Mongolia plans to issue first sovereign bonds

The money has not yet come in, but the debt has already started...

Mineral-rich Mongolia plans to issue first sovereign bonds - FT.com

Mongolia plans to issue its first sovereign bonds this month, marking a milestone for capital markets in this resource-rich democracy.

The newly created Development Bank of Mongolia will issue $700m in sovereign bonds to fund lending programmes...in areas that include infrastructure, industry, energy and roads. 

the issuance would take place in tranches beginning this month, with the first slice likely to be $100m.

The bond will be in tugrik, the Mongolian currency, which has appreciated by 1.6 per cent against the dollar since January.

investment in the mining sector has soared in the past two years along with global commodities prices.

Government revenues from the mining sector are set to jump next year as the Oyu Tolgoi copper and gold mine comes online, and politicians in Ulan Bator are looking for ways to manage the coming influx into state coffers.

The Development Bank is being set up with training from the Korean Development Bank and the Development Bank of Japan. 

yields on the bonds could be quite low, perhaps 6-8 per cent.

Mongolian sovereign debt has a B1 non-investment grade rating from Moody’s

Read the full article here: FT.com / Capital Markets - Mineral-rich Mongolia plans to issue first sovereign bonds

Share this|

________________________
The MasterBlog

Canadian Miners Don’t Love the London Stock Exchange - Deal Journal - WSJ

Canadian Miners Don’t Love the London Stock Exchange
- Deal Journal - WSJ:
"By Phred Dvorak and Edward Welsch

When the London Stock Exchange Group Ltd. announced its proposed takeover of Toronto’s bourse, one of the supposed benefits was access–for Toronto-listed firms–to London’s deep pools of capital.

EPA/Adrian Bradshaw

That’s a topic dear to the hearts of roughly 1,500 cash-hungry start-up miners that populate the Toronto bourse and its venture affiliate. Those “junior miners”–and their constant need for money to drill, test and explore — have made the Toronto Stock Exchange, operated by TMX Group Inc., the mining-finance market of choice.

So what do those juniors think about the proposed deal? Not much, according to some of the attendees Deal Journal interviewed at the Prospectors & Developers Association of Canada conference in Toronto, the world’s largest gathering of small-cap miners.

Kerry Knoll, chairman of Canada Lithium Corp., with some $140 million in market cap, looked into listing on the LSE’s AIM market for smaller firms a few years ago and found it a much more expensive proposition than going public on the Toronto bourse. If London controlled the Toronto exchanges as well, the combined entity could raise the cost of listing in Canada, Knoll worries: “I would fear they’d bring that (higher-cost model) here and really put a crimp in our incubator.”

LSE and TMX executives selling the deal in recent weeks have said the Toronto exchange would remain Canadian-operated and regulated, and would benefit capital-seeking firms by offering truly global scale.

But David McPherson, president of Pure Nickel Inc., at some $14 million market cap, said he’d worry the interests of small, Canadian firms like his may get lost in a bigger exchange.

Pure Nickel raised money on the Toronto Venture Exchange, TSE’s junior market, in 2007 to buy land. It moved up to Toronto’s big board later that year. It’s already raised money from London institutional investors, but it doesn’t expect any additional U.K. retail-investment opportunities from a TSX-LSE combination.

“All I see is the risk that we could become insignificant in a much larger exchange,” he said.

But there are some fans, including Graham Downs, the CEO of ATAC Resources Ltd., market cap north of $600 million, thanks in part to a new discovery of gold in the Yukon.

“There’s a big resource component of the London Stock Exchange, but they are so focused on Africa and all these other places that they know,” Downs says. “They don’t have a lot of access to us, so I think it’ll open more pockets [of money] to Canadian ventures.”

Even though money may initially flow more toward London than Canada while the market finds its equilibrium, Downs says, in the end there will be a bigger pool of capital available to the best companies.

“If you’ve got good projects, if you’ve got a quality team, the money will find you,” he says.

