Aussie's Strike Gold in Egypt

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Precious Metals

Australian AIM listed gold miner Centamin is set to be catapulted into the big time as the resource they have been working since 1995 in Egypt finally nears commercial production. In a Telegraph article Centamin announced they have started gold exports to Johnson Matthey and reserves at Sukari Hill have been identified in the region of 13 million ounces making it potentially North Africa’s largest deposit according to an article in Mineweb. The average grade is put at 1.4g/metric ton and approximately 5 million tons of ore are expected to be mined per annum when the open pit operation reaches full production later this year. Processing is intended to run at 4 million tons of ore creating an ore  stockpile for later years when the mine ceases. The cut-off grade will be managed to process material of around 1.87g/ton in the early years leaving the stockpile to average some 0.66g/ton. This creates an enhanced cash flow in the early years to pay down debt and at a run rate of 4 million tons per annum should yield about 240,500 ounces of gold which at current prices should make Sukari highly profitable. The original operating costs were put at US$365/ounce although they may have increased somewhat since then but even so providing political interference can be avoided, Centamin have developed a valuable asset at just the right time in terms of the gold price. According to the Telegraph article production is intended to increase up to 500,000 ounces per annum by 2012 although that may take some doing from the current standing start. At the very least, the mine has a 15 year life and probably closer to 25-30 as the limits of the deposit have yet to be established.

Not many new sizeable reserves come on stream nowadays and those that do are often located in unstable areas putting them at high risk of political interference, such as in Venezuela where the Canadian miner Crystallex recently pulled out of a proven high quality resource because of a refusal by the Venezuelan Ministry of the Environment to approve permits since April 2008. The Las Cristinas resource is said to contain some 27 million ounces of gold and one can only imagine what a benefit such revenue would be to a cash strapped Venezuela. Clearly common sense doesn’t have much weight in such regimes and one can only hope Centamin’s long standing relationships in Egypt serve them better than Crystallex’s did in Venezuela.

–Stuart Burns

There is nothing like a little downtime to catch up on some old reading. Headlines that looked interesting a couple of weeks ago but for which one didn’t have the time to review previously now get their due.   So imagine my enthusiasm reading this little headline from Forbes, Seven Looming Financial Bubbles. To save you the trouble of reading the article, here were the seven bubbles identified: Gold

  1. Gold
  2. China
  3. Emerging markets
  4. Treasuries
  5. College tuition
  6. Exchange traded funds
  7. Copper

How interesting! I won’t comment on all of these but let’s pick three we talk about regularly on MetalMiner: gold, China and copper. Gold first. When gold really start looking spiky several weeks ago, I asked Stuart if he wanted to cover it to which he replied, “Gold is a yawn. It’s only where it is because of the dollar and fears of inflation. Enough said. Though admittedly, the emergence of GDP growth, Chinese monetary policy and the development of expansive cities but oops nobody can afford to live or work there!

Copper has had a stunning year, unfortunately not due to demand or market fundamentals but rather one of the other seven bubbles Forbes cites, exchange traded funds. We have gone so far as to describe the copper market as having reached irrational exuberance. We could also concur with the fact that exchange traded funds have also reached exalted bubble status. Read more

Gold has certainly had a roller coaster ride this last 12 months, up to a peak of $1030/ounce before falling back some $200. You’ve heard the popular saying: “When the dollar falls, gold rises.” In reality, the relationship between the euro, the dollar, and gold has been 94% accurate, according to a   Reuters report in Mineweb.

In that case,  what could the current fall in gold tell us about the direction of the euro and the dollar? If the dollar were to make a significant gain against the euro this year, from its current 1.55 towards 1.45 last seen in 2007, we could see a flood of cheaper imports, particularly steel, come into the market. The dollar won’t change the fundamentals of the world steel industry, but a combination of a stronger dollar and more imports could curtail price rises later this year if the assumed relationship between gold, the euro, and the dollar holds true.

–Stuart Burns

Here’s an old idea that has caught the attention of commentators  this week but  with a new twist due in large part to the high price of the metals involved. Metals and material have been recycled for decades and in many countries considerable encouragement is given by governments in an effort to reduce raw material and energy consumption. But the rise in the price of gold, silver and many other metals used in the electronics industry has given the recycling of mobile phones, laptops and other electronic devices a major boost and promoted the phrase urban mining. The figure that caught my eye was a direct correlation to the mining industry ” one ton of ore from a gold mine produces just 5 grams (0.18 ounce) of gold on average, whereas one ton of discarded mobile phones can yield 150 grams (5.3 ounces) or more, according to an article in Reuters.

