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Indian and Chinese “strong hands” continue to boost gold demand – WGC -by Geoff Candy (Mineweb.com – August 15, 2013)

http://www.mineweb.com/

According to the World Gold Council, the gold market continues to re-balance and demand is moving distinctively from West to East.

Gold demand in India and China is expected to account for close to 45 to 50% of the total gold market by year end, the World Gold Council says, as consumer demand for gold continues to ratchet higher.

Speaking to Mineweb on the launch of the group’s Gold Demand Trend report for the second quarter, MD for investments, Marcus Grubb, explained that based on the figures for the year so far, the council has moved its range for total demand to roughly the same level – 900 – 1000 tonnes each.

Both markets are up roughly 45 to 50% for the year to date and “they are remarkably close together; they are still within about 35 tonnes of each other, which is very similar to where they were in the first half of last year (about 30 tonnes apart) in spite of being 50% larger this year.”

Grubb points out that this forecast implies a new all time high total demand figure for China, comfortably higher than the previous record of 776 tonnes.

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UPDATE 2-Platinum miner Lonmin recognises AMCU union, averts strike threat – by Sherilee Lakmidas (Reuters U.S. – August 14, 2013)

http://www.reuters.com/

JOHANNESBURG, Aug 14 (Reuters) – Platinum producer Lonmin and South Africa’s hardline AMCU said they signed a recognition accord on Wednesday in a move that averts threatened strike action by the union.

The agreement, reached two days before the first anniversary of the massacre of 34 striking workers shot by police at Lonmin’s Marikana mine, opens the way for wage talks between the Association of Mineworkers and Construction Union and the company that are expected to start within weeks.

While the deal heads off a potential strike over recognition, the pay talks are expected to be extremely tough, given AMCU is demanding pay hikes as high as 150 percent from Lonmin rival Anglo American Platinum, the world’s top producer of the precious metal.

Members of AMCU, which claims most of Lonmin’s workforce, have twice this year staged brief illegal strikes at its mines and had threatened to down tools again unless the company recognised it as the dominant union.

The agreement formally recognises AMCU as the majority union at Lonmin, the world’s third largest platinum producer.

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Is the rally in global miners too good to be true? – by Ansuya Harjani (CNBC Asia – August 14, 2013)

http://www.cnbc.com/

Even as global resource stocks have had a stellar run-up in the recent weeks, driven by signs of stabilization in China’s economy, cheap valuations and short covering, questions are building over the sustainability of this trend.

Shares of large-cap mining companies such as Australia-listed BHP Billiton and Rio Tinto and U.K.-listed Vedanta have rallied between 11 percent and 14 percent since mid-July.

“There has been a lot of trading money coming into the space by longer-term investors who have wanted to buy the mining space, but haven’t had the clarity because of China, falling commodity prices,” Chris Weston, senior investment strategist at IG Markets told CNBC. “But the easy money has been made. The question now is how much more upside do we think there’s going to be,” he said.

According to Weston, further gains are likely in the near term given improving sentiment around the global economy. But beyond that, he says the outlook for mining stocks remains unclear, pointing to the risk of a selloff in commodities once the U.S. Federal Reserve begins to taper monetary stimulus and potential oversupply in resources such as iron ore in 2014.

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EDITORIAL: Industrial policy gone wrong (South Africa Business Day Live Editorial – August 13, 2013)

http://www.bdlive.co.za/

REPORTS that Eskom stands to lose as much as R11.5bn in revenue as a result of its controversial preferential power agreement with BHP Billiton is a brutal lesson in the pitfalls of ill-conceived industrial policy. It will also hopefully provide a learning opportunity for Eskom as it completes the process of negotiating the present round of renewable energy agreements.

In its annual report last week, Eskom said it expected its liability as a result of an agreement signed in 1992 to provide cut-price electricity to BHP Billiton’s aluminium smelters, Mozal and Hillside, to more than double from the R5.9bn reported in last year’s financial statement. While the potential for revenue losses as a result of the agreement is regrettable, the biggest error in the agreement was failing to build in a stop-loss clause. The extent of the liability is calculated as the opportunity cost of supplying electricity to BHP Billiton on the present special pricing formula compared with the revenue that would be generated if it was to sell that power at regular industrial customer tariffs.

