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June 27, 2012

Xstrata, Glencore Under Pressure to Amend Deal -

#Xstrata PLC and #Glencore International PLC are under intense pressure to amend their proposed merger as people close to the matter said it is becoming increasingly clear shareholders will block the landmark deal on its current terms.

Xstrata, Glencore Scramble to Save Deal

Global commodities giants Xstrata PLC and Glencore International PLC are under intense pressure to amend their proposed merger as people close to the matter said it is becoming increasingly clear shareholders will block the landmark deal on its current terms.

The deal, creating a company with a market value of some $60 billion, has been touted as a potential reshaping of the global mining industry. But it is running into a buzz saw of opposition on two fronts: price and executive compensation.
The headquarters of Swiss commodities trader Glencore's in Baar, near Zurich.

At issue is both the proposed price Glencore would pay—2.8 of its shares for each Xstrata share—and a £173 million ($270 million) retention package for senior Xstrata officials. Many investors have cried foul over the package at a time when opposition to lavish executive pay is running high in the U.K.
Xstrata has proposed to Glencore new terms for the retention package, according to a person familiar with the matter, in a move that could put the focus on investor demands for Glencore to improve the share ratio.
Xstrata shareholders are scheduled to vote on the deal July 12. In order for it to go forward, they must approve both the share ratio and the retention package in separate votes.
Based on feedback shareholders have provided in recent meetings, it is likely that if both aren't revised, the merger will get blocked, according to two people familiar with the matter.

Representatives of the two companies are working to amend the deal and are aiming for an agreement on new terms in the next few days, though it isn't clear they will be able to reach one. If they aren't able to hammer out new terms, the merger, which would create the world's fourth-largest mining company, is in danger of collapsing.
Adding to the urgency, Qatar Holding, which had been thought to favor the merger on its current terms, said in a statement late Tuesday that it believes a share ratio of 3.25 would be more appropriate. Qatar recently built a 10% stake in Xstrata and is the Anglo-Swiss miner's largest shareholder aside from Glencore, which already owns a 34% stake.
It is unclear whether U.K.-listed Glencore and Chief Executive Ivan Glasenberg will bend on the share ratio, given that he has said in the past that more-generous terms threaten to make the deal uneconomical for the commodities-trading firm.
Xstrata investors' concerns, which had been festering since the deal was announced in February, have been building since the company last month sent its shareholders a 144-page document detailing the retention payments.
Under the plan, Xstrata CEO Mick Davis would receive $14.9 million a year through 2015, for a total of $44.7 million. The retention payments carry no obligation to meet performance targets. Xstrata has said the payments are necessary to keep top managers at the firm, but the people said Tuesday that a performance element would likely need to be added to win shareholder approval. Indeed, one of the people said late Tuesday that Xstrata has proposed to Glencore that the payments be made in stock instead of cash and that for the senior executives they include a performance condition tied to cost savings.
The retention package must be approved by a simple majority of Xstrata's non-Glencore investors, while the overall deal has a 75% approval threshold of non-Glencore investors. That means that if just a third of Xstrata shares are voted against the retention package—or less depending on turnout—it would be defeated.
The bar for rejection on the overall deal vote is even lower, at approximately 16%.
On Tuesday, Glencore shares fell 1.8% £3.03 in London trading; Xstrata fell 1.1% to £7.86 in London.
Write to Dana Cimilluca at and John W. Miller at
Corrections & Amplifications
Qatar is Xstrata's largest shareholder aside from Glencore. An earlier version of this article incorrectly said Qatar was Xstrata's largest shareholder.
A version of this article appeared June 27, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Xstrata, Glencore Scramble To Save Deal.
Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved

 See the article online here: Xstrata, Glencore Under Pressure to Amend Deal -

The MasterMetals Blog

Base #Metals Market: Nickel, Lead, Zinc All in Surplus – When Will Markets Balance Out?

From MetalMiner:
All the other base metals were in surplus during the first quarter Lead, for example, to the tune of 10,900 tons, building on a surplus of just 3,600 tons for the whole of 2011. Underlining the state of the market, global stocks rose with LME inventory some 25,500 tons higher at the end of March 2012, compared to end of December 2011, in spite of global refined metal production falling by 155,000 tons January-to-March 2012 from the same period last year.
Consumption dropped even more, down 166,000 tons according to the WBMS, and this time China also played a part with consumption, down 16 percent from last year reflecting weaker automotive and e-bike sales.

The 161,000-ton surplus in the Zinc market between January and March this year shows an increase even on last year’s surplus of 540,000 tons for the whole of 2011. The LME now holds some 74 percent of global inventory, showing it is truly the market of last resort for producers of a metal in surplus. China consumes some 44 percent of global production, but much of its imports, which have fallen only marginally this year, come from other Southeast Asian markets. The WBMS cross-references export data from Japan, South Korea, Taiwan, etc. to correlate the Chinese import figures, supporting the picture of Chinese imports remaining at historically high levels.
Reports of slowing stainless production both in Europe and Asia are supported by WBMS reports of rising surplus’ in the Nickel market. Jan to March production exceeded apparent demand by 6,200 tons compared to a surplus of 8,600 tons for the whole of 2011. Mine production during Jan to March was up 98,200 tons above the same period in 2011 but so too was consumption up with apparent demand increasing by 46,700 tons, some of the surplus finding it’s way into increasing LME stocks up 8,300 tons over the level at the end of 2011.
See the whole article online here:  Nickel, Lead, Zinc All in Surplus – When Will Markets Balance Out?

The MasterMetals Blog

June 26, 2012

Mid-tier producers grapple with #Peru's growing pains | The Northern Miner #Mining

Mid-tier producers grapple with Peru's growing pains

By: Ian Bickis

VANCOUVER 2012-06-25
Peru is experiencing a mining boom of global proportions thanks to years of heavy investment and increasing production.

The country is the world’s number-two copper producer, number-two silver producer, number-six gold producer, number-two zinc producer and number-four lead producer, and it ranks high in other commodities, too. Exports, of which mining accounts for about 60%, have grown from $6 billion in the late 1990s to $46 billion in 2011.

That growth shows little sign of letting up, with $50 billion in investments lined up for mining projects, and much of the country remaining under-explored.

But the rapid growth is creating new challenges for companies large and small trying to open and operate mines in the country. On a social level there is growing discontent as to how the benefits of mining have been distributed, while on the operational side, the mining boom has brought with it the same kinds of labour shortages seen elsewhere in the mining world.