Canadian Miners Don’t Love the London Stock Exchange - Deal Journal - WSJ

Share

-- The MasterFeeds

Openness can help lift the curse of resources

Openness can help lift the curse of resources
By George Soros
FT.com

Published: March 3 2011 22:13 | Last updated: March 3 2011 22:13

The natural resources sector has the potential to generate billions of dollars in revenues that can be used for poverty reduction and sound investment. For decades, however, management secrecy has allowed corruption to thrive in countries such as Angola, Cambodia, and Guinea. According to Nigeria's own corruption agency, up to $400bn of oil money has been stolen or wasted over the past 50 years. And in Libya, in particular, we now see a population rising against rulers whose control has been financed by the immense revenues they manage, and mismanage, in secret.

Ending this problem and letting new democracies flourish will, of course, not be easy. The resource curse undermines the investment climate, raises costs for companies, threatens energy and mineral security, and consigns millions of citizens in resource-rich countries to poverty. But evidence suggests that transparency in extractive industries can play an important role.


In 2002, I helped to launch the Publish What You Pay coalition, a global network of civil society organisations that has advocated for better management of oil, gas and mining revenues, and worked to ensure monies received are invested in schools, hospitals and poverty reduction. The coalition recruits oil companies, which then pledge to reveal what they pay to the governments and leaders of the states in which they operate, allowing them to be held accountable. In Liberia, this approach has seen moves towards new transparency standards, including openness on payments and contract terms – amazing progress in a country better known for former president Charles Taylor's macabre violence and blood diamonds.


There are further positive signs from the Extractive Industries Transparency Initiative, an alliance to improve standards of transparency on a voluntary basis. Azerbaijan's credit rating improved in part because it played a constructive role in the initiative. This week, after the first democratically held elections in its history, Guinea rejoined the initiative too, because its leaders know that with EITI membership comes a better investment climate.


Now, governments that regulate stock markets are going one necessary and long-awaited step further, in establishing mandatory listing rules. In July 2010, the US passed the Dodd-Frank Act, which requires all oil, mining and gas companies registered in the US to report payments to foreign governments, both by country and by project. Companies as diverse as PetroChina, BHP Billiton and BP will have to comply. Similarly, Hong Kong recently improved the disclosure of its companies' payments as a condition of listing on its exchange.


The French and UK governments have also indicated support for new European oil and mining rules. EU revenue transparency legislation could build on US plans to move towards a new global transparency standard. The London Stock Exchange is one of the world's most important financial markets, hosting more than £1,000bn worth of oil, gas and mining capital. It should follow others' lead and change its rules too.


All of these measures hold great promise. Africa is the new frontier for investors in the natural resources sector, holding a 10th of the world's oil reserves, 40 per cent of its gold and significant reserves of other minerals vital for modern industrial economies. The Middle East, meanwhile, could soon develop a string of prosperous democracies. Those promoting greater transparency in the natural resources industries are helping to reinforce powerful historical forces, which will unlock transformational sums of money to improve the lives of millions of people in some of the most fragile countries in the world.

The writer is chairman of Soros Fund Management LLC and founder of the Open Society Foundations

Copyright The Financial Times Limited 2011. 
You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Read article on FT.com

(BN) Copper Faces 2-Year Shortage, Peak Over $10,000, Trafigura Says

(BN) Copper Faces 2-Year Shortage, Peak Over $10,000, Trafigura Says
2010-12-07 09:29:56.282 GMT

