The high investment demand would push silver prices to a higher position.

Andrew Thomson, president and CEO of Soltoro Ltd. (TSX.V:SOL), a Toronto-based silver explorer with projects in Mexico, regularly receives calls from U.S. investors looking to buy a chunk of his silver play. One such investor with a net worth approaching $150 million recently asked Thomson if he could buy a block of 500,000 Soltoro shares. Thomson told him yes but that he would have to get them on the open market.

Times are good for silver juniors.

Thomson estimates there could be another 60 silver companies trading on North American bourses by the end of 2011 and says that's due to cash-rich U.S. funds seeking northern exposure.

"U.S. players are starting to look at value propositions. They just want to be in silver, and they don't want the physical metal; they want equity because they want to be able to trade it," Thomson says. "It's similar to what happened a few years ago when Chinese, Korean and Vietnamese investors came [to Canada] looking for hard assets. In this case, it's the U.S. funds that are starting to look at our natural resources. It's kind of ironic that it takes a strong Canadian dollar for them to start investing in our economy."

But not all big U.S. funds are making the pilgrimage north or, if they are, the journey is often short-lived. On March 15, Barron's blogger Murray Coleman reported that U.S. hedge fund managers were buying silver. A week later, however, he told readers "hedge funds in the past week were unloading positions in gold, silver, copper, platinum and palladium."

"There's a lot of confusion out there. There are funds that are dumping silver and there are funds that are buying silver. The funds tend to react to the news, and then become the news themselves when they dump large positions. If you watch those big funds' positions, all you're going to really see is a bobbing cork. I think net their positions are accumulative," says James West, editor of the Midas Letter.

David Keating, managing director of equity capital research with Mackie Research Capital, a sizeable Bay Street player in junior mining financings, says the 60 companies figure is likely on the high side but that Thomson's number is in the ballpark.

"Sixty sounds like a big number but it doesn't strike me as outrageous," says Keating. "There's certainly lots of demand in the market for silver stories."

Keating notes he's getting more calls about silver and is currently looking to finance as many as five silver plays. "You've got U.S. funds and international funds looking at getting direct toeholds in some of these plays and they are prepared to put up the $5, $10 or even $15 million to get the exploration going. We've definitely seen that in the silver names and in the gold names," he explains.

Keating explains that when you get sustained upward price movement in the underlying commodities, a lot of assets that wouldn't have earned a second look at lower prices suddenly become attractive at higher prices. He adds, "Companies these days are able to raise capital, so exploration budgets are going up and you're getting more and more exploration and development. And some of the assets that aren't getting attention can be spun off into cleaner, pure plays."

West, until recently, owned a stake in a precious metals mine in Peru and is connected to junior mining plays all over the world, especially those in Latin and South America. He often gets calls from the "who's who" of Toronto merchant banks and brokerages seeking exploration-worthy assets for capital pool companies (CPCs) or corporate shells.

Brokerages source assets from people like West and-after filing a prospectus and raising seed capital-CPCs buy the assets via a "qualifying transaction," which is needed to get a listing on the TSX Venture Exchange. It's often a well-rehearsed dance between brokers and companies.

"If you look at any of the CEOs on the TSX Venture Exchange who have a track record of value creation in public companies, generally, you'll find them aligned with one or two brokers with whom they do all their business. Usually these groups make money together and they tend to move forward under that arrangement until something goes sideways on a deal, somebody retires, somebody gets sued by their wife. . .whatever," West explains.

When it comes to silver exploration plays, West says, it's a seller's market. "The (property) vendors are demanding a higher price and are willing to sit with their asset on the sidelines, confident that the price is only going to go up. And with every uptick in the silver price, people are willing to pay higher prices for these silver assets," he says.

Two years ago, on March 24, 2009, silver closed at $13.44/oz. And two years later, the white metal finished the day at $37.42/oz. on the NYMEX-a gain of 178%.

West believes we will see $40/oz. silver by the end Q2 2011 and that the white metal could hit $50/oz. by year-end based on not only the typical industrial and investment demand drivers, but also what he refers to as "smart money" entering the space.

By "smart money," West means the cash behind the big players like Toronto-based Sprott Asset Management. Eric Sprott, the firm's bearish leader and chief investment officer, is staking his reputation on precious metals. He's telling anyone willing to listen that gold will see strong resistance above $2,000/oz. and that, during this current bull market in precious metals, the silver:gold ratio-or the number of silver ounces it takes to buy 1 ounce of gold-will return to its historical norm of less than 20:1, perhaps even as low as 10: 1.

Others aren't quite so bullish.

"[Eric Sprott] is indicating that silver will go to $200/oz. I'm not in that camp, but there is a squeeze going on. There's a lot of new equity traded funds and funds getting into the silver space that are drying up [silver] production, in terms of the delivery of actual physical silver, and that's what's driving the price up. It's a bit of a manipulation from the perspective that it's the investors who are stepping into [the silver space] and squeezing the supply for the end users. I think that's very real and that's why the [silver:gold] ratio is changing," Thomson says.

The last time the silver:gold ratio closed the gap that much was in 1980 when brothers William and Nelson Hunt attempted to corner the silver market. The ratio peaked at 17:1 before the silver price collapsed on the ill-fated Silver Thursday, which occurred in late March, 31 years ago.

In 2003, when the current bull market in precious metals really started rolling, the silver:gold ratio was roughly 83:1. With silver now approaching $40/oz., the gap has closed to about 38:1 and is steadily narrowing.

"When you've got guys like Eric Sprott and Frank Holmes [CEO and CIO of U.S. Global Investors]-guys that are really recognized as 'thought leaders' in the space-predicting much higher silver prices, that in itself becomes a fundamental driver for the price," West says.

Sprott put his money where his mouth was and further boosted silver demand by launching the Sprott Physical Silver Trust (NYSE.A:PSLV) in November 2010 at $10 per unit. It closed at $17.38 on March 24 with a market cap of $869 million. The trust trades at a premium to net asset value (NAV) and its silver bullion is tucked away safely in a Canadian vault, a task that took longer than expected. In November, the trust had contracted to purchase 22,298,525 ounces (22.3 Moz.) of silver bullion but by the end of 2010 had taken possession of roughly 21 Moz. The remaining 1.4 Moz. or so did not arrive until well into 2011. The delivery delay clearly demonstrated the tightness in the physical silver market.

"Frankly, we are concerned about the illiquidity in the physical silver market. We believe the delays involved in the delivery of physical silver to the trust highlight the disconnect that exists between the paper and physical markets for silver," Sprott said in a January press release.

Sprott's main competition, the iShares Silver Trust (ETF) (NYSE:SLV), has been trading in unprecedented volumes. On March 24, 27 million shares changed hands for a close at $36.12. The $13.2 billion trust is up 121% year-over-year (YOY) from its March 24 close of $16.29.

The Sprott Physical Silver Trust is just one prong in Sprott's multipronged approach to precious metals investing. Sources close to the situation say he's buying equity in just about every silver play coming to market and can't write the checks fast enough. They estimate Sprott's total bet on silver, including the trust, approaches $1 billion.

David Morgan, editor of the Morgan Report, a silver-focused newsletter, provided Sprott with some names to help him source his silver bullion. Morgan was in the market when silver's last bull market ended in 1980. He knows what it's like when the music stops, and he recommends caution.

"The problem with the gold-silver cycle is that it's such an emotional market because the people who are in it-the gold and silver bugs-have an attachment to [gold and silver] being money. All markets that have a bull market go from undervalued, to fair valued to overvalued; and nothing gets to the extreme overvaluation level, at least in the last bull market, that gold and silver do. What happens at the top of the market-and we're far from that now, mind you-is that anything with silver in the name of it will go sky high regardless of its merit," says Morgan.

Thomson agrees but says good assets are good assets in bull and bear markets.

"I think it's like anything. The museum-quality assets are going to rise to the top, and the stuff that's smoke and mirrors will always be smoke and mirrors. And, at some point when the market falls apart, the quality will persist and the crap will fall by the wayside," Thomson says.

1) Brian Sylvester of The Gold Report wrote this article. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the article are sponsors of The Gold Report: None

The above article is an edited version of one which first appeared in The Gold Report -

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The decline in gold prices on Tuesday reached the lowest level in nearly two weeks, extending their losing streak to four sessions as investors locked in some profits recently.

Gold for June delivery (GCM11 1,429, -11.00, -0.76%) ended up $7.40, or 0.5%, at $1424.90 an ounce on the Comex division of the New York Mercantile Exchange. The precious metal touched a high of $1,431.70 an ounce early in the day, then dove to a slight loss and an intraday low of $1,413.10 an ounce before rebounding.

Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, said many of the common themes pushing up gold still apply, such as uncertainty about the Middle East and the impact of crippled nuclear plants in Japan.

“Today’s move lower was rejected: There are more reasons to be a buyer than a seller,” Klopfenstein said. “Fresh money likes to come in on any signs of weakness.”

On Tuesday, gold futures logged a fourth-straight losing session to finish at their lowest price in almost two weeks.

“Gold prices rose as euro-zone debt concerns and continued fighting in Libya supported the safe-haven allure of the bullion,” economists at ICICI Bank said in a daily market report.

“However, expectations of a [European Central Bank] rate hike in its meeting on April 7 capped the gains, as higher interest rates increase the cost of holding gold,” they said.