Rio Alto Mining (RIO-T) and Fortuna Silver Mines (FVI-T, FSM-N) are two of the few Canadian-listed companies that have transited from developer to producer in the country. Both have faced these issues, and through a variety of approaches have succeeded despite them, continuing to ramp up production and for the most part increase earnings.

Since restructuring in 2009 and listing on the Lima Stock Exchange, Rio Alto has commissioned its first gold mine, La Arena, in Peru’s northwest district of La Libertad. The company started pre-production at the oxide mine in May 2011, produced 56,000 oz. gold in the first quarter of 2012 and expects to produce around 155,000 oz. gold for the year. Meanwhile, the company’s stock price has gone from 7¢ in late 2008 to a recent 52-week high of $4.76, at a time most mining stocks have declined.

In the past six years Fortuna has gone from being a company with five employees to a mid-tier producer with two mines in operation and some 1,500 employees, including contractors. In the first quarter of 2012 the company produced 953,000 oz. silver, 5,100 oz. gold, 4.4 million lb. lead and 5.3 million lb. zinc from its Caylloma polymetallic mine in Peru’s southern region of Arequipa and its San Jose mine in Mexico. Since late 2008 the company’s stock price has gone from 38¢ to a high of $7.58 in late February.

But Fortuna’s stock price was hit hard at the end of March, dropping well below $4 for a stretch, after several issues came to light in its quarterly results. The news that most affected the company’s stock price were the higher costs it encountered in the quarter and its projections of 20% in cost inflation for 2012. According to Fortuna’s investor relations manager Carlos Baca, that cost increase can be blamed mostly on rising labour costs.

Peru, which had been isolated from the global labour crunch for some time thanks to its established talent pool, is now facing the same shortages as the rest of the industry.

Jorge Ganoza, president and CEO of Fortuna, said in a phone interview from Lima that he remembers hearing about skilled-worker shortages in Australia and South Africa a few years ago, but that it wasn’t affecting Fortuna’s operations.

“We were in Peru and Mexico at the time and we didn’t know what they were talking about. There were no shortages here. And then the shortages moved to North America — to the U.S. and Canada — and we were still immune to that. But now it’s ­happening to us,” Ganoza says.

Ganoza spots big career ads in the Lima newspapers from BHP, Rio Tinto and the other big multinationals hunting for skilled labour, often looking for workers for their operations abroad in ­Australia or Africa.

“Peru has become a pool for talent, and that of course is putting pressure on us here as well,” Ganoza says.

In response, Fortuna has implemented new compensation packages, but also moved to do things Ganoza has not seen in the past, like mapping talent in the company, determining key positions and issuing retention packages for key personnel. Without the vast resources of the majors, it can be harder to manage human resources, but Ganoza says that for the size of the company, Fortuna has been innovative in its efforts.

At Rio Alto, company president and CEO Alex Black said in a phone interview from Lima that the company has also seen labour costs increase, despite the country’s talent pool.

“We’re lucky because Peru is a mining country, so there is a lot of talent in-country. Having said that, we are seeing wage inflation in the mining sector because the country is growing and the mining sector is very lucrative.”

But Black says that Rio Alto is well placed to attract workers because Peru has an 8% profit sharing regime, and Rio Alto expects to be profitable in the coming years as it ramps up production.

“Workers will gain considerably from a successful operation,” Black notes. He also added that with Rio Alto’s La Arena mine sitting at a relatively manageable 3,500 metres, and within about 100 km of the coast and the city of Trujillo, it is more accessible and easier to attract workers than some of Peru’s more remote or high-latitude mines. And the company’s stock performance, helped by a stable Peruvian shareholder component, has given the company a higher profile that has also made attracting talent easier.

“It adds to our visibility and credibility. We’re not some junior company that just appeared. So that helps us attract people as well,” Black says.

But while the labour shortage creeps up in the background, social unrest is the glaring challenge to operating in Peru. The high-profile conflict surrounding Newmont Mining’s (NMC-T, NEM-N) $4.8-billion Conga copper-gold project is only the most visible of many simmering social conflicts affecting projects large and small across the country.

Both Rio Alto and Fortuna have experienced social unrest in the past year, though both incidents were fairly isolated. Rio Alto had around 30 locals blockade a road to its mine last September, and at the end of May the road to Fortuna’s Caylloma mine was blocked by a few hundred people in a 48-hour strike.

In Rio’s case, Black says the locals did not have particular demands and mostly sought clarification of agreements already made. The illegal blockade prevented 700 people from getting to work and disrupted operations at the mine, but the company took a patient approach.

“Instead of letting nature take its course and allowing the police to come in, we instigated dialogue to let them voice their objections to get the blockade over and done with,” Black says. It took a few days, but after the company agreed to form joint committees to monitor previous agreements, the blockade was lifted, while the community members agreed to start with dialogue before trying any blockades in the future.

Black also says that being near Barrick Gold’s (ABX-T, ABX-N) Lagunas Norte mine has made things easier for the company, since Barrick started off on the right foot when it arrived. He contrasted that with Newmont’s problems, which stem in part from having a poor operational record in the past.

“Here in Peru, if you make mistakes, especially on the social side, those mistakes stick with you for a long time,” Black says.

As to the Callyoma protest, Ganoza says locals blocked a main road intersection in a show of force that affected several mines in the area, while local media reported they were demanding more local infrastructure projects. The roads reopened within 48 hours, but the lack of infrastructure spending in the countryside makes such protests likely to happen again.

A recent Reuters investigation showed that Peru’s provincial governments are sitting on $3.5 billion in mining revenue gathered over the past decade, but lack the capacity to spend it.

Ganoza has seen this problem first-hand. He’s witnessed the country’s rapid growth in the past decade that has halved the poverty rate to 28%, but left many people not benefitting from the growth.

“We went from having a government without financial resources, to local governments having a large amount of financial resources available. So we need to catch up and learn to spend that money,” Ganoza says.

The problem, Ganoza says, is not the mining companies, mining legislation or system, but the need for better implementation of what’s already established.

“In Peru we have an excellent mining code that I think should be an example to many countries. It’s just the ability of the government to execute on existing laws . . . we just need the government to be more effective in its use and distribution of state resources,” Ganoza says.

Despite the challenges, both ­Black and Ganoza consider Peru one of the world’s top mining ­jurisdictions.

Ganoza says that Peru has not gotten any easier, but that it stands out as one of the best countries in Latin America.

