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May 27, 2014

#Commodities: Global recovery injects life back into #MiningStocks - Telegraph

Mining companies and most raw commodities are now seeing either sustained year-on-year gains in price, or have cut their losses after last year’s rout.

Commodities: Global recovery injects life back into mining stocks

BHP Billiton wins £352m Australian tax dispute

Commodities were beginning to look like a graveyard for investors last year but the first half of 2014 has seen the sector recover some of its allure. The broadening global economic recovery now spreading from North America through to the UK, Europe and into Asia is underpinning a revival in resources as an asset class even if the boom years of the last decade may never return.
Mining companies and most raw commodities are now seeing either sustained year-on-year gains in price, or have cut their losses after last year’s rout. Although some concern remains over major consumer China suffering its own debt crisis, resources are once again offering investors a low-risk option to gain exposure to rising global consumption and the return of sustained economic growth.
Here is a review of the first half of industrial commodities; and the hot areas for investors to look out for in the next six months:
Although investors remain cautious the big four mining groups listed in London, BHP Billiton, Rio Tinto, Anglo American and Glencore have performed better over the last year. Year-on-year these four - accounting for about 8pc combined of the FTSE-100 - have gained an average of 5.64pc, which is still underperformng the overall gains on the main market over the same period. The overarching theme for the four bellwether mining stocks has been cost cutting and their individual ability to rein in overheads, while selling non-performing assets.
BHP Billiton and Rio Tinto are the two standouts in terms of gains in value up 11.9pc at 1,947.40p and 13.62pc to 3,257.50p respecively since last May. Their performance is reflected in the ability to strip costs quicker than their major rivals and focus on key bulk industrial raw materials such as iron ore and copper. In the second half of this year investors should look out for BHP Billiton making a further $5.5bn (£3.2bn) of savings and a possible $20bn demerger of its nickel, manganese and aluminium interests as the company continues to sharpen its focus on what it defines as its “four pillars” of iron ore, copper, coal and energy.
Rio Tinto, which has a narrower portfolio, may struggle to gain traction due to the current weakness in iron ore prices. The company is seen to be vulnerable to fluctations in demand for the steel-making commodity. Analysts at RBC Capital Markets believe the stock needs to fall to around £31 per share, from which point it could see a 25pc upside. However, the broker warns: “Rio’s exposure to aluminium, iron ore, base metals and coal in particular is vulnerable should world growth, especially China’s growth, be slower than we expect.”

May 23, 2014

Physical #Gold Supply Never Been Tighter

Getting to the end of the correction in the gold price?
Physical #Gold Supply Never Been Tighter 
Alex Stanczyk

Wednesday I had the privilege again to interview Alex Stanczyk, Chief Market Strategist for the Anglo Far- East group of companies, who just returned from a trip to Switzerland. Alex confirmed to me the distribution of gold from west to east is not slowing down whatsoever. Refineries in Switzerland are still working 24 hour a day to cast bars for China, sometimes having difficulties sourcing the gold..

 What was the purpose of your trip to Switzerland?

 The purpose was two fold. We go to Switzerland once a year as part of our governance, we're required to have an annual inspection of the gold, that was the main purpose of the trip. But in addition to that we also liked to talk to the refineries. It was myself, it was the managing director of Anglo Far-East mister Philip Judge, and Jim Rickards went with us, he sits on our advisory board.




We met with the managing director of the largest refinery in Switzerland and spend about two hours talking to him, we learned some very interesting things. Whats going on in the gold market as far as the price, is I think very counter intuitive. Everybody understands, knows and believes the price should be higher than it is, but it isn't. There's confusion in the marketplace, and there are two reactions; the reaction in the west is fear, confusion and uncertainty; the reaction in the east is buying. Now, this gentleman we were talking to probably has a better idea of physical gold flow than anybody else globally. He sees what is coming from the mines, he sees what is coming from the UK, and all over the world, as well as where its going. He indicated the price didn't make sense because he has got so much fabrication demand. They put on three shifts, they're working 24 hours a day, and originally he thought that would wind down at some point. Well, they've been doing it all year. Every time he thinks its going to slow down, he gets more orders, more orders, more orders. They have expanded the plant to where it almost doubles their capacity. 70 % of their kilobar fabrication is going to China, at apace of 10 tons a week. That's from one refinery, now remember there are 4 of these big ones [refineries] in Switzerland. 

