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September 29, 2014

#China's #gold demand -ScotiaBank

 Simply look at the weekly withdrawals from Shanghai Gold Exchange vault. 

This from Scotiabank's China specialist Na Li:


- Na's China Express – Measuring China's Gold Demand: Overnight data shows that China's net gold imports from Hong Kong dropped to 21.134 tonnes in August, the lowest level since May 2011 (Exhibit 1 below). This data point supports our view that China is still in a destocking stage for gold and our relatively cautious "market weight" call on gold from a China perspective. However, we do caution that investors should no longer regard China's net imports from Hong Kong as an accurate proxy for China's gold import demand. This is because gold is increasingly flowing into the Chinese market through Shanghai and even Beijing. To understand China's real physical gold demand, investors should simply look at the weekly withdrawals from Shanghai Gold Exchange vaults (Exhibit 2). We visited the Shanghai Gold Exchange (SGE) in May and talked to the senior executives of the exchange. After reviewing the exchange's trading mechanism, we are of the view that the weekly withdrawal figures provide a much more accurate data series that reflects China's aggregate wholesale demand in a timely way. This is because for tax purposes all gold imported into China and all gold produced within China must pass through the vaults once, and only once, before reaching jewellery makers, investors, industrial users, and consumers. Exhibit 2 presents the weekly withdrawals from SGE vaults by numbered week (each calendar year has 50 trading weeks). As the exhibit shows, in recent weeks China's wholesale gold demand has actually picked up slightly. This is in contrast to the Hong Kong import data. Overall, by mid-September, China's cumulative wholesale demand in 2014 was down 16.2% YOY. This decline is much milder than the Hong Kong import number implies.




September 12, 2014

#Kinross Gold in talks to sell #Ecuador #Gold project FDN to Lundins

Seems like the cat is out of the bag.  This news has been whirling around for some time in investment banking circles, now the MSM has gotten a hold of it.

In essence, this is Kinross continuing to de-risk after its failed acquisition spree under Tye Burt, its previous CEO . The Lundins are jumping on the opportunity. No surprise there- they tread where others fear to go, and reap the subsequent rewards.

Kinross Gold in talks to sell Ecuador project to Lundin family
The Globe and Mail

Kinross Gold Corp. is in talks to sell its mothballed gold project in Ecuador in a move that could see the Lundin family develop the deposit, according to people familiar with the matter.

For about a year, Kinross has been trying to exit Ecuador and divest the Fruta del Norte after clashing with the local government on the economic terms of the project.

The Ecuadorean government gave Kinross approval to sell Fruta del Norte last week, one person familiar with the matter said.

Fruta del Norte, also known as FDN, was at one time seen as critical to Kinross’s growth. The company acquired the precious metal deposit when it bought Aurelian Resources for $1.2-billion in 2008.

But after more than two years of negotiations with the Ecuadorean government, Kinross threw in the towel and said it was not going to waste any more capital developing the mine. It recorded a $720-million charge on the asset in 2013 and slashed its gold reserves by a third to reflect the loss of Fruta del Norte.

“We continue to work co-operatively with the Ecuadorean government on our exit from the country and the FDN project,” Kinross spokeswoman Andrea Mandel-Campbell said. “We do not comment on speculation,” she said.

It is unlikely Kinross will recoup much of the $1.2-billion it paid for Aurelian. But analysts said any sale was positive.

“Anything is better than nothing. If they can surface any value that is a positive,” said Pawel Rajszel, analyst with Veritas Investment Research.

It isn’t clear which Lundin entity would acquire Fruta del Norte if a deal is completed, or whether other potential buyers are in the mix. Lukas Lundin and his brother, Ian, run the Lundin Group of Companies, a conglomerate of mining and energy companies that was founded by their father. A spokeswoman for the Lundin Group declined comment.

If Lukas Lundin succeeds in getting his hands on Fruta del Norte, he will face the same obstacles Kinross had in Ecuador. The South American country is considered a risky place for foreign investment and has imposed a hefty tax on mining projects. The left-leaning government, however, said in June it plans to change its mining law and offer tax incentives to attract investors, according to Reuters.