“Where else are you going to go? In Chile, there is a shortage of power and water. Argentina today has become off limits for the industry basically, with all this nationalism. Brazil has always been challenging and it’s not getting any easier. Ecuador — well, we know all about Ecuador. There is a lot of excitement about Colombia but nothing has been permitted in Colombia yet. So it’s a paradise to go and explore, but how about turning those discoveries into mines?”

With their current projects up and running, Rio Alto and Fortuna  are on the hunt for their next mine. With both companies based in Peru, it is a natural starting point, but Black and Ganoza mention they are looking quite a bit at North America for their next asset as well.
We’ll see if either company decides to leap into another Peruvian challenge, or try its luck elsewhere.
© 1915 - 2012 The Northern Miner. All Rights Reserved.

 Se the Article online here:   Mid-tier producers grapple with Peru's growing pains | The Northern Miner - The Global Mining Newspaper

The MasterMetals Blog

RPT-#PDVSA turns to traders to sustain #Ecuador #oil deal | Reuters

And the $64,000 question, How much are the traders and their chavista friends making off these deals?

* Half of PDVSA's 2009-2011 shipments from 3rd countries

* Agreement aimed to eliminate reliance on intermediaries - supposedly...

RPT-PDVSA turns to traders to sustain Ecuador oil deal | Reuters

Mon Jun 25, 2012 9:00am EDT

By Marianna Parraga and Daniel Wallis

CARACAS, June 24 (Reuters) - Venezuelan state oil giant PDVSA has had to buy dozens of extra fuel cargoes from countries as far away as Estonia and Saudi Arabia to keep up its side of a 2008 oil supply deal with leftist ally Ecuador, according to traders and sales documents.

In an examination of shipping data that highlights the practical risks of political trade deals, Reuters found that half the fuel Venezuela sent to Ecuador, which cannot process its own heavy crude, came from third countries, often via trading companies including Glencore.

What was meant to be an example of cooperation between ideologically aligned states, with Venezuelan President Hugo Chavez importing Ecuadorean crude in return for refined fuel, has instead become another sign of problems in PDVSA's refining network and a profitable niche for foreign traders.

It is also the latest indication of difficulties for PDVSA, one of the world's biggest oil companies and the cash cow of Chavez's "21st century" socialism. In an election year in Venezuela, PDVSA's finances are under growing pressure as Chavez digs deep into its coffers to fund welfare programs.

The shipments to Ecuador were corroborated by some traders involved in the deals - and show that the system appeared to stumble after its first year.

So Venezuela turned to third countries and traders, often derided by Ecuadorean President Rafael Correa as speculators, for many of the supplies. Sources said Venezuela paid the transport costs for bringing cargoes from countries that also included Britain, France, the Netherlands and Colombia.

"PDVSA has made deals but then doesn't have the agreed products, whether due to problems with refining, production or quality," said one trader involved in the transactions who asked for anonymity.

The bottlenecks in PDVSA's refineries - from accidents to outages and unplanned stops for maintenance - are well-known.

But the dynamics of the Ecuador deal underscore a less familiar truth: as Chavez inks ever-growing numbers of pacts with political allies, PDVSA has found itself in the improbable role of middleman. PDVSA officials did not immediately respond to a detailed request for comment.

Trading companies Glencore, Trafigura and PRSI Trading were hired by PDVSA to buy fuel for Ecuador on the open market, the details of the transactions showed.

Between 2009 and 2011, 53 percent of Venezuela's shipments to Ecuador were sourced from third countries, with traders accounting for 39 percent, according to a database of the shipments compiled by Reuters and, a Caracas-based network of investigative journalists.


The remaining 47 percent came from Venezuela and its overseas storage and refining facilities, according to the study. In total, shipments valued at $947 million were put in the hands of intermediaries during that 2009-11 period.

It was not clear how much traders made on the deals.

The agreement signed with much fanfare by Chavez and Correa four years ago s ays state oil company Petroecuador would supply Venezuela with Ecuadorean crude for processing by PDVSA refineries, and would receive fuel in return from Venezuela.

That way, the accord said, it will "eliminate intermediaries from direct participation in the buy-sell process."

Nevertheless, the Venezuelan government says it always planned for there to be scope in the agreement to vary where the crude was sent, and where the products for Ecuador were sourced.

"What we are doing is a triangulation," Venezuelan Energy Minister Rafael Ramirez said when asked by Reuters about the agreement, referring to the practice of receiving Ecuadorean crude then sourcing refined products from abroad.

"We receive their oil and we determine its value carefully. It is sold, and we get the products they need, of the quality they need, and it is sold to them."

The Ecuador deal is one of a host of oil deals that Chavez has signed with political allies - including China, Cuba and more than a dozen other nations in Central America and the Caribbean - many of which have been criticized by Venezuela's opposition before the Oct. 7 presidential election.

The opposition says Chavez rewards allies with crude on easy terms, including nations with questionable rights records such as Syria, Iran and Belarus. His government routinely dismisses such criticism as "counterrevolutionary" lies.

Chavez's government has also funded literacy programs, schools and health clinics in several leftist Latin American nations, winning him political influence in recent years and prompting some leaders to turn their backs on Washington and strengthen relations with China and Russia instead.

The oil agreements are a major factor putting pressure on PDVSA's increasingly constrained cash flow: in some cases, customers pay for shipments in exchange for goods and services.

The company also has to contend with falling global prices, and heavy local subsidies that mean Venezuelans enjoy the cheapest gasoline in the world.


To be sure, PDVSA still has a lot of financial clout. Its net profit jumped 42 percent to $4.5 billion last year on record revenue of almost $125 billion.

And it is still able to make huge contributions to Chavez's government - they doubled last year to nearly $50 billion - that help pay for his signature social programs, a central element of Chavez's re-election bid.

Companies including U.S. majors Chevron and Exxon Mobil Corp, Brazil's Petrobras and Petrochina also delivered cargoes to Ecuador on PDVSA's behalf under the deal, according to the bills for the shipments.

Individual traders confirmed the trend and various transactions involving their companies.

They said Venezuela's state oil company does the same thing to cover shortfalls in supply deals with other countries. Data on those agreements was not immediately available.

"PDVSA buys in the same way to supply Argentina, Uruguay and Bolivia," a trader told Reuters.

It would not be the first time Chavez's administration has worked with Western traders: Trafigura helped it beat a months-long, opposition-led strike that all but halted operations by PDVSA's own tankers during 2002 and 2003.

