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Does reality TV’s gold boom suggest an end to soaring prices? – by Colin Campbell (Maclean’s Magazine – February 5, 2013)

http://www2.macleans.ca/

Gold Rush fans may not want to change the channel just yet

Reality television’s latest obsession is gold. Jungle Gold, Gold Rush, Bering Sea Gold and Gold Fever are all shows documenting miners’ efforts to dig up flakes of the precious metal worth $1,700 an ounce. The last time TV was so caught up in a trend it was in the house-flipping genre (Flip This House, Flip That House), which seemed to hit its peak just before the U.S. housing market crashed. Is there a similar warning sign in the TV gold boom? Does all the mainstream fascination with gold suggest an overinflated interest and price?

Some analysts on Wall Street, at least, seem to think gold’s wild ride may be nearing its end. This week, Morgan Stanley lowered its gold-price forecast for the year by four per cent, to $1,773. Late last year, Goldman Sachs cut its target price for 2013 to $1,800 an ounce from $1,940, citing an improving U.S. economy. “The risk-reward of holding a long gold position is diminishing,” it said.

Gold is the ultimate safe-haven investment and has enjoyed an incredible rise in recent years. A decade ago, gold was worth little more than $300 an ounce. Since 2000, it has gone up every year for 12 years (a record) and in each of the three years after the 2008 crash, gold prices peaked to hit record highs. That gold might be finally losing some of its shine suggests fear of riskier investments may be ebbing. The S&P 500 index last week, for instance, cracked the 1,500 mark for the first time since 2007.

Not everyone is convinced the gold rush is finished just yet. Morgan Stanley said that despite its price cut, it still remains “bullish on the gold-price outlook,” citing an ongoing commitment in the U.S. to low interest rates and government stimulus spending in the face of “a below-par recovery.” Many central banks are also still buying gold. As Goldman admits, “calling the peak in gold prices is a difficult exercise.”

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Live from Mining Indaba 2013: Cynthia Carroll, outgoing Anglo American CEO with Geoff Candy – by Moneyweb.co.za (February 6, 2012)

http://www.moneyweb.co.za/moneyweb-home

Carroll talks mining prospects, Anglo projects and the Plat Review.

GEOFF CANDY: Hello and welcome to this Mineweb.com Newsmaker podcast. Joining me here live at the Cape Town Convention Centre is Cynthia Carroll, the outgoing CEO at Anglo American. Cynthia, you took over the reins at Anglo American in March 2007. It’s been an exceptionally eventful five years, not just for Anglo American but for the sector as a whole. What do you think is the most significant change you’ve seen in the mining sector in those five years?

CYNTHIA CARROLL: Well, first of all we have clearly gone through two significant economic downturns that I don’t think anybody anticipated, and at the same time Anglo American had two record years – 2008 and 2011. I think that there has been a developing disconnect between the expectation of investors and what the mining companies have been able to deliver in the short term. And during the peak of the cycle when everything was going gangbusters, everybody was saying you have to invest and you have to spend and we want to see growth and we want to see production.

But we’re in a period right now, again that nobody would have predicted when there has been much more contraction, starting with Europe in terms of demand and then a slowing down in Asia. So some investors are walking away completely from the industry, others are putting greater demands on industry heads to say, we want to be assured of our returns first and foremost before you spend any money, and we want you to cut back significantly.

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Excerpt from “The History of Mining: The events, technology and people involved in the industry that forged the modern world” – by Michael Coulson

To order a copy of The History of Mining please click here: http://www.harriman-house.com/products/books/23161/business/Michael-Coulson/The-History-of-Mining/

SIR ERNEST OPPENHEIMER (1880-1957)

It is impossible when considering mining in the 20th century not to place the Oppenheimer family at the centre of the development of the South African industry, one that is pre-eminent in the production of precious metals. Sir Ernest Oppenheimer played a crucial role in establishing the Anglo American group and, as Chairman of De Beers, in organising the modern diamond-trading cartel, the Central Selling Organisation, now much reformed.