When the agreement was signed in 1992, it was hoped it would serve the dual purpose of utilising the power utility’s excess capacity and developing South Africa’s industrial capacity. However, during the first decade of democracy in particular, economic growth and Eskom’s failure to invest sufficiently in new capacity has meant that excess capacity has been eroded, to the point where there are now other industrial users willing to pay more than BHP Billiton — hence the potential for loss.

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Glencore cuts budget for $5.9 billion Philippine project – by Erik dela Cruz (Reuters U.S. – August 13, 2013)

http://www.reuters.com/

MANILA – (Reuters) – Glencore Xstrata (GLEN.L) will cut up to 920 jobs and slash spending at its $5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a record-breaking takeover.

Tampakan, a challenging project in a restive region of the southern Philippines, has not been officially put up for sale.

But, like many of the big-ticket mining projects previously held by Xstrata, it is under review by its new owners and is one of four projects Glencore has said it could sell to appease Chinese regulators’ concerns over its dominance in copper – if it is unable to sell the Las Bambas mine in Peru.

Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said on Tuesday it had revised its work plan as the project still faced “substantial development challenges” – including a ban on open-pit mining in South Cotabato province.

That means it is unlikely to hit an already revised 2019 target for first production. “No investment decision can be made until the current project challenges are resolved and necessary approvals obtained,” Sagittarius spokesman John Arnaldo said.

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COLUMN-Australia’s coal industry enters the final stage of grief – by Clyde Russell (Reuters India – August 14, 2013)

http://in.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

Aug 14 (Reuters) – Australian coal miners have been in mourning over the rapid loss of profitability and expansion opportunities, but the industry is entering the final stage of the grieving process.

The five stages of grief, as described by Swiss-American psychiatrist Elisabeth Kubler-Ross on how people face events like terminal illness, are denial, anger, bargaining, depression and acceptance.

While not all of the attendees at the annual Coaltrans Australia conference this week have got past the depression stage, most were looking at how the industry deals with the reality of its myriad of issues.

These include an apparent structural shift to lower prices for the foreseeable future, rising public opposition to mining on the back of a well-funded and organised environmental lobby, lack of capital available for new projects, still high labour costs and an increasing burden of government red and green tape.

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Losing Faith in Gold From Ghana to Vancouver Proves Rout – by Peter Robison & Ekow Dontoh (Bloomberg News – August 13, 2013)


http://www.bloomberg.com/

Akwesi Boahene’s gold dreams ended better than those of some people in Dunkwa-on-Offin, Ghana, whose riverbeds yield flecks of the precious metal to pickaxes. He still had his life.

Boahene, a satellite-television installer, and a partner pooled $10,000 two years ago to rent land and start a mining operation in a muddy West African town then booming with prospectors lured by what was gold’s longest bull market in at least nine decades.

In May, as prices sagged, his venture became another victim in a year of lost faith in the metal. Boahene shut down the no-longer-profitable business and told his 15 workers to stay home. When a former employee phoned one morning in June about returning to work, Boahene, 33, had no good news.

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FBI arrests seven in $140 million penny stock fraud – by Bernard Vaughan (Reuters U.S. – August 13, 2013)

http://www.reuters.com/

NEW YORK – (Reuters) – Federal prosecutors said on Tuesday they arrested seven people in a more than $140 million international penny stock scheme that involved fraudulently inflating share prices and trading volumes.

Two people charged, including the alleged mastermind, remain at large, according to the office for the U.S. Attorney for the Eastern District of New York.

The fraud generated funds from investors in about 35 nations through various brokerage and bank accounts, according to a statement from the office of U.S. Attorney Loretta Lynch in Brooklyn.