Part of the problem is that Ecuador produces heavy crude, like the majority of Venezuela's oil, meaning there is competition for access to Venezuelan refineries that process it.

That was cited by Venezuela's government in 2007 as one of the main reasons why the two nations had not signed a similar agreement earlier. But Ramirez later said it had been decided that PDVSA's U.S. refining subsidiary Citgo would handle some of the cargoes from Ecuador, with the rest going to Venezuela.

Sourcing fuel cargoes going the other way has proved expensive. For example, in June 2009 Trafigura chartered the Bright Express tanker to ship 263,500 barrels of catalytic naphtha, used for making gasoline, to Ecuador from Yanbu in Saudi Arabia. Maritimes sources say that journey alone will have cost PDVSA some $1.2 million.

"Trafigura was carrying a lot from Venezuela to Africa that year, so certainly it suited it to do the return journey bringing (products) from Yanbu," said a maritime source involved in PDVSA's shipping logistics.

"These are business opportunities that traders can't ignore."


Asked by Reuters about the agreement, Petroecuador's general manager, Marco Calvopina, said it had always been expected that PDVSA might procure Ecuador's fuel from third countries.

"They handle big volumes of oil products. They can always find them on better terms than Petroecuador," Calvopina said.

"We have always compared the prices Venezuela offers us against the market ... sometimes we take them when it's convenient for the state, and on other occasions we have not."

Petroecuador has complained to PDVSA about the delayed arrival of some cargoes, and at times about the quality of the fuel delivered, the study of the shipping records showed.

Ecuador, OPEC's smallest member, currently pumps around 500,000 bpd of crude, just about a sixth as much as Venezuela.

As part of a big plan to revamp its fuel production and become an exporter within three years, Ecuador is investing $750 million to boost efficiency at its largest refinery, the 110,000 bpd Esmeraldas facility, and will invest an additional $600 million to enable it to make higher-quality products.

It says it also plans to spend $800 million overhauling its smaller Shushufindi refinery in the Amazon region.

At the center of the efforts is another project that also involves Venezuela: the construction of the 300,000 bpd, $12.5 billion Pacifico refinery, a PDVSA-Petroecuador joint venture slated to begin production in 2015. Ecuador says it is in talks with China about financing for it.

In April, Ramirez hailed Ecuador for "strengthening its capacity" to distance itself from market intermediaries who had undervalued its crude. A month later, Ecuador's foreign minister, Ricardo Patino, was in Caracas for talks with officials.

He said the two nations' collaboration should inspire similar pacts worldwide. "We are an example that can be turned into a form of global exchange," Patino said.

RPT-PDVSA turns to traders to sustain Ecuador oil deal | Reuters

June 25, 2012

#Guatemala introduces sweeping #mining law reforms -

Guatemala introduces sweeping mining law reforms

Guatemala's Union of Extractive Industries says it will not support sweeping reforms to the nation's Mining Act, which include permanent royalty increases and the creation of a state mining company.

Author: Dorothy Kosich
Posted:  Monday , 25 Jun 2012

The Ministry of Energy and Mines (MEM) has introduced amendments to 30 articles of the country's Mining Act, one of which would require 147 companies with operating licenses to pay new royalty rates.

The amendments would also replace a voluntary agreement signed earlier this year between the mining industry and Guatemala's President Otto Perez Molina which increased the royalty rate on gross revenue by 400%. Gold and silver companies now voluntarily pay 4%, while base metals pay 3% and industrial minerals remained at 1%.

As a result the state is expected to reap royalties between Q600 million (US$76.38mn) to Q700 million (US$89.11mn) this year, up Q500 million (US$63.65mn) more than previously paid by Guatemala's mining industry.

The legislation also proposed the creation of a state mining company to possibly encourage government participation in Guatemala's mining and oil projects.

The MEM amendments would also establish a mining fund to distribute incomes from royalties including 35% to the community where the mine is located and 20% for the remaining communities in the department in which the mines operate.  Guatemala's Ministry of Social Development will get 20% of the royalties, the fund for national disaster emergencies 20%, and MEM and the Ministry of the Environmental and Natural Resources would receive 3% and 2%, respectively.

The legislation would also create a national system of mining information, as well as regulations for the reclamation of abandoned mines in Guatemala.

The MEM also proposes a crackdown on illegal mining in the country including the disposal of materials and chemicals in rivers.

A Mining Council, chaired by the Ministry of Energy and Mines, would be convened to develop a vision plan for mining both at the local and national levels. Council members would include the Ministry of the Environment and Natural Resources, the Ministry of Planning and Programming for the Presidency, a representative of the mining sector association, the Union of Extractive Industries (Gremiex), and a representative of the National Association of Municipalities.

However, Gremiex issued a statement, stating that the organization does not support the reform submitted by MEM because mining companies have not had a chance to review the contents of the legislation.

Gremiex said they were surprised that the MEM submitted reform measures to the Mining Act without reaching a consensus with mining and exploration companies.

Among the mining and exploration companies doing business in Guatemala are Goldcorp's Marlin operation and Radius Gold's El Tambor gold mine.

Read the article online here: Guatemala introduces sweeping mining law reforms - POLITICAL ECONOMY -

June 22, 2012

#Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR #MINING -

No mystery here...

Gold companies where management has 'skin in the game' outperform others - U.S. Global

New research by U.S. Global Investors shows that companies that have high levels of insider ownership have significantly outperformed their peers where this is not the case.

Author: Geoff Candy
Posted:  Friday , 22 Jun 2012
GRONINGEN (Mineweb) - 

Gold companies that have a high level of insider ownership have significantly outperformed peers with less insider ownership says U.S Global Investors.

Speaking to's Newsmaker podcast, U.S Global portfolio manager, Brian Hicks explained, after attending a number of conferences over the spring and hearing many discussions about the difference in performance between bullion and gold stocks, a few anomalies caught his attention.

While a number of stocks are clearly very cheap on a relative basis, he said, there was a dislocation "in that you're really not seeing insiders buying their own shares and yet they're asking us to buy their shares and trying to convince us that this is a great time to invest because of the disparity between bullion and the mine shares."

Hicks compared the share price performance of 32 silver and gold producers to the percentage of "insider ownership" of these stocks and found that, "the companies that were in the top half of insider ownership clearly outperformed, in a very meaningful way, companies that were in the bottom half of insider ownership."

