Mumbai, Dec 10 Industrial demand for gold will increase if automotive industry adopts breakthrough technology that will allow use of the yellow metal in reduction of emissions.
Nanostellar, California-based developer of nano-engineered catalyst materials, has been responsible for development of a new product called ‘NS Gold’.
This auto catalyst will enable manufacturers of diesel engines to reduce noxious emissions by as much as 40 per cent more than the existing pure platinum catalyst, a press release from the World Gold Council stated.
Noxious emissions
Noxious emissions are present in the exhaust gases of an internal-combustion engine of a motor vehicle. Auto catalyst use platinum group metals to control these harmful elements like carbon monoxide, hydrocarbons, smoke and smog forming compounds.
The council, a body that promotes demand for gold, has invested in Nanostellar to enable introduction of gold into the auto catalyst market and to facilitate commercialisation and marketing of the gold-based technology.
Projections
According to international projections during 2007, 4.24 million oz (119 tonnes) of platinum is expected to be used in automotive catalysts.
Therefore, at current prices of approximately $ 1400- $1450 per oz the total value of platinum used are expected to exceed $ 6 billion.
As producers of catalyst materials replaced expensive platinum with palladium, further use of gold, nearly half the price ($ 800 oz) will further bring down the use of platinum.
The industrial demand for gold in 2006 totalled 16.1 million ounces or 458 tonnes.
The auto catalyst market is a large and important one for the platinum group of metals “…. we are pleased to see gold play the role”, said Mr James Burton, CEO of the World Gold Council.
Marketing expertise
“The councils marketing expertise, coupled with our technical knowledge, should prove a powerful combination in winning advocacy for our new product,” said Mr Pankaj Dhingra, CEO of Nanostellar Inc.
The demand for platinum in diesel emissions control has been rising due to stricter international emission standards.
But the white metal is the most expensive component of diesel oxidation catalyst required for 14 million light-duty and two million heavy-duty diesel vehicles produced annually.
Monday, December 10, 2007
Global Commodities Boom Makes Bucyrus a Buy
With the global commodities boom still intact, worldwide demand for coal, copper, iron ore, coal, copper and other basic materials looking like its not letting up anytime soon, and with the tremendous growth internationally, especially in China and India we have a buy on Bucyrus, ticker BUCY.
Remember who got rich from the California Gold Rush in the 1800’s? Was it the gold miners or those who provided the picks and shovels? It was the pick and shovel suppliers. What we consider to be a global commodities super-cycle we are in currently, we think Bucyrus has continued growth with its play in the commodities sectors.
Required resources behind the strong and fast rise of emerging industrial global economies are basic materials. Mining companies have increased production to meet growing demand. More equipment from suppliers is required such as drills, mega shovels and other major excavation equipment and tools. A company that supplies mining companies is Bucyrus International (BUCY). The company specializes in large scale excavation equipment used in surface mining and more recently high-tech systems for underground coal mining.
Bucyrus is one of the top two mining suppliers in the world, and based in Milwaukee Wisconsin. Bucyrus has operations that cover the globe. About 60% of its revenue comes from outside the U.S and the international growth that's happening now. Commodity businesses are cyclical and we see the current up cycle -- now in its fourth year -- extending at least another few years, if not for another decade or two possibly.
High commodity prices and capital expansion projects from the mining firms are among the main ingredients behind what will be an extended commodities cycle we believe. After years of losses, income at Bucyrus picked with earnings rising from 48 cents a share that year to $2.25 in 2006. This year we're expecting earnings to rise 31% vs. 2006, to $2.95, and we expect profit to climb 55% in 2008 and 31% in 2009.
Earnings could peak in 2010. Bucyrus CEO Tim Sullivan in a November conference call said that the Bucyrus surface mining shovel business is two-thirds sold out for 2008 and will probably be fully sold out by January at the latest. Bucyrus went into the underground coal mining business when it purchased German mining supplier DBT in May. The underground coal component was more than half of third-quarter revenue. Underground total sales were $263 million vs. $237 million in surface mining. Surface mining was second in sales, but with higher margins which is very nice.
Bucyrus third-quarter results were from surface mining margins which reached 19.7%. Also underground margins were about 14%, well ahead of the forecasted 10%. With the increased revenue from the DBT purchase, total third quarter revenue was 170% higher than last year's figure at $500.3 million. Surface mining sales rose 28% from last year's third quarter also.
Earnings in the quarter were up 43% from last year, to 76 cents a share. The market for underground equipment is not growing as fast as surface mining currently. It's taking a break after a big run, we are expecting a rebound for the next foreseeable quarters. Bucyrus back-log Sept. 30 stands at $1.3 billion, which is down from the second-quarter backlog in both sectors.
Orders for large draglines, multi-million dollar machines dig up rock and dirt should increase into the middle of 2008. Shipping congestion in Australia has been problem for on-time delivery of new orders from major mining customers. Bucyrus has been a leader in powerful dragline drive systems for nearly 30 years. It has almost 400 drag-lines in operation, with income being generated from on parts and services. BHP Billiton (BHP) is one of the firm's largest customers. With the recent on and off again merger buyout wars of mining rival giants BHP and Rio Tinto (RTP), we feel Bucyrus will continue to be profitable supplying their growth and the rest of industries growth.
"Bucyrus is building a new dragline for a major Canadian coal mining company, with a contract value of more than $100 million. The sale of this dragline highlights the ongoing demand for our products and services," CEO Sullivan said in a statement. He told analysts his company is talking with producers in Canada's active oil sands "to get a bigger piece of the pie." With high prices, and if they go higher, will make the oil sands a place to be invested in on way or the other.
CFO Craig Mackus said in the conference call that capacity constraints are affecting the surface mining sales. The expansion of the company’s headquarters plant should be finished by the first quarter of 2008, he said. "The big issue out in the marketplace right now is not, gee, is there going to be machinery bought," Sullivan said during the conference call.
Based on announced capital expansion plans by major producers of iron ore, copper and gold, "that's a given," he said. "The concern by the producers right now is if they're going to get their equipment when they need it and when they want it." Those words are music to our ears fundamentally as demand is not stopping yet. Technically, and at current new high prices, we think Bucyrus is a great growth story buy with its current price to earning ratio at 34.
Remember who got rich from the California Gold Rush in the 1800’s? Was it the gold miners or those who provided the picks and shovels? It was the pick and shovel suppliers. What we consider to be a global commodities super-cycle we are in currently, we think Bucyrus has continued growth with its play in the commodities sectors.
Required resources behind the strong and fast rise of emerging industrial global economies are basic materials. Mining companies have increased production to meet growing demand. More equipment from suppliers is required such as drills, mega shovels and other major excavation equipment and tools. A company that supplies mining companies is Bucyrus International (BUCY). The company specializes in large scale excavation equipment used in surface mining and more recently high-tech systems for underground coal mining.
