Osisko acheives record gold production as it tries to fight off takeover bid |
- Osisko acheives record gold production as it tries to fight off takeover bid
- China's record copper, iron ore imports are not being put to work
- British Columbia to pump $29 million into LNG development
- Coeur Mining significantly increases silver and gold reserves
- Report: Chinese bank poised to join London gold fix
- Who let the bears out? Gold price rally stalls
| Osisko acheives record gold production as it tries to fight off takeover bid Posted: 18 Feb 2014 04:15 PM PST Osisko Mining (TSE:OSK) came out with some news on Tuesday that might whet the appetite of takeover bidder GoldCorp (TSE:G) even further: The company announced that it hit record annual gold production in 2013, putting out 475,277 ounces compared with 388,478 in 2012. In its end-of-year results, the company reported adjusted net earnings – which include net earnings minus impairment charges – of $116 million for the year, or 27 cents per share, compared with $199.8 million in 2012. The decrease in adjusted net earnings is mainly the result of lower average selling prices of gold during the fourth quarter of 2013 and higher depreciation charges, Osisko wrote. Osisko has one operating mine, Canadian Malartic, along with three exploration properties. "The strong second half results at Canadian Malartic clearly demonstrated the value of this world class gold minem," CEO Sean Roosen said in a statement. "Following Q4, in January 2014, Canadian Malartic achieved record monthly production of 50,111 ounces at cash costs1 of $670 per ounce … The record gold production was achieved despite mill downtime and unusually cold weather conditions." The Montreal-based company also took the opportunity to comment on GoldCorp's hostile takeover bid, initiated last month. Under GoldCorp's terms, Osisko shareholders would receive $2.26 in cash and 0.146 share of Goldcorp per Osisko share. After recommending that shareholders reject GoldCorp's offer, saying that it failed "to adequately compensate the shareholders for the strategic value of Osisko's world-class asset base," Osisko commenced litigation against the mining giant. According to mid-tier producer Osisko, GoldCorp "misused confidential information, breached a confidentiality agreement and failed to honour a standstill agreement in launching its hostile bid for Osisko." The Quebec Superior Court will hear the case in March. Osisko was trading slightly higher on Tuesday for a price of $7.02 per share, compared with around $6.95 on Friday. The Canadian miner has gained more than 50% over the past three months.  |
| China's record copper, iron ore imports are not being put to work Posted: 18 Feb 2014 03:40 PM PST The copper price's February comeback accelerated on Tuesday, bringing gains so far this month to more than 4%. In New York trade spot copper jumped 2c to $3.34 a pound, up from $3.20 hit at the end of January over fears of a marked slowdown in the economy of number one consumer China. For 2014 economists are predicting 7.4% which would make it the slowest nominal growth since 1990. Given its widespread use in transportation, manufacturing and construction the copper price is sensitive to any economic slowdown. Yet, copper imports into China which last year amounted to 44% of the global trade in the red metal, continue to surge. The 536,000 tonnes of refined copper imported in January constituted a 53% jump over last year's tally and 21% more than in December. China's electricity grid build-out is responsible for 40% of the country's demand and growth in the sector is expected to be double that of the economy as a whole which could account for the spike. At the same time inventories in London Metal Exchange warehouses continue to be drawn down. LME stocks reached a decade high of 678,000 tonnes in June last year when copper fell to $3.03 a pound, a close to 3-year low, but since then the declines have been remarkably consistent reaching fresh low this week of 296,000 tonnes. Reuters columnist Andy Home points to a different reasons for China's copper appetite, where stocks are rising even as they disappear elsewhere: "But sharply rising inventory within China suggests that financing demand for copper is currently just as important as manufacturing demand in forcing up the import pace. "Much of the imports were likely driven by financing, as tight monetary conditions persisted in Q4 and rates rose," wrote analysts at Barclays Capital. While easing in January credit remains tight in China. In December the interbank repo rate climbed to the highest since a record liquidity squeeze in June last year spooked markets. While using warehoused copper for credit financing is a long established practice, the same dynamic now seems to be at play in iron ore, where China plays an even more dominant role in the 1.1 billion tonnes seaborne trade. The price of iron ore on Tuesday remained steady at $124.40 a tonne after bouncing off last week's seven month low of $120 a tonne. China's steelmakers imported a record 86.84 million tonnes in January, up 18% on December and more than 21 million tonnes higher than January 2013. But with the latest China Iron & Steel Association data showing output falling to under 2 million tonnes per day from last year's torrid pace which peaked above 2.2 million tonnes, stockpiles at the country's major ports also grew, topping 100 million tonnes for the first time in 18 months. "Imports kept piling up at ports as more cargoes are being hauled in for trade-financing deals," Gao Bo, chief iron ore analyst at Mysteel.com, a researcher in Shanghai, told Bloomberg earlier this week. Image from Thomas Fisher Library. |