That makes sense because withdraws from the Shanghai Gold Exchange vaults are 40 tons a week on average this year.

 Well, there you go.

…At this Swiss refinery there have been several times this year on which they were unable to source gold, this shocked me. They're bringing in good delivery bars, scrap and dore from the mines, basically all they can get their hands on. This gentleman has been in the business for 37 years, he was there during the last bull market in the late seventies. I asked him when was the last time this has happened, that he was unable to source gold, he said never. And I clarified it, I asked: let me make sure if I understand what you're saying to me, in the last 37 years you've worked in the gold industry this has never happened? He said: this has never happened.

 …There was one other comment that was fascinating, he said sometimes when they get gold in, it's coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the sixties. This is a huge supply squeeze and its worse than anything that has happened in the last four decades. At some point there is going to be a massive squeeze on the price.

 …All four Swiss refineries combined may be doing as much as  [supply China] 2000 tons this year. That doesn't include what the Perth Mint ships to China, it doesn't include the 400 tons the Chinese mined domestically, and it doesn't include what they mined offshore with the mining companies they own all over the world. I suspect that total Chinese demand can reach as much as total global mining production this year.

 …He also noted, in China there are 6 LBMA refineries but he has never seen a Chinese gold bar, they're keeping it all. Gold that goes into China is like going into a black-hole. I don't think it will be available on the market for decades to come, which only tightens the physical supply.

 …The Chinese aren't buying it for trading, they're buying it as part of their wealth foundation for future generations. When the communists came to power in 1949, Chiang Kai-shek and the nationalist army fled the country and took all the gold with them. On that moment China had no gold, although they had thousands of years of history with gold, they had to start all over. I think the importance of rebuilding their gold reserves had been there in the last decades, but it accelerated the last three years or so, encouraging their people heavily to buy.

 I also heard there is strong kilobar demand from the Middel East.

 That's because Dubai does a lot of clearing for that entire area. Given what's happening to Saudi Arabia, and the potential that Saudi Arabia is separating itself from the United States, essentially the whole petro-dollar is at risk for them. Normally what they would do is sell their oil for dollars and then buy US treasuries, but if they're gonna separate from the US they're not gonna buy US treasuries. So what are they gonna buy?


 Yes, possibly. That's what we think. We don't think they will be buying US treasuries, they supported them for 40 years, but the US has basically stabbed them in the back.

 Alasdair Macleod actually said, on the Keiser Report, that a lot of 400 ounce bars from the Middle East are being refined in Switzerland into 1 K 4 nine bars [a gold bar of 1 kilogram, 99.99 % purity] and then sent back. Is the 1 K 4 nine bar becoming some new form of liquidity?

 Possibly, all the demand that we can see in China is for 1 K bars. They want kilo, and they want four nines.

 When do think the price is going to rise?

 I'm not comfortable to put a time on this. What I do know is that we are on the threshold of a situation that has never occurred before. A squeeze is imminent, it could take 3 months or 6 months, but all I know is that it's coming, and I know that with 100 % certainty.   

May 22, 2014

#Kurdistan is doing very (#oil) well, thank you #MasterEnergy @BloombergMrkts

With the new pipeline, oil production should grow to 1MM bopd in 2015

Tony Hayward Gets His Life Back as Kurdish Pipeline Opens

Photographer: Sebastian Meyer/Bloomberg Markets

A rig drills into Kurdistan's rich Taq Taq field, where production is
expected to increase as more and more oil flows through the new

Erbil, the regional capital of Iraqi Kurdistan, has all the trappings
of an oil boomtown. It bristles with construction cranes. Land Cruisers
and Range Rovers with tinted windows ply the busy streets. Oil workers
and briefcase-bearing foreigners crowd into the Divan Erbil Hotel’s
piano bar.

At the foot of the 8,000-year-old Citadel -- which
claims to be the oldest continuously inhabited town in the world --
currency traders in the central market swap dollars, euros and Turkish
liras for Iraqi dinars out of glass boxes on the sidewalk. Shoppers
flock to Erbil’s Family Mall, which features stores such as French
hypermarket operator Carrefour SA (CA) and Spanish clothing chain Mango.

the opening of a new oil pipeline this year, the boom is getting a
boost, Bloomberg Markets magazine will report in its June issue. Crude
that used to be transported by truck across the rugged, mountainous
terrain of the three northern provinces known as Iraqi Kurdistan began
flowing in stages through the pipeline in January.