Bucyrus is one of the top two mining suppliers in the world, and based in Milwaukee Wisconsin. Bucyrus has operations that cover the globe. About 60% of its revenue comes from outside the U.S and the international growth that's happening now. Commodity businesses are cyclical and we see the current up cycle -- now in its fourth year -- extending at least another few years, if not for another decade or two possibly.
High commodity prices and capital expansion projects from the mining firms are among the main ingredients behind what will be an extended commodities cycle we believe. After years of losses, income at Bucyrus picked with earnings rising from 48 cents a share that year to $2.25 in 2006. This year we're expecting earnings to rise 31% vs. 2006, to $2.95, and we expect profit to climb 55% in 2008 and 31% in 2009.
Earnings could peak in 2010. Bucyrus CEO Tim Sullivan in a November conference call said that the Bucyrus surface mining shovel business is two-thirds sold out for 2008 and will probably be fully sold out by January at the latest. Bucyrus went into the underground coal mining business when it purchased German mining supplier DBT in May. The underground coal component was more than half of third-quarter revenue. Underground total sales were $263 million vs. $237 million in surface mining. Surface mining was second in sales, but with higher margins which is very nice.
Bucyrus third-quarter results were from surface mining margins which reached 19.7%. Also underground margins were about 14%, well ahead of the forecasted 10%. With the increased revenue from the DBT purchase, total third quarter revenue was 170% higher than last year's figure at $500.3 million. Surface mining sales rose 28% from last year's third quarter also.
Earnings in the quarter were up 43% from last year, to 76 cents a share. The market for underground equipment is not growing as fast as surface mining currently. It's taking a break after a big run, we are expecting a rebound for the next foreseeable quarters. Bucyrus back-log Sept. 30 stands at $1.3 billion, which is down from the second-quarter backlog in both sectors.
Orders for large draglines, multi-million dollar machines dig up rock and dirt should increase into the middle of 2008. Shipping congestion in Australia has been problem for on-time delivery of new orders from major mining customers. Bucyrus has been a leader in powerful dragline drive systems for nearly 30 years. It has almost 400 drag-lines in operation, with income being generated from on parts and services. BHP Billiton (BHP) is one of the firm's largest customers. With the recent on and off again merger buyout wars of mining rival giants BHP and Rio Tinto (RTP), we feel Bucyrus will continue to be profitable supplying their growth and the rest of industries growth.
"Bucyrus is building a new dragline for a major Canadian coal mining company, with a contract value of more than $100 million. The sale of this dragline highlights the ongoing demand for our products and services," CEO Sullivan said in a statement. He told analysts his company is talking with producers in Canada's active oil sands "to get a bigger piece of the pie." With high prices, and if they go higher, will make the oil sands a place to be invested in on way or the other.
CFO Craig Mackus said in the conference call that capacity constraints are affecting the surface mining sales. The expansion of the company’s headquarters plant should be finished by the first quarter of 2008, he said. "The big issue out in the marketplace right now is not, gee, is there going to be machinery bought," Sullivan said during the conference call.
Based on announced capital expansion plans by major producers of iron ore, copper and gold, "that's a given," he said. "The concern by the producers right now is if they're going to get their equipment when they need it and when they want it." Those words are music to our ears fundamentally as demand is not stopping yet. Technically, and at current new high prices, we think Bucyrus is a great growth story buy with its current price to earning ratio at 34.
FTSE hit by banking sector losses
London equities fell on Monday after news of a £200m writedown at Lloyds TSB added to fresh fears about the impact of troubled credit markets on the banking sector. Surprise news of $10bn losses at Swiss bank UBS gave the fears further impetus. The FTSE 100 started the session 0.3 per cent lower at 6,538.1, a loss of 17 points largely accounted for by banks. The mid-cap FTSE 250 fell 0.1 per cent to 10,618.1. Although Lloyds TSB stood by its existing profit guidance for 2007, saying profits on the disposal of non-core businesses balanced credit market losses, news of the £200m writedown added to a sense of gloom in the sector. Shares in the company fell 1 per cent to 483½p and there were wider losses for banks as UBS’s shock move damaged sentiment. Barclays fell 1.4 per cent to 558p, Royal Bank of Scotland fell 1.4 per cent to 476.8 and HSBC lost 1.1 per cent to 849p. Worries that UBS’s move, including an $11.5bn injection of emergency capital from the Singapore government’s investment vehicle and an unnamed middle eastern investor, signalled continuing credit market turbulence into the medium term hit Northern Rock. Shares in the stricken Newcastle-based bank, still dependent on emergency credit from the Bank of England as it considers several rescue bids, fell 6.9 per cent to 103p, the biggest losing margin on the FTSE 100. Overall losses were kept in check by lingering strength in the mining sector on growing hopes for a wave of bid activity in the sector. Kazakhmys, the eastern European copper processor, rose 2.1 per cent to £13.89 and Xstrata rose 1.9 per cent to £37.21.
Recession fear forces oil and metals lower
Oil and base metals came under pressure Monday after Morgan Stanley forecast a mild US recession in 2008, warning that fear and an associated reduction in exposure to “risky” assets could send commodity prices below levels warranted by fundamentals.
But with a US recovery expected in the second half of 2008, “we see any commodity price weakness, not related to fundamentals, as a buying opportunity,” said Hussein Allidina, of Morgan Stanley. “Any decline in demand is likely to be cyclical and short-lived, while supply-side constraints are largely structural, foreshadowing higher commodity prices in the long-run.”
Nymex January West Texas Intermediate fell 50 cents to $87.78 a barrel while ICE January Brent also lost 50 cents at $88.14 a barrel.
Ed Morse, of Lehman Brothers, says the relentless pressures pushing oil prices up since 2002 are set to continue next year. He is forecasting both WTI and Brent to average $84 a barrel in 2008, declining to $78 in 2009.
Lehman expects further disappointments from non-Opec supply growth and for new dilemas to emerge for Opec next year.
“A rift is widening between those [Opec members] unable to raise output and revenues except through higher prices [Iran and Venezuela] and those with more output capacity and diversified economies [Saudi Arabia and other GCC members],” says Mr Morse. “This is set to impede unanimity and may encourage Saudi Arabia to achieve its objectives through output increases.”
In Chicago, traders expect the US Department of Agriculture will Tuesday revise down its estimates for corn, wheat and soyabeans stocks at the end of the 2007/08 marketing year.