The Fruta del Norte debacle is one in a series of setbacks for Kinross. The company incurred multiple writedowns on its Tasiast mine in Mauritania, erasing most of the $7-billion value it paid to acquire Red Back Mining, which owned the mine, in 2010.

Lukas Lundin has a history of working with Kinross. He was the chairman of Red Back Mining and helped engineer the sale of his company to Kinross while on a ski trip with former Kinross chief executive Tye Burt. Mr. Lundin briefly served as a Kinross board director. The Red Back deal eventually cost Mr. Burt his job.

Although Kinross has slashed costs to conserve capital and deal with the sharp drop in gold prices, the company can’t seem to catch a break. Nearly a third of Kinross's gold production comes from its two mines in Russia, which is locked in a diplomatic row with Canada and other Western countries.

The miner’s exposure to Russia has helped keep the company’s stock at multiyear lows. Its shares are down about 14 per cent so far this year to $4.03 a share at Wednesday’s close. In contrast, Kinross’s peer Goldcorp Inc. has gained about 15 per cent to $27.61.

The MasterMetals Blog

September 11, 2014

#AngloGold springs London Newco surprise, sets out to raise $2.1bn

AngloGold's international assets will be spun out into new London listed Newco. 

AngloGold springs London Newco surprise, sets out to raise $2.1bn

JOHANNESBURG ( – Johannesburg- and New York-listed gold-mining major AngloGold Ashanti on Wednesday sprung a restructuring surprise with the spinoff of a separate Newco that will be listed in London, along with corporate restructuring and the raising of additional $2.1-billion capital next year in a move that would leave it debt-free.
AngloGold, under fast-moving CEO Srinivasan Venkatakrishnan (Venkat), has proposed Gmorphing into simpler entities with Newco taking over gold production and exploration assets outside South Africa and AngloGold focusing on its South African portfolio and giving consideration to developing a multi-commodity growth strategy in South Africa and beyond over time.
Investec Securities said that latest data indicated that AngloGold Ashanti's international assets generated 60% to 65% of its gross profit and made up 75% of the assets.
Venkat said that AngloGold, which would initially be the controlling shareholder of the London-listed Newco in what is a partial demerger, would continue to be a South Africa-domiciled company under a new name and Newco would have an inward South African listing on the JSE. 
Thirty-five per cent of Newco would be partially demerged to the shareholders of AngloGold, which would initially retain a 65% controlling interest.
"Newco could be a £3-billion company that would place it in the gap between African Barrick at £1-billion and Randgold Resources at £4-billion," Investec added.
image.jpegVenkat would continue to lead AngloGold together with incoming CFO Christine Ramon, chief operating officer Mike O’Hare and Italia Boninelli.
AngloGold’s Charles Carter would move out as the Newco’s designate CEO, and be joined by AngloGold chief operating officer Ron Largent and AngloGold executive team members Graham EhmMaria Sanz Perez and David Noko.   
Each business would chart its own course under separate identities.
AngloGold told the JSE that it had obtained South African Reserve Bank approval to restructure its international mining operations under the new UK Newco, which would seek a premium LSE listing, plus inward JSE and and NYSE secondary listings.
The restructuring was motivated by the belief that separately-listed vehicles would give independent management teams the opportunity to execute distinct strategies in the context of the current low gold price and macroeconomic environment.
It was envisaged that simplified portfolios would allow each management team scope to accelerate initiatives to lower operating costs and benefit from flatter overhead structures.
The combined corporate costs of both entities would be materially reduced and separate listings would also allow each to reflect their individual investment cases and associated access to capital in distinct markets.
"The two distinct parts of our portfolio require different strategies to realise their full potential and unlock further value for shareholders,” new AngloGold chairperson Sipho Pityana said.
The existing AngloGold board would remain with the exception of Michael Kirkwood, Newco’s designated chairperson, and David Hodgson, who would resign to join the Newco board once established.
AngloGold would have the right to nominate two nonexecutives, who would initially be Pityana as deputy chairperson and Venkat, for as long as the company’s shareholding in Newco was higher than 20%.
AngloGold wanted an equity capital raising rights issue irrespective of whether or not the restructuring occurred on the basis of its current debt levels deemed as too high.
The restructuring would itself render AngloGold debt free apart from existing guarantees to comply with reserve bank conditions.
Most of the $2.1-billion raised would be used to repay debt and allow AngloGold to retain flexibility and strengthen its balance sheet.
Execution, planned for 2015, was subject to shareholder approval at a general meeting, as well as regulatory and third-party consents.
AngloGold said that it had returned to production growth, commissioned two new projects and significantly reduced costs against the background of a 25% drop in the gold price in the last two years.
Second-quarter production had increased 17% to 1.098-million ounces, all-in sustaining costs lowered 19% to $1 060/oz, corporate and marketing costs cut 65% to $20-million and earnings before interest, taxes, depreciation and amortisation increased 33% to $382-million while a record safety performance was posted.
Edited by: Creamer Media Reporter