"Just to quantify that," he added, "this is over a three year time period that ended on June 13 and the entire universe of stocks had a median return of 10.2%. The top half in terms of insider ownership returned about 14.6% whereas the bottom half only returned 7.8%."

U.S. Global Investors CEO, Frank Holmes says that this qualitative measure fits well into the firm's existing framework of assessing stocks that focuses on relative valuations.

He explains, "We line them all up and compare who has the best or worst production per share, who has the best of growth of reserves per share and who has the best growth cashflow per share. And then the mosaic would include, is this event going to be positive or negative in the next 12 months, will it change momentum and then we make decisions to overweight or underweight those companies."

Intuitively such a finding makes sense, given that managers with more skin in the game are likely to work harder to ensure profitability, as Hicks explains, " clearly if you have a stake in the position or in the company, you're going to be more diligent, you're going to be more thoughtful in running that business and it looks as though performance is enhanced."

Notwithstanding these findings, with the advent of the gold ETF, management teams have become even more important at gold mining companies because investors now need a reason to choose the stocks over investment in the actual metal.

Holmes agrees adding that the gold ETF has created a "transparency of their performance on a relative basis.

"One of the things we noted in some research by CIBC was the cost now of looking for producing and shipping an ounce of gold worldwide is over $1500/oz, taxes have risen dramatically and the cost of ongoing production has gone up dramatically, so management is going to be very, very key in making very prudent decisions that are not dilutive to the shareholders that they can show this attractiveness on reserves and production per share growth."

See the article online here: Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR MINING - Mineweb

June 21, 2012

#Gunvor's Timchenko eyes downstream buys | Reuters #Oil

Gunvor's Timchenko eyes downstream buys

ST PETERSBURG, Russia | Thu Jun 21, 2012 5:54am EDT
(Reuters) - Gennady Timchenko, co-owner of Gunvor, says now is the right time to buy downstream assets, as he eyes transforming his fast-growing Russian trading house into a vertically integrated energy business.
But, in an exclusive interview with Reuters on Thursday, Timchenko said he was not ready for big purchases, such as the one-half stake in TNK-BP, Russia's No.3 oil firm, that has been put up for sale by British oil major BP.
"It (TNK-BP) is a very big company, we are not ready for such big purchases, we did not even discuss this subject," Timchenko said on the fringes of the St Petersburg International Economic Forum.
"We have become active in buying oil refineries now as we think that now is the right time to enter oil refining."
Gunvor recently bought bankrupt Swiss oil firm Petroplus's refinery in Ingolstadt, Germany, following an earlier deal to buy a plant in Antwerp, Belgium.
Timchenko added that Gunvor may look at other "interesting possibilities" in downstream if they arise.
Timchenko, viewed as having good relations with Russian President Vladimir Putin, said he owns just over 46 percent in Gunvor. Chief Executive Torbjorn Tornqvist owns 46 percent, while the rest is owned by management.
(Reporting by Katya Golubkova and Denis Pinchuk; Editing by Douglas Busvine)

Read the article online here:  Exclusive: Gunvor's Timchenko eyes downstream buys | Reuters

June 20, 2012

End of the supercycle is also spelling the end of radical resource nationalism |

End of the supercycle is also spelling the end of radical resource nationalism

Frik Els | June 17, 2012
Last year according to an Ernst & Young survey of the world's 30 largest miners, resource nationalism jumped to the top of the risk list after 25 countries announced their intentions to increase their take of the mining industry’s profits and others contemplate outright nationalization.

A growing list of nations – and not just radical fringe territories such as Zimbabwe or Venezuela – but stable jurisdictions including Poland, Ghana and Botswana have been pushing for greater control and ownership of the resource sector on top of higher taxes and royalties as cash-rich mining companies become easy targets for politicians.

South Africa recently stepped back from nationalization, but is nevertheless tightening its grip on the industry.  Although it has since backtracked in the run-up to elections in Mongolia set for the end of the month draft legislation put forward new provisions to cap foreign ownership of domestic companies at 49%.

Zambia has publicly acknowledged that the period of state-controlled copper mining was disastrous, but is also looking at ways to increase state ownership and intervention in its resource industry.

Indonesia surprised the global mining community in March after a new rule – Government Regulation No. 24 of 2012 – was quietly announced on the mining ministry's website which requires all foreign mining companies to sell majority stakes in their mining operations to locals. That news was in addition to  new export duties levied on minerals.

The tide of resource nationalism may now be turning however argues the Financial Times because the world's biggest miniers "are slowing down – or even talking about cancelling – their investment programme, allowing them to play country against country".

Natural resources companies with a pipeline of, say, five projects in five different countries are now likely to build just two or three of those. Thus, executives have the power to cherry pick which combination of country and project offers the best returns.

The threat of a cancellation – or long delays – could be a powerful incentive for politicians to offer better terms to companies, executives mutter.

In particular, local and regional politicians will be particularly prone to lobby in companies’ favour in the hope of securing jobs and investments.

The paper says Australia appears to be leading the way in backing off from placing too onerous demands on resource investors and African countries are also taking a softer stance.

Changes in South American governments' attitude towards greater state control and revenue from mining are less evident, with a country like Peru struggling to contain protests against new mega-mines and Argentina seizing outright control of energy assets.

As attractive deposits become harder and harder to find in traditional markets, miners – especially those exploring for gold – are also pushing the limits of the political risk they are willing to take on.

Read more >>End of the supercycle is also spelling the end of radical resource nationalism |

June 19, 2012

CME Group to allow physical settlement of weekly #gold options - MINING FINANCE / INVESTMENT -

CME Group to allow physical settlement of weekly gold options

Chicago-based CME says it will amend the contract of its weekly gold options to let investors exercise into futures contracts effective July 1, pending approval from the U.S. CFTC.

Author: By Frank Tang
Posted: Tuesday , 19 Jun 2012


CME Group is allowing investors in its short-term gold option contracts to take delivery of physical bullion in a bid to increase the product's appeal against over-the-counter gold options.

The biggest operator of U.S. futures exchanges said it will amend the contract of its weekly gold options to let investors exercise into futures contracts effective July 1, pending approval from the U.S. Commodity Futures Trading Commission, CME said in a notice late last week.

Prior to the change, the options, which were launched in July last year on CME's COMEX metals platform, were settled by cash only and physical delivery was not permitted.

Chicago-based CME is trying to make the options more attractive as some investors favor owning physical precious metals as a safe haven in market turbulence.