Sir Ernest was born in 1880 in Freidberg, Germany, where his father Edward was a cigar merchant. The Oppenheimers were a large German Jewish family with excellent connections, particularly in the diamond business in England. When he was 16 he went to England and started work as a clerk in the London office of diamond merchant A. Dunkelsbuhler, who was his cousin, and became a naturalised Briton.

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South Africa Faces Tax Dilemma as Mining Industry Costs Soar – by Mike Cohen & Paul Burkhardt (Bloomberg.com – February 5, 2013)

http://www.bloomberg.com/

South Africa’s government faces a dilemma: how to help mining companies weather surging costs and depressed commodity prices as the ruling African National Congress seeks to wring more revenue from the industry.

Upheaval has plagued platinum and gold producers since August last year, when thousands of workers staged a series of illegal strikes, winning pay increases of as much as 22 percent. Adding to mining costs, Eskom Holdings Ltd., which supplies about 95 percent of South Africa’s power, is seeking 16 percent average annual tariff increases until 2018 to fund expansion.

While Mining Minister Susan Shabangu says the government is committed to working with the industry, the ruling ANC wants the country to derive greater benefit from its minerals. At a conference in December, the party said a “resource-rent” tax, or higher royalties, were under consideration.

“I’m quite worried,” Nick Holland, the chief executive officer of Gold Fields Ltd. (GFI), Africa’s No. 2 gold producer, said in an interview yesterday at the Investing in African Mining Indaba, a gathering of more than 7,500 industry executives. “We can ill afford to accept any taxes beyond what we have. It’s just going to increase the speed of the decline of the mining industry.”

Mining output slumped 11 percent on a seasonally adjusted basis in the three months through November from the prior three months, government data show. Nine loss-making platinum-mine shafts were shut in the second half of 2012, according to the Department of Mineral Resources, while Anglo American Platinum Ltd. (AMS), the largest producer, last month announced plans to idle four shafts, which may result in as many as 14,000 job losses.

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New heads for a new cycle: Mining giants switch bosses (The Economist – January 26, 2013)

http://www.economist.com/

Why the top posts are changing hands

MINING is a cyclical business. If China’s epic demand for commodities has done much to disguise that fact in recent years, a slew of changes at the top of the big Western mining firms is a timely reminder that it is still true. The latest casualty, Tom Albanese, was shown the door by Rio Tinto on January 17th. His departure is the latest sign that investors reckon a change of leadership is required for the next phase of the cycle.

Rio’s decision comes after Cynthia Carroll said last October that she would step down as boss of Anglo American. A couple of weeks later it was reported that BHP Billiton, the world’s biggest mining company, is seeking a successor to Marius Kloppers, suggesting that he may remain only for another year or so. The terms of a merger between Glencore and Xstrata mean that Mick Davis, Xstrata’s boss, will also soon be looking for a new job.

The clear-out is no coincidence. With the exception of Mr Davis the current crop were all appointed in 2007. If mining bosses have a shelf-life, they may all have reached the end of it. Moreover, none has been entirely successful in profiting from sky-high commodity prices.

Each of the mining giants claims to have been the first to notice the rise of China—which now consumes 40% of the world’s industrial metals—and to have reacted fast. In fact, they were all slow off the mark. The current bosses took office with a remit to catch up. But things have not gone well.

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Glencore’s Glasenberg Seen Eyeing Anglo After Xstrata – by By Matthew Campbell & Jesse Riseborough (Bloomberg.com – Feb 4, 2013)

http://www.bloomberg.com/

What will Ivan do next? That’s the question likely to percolate amid seaside cocktails in Cape Town this week as mining executives gather for a four-day industry confab of speeches and discreet meetings.

Ivan, as everyone calls him, is billionaire Ivan Glasenberg, chief executive officer of Glencore International Plc. (GLEN) Next month he’s due to close a $37 billion takeover of Xstrata Plc (XTA), creating the world’s fourth-largest mining company. While he isn’t scheduled to address the annual Investing in African Mining Indaba conference, his outsized role in the industry almost guarantees speculation about his next move.