By Claudia Carpenter
Dec. 7 (Bloomberg) -- Copper supplies will lag demand for
at least the next two years, with prices peaking over $10,000 a
metric ton in the second quarter next year, according to
Trafigura Beheer BV, which considers itself the world's second-
largest trader of industrial metals.
Copper will move from a balanced market this year to
shortages of 800,000 tons in both 2011 and 2012 at current
prices, Simon Collins, head of refined metals at Trafigura in
Lucerne, Switzerland, said in an interview yesterday. That's
even before demand climbs as exchange-traded funds backed by the
metal are introduced, he said.
Such funds "will result in higher prices, which in turn
will affect price-sensitive demand and price-sensitive supply,"
Collins said. "Consumers are concerned about an ETF.
Inventories are already relatively low."
Copper prices are up 21 percent this year, and reached a
record $8,973.50 a ton today, partly as manufacturers and other
buyers who anticipate shortages build inventories to meet demand
for next year, Collins said. Imports into China, the world's
largest consumer, typically are strongest in the second quarter,
helping to boost copper prices and leading gains in lead, nickel
and aluminum, he said. Copper stockpiles tracked by the London
Metal Exchange have slid 30 percent this year.
In 2006, the copper market was also forecast to have a
large deficit when higher prices brought the market further into
balance than originally estimated, Collins said. If prices rise,
next year's deficit may be only 400,000 tons, he said.
Copper Trading
Trafigura trades about 1 million tons of copper a year,
Collins said. Glencore International AG is the largest trader of
industrial metals, according to Trafigura estimates.
Trafigura is preparing for more metals demand by customers
and increasing its warehouse capabilities through its subsidiary
NEMS, with plans to expand in the U.S. next year for the first
time with storage facilities in Baltimore and New Orleans, as
well as in China, Collins said. He declined to give an estimate
of the investment.
Copper demand may rise if JPMorgan Chase & Co., BlackRock
Inc. and ETF Securities Ltd. start ETPs backed by the metal, in
line with plans announced by all three companies in October.


For Related News and Information:
Top commodities: CTOP <GO>
Top shipping: SHIP <GO>
Searches: NSE <GO>
Commodity curves: CCRV <GO>
--Editors: Dan Weeks, John Deane.
To contact the reporter on this story:
Claudia Carpenter in London at +44-20-7330-7304 or
ccarpenter2@bloomberg.net
To contact the editor responsible for this story:
Claudia Carpenter at +44-20-7330-7304 or
ccarpenter2@bloomberg.net

M & A: Worries Grow About BHP Deal for Potash

Worries Grow About BHP Deal for Potash

will the deal go through?  If not, CAD 130/share is the target! -

----------------------------------------

From the NYTimes.com- DealBook

Potash Corporation of Saskatchewan investors seem to fear that the Canadian government may block BHP Billiton's hostile bid for the company, analysts said.

Go to Article from The New York Times:

http://www.nytimes.com/2010/10/29/business/global/29potash.html?emc=dbk

Potash chief Bill Doyle urged patience for investors expecting an alternative to BHP Billiton's $40 billion bid, two months after starting talks with potential suitors, Bloomberg News reported.

Go to Article from Bloomberg News:

http://www.bloomberg.com/news/2010-10-28/potash-having-very-active-conversations-on-alternative-bids.html?dbk

Read More

http://dealbook.blogs.nytimes.com/?p=309373&dlbk&emc=dlbk

List of companies involved in the rescue of the 33 Chilean miners

List of companies involved in the rescue of the 33 Chilean miners

But this happened because the Chilean people, government and President were more interested in doing whatever it took, and accepted whatever would help from sources around their country and around the world.  They did not allow false nationalism nor internal politics nor special interests to stand in the way of their heartfelt national effort to retrieve their trapped brothers.  The Chileans organized the worldwide effort and made it work.

This displays true compassion, maturity and unity of purpose by the Chilean people and is what made the rescue successful.

List of American companies who contributed to the rescue of the Chilean miners. Organizations from other lands were likewise involved. The Chilean President was most gracious in recognizing all those who helped create the Chilean miracle.  · Schramm Inc. Of West Chester, Pennsylvania built the drills and equipment used to reach the trapped miners.  · Center Rock Company, also from Pennsylvania , built the drill bits used to reach the miners.  · UPS, the US shipping company, delivered the 13-ton drilling equipment from Pennsylvania to Chile in less than 48 hours.  · Crews from Layne Christensen Company of Wichita Kansas and its subsidiary Geotec Boyles Bros. Worked the drills and machinery to locate and reach the miners and then enlarge the holes to ultimately rescue them.  · Jeff Hart of Denver Colorado was called off his job drilling water wells for the U.S. Army's forward operating bases in Afghanistan to lead the drilling crew that reached the miners. · Atlas Copco Construction Mining Company of Milwaukee, Wisconsin provided consulting on how to make drilling equipment from different sources work together under differing pressure specifications. · Aries Central California Video of Fresno California designed the special cameras that were lowered nearly a mile into the ground sending back video of the miners. · Zephyr Technologies of Annapolis Maryland, made the remote monitors of vital signs that miners will wear during their ascent. · NASA Engineers designed the " Phoenix " capsule that miners would be brought to the surface in, and provided medical consulting, special diets and spandex suits to maintain miners' blood pressure as they're brought back to the surface. · Drilling Supply Co., Houston also involved. Canadian-based Precision Drilling Corp. And South-African company Murray & Roberts, drilled  backup rescue shafts in case the American rig failed. Which fortunately did not happen.