Standard & Poor’s Ratings Services lowered its rating Tuesday on Portugal to BBB-minus from BBB, one notch above junk status. The ratings agency also cut Greece’s credit rating to BB-minus from BB-plus.

In Libya, violence continued as forces loyal to Libyan leader Moammar Gadhafi waged counterattacks, reversing some recent gains by rebels.

The dollar edged higher against a basket of currencies as the greenback advanced to its highest level against Japan’s yen (USDYEN 84.0800, +0.0400, +0.0476%) since that country’s March 11 earthquake. The dollar fell against the euro (EURUSD 1.4238, +0.0003, +0.0211%) , however, after a European Central Bank board member’s comments suggested the ECB could raise rates earlier than some expected.

“We’re seeing the dollar weakening-strong gold trade today,” said Jay Feuerstein, chief executive officer for asset manager 2100 Xenon Group.

Silver for May delivery (SIK11 3,784, -15.60, -0.41%) added 52 cents, or 1.4%, to $37.51 an ounce.

June palladium (PAM11 774.55, +7.15, +0.93%) rose $5.15, or 0.7%, to $758.10 an ounce, and July platinum (PLN11 1,770, -6.30, -0.35%) rallied $30, or 1.7%, to $1,774.10 an ounce.

May copper (HGK11 425.60, -4.90, -1.14%) slipped 7 cents, or 1.7%, to $4.274 a pound.


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In the short term there is likely to occur consolidation, but many global problems that occur can lead to rising gold prices.

On Thursday, March 24th, gold hit another record high of $1448.60 an ounce as it attempted to breach the $1450 an ounce level for the first time in the history of the yellow metal. Since then the price has pulled back slightly and as to be expected, once again, investors are asking if the price is too high, and if gold is in a bubble.

When this bull market in gold began in 2000, the price was $250 an ounce. At the time, practically every main stream analyst saw no value in gold and advised clients to stay well away from this metal. It was referred to as a barbaric relic that no one wanted and besides who on earth would want to invest in something that did not pay a dividend?

Then, the price went to $500 and the same comments were repeated by the same analysts. When the price went to $700 an ounce the same analysts were emphatic that the price was in a bubble and they continued to denigrate gold as an investment. But, the price of gold continued to climb and when it broke through the $1000 an ounce level, the same analysts remained adamant that the price had then reached a top and offered investors no value whatsoever. And, on most occasions, their reasoning had very little to do with the real events driving the price higher. I always remember one market genius, who always had a negative view on gold and who would always say, with a smirk on his face, that investing in gold was a total waste of time because demand was mainly dependent on a few housewives living in India. Boy, I sure would like to meet those ladies as they must have access to huge amounts of money judging by the way they have driven this gold price higher.

In the meantime we should not forget that since 2001 while the gold price has increased by almost six times, the same can't be said regarding equities and bonds. And, while the price of gold has increased, we have seen global currencies fall, property fall, equities fall and rise, and bond prices fall. So, are we in a bubble? Is gold such a bad thing to include in your portfolio? And, my answer remains the same as it has been for several years now. Gold is not in a bubble and it should be included in your investment portfolio.

The analysts, who over the last ten years or so have remained negative on gold, have not only missed an amazing opportunity for their clients but, they have also failed to understand the fundamentals driving the gold price higher. And, while the price of the yellow metal could pull-back from its recent highs the underlying driving forces have not changed. When asked if the price is going to pull-back, I always tell my clients that in the short-term I have no idea, and while it is possible I don't particularly care. I am in this for the long-term and see prices going much higher. Therefore, I simply do not pay much attention to the corrections along the way, other than to use them as buying opportunities. And, since my investment choice consists mainly of bullion which is paid for, I do not have to worry about any short-term drop that a trader using leverage has to worry about.

If you speculate in the gold market or any market for that matter, and if you are using a leveraged instrument such as a futures contract and the price moves in the direction you anticipated, high leverage can yield large profits in relation to your initial margin deposit. But, if prices move in the opposite direction, high leverage can produce large losses in relation to your initial margin deposit. Leverage is a two-edged sword. On the other hand if you have paid and stored your physical gold, while the total value will fluctuate relative to the price, if there is a sharp short-term drop, there is no need for you to have a sleepless night. The price will ultimately recover and over the coming years it will increase in value.

It seems to me that natural and man-made disasters are becoming increasingly common. While I cannot offer any explanation regarding the causes of natural disasters, and thus have no idea what to do in order to avoid them, I can at least try to avoid some of the man-made disasters that can have an equally devastating effect. In fact, some of the blunders that man can make can cause misery and unhappiness on scales unimaginable. While there are many ways in which man can destroy, the one form of destruction that I am alluding to is financial destruction, or more specifically the erosion of one's wealth. Without money life can be extremely difficult and miserable. Can you imagine what it must be like to wake up one day and find that all the money you have saved after working most of your life has just become worthless?

This is exactly what happened in Zimbabwe where Mugabe and his bankers, totally destroyed not only the country's monetary system but the wealth of many individuals who had spent their entire life saving for their retirement. In Zimbabwe the state does not offer social security or pensions for the old aged. Now, those people cannot find work and have to rely on financial assistance from friends and family while Mugabe and his group of bandits continue live in the lap of luxury. However, those people who owned hard assets such as gold escaped this devastation.

While no logical thinking individual can compare Zimbabwe to the US or the Eurozone, the effect of currency debasement is the same. It ultimately, lowers the value of the currency, and causes higher inflation. It also lowers the standard of living of many citizens and eventually erodes their wealth. But, precious metals such as gold and silver protect against this.

As current events continue to unfold, it looks as if the expansionary monetary policies of central bankers are set to continue. This will ultimately cause a great deal of destruction. If you believe that this policy does not cause inflation, and does not weaken the value of the respective currencies, fine. If not take the necessary precautions and invest in gold.

Once again, I am going to include what Peter Munk, chairman of the world's largest gold producer Barrick Gold, said in an interview at Davos. I am including his statement again because I believe it is so profound. He said, "If you are a utopian, if you believe the problems of currency, the problems of terrorism, the problems of unrest around the world will all be resolved by the end of the year, then gold would have a difficult path. If you believe like I do that we bought ourselves a temporary peace from the panic of last year and the year before, [and] that the fundamentality of the problems are long term still issues, then your attitude will be a bit more positive toward gold."


gold price analysis, gold price progress, gold price update, gold review

The price of gold seems to be hitting resistance at around $1440 an ounce (R1). This suggests that while prices will maintain their upward bias, we may see some consolidation in the short-term.

This article was written by David Levenstein. David Levenstein began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.


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Though perhaps a stronger dollar, relatively at least, who has put yet another dent in the growth of gold and silver prices, final price hiatus may be short-lived yet.

Eurozone weakness revolving around doubts raised over Portuguese debt, coupled with some better economic pointers on the recovery in the U.S. economy led to dollar strength vs the Euro on Monday and, coupled with profit taking after last week's new high led to a sharpish fall in the gold price in dollars as a result.

Indeed gold is not alone in being adversely affected pricewise, silver and platinum group metals initially moved down even more steeply in percentage terms, while oil and base metals prices all also declined by greater or similar percentages. At one point gold fell back to around the $1412 level before making a recovery to around the $1420s in later trading. There was still some weakness apparent on Tuesday morning overnight Asia and in early European trade, which again has largely been down to some slightly nervy profit taking, by less firm holders of precious metals taking a positive view on growth in the U.S. and the global economies.

But recent history shows that such temporary, mainly currency-related readjustments are unlikely to continue and that precious metals prices are more likely to consolidate again and then continue their upwards paths. Economic progress seldom stays unchecked and there are still a sufficient number of doubts about the state of the U.S. economy and the onset of price inflation there that any dollar recovery may be shortlived and, likewis,e falls in hard commodity prices in dollar terms may quickly be reversed. How long the current correction will last, and how far it could take prices down before a recovery, remains to be seen.

Gold and silver may also have been affected adversely in some Asian markets by comments attributed to the Chinese Central Bank suggesting that gold, in particular, may be nearing its peak. Such Chinese pronouncements seldom seem to be made without some ulterior motive behind them and a precious metals price hiatus may suit the Middle Kingdom as it continues in some efforts to reduce its heavy dollar weighting in its monetary reserves. Lower metals prices in general may also suit the Chinese as global prices have been very much supported by the country's seemingly insatiable appetite to feed both investors and its manufacturing industry. Higher input prices mean higher costs of Chinese products in global markets which could reduce sales and income in still cash-strapped economies as well as higher inflation locally.

Some analysts see the move in precious and base metals prices as a necessary correction, but it is interesting that the current gold price level as I write of $1415 is viewed by some of gold's detractors as being the beginning of the end of the gold bull market, yet it has only fallen just over 2% from its peak and is far above what was seen as its likely top of $1000 only a little over a year ago. Others now see $1400 as a likely gold price bottom, although a serious correction could take it down to well below there - but still without interrupting the overall bull market trend.

Things have indeed changed though in the perception of global economic recovery since the depths of only two and a half years ago and certainly there are positive signs in the U.S. at least, although some Eurozone nations appear to remain teetering on the brink with a reluctance of populations, not unnaturally, to accept the strong economic medicine being dished out by governments, the ECB and the IMF. And who can blame them? It's not their fault that their countries' economies are in a mess - except perhaps for in believing politicians promises of unending growth and voting them in to continue with their over-profligate borrowing and spending policies!