In a similar move to woo investors who favor physical metals in October last year, CME more than doubled the amount of physical gold it can accept from its clearing members as collateral.

Dealers said that the CME was trying to gain market share from the over-the-counter market, which offers investors gold options with a wide array of expiration dates.

Each of the short-term options has a five-business-day expiration period, and the exchange rolls out a new option contract with a new date of expiry on a daily, continuous basis.

COMEX floor traders said investors, however, have greeted the product with little interest, as the contract was rarely traded.

Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader, said that market makers are reluctant to provide liquidity for the high-risk, short-term product, which has failed to garner interest from both institutional and retail investors.

"Statistically, 95 pct of the options go out worthless, so who's going to take the first step" to trade them, Neglia said. He added there was some interest for the product among trading houses.

In a sharp contrast to the weekly options, open interest of CME's popular monthly COMEX gold options currently totals at well over 1 million contracts as more investors are using options to bet on the upside in gold due to economic uncertainty.

© Thomson Reuters 2012 All rights reserved

CME Group to allow physical settlement of weekly gold options - MINING FINANCE / INVESTMENT -

June 18, 2012

Metals News - The Incredible Collapse Of The Athens Stock Market

THE increíble shrinking Athens stock market:

Metals News - The Incredible Collapse Of The Athens Stock Market

The MasterMetals Blog

Australian exploration spending hits record US$1.09bn - EXPLORATION -

Australian exploration spending hits record US$1.09bn

the first time more than a billion dollars has been spent on exploration in a single quarter.

Despite the levying of carbon pollution and mineral resources rent taxes, Australian mineral exploration spending achieved a record in the quarter ending March.
Author: Dorothy Kosich
Posted:  Monday , 18 Jun 2012
Spending on mineral exploration in Australia reached a record A$1.09 billion (US$1.09bn) in the March quarter-the first time more than a billion dollars has been spent on exploration in a single quarter.
In his weekly Treasurer's Economic Note issued Sunday, Australian Treasurer Wayne Swan observed "In fact, exploration expenditure has risen by about 35% since a price on carbon pollution was announced, and nearly 80% since the Minerals Resources Rent Tax was announced."
"It's yet another reality check for those who try to talk down the outlook for our resources sector or make ridiculous claims that important economic reforms are hurting investment," he stressed.
Beginning on July 1, Australia will levy a controversial carbon tax on 294 firms for the A$23/tonne (US$22.96/tonne), with mining companies, steel makers and electricity generators among the largest polluters.
Australia is one of the world's largest per-capita carbon emitters due to its reliance on coal for 85% of electricity generation.
"What's often not appreciated is that Asia's rise will create demand for a lot more than just our iron ore and coal," said Swan. "That means there will be opportunities for more than just our resources sector."
Australia's economy grew 1.3% in the March quarter, double what economists had anticipated. A major driver was a 19.7% increase in engineering construction, mainly in mining. Planned investment in the resources sector reached A$500 billion (US$500bn).
Earlier this month, Swan noted the strong growth was achieved in spite of a cyclone disrupting iron ore exports from Western Australia. The region's economy grew by 13.6% during the period from March 2011 to March 2012.The Australian government forecast in May that the mining boom will lift economic growth from 3% in the current fiscal ending June 30 to 3.25% next fiscal year.

Australian exploration spending hits record US$1.09bn - EXPLORATION - Mineweb

June 14, 2012

Gold equities reversing a 10 month underperforming trend- BMO

From BMO Capital Markets, a buy signal for gold shares.
FIRST MESSAGE: Gold shares are reversing a 10 month downtrend against the S&P 500.
2-      STOCKS REVERSING AN UNDERPERFORMING TREND ARE: Yamana, Randgold, Goldcorp, NewGold, Newmont and Iamgold ( see second last link below).
SECOND MESSAGE:  those looking for sources of funds to buy golds should consider energy. See figure 2 below.

Buy Golds, Sell S&P 500

Gold shares are reversing a 10-month downtrend against the S&P 500 – Figure 1.

·         Gold is now trending slightly higher in Aussie dollars, a currency whoseinterest rate advantage has slipped dramatically.  

·         Those looking for sources of funds to buy golds should consider energy –Figure 2.

There are a few gold shares that are already consistent outperformers versus broad equity markets, like Goro Resources – Figure 3.

·         We advise against bottom fishing amongst the laggards – Figure 4.

·         Price trends on gold shares are found at this link.

·         Relative strength trends of gold shares in the MSCI World index are found here.

·         Relative strength trends of gold shares in the S&P/TSX Composite Index are found here

Figure 1: Gold Miners vs S&P 500 ETF (Mind The Inflection Pt)
Figure 2: Gold vs Oil (Sell Oil or Energy Shares to Fund)

Figure 3: Goro Resource vs. ACWI (one of a few outperformers)

 Figure 4: Kinross vs. Gold Miners (Don't Dumpster Dive)
Source: BMO Capital Markets, Bloomberg, Thomson, Markit

June 13, 2012

Gold replacing German bonds as a safe haven?

Gold replacing German bonds as a safe haven?

Yesterday, for the first time, the Swiss 5-year bond yield was bid into negative yield. The Swiss safety deposit box grows in duration – Figure 1.

·         Importantly, other "safe-haven" bonds, such as German bunds and U.S. Treasuries are not following suit.

o    German bund yields are actually soaring.

§  And that is with this morning's 10-year auction that, according to initial reports, saw "decent" demand.

o    Rising treasury yields are very near and dear to our hearts. The fit of the moves between the S&P 500 and U.S. 10-year Treasuries is now an impressive (or not really if your job is to argue why equity fundamentals matter) 77% - Figure 2. 

§  Rising Yields = Rising Equities

·         Back to bonds:

·         The sell-off in German bunds coincides with a deterioration of creditworthiness of Germany versus Switzerland – Figure 3.

o    One is a Target 2 creditor, which could get paid back in a euro-lite currency. The other is not.

·         The sell-off in Treasuries contains no such fuse, and thus one should expect no such fire behind the move. This is a key point (back to Figure 2).

·         You can't go to Switzerland without mentioning gold – Figure 4.


Figure 1: Swiss Bond Yields: 2 to 20-year Bonds

Inflation-adjusted commodities price performances #Gold #oil

Inflation-adjusted commodities price performances 
Outlook for oil, copper, gold, silver, and platinum

Below is an excerpt from a commentary originally posted at on June 10, 2012.