The conduit,
built by the Kurdistan Regional Government, or KRG, runs about 400
kilometers (250 miles) from Khurmala, southwest of Erbil, to the Turkish
border, where it connects with an existing link to the Mediterranean
port of Ceyhan. Oil that sells for about $70 a barrel domestically could
fetch $100 or so in world markets.

Soaring GDP

The KRG said in October that an
average output of 400,000 barrels a day in 2014 could jump to 1 million
barrels by 2015 and twice that much by 2019. For 5.2 million Kurds in an
area roughly the size of Switzerland, the influx of foreign investment
and rising oil-related income promises an improving standard of living
as the rest of the country remains mired in sectarian violence.

KRG’s Ministry of Planning forecasts that the economy will grow 8
percent a year through 2016. Since the KRG began selling oil contracts
to foreign investors in 2007, per capita gross domestic product in
Kurdistan has soared; it hit $5,600 in 2012, up from $800 10 years ago.

The boom has also benefited oil exploration companies,
especially those that placed early bets. Beginning with the 1980 to 1988
War, the development of natural resources across all of Iraq, including
the north, was virtually on hold for more than two decades.

Fractious Leadership

because a series of full-blown conflicts and internecine clashes
preoccupied first Saddam Hussein and then the fractious leadership in
Baghdad that followed his ouster by U.S. and U.K. coalition forces in

Since then, almost daily clashes in the south have pitted the
Shiite majority that dominates Iraq politically today against the Sunni
minority that held sway under Hussein. In the north, the population is
overwhelmingly Sunni and relatively free of sectarian strife. In fact
sheets for foreign investors, the KRG says that no coalition soldiers
have been killed and no foreigners kidnapped in Iraqi Kurdistan.

Todd Kozel, chief executive officer of Hamilton, Bermuda–based Gulf Keystone Petroleum (GKP) Ltd., came to Iraqi Kurdistan three years after the 2003 invasion.

“If you were an oilman in 2006, with oil in your blood, you
just had to be here,” he says, sipping Johnnie Walker Black Label at the

Highly Rewarded

Pittsburgh-born Kozel, 47,
says he saw opportunity in a land where high risk would be highly
rewarded. And it was. Since Gulf Keystone discovered oil at Iraqi
Kurdistan’s Shaikan field in 2009, its market value has grown to about 1
billion pounds ($1.66 billion) from about 50 million pounds.

Todd Kozel, the CEO of Gulf Keystone Petroleum, placed an early bet on Kurdistan's oil riches, arriving in the north three years after the 2003 invasion of Iraq. Photography: Courtesy of Gulf Keystone Petroleum
Kozel, the CEO of Gulf Keystone Petroleum, placed an early bet on
Kurdistan's oil riches, arriving in the north three years after the 2003
invasion of Iraq. Photography: Courtesy of Gulf Keystone Petroleum

The first foreign exploration firm to come to Kurdistan -- in 2004 -- was Oslo-based DNO International ASA. (DNO)
Chairman Bijan Mossavar-Rahmani says in his London office that DNO
plans to increase output from its Tawke field to about 200,000 barrels a
day this year from about 125,000 in 2013, showing how companies will
hike production when their oil can be sold at higher world-market

Former BP Plc (BP/)
CEO Tony Hayward came to Kurdistan after the 2010 Deepwater Horizon oil
rig explosion in the Gulf of Mexico cost him his job as BP’s chief
executive -- in part because of a string of public relations fiascoes
that included his saying “I would like my life back” to a group of
reporters while touring an oil-slicked beach in Louisiana.

Photographed in London, Tony Hayward, the CEO who left the oil giant BP after the 2010 Deepwater Horizon rig explosion in the Gulf of Mexico, joined forces a year later with British financier Nathaniel Rothschild to acquire a Turkish firm already operating in Kurdistan. Photographer: Daniel Stier/Bloomberg Markets
in London, Tony Hayward, the CEO who left the oil giant BP after the
2010 Deepwater Horizon rig explosion in the Gulf of Mexico, joined
forces a year later with British financier Nathaniel Rothschild to
acquire a Turkish firm already operating in Kurdistan. Photographer:
Daniel Stier/Bloomberg Markets 

In 2011, Hayward joined forces with British financier Nathaniel
Rothschild to acquire a Turkish firm already operating in Kurdistan.
The firm, renamed Genel Energy Plc (GENL),
says it’s poised to raise production at Taq Taq and other fields to
70,000 barrels a day this year from 44,000 in 2013. On May 8, Hayward
was named chairman of Glencore Xstrata Plc (GLEN), the mining company that is also one of the world’s biggest crude traders.