But even though the U.S. economy does appear to be picking up, all is not rosy debt-wise there either. States and Municipalities are still mired in huge debts and it is unlikely all can be bailed out. There will be defaults and bankruptcies which will dent public perception of the recovery and impact adversely any recovery in employment for some time yet to come.

The ongoing increases of unbacked money supply to stimulate growth also have to have an ongoing impact and will result, if they have not already, in ever-rising inflation. At some stage the realisation that prices are rising, unemployment is not falling significantly and wages are not increasing to counter the inflationary trend, will sink in and perhaps hit the stock market hard and drive waverers back into gold and silver yet again. And so the cycle continues!


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"Buy or sell?" This question investors constantly ask myself. There are, of course, there is no universal right answer. It depends too much on the person, or a corporation’s, specific circumstances. In theory everyone acknowledges the veracity and wisdom of buying when there is blood in the streets, or straw hats in winter. But in practice it is extremely difficult to do because everyone is concerned that bad things can get worse. And when the sun is shining no one can conceive of things being anything other than bright and shiny.

In part these attitudes can be put down to age. Once you’ve lived through a few crises another one just seems par for the course. Youngsters find each new drama unsettling which is one reason perhaps that contrarian investing is always so unpopular. Few people have the sagacity of Warren Buffet, who recommends investing in Japan now. But the reassuring factor about wars, insurrections, earthquakes and tsunamis is that they are not monetary. They were not caused by financial speculation.

It might be fair to say that many insurrections in the Arab world were, ultimately, caused by the greed of their despotic rulers. And if that is the case, and if the era of the greedy despot is passing, then the changes that are now underway will have far reaching and deep rooted consequences. What every country needs before its economy can really take-off, as China’s and India’s have done, is a burgeoning middle class.

Such a class was never allowed to develop in Tunisia, Egypt, Libya or Syria. The elite did not want to share their wealth with their countrymen. But if these revolutions succeed, and it is hard to envisage the populace being content with the old order now, it could mark the start of a massive surge of growth in countries that historically have had no significant economic footprint. Like the Indians and the Chinese, Arabs are famous for their trading and entrepreneurial skills. Ally that with oil resources, and the potential for creating wealth is phenomenal.

This global uncertainty has unsurprisingly triggered a correction in some growth correlated asset classes, such as equities and commodities, in recent weeks. Base metals in contrast, as measured by the LME index, continue to make good progress. A gain of 2.9 per cent on the week takes the rise over the year to date to six per cent. It might not be dramatic, but it puts the asset class in a healthy situation relative to others.

What is interesting is the rotation within the sector. Copper led the way initially and breached the US$10,000 a tonne barrier but has since drifted back and is essentially flat on the year at US$9,700. In contrast, aluminium has made steady progress over that period and is up 5.7 per cent at US$2,595 a tonne. Like copper, nickel has drifted back from its peak but unlike the red metal is still showing an eight per cent gain on the year. Lead has been a bit more subdued but is still 5.4 per cent to the good over the year. It is only zinc that has let the side down with its 2.4 per cent slide but a modest 20,000 tonne increase in LME inventories to 735,000 tonnes provides a reasonable explanation.

It would be easy to us the current news flow as an excuse to sell out of growth assets like metals and mining shares. But if these changes in the Maghreb become embedded and allow the region properly to join the democratic capitalist world, then the scope for growth and increased metal demand must be positive. Even today the bulk of metal demand comes from a handful of countries like the USA, China, Germany and Japan. Anything that allows that list to grow is good news, even if it doesn’t feel like it at the time.


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In several parts of the world the political and military situation remains on a knife-edge, but this week at least the global situation stabilised sufficiently to allow commodities traders to recover their poise. Gold rose to US$1,436 per ounce while silver climbed 5.8 per cent to close at US$37.31 per ounce. Platinum climbed to US$1,748.8 per ounce and palladium gained five per cent to US$751.85 per ounce. It was a similar story in base metals where copper rallied to US$9,730.5 per tonne, or US$4.41 per pound. Nickel closed higher at US$27,095 per tonne while zinc climbed to US$2,384 per tonne.

The mining sector took advantage of slightly more benign conditions to trend higher too. Amongst the majors BHP Billiton provided most of the news. The company approved US$6.6 billion worth of capital investment to continue expanding production from its Western Australia iron ore operations. It also approved development at three metallurgical coal projects in the Bowen Basin in central Queensland and a US$400 million expansion to expand Hunter Valley Energy Coal in New South Wales. The shares gained 1.9 per cent to 2,349p.

Rio Tinto and Anglo American both closed the week higher. Rio closed 5.2 per cent up at 4,224p, while Anglo also rose 5.2 per cent higher at 3,193p. Xstrata climbed 3.9 per cent to close at 1,436p.

Elsewhere, Kazakh miner ENRC reported record production volumes across all divisions last year. The miner has substantially increased its capital budget to US$11.1 billion this year, money which will primarily go towards developing iron ore assets in Brazil and Kazakhstan and to adding new power generating capacity. The shares gained 3.5 per cent to 935p.

Gem Diamonds firmed 7.8 per cent to 291p after it confirmed that it is in preliminary discussions with Lucara Diamond Corp regarding a possible merger that might constitute a reverse takeover under UK listing rules. Gem expects to publish an updated reserves and resources statement at around the time of its April trading update. Meanwhile, Botswana Diamonds, the business that remained after Lucara bought African Diamonds, and so acquired the prospective AK-6 kimberlite in Botswana, has been awarded a diamond exploration licence in Cameroon. Its shares climbed 9.7 per cent to 4.25p.

Gold miner Petropavlovsk published a reserves and resources statement updated to 1st January 2011 that showed proven and probable reserves up by 36 per cent to 9.1 million ounces. The increase was attributable to successful exploration predominantly at Malomir and Pioneer. Total mineral resources have increased by 96 per cent to 23.1m ounces of gold. The shares climbed seven per cent to 1,070p.

Other gold miners have also been making good progress with exploration. African Barrick Gold continues to make progress at the Tusker resource area of the Nyanzaga project. African Barrick believes these higher grade zones can add considerable value to its bulk mining project. In response, the shares climbed 2.7 per cent to 539p.

Elsewhere, Avocet Mining gained 6.5 per cent to 241p after it announced positive results from ongoing drilling at its Inata gold mine in northern Burkina Faso. The latest drilling results are from the Minfo deposit, the southernmost of the five open pits in the current mine plan, which results indicate remains open along strike and at depth.

And Tajikistan-focused Kryso Resources climbed 5.9 per cent to 15.35p after it reported encouraging assay results from recent drilling at its Pakrut gold deposit. Drill holes confirmed the existence of high grade zones and that surface mineralisation continues at depth. The company expects to release an updated resource estimate by the summer.

After receiving the necessary environmental and mining permits, South America-focused Orosur Mining moved further forward with plans to develop its Arenal Deeps project in Uruguay. The shares climbed 22.2 per cent to 77.9p.

The news was less good from Vatukoula Gold Mines, which has been targeting annualised output of 100,000 ounces from its gold mine in Fiji. Production in the last quarter was 11,405 ounces compared to 16,565 ounces in the quarter before. The company has consequently downgraded its estimate to 75,000 ounces for the year to August and its shares closed 12.3 per cent lower at 136p.

In platinum mining, Pan African Resources climbed 9.9 per cent to 10.75p after it announced it had begun bulk earthworks at its Phoenix project in South Africa. First production is planned for October and the chrome tailings retreatment plant there is expected to reach full capacity in the first quarter of 2012.

Meanwhile, South African iron ore miner Ferrum Crescent announced the completion of a 1,500-metre drilling programme at its Moonlight project. The company found iron ore mineralisation in all 12 holes drilled, with intersections considerably thicker than previously predicted. The shares rose 18.8 per cent to close at 19p.

Still in South Africa, Coal of Africa announced that it had secured a revolving thermal coal export finance facility for up to US$50 million with Deutsche Bank. The facility will be used to finance capital expenditure and for general working capital, and to repay the company’s existing US$20 million unsecured revolving loan facility. The shares edged higher to 73.5p.

Away from Africa, Beowulf Mining announced that initial results from the first 10 drillholes from its Kallak South deposit in northern Sweden confirm the presence of high grade iron ore similar in type and quality to that found at Kallak North. Preparation of a JORC-compliant resource estimate for the Kallak North deposit is ongoing and expected to be completed by the summer. The shares climbed 15.3 per cent to 64.25p.

In other commodities, Spain-focused uranium miner Berkeley Resources has begun a substantial drilling programme to test new exploration targets close to existing resources. The shares climbed 19.1 per cent to 68.5p.

Finally, Rambler Metals and Mining is raising approximately £10 million through a placing at 36p. The money will be used as working capital requirement as the company completes construction of the Ming copper-gold project in Newfoundland. The shares closed 3.7 per cent lower at 38.77p.


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Traders and exporters feel the prices may come down by $10 to $150 per tonne by the end of this month

The Multi Commodity Exchange of India (MCX) has received permission from the commodity markets regulator, the Forward Markets Commission, to launch an iron ore futures contract in Mumbai.

India`s metal and energy exchange MCX has already commenced trading in iron ore futures. This is the country's first commodity exchange to launch the contract. MCX's iron ore contract is designed to be the true benchmark of the Indian iron ore fines export market.

Iron ore is one of the most important commodities in the world today with increased demand being witnessed from steel mills.

``The MCX iron ore futures contract will give all market participants an opportunity to hedge their price risks against the volatility of the physical market,'' MCX's managing director Lamon Rutten said.

