Australian miners invest $20bn in Africa, ‘billions more in the pipeline’ -Africa Investor - News

Australian miners invest $20bn in Africa, 'billions more in the pipeline'

Wednesday, 31 Aug 2011

Australian Foreign Affairs Minister Kevin Rudd said on Wednesday that there was significant opportunity for Australian companies to increase their presence in the African resources sector.

In a prerecorded message to the Africa Downunder conference, in Perth, Rudd said that while Africa was estimated to host around 30% of the world's mineral resources, the continent only accounted for around 5% of global exploration expenditure.

"Australia is at the forefront of this exploration expenditure, and there is opportunity to expand this even further."

Australia's investment into the African mineral resources sector currently amounted to around $20-billion, with "billions more in the pipeline", Rudd said.

At least 230 Australian companies have more than 650 projects in 43 countries and territories. Over 40% of Australian miners' overseas projects are located on the continent.

"This investment has absolutely transformed Australia's relations with its African counterparts. It has built unshakable foundations, has brought governments and people closer together, and has provided new opportunities for trading goods and services," the former Australian prime minister said.

He noted that Australian companies were well sought after by African governments to invest in the resources sector, as Australian firms not only had a history of clear and responsible operations, but were also well versed in dealing on the African continent.

"African countries consistently request more Australian investment or assistance in their natural resources sector to deliver the economic benefit that we in Australia have enjoyed for years. And we are responding to this," Rudd said.

He noted that the Department of Foreign Affairs and Trade had recently reviewed its aid programme, for the first time in 15 years, and had outlined changes to increase the effectiveness of the programme. For the first time, this aid programme would include the development of sustainable mining industries on the continent, Rudd noted.

"For the first time in our history, mining will be a significant objective of the Australian aid programme. We are already working on this."

He noted that while the challenges of working on the African continent was not lost on the aid unit, several of the African countries had shown improvement on matters of democracy, accountability, as well as infrastructure and technology infrastructure.

Special Minister of State, Gary Gray told delegates that around 70% of the top-ten growth companies in Western Australia over the past decade had resource assets in Africa.

"Moreover, the amount of potential and prospective investment in Africa has increased enormously: the projected capital expenditure in feasibility studies alone by Australian mining companies totals over A$17-billion," Gray said.

He added that the federal government believed that well-managed mining could improve employment, access to education, enterprise and income opportunities and, importantly, government revenue flows, which in turn could support poverty reduction.

"Responsible development of the natural resources of Africa will play an important role in the story of the development of a new Africa," Gray said.

Credits: Mining Weekly

http://www.africainvestor.com/article.asp?id=9303

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Gold: Is a deep correction due?

Gold: Is a deep correction due?
If judged by the criteria of six years ago, Julian Phillips argues, then one could argue that it should be time to sell but, change has come to the gold market and things are not what they were.
Author: Julian D.W. Phillips
Posted: Friday , 26 Aug 2011

JOHANNESBURG -

The rise in the gold price has continued and shown a break up above the trend line. This has always been a sign that the gold, silver prices have ‘spiked'. This has always been a signal to be ready to take profits and be ready to go back in lower down.

This was a correct approach and we do not argue with the logic; however, a change is happening in precious metal markets. Over the last few weeks gold has run ahead but it has seen brief and shallow corrections until this last week when traders and speculators caused a ‘spike' to $1.910, before an equally dramatic fall back to $1,716. This is not the sort of correction we are discussing here. The speed and extent of the correction did not reflect the market fundamentals.

So we must ask, "Are the current buyers also potential sellers?" In developed markets, the concept that an investor will not take a profit once his target price is reached seems ridiculous because it is believed that all buyers will be sellers when they have a good profit. But in the changed gold market of today buyers are not often sellers, as we know it.

Does the Developed World Still Dominate Gold Prices?

The ongoing uncertainty in the developed world, the lack of political leadership over financial matters -Angela Merkel telling all that governments should not be told what to do by markets, still-and overwhelming debt in the face of further economic downturns, points to demand for gold coming from the developed world; however, gold demand is lackluster there, at best.

Developed world investors are asking themselves...

• Will the developed world debt and distress factors pushing gold higher be put right?
• Are these the factors that are pushing gold higher?
• Are the gold and silver price rises just about the developed world and its problems?
• Has gold seen its top?

By past measures the gold price looks as though it should have a deep correction. The same was said when gold hit $500 after rising from $300 too.

Table - Gold demand by region - (Jewelry, coin & bar demand only)

Region/Country	Percent
India	32%
Greater China	20%
Europe and Russia	13%
Middle East and Turkey	12%
North America	8%
Others	15%

There has never been a more important time to understand both the gold and silver markets. The table above is the most definitive piece of evidence describing what is happening in the global gold markets.

Gold Goes Global

Gold went really global around five years ago. In 2009 central banks came in as buyers. These two factors have changed the gold market entirely; they have distorted the factors bearing on technical analysis and changed the way prices move now. In fact, the very nature of investors in gold has changed, and for good!

Of course the market looks as though it needs a major correction, if you look at it through the eyes of six years ago. If you believe the picture painted by the old criteria, you should sell gold and stay out until it drops back, but to where?

If you understand the new investors and how they think, then your conclusions should be different. Look at what has happened since June and note that while the risks in the gold market have risen, current buyers are not price chasers either. This fact alone should make you ask,

Are they likely to be sellers because of a swift rise?