‘Frontier Types’

Since 2011, four big oil companies -- Chevron Corp., Exxon Mobil Corp., Hess Corp. and Total SA (FP)
-- have followed 30 or so smaller players into Iraqi Kurdistan and
signed exploration deals. Hayward, whose career straddles oil majors and
minors, says the pattern is a familiar one.

“There are lots of
entrants early on, the real frontier types,” Hayward says in his London
office. “Then the big guys arrive, and there’s consolidation. If you’re a
little guy, you have to get there early.”

The oil boom is
transforming a part of Iraq that ethnic Kurds throughout the South
Caucasus and Middle East consider their homeland. Unlike Kurdish
enclaves in Iran, Turkey, Syria and Armenia, Iraqi Kurdistan is self-ruled, having gained autonomous status in a 1970 agreement with the central government in Baghdad.

Changing Relations

it defers to the government on most external affairs such as treaties
and membership in international organizations, the KRG has its own
parliament, issues its own visas and has its own army, the Peshmerga,
meaning “those who confront death” in Kurdish.

Oil is also
changing relations between Iraqi Kurdistan and the central government in
Baghdad. They’ve been tense for decades -- never more so than in the
closing days of the war with Iran, when Hussein’s forces launched a
chemical attack on the Kurdish city of Halabja, killing as many as 5,000
people in retaliation for collusion between Kurdish and Iranian

In 1991, at the end of the first Gulf War, the U.S.
and its allies established a safe haven in Iraqi Kurdistan enforced by a
no-fly zone. While the no-fly zone effectively created a buffer between
the Kurds and their masters in Baghdad, accelerating economic
development in the north, the north-south dispute over oil carried on.

State Oil Marketing Organization maintains that it has exclusive rights
to the sale of Iraqi Kurdistan’s oil, whether it flows through the new
pipeline or through pipelines outside of Iraqi Kurdistan.

Unanswered Questions

December, the KRG agreed to work with the central government in Baghdad
in determining how to distribute revenue from Kurdistan oil exports,
though a lot of questions remain unanswered, according to Sanford C.
Bernstein & Co. in a note published on April 29.

“The resource base is too big for a solution not to be found,” analysts led by Hong Kong–based Neil Beveridge wrote.

new pipeline, fully in KRG territory, should make it easier for
Kurdistan to overcome central government resistance and get its oil to
market, says Gareth Stansfield, a senior associate at the Royal United Services Institute, a London-based research organization.

the Kurds are able to pump the amounts of oil they’re promising, then
this is a fundamental geopolitical game changer,” Stansfield says. “It
gives the Kurds economic independence from Baghdad.”

‘Wasting Time’

Iraqi Kurds want more than that: Almost 60 percent of those surveyed
supported statehood in a 2012 poll by the Kurdistan Institute for
Political Issues.

“We’re wasting our time trying to deal with
Baghdad,” says Davan Yahya Khalil, a Kurdish writer who grew up in an
internment camp when Hussein was in power. “It’s better to call for
independence today.”

Iraq ranks fifth in the world in proven oil
reserves -- 150 billion barrels, according to the BP Statistical Review
of World Energy 2013. The KRG says Kurdistan alone -- comprising less
than a 10th of Iraqi territory -- holds 45 billion barrels. If the
autonomous region were a country, its reserves would rank it 10th in the
world, after Libya, according to BP.

While oil production has
soared in the north, slower output in the war-torn south has kept
Iraq-wide production low: Only in recent months has output reached 1979
levels of 3.62 million barrels a day, according to OPEC.

Complex Bureaucracy

hassles of dealing with Prime Minister Nouri al-Maliki’s Baghdad
government compound sluggish production in the south, says Paolo
Scaroni, CEO of Eni SpA, Italy’s biggest oil company. Eni is one of several large companies, including BP and Royal Dutch Shell Plc (RDSA), operating in the south.

“We’re suffering from a lot of complex bureaucracy,” Scaroni says.

had planned to invest $7 billion this year in developing its oil
business in the south; it will end up spending only $3 billion, he says.