It could be a whopper. Glasenberg, 56, may consider a long- speculated takeover of Anglo American Plc (AAL), according to people familiar with his thinking. The $43 billion mining giant trades at the cheapest level relative to profit of any rival, data compiled by Bloomberg show. Also on his mind: Smaller deals such as a purchase of Eurasian Natural Resources Corp. (ENRC), which has operations in the Democratic Republic of Congo that complement Glencore’s, said the people, who asked not to be identified because the matter is private. First Quantum Minerals Ltd. (FM) is also a candidate, according to Sanford C. Bernstein & Co.

“I don’t see why Glasenberg shouldn’t try this again with another target,” said Paul Gait, a mining analyst at Bernstein in London. “If Glasenberg wants to continue expanding, he has two choices: double down on the Congo via the ENRC or First Quantum route and be a third-world miner, or set up a lower political-risk entity by merging the Anglo and Xstrata operating assets.”

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Canada’s African adventure takes a colonial turn – by Doug Saunders (Globe and Mail – February 2, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

What do we call the thing Canada is doing in Africa?

It involves our largest corporations, the federal government, public- and private-sector aid agencies, and sometimes the military. And their activities are increasingly connected, sometimes by choice, often by force of circumstance.

This week saw Ed Fast, the Minister of International Trade, touring some of the scores of city-sized mining, oil and infrastructure developments that Canada is creating in Nigeria and Ghana, and the development and aid activities that we’ve brought in to surround them. He’s the third cabinet minister to visit those countries since October.

If you follow his steps, you realize Canada is no longer simply “doing business” or “providing aid” in Africa. What we’re doing is something that bears a striking resemblance to the things Britain and France were doing in Canada two centuries ago.

First came the exploiters, in search of mineral wealth. Though most Canadians don’t realize it, Canada is now the largest foreign mining operator in the continent, exceeding even China: We have almost $25-billion in investments in hundreds of huge projects. Our petroleum companies are gigantic players, too.

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Anglo American – Haunted by history – by Rex Gibson (Financial Mail – January 31, 2013)

http://www.fm.co.za/

What’s in Mark Cutifani’s in-tray

What kind of company will Mark Cutifani inherit? Every move Anglo American makes provokes an intense response from its myriad local stakeholders. This despite its moving its primary listing to London 14 years ago . Rex Gibson reflects on the role mining, and in particular Anglo American, has played in the SA economy.

It may be one of the most inept public relations performances ever by a government not renowned for its PR skills. President Jacob Zuma went to the World Economic Forum in Davos intending to reassure the world that SA welcomed investors in mining. But it appears that nobody told some of his top lieutenants.

A few days before, mineral resources minister Susan Shabangu launched a broadside of remarkable ferocity and insensitivity against Anglo American and its subsidiary, Anglo American Platinum (Amplats). The two culprits had had the nerve to announce their business proposals without talking to her.

Though clearly directed at these two, her bullying approach carried a disturbing message for the industry as a whole: “I’ll show you who’s the boss.” The result was that Zuma felt obliged to repudiate Shabangu, insisting that investors were welcome. But that didn’t do much for the confidence and sense of security of those looking to store their money for the long term in a safe place.

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Mining tycoon becomes first African billionaire to pledge half his wealth to charity – by Geoffrey York (Globe and Mail – January 31, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

JOHANNESBURG — As a boy in an impoverished village in South Africa’s apartheid era, Patrice Motsepe watched his mother giving free food to the poorest customers at their small grocery store.

It was a lesson he never forgot, even when he made history by becoming South Africa’s first black billionaire. Ranked the eighth-richest man on the continent with an estimated fortune of $2.65-billion, the 51-year-old mining tycoon has become the first African billionaire to make a dramatic pledge to give away half the wealth generated by his family’s assets.