To paraphrase Einstein, not everything worth measuring is measurable and not everything measurable is worth measuring. The purchasing power of money falls into the former category. It is worth measuring, in that it would be useful to have a single number that consistently reflected the economy-wide purchasing power of money. However, such a number doesn't exist.

Such a number doesn't exist because a sensible result cannot be arrived at by summing or averaging the prices of disparate items. For example, it makes no sense to average the prices of a car, a haircut, an apple, a dental checkup, a gallon of gasoline and an airline ticket. And yet, that is effectively what the government does -- in a complicated way designed to make the end result lower than it would otherwise be -- when it determines the CPI.

The government concocts economic statistics for propaganda purposes, but our point here is that even the most honest and rigorous attempt to use price data to determine a single number that consistently paints an accurate picture of money purchasing power will fail. It will necessarily fail because it is an attempt to do the impossible.

The goal of determining real (inflation-adjusted) performance is not completely hopeless, though, because we know what causes long-term changes in money purchasing power and we can roughly estimate the long-term effects of these causes. In particular, we know that the purchasing power of money falls due to increased money supply and rises due to increased population and productivity. By using the known rates of increase in the money supply and the population and a 'guesstimate' of the rate of increase in labour productivity we can arrive at a theoretical rate of change for the purchasing power of money. This theoretical rate of purchasing-power change will tend to be inaccurate over periods of a year or less but should approximate the actual rate of purchasing-power change over periods of five years or more.

We've been using the theoretical rate of purchasing power change, calculated as outlined above, to construct long-term inflation-adjusted (IA) charts for almost two years now. Here are the updated versions of some of these charts, based on data as at the end of May.
1. In current dollar terms, the oil price peaked at just under $200/barrel in 2008 and at around $170/barrel in 1980. It is now only slightly above its 40-year average.

We doubt that oil will ever again trade below $50/barrel in nominal dollar terms. Also, the 2008 peak was almost certainly the secular variety, so we probably won't see the IA oil price trade above its 2008 peak any time this decade. If oil does make a new high in IA terms within the next few years it will be because of a major Middle East conflagration that greatly reduces the global supply of oil, not because of rising demand or geological limitations on supply.
2. As is the case with oil, in IA terms the copper price probably made a secular peak in 2008. As is also the case with oil, the IA copper price is now only slightly above its 40-year average.

Falling demand due to a global recession over the next 12 months could cause the copper price to drop back to $2.00, but we doubt that it would stay that low for long because economic weakness always prompts central banks to boost the money supply. However, future rounds of QE (or whatever other name they give to the money pumping) probably won't do anywhere near as much for the IA copper price as the earlier rounds did. Another way of saying this is that copper probably won't be one of the main beneficiaries of future monetary inflation. One reason is that China's construction boom is turning to bust. Another is that the high prices of the past six years have increased the current and future supplies of this metal.
In 2012 dollar terms we think a copper price in the $2.50-$3.50 range is about right. We would therefore steer clear of copper mining projects that required a copper price of much above $3.00/pound to be economically robust and we would be wary of low-grade copper projects with unknown economics.
3. In early 2008, the combination of fear that electrical power shortages in South Africa would severely disrupt the global platinum supply and fear of Fed-sponsored dollar depreciation drove the IA platinum price above $3000/oz (about $2300/oz at the time, which is the equivalent of just over $3000/oz in terms of today's dollar). This will probably turn out to be a secular peak for the IA platinum price, although platinum stands a better chance than either oil or copper of exceeding its 2008 peak in IA dollars. There are two reasons for this. First, platinum supply is more concentrated and therefore more vulnerable to disruption than oil or copper supply. Second, we expect that platinum will benefit from the continuing upward trend in the IA gold price.
We may be interested in buying platinum if it drops to $1200/oz.
4. The IA gold price continued its long-term upward trend following a normal intermediate-term correction during the 2008 crisis. It is yet to experience a major upside blow-off like it did in the lead-up to its January-1980 peak and like the oil, copper and platinum markets did leading up to their 2008 peaks.
5. In nominal dollar terms, silver's April-2011 peak was a test of its January-1980 peak. In IA terms, however, silver's highest price in April of 2011 was only slightly more than one-third of its 1980 peak.
Silver's January-1980 peak was so extraordinary that it will possibly never be exceeded or even seriously challenged in IA terms, but there's a high probability that silver will handily exceed last year's peak in IA terms before its long-term bull market comes to an end. This is largely because although industrial demand plays a much bigger role in the silver market than in the gold market, investment demand is still the primary driver of silver's long-term bull market. Furthermore, the same factors that should continue to boost the investment demand for gold (government and central bank stupidity in all its forms) are likely to do the same for silver.
6. Because the official "inflation" indices chronically understate the reduction in currency purchasing power, using these indices to calculate inflation-adjusted performance overstates the performance. That's why Malthusians such as Jeremy Grantham are able to use CPI-adjusted charts of the CRB Index to support their theories that the world is about to run short of valuable agricultural and industrial commodities. These CPI-adjusted charts suggest that the ultra-long-term downward trend in "real" commodity prices has ended, an implication being that commodity supply is now in a long-term downward trend relative to real commodity demand.
The picture is very different if our preferred method is used to adjust for the effects of inflation. As illustrated by the following chart, the IA CRB Index made a new all-time low in 2001 and then peaked in 2008 at well below its 1974 and 1980 highs. There is no evidence that its long-term downward trend has ended.