Supply Squeeze of Physical Gold and Silver May Be Heating Up | Coin Update News

Within the past 48 hours, as gold and silver have broken to new highs (ignoring inflation), there are some indications that demand for physical precious metals may be on the rise.

Supply Squeeze of Physical Gold and Silver May Be Heating Up

By Patrick A. Heller on September 24th, 2010

My company does not deal with the customers who make purchases of tens to hundreds of millions of dollars at a time. Such buyers normally deal direct with the major brokers in London or New York. Instead, our median purchaser of gold and silver bullion-priced products probably spends less than $5,000 per transaction. We do have a number of customers who regularly spend five or six figures and the occasional seven figure deal, but my company’s total volume is unimportant when compared to total global precious metals trading.
Still, we are in constant communication with several primary distributors of products for the US Mint and other world mints that issue bullion products. We also keep in touch with a number of other wholesalers across the country. If there is a change in product availability or price level, we learn about it quickly.
Today my company enjoyed one of its five highest retail sales days of the past 30 years. As we were contacting wholesalers to replenish our inventories, we picked up what may be significant indicators that a supply squeeze of physical gold and silver could be heating up.
Three different wholesalers who are primary distributors for the US Mint told us that they have experienced a sharp increase in demand for physical silver coins and ingots in the past 48 hours.
When we tried to purchase a quantity of South Africa 1 Ounce Gold Krugerrands, we were also in for a shock. Yesterday, these coins were available pretty much everywhere, with wholesalers competing to sharpen their pencils to shave their ask price. Today, two of the wholesalers were completely out of Krugerrands for live delivery. Our cost to purchase these coins increased almost 0.5% more above the gold value than they did just the day before!
One more indicator of a potential supply squeeze is the “spot” price quoted by wholesalers. For protection in volatile markets, wholesalers often use two different spot prices, depending on whether they are buying or selling. For our last large silver order today, the distributor used an ask silver spot price that was eight cents higher than its bid spot price. Previously this company had used the same spot price for both buying and selling or had a maximum spread of just four cents for silver.
Our suddenly zooming retail demand and reports that this may be happening across the country, if it continues for a few more days, could spark another buying frenzy such as we experienced in late 2008. Two years ago, availability was so tight that it was not unusual for customers to have to wait at least a month after making payment to receive their merchandise. In 2008, premiums soared for just about any live physical gold and silver. At the peak, bags of US 90% Silver Coins were selling retail for about 40% above their intrinsic metal value!
Along with my expectations of higher gold and silver prices, I have also predicted that supplies of physical metals would dry up. This may be now occurring. However, we cannot be sure until we see the pattern continue for another couple of days. Should this pattern continue through next Tuesday afternoon, I would recommend not waiting any longer to establish your position in precious metals. To be extra safe, you may now want to wait even that long.


Supply Squeeze of Physical Gold and Silver May Be Heating Up | Coin Update News

Share|

_______________________________________

Rio’s sights fixed on Ivanhoe and Mongolian mine

By William MacNamara
Published: September 22 2010 22:15 | Last updated: September 22 2010 22:15