India is the world's third-largest iron ore supplier and plays a significant role in the global iron ore industry.

India had an estimated annual production of around 226 million tonnes in 2009-10, according to data from the ministry of mines, government of India. It exports over 130 million tonnes of which a large portion account for exports of ore fines.

``MCX's iron ore futures contract will go a long way in creating a market-driven benchmark for the entire industry and also for those nations importing iron ore from India, mainly China, which is the world's largest importer,'' the official added.

Meanwhile, an official of Sesa Goa said that iron ore prices dropped by 10% between February and March. ``The percentage drop from mid February to mid March is between 10-15%, depending on the grades, where lower grades have got a bigger hit than the higher grades,'' said P K Mukherjee, managing director of Sesa Goa.

He added that demand had been robust for the past two-three years, especially from China, whose field demand is quite aggressive and strong.

However, iron ore prices in China have come down over the last few days following a slow down in demand due to the devastating earthquake in Japan, the world's second largest steel maker after China.

Meanwhile, India's union government increased export duty on iron ore fines four-fold to 20% in the budget proposal for 2011-12, in a bid to discourage exports and conserve the material for use by the steel makers within the country.

Iron ore spot prices in Orissa, a leading producer of the ore in the country, has slumped and may fall by at least 6% within the next two weeks because of the new export duty that comes into effect from April 1.

Currently better quality iron ore is priced at $160 per tonne at Paradeep port. Traders and exporters feel the prices may come down by $10 to $150 per tonne by the end of this month. After the announcement in the budget, iron ore shipment contracts have taken a hit, exporters said.


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Much of the past week was spent at the Mines & Money conference in Hong Kong while also keeping a watchful eye on the home market. The mood in both places was equally positive, and the 2,000 delegates who made it to the Hong Kong edition of Mines and Money certainly came away feeling pretty optimistic especially after being revved up by the like of Robert Friedland on the outlook for copper, Andrew Forrest on iron ore, Rob McEwen on gold and David Morgan on silver.

Not a bad team of keynote speakers, and certainly a big turn up compared with last year.

Roughly triple the head count of the 650 who were at the 2010 conference, which isn’t a bad measure of the ultra-positive mood in this part of the world towards commodities. Morgan and McEwen in particular played to the audience, with Morgan tipping a future silver price of more than US$100 an ounce, and McEwen tipping gold to go to US$5,000 per ounce. Wild and hairy-chested as those forecasts look, both men have the credentials to make them. Morgan runs and has forgotten more about his favourite metal than most people know. McEwen is the founder of the very successful Canadian gold company, Goldcorp.

They picked a good week to spruik their wares with gold and silver continuing their relentless upward charge. Time’s short, let’s switch to the Australian market.

It was an up week on the ASX. The all ordinaries index added 2.6 per cent. The metals and mining index was slightly behind, up 2.3 per cent, and the gold sector starred with a gain of 5.7 per cent. The rise in local gold shares was especially commendable as the Australian dollar also surged to fresh heights, closing the week at its highest since it was allowed to float freely in 1983, at US$1.02.

Prices now, but perhaps keep it brief as you have a plane to catch.

Thanks. Gold is the obvious starting point for a shortened market review. The challenge is to find any gold company that fell in such an up week. Among the top performers was the Brazilian focussed gold and iron ore explorer, Beadell Resources (BDR), which confirmed that it might produce both products, given the unique nature of its orebody. That news helped the shares add A12 cents to A90 cents. Several of the Aussies attending Mines and Money also did well. Gold Road (GOR) put on A5.5 cents to A47.5 cents. Cobar Consolidated (CCU), the silver specialist, added A11 cents to A97 cents. Kingsgate (KCN) gained A49 cents to A$8.99. Medusa (MML) rose by A43 cents to A$7.21. And Kingsrose (KRM) added A7 cents to A$1.62, but did hit an all-time high of A$.68 during Friday trade. Other movers included Troy (TRY), up A12 cents to A$3.82, Resolute (RSG), up A13 cents to A$1.25, Allied (ALD), up A4 cents to A66 cents, Adamus (ADU), up A6 cents to A77 cents, Perseus (PRU), up A30 cents to A$3.10, and Ausgold (AUC), up A7 cents to A$1.18.

Uranium companies next, please, given the rebound which seems to have started.

There was a solid recovery, although not back to the pre-Japan tsunami level. Mantra (MRU) was one of the best thanks to a revived, albeit lower, takeover offer. It added A$1.43 to A$6.72. Extract (EXT), another company in the middle of a corporate shuffle, was also better off, closing up A$1.43 at A$8.43. Other uranium movers included Berkeley (BKY), up A17 cents to A$1.07, Uranex (UNX), up A5 cents to A38 cents, Bannerman (BMN), up A3.5 cents to A48 cents, and Paladin (PDN), up A25 cents to A$3.85. Manhattan (MHC) was also stronger, up A19 cents to A$1.00, as its chief executive, Alan Eggers, took every opportunity in Hong Kong to spread the uranium story.

Over to the base metals now, starting with copper to see whether Mr Friedland’s talk helped the market.

He seems to have done his job, as the copper companies were up, as were, the zinc and nickel companies. One of the best copper moves came from Hot Chili (HCH) which caught the attention of Mines and Money delegates after a presentation by its chief executive, Christian Easterday. Hot Chili’s shares added A7 cents A75 cents. Rex (RXM) was another copper player making itself visible in Hong Kong, and it duly rose by A14 cents to A$2.89. Other copper movers included Marengo (MGO), up A3 cents to A31.5 cents, Sandfire (SFR), up A21 cents to A$6.99, and Equinox (EQN), up A6 cents to A$5.37. Metminco (MNC) was one of the few to fall last week, down A3 cents to A38 cents.

Nickel companies attracted an increased level of interest, perhaps aided by a tip from a presenter at Mines and Money. Warren Gilman, deputy chairman of the Canadian investment bank CIBC, said nickel was set for an upward run in the next 12-to-18 months. Across the seas to the south, on the ASX, Panoramic (PAN) was the strongest of the nickel miners, adding A31 cents to A$2.31. Western Areas (WSA), another Aussie in Hong Kong, rose by A63 cents to A$6.66. Mincor (MCR) reversed a little of its recent slide with a rise of A2 cents to A$1.43. Independence (IGO) added A30 cents to A$6.56, and Minara (MRE) put on A6 cents to A78 cents.

The zinc moves were generally modest, but there was evidence of a stronger overall upward trend, although that might well have been a rub-off from the strengthening price of lead. Blackthorn (BTR), a zinc player we used to hear a lot about, was the pick of the sector after it announced a fresh deal with Glencore regarding its Perkoa project in Africa. Blackthorn added A12 cents to A66 cents. Meridian (MII) rebounded after a painful slide, rising by A2.2 cents to A12 cents. Kagara (MZL) gained A6 cents to A63 cents, and Perilya (PEM) added A6.5 cents to A62 cents.

Iron and coal next, please.

Both coal and iron ore were mixed, but trending up. Pick of the better known coal companies were two Mines and Money attendees, Hunnu (HUN) and Xanadu (XAM). Both are busy in Mongolia. Hunnu added A15 cents last week to A$1.48 and Xanadu rose A7 cents to A57 cents. Coal of Africa (CZA) went against the trend with a fall of A11 cents to A$1.15, but Carabella (CLR) continued its strong upward run, rising by A70 cents to A$2.75. Good as all that looks, the star of the coal sector was a new player, Newland Resources (NRL), which reported promising coking coal assays from its tenements in the Bowen Basin of Queensland, and effectively doubled on the news to close at A15.5 cents.

Iron ore companies were led higher by Fortescue (FMG) which added A30 cents to A$6.28 after an upbeat talk from Andrew Forrest in Hong Kong and a revised resource estimate of 10 billion tonnes of ore. Elsewhere, Atlas (AGO) added A20 cents to A$3.52. Iron Ore Holdings (IOH) attracted plenty of interest in Hong Kong as Ocean Equities analyst, Sam Spring, did a good job talking up the company. The shares gained A29 cents to A$1.91, but did pop up as high as A$2.04 earlier in the week. Other movers included Gindalbie (GBG), up A1.5 cents to A$1.06, and BC Iron (BCI), up A10 cents to A$2.54. However, Sundance (SDL) lost support after a big share shuffle which saw the estate of the late Ken Talbot exit the company. That knocked A3 cents off the price which ended at A46 cents. Elsewhere, Brockman (BRM) eased back by A20 cents to A$5.90, while Murchison (MMX) tumbled a sharp A17 cents to A$1.06 amid doubts about plans for a new port on the west coast.

Minor metals and then off.

A mixed bag among the lesser metals. Tin companies were mixed. Venture (VMS) lost A1.5 cents to A47.5 cents. Kasbah (KAS) added A1.5 cents to A28 cents. Lithium was also a mixed bag. Galaxy (GXY) lost A9 cents to A$1.24, but Orocobre (ORE) added A27 cents to A$2.76. Iluka Resources (ILU), the biggest of the zircon miners, put in a star turn, rising by A98 cents to A$11.75.


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That was the week when the metals markets began to recover his composure after the disaster in Japan. Junior miners were generally better off as a result, given that virtually all the metals closed higher, and that the newsflow continued to come in thick and fast. The TSX Venture Exchange Index closed up just over 30 points at 2,314, while the Metals and Mining Index was up just under 20 points at 1,425.