It’s a huge coup for U.S. entrepreneurs Warren Buffett and Bill Gates as they try to launch a global wave of philanthropy. They have persuaded nearly 100 billionaires to pledge the bulk of their wealth to charity, but most so far are American, and Mr. Motsepe is believed to be the first in the fast-rising African economy to participate in the program, the Giving Pledge, in which prosperous families are encourage to give away at least half their wealth.

The 51-year-old mining tycoon announced Wednesday that he has joined the Giving Pledge. Members of the campaign have courted him for months. Last August he held talks with Mr. Buffett in Omaha, and last month Mr. Gates flew to Cape Town and met Mr. Motsepe to explain the Giving Pledge. At a press conference on Wednesday, Mr. Gates joined by video link to praise Mr. Motsepe’s decision.

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UPDATE 3-Anglo American’s $4 bln hit clears decks for new CEO – by Sarah Young and Brenda Goh (Reuters.com – January 29, 2013)

http://www.reuters.com/

LONDON, Jan 29 (Reuters) – Anglo American took a $4 billion hit to its Minas Rio project on Tuesday, clearing the decks for new boss Mark Cutifani and indicating that the delayed Brazilian operation will eventually get off the ground.

Minas Rio, which is now costing Anglo more than three times its original estimates, has been seen as Anglo’s most significant failure of recent years and is partly responsible for costing outgoing chief executive Cynthia Carroll her job.

The writedown to the valuation of the huge iron ore project and a jump in the bill for its development to $8.8 billion, alongside a planned overhaul for the company’s troubled platinum business, are as near to a clean slate as new CEO Cutifani is going to get.

Shares in Anglo American gained 2.2 percent to 19.14 pounds ($30.06), topping Britain’s blue-chip leader board in midday trading after the announcement of the impairment charge. “The Minas Rio impairments give the incoming CEO a clean slate, creating a degree of positive sentiment,” Bernstein analyst Paul Gait said.

“The greater detail and clarity on the progress of Minas Rio can only increase the confidence around the executability and delivery of the project.”

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Excerpt from “The History of Mining: The events, technology and people involved in the industry that forged the modern world” – by Michael Coulson

To order a copy of The History of Mining please click here: http://www.harriman-house.com/products/books/23161/business/Michael-Coulson/The-History-of-Mining/

HANS MERENSKY (1871-1952)

Hans Merensky was born in 1871 in Botshabelo in the Transvaal. His father Alexander, a German, was an ethnographer interested in the scientific study of local African culture; he was also resident missionary in the area.

In 1882 the family returned to Germany where Merensky finished his schooling and then went to the State Academy of Mining in Berlin to study mining geology and engineering, and then took a doctorate in geology at the Royal Technical College of Charlottenburg. His course professor in Berlin remarked on Merensky’s sixth sense for ferreting out mineral deposits.

Following that he worked in the coal mines of Silesia before joining the Department of Mines in East Prussia. In 1904 Merensky returned to South Africa on sabbatical from the Department to do some geological field studies and it was here that he made the first of a suite of major mineral discoveries in southern Africa. Working in the Transvaal he discovered tin near Pretoria and then became associated with Premier Diamonds.

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Iamgold to cut back Mali exploration activity – by Pav Jordan (Globe and Mail – January 24, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

A move by Iamgold Corp. to reduce exploration activity in Mali marks the latest move by the Toronto-based company to protect itself from political risk in the region.

Iamgold has operations in Canada, South America and Africa, but half its output comes from mines in Mali, and neighbouring Burkina Faso. In Mali it is a 41-per-cent owner in the Sadiola gold mine and a 40-per-cent owner in Yatela, also a gold mine.

“Although it is business as usual at the Sadiola and Yatela mines operated by the company’s joint venture partner and which are approximately 1,300 kilometres by road from the regions of conflict, the company is reducing its exploration activity in the region at this time as a precautionary measure,” Iamgold stated in a news release on Tuesday.