Rio Tinto is creeping its way towards control of Canada’s Ivanhoe Mines at a slow but relentless pace, drawing investors’ attentions away from a multi-billion dollar mining transaction that could be as significant for Rio as Canada’s PotashCorp looks to be for BHP Billiton.
Over the past six months a conflict has erupted between Rio and Ivanhoe, developers of a new copper project in Mongolia that many analysts consider to be one of the best in the world. With a stake in Ivanhoe that rose to 35 per cent last week, Rio can feel confident that it is best placed for an eventual takeover. It has invested more than $1bn in Ivanhoe and its Oyu Tolgoi mine since 2006.
But under Robert Friedland, the legendary mining entrepreneur, Ivanhoe has been making plain that Rio’s money will not buy its love. It has engaged investment bankers to assess “strategic options”. Over the summer it pushed through a shareholder rights plan, otherwise known as a poison pill, to protect against what it calls “coercive and creeping takeovers”.
The markets are giving credit to Ivanhoe’s manoeuvres. One London-based analyst ascribed the performance of its share price, which hit a 12-month high above C$22 on Wednesday, to investors’ intrinsic faith in Mr Friedland’s “wiliness” and record of coming out ahead.
The Toronto-listed shares have stayed elevated since July when the company adopted the poison pill, causing Rio to launch arbitration against Ivanhoe. It cancelled a restriction against selling more than 5 per cent of its shares to a strategic partner. But despite Ivanhoe’s much-advertised search for alternative options all year, no third-party offer has materialised. “This is completely in keeping with Robert’s personality,” said one banker who has worked for Ivanhoe. “He wants the best deal for his shareholders. He wants to make sure that Rio does not have a 100 per cent stranglehold on his company.

Kicking off Mongolia mining fever

Ivanhoe’s Robert Friedland is a legend in the mining industry. The superlatives he enjoys range from “best entrepreneur” to “biggest genius” to “luckiest stiff”.
This last tag refers to his big break in the 1990s. Mr Friedland was a large investor in an exploration company called Diamond Fields Resources. In the course of exploring for diamonds in Canada’s Labrador province the company struck a motherlode deposit of nickel. The company’s sale to Inco netted Mr Friedland a fortune that helped him launch Ivanhoe.
In 2000 Ivanhoe took over an exploration programme in Mongolia, then an unpromising mining zone, from BHP Billiton. Ivanhoe spent several years proving that the Oyu Tolgoi copper-gold deposit is one of the biggest and world’s best new sources of copper.
Mr Friedland evangelised the promise of Mongolia to investors with his Steve Jobs-like knack for the grand narrative. He laid the groundwork for the Mongolia fever that has swept the mining industry since Oyu Tolgoi won government approval in October 2009.
An early convert to his vision for Oyu Tolgoi was Tom Albanese, currently chief executive of Rio. In 2006 Mr Albanese headed Rio’s copper and exploration division, and he led the deal that created the Rio-Ivanhoe partnership. Both men appear to have an affinity for Oyu Tolgoi.
They also are known to be personally friendly in spite of the widening rift between the two companies. Over the summer Mr Albanese stayed at Mr Friedland’s home in Ulan Bator, the Mongolian capital.
Ivanhoe and Oyu Tolgoi stand to be the most important venture of Mr Friedland’s career. That, say some, is why this owner of 20 per cent of shares wants to ensure a good outcome. Seeing the project through and possibly selling at a premium might also expunge his reputation as Toxic Bob, a name he earned in 1993 when one of his early gold projects leaked cyanide, causing an environmental disaster.