AngloGold springs London Newco surprise, sets out to raise $2.1bn

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September 9, 2014

#Mexico will see significant growth from the coming huge private investment in #energy #MasterEnergy

Total private investment in energy may reach $161bn between 2014 and 2020.

Mexico counting on huge private investment in energy

Beyondbrics -

Mexico’s energy reform is all about boosting investment and thus production. But the million dollar question is: just how much investment will flood in, and to what type of resource, when fields are put on the block starting from next year?
Ernesto Marcos, a former CFO of Pemex, the Mexican state company, has hazarded what looks like the first comprehensive guess.
His estimates, which Franklin Templeton Investments publishes in a note to clients, reckon that Mexico can count on $29bn in private investment in energy in 2018, the end of the administration of Enrique Peña Nieto, equivalent to 1.9 per cent of GDP. In 2020, the investment total could be $50bn, or 3 per cent of GDP, he reckons. Total private investment in energy may reach $161bn between 2014 and 2020.
How will the investment be broken down per sector? Mexico, after all, has a wealth of opportunities, including shale plays that are the geological continuation of US formations, and deep-water riches. But shale faces significant challenges including lack of water and infrastructure, and being located in areas prone to drug cartel violence that will add security concerns. Hydrocarbons in the depths of the Gulf of Mexico will take big investment and many years to extract.
Shale, not unsurprisingly, is expected to get off to a slow start with investment of $1bn next year. But it could gather pace speedily to $3bn in 2017, $6bn in 2018, $9bn in 2019 and $12bn in 2020, when Marcos’ consultancy, Marcos & Asociados, expects it to account for more than a fifth of all private energy investment in Mexico.
Investment in deep-water prospects is also expected to hit $6bn by the end of this administration, increasing to $9bn by 2020. The slightly slower pace underscores how much of a long-term investment deep-water is.
Most investment next year is likely in mature fields and gas pipelines. Gas processing is expected to take off from 2018, while mature fields and refinery modernisations will attract some $6bn each in 2020, according to the forecast.
Here are Marcos & Asociados’ estimates in full:

Source: Franklin Templeton Investments
So with Mexico’s economy set to grow still below initial expectations – the government is forecasting 3.7 per cent for next year – just how much will all this hydrocarbons investment boost the economy?
Significantly, Franklin Templeton says:
We still do not have a macroeconomic model that will translate this additional investment into growth for the Mexican economy. However, similar experiences of liberalising the energy sector in Brazil and Colombia indicate a multiplier effect from the additional investment of at least 1:1 on GDP.
We also have to take into account that these estmates do not include additional investment from the opening up of the electricity sector. This implies that an estimate of a level of growth of another 2 per cent of GDP from 2018 onwards ould be reasonable.
Of course, Pemex, the state oil company that is losing its monopoly, will continue to be a major player: Its investment budget from 2014-2020 alone is $209bn. Put that together with private investment and Mexico’s hydrocarbons sector is expected to suck in a whopping $370bn by 2020.
Fasten your seatbelts then. Mexico’s energy sector looks like being an exciting ride.

September 3, 2014

Top 50 #Gold mines contain more than 33.5% of the world’s gold #Infographic

What is the Cost of Mining Gold?

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