Inflation-adjusted commodities price performances

The MasterMetals Blog

South African Oligarch Beats Oleg Deripaska To The Pot In Guinea - Business Insider

South African Oligarch Beats Oleg Deripaska To The Pot In Guinea - Business Insider

MOSCOW—A group of South Africans, led by Tokyo Sexwale, has devised a scheme to take over mineral assets and mining concessions in the west African republic of Guinea, which the government plans to renationalize after revoking deals struck by previous Guinean governments. The Sexwale scheme is a growing threat to Oleg Deripaska’s Rusal in Guinea, as the offers Deripaska has proposed to Guinean President Alpha Conde and his family miss their mark.
On the eve of Rusal’s annual general meeting of shareholders in Hong Kong, due on June 15, there has been no fresh warning to Rusal shareholders that their Guinean bauxite mines and alumina refinery are facing confiscation, and transfer to a state mining company controlled, indirectly, by the South Africans. These Guinean assets account for more than half of Rusal’s global bauxite reserves. On last year’s production results, the Guinea bauxite mines represent 36% of Rusal’s annual bauxite production of 13.5 million tonnes; 7% of Rusal’s alumina output of 8.2 million tonnes. Both totals were down below past-year volumes.
In its latest challenge, the Guinean government charges Rusal with fraudulent under-reporting of output figures. A billion-dollar claim by the Guinean government dating back to 2009 accuses Rusal of under-counting the volume of its bauxite and alumina exports, and under-paying on taxes.
The only reference Rusal has made to the potential losses is this line in the annual financial report for 2011: “Operations in these countries involve risks that typically do not exist in other markets, including reconsideration of privatisation terms in certain countries where the Group operates following changes in governing political powers.” In its May 2012 financial report, Rusal also claims that the government’s position in the Guinean courts “has no merit and the risk of any cash outflow in connection with this claim is low and therefore no provision has been recorded in this regard in these consolidated financial statements.”
The collapse of Rusal’s position in Guinea this year is one of the targets for legal challenges against Deripaska’s management by shareholding partners, Victor Vekselberg, Len Blavatnik, and Mikhail Prokhorov.
Rusal’s share price is currently fixing in the Hong Kong market at an all-time low of between HK$4.20 and HK$4.60 (54 and 59 US cents). At US$9 billion, the company’s value in the market is $2 billion less than its bank debts. The Russian government’s official and unofficial stake in the company is now worth about $2.6 billion, two and a half times less than it was worth when the Kremlin agreed to bail Rusal out of insolvency and default in November 2008; then underwrite Deripaska’s initial public offering of shares on the Hong Kong Stock Exchange in January of 2010.
Sexwale is one of South Africa’s wealthiest black leaders, with substantial holdings in the minerals and mining sector through his Mvelaphanda Group . He is also the Minister for Human Settlements (slums) in the current South African government, a critic of President Jacob Zuma, and a potent challenger at the next presidential election in 2014.
According to sources in Johannesberg, Sexwale is discussing with Eurasian National Resources Corporation (ENRC) a plan to buy into mining interests in Guinea. London-listed ENRC is one of Kazakhstan’s dominant mining companies, producing iron-ore, ferro-alloys, copper, coal, bauxite and alumina. Although ENRC is smaller than Rusal as a global bauxite and alumina producer, if Sexwale manages to oust Deripaska from Guinea, that would change dramatically. Currently, ENRC’s market capitalization is $8.1 billion.
Sexwale is believed to be the power behind two obscure British Virgin Island vehicles, one called Palladino Holdings and another called Floras Bell, which are managed by Olaf Walter Hennig. An investigation by David Gleason in Business Day of Johannesberg reports that a year ago Hennig arranged for a loan of US$25 million to finance the start-up of a new Guinean state mining company. The new mining code, drafted by Conde’s advisors, would grant that new state entity a free 15% stake in the country’s mining projects, and the option to buy another 20%.
Behind Hennig and the $25 million loan, according to Gleason and confirmed independently by sources in Conakry, the Guinean capital, are Sexwale; Mark Willcox, the chief executive of Mvelaphanda, and several other businessmen of South African, Polish, and British extraction. One of them reported by Gleason is Ian Hannam, a City of London financier who tried to arrange Rusal’s float on the London Stock Exchange in 2007, but failed.
Guinean sources say Sexwale, Willcox and Hennig are the control shareholders of the BVI entities. A report in the Sunday Times of London in May claimed that Hennig was a “shadowy middleman”, and that the Palladino loan had been signed in April 2011 by the Guinean finance minister and a local proxy for Palladino. The terms look as if they were copied out of the Russian loans-for-shares book. If the Guinean state entity defaults on repayment of the Palladino loan, Sexwale and his pals would be eligible to convert the debt into a 30% stake in the state mining company and its assets.
A senior Guinean official says this is one of several non-transparent deals arranged by President Conde which have convinced BHP Billiton to withdraw from concessions they currently hold in Guinean bauxite and iron-ore. Rusal’s concessions are a target, the source adds, because of the personal falling-out between Conde and Deripaska chronicled here.
Guinean officials who have tried to persuaded Conde to continue the reforms initiated by former Mining Minister Mahmoud Thiam had hoped the new code would establish a transparent foundation for renegotiation of many of the Guinean resource deals. Those have enriched the country’s rulers, deprived the country of taxes and investment, and left its resources in the ground. The reformers suspect Conde of appearing to endorse the public goals while secretly bargaining for private gains to be channelled through newly created entities backed by fresh alliances. Sexwale, said a Conakry source, “and the South African gang were [President Conde’s] business partners through the ANC [African National Congress, the ruling South African political party] from before he became president. There is that trust and an agreement to do business that predates everything.”
Other Guinean sources contend the Palladino loan is illegal, because it hasn’t been ratified by the Guinean parliament; because violations of US and UK anti-corruption laws are suspected, and because the government in Conakry has pledged that in return for debt relief from the Club of Paris government creditors, the World Bank and the International Monetary Fund (IMF), it cannot pledge or transfer national resource assets bilaterally.
“The [share] pledge made in this [Palladino loan] agreement by the Government cannot be implemented. Under Guinea’s procurement and asset disposal law, any transaction with state-owned assets with a value exceeding 800 million Guinea francs ($120,000) has to be made through a public tender process. [The Palladino loan] also violates Article 150 of the new mining code which says the same things. Perhaps the [Palladino] consortium, aware of the provisions of the mining code, part of which they may even have drafted, secured their agreement five months ahead of the release of the mining code in the hope the new law would not be retroactive. Too bad! The public procurement law overrides the mining code.”
A high Guinean source describes the Palladino scheme an “an attempt to seize the assets of the Guinean Government by the back door, on the cheap and risk free. Essentially, whoever is behind Paladino has found it easy to penetrate the higher echelons of the new Guinean administration. The $25 million loan, far from being a loan, can actually be perceived as ‘entry ticket’ or ‘signature bonus’. All the consortium has to do is bide their time seat and wait.”
An advisor in Conakry says that for Rusal to wait for Conde’s relationship with Deripaska to improve plays into the South Africans’ hands now. “Deripaska and Conde had a marriage of convenience that worked in the beginning and each side thought it would extract maximum value for very little in return. Neither was able to deliver to the other’s expectations.”

South African Oligarch Beats Oleg Deripaska To The Pot In Guinea - Business Insider