| British Columbia to pump $29 million into LNG development Posted: 18 Feb 2014 03:12 PM PST Over the next three years the British Columbia government will pump $29 million into the liquefied natural gas sector as part of its 2014 Budget, the BC government announced on Tuesday. The funding is expect to support the development of the BC LNG industry by attracting investments and "supporting a stable environment for investment decisions; facilitating timely processing for regulatory and permitting requirements; and ensuring ongoing environmental protection, management and stewardship." The Ministry of Natural Gas Development will receive the largest chunk of cash and the rest will go to the Ministry of Forests, Lands and Natural Resource Operations, the Ministry of Environment, and the Ministry of Aboriginal Relations and Reconciliation. Natural gas is expected to take up an increasingly larger chunk of the global energy mix over the next two decades and the provincial government sees BC as particularly well-positioned to meet growing demand in Asia. As expected, the province also announced a planned two-tier income tax for the LNG industry, with a tier one rate of 1.5% and a tier two rate of up to 7%. "Our LNG income tax revenue framework strikes the right balance between the need to maximize the return to British Columbians, while also ensuring B.C. is an attractive and competitive place to develop LNG, de Jong wrote. "The LNG revenue framework will deliver long-term benefits for British Columbia and provide industry with the certainty it requires to be successful." The taxes will be introduced to the legislature by fall this year. Meanwhile, the independent British Columbia Economic Forecast Council forecasts provincial real GDP growth to be 2.3% in 2014, 2.7 per cent in 2015 and an average of 2.7 per cent over 2016-2018. "Government's economic growth forecast is 2.0 per cent in 2014, 2.3 per cent in 2015 and 2.5 per cent in 2016 — a forecast that is prudent relative to the Economic Forecast Council," the BC government wrote. As announced last month, the budget extended the flow-through share tax credit which allows resource industry investors to deduct their investments from their income, helping junior companies secure financing. The Association for Mineral Exploration (AMEBC) released a statement on Tuesday praising the government's 2014 budget. "With $476 million spent in 2013, mineral exploration and development is a socio-economic driver of both urban and rural communities and First Nations in all regions of the province, and we thank the provincial government for the recognition of our industry's contributions across BC," said Gavin C. Dirom, CEO of AMEBC. But not every one was applauding. The Sierra Club BC said the BC government was "ignoring" the "inconvenient truth" of pollution from the LNG industry. "Natural gas resources are non-renewable and increasingly extracted by fracking," Caitlyn Vernon from the Sierra Club noted in a statement. "The pipedream of LNG fails to account for the costs to BC's water, farmland and communities of extracting this highly polluting resource." |
| Coeur Mining significantly increases silver and gold reserves Posted: 18 Feb 2014 01:41 PM PST Coeur Mining (NYSE:CDE) is joining the ranks of the few precious metals miners that have increased their mineral reserves for 2014 following a rough year in the sector. The US-based miner has raised its proven and probable silver and gold reserves by 16% and 12% respectively. The calculations are based on price of $25 per ounce of silver and $1,450 per ounce of gold. Not many major precious metal miners have used such high price forecasts for their 2014 reserve calculations. Coeur's share price jumped nearly 7% to $11.92 per share following the announcement. The company also announced a 27% increase in measured and indicated silver resources and 1.4% for gold. "For the past several years, our main focus has been to get all four of our mines up and running consistently," CEO Mitchell J. Krebs said in a statement. "2012 was the first year we devoted significant capital to exploration and we are starting to see the fruits of these efforts." The bulk of the increase comes from the Rochester mine in Nevada and the Kensigonton mine in Alaska. The company plans to invest up to $28 million this year in exploration and may increase this budget if drill results warrant further work. "We have spent $74 million in exploration expenditures over the past two years and will continue to fund exploration activities using a success-based approach focused on resource conversion," Krebs said. "We believe a robust exploration program represents a high-return use of our capital based on the results we have achieved." Coeur is the largest US-based silver producer and has four operating precious metals mines, including two in Latin America and two in the US. The Company also has a non-operating interest in the Endeavor mine in Australia in addition to net smelter royalties on the Cerro Bayo mine in Chile, the El Gallo complex in Mexico, and the Zaruma mine in Ecuador. |