Soyabeans hit a 34-year high of $11.27½ a bushel amid concerns about dry weather affecting South American production. CBOT January soyabeans weakened later in the session, down 1½ cents to $11.18¼ a bushel. The consensus forecast is for soyabean stocks to fall to 196m bushels, from the November estimate of 210m bushels, and a fall below 200m could set off “alarm bells” for soyabeans, according to Gavin Maquire of Iowa Grain.
Wheat prices were supported by further evidence of strong overseas demand as India launched a tender to buy 550,000 tonnes of wheat.
CBOT December wheat traded above the key $9.00 level, gaining 10 cents at $9.13½ a bushel. Mr Maquire says the USDA could trim its November wheat stocks estimate of 312m bushels to less than 300m, which would support prices further.
December wheat prices in Minneapolis have traded above $10 a bushel for the first time in US history after Canada’s statistical bureau reduced its estimate for the spring wheat harvest by around 600,000 tonnes to just 20.05m tonnes.
Corn dipped ½ cent to $3.99 a bushel with the USDA expected to trim its November corn stocks estimate from 1.897bn bushels to around 1.882bn. But the forecasts range widely from 1.75bn to 2.08bn bushels.
“Agricultural prices will remain resilient to global growth risks, skittish equity markets and a new Fed easing cycle,” said Michael Lewis of Deutsche Bank: “From a valuation perspective this sector remains cheap since inventory-to-consumption ratios across most of the complex are close to multi-decade lows.”
Gold pushed through the $800 level, rising 1.8 per cent to $809.10 a troy ounce.
But with a US recovery expected in the second half of 2008, “we see any commodity price weakness, not related to fundamentals, as a buying opportunity,” said Hussein Allidina, of Morgan Stanley. “Any decline in demand is likely to be cyclical and short-lived, while supply-side constraints are largely structural, foreshadowing higher commodity prices in the long-run.”
Nymex January West Texas Intermediate fell 50 cents to $87.78 a barrel while ICE January Brent also lost 50 cents at $88.14 a barrel.
Ed Morse, of Lehman Brothers, says the relentless pressures pushing oil prices up since 2002 are set to continue next year. He is forecasting both WTI and Brent to average $84 a barrel in 2008, declining to $78 in 2009.
Lehman expects further disappointments from non-Opec supply growth and for new dilemas to emerge for Opec next year.
“A rift is widening between those [Opec members] unable to raise output and revenues except through higher prices [Iran and Venezuela] and those with more output capacity and diversified economies [Saudi Arabia and other GCC members],” says Mr Morse. “This is set to impede unanimity and may encourage Saudi Arabia to achieve its objectives through output increases.”
In Chicago, traders expect the US Department of Agriculture will Tuesday revise down its estimates for corn, wheat and soyabeans stocks at the end of the 2007/08 marketing year.
Soyabeans hit a 34-year high of $11.27½ a bushel amid concerns about dry weather affecting South American production. CBOT January soyabeans weakened later in the session, down 1½ cents to $11.18¼ a bushel. The consensus forecast is for soyabean stocks to fall to 196m bushels, from the November estimate of 210m bushels, and a fall below 200m could set off “alarm bells” for soyabeans, according to Gavin Maquire of Iowa Grain.
Wheat prices were supported by further evidence of strong overseas demand as India launched a tender to buy 550,000 tonnes of wheat.
CBOT December wheat traded above the key $9.00 level, gaining 10 cents at $9.13½ a bushel. Mr Maquire says the USDA could trim its November wheat stocks estimate of 312m bushels to less than 300m, which would support prices further.
December wheat prices in Minneapolis have traded above $10 a bushel for the first time in US history after Canada’s statistical bureau reduced its estimate for the spring wheat harvest by around 600,000 tonnes to just 20.05m tonnes.
Corn dipped ½ cent to $3.99 a bushel with the USDA expected to trim its November corn stocks estimate from 1.897bn bushels to around 1.882bn. But the forecasts range widely from 1.75bn to 2.08bn bushels.
“Agricultural prices will remain resilient to global growth risks, skittish equity markets and a new Fed easing cycle,” said Michael Lewis of Deutsche Bank: “From a valuation perspective this sector remains cheap since inventory-to-consumption ratios across most of the complex are close to multi-decade lows.”
Gold pushed through the $800 level, rising 1.8 per cent to $809.10 a troy ounce.
Treasurys fall ahead of Fed decision
NEW YORK (AP) - Treasury prices dropped Monday as bond market investors tried to gauge Federal Reserve monetary policy a day ahead of a critical Fed decision on rates.
Many bond market investors believe the Fed is likely to cut rates Tuesday, but that the reduction likely will only be 0.25 percentage point and that it will mark the final easing in this cycle.
In prior weeks, investors were more convinced that a 0.50 percentage point rate cut is possible this week and that future Fed meetings would bring additional easings.
"The Treasury market is trading lower this morning as more and more investors feel that the Fed is close to the end of its short-term 'ease cycle' and that the U.S. economy is not as weak as many thought," said Kevin Giddis, managing director of fixed income at Morgan Keegan.
"There is also the thought that the rate reductions by the Fed have a future price: inflation."
The bond market always keeps inflation in its sights because higher price pressures dent into the value of fixed income instruments. Still, the market would welcome a rate cut Tuesday because it would stimulate strained capital markets.
The benchmark 10-year Treasury note fell 16/32 to 100 26/32 with a yield of 4.15 percent, up from 4.12 percent late Friday. Prices and yields move in opposite directions.
The 30-year long bond dropped 1 point to 106 8/32 with a yield of 4.61 percent, up from 4.58 percent on Friday.
The 2-year note fell 3/32 to 99 30/32 with a yield of 3.15 percent, up from 3.10 percent rom late Friday.
The yield on the 3-month note dropped to 3.07 percent from 3.12 percent late Friday as the discount rate fell to 3.00 from 3.05 percent Friday.
Further selling in after hours trade, sent yields up further. The 10-year yield at 5:30 p.m. Eastern time reached 4.16 percent, as the 30-year yield rose to 4.62 percent and the 2-year yield increased to 3.18 percent.
But the 3-month yield fell to 3.04 percent and the discount rate dropped to 2.97 percent.
As the year draws to a close, the Fed is under unusually strong pressure to make sure financial markets are liquid, and this has increased certainty that the central bank is likely to cut rates Tuesday.
The need to keep money in circulation always increases right before the year-end as consumers ramp up their spending for the holidays and institutions grapple to square their books and improve their balance sheets. These usual seasonal pressures this year are compounded by the fact that credit markets are over-stressed.
"This year, in addition to seasonal needs for money in the financial system, the Federal Reserve must contend with extraordinary demands for liquidity, the likes of which have not been season at year's end since 2000 when concerns about the impact of the advent of the millennium were rampant," said Tony Crescenzi, fixed-income analyst at Miller Tabak.