The article goes on to say the same volume of discarded mobile phones also contains around 100 kg (220 lbs) of copper and 3 kg (6.6 lbs) of silver, among other metals. Hence the phrase urban miners used to describe the recycling industry that has grown up around this resource. The company being reported, Eco-System of Honjo, Japan typically produces about 200-300 kg (440-660 lbs) of gold bars a month with a 99.99 percent purity, worth about $5.9 million to $8.8 million. That’s apparently the equivalent of a small gold mine.

In a country with 128 million people with over 80% mobile phone ownership and who on average change them every 2 years 8 months, you would think there would be a never ending supply of raw material. But you would be wrong, only 10-20% of the phones discarded each year are recycled. Why? Largely because of fears that the phones contain personal data, people horde them away rather than risk releasing them for recycling. As PC’s, laptops and now even mobile phones have become the gateway to our bank, share dealings, health records, and in fact every item of sensitive data in our lives the risks are perceived to be ever greater of letting them fall into the wrong hands. Particularly in Japan where the use of the mobile phone is more advanced than in the US or Europe, phones can be used for payment of bills, move funds around bank accounts, pay rail and bus fares. Indeed the mobile phone is becoming the mobile wallet.

It does raise an interesting concept though.

As the world’s reserve of metals becomes ever smaller, to what extent can we access those already used and available in manufactured goods? Certainly we have only scratched the surface so far and the high prices of all metals will encourage this resource to be pursued much more vigorously in the future.

–Stuart Burns

There are constant news reports on stolen metals: Bridges disappearing overnight, copper pipes stolen from homes, and large, bronze statues disappearing from the streets.  

Delaware State Police have decided to take a bite out of metals crimes, creating new rules for businesses which cover some of America‘s most stolen metals, including copper, brass, gold, and silver. WBOC suggests that these rules will stop metals thieves from striking: Pawn shops and scrap metal processors  that sell  metal  now  have to wait 18 days after purchasing  the metal  to sell it to a new customer. This gives police the opportunity to investigate when a potential victim claims property was stolen.

In addition, some of these shops will need to register with police for a sales license, as well as keep track of all sales to the store.  While securing a sales license and collecting information about sales shouldn’t harm businesses, some business owners worry that the 18-day wait before selling to new customers will hurt their own  operations, especially considering the fluctuating prices of metals in the economy.    
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One day, precious metals are gaining; the next day, they’re falling, and the rise and fall of the dollar is blamed.

Yesterday, the dollar rebounded after record lows against the Euro, and precious metals prices finally took a hit. “Silver for May delivery dropped 18.5 cents to $18.015 an ounce on the Nymex, while May copper lost 7.7 cents to $3.9230 a pound,” the AP shared, while similarly, “Gold for June delivery fell $5.60 to $931.90 an ounce on the New York Mercantile Exchange, after earlier falling as low as $925 an ounce. Gold has gained 7 percent this year but has struggled to return to levels approaching its all-time high of $1,038.60 an ounce, reached March 17.” Read more

Which would you prefer, a diamond or a sapphire? (sapphire) Which would you give your wife, gold or silver (silver)? Despite the fact that gold reached that $1000/ounce threshold last week, the yellow metal is still far away from its all time inflation adjusted high back in 1980, ($850/ounce in 1980 dollars) according to this article, that would be the equivalent of $2177/ounce in today’s dollars, though it only hit that peak for one day back in 1980. We have been asked several times to comment on where we feel the gold and silver markets are headed. In short, we do believe that gold is likely to rise still further as investors (and speculators) tend to put their money in gold when the dollar falls (and oil is high). Given the overall economic picture, we believe many speculators are moving their dollars to commodities in general and hence prices are still increasing. We’ll get to silver in a minute. Read more

While metals  such as  gold and copper have recently hit record highs, the future outlook is uncertain —  particularly since oil and the global economy are adding to the volatility of the metals market.

Always considered the safe haven of metals, gold reached a record $992.95 an ounce earlier this week. Soon, it could even hit $1,000 an ounce. Who is to say, however, if it’s a decent time to jump into a deepening pool of gold wealth? This is a terrific time to sell old gold jewelry and make some bang for your bling, as Lisa reported in a past entry, but  the investment arena isn’t as certain.  With prices that jumped 52 percent since the end of 2006, the oft-promising metal could be a high risk at this point. Then again, the dollar could be pushing gold even higher in value next week, when the U.S. jobs report, which is expected to be weak, is released against the backdrop of the U.S. dollar dropping further in value against the Euro.

In addition to the weak dollar, fresh highs for oil look set to entice further anti-recessionary/inflationary hedging towards gold and will ultimately push the metals higher, Bullion Desk analyst James Moore explained in a recent Forbes article.


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