At the top end of the market, the tussle between Equinox and Lundin continues. Market watchers raised the possibility that a rival bid for Lundin remains a possibility, as Equinox responded to Lundin’s rejection of its own C$4.8 billion bid. A rival bid from Inmet is already on the table, and some industry watchers think it might be sweetened. But the Equinox team are urging Lundin shareholders to accept its C$8.10 per share offer, on the basis that it offers considerable a premium to the closing price of Lundin shares prior to the offer. Equinox also stated that it believes that its offer is underpinning the current share price. Lundin’s shares closed out the week up slightly more than C20 cents, at C$7.59.

Elsewhere, Endeavour Mining reported a decent set of full year financial results. The company delivered net income of C$9.6 million, or C$0.09 per share for the six months to 31st December 2010. During the period the company completed its acquisition of Etruscan, and was able to report gold production for the 12 months ended 31st December of just over 82,000 ounces at an average cash cost of US$613 per ounce. The company reckons that this year it will produce around 84,000 ounces at around US$600. A significant programme to boost reserves and resources is also underway. Endeavour ended the week up just over C$0.10 at C$2.72.

In fundraising news, Great Panther took advantage of the high silver price and a recent run of decent production news from its Mexican Silver Mines to tap the market for C$21 million through the issue of five million new shares at a price of C$4.20 each. On the market the shares were broadly flat at C$4.20.

Moving to the earlier stage companies, Gold Bullion Developments stated that it has appointed drilling specialist Ronald Goguen to its board of directors. Gold Bullion is currently exploring working up two properties in Canada, the Long Bars gold prospect on its Granada project in Quebec, which continues to deliver high grade intersections, and the Castle Mine silver project. Gold Bullion closed the week up C$0.04 and C$0.46.

Also on the move was Colossus Minerals which closed the week up by almost C$0.40 at C$8.30, after it announced some good-looking intersections on its Serra Pelada project in Brazil. The best intersection showed 7.81 metres at 136.43 grams per tonne gold, 249.2 grams per tonne platinum, and 121.4 grams per tonne palladium. The company is currently drilling 25,000 metres at Serra Pelada with five rigs, and hopes to add more rigs to the effort soon. Further results are imminent.

Fire River Gold also delivered some decent looking drill results as it continues to work towards the resumption of full-scale mining at its Nixon Fork gold mine in Alaska. The latest intercepts showed six metres of 125.5 grams per tonne material, including 189 grams per tonne over 3.5 metres. The market took a cautious approach to the news, however, as the full-scale restart is the next real trigger, and the shares ended the week C$0.02 weaker at C$0.49.

Away from the precious metals, Firestone Ventures announced plans to initiate drilling on its Black Mountain zinc-lead-silver property in Nevada. Drilling is now slated to begin in May, according to a statement from Firestone chief Lori Walton. She also stated that the company had initiated the permitting process for a proposed drilling campaign at the nearby Antelope zinc-lead-silver property. Firstone’s shares ended the week around C$0.01cent weaker at C$0.125.

Also stepping up its drilling effort was Pelangio. The company announced the commencement of a 5,000 metre campaign to drill 36 holes on its Obuasi project in Ghana. Pelangio stated that Obuasi holds “significant potential” and highlighted the proximity of AngloGold Ashanti’s Obuasi project, which in its time has produced over 30 million ounces. The market liked the story, and Pelangio’s shares rose C$0.11 to C$0.74.


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Gold attracted extraordinary emotions of the people and always do it. It manages to bring out extremes in investors, journalists, government. This is either hated or loved. Copper is not, not nickel and coal are not.

You can call it a commodity, a barbarous relic, money or a wealth preserver. Whatever title you use, someone will react.

As a metal, it has certain qualities that other metals don't have, but that's not what produces these reactions. It's not even its price rise over the last decade that causes the noise. In fact, it's not about gold at all.

Governments have in turn loved it, hated it and now are beginning to love it again. It's what it's purported to represent that causes all the fuss. Just look at the reasons put forward by some as to why it's rising in price and you get the picture.


Gold has defied many sound technical analysts' forecasts of late and it continues to do so rising to record levels in the dollar. It still has to rise to €1070 to beat the euro highs and if it does with the dollar falling heavily a rise to that price with the dollar at around $1.42 against the euro, you will see a dollar price of $1,519.

It doesn't seem far away does it? Why should it be rising so strongly?


We heard one commentator ask if this was the rejection of capitalism. Nothing so restricted, we say. It goes far deeper than that.

A look at China shows a communist form of capitalism [if there is such a thing] and they are doing very well with it, yet they are buying gold, buying silver, buying gold, buying silver.....

We are looking at the entire structure on which global economies are built on to see why. Could it be a rejection of the entire monetary systems of the world? That's part of it.

Is it something deeper than that, going down to the behavior of man from the individual to all powerful government? We think so.

A fact that most are realizing now is, that man is incapable of leaving the underlying principles that should dominate money without interference.

What goes wrong? National interests kick in. Selfish influences discolor money's value. Power that comes from controlling money becomes irresistible and distortions are inevitable, as we are seeing.


For instance, a perpetual trade deficit becomes a way of exacting ‘tribute' from trade partners who accept newly printed money in payment. All other nations have to earn that money through trade surpluses or face a cheapening of their own money.

By pricing international trade in the dollar, the business gained in U.S. banks from foreign global trade is vast. All the benefits of being the world's superpower accrue to the nation dominating the world's global reserve currency.

That is until international trust is lost in that nation and another superpower rises to share and eventually take on that crown of power.

In the past that position has been the subject of wars, but in today's world the battleground is economic and financial.


Man will always need and use a means of exchange even if it descends to barter, but history has shown that the only money that has proved enduring is one free from individual national influence in this world. Gold and silver have carried that mantle and always will.

The experiment with manmade money could only last as long as man's determination to provide a money that moved from simply a means of exchange to a measure of value. Man's inherent nature ensures that.

We are now at the point where manmade money is losing its value and most men can see this and don't like it. They feel betrayed at the most basic of levels and by their own governments.

Remarkably, in the first 100 days of 2011, we have seen the effectiveness of government melting. We are not just referring to those in the Middle East, but to the collapse or emasculation of governments in the developed world. The U.S. and the U.K. have governments that are now only capable of functioning well when issues agreed by both sides come to the fore. Citizens are appalled when they see their leaders unable to agree on critical matters such as reining in excessive spending and debt growth.

As to the sight of money creation through quantitative easing for the benefit of boosting economic growth one is made tense in the knowledge that this is a process that undermines confidence in and the value of money, in savings, investments and trade. If such devaluations were fully realized then the flight to gold and silver and out of manmade money would rise to a stampede.


In the past money was an item whose principal role was to measure value. Its secondary role was to function as a means of exchange. By using a desirable commodity to act as money it was made to be attractive to all men wherever they were on this planet.

By using an item of limited availability, the ability of man to expand it beyond its accepted value was curtailed. By using an internationally recognized and accepted item of high value men, wherever they were, would use it.

The moment one nation could dominate money and its international acceptability, the only way if could be used effectively was if that nation dominated all nations. Rome was a case in point. The U.K. morphing into the U.S. rule ensured that first the pound sterling and then the dollar ruled global money.

In moving from gold to manmade money, dependence on the behavior of government became total. The only link to the ongoing credibility was to the oil price which created an ongoing international demand for the dollar. Break that and the entire credibility of the dollar rests on trust in the U.S. monetary system, so far, hardly an inspiring performance.

The last forty years has been an incredible experiment with manmade money made possible only by lulling mankind into acceptance through economic growth. Take that growth away and its path to rejection will be a short one. Since 2007 we have started down that road.

This article was written by Julian Phillips, he is a long term analyst of the global gold and silver markets and is the founder and principal contributor for Global Watch - Gold Forecaster - and Silver Forecaster -


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In a note to clients on Johannesburg-based Harmony Gold, RBC Capital Markets argues that the stock could be takeover target, given its demonstrable market undervaluation, combined with the likelihood that it will start delivering on promises "within a couple of months". In Johannesburg, the stock price jumped nearly 10% on Thursday.

Analysts at RBCCM argue that one of the main reasons Harmony is undervalued can be traced to its 50% stake in Papua New Guinea's Morobe project, which includes the new-operating Hidden Valley mine, and the prolific Wafi Golpu property. "On our numbers" say the analysts, "even on the most conservative basis, Wafi could add in the order of USD 1.5bn to USD 2bn to the value of Harmony. This is some 40% of the current market capitalisation [value] of the company".

Harmony, in RBCCM's view, "has been a disappointing story since the rand started strengthening in 2002, due to a strategy that banked on a weakening [rand] currency to keep marginal assets alive".

In 2007 the strategy and CEO changed from Bernard Swanepoel to Graham Briggs. From then, the main lines of attack were simple, according to RBCCM: "close loss makers, bolster the balance sheet, joint venture high risk ventures and, invest capital aggressively to re-establish a better quality asset base. The one thing it needed, was time - time, and a bit of luck".

Time has passed, say the analysts, "and the new strategy is now set to deliver a new, less marginal, lower cost, more diversified Harmony. But that is not the end of the story. The ‘lucky' part of the equation is really reflected in the outstanding exploration results seen at the Wafi Golpu deposit in Papua New Guinea. We believe this exploration play is fast becoming a central play in the valuation of Harmony".