“He has gotten hundreds of millions of dollars from Rio so far,” the banker continued, “but the [Oyu Tolgoi] copper deposit is clearly worth billions.”
Rio’s rigid agreements with Ivanhoe, which owns 66 per cent of Oyu Tolgoi, may give the Canadian miner less flexibility than is appreciated. In 2006, when its Mongolian project carried heavy political risk, it agreed a financing deal with Rio that essentially gave the Anglo-Australian miner a path to ownership that it could exercise in 2011. Over the years Rio has released project financing in return for tranches of equity. Over the past year it has raised its stake from 19.7 per cent to 34.9 per cent. In Canadian law there is no level above which an shareholder must make a bid for the full company.
Rio’s agreements with Ivanhoe, however, stipulate a maximum stake of 47 per cent until October 2011, when a “standstill agreement” preventing takeover moves lapses.
It is toward that October 2011 date that both companies are hurtling, amid attempts to outmanoeuvre each other. Ivanhoe has pushed back the date of the standstill agreement by adopting a poison pill. So far the companies have not yet agreed on a Canadian arbitrator to hear Rio’s request that the defence be struck down.
Today the Oyu Tolgoi mine is taking shape in a bleak area of Mongolia’s south Gobi desert. Mongolia has become one of the world’s leading frontiers for metals and mining, largely because its rich deposits of copper and coal lie so close to the border of China. Oyu Tolgoi’s strategic position has led to speculation that Ivanhoe could find a white knight in a state-owned Chinese company.
But the 2006 agreement gives Rio right of first refusal over any offer made from a third party. This places Ivanhoe in the dangerous position of offering its shares to a bidder, only to see Rio pre-empt and possibly move to immediate control of the company. Ivanhoe’s best tactic, said one person involved in the 2006 deal, may be to find a bidder whose offer is so high that Rio cannot follow.
“Whether all this momentum is leading to anything all depends on if Robert Friedland finds his $40 [per share] man,” the person said, referring to an offer of C$40 per share compared with Thursday’s price of about C$20 per share.
Chinalco, the Chinese state-owned aluminium producer, is one potential bidder for Ivanhoe, as it is attempting to diversify out of aluminium. Chinalco, however, is also Rio’s largest shareholder. That raises the possibility that Chinalco would be more likely to join with Rio to take control of the group than pay a high premium to buy Ivanhoe on its own.
“There aren’t that many players who can play,” said one Canadian banker familiar with both companies. “This project is about the big boy miners and governments. It’s about countries as big as China and companies as big as Rio or BHP. The permutations are very small.”

Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.

FT.com / Companies / Mining - Rio’s sights fixed on Ivanhoe and Mongolian mine

Share

-- The MasterFeeds

Eurasian Natural Resources (ENRC-LSE): DRC Assets Acquired, Including Kolwezi; Potential Negative to Sentiment - BMO Comment

Eurasian Natural Resources (ENRC-LSE): DRC Assets Acquired, Including Kolwezi; Potential Negative to Sentiment – Negative

Rating:   Market Perform Price:     £8.66 Target:   £10.50

The acquisition of DRC copper-cobalt assets from companies associated with the Gertler Family including the exploration licence for First Quantum's Kolwezi project (currently in international arbitration) is expected to generate negative market sentiment. Further, it may open up potential future legal issues with respect to the ownership of Kolwezi, plus suffer potential ill-will from the community of global mining companies in future. ENRC has announced the acquisition of a 50.5% interest in DRC-focused Camrose Resources. The stake was purchased from Silvertide Global, Zanette and Cerida Global, all held by the Gertler Family Trust. Total consideration is US$175M, comprising US$50M in cash and US$125M in promissory notes payable in 9-24 months. Click Here For Link to Research PDF

In which phase of the gold bull market are we?

Gold is seen as transitioning from phase 2 to phase 3 in an ongoing bull market which still has some way to run

Author: Ronald Stoeferle
Posted:  Friday , 25 Jun 2010 

VIENNA (Erste Bank) - 

A central pillar of the Dow Theory is the description of the phases of a bull market. According to Dow the three phases reflect the confidence of the investors:  

- 1. Accumulation 

- 2. Participation of the public 

- 3. Distribution  

The first phase is dominated by a drawn-out process. We think that this phase was happening in 1999 to 2003. At the beginning, only "early adaptors" are invested. The fundamental picture tends to be bleak, and there is a selling overhang. The longer this phase takes, the stronger the development in phases 2 and 3. For example, the oil price was traded within a bandwidth of USD 10-35 for more than 25 years. In 2004 it broke out of this range and increased to USD 147/barrel within four years. Something similar happened on the equity markets. The Dow Jones index traded within a bandwidth of 600 to 1,000 points from 1962 to 1982. The outbreak was followed by 18 years of bull market, which took the index to 11,700 points or +1,400% (annualised performance 16.5%). This is the nature of a bull market.  

The second trend phase is characterised by improved fundamentals, higher confidence, and new groups of investors. And lastly, phase 3 is the euphoric phase that culminates in a "blow-off", i.e. in a parabolic increase. At the end of each cycle the smart money is distributed.  

The following chart, depicting the sharply rising volume of contracts at the COMEX, highlights the soaring interest that is integral to a bull market.

