For Metals, Buying Chance Coming, But Still Months Away - CNBC.com

The key in the coming months will be to be selective in which metals and other commodities one is exposed to. 

Those commodities most related to industrial production will have the harder time in this global recessionary environment. 

 For Metals, Buying Chance Coming, But Still Months Away

The four-month slump in gold and other metals by nature is setting up a buying opportunity somewhere, but it could be months before a solid entry point materializes.

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http://www.cnbc.com/id/45816423

Cyprus gas find boosts country’s energy hopes - FT.com

Cyprus gas find boosts country's energy hopes

NICOSIA – Cyprus said on Wednesday that an offshore prospect where exploratory drilling is under way contains an estimated 5tn-8tn cubic feet (tcf) of natural gas, a first for the island which could make it self-sufficient in the commodity for decades.

Based on the exploratory drill by US-based Noble Energy, the prospect, which lies south of the island, contains a gross mean of 7 tcf of gas, Cypriot president Demetris Christofias said in a statement.

"The discovery of natural gas in the exclusive economic zone of our country opens great potential for Cyprus and its people, which with prudence and in a spirit of collectiveness we will utilise in the service of public interest," Mr Christofias said.

"New favourable economic prospects have opened for the future of the country," Christofias added.

It was an auspicious end to a traumatic year for Cyprus, which was hammered by rating agencies for fiscal slippage, shut out of international capital markets and hit by a large munitions blast that destroyed its largest power station.

Its northern neighbour and old rival Turkey has challenged Cyprus's bid to search for hydrocarbons, saying the island has no jurisdiction. The island was split in a Turkish invasion in 1974 after a brief Greek-inspired coup, and Ankara supports a breakaway state in northern Cyprus.

The island, which is run by an internationally recognised Greek Cypriot government, says estranged Turkish Cypriots can benefit from hydrocarbon finds in the context of a political settlement ending decades of division.

Turkey says it plans to conduct its own hydrocarbon surveys off Cyprus. When Noble started its exploratory drilling in September, it sent its own survey vessel to the area.

"We call upon Turkey to show a spirit of peace and reconciliation [and to] avoid any adventurous acts and provocations which cause problems to [peace] talks and also tension in the eastern Mediterranean," Mr Christofias said.

Greek and Turkish Cypriot sides have been engaged in peace talks under UN auspices for decades. The latest round of talks began in 2008.

Turkish Cypriots reacted coolly to the announcement.

"In our view the Greek Cypriots should be investing more in the negotiations, and not in things that cause further disputes," said Kudret Ozersay, chief aide to Turkish Cypriot leader Dervis Eroglu in peace talks.

The Cypriot block, known as Block 12, covers about 40 square miles and will require additional appraisal drilling prior to development.

It was a "significant" discovery, Noble Energy chairman and CEO Charles Davidson said in a statement. Noble has also reported significant natural gas discoveries off neighbouring Israel.

"This is the fifth consecutive natural gas field discovery for Noble Energy and our partners in the greater Levant basin, with total gross mean resources for the five discoveries currently estimated to be over 33 tcf," Mr Davidson said. "This latest discovery in Cyprus further highlights the quality and significance of this world-class basin."

The gross mean resource range of 5 tcf to 8 tcf could be a conservative estimate, US-based brokerage Sterne Agee said.

"If we use prior news releases on the Tamar and Leviathan discoveries as a guide, we believe that today's initial resource report by Noble is likely to be conservative, and we would not be surprised to see significant upward revisions in the next couple of years as the project nears production," analyst Michael McAllister said in a note. Leviathan and Tamar are two fields off Israel.

Proved discoveries could make Cyprus, which now relies almost exclusively on imported and expensive fuel oil to fire its energy grids, self-sufficient for decades. The island has estimated needs in gas of 1bn cubic metres per year.

http://www.ft.com/intl/cms/s/0/fc900ac6-317e-11e1-a62a-00144feabdc0.html#axzz1hvDzO5VI

Sprott expands on call for silver miners to hold back metal - SILVER NEWS | Mineweb

Sprott expands on call for silver miners to hold back metal

SILVER NEWS

The Gold Report asks Eric Sprott and silver insiders what impact limiting sales of newly mined silver could have in one of the most volatile subsets of the resource sector.

In an open letter to silver producers at the end of November, Sprott Inc. Chairman Eric Sprott cited an overleveraged banking system, weakening dollar and increasing demand as reasons to hold profits in silver rather than selling all production and putting the proceeds in the bank. "Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals," Sprott said.

Interviewed mid-December Sprott, who is a major investor in physical and silver equities, explained why he wrote his letter. "I have always liked silver because I look at the physical supply and demand metrics and they scream that silver should be higher. But the price is being kept down by paper silver traders who are abusing the market."