Given the potentially significant value attributable to Harmony's stake in Wafi, RBCCM's analysts argued that "another gold major could be looking at a strategy of making a bid for Harmony with the aim of stripping out the Papua New Guinea assets and re-listing the rump as a separate vehicle".

RBCCM says "the rump could be re-listed following the example set by Barrick Gold with African Barrick recently". The analysts believe that "in essence, this ‘lost value' in Harmony must be unlocked. Harmony could do this very easily by simply deciding to list a separate international vehicle. Such a move would likely cause an immediate and sharp increase in the Harmony share price but, in our view, this would inevitably leave the new international vehicle very vulnerable to a takeout and would undoubtedly lead to a discounted valuation on the remainder of Harmony".

The analysts believe that "far more value than the simple sum of the parts could be created by allowing the needs of AngloGold Ashanti or Gold Fields and Harmony to be met simultaneously through a merger of the two companies and a subsequent or simultaneous re-listing of separate vehicles that hold the good SA plays (now with nice growth), the marginal plays (marginal, but strong enough in terms of cash generation that it attracts the attention of companies like Village Main, desperately looking for a cash-generative marginal base) and even maybe a uranium arm on account of Harmony owning 40% of Rand Uranium, and AngloGold itself being the largest producer of uranium in South Africa at present".

AngloGold Ashanti and Gold Fields are also Johannesburg-based, but already conduct substantial transnational operations. In Wafi Golpu, the analysts conclude, Harmony is sitting on a ‘get out of jail free' card, "and we believe this will be played - one way or another".

Tier I gold diggers

Stock From From Value
price high* low* USD bn
Agnico-Eagle USD 67.63 -23.3% 25.1% 11.421
Goldcorp USD 48.18 -5.2% 32.5% 38.466
Polyus USD 32.15 -17.0% 43.1% 12.257
Harmony ZAR 85.99 -2.9% 26.2% 5.342
Lihir Now at Newcrest
AngloGold Ashanti USD 45.23 -14.4% 25.5% 17.242
Zijin CNY 7.87 -27.5% 109.3% 12.641
Barrick USD 50.22 -9.9% 36.9% 50.147
Newcrest AUD 37.07 -15.2% 24.7% 28.662
Gold Fields ZAR 114.40 -11.2% 28.8% 11.922
Kinross USD 15.87 -20.3% 11.2% 17.993
Newmont USD 53.17 -18.8% 10.3% 25.871
Buenaventura USD 43.36 -24.2% 47.1% 11.919
Freeport-McMoRan USD 52.28 -14.8% 86.0% 49.483
[[SPDR Gold Shares ETF]] USD 139.05 -1.1% 30.9% 55.676
Tier I averages/total -14.6% 36.2% 293.365
Weighted averages -14.8% 37.1%
* 12-month / Source: market data; table crunched by Barry Sergeant


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Cost is a concern for gold miners around the world even when they are rolling in cash as profits soar on back of record gold prices.

While the high price of silver, copper and other by-products of gold extraction have kept operating costs in check, miners are worried that capital spending on new projects will become unmanageable as labor, steel and energy costs keep pushing higher.

On top of that, gold miners have also suffered as the Canadian dollar, Australian dollar, Chilean peso and Mexican peso have strengthened against the U.S. dollar. Sales of most miners are typically denominated in U.S. dollars, while costs are often based in local "commodity" currencies.

"The costs of the industry have come up fairly dramatically over the last 10 years, such that the average cash cost for the industry is getting up towards $600 an ounce and that's not counting capital investment, financing and the other costs on top," said Greg Hawkins, chief executive of African Barrick Gold (ABGL.L).

"The all-in costs for the industry are getting up to $800, $900, even close to $1,000 for certain companies," said Hawkins, while speaking at the Reuters Global Mining and Steel Summit in London this week.


With big gold deposits getting harder to find, majors are forced to go further afield to replace and expand the size of their reserves and output. But this growth often comes at a higher price.

"This is a tough business and companies are going to have to go into parts of the world that they weren't contemplating going into 20 years ago," said Sean Boyd the CEO of Agnico Eagle (AEM.TO), which owns a gold mine in the Canadian Arctic.

"If you look at the sector, a lot of the flagship deposits that were the mainstays in the 90s are no longer there," said Boyd, who participated in the Toronto-leg of the Reuters Summit. "The sector in 2010, produced as much gold as it did in 2001, even with the dramatically higher gold price."

The price of gold has roughly quadrupled over the last decade -- spot gold XAG= touched a record of $1,447.40 an ounce on Wednesday, while silver at $38.13 an ounce is at a new 31-year high. The surge in bullion prices is being driven by inflationary concerns, political turmoil in the North Africa and the Middle East, the European sovereign debt crisis and other issues.

Ironically, the higher price of gold is one of the factors that pushes up average mining costs within the industry, as many miners look to tap easily accessible low grade material that is more costly to process and that would have in been ignored in the past, when gold was trading at a lower price.

Aaron Regent, the CEO of Barrick Gold (ABX.TO), notes that while this impacts cash costs per ounce, it is a low cost way of growing net asset value per share.

"When it comes to looking at costs, part of what's helping us get to the 9 million ounces (annually) is satellite deposits around existing infrastructure," Regent said at the Reuters offices in Toronto. "These are lower grade - so they are higher-cost ounces, but the capital costs of actually developing these are really small."


Barrick and Goldcorp (G.TO), jointly developing the massive Pueblo Viejo project in the Dominican Republic, have already indicated that capital expenditure costs on the project are going to be 10 to 15 percent above the prior estimate of $3.3 billion to $3.5 billion.

Barrick, the world's largest gold miner, has also said costs to build its Pascua Lama gold-silver project will be about 10 to 20 percent higher at $3.3-$3.6 billion, due to a stronger Chilean peso, along with higher labor and commodity costs.

Nick Holland, the CEO of Gold Fields (GFIJ.J), notes that miners face, "What might be a very difficult year across the planet in terms of costs."

"The oil price, the steel price, the price of timber the price of cyanide and the price of even labor is not within our control," he said. "If these exogenous factors continue to prevail over the balance of the year, I think all of us in the mining industry will be recalibrating our cost profiles."


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Gold rose to within a whisker of its all-time high on Wednesday, as record low U.S. new home sales stirred talk of extended central banks' accommodative policies, and a possible collapse of Portugal's government rekindled euro zone debt worries.

Bullion rose 0.7 percent to $1,439.76 per ounce, just short of its record $1,444.40 set on March 7, rebounding over 4 percent in the last eight sessions amid safe-haven buying and ongoing Western air strikes on Libya.

"Gold rose on a culmination of further concerns about the European debt issue, coupled with the situation in Libya and very strong crude prices," said Brian Hicks, portfolio manager of U.S. Global Investors' Global Resources Fund (PSPFX.O) with about $1 billion assets under management.

Rising U.S. crude futures also stoke inflation worries on heightened political unrest in the Middle East and North Africa. Yemen's president offered to step down by year end to appease mounting demands for his resignation.

Spot gold rose 0.7 percent to $1,439.60 an ounce by 3:29 p.m. EDT (7:29 p.m. GMT).

Gold accelerated gains to hit a session high of $1,440.90, its highest since March 7, after data showed the U.S. housing market slide was deepening as new home prices fell to their weakest since 2003.

U.S. April futures settled up 0.7 percent at $1,438 an ounce. While commodity markets were mostly quiet on Wednesday, COMEX gold was one of the most actively trading markets with volume approaching 140,000 contracts.

Portfolio managers, including Hicks, said that disappointing new home sales data could lead to an extension of the Fed's $600 billion bond buying program -- dubbed QE2 because it is the second round of quantitative easing -- before it is scheduled to end in June.

"The new home sales data inspired some to think that we may not see the demise of QE2, and we are going to see money printing continue past its potential expiration at the end of June," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott with $53 billion assets under management.

"That would likely mean more stimuli and more prospect for inflation, and that's gold friendly," Luschini said.

Spot silver soared to a 31-year peak of $37.34 an ounce, surpassing its previous high set two weeks ago. It later gained 2.6 percent to $37.30 an ounce.

Year to date, silver has gained over 20 percent, and gold was up just over 1 percent. Silver was boosted by near-term supply tightness and strong industrial demand on expectations the global economy continued to recover.


A senior official at the U.S. Federal Reserve said the Fed must be "extremely wary" not to let price pressures take hold in the U.S. as they seem to be doing in parts of Europe.

Dallas Fed President Richard Fisher's comments highlight divisions at the U.S. central bank as its bond-buying plan is about to expire.

Gold was also bolstered by the expectation Portugal's parliament would reject the government's latest austerity measures, and that rekindled euro zone debt worries ahead of a summit of the economic bloc.

Despite gold's rally this week, the implied volatility of gold options eased to about 14 percent after it surged above 17 percent in the previous week.

Both platinum and palladium, mainly used as autocatalysts in vehicles, have come under pressure since Japan's March 11 earthquake and tsunami shut car factories in Japan.

Toyota Motor Co (7203.T) said on Wednesday it would delay the launch in Japan of two new additions to the Prius line-up, while Honda Motor Co (7267.T) on Tuesday suspended production in Japan at least until March 27.

Platinum climbed 1.4 percent to $1,756.33 an ounce and palladium gained 2 percent to $747.50.