In the north, it’s a different story. Genel has been shipping
crude to Turkey by truck, with 700 tankers rolling out of its Taq Taq
field every day. With the new pipeline expected to be fully up and
running later this year, the company says it’s poised to take advantage
of the new transportation capability by increasing production.

KRG’s Ministry of Natural Resources says its goal is to transport
300,000 barrels a day by the end of the year via the pipeline, shifting a
sizable portion of exports away from tanker transport, not to mention
pipelines controlled by the government in Baghdad.

‘Safe, Secure’

who visited southern Iraq as the head of BP from 2007 to 2010, says he
was impressed by the contrast between Erbil and Baghdad when he first
traveled to the north in 2011.

“The thing that really struck me
was the amount of development that was taking place,” Hayward says of
Erbil. “It felt safe, secure and prosperous.”

Oil is also helping to change the relationship between Turkey and Iraqi Kurdistan.

in the 1980s, the Kurdistan Workers’ Party, known by its Kurdish
acronym, PKK, began an armed struggle against the Turkish government.
Turkey was wary of Iraqi Kurdistan as a staging area for PKK
paramilitaries seeking to establish an independent Kurdish nation in and
around northern Iraq.

Genocidal Attacks

In 2003,
Turkey, though a NATO member, refused to allow U.S. troops to invade
Iraq from the north through Turkish territory partly out of concern the
invasion would, in toppling Hussein and a regime that had oppressed the
Kurds, promote Kurdish independence movements. The PKK and the Turkish
government agreed to a cease-fire in March 2013, easing tensions.

“Turkey’s been a big help,” Gulf Keystone’s Kozel says. “All our drilling rigs come through there.”

Kurds -- fearing their enemies, distrustful of neighboring governments,
victims of Hussein’s genocidal attacks -- are used to doing whatever
they can to determine their destiny, Hayward says.

“It’s clear
as the Kurds get more and more production and infrastructure, they’re
just going to do their own thing,” he says. “As they like to say, ‘We
have no friends but the mountains.’”

Kurdistan has made Kozel a
wealthy man. Gulf Keystone, which operates almost exclusively in Iraqi
Kurdistan, has paid him a base salary of $675,000 since 2008, with
varying bonuses. By 2011, his total compensation had soared to $22.2
million, according to company reports.

‘Biggest Risk’

in the Divan’s piano bar on a February evening, Kozel, who started his
first oil company when he was 21, reflects on how far he and Gulf
Keystone have come.

“Our biggest risk when we entered here in
2006 was logistics,” he says. “We imported literally every single thing
we needed -- equipment, people, products.”

He says it wasn’t a gamble everybody was willing to take.

“I guess I was just a bit less risk averse than most,” he says.

same could be said for other investors who came early to this corner of
Iraq -- and whose bets on Kurdistan are also paying off.

To contact the reporter on this story: Brian Swint in London at

To contact the editors responsible for this story: Stryker McGuire at Jonathan Neumann

Tony Hayward Gets His Life Back as Kurdish Pipeline Opens - Bloomberg

May 20, 2014

Physical #Silver Demand Achieves Record Level in 2013 | The Silver Institute

World Silver Supply and Demand (million ounces)

(totals may not add due to rounding)


2012 2013
Mine Production 792.3 819.6
Net Government Sales 7.4 7.9
Scrap 252.6 191.8
Net Hedging Supply -47.0 -41.3
Total Supply 1,005.3 978.1


2012 2013
Jewelry 181.4 198.8
Coins & Bars 139.3 245.6
Silverware 44.6 50.0
Industrial Fabrication 589.1 586.6
…of which Electrical & Electronics 237.0 233.9
…of which Brazing Alloys & Solders 60.3 62.4
… of which Photography 54.4 50.4
… of which Other Industrial 237.4 240.0
Physical Demand 954.4 1,081.1
Physical Surplus/Deficit 51.0 -103.0
ETF Inventory Build 55.1 1.6
Exchange Inventory Build 62.2 8.8
Net Balance -66.3 -113.3

 See the whole report online here: Total Physical Silver Demand Achieves Record Level in 2013 | The Silver Institute


The MasterMetals Blog

#Nigerian #Oil Fields

Activity is heating up in the Niger delta, Nigeria as companies vie for those assets with near term production.

Source: Mirabaud Securities