The arrests, made in five states and in Canada, followed one of the largest international penny stock investigations ever conducted by the U.S. Department of Justice and the FBI, according to the statement.

“As alleged in the indictment, the defendants used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe,” Lynch said in a statement. “Where others saw citizens of the world, the defendants saw a pool of potential marks.”

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UPDATE 1-Freeport says Indonesia export ban may cut copper output – by Fergus Jensen (Reuters India – August 13, 2013)

http://in.reuters.com/

Aug 13 (Reuters) – Freeport-McMoRan Copper & Gold Inc’s Indonesian subsidiary warned that output from Grasberg, the world’s second-biggest copper mine, could be cut by a ban on unprocessed ore exports that takes effect next year.

The Indonesian government is pushing miners, especially foreign-owned operations such as Freeport’s Grasberg, to add more value within the country.

Freeport, which on Tuesday signed two memorandums of understanding with Indonesian companies planning to build smelters that would process its ore, said it might seek a way around the rules during its contract renegotiation with the government.

The company currently processes only around 40 percent of its ore mined in Indonesia at one smelter in East Java, PT Freeport Indonesia Chief Executive Rozik Soetjipto said on Tuesday, but the law now requires it to smelt all of the ore in Indonesia from January 2014.

“If there is no dispensation from the government… our mining capacity will need to be reduced … It’s very complicated,” Soetjipto said at a news conference in Jakarta.

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Patent fight could impact half of global rare earth metal supply – by Dorothy Kosich (Mineweb.com – August 13, 2013)

http://www.mineweb.com/

A dispute between a new Chinese rare earth company industrial alliance and Japan’s Hitachi Metals over extension of Nd-Fe-B magnets could impact U.S. and Chinese manufacturing.

RENO (MINEWEB) – China’s desire to promote the development of a domestic rare earth permanent magnet industry is running head-on into Japan’s Hitachi Metals, Ltd. which is trying to protect over 600 sintered rare earth magnet patents globally, including over 100 patents in the U.S., 300 in China and 600 in Japan.

The dispute could impact up to half of the world’s rare earths production. The neodymium- iron-boron alloy magnet is used in motors, audio speakers, headphone, cordless tools, computer hard drives and even golf ball markers.

A year ago, Hitachi Metals, Ltd. and Hitachi Metals North Carolina, Ltd. asked the U.S. International Trade Commission (ITC) to stop the sales of such products and their downstream products that did not have a U.S. patent license. Four Chinese companies entered into settlement agreements with Hitachi in May by paying money to gain the patent license.

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Mexico proposes energy reform, some investors skeptical – by David Alire Garcia and Simon Gardner (Reuters U.S. – August 12, 2013)

http://www.reuters.com/

MEXICO CITY – (Reuters) – President Enrique Pena Nieto on Monday proposed an overhaul of Mexico’s energy industry to offer private companies profit-sharing contracts, but investors said it might be too cautious and some sold Mexican assets.

The proposal calls for changes to key articles of the constitution that ban certain contracts and make oil, gas, petrochemicals and electricity the sole preserve of the state, in a bid to lure investment to stem sliding oil output.

If enacted, the reform would mark the largest private sector opening in decades for Mexico’s energy industry, which was nationalized in 1938 and is controlled by state monopoly Pemex.

However, the centrist government’s bill stops short of proposing concessions to tap Mexican oil, or production-sharing, that were viewed as the best-case scenarios by oil companies.

It also avoids giving private companies ownership over Mexico’s oil and gas and instead gives them a share of profits, in cash but not oil. It was not yet clear how attractive the reform would be for oil majors such as BP Plc and Exxon Mobil Corp.

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Europe’s slowdown forces Finland to turn to Russia again – by Jussi Rosendahl (Reuters India – August 12, 2013)

http://in.reuters.com/

HELSINKI, Aug 11 (Reuters) – After decades of pursuing trade with western Europe, Finland is becoming dependent on Russia again as that country’s burgeoning middle class and wealthy investors provide opportunities for growth lacking in recession-hit Europe.