What we have seen is a failure to follow prices up, but to wait until they pull back and for physical gold to be on offer. The new investor wants physical gold itself and is not so concerned with price. If they are right, sooner or later the price will rise to well above what they have paid. The lifespan of their investment is generations long, not days, weeks, or years long.

The conditions that have lifted gold from $275 to $1,900 continue to persist. The gold price is not about gold; it is about the bear market in currencies, the deteriorating confidence in the value of currencies, as well as developed world's government's ability to restore that confidence.

As these factors point to more of the same -expect a continuation in the fall of currencies against gold and silver to levels deemed incredible by the developed markets of the world.

Do you expect the value of currencies to rise? Do you expect a resurgence of economic health in the developed world? Do you expect strong government with the force and conviction to produce a reformed strong monetary system across a financially united world?

Asian View of Money

Asia has always had an inherent trust in precious metals; a trust, which has now been validated again and again over the last decade.

Asian investors have never believed that paper money is a solid measure of value. When they see currencies weaken it is in line with the nature of governments. Is there a government whose money has lasted throughout its entire lifetime? When there has been, its money was gold and silver, and such money has lasted throughout most governments in history. Now, has there been a paper money based on a government's obligations that has lasted beyond the life of the government?

It is this perspective of money that is critical to understanding today's gold and silver markets.

There is a point where confidence in paper money has sunk so low that a collapse is triggered. Governments will fight tooth-and-nail to prevent that from happening. When it does happen, it happens as fast as rebels entering Tripoli.

Central bank's investment in gold is an insurance policy against such a collapse. People who have never been lulled into the developed world's sophisticated monetary systems are not likely to be so, now that it looks so wobbly. The rise of gold and silver prices is about the fall of paper money.

Julian Phillips is a well-respected gold and silver analyst based in South Africa and principal writer for www.goldforecaster.com and www.silverforecaster.com

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UBS Weighs Fee on Franc Deposits - WSJ.com

UBS Weighs Fee on Franc Deposits

By KATHARINA BART And DEBORAH BALL

• MARKETS
• AUGUST 27, 2011

ZURICH—In a sign of mounting tension caused by the strong Swiss franc, UBS AG said it may begin levying a temporary charge on Swiss franc deposits as a way of encouraging other banks to limit the cash they keep in the surging currency.

On Friday, UBS notified other lenders that bank with the Swiss group that, in light of strong inflows of cash deposits held in Swiss francs, it "might have to take corrective action, within the next few days, by means of a temporary excess balance fee." UBS declined to comment further on the notice.

Reuters

UBS's move echoes a recent move by Bank of New York Mellon, which said it would charge large corporate and investor clients for deposits.

The potential move comes as Swiss National Bank has been battling to rein in the franc, which has surged against the dollar and the euro in recent weeks. Earlier this month, it trimmed its key three-month London interbank offered rate target to close to zero in an effort to stem investor demand for the franc. It has also increased banks' most readily available deposits—a type of overdraft available to retail banks that want it—to 200 billion francs in recent weeks from 80 billion francs.

The resulting swelling of liquidity has effectively sent short-term interest rates into negative territory in the interbank market. For banks, this means holding Swiss franc cash deposits for other banks isn't worth their while.

UBS has in turn been flooded with Swiss-franc deposits from other banks that yield close to zero. When the cost of managing these accounts is taken into consideration, these deposits could be loss-making for UBS.

"It means that they are also quite nervous about these negative rates," said Ursina Kubli, foreign exchange strategist with Bank Sarasin.

Credit Suisse Group and Julius Baer Group declined to comment as to whether they would follow UBS's warning. However, a person familiar with the situation says Swiss banks have been warning their clients that they are reluctant to take on additional large Swiss franc deposits. Swiss banks, including UBS and Credit Suisse, have said that rock-bottom interest rates have weighed heavily on their profits in recent quarters.

UBS's move echoes a recent move by Bank of New York Mellon Corp., which said it would charge large corporate and investor clients for deposits. Turmoil in the financial markets has driven investors and corporations to hoard cash with banks that have custodial operations, rather than investing the money in even relatively safe securities. As a result, BNY Mellon was flooded with cash that it was struggling to reinvest, particularly in an environment of ultra-low interest rates. Moreover, institutions such as BNY Mellon pay fees to regulators to insure their deposits.

However, while BNY Mellon's decision reflected broader strains in the U.S. economy, UBS's warning is a side effect of investors' view of Switzerland and the Swiss franc as a haven in a time of turmoil.

In the 1970s, the SNB required Swiss banks to charge a penalty on franc deposits by nonresidents, in an effort to control a similar surge in the Swiss currency. Those penalties were held in place for much of the decade, but did little to stem the rise of the currency by the time the bank abandoned it.

On Friday, the SNB said that it hasn't asked UBS or Credit Suisse to impose fees on deposits. While some traders have been looking for the SNB to intervene in the currency market to weaken the franc, few expect it to repeat the 1970s experience of ordering Swiss banks to charge foreigners for franc deposits.

The SNB's actions have helped in part to rein in the franc in recent weeks. In early August, the euro hit a record low against the franc, nearly reaching parity with the Swiss currency. In late trading Friday in Europe, one euro bought 1.17 francs.

Meanwhile, the dollar has risen 14% against the franc since it hit a record low on Aug. 9, surging nearly 2% on Friday afternoon on the back of comments by Federal Reserve Chairman Ben Bernanke, which seemingly ruled out another round of stimulus.

Write to Katharina Bart at katharina.bart@dowjones.com and Deborah Ball at deborah.ball@wsj.com

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

UBS Weighs Fee on Franc Deposits - WSJ.com

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