
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Glencore and Xstrata are in advanced talks for a nearly $80bn merger that could reshape the mining industry
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