Prices at 3:29 p.m. EDT (7:29 p.m. GMT)


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Metal inserted into the relatively calm day with an average gain of 0.1 percent and the average range plus minus 1.1 percent to 0.7 percent. Nickel led on the way down with a 1.1 percent drop to $26,400, while tin was the best performer with a 1.5 percent gain. Equities in Europe and the US failed to follow on from the strength seen in Asia on Tuesday morning and the dollar was generally quiet – so a day of consolidation.

This morning the metals are more buoyant with average gains of 0.8 percent, with zinc leading the advance with a 2.3 percent gain to $2,373. Interestingly zinc had been lagging behind the rebound in the other metals so is now showing signs of catching up. Copper is up 0.6 percent at $9,540. Volumes remain relatively quiet with 1,894 lots of copper, 1,430 lots of zinc and 661 lots of aluminium traded. Total volume has been 3,768 lots as of 7am GMT.

In Shanghai the June contracts are up an average of 1.5 percent, zinc is up 3 percent at Rmb 18,600, copper is 1 percent higher at Rmb 71,980 and aluminium is up 0.4 percent at Rmb 16,830. Spot copper in Changjiang lags the futures with a 0.4 percent gain to Rmb 71,350-71,600, so remains in contango, while the LME/Shanghai arb remains negative at $210/tonne.

The Shanghai Futures Exchange (SHFE) will start trading lead futures tomorrow. The contract period for the futures will range from September 2011 to May 2012. The daily limit on price movements will be 6%.

Equities – the Dow dipped yesterday, it closed down 0.2 percent, the Nikkei is down 1.7 percent, the Hang Seng is off 0.3 percent, the MSCI Asia Apex is down 0.2 percent and China’s CSI 300 is bucking the trend with a 1.3 percent increase. Concerns over the spread of radiation and further production delays have weakened the Nikkei as that refocuses the market on the short term issues, rather than the medium term recovery outlook.

The dollar has picked up slightly – the dollar index is at 75.52, the recent low was 75.25. The euro is down at 1.4180, the pound is strong at 1.6376, the aussie is last at 1.0096 and the yen is strong at 80.83. Gold is firm at $1,429, as is silver at $36.35 and oil is high at $105.00. Strong oil and any rebound in the dollar may well provide some headwinds.

The economic calendar is fairly busy, Portugal’s government is voting on austerity measures, the UK budget is being announced and various central bankers are talking, including Fed Chairman Bernanke. On the data front he focus will be on EU new industrial orders and US new home sales, see table below for more details

On balance the rebounds off last week’s lows are continuing as prices stretch to the upside and gradually recoup ground lost in the aftermath of the earthquake in Japan. Whether the current economic environment warrants continued price rises is a moot point – our overall view is that the short to medium term consequences of the earthquake and higher oil prices should be negative for metal prices. However, perhaps buyers are strong enough to look further forward. A lot is likely to depend on whether broader confidence remains robust or whether it suffers if companies start to be affected by supply-chain issues.

LME Overnight Performance
6:59 AM +/- +/- % Lots
Cu 9540 60 0.6% 1894
Al 2597 6.75 0.3% 661
Ni 26518 118 0.4% 119
Zn 2373 53 2.3% 1430
Pb 2693 16 0.6% 388
Sn 30250 100 0.3% 24
Steel Med 0 0 0.0%
Economic Agenda
Time Country Period ACTUAL Expected Previous
9:30am UK MPC Meeting Minutes 3-0-6 3-0-6
9:30am UK BBA Mortgage Approvals 29.4K 28.9K
10:00am EU Industrial New Orders m/m 1.4% 2.6%
11:00am US FOMC Member Fisher Speaks
12:30pm UK Annual Budget Release
2:00pm EU Belgium NBB Business Climate 5.1 5.8
2:00pm US New Home Sales 291K 284K
2:30pm US Crude Oil Inventories 2.0M 1.7M
3:00pm EU Consumer Confidence -11 -10
4:00pm US Fed Chairman Bernanke Speaks
11:50pm JPN Trade Balance 0.68T 0.19T


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Effect of Japan's earthquake and tsunami, was weighing on the market a week ago. And investors were further unsettled by military action in Libya and worsening unrest in Bahrain. The FTSE 100 ended down by around 80 points at 5,718.13.

Precious metals also weakened. Gold fell to US$1,419.3 per ounce while silver fell to US$35.26 per ounce. Platinum slipped to US$1,723.5 per ounce and palladium fell to US$716 per ounce. Base metals recovered some of the ground lost in last week’s heavy falls, as some commentators suggested that demand might surge once reconstruction in Japan gets underway in earnest. Copper rebounded sharply to US$9,525 per tonne, or US$4.32 per pound. Nickel recovered to US$26,200 per tonne, and zinc climbed to US$2,330 per tonne.

It was a mixed week for London’s mining majors. Rio Tinto closed 1.3 per cent higher at 4,016p and Xstrata climbed 2.4 per cent to 1,383p. But BHP Billiton closed 0.5 per cent lower at 2,305p and Anglo American slipped 2.9 per cent to close at 3,037p.

The real damage was done in the uranium sector. Several governments have indicated that they will re-think their nuclear policies, most crucially, perhaps, China. Having soared to 300p just days earlier on news of a potential Chinese takeover, Kalahari Minerals slumped 23.5 per cent to 228p. VANE Minerals slipped 16.3 per cent to 2.62p. And Forte Energy fell 19.6 per cent to 5.43p even as it announced assay results from a further 17 holes drilled at the A238 uranium prospect in Mauritania. Once the current 1,500 metre diamond drilling programme is complete at A238, Forte is hoping to deliver a maiden resource estimate for the prospect.

In gold, it was a mixed picture. Allied Gold confirmed a 271,000 ounce increase in mineral resources at the Botlu deposit at its Simberi gold mine in Papua New Guinea. The company also confirmed that it had suffered no impact from the Japanese tsunami. As a result the shares climbed 3.7 per cent to 39.67p.

But shares in Australia-focused gold developer GGG Resources declined by nine per cent to 35.39p after it launched an all-paper offer for Auzex Resources, its partner in the Bullabulling gold project in Western Australia. Securing full control of Bullabulling would enable GGG to accelerate the project. We’ll be hearing more on the potential advantages of consolidating ownership of Bullabulling from GGG chief Jeff Malaihollo next week.

Elsewhere, Avocet Mining released further significant results from follow-up drilling at the Koul├ękoun gold deposit in Guinea. This has a current resource of 666,500 ounces. Drilling is expected to continue until late April with an updated resource expected by mid-year. The shares closed 1.5 per cent lower at 226p.

And Argentina and Chile-focused Mariana Resources slipped 12.6 per cent to 31.25p after it started a 4,000-metre drilling programme at the Sierra Blanca silver-gold project in the Deseado Massif gold district in southern Argentina. Mariana chief John Sutcliffe will be passing through London within the next few weeks so, so interested parties should watch for more detailed commentary around then, as he meets and greets with press and investors.

Elsewhere in South America, Orosur Mining slipped 3.4 per cent to 63.75p after it agreed a US$5.5 million line of credit facility to fund the purchase of equipment for its Arenal Deeps project in Uruguay.

In precious metals, Jubilee Platinum secured a £15 million standby equity distribution agreement to allow it to acquire chrome and platinum properties hosting ore suitable for use in the company’s ConRoast process. The company’s operations are currently focussed in South Africa, although it also has assets in other countries. The shares closed 7.1 per cent lower at 26.23p.

West Africa-focused Stellar Diamonds closed flat at 8.13p after it reported encouraging diamond grades from initial bulk sampling at its Bouro kimberlite dyke project in Guinea. This has already been the subject of significant artisanal mining down to a depth of 17 metres. The first sample returned 565 carats at a grade of 243 carats per hundred tonnes.

In base metals, Central Asia Metals confirmed that its 10,000 tonnes per annum Kounrad copper cathode plant in Kazakhstan is still on schedule for start-up in late 2011. The company also said that capital costs remain in line with the US$46.9 million budget. The shares closed 2.8 per cent lower at 86.5p.

Sticking with copper, Rambler Metals and Mining climbed 6.5 per cent to 40.48p after it received final construction approval from the provincial government in Newfoundland for its Ming copper-gold mine. This was one of the trigger points agreed in the earlier financing deal concluded with Sandstorm Gold, which immediately approved and released the final US$6 million tranche of the cash required to complete the mine. Ming should now be in production later this year.

Following a strategic review of exploration on its Spanish projects, Ormonde Mining has decided to concentrate on potential tungsten-gold satellites for its flagship Barruecopardo tungsten project. The company’s other, gold-only projects will go into a new joint venture with an old friend of Ormonde’s, Aurum Mining. Ormonde’s shares closed 4.7 per cent lower at 10p, while Aurum’s shares slipped 16.1 per cent to close at 4.83p.

Sub-sea miner Nautilus Minerals closed 8.5 per cent lower at 162p as the government of Papua New Guinea confirmed it is to take up its option to acquire a 30 per cent stake in the Solwara 1 project in the Bismarck Sea. The government will contribute funds to the project in proportion to its interest, including its share of costs incurred to date.

Finally, in the most bizarre news of the week, EMED Mining revealed that four workers at its Rio Tinto project in Spain had descended into the project’s underground shafts to protest against the glacially slow progress of the government's permitting of the mine. The workers’ action helped lift the shares 9.4 per cent to 16p.