As proof, Sprott pointed to the day last April when silver hit $50 an ounce (oz) and then immediately dropped $6/oz in 13 minutes when almost none of the markets were open. "A billion ounces of paper silver traded that day. The mining industry only produces about 700 million ounces (Moz) a year. The major financial institutions, which had been shorting silver for a long time, refused to let silver break $50/oz so they manipulated the market to keep a lid on it," Sprott charged.

"That is why I think the physical silver producers, the miners, need to be more active participants in the market," Sprott explained. "When silver is produced for less than $15/oz and sold for $30/oz, theoretically the producer is making $15/oz. I believe it is irresponsible for companies to leave that money in the bank where it is vulnerable. It is too risky. Producers have to find something to invest in and the obvious choices are gold and silver. It seems very logical to me that silver producers should invest in silver as a monetary metal."

"I'm not trying to create a Hunt Brothers type situation," he said, referring to when Nelson and William Hunt tried to corner the silver market in the late 1970s by buying as much as a third of the world's supply, driving the price up to almost $50/oz before the market crashed on Silver Thursday. "I'm just trying to create a fair playing field. Producers should take their future into their own hands," he said.

To those who compare his call for silver producers to act in concert to the methods of an oil cartel, Sprott said he agreed with the business model. "OPEC [Organization of the Petroleum Exporting Countries] was right that the price of oil was ridiculously cheap. Coming together to control supply was probably one of the more responsible things oil producers did. They were being disadvantaged and they took appropriate action. I think that's what the silver industry should do," he said.

As a major silver owner, Sprott could profit if holding silver reduces supply and results in a higher silver price, but so would other equity holders, he said. "Silver producers and their shareholders are the ones who are most effected and yet they aren't even involved in a pair of lawsuits against J.P. Morgan Chase and HSBC Holdings Inc. for silver market manipulation going back to 2008. Producers have to get themselves in it. They have to understand what's happening in the game. How can we let some guy manipulate the price of silver down and stand back and do nothing?" he asked rhetorically. "This [letter] was born out of frustration with the paper market and doubts about the banking system. Having money at a bank is taking on inordinate risk because when things start to implode, capital can be eaten away in no time."

Holding back a little can make a big difference, Sprott suggested. "It just takes a bit of a groundswell. When I look at the supply/demand for silver, it's a very, very tight market. It wouldn't take many ounces to have an impact. The COMEX [Commodity Exchange Inc.] has about 30 Moz or $1 billion of deliverable silver. That is not a lot of money in this day and age for all of the producers," he said. He estimated that if the silver producers put 15% of their cash balances back into silver it would reduce the silver supply by 21%; that would result in a shortage of supply for industry purposes, let alone investing, and drive up the price. "If you are in the silver business, put your money into silver and stop the paper guys from knocking the price around," he said.

"The key thing is just to get a momentum change," Sprott said. "I would like the CEOs of silver companies to think about the silver market. Let's not just think about tons and grade and recovery. Let's deal with what is going on in the market in a rational way."

Sprott says he has had some positive responses to his letter from major producers. "I know it's under consideration by a lot of people," he said.

Endeavour Silver Corp.'s Chairman and CEO Bradford Cooke said he appreciated Sprott's call to action. He predicted that the silver price is on the way up regardless, although the sector could be "sloppy" for the next nine months while global uncertainty works its way out. "Gold and silver will be the first sectors to start moving in 2012," he said.

The move up will probably not be driven by anything silver producers do, however, Cooke said. "I don't think producers have enough cash to impact the price of silver enough to make a difference globally," he said. "We can make an impact to individual balance sheets," he added.

Silver Investor Publisher David Morgan also said he liked the idea of companies investing in their own product, but didn't think they could impact the price of the metal materially unless every mine in the world participated. "It has been tried before," he said. The challenge, according to Morgan, is that the market is controlled by big players, most of which are not exclusively silver producers since as much as 70% of production is the result of byproducts from mining for other metals. "What the practice can do," Morgan said, "is add value for investors and differentiate companies by creating a premium for their share price."

Even if producers holding silver don't push up the price, Sprott is convinced companies that hold silver will benefit from delaying the sale of the metal because geo-economic forces will increase silver's attractiveness anyway. He cited rising demand for silver from an additional 4.3 billion people in Asia and South America. This increasing hunger for the metal for industrial and investment purposes was demonstrated in September's historic sale of physical silver coins and China's importation of 7.7 Moz of silver that same month. "Silver will go up on its own. But the silver industry could aid and abet the situation. Then companies will be double winners. The stock will go up because silver is going up and the company will make more money because it was not in a bank.

"I think the price should already be substantially higher," Sprott said. "The trade should be 16:1 gold:silver ratio. That implies that at $1,600/oz gold, silver should be $100/oz. At $3,200/oz gold, silver should be $200/oz. The outlook for gold is phenomenal and silver is going to go up even faster. That is why I think that this next decade will be the decade for silver," Sprott predicted.

Article published courtesy of The Gold Report - www.theaureport.com

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