| Report: Chinese bank poised to join London gold fix Posted: 18 Feb 2014 11:30 AM PST Deutsche Bank announced in January it is withdrawing from the price-setting process for gold and silver, known as the London fix, amid a probe into the benchmark used for much of the physical trade around the globe. A new report suggest South Africa's Standard Bank, in conjunction with Industrial and Commercial Bank of China, is in "prime position" to buy the Deutsche seat: "Standard Bank is a shoo-in for the fixing seat – they want it, and it would be acceptable to the other members," a senior gold market source told Reuters. "It's just whether they can agree a fee." The UK's Financial Conduct Authority launched a probe late last year over the way gold prices are set every day in London by five banks – Deutsche, Scotia-Mocatta, Barclays, HSBC and Société Générale – acting as market makers in an obscure process that dates back to 1919. According to the London Bullion Market Association, total trading volume in gold per day is some $240 billion, with only a tiny fraction of the total ever physically settled. Reuters reports the last time a seat was vacated was in 2004, when NM Rothschild and Sons sold theirs to Barclays for a purported $1 million. ICBC,the globe's largest bank in terms of market value and assets under management, has been "steadily building its presence in the gold market since setting up its precious metals department in 2009," and is particularly keen to expand overseas. A fortnight ago, ICBC announced the purchase of the London commodities-focused arm of Standard Bank, Africa's largest bank, in which it already owns a 20% stake. ICBC is paying $765 million for 60% of the London unit of Johannesburg-based Standard Bank, gaining access to a well-established commodities, credit and forex trader with affiliates and operations in all the major trading hubs including New York, Hong Kong, Tokyo and Shanghai. The Chinese giant, which boasts more than four million business clients and services 410 million retail customers, also received a five-year option to purchase another 20% of Standard Bank's global markets unit for up to $500 million in cash. Jianqing Jiang, the chairman of ICBC said at the time of the Standard Bank purchase that "the large amount of commodities trading and the consequential needs for hedging resulting from the development of the Chinese economy, as well as financial reforms, posed new demands for the transformation of the service capabilities and business model of Chinese banks." In October, the UK made it easier for Chinese banks and investors to trade inside the country and London is already responsible for the bulk of trading in renminbi outside China. The investigation into the London gold price fix came after Libor (London Interbank Offered Rate) referenced in trillions of dollars of derivative and other financial transactions was being manipulated. Image by xiaming. |
| Who let the bears out? Gold price rally stalls Posted: 18 Feb 2014 10:32 AM PST The steady climb in the gold price in recent weeks came to a halt on Tuesday, as momentum traders take some profits in the metal up nearly 10% since the start of the year. In noon trade on the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – hit $1,324.60 an ounce, down $4.30 from Monday's close, but up from lows earlier in the day of $1,314. Gold remains near a three-and-half month high as 2014 sees a shift in sentiment after 2013's 28% retreat, the worst performance since 1980. Gold's rally in 2014 on the back of safe haven buying on turmoil in emerging markets, weak economic news from the US and continued strong physical demand from Asia has not convinced everyone that the market has turned a corner. The median forecast for the fourth quarter 2014 of the nine gold analysts tracked business news wire Bloomberg is $1,165 an ounce and the two most accurate gold price forecasters in the group are even more bearish: "I just see this [gold's rally and ETF buying in 2014] as a corrective move," said Robin Bhar, the head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg in the past two years. "We would still want to be bearish gold," said Bhar, who expects a fourth-quarter average of $1,050." "Haven demand plays well when gold is cheap, but it's no longer cheap," said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp. and the second most-accurate forecaster tracked by Bloomberg in the past two years. "I'm a little surprised by the volatility in the market, but it really doesn't change my overall view," said Smirk, who expects a slide through the year to a fourth-quarter average of $1,020. A week ago, Credit Suisse's head of precious metals research, Tom Kendall, speaking on CNBC predicted that the rally in gold may start to fizzle out: "I wouldn't be surprised if we see it trade up a little bit above $1,300 in the next couple of sessions," but "I think the momentum that we're seeing here is probably looking to exhaust itself in the not-too-distant future." Kendal is particularly negative towards gold this year saying that towards the end of 2014 the gold price will touch $1,000 an ounce: "[It's] not out of the realm of possibility by any stretch of the imagination, particularly once we get through this soft patch in the U.S. economy and we see real interest rates tick back up." ETFs vs bars and coins A new study by the World Gold Council shows demand for bars and coins surged to an all-time high of 1,654 tonnes as individual investors took advantage of lower prices. Investment in physical gold trusts or gold-backed ETFs moved in the opposite direction in 2013 with net redemptions totaling just over 880 tonnes. The net effects was an overall 15% decline in gold demand in 2013 according to the industry group. After turning gold into a one-way bet lower last year, large investors, primarily made up by hedge funds, have recently turned more bullish. Net long positions – bets that the price will go up – held by so-called managed money surged 17% and to 69,291 lots or 6.9 million ounces according to Commodity Futures Trading Commission data released on Friday. Last week gold ETF holdings also showed some positive signs, increasing by 3.2 tonnes. While the additions are still modest February is on track to show the first monthly increase in ETF holdings since December 2012, when gold in vaults held by these funds peaked at over 2,600 tonnes.
Image of gold bear by The Scott |
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