New real estate sector data Monday backed the view that the economy may not be weak enough for the Fed to sustain a series of rate reductions beyond Tuesday. However, it is also thought that in the current cycle, the Fed's decisions are based as much on concerns about the health of the credit markets as on indications about the strength of the broader economy.
The National Association of Realtors reported that its pending home sales index rose 0.6 to 87.2 in October from 86.7 in September. The September level was revised higher from an original reading of 85.7 and followed two large declines in July and August.
"The back to back monthly gains and slowing in the year on year slide gives some hope that the worst might be over for the housing market," said Action Economics. "
"The data are of interest, but ahead of tomorrow's Fed decision and more important economic reports later in the week, there won't be much market reaction this morning."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Many bond market investors believe the Fed is likely to cut rates Tuesday, but that the reduction likely will only be 0.25 percentage point and that it will mark the final easing in this cycle.
In prior weeks, investors were more convinced that a 0.50 percentage point rate cut is possible this week and that future Fed meetings would bring additional easings.
"The Treasury market is trading lower this morning as more and more investors feel that the Fed is close to the end of its short-term 'ease cycle' and that the U.S. economy is not as weak as many thought," said Kevin Giddis, managing director of fixed income at Morgan Keegan.
"There is also the thought that the rate reductions by the Fed have a future price: inflation."
The bond market always keeps inflation in its sights because higher price pressures dent into the value of fixed income instruments. Still, the market would welcome a rate cut Tuesday because it would stimulate strained capital markets.
The benchmark 10-year Treasury note fell 16/32 to 100 26/32 with a yield of 4.15 percent, up from 4.12 percent late Friday. Prices and yields move in opposite directions.
The 30-year long bond dropped 1 point to 106 8/32 with a yield of 4.61 percent, up from 4.58 percent on Friday.
The 2-year note fell 3/32 to 99 30/32 with a yield of 3.15 percent, up from 3.10 percent rom late Friday.
The yield on the 3-month note dropped to 3.07 percent from 3.12 percent late Friday as the discount rate fell to 3.00 from 3.05 percent Friday.
Further selling in after hours trade, sent yields up further. The 10-year yield at 5:30 p.m. Eastern time reached 4.16 percent, as the 30-year yield rose to 4.62 percent and the 2-year yield increased to 3.18 percent.
But the 3-month yield fell to 3.04 percent and the discount rate dropped to 2.97 percent.
As the year draws to a close, the Fed is under unusually strong pressure to make sure financial markets are liquid, and this has increased certainty that the central bank is likely to cut rates Tuesday.
The need to keep money in circulation always increases right before the year-end as consumers ramp up their spending for the holidays and institutions grapple to square their books and improve their balance sheets. These usual seasonal pressures this year are compounded by the fact that credit markets are over-stressed.
"This year, in addition to seasonal needs for money in the financial system, the Federal Reserve must contend with extraordinary demands for liquidity, the likes of which have not been season at year's end since 2000 when concerns about the impact of the advent of the millennium were rampant," said Tony Crescenzi, fixed-income analyst at Miller Tabak.
New real estate sector data Monday backed the view that the economy may not be weak enough for the Fed to sustain a series of rate reductions beyond Tuesday. However, it is also thought that in the current cycle, the Fed's decisions are based as much on concerns about the health of the credit markets as on indications about the strength of the broader economy.
The National Association of Realtors reported that its pending home sales index rose 0.6 to 87.2 in October from 86.7 in September. The September level was revised higher from an original reading of 85.7 and followed two large declines in July and August.
"The back to back monthly gains and slowing in the year on year slide gives some hope that the worst might be over for the housing market," said Action Economics. "
"The data are of interest, but ahead of tomorrow's Fed decision and more important economic reports later in the week, there won't be much market reaction this morning."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Metals - Gold continues higher ahead of Fed meet as oil gains, dollar weakens
LONDON (Thomson Financial) - Gold rose above 800 usd per ounce as the metal benefited from a recovery in oil prices and from renewed weakness in the dollar ahead of tomorrow's rate verdict from the US Federal Reserve.
But analysts said the upside is limited ahead of tomorrow's widely expected 25 basis point rate cut by the Federal Reserve.
"It is hard to see markets moving much ahead of the FOMC decision on Tuesday evening but beyond that gold remains well within its recent 772-836 usd an ounce range," said UBS Investment Bank analyst John Reade.
While there is a risk of profit taking in gold heading into the year end, Reade added he remains positive on the metal and is waiting for an opportunity to take up long positions or bets on price rises.
At 3.29 pm, spot gold was trading at 808.60 usd per ounce, up from 794.40 usd in late New York trade on Friday.
The dollar turned lower against the euro, giving back small gains seen in Asian trading hours when investors were scaling back expectations over the magnitude of tomorrow's rate cut.
Earlier last week, many players were betting the Fed would cut rates by 50 basis points, but last Friday's better-than-expected payrolls report indicated a cut of that magnitude might not be necessary.
All the same however, analysts say a rate cut of any size will be good for gold over the longer term as it weakens the dollar and boosts the attractiveness of the precious metal as an alternative asset.
Looking into the year end, however, TheBullionDesk.com analyst James Moore said he believes any rallies in gold are likely to run into selling pressure as traders lock in profits before the New Year.
Gold fell to 777 usd per ounce earlier this month on end-of-year profit taking and on weakness in oil.
In November, the metal touched a 28-year high of 845 usd per ounce, just below the all-time record of 850 usd on record high oil prices, record weakness in the dollar and uncertainty in the broader financial markets.
This uncertainty remains for now, with markets still very jittery about the fall-out from the summer's sub-prime housing and credit crisis. Consequently, the outlook for gold is positive in the longer term.
Gold usually benefits from economic turmoil as it is seen as a safe haven asset.
Among other precious metals, platinum was up 1,461 usd per ounce against 1,458 usd yesterday, while sister metal palladium dipped to 342 usd per ounce from 343 usd.
Moore said platinum could easily eclipse last month's all-time record high of 1,489.50 usd per ounce on continuing "fundamental imbalances and market tightness".
Silver was trading at 14.66 usd per ounce against 14.34 usd.
But analysts said the upside is limited ahead of tomorrow's widely expected 25 basis point rate cut by the Federal Reserve.
"It is hard to see markets moving much ahead of the FOMC decision on Tuesday evening but beyond that gold remains well within its recent 772-836 usd an ounce range," said UBS Investment Bank analyst John Reade.
While there is a risk of profit taking in gold heading into the year end, Reade added he remains positive on the metal and is waiting for an opportunity to take up long positions or bets on price rises.
At 3.29 pm, spot gold was trading at 808.60 usd per ounce, up from 794.40 usd in late New York trade on Friday.