From our point of view we are currently located at the transition from phase 2 to phase 3. Gold is getting gradually more accepted as an investment vehicle. Legendary investors such as Paul Tudor Jones, John Paulson, and David Einhorn have reported purchases of gold, the turnover is increasing, and numerous new products are being launched. In addition, gold is becoming more and more important in the asset allocation of institutional investors. We think that the passing of the "magic" USD (or EUR) 1,000/ounce mark heralds the imminent start of the trend acceleration phase. We saw a similar situation when oil increased above USD 100/barrel.

If we compare the current bull market to the most recent big gold rush, we can see a pronounced distribution phase that ended in a parabolic "blow-off". The finale phase ended in January 1980 at a high of USD 850/ounce. In the course of the previous ten trading days the price increased by 35%, in the previous six weeks the price had almost doubled (+94%). The same thing might occur in the final phase of the current bull market.

 "Buying the dips" seems to be the motto of the current phase. Within the corrections, gold moves from weaker to stronger hands. Consolidations in the current bull market have become shorter and less pronounced in terms of the underlying trend. We have seen this very development since the beginning of 2009. As soon as the corrections turn really small, the market will probably make the transition to its final phase. The transformation definitely has psychological reasons. The unshakeable myths and misunderstandings (gold does not pay interest, buying physical gold is expensive, gold is speculative and volatile...) are being de-mystified. Given that many of such arguments, defamations, and convictions were deeply engrained after a 20-years' bear market, the change of heart is accordingly drawn-out and tedious.

Gold is a gauge for risk, and thus the currency of fear. In that sense, both fear and greed can trigger the often-quoted "irrational exuberance" and thus the parabolic increase in the final phase.   

It is a fact that gold is certainly no contrarian investment anymore, as opposed to 2000, although investors are still sceptical, and the same old arguments still abound in the market.

Having a closer look at the sentiment, we find that we are far from anything like euphoria, so gold is definitely no mainstream investment. In comparison with the Nasdaq at the beginning of 2000, gold is certainly more of a dark horse. If one were to ask ten people for names of three gold mining shares, chances are they would not know any. This is a stark contrast to the situation a couple of years ago when the vast majority of people were talking about technology shares and invested in highly speculative start-ups, or US consumers who were taking out mortgages, hoping to benefit from continuously rising property prices.   

The numbers, too, substantiate the notion that the parabolic phase of gold should still be ahead of us. For example, the Nasdaq 100 index increased by 85% in 1998 and by even 102% in 1999. It rose by an additional 27% in 2000 before collapsing at the end of March. At the end of the bull market, 30 shares had gained more than 1,000% by 1999. Is the comparison of trends in different asset classes admissible? We certainly think so, given that human behaviour patterns and emotions in extreme phases are the same. Greed and fear determine the beginning and the end of bull markets. Therefore we assume that gold and gold shares could show a similar performance to the one of the Nasdaq at the end of the 1990s.

The last bull market came to an abrupt end in 1980. The then chairman of the Federal Reserve, Paul Volcker, increased the key lending rates to 20% within only a few months. Could this be possible today? Definitely not! In 1980 the USA was one of the biggest creditor nations in the world and had a positive trade balance. On top of that, the financial industry was substantially smaller in terms of the GDP, and excessive debt was neither in the private nor in the public sector an issue.

The above article is abstracted, with permission, from the Erste Bank 85-page analysis of gold and the gold market prepared by Ronald Stoeferle and entitled Special Report Gold - In Gold we trust (2010)

INDEPENDENT VIEWPOINT | Mineweb.com - The world's premier mining and mining investment website

In which phase of the gold bull market are we? 

http://www.mineweb.com/mineweb/view/mineweb/en/page103855?oid=106818&sn=Detail&pid=102055

Tantalum Investing News » Tantalum: Congo Conflict Mineral » Print

check this out!

Tantalum Investing News » Tantalum: Congo Conflict Mineral » Print

________________________

The MasterBlog

The Master Blog: Gold miners not finding new deposits to meet future needs - study

The Master Blog: Gold miners not finding new deposits to meet future needs - study