The company said, however, that production at the joint venture operations had not been disrupted by the conflict in Mali, where Islamic militants have taken over a large swath of the territory.

Iamgold, one of the largest mining companies operating in Mali, has been shifting its focus away from the African continent for the past two years, selling stakes in mines in Ghana in early 2011.

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Canadian miners caught up in Mali unrest – by Jessica McDiarmid (Toronto Star – January 23, 2013)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Canadian miners in Mali are grappling with security as a French-led assault pushed rebel forces further away from the capital on Tuesday.

Some companies have reduced operations, cancelled exploration or pulled out foreign workers. But mining operations are still carrying on normally in Mali’s gold-rich southwest, where most companies work hundreds of kilometres from the fighting that has gripped the vast West African nation.

Toronto-headquartered IAMGOLD evacuated about six Canadian workers from several areas in early January when rebels began advancing southward toward the capital, Bamako, as a “precautionary measure,” said Bob Tait, vice president of investor relations.

It has cut some exploration activities but its two mines continue to operate normally, he said. IAMGOLD holds equal shares in the Sadiola and Yatela gold mines with AngloGold Ashanti, which operates both mines. Mali is Africa’s third-largest gold miner after Ghana and South Africa. Production — and investment — is rising as its government looks to take advantage of high metal prices worldwide.

As of 2011, Canadian mining assets in the country were nearly $500 million, ranking it ninth in Africa. There are more than 15 Canadian mining and exploration firms working in the country, according to Natural Resources Canada.

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Rio reviews Mozambique as miners retreat from big plans – by Agnieszka Flak and Clara Ferreira-Marques (Reuters.com – January 22, 2013)

http://www.reuters.com/

JOHANNESBURG/LONDON, Jan 22 (Reuters) – Rio Tinto has begun a review of its Mozambique coal mining operations which cost it a $3 billion write-off, reconsidering development plans, partners and its options for getting the coal from pit to port.

Rio’s troubles in Mozambique offer a cautionary tale on big projects in new areas, which have become increasingly unattractive for miners under pressure from shareholders to control spending and improve returns.

A source familiar with the project said the review was underway. “The reality is that Rio has to look at what it has, and at what options there are,” said the source. The focus is not currently on a sale, although a new project partner could help Rio to share the infrastructure and development costs.

Rio sacked chief executive Tom Albanese last week when it wrote off $14 billion on the value of its aluminium arm and the Mozambique coal assets it bought in 2011. Mozambique’s infrastructure had proved more challenging than expected, Rio said, and estimates of recoverable coking coal used in steel production were lower than expected.

Benga mine, in which India’s Tata Steel owns a minority stake, began exporting last year but the amounts remain a small fraction of the eventual estimated capacity of Rio’s total Mozambique coal assets.

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More strife in South Africa’s troubled mines – by Margaret Evans (CBC New.ca – January 21, 2013)

 http://www.cbc.ca/news/

Labour unrest ripping through the country

Picture a site not far from the town of Rustenburg in the broad expanse of South Africa’s North West “platinum province,” along the border with Botswana. To one side stands the industrial hulk of the Lonmin mine, symbol of industry and (until recently) South Africa’s booming resource economy. It’s grey concrete shafts rise up out of the ground to tower over a maze of power lines.

Sprawled at its feet, the muddy shantytown that serves as home to the miners who fuel the industry, and scratch out their meagre living. In the distance you can see the red kopi, the hill where 34 miners met their end, shot dead by police in the midst of a wildcat strike in August. A crooked cluster of white wooden crosses, their memorial.

This is the stage where the most seminal event in South Africa’s recent history was played out, where the raw elements of a fractured society collided with deadly effect.

“They were killed right in front of me,” says miner Teboho Hlakentso. “And some of the people who got killed, they were not just shot, they were stabbed with spears by the police.

“So the people would be shot and they would be laying there wounded and dying and the police would take their spears and the police would finish them off with spears.”

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