The dollar turned lower against the euro, giving back small gains seen in Asian trading hours when investors were scaling back expectations over the magnitude of tomorrow's rate cut.
Earlier last week, many players were betting the Fed would cut rates by 50 basis points, but last Friday's better-than-expected payrolls report indicated a cut of that magnitude might not be necessary.
All the same however, analysts say a rate cut of any size will be good for gold over the longer term as it weakens the dollar and boosts the attractiveness of the precious metal as an alternative asset.
Looking into the year end, however, TheBullionDesk.com analyst James Moore said he believes any rallies in gold are likely to run into selling pressure as traders lock in profits before the New Year.
Gold fell to 777 usd per ounce earlier this month on end-of-year profit taking and on weakness in oil.
In November, the metal touched a 28-year high of 845 usd per ounce, just below the all-time record of 850 usd on record high oil prices, record weakness in the dollar and uncertainty in the broader financial markets.
This uncertainty remains for now, with markets still very jittery about the fall-out from the summer's sub-prime housing and credit crisis. Consequently, the outlook for gold is positive in the longer term.
Gold usually benefits from economic turmoil as it is seen as a safe haven asset.
Among other precious metals, platinum was up 1,461 usd per ounce against 1,458 usd yesterday, while sister metal palladium dipped to 342 usd per ounce from 343 usd.
Moore said platinum could easily eclipse last month's all-time record high of 1,489.50 usd per ounce on continuing "fundamental imbalances and market tightness".
Silver was trading at 14.66 usd per ounce against 14.34 usd.
Precious metals gain; base metal prices trend downward
Gold prices climbed in New York on Monday after the US dollar declined again in relation to the euro after indications were that the US Federal Reserve will cut interest rates when it meets this week but that the European Central Bank will raise rates soon in the face of inflation threats.
February gold added $13.30 to $813.50 per troy ounce, a gain of 1.7 percent on the session.
Meanwhile, March silver jumped 35 cents to $14.85 per troy ounce and January platinum was up $4.10 to $1,466.30 per troy ounce.
Among base metals, however, prices were generally lower.
March copper was down 3 cents to $3.09 per pound in New York, while three-month copper on the London Metal Exchange fell $50 to $6,860 per tonne.
Three-month nickel dropped $1,100 to $25,300 per tonne in London, while lead fell as low as $2,540 per tonne during the session.
Zinc and aluminium were down by lesser amounts, to $2,429.75 per tonne and $2,468 per tonne respectively while tin remained steady.
MarketWatch
February gold added $13.30 to $813.50 per troy ounce, a gain of 1.7 percent on the session.
Meanwhile, March silver jumped 35 cents to $14.85 per troy ounce and January platinum was up $4.10 to $1,466.30 per troy ounce.
Among base metals, however, prices were generally lower.
March copper was down 3 cents to $3.09 per pound in New York, while three-month copper on the London Metal Exchange fell $50 to $6,860 per tonne.
Three-month nickel dropped $1,100 to $25,300 per tonne in London, while lead fell as low as $2,540 per tonne during the session.
Zinc and aluminium were down by lesser amounts, to $2,429.75 per tonne and $2,468 per tonne respectively while tin remained steady.
MarketWatch
GATA seeks to expose US gold reserves
The Gold Anti-Trust Action Committee (GATA) is attempting to compel the US Federal Reserve and the Treasury Department to publicise the extent of the country’s gold reserves.
GATA is a non-profit making organization that seeks to prevent gold cartels controlling the price and supply of gold and its related financial securities.
The committee is demanding sight of all records in the possession or control of the Federal Government that contain mention of gold swaps involving the US Government from January 1, 1990, to December 6, 2007.
In addition, it is asking for documents identifying the legal authority for the swaps and will also request documents involving gold loans and leases “and any other possible impairments of the gold reserve.”
Bullion banks borrow gold from Central banks under leasing arrangements, while gold swaps are normally transacted between central banks, in exchange for currency.
According to GATA Chairman, William Murphy, the requests are “only the first we plan to make seeking a full accounting of the US gold reserve”.
The reserve has not been audited in 60 years and Mr Murphy believes that “investors have the right to know exactly what the US government is doing to affect what is supposed to be free markets”, especially as “intervention by governments in the currency and gold markets has been increasing dramatically”.
In late 2006, Blanchard and Company, the retail dealer in rare coins and precious metals, published a report in which it explained that “central banks are far and away the largest holders of gold bullion on the planet, making up roughly 18% of the available stock”.
Some central banks report their purchases and sales of gold with a delay of up to nine months and there are suggestions from market analysts that governments are less than transparent about the extent of their gold purchases.
GATA is a non-profit making organization that seeks to prevent gold cartels controlling the price and supply of gold and its related financial securities.
The committee is demanding sight of all records in the possession or control of the Federal Government that contain mention of gold swaps involving the US Government from January 1, 1990, to December 6, 2007.
In addition, it is asking for documents identifying the legal authority for the swaps and will also request documents involving gold loans and leases “and any other possible impairments of the gold reserve.”
Bullion banks borrow gold from Central banks under leasing arrangements, while gold swaps are normally transacted between central banks, in exchange for currency.
According to GATA Chairman, William Murphy, the requests are “only the first we plan to make seeking a full accounting of the US gold reserve”.
The reserve has not been audited in 60 years and Mr Murphy believes that “investors have the right to know exactly what the US government is doing to affect what is supposed to be free markets”, especially as “intervention by governments in the currency and gold markets has been increasing dramatically”.
In late 2006, Blanchard and Company, the retail dealer in rare coins and precious metals, published a report in which it explained that “central banks are far and away the largest holders of gold bullion on the planet, making up roughly 18% of the available stock”.
Some central banks report their purchases and sales of gold with a delay of up to nine months and there are suggestions from market analysts that governments are less than transparent about the extent of their gold purchases.
Quarter-point cut, discount rate move seen likely
WASHINGTON (MarketWatch) -- Wall Street economists firmly expect a rate cut of a quarter of one percentage point and also engineer an even larger reduction in the discount rate when the Federal Reserve meets on Tuesday to consider its monetary policy.
The Fed is also expected to leave room for further easing by characterizing risks as tilted toward further economic slowdown.
The Fed is likely to cut the federal funds target rate to 4.25% and the discount rate to 4.5% from 5.0%.
Economists said almost nothing has gone right for the central bank since the last FOMC meeting on Oct. 31.
"The problem is what they've seen since Oct. 31 has certainly been a lot worse that I think we would see and we've seen a resumption of the strains in the capital markets," said David Resler, chief economist at Nomura Securities at a news conference on the 2008 outlook sponsored by the Securities Industry and Financial Markets Association.
Economists had hoped that the financial markets would gradually improve after remaining calm through October.
"But that calm gave way to new storms," Resler said.