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We have, though it was a week that brought to mind Melbourne’s famously fickle weather, where you get four seasons in a day. The ASX started horribly, as was expected after the triple-headed crisis in Japan, steadied, wobbled again, and then rebounded on Friday to finish roughly where it started. The indices tell the story of the week, but not of the day-to-day confusion. The all ordinaries closed on Friday down 0.4 per cent. The metals and minerals index closed up 0.9 per cent, and the gold index closed down one per cent.

In other words: all over the shop.

Very much so, though you could also say we were saved by Friday, when the indices made up most of their lost ground. The all ordinaries added 1.7 per cent on Friday. Metals and mining added 2.6 per cent, and gold rose by 3.6 per cent. Victim of the week was undoubtedly the uranium sector which was slaughtered, with all companies down by between 20 and 35 per cent. A few brave chief executives raised their voices against the sell-off, only to be whacked by the popular press, which added insult to injury. The gold sector produced a surprising number of positive moves, even if the index did end lower. Copper was the best of the base metals. Iron ore was mixed, as were the minor metals.

Let’s go straight to gold, and leave uranium for last because most investors up this way already understand what happened there.

Kingsrose (KRM) was Friday’s star. It rose a sharp A20 cents to a 12 month high of A$1.55 in its second heaviest trading day of the past 12 months. Slightly more than three million shares were traded, almost matching the previous record of 3.5 million recorded late last year. Nothing was filed by the company at the ASX, and the exchange did not hit the company with a price and volume speeding ticket. Perhaps it’s in the mail.

Another solid upward move in the gold space came from Ramelius (RMS). The shares rose A17 cents to A$1.27 after the company reported a resource upgrade at its Mt Magnet project in Western Australia. The new resource for the Galaxy area alone at Mt Magnet stands at just over one million ounces, comprised of 20.3 million tonnes grading 1.65 grams of gold a tonne. Troy Resources (TRY) also had a good week, recovering A28 cents of recently lost ground to close on Friday at A$3.70, thanks largely to the discovery of a high-grade gold vein at its Casposo project in Argentina. This could potentially add years to the mine’s life. Also on the move was Crusader (CAS), which continued to rise in the wake of fresh drill results from its Borborema project in Brazil. The best assay showed 19.65 metres at 5.33 grams per tonne, which included nine metres at 9.75 grams per tonne. The shares rose A13 cents to A$1.10.

Two other gold companies which we follow closely also deserve special mention. Gold Road (GOR) reported that it has boosted the resource base at its Central Bore project in Western Australia beyond the one million ounce mark. In response Gold Road’s shares rose A2 cents to A42 cents. And Catalpa (CAH) enjoyed a decent rub-off from Bruce McFadzean’s talk at the 77th Minesite forum last week, rising by A16 cents to A$1.74.

Which goes to show that London investors can still drive your market.

Never doubted it. We’ll wrap up the developments in the gold space with a quick call of the card. Companies on the rise included Kingsgate (KCN), up A42 cents to A$8.50, Saracen (SAR), up A4.5 cents to A64.5 cents, Silver Lake (SLR), up A5 cents to A$2.09, Medusa (MML), up A27 cents to A$6.78, and Beadell (BDR), up A3 cents to A78 cents. Gold companies that fell included Ausgold (AUC), down A17 cents to A$1.10, Perseus (PRU), down A10 cents to A$2.80, OceanaGold (OGC), down A9 cents to A$2.40, Northern Star (NST), down A1.5 cents to A34.5 cents, and Scotgold (SGZ), down A0.3 of a cent to A7.2 cents.

Base metals next, please.

Copper did best. Nickel companies slipped a little, and zinc companies slipped a little more. Best of the emerging copper producers were Sandfire (SFR) and Rex (RXM). Sandfire rose A35 cents to A$6.78 and Rex rose A15 cents to A$2.75. Other copper companies on the rise included: OZ Minerals (OZL), up A7 cents to A$1.53, Equinox (EQN), up A16 cents to A$5.31, Marengo (MGO), up A1 cent to A28.5 cents, and PanAust (PNA), up A4.5 cents to A77 cents. Bougainville Copper (BOC) was also on the move as it continues to attract speculators ahead of a possible commitment to the re-development of its mothballed mine in Papua New Guinea. Bougainville rose A20 cents to A$1.50.

Nickel movers included: Mincor (MCR), down A1.5 cents to A$1.41, Western Areas (WSA), down A26 cents to A$6.03, Panoramic (PAN), down A4 cents to A$2.05, and Poseidon (POS), down A1.5 cents to A25 cents.

Zinc movers included: Perilya (PEM), down A7 cents to A55.5 cents, Terramin (TZN), down A2.5 cents to A35 cents, Ironbark (IBG), down A1.5 cents to A22.5 cents, and Prairie Downs (PDZ), down A3 cents to A15.5 cents. The one zinc company to rise was Bass (BSM), which closed up half a cent to A39 cents.

Iron ore and coal next, please.

The trend was modestly down, although there were also some risers, and one company that fell markedly. BC Iron (BCI) dropped A51 cents to A$2.44 after the surprise withdrawal of a takeover bid from Regent Pacific. We should hear more about that in the weeks ahead because the reason for the withdrawal, a claim that Ukrainian oligarch Gennadiy Bogolyubov, the owner of Consolidated Minerals, had not spelled out his intentions to accept or otherwise, has raised eyebrows. Other companies on the move included: Atlas (AGO), down A6 cents to A$3.32, Iron Ore Holdings (IOH), down A1.5 cents to A$1.62, Territory (TTY), down A1 cent to A27.5 cents, Brockman (BRM), up A14 cents to A$6.10, and Fortescue (FMG), up A6 cents to A$5.94.

Coal companies had a mixed time of it, though there was one notable rise. Aspire (AKM) reported fresh assay results from its Ovoot coking coal project in Mongolia, and rose A7 cents to A75 cents. Other movers included: Coal of Africa (CZA), down A7 cents to A$1.24, Riversdale (RIV), up A19 cents to A$15.71, Hunnu (HUN), down A1 cent to A$1.33, Xanadu (XAM), down A5.5 cents to A50 cents, and Aston (AZT), up A28 cents to A$8.77.

Minor metals, and then finish with the call of the rather ill uranium card.

There was very little to report among the minor metals. Rare earth companies were weaker. Lynas (LYC) slipped A5 cents lower to A$1.92, and Alkane (ALK) lost the same amount, A5 cents, to A$1.35. The tin companies went in different directions. Venture (VMS) added A3.5 cents to A49 cents, while Kasbah (KAS) lost A1.5 cents to A26.5 cents. South Boulder (STB), the leading potash player, recovered a modest A4 cents to A$4.51. Nkwe Platinum (NKP) returned to trade after a period in suspension over uncertainty relating to its tenements in South Africa, and promptly dropped A9.5 cents to A35.5 cents.

Uranium, and goodbye.

As you might expect, there’s no good news to report. Just a list of share price falls. Mantra (MRU) dropped A$2.55 to A$5.29 after a Kazakh-based company dropped its proposed takeover bid. Paladin (PDN) fell A$1.13 to A$3.60, but did get as low as A$3.01 on Thursday, although there were some signs of a recovery on Friday. Extract (EXT) fell A$3.63 to A$7.00. Manhattan (MHC) fell A24 cents to A81 cents, but did touch A60 cents on Thursday. Berkeley (BKY) fell A52 cents to A90 cents, but did get as low as A74 cents on Tuesday. And Bannerman (BMN) fell A24.5 cents to A44.5 cents, but did get as low as A34.5 cents on Tuesday.


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Following Lanco Infratech $830 million for Griffin Coal's adjacent mines last year, Premier coal mine, which supplies Western Australia's electricity network, is up for grabs.

In 2007, UBS valued Premier Coal at $500m. Officials at Lanco, who are also said to be eyeing Premier Coal, said that owning both the mines ``made perfect sense'' as the company could ensure efficiencies of scale.

The mine is located near Collie, 200 km south of Perth. India's GVK Power is also said to be amongst the forerunners in the bid.

A reliable company official said that since GVK has lost out to Lanco in the Griffin auction race, it was very keen to ``hold on to this prize catch''.

Reports indicated that last year, the Perth-based Wesfarmers considered adding Premier Coal to the Griffin Coal pitch, but certain circumstances had ensured that the company pulled out of the bidding process in September.

Wesfarmers executives were reportedly shocked at how much Lanco was willing to pay for Griffin. Now, with Lanco looking to build on its recent purchase, a new turf war may emerge between Indian suitors and some Chinese firms.

Although the world's second-largest economy is at a strategic inflection point in terms of its commitment to become more energy efficient and reduce the carbon intensity of its economy, coal will continue to play an important part, analysts said and market sources indicate that several Chinese firms have shown interest in the project

Though China's new five-year plan proposes to cap the country's energy use at 4 billion tonnes of coal equivalent a year by 2015 (up from 3.25 billion in 2010), companies are scouting Australian shores.

Wesfarmer officials have been quoted as saying that they fielded enquiries from both Chinese and Indian firms.

Interestingly, three Indian corporates have thrown their hats into the ring for the coal assets of one of Australia's largest thermal coal explorers, Bandanna Energy.

In a deal reportedly valued at $1.5 billion, GVK, state-owned consortium ICVL and Reliance Power are said to have bid for the assets. Analysts said that the Bandanna Energy is estimated to have reserves of over 1.3 billion tonnes of thermal coal.

Bandanna Energy had initiated an auction process to sell the assets and had mandated UBS to advise it. The last date for submission of bids is March 31, 2011. By then, it will be action stations.


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