While some Finns still view their eastern neighbour and former ruler with suspicion, expectations of only a slow European recovery mean more businesses are likely to embrace closer ties with Russia, signalling a readjustment after two decades of close commercial relations with Europe.

Recent trade data show a shift has already begun. Finnish exports to the rest of the European Union fell 4 percent year-on-year in the first five months of 2013, while those to Russia rose 4 percent.

Judging from second-quarter corporate results, which showed a wide range of companies hit by uncertainty in Europe, Finland may become even more dependent on Russia. Top companies such as retailer Kesko and department store chain Stockmann have cited Russia as their strongest card.

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Decade-long Australia mining boom turns to bust (The Associated Press/Las Vegas Sun – August 10, 2013)

http://www.lasvegassun.com/

The Australian mining boom built over a decade on Chinese hunger for energy and raw materials is turning into bust for many business owners as China’s cooling growth reverberates through a country accustomed to winning from the rise of an Asian economic giant.

Endowed with vast mineral resources, Australia has been the envy of the Western world for avoiding recession during the global financial crisis while other wealthy countries drowned in debt. But the country now faces a potentially painful transition as it weans itself off a heavy reliance on its two biggest exports, coal and iron ore.

Australia’s dilemma underscores that China’s long run of supercharged growth has given it enough weight in the world economy to create not only winners, but losers too when its own fortunes change.

Trade between Australia and China equaled 7.6 percent of Australia’s $1.5 trillion economy last year, a dramatic threefold increase from a decade earlier, according to an Associated Press analysis of trade data. During that time, mining companies gushed multibillion dollar profits while jobs as mundane as maintenance commanded salaries above $120,000.

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Mining industry’s view: Let mining boost state manufacturing – by Hal Quinn (Duluth News Tribune – August 11, 2013)

http://www.duluthnewstribune.com/

Hal Quinn is president and CEO of the Washington, D.C.-based National Mining Association (nma.org), which advocates on behalf of America’s mining and minerals resources.

The economy is a top concern for state manufacturers who question whether Minnesota is a competitive state in which to do business, according to findings from Enterprise Minnesota’s fifth-annual “State of Manufacturing” report released in July.

The economy is a top concern for state manufacturers who question whether Minnesota is a competitive state in which to do business, according to findings from Enterprise Minnesota’s fifth-annual “State of Manufacturing” report released in July. Chief among the features state officials should be touting to anxious industry leaders is Minnesota’s vast mineral wealth, which — through sound reform of the federal mine-permitting process — could provide manufacturers with ready, reliable access to the raw materials upon which they rely.

That’s not to say there aren’t already thousands of Minnesotans working to develop some key state resources. Last year, more than $4.5 billion worth of minerals were produced in Minnesota, minerals crucial to high-tech devices, electro-medical equipment, advanced-energy components, defense technologies and infrastructure.

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Mining the Gobi: The Battle for Mongolia’s Resources – by Bernhard Zand (Spiegel Online International – August 7, 2013)

http://www.spiegel.de/international/

Mongolia is over four times the size of Germany, with nearly 3 million inhabitants and a GDP of $10 billion (€7.5 billion) in 2012.

British-Australian mining corporation Rio Tinto employs 71,000 people in more than 40 countries and is worth about $60 billion.
These two unequal partners — a poor, potentially rich nation and the second largest mining corporation in the world — have joined together to mine one of the globe’s largest deposits of copper and gold. But will they be capable of distributing this wealth fairly?

The mine in question lies an hour’s flight south of the Mongolian capital Ulan Bator, near the border with China. There is enough copper in the ground here to build the Statue of Liberty more than 800,000 times over. Once the planned mine goes into full operation, it could increase the country’s GDP by a third. It could, at least in theory, bring prosperity to this country where many people still live in simple yurts and huts.

But in practice, the transaction between this global corporation and this country that is poor but rich in raw materials looks quite different. In fact, the project serves as a prime example of what is happening in a growing number of newly industrialized and developing countries.

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