Andrew Tilton, economist at Goldman Sachs, said this course of action would represent the "middle ground" between the FOMC's neutral policy stance at its last meeting on Oct. 31, which implied that interest rate cuts might end and market expectations of a good chance of a half-point cut in the federal funds rate target.
It would be a risky move for the central bankers to hold rates steady, he said.
"To hold the funds rate at 4.5% would be a major disappointment and would risk increasing the level of market stress at an already fragile moment," Tilton said in a note to clients.
The Fed is also expected to leave room for further easing by characterizing risks as tilted toward further economic slowdown.
The Fed is likely to cut the federal funds target rate to 4.25% and the discount rate to 4.5% from 5.0%.
Economists said almost nothing has gone right for the central bank since the last FOMC meeting on Oct. 31.
"The problem is what they've seen since Oct. 31 has certainly been a lot worse that I think we would see and we've seen a resumption of the strains in the capital markets," said David Resler, chief economist at Nomura Securities at a news conference on the 2008 outlook sponsored by the Securities Industry and Financial Markets Association.
Economists had hoped that the financial markets would gradually improve after remaining calm through October.
"But that calm gave way to new storms," Resler said.
Andrew Tilton, economist at Goldman Sachs, said this course of action would represent the "middle ground" between the FOMC's neutral policy stance at its last meeting on Oct. 31, which implied that interest rate cuts might end and market expectations of a good chance of a half-point cut in the federal funds rate target.
It would be a risky move for the central bankers to hold rates steady, he said.
"To hold the funds rate at 4.5% would be a major disappointment and would risk increasing the level of market stress at an already fragile moment," Tilton said in a note to clients.
Time left in 2007 for gold rally?
NEW YORK (MarketWatch) -- Over the past few decades, gold has been quite often closed the year advancing on a blow-off peak.
There is a rationale for this: India, which as Bill Murphy's Le Metropole Cafe Webzine keeps stressing, is the world's largest bullion buyer, sees crest demand in the early months of the year, the wedding season, when gold is traditionally in demand as jewelry. See Website See Oct. 18 column
Could it happen this year?
Right now gold's strongest friends seem somewhat intimidated. The huge rises in early and late November - peaks in the $830s and the $820s respectively - seem, after all these years, to have stunned them.
Dan Norcini, whose highly sophisticated daily commentary appears on Jim Sinclair's MineSet Website, wrote Friday in his "Hourly Action" comment: "It still looks to me like gold is already experiencing end of the year positioning influences as those who have nice big profits from being long this year are booking them and moving to the sidelines ... This time of the year the trading conditions thin out ... as the insects that live on the trading floor known as the pit locals tend to take over ... to basically stick it to the public." See Website
This sort of year-end profit-taking effect may be true for commodities in general. But gold, of course, is notoriously unique. It simply is more influenced by sentiment about systemic financial risk than anything that is eaten, burned, or worn.
And late 2007 is not short of fears about systemic financial risk.
This no doubt is what the glacially long-term chartist Martin Pring perceived in his latest weekly comment, published on Thursday evening. Pring is especially interested in the action of Amex Gold Bugs Index, which he regards as an indicator of financial system stress. He wrote, in chart-speak: "Thursday's action was a small outside day and there was a penetration of the potential neckline during the day. By the close of business though, the price had rallied back to the down trendline. If the line is now violated on the upside there would be a strong possibility that the head and shoulders would fail. This would then have bullish implications for both shares and metal prices. The line, for the record, is currently at 414." See report
On Friday the HUI closed at 412.06.
MarketVane's Bullish Consensus on gold, a distinctly non-establishment information source, saw gold on Friday night at 80%. That's high overall, but it's close to the lowest level seen in the past three months. And it's a long way from the spectacular 22-day high above 90% in October and early November, which gold-watchers say has no precedent.
In other words, bullish enthusiasm is not at the point at which it would attract contrarian skepticism.
I've written before about the Australian gold service The Privateer, and the wonderful long term point-and-figure chart it graciously makes available for free. It seems in no particular danger of a breakdown right now. See chart
LeMetropoleCafe reports that there is one of the periodic confusions occurring about assessing Indian gold prices, due to uncertainty about what local taxes actually are.
But no one suggests that the Indians are far from the market. In fact, wire service reports speak of imports right now.
At the least, gold bears might be unwise to hibernate.
There is a rationale for this: India, which as Bill Murphy's Le Metropole Cafe Webzine keeps stressing, is the world's largest bullion buyer, sees crest demand in the early months of the year, the wedding season, when gold is traditionally in demand as jewelry. See Website See Oct. 18 column
Could it happen this year?
Right now gold's strongest friends seem somewhat intimidated. The huge rises in early and late November - peaks in the $830s and the $820s respectively - seem, after all these years, to have stunned them.
Dan Norcini, whose highly sophisticated daily commentary appears on Jim Sinclair's MineSet Website, wrote Friday in his "Hourly Action" comment: "It still looks to me like gold is already experiencing end of the year positioning influences as those who have nice big profits from being long this year are booking them and moving to the sidelines ... This time of the year the trading conditions thin out ... as the insects that live on the trading floor known as the pit locals tend to take over ... to basically stick it to the public." See Website
This sort of year-end profit-taking effect may be true for commodities in general. But gold, of course, is notoriously unique. It simply is more influenced by sentiment about systemic financial risk than anything that is eaten, burned, or worn.
And late 2007 is not short of fears about systemic financial risk.
This no doubt is what the glacially long-term chartist Martin Pring perceived in his latest weekly comment, published on Thursday evening. Pring is especially interested in the action of Amex Gold Bugs Index, which he regards as an indicator of financial system stress. He wrote, in chart-speak: "Thursday's action was a small outside day and there was a penetration of the potential neckline during the day. By the close of business though, the price had rallied back to the down trendline. If the line is now violated on the upside there would be a strong possibility that the head and shoulders would fail. This would then have bullish implications for both shares and metal prices. The line, for the record, is currently at 414." See report
On Friday the HUI closed at 412.06.
MarketVane's Bullish Consensus on gold, a distinctly non-establishment information source, saw gold on Friday night at 80%. That's high overall, but it's close to the lowest level seen in the past three months. And it's a long way from the spectacular 22-day high above 90% in October and early November, which gold-watchers say has no precedent.
In other words, bullish enthusiasm is not at the point at which it would attract contrarian skepticism.
I've written before about the Australian gold service The Privateer, and the wonderful long term point-and-figure chart it graciously makes available for free. It seems in no particular danger of a breakdown right now. See chart
LeMetropoleCafe reports that there is one of the periodic confusions occurring about assessing Indian gold prices, due to uncertainty about what local taxes actually are.
But no one suggests that the Indians are far from the market. In fact, wire service reports speak of imports right now.
At the least, gold bears might be unwise to hibernate.
India plans $9b venture with Egypt
Mumbai: India's top state-run refiner, Indian Oil Corp, will partner Egyptian General Petro-leum Corp (EGPC) to jointly build a $9 billion refinery and petrochemical complex in Egypt, the Economic Times newspaper said yesterday.
"We have agreed to work out details of the project," the newspaper quoted Indian Oil's (IOC) director for planning and business development, B.M. Bansal, as saying.
Talks on the size of the refinery, its cost or the location have yet to be fin-alised, he said.
Citing unnamed Egyptian officials, the paper said the complex would be built near Gamasa or Port Said at a cost of $9 billion.
A spokesman at IOC confirmed the refiner was looking at the proposal.
By 0706 GMT, the firm's shares were up nearly 5 per cent at Rs620 in a Mumbai market down 0.22 per cent.
State-run Engineers India Ltd (EIL) told reporters on the sidelines of an energy conference in New Delhi that the firm hopes to conduct a feasibility study for the project.
"We have verbally communicated for the feasibility study. It should be of the size of 180,000 to 300,000 barrel per day refinery and petrochemical project," Mukesh Rohatgi, EIL chairman, said.
"We have agreed to work out details of the project," the newspaper quoted Indian Oil's (IOC) director for planning and business development, B.M. Bansal, as saying.
Talks on the size of the refinery, its cost or the location have yet to be fin-alised, he said.
Citing unnamed Egyptian officials, the paper said the complex would be built near Gamasa or Port Said at a cost of $9 billion.
A spokesman at IOC confirmed the refiner was looking at the proposal.
By 0706 GMT, the firm's shares were up nearly 5 per cent at Rs620 in a Mumbai market down 0.22 per cent.
State-run Engineers India Ltd (EIL) told reporters on the sidelines of an energy conference in New Delhi that the firm hopes to conduct a feasibility study for the project.
"We have verbally communicated for the feasibility study. It should be of the size of 180,000 to 300,000 barrel per day refinery and petrochemical project," Mukesh Rohatgi, EIL chairman, said.
Mining Explained
An introduction to mining, or a place to refresh your understanding of the basic industry rules of thumb.
THE total number of mines in the world is huge. However, the exact figure depends on how a mine is defined. If small-scale mines are excluded (of which there are 8,300 in China alone) and only industrial-scale operations are counted, there are some 2,500 metal-producing mines.
The average life of these mines varies dramatically – a gold mine averages some eight years whereas a copper mine can soldier on for close to 30 years. In South Africa there are several diamond mines that have produced for 50 years, and are expected to produce for another 50 years.
No reliable figures exist for industrial minerals and aggregate quarries. However, in the US, there are some 100 metal mines, 900 mines and quarries producing industrial minerals, and 3,320 quarries are producing crushed rock.
Assuming that there is a similar relationship elsewhere, there would be some 25,000 mines in the world producing industrial minerals, and almost 100,000 quarries producing aggregates for construction purposes.
The existence of mineable deposits and their frequency and abundance in nature, corresponds closely with the chemical composition of the earth’s crust.
Silver, for instance, occurs in nature 19 times as frequently as gold. If we imagine a pyramid with high grade at the apex and low grade at the base, then we can easily see that as we lower the grade that is economic to mine, the available reserve tonnages goes up.
We should not be surprised to find the world is awash in low-grade copper deposits that also include small amounts of gold and silver.
The fact is that mineable mineral deposits are few and far between, and still fewer people will bring a deposit into profitable production. The chances of bringing a raw prospect into production have been estimated at 1 in 5,000-10,000. Some deposits eluded recognition for several decades, despite intermittent exploration of the same showings by several companies and, in many cases, claims were allowed to lapse.
There are many instances in which prospectors have revived old prospects and induced companies to drill just one more time before a discovery was made.
Resource development in the 20th century has been marked by the growth of large-scale mining and technological development that enabled the use of economies of scale.
Back in 1887 the development of the cyanide process made possible the mining and recovery of lower-grade gold-bearing ores and caused South Africa to overtake the US as the world’s leading gold-producing nation.
Over the next 100 years, technology permitted low-gold grade ores to be mined ever more cheaply. Indeed, the rise in metals consumption during the past hundred years was been little short of awesome.
Most dramatically, the mined output of bauxite (the raw material for alumina, and hence the ‘new’ metal aluminium) soared from barely 100,000 t/y (tonnes per year) in 1900 to over 125 Mt/y (million tonnes per year) by the end of the 20th century.
The rate of copper mined between 1900 and 1999 grew from around 0.5 Mt/y to 12 Mt/y. The rise in precious metals output has also been noteworthy, with gold production, for example, rising during the 100-year period from 400 t/y (12.9 Moz) to 2,500 t/y (80.4 Moz).
The total volume of ore produced globally is almost 17,000 Mt, excluding sand and gravel. Metals account for barely one quarter of this amount, while crushed rock (mainly limestone) is by far the dominating commodity (by volume), accounting for some 7,000 Mt/y (40% of the total).
This is not to suggest that we are running out of metals just yet. Already-identified ore reserves, as a multiple of recent annual production rates, represent almost 200 years for bauxite, 30 years for copper and 20 years for gold.
Few mining companies have the financial resources to delineate ore reserves too far into the future. Potash Corp of Saskatchewan is an exception, its mine reserves (at current production rates) are sufficient for 200 years; as close to an annuity for shareholders as it is possible to get.
As a result, most of the world’s store of metals and minerals remain undiscovered. Moreover, as (or rather, when) the world’s reserves of a particular commodity become depleted, the price will inevitably rise (unless there is a readily available substitute). This, in turn, will make lower-grade ore economic, boosting the available reserves.
Complicating the issue of scarcity is to what extent the extracted metal or mineral is actually ‘consumed’. With modern technology (and the increased value of the raw material) we are able to recover commodities that have already been used.
This recycling is of increasing importance in the supply/demand balance of many metals.
Mined metals and minerals (excluding oil and gas) have an annual value of some US$350 billion, split, roughly equally, between coal, metals and aggregates/industrial minerals.
THE total number of mines in the world is huge. However, the exact figure depends on how a mine is defined. If small-scale mines are excluded (of which there are 8,300 in China alone) and only industrial-scale operations are counted, there are some 2,500 metal-producing mines.
The average life of these mines varies dramatically – a gold mine averages some eight years whereas a copper mine can soldier on for close to 30 years. In South Africa there are several diamond mines that have produced for 50 years, and are expected to produce for another 50 years.
No reliable figures exist for industrial minerals and aggregate quarries. However, in the US, there are some 100 metal mines, 900 mines and quarries producing industrial minerals, and 3,320 quarries are producing crushed rock.
Assuming that there is a similar relationship elsewhere, there would be some 25,000 mines in the world producing industrial minerals, and almost 100,000 quarries producing aggregates for construction purposes.
The existence of mineable deposits and their frequency and abundance in nature, corresponds closely with the chemical composition of the earth’s crust.
Silver, for instance, occurs in nature 19 times as frequently as gold. If we imagine a pyramid with high grade at the apex and low grade at the base, then we can easily see that as we lower the grade that is economic to mine, the available reserve tonnages goes up.
We should not be surprised to find the world is awash in low-grade copper deposits that also include small amounts of gold and silver.
The fact is that mineable mineral deposits are few and far between, and still fewer people will bring a deposit into profitable production. The chances of bringing a raw prospect into production have been estimated at 1 in 5,000-10,000. Some deposits eluded recognition for several decades, despite intermittent exploration of the same showings by several companies and, in many cases, claims were allowed to lapse.
There are many instances in which prospectors have revived old prospects and induced companies to drill just one more time before a discovery was made.
Resource development in the 20th century has been marked by the growth of large-scale mining and technological development that enabled the use of economies of scale.
Back in 1887 the development of the cyanide process made possible the mining and recovery of lower-grade gold-bearing ores and caused South Africa to overtake the US as the world’s leading gold-producing nation.
Over the next 100 years, technology permitted low-gold grade ores to be mined ever more cheaply. Indeed, the rise in metals consumption during the past hundred years was been little short of awesome.
Most dramatically, the mined output of bauxite (the raw material for alumina, and hence the ‘new’ metal aluminium) soared from barely 100,000 t/y (tonnes per year) in 1900 to over 125 Mt/y (million tonnes per year) by the end of the 20th century.
The rate of copper mined between 1900 and 1999 grew from around 0.5 Mt/y to 12 Mt/y. The rise in precious metals output has also been noteworthy, with gold production, for example, rising during the 100-year period from 400 t/y (12.9 Moz) to 2,500 t/y (80.4 Moz).
The total volume of ore produced globally is almost 17,000 Mt, excluding sand and gravel. Metals account for barely one quarter of this amount, while crushed rock (mainly limestone) is by far the dominating commodity (by volume), accounting for some 7,000 Mt/y (40% of the total).
This is not to suggest that we are running out of metals just yet. Already-identified ore reserves, as a multiple of recent annual production rates, represent almost 200 years for bauxite, 30 years for copper and 20 years for gold.
Few mining companies have the financial resources to delineate ore reserves too far into the future. Potash Corp of Saskatchewan is an exception, its mine reserves (at current production rates) are sufficient for 200 years; as close to an annuity for shareholders as it is possible to get.
As a result, most of the world’s store of metals and minerals remain undiscovered. Moreover, as (or rather, when) the world’s reserves of a particular commodity become depleted, the price will inevitably rise (unless there is a readily available substitute). This, in turn, will make lower-grade ore economic, boosting the available reserves.
Complicating the issue of scarcity is to what extent the extracted metal or mineral is actually ‘consumed’. With modern technology (and the increased value of the raw material) we are able to recover commodities that have already been used.
This recycling is of increasing importance in the supply/demand balance of many metals.
Mined metals and minerals (excluding oil and gas) have an annual value of some US$350 billion, split, roughly equally, between coal, metals and aggregates/industrial minerals.
China may exhaust existing gold mines in six years
China, poised to overtake the US as the second-biggest gold producer this year, must acquire more bullion assets overseas because existing mines will run out of ore in six years, Zijin Mining Group Co said.
China produces more than 200 t of the bullion a year from mines that only have gold, and will deplete the deposits without discoveries, Ren Guangzhi, manager of investment at Zijin, owner of the country's largest gold mine, said. Ren cited data from London-based research company GFMS Ltd.
Rising economic growth in China has led to surging demand for jewelry and spurred Zijin Mining, Zhongjin Gold Corp and other Chinese producers to increase production.
The Asian nation is the world's largest importer of iron ore and copper because domestic production lags behind demand.
"It's urgent for Chinese companies to develop gold mines overseas," Ren said in an interview in Shanghai n Thursday.
Zijin fell 0.9% to HK$11.40 (US$1.46) at the 4:00 p.m. close in Hong Kong. The stock has more than doubled this year.
Zhaojin Mining Industry Co, which holds the second-most untapped gold deposits in China, is looking to invest overseas, Lv Ruixiang, vice general manager at the Hong Kong-listed company, said in an interview in Shanghai on Tuesday.
"We have examined some projects in countries such as the Philippines and Burma," Lv said. "But there have been no agreements."
Chinese miners may be able to profitably extract gold at lower grades compared with overseas rivals, Zijin's Ren said. Zijin could recover gold from ore with grade as low as 0.3 g/t, whereas other miners would need a grade of at least 3-5 g/t, he said.
Zijin Mining agreed to buy a 20% stake in a Philippine gold project from Lepanto Consolidated Mining Co, Manila-based Lepanto said on November 8. The Chinese company also agreed in June to pay US$55.1 million to buy a controlling stake in Tajikistan's biggest producer of the precious metal.
China produces more than 200 t of the bullion a year from mines that only have gold, and will deplete the deposits without discoveries, Ren Guangzhi, manager of investment at Zijin, owner of the country's largest gold mine, said. Ren cited data from London-based research company GFMS Ltd.
Rising economic growth in China has led to surging demand for jewelry and spurred Zijin Mining, Zhongjin Gold Corp and other Chinese producers to increase production.
The Asian nation is the world's largest importer of iron ore and copper because domestic production lags behind demand.
"It's urgent for Chinese companies to develop gold mines overseas," Ren said in an interview in Shanghai n Thursday.
Zijin fell 0.9% to HK$11.40 (US$1.46) at the 4:00 p.m. close in Hong Kong. The stock has more than doubled this year.
Zhaojin Mining Industry Co, which holds the second-most untapped gold deposits in China, is looking to invest overseas, Lv Ruixiang, vice general manager at the Hong Kong-listed company, said in an interview in Shanghai on Tuesday.
"We have examined some projects in countries such as the Philippines and Burma," Lv said. "But there have been no agreements."
Chinese miners may be able to profitably extract gold at lower grades compared with overseas rivals, Zijin's Ren said. Zijin could recover gold from ore with grade as low as 0.3 g/t, whereas other miners would need a grade of at least 3-5 g/t, he said.
Zijin Mining agreed to buy a 20% stake in a Philippine gold project from Lepanto Consolidated Mining Co, Manila-based Lepanto said on November 8. The Chinese company also agreed in June to pay US$55.1 million to buy a controlling stake in Tajikistan's biggest producer of the precious metal.
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