Tubthumping gold- Rewritten and reposted

Another article posted on info.sharpspixley.com yesterday – a rewritten and reposted version of one I wrote a week ago.

Those of us who remember 1990s pop music may well recall the Brit anarchic band Chumbawumba and its major hit titled Tubthumping.  Its refrain, which actually comprised most of the song was the repeated over and over – ‘I get knocked down but I get up again.  You are never going to keep me down.’ which could well be the anthem for the gold price in recent months.  (For a link to a YouTube feature of the band appearing on the David Letterman Show around 20 years ago now, complete with a probably unanticipated political add-on – ‘Free Mumia Abu Jamal’, not on the original recording – click here.)

Gold ‘knockdowns’ when gold appears to be in freefall are seeming to occur at ever increasing frequencies – indeed whenever gold seems to be making strong progress again, but as the song suggests it still manages to get up again.  The falls are steep, and the recoveries gradual, but gold does seem to get back to where it was, and then some, over time.

If these ‘knockdowns’ had happened just a couple of times one could put that down to profit taking and normal trading with data driven gold being spooked by occasional bouts of adverse news. But this keeps on occurring.  The drops and flash crashes have nearly all been very steep indeed, which does suggest some kind of external influence putting big paper transactions into play. But, what should be comforting for the gold bulls is that each time gold has been ‘knocked down’ in this manner it has subsequently ‘got up again’ mostly back to prior levels, although the overall effect may well have been to exert some kind of overall price control slowing down what we see as gold’s inevitable rise.  Rewording the refrain from Tubthumping:  ‘Gold gets knocked down, but it gets up again.  You’re never going to keep it down

The strange recent big sales out of America’s GLD, the world’s largest gold ETF, without similar sales seeming to have been made out of IAU – America’s second largest gold ETF – also look as though they may have been designed to help keep the gold price under control.  The fact that these appear to have had little impact in actually depressing gold prices, although may have well helped prevent price rises in the light of continuing strong Asian demand for physical gold, could well suggest that gold is building up strength for an upwards breakout.

As to Asian demand, the anticipated fall-off in Indian demand after the pre-GST restocking is reportedly not taking place – at least not to the extent analysts had expected – and Chinese demand appears to be holding up to, or slightly bettering, last year’s levels.  If one includes Turkey as being in Asia, there have been increasingly strong imports of gold going in to that nation.  Turkey has acted as a conduit for gold going into other Middle Eastern nations, notably Iran, but one suspects these latest increases may reflect safe haven buying by the domestic population in the light of increasingly autocratic moves by Turkish President Recep Tayyip Erdogan, and other destabilising political events in the Middle East.

The North Korean situation and war of words between Supreme Leader Kim on the one hand and President Trump on the other have also been fanning the flames of uncertainty which has been positive for gold as a safe haven investment, both in the Far East and the USA, but if the rhetoric gets toned down on both sides, as we expect it might be, then we could yet see gold slipping back again, but the ongoing underlying rise looks inevitable.  It may not happen as fast as the more bullish observers are suggesting though.

These facts, coupled with a small decrease in new mined supply, suggest that gold has the potential to again threaten the $1,300 level through the rest of what is normally a weak northern summer although there’s not much of it left to accomplish this.  The American Labor Day holiday (Sept 4th this year), which is traditionally the end of the North American summer holiday period, often seems to be a game-changing date for the gold price to move in either direction.  It will be interesting to see what is in store for us in this respect this year, but in our view the force is now with gold – to add a Star Wars analogy to the Chumbawumba refrain.  Be prepared for a steadyish rise, but still with the occasional ‘knockdown’ en route.

Gold – Rhetoric and U.S. economy calling the price

Article first posted on info.sharpspixley.com yesterday

While there is little doubt that the USA has a much larger and proven nuclear arsenal than North Korea, Kim Jong Un will know that to deploy this against the relatively small Asian nation is fraught with problems in that nuclear fallout as a result of any such attack could also have an impact on China and South Korea – the one a potentially even more dangerous adversary and the other an ally.  Whereas if North Korea were to take out say Guam with a nuclear strike, which it has threatened to do, the impact on other nations would be far less.  However we feel either scenario is unlikely, although one can’t rule out an escalation into conventional warfare..

In assessing the risk though one assumes the U.S. is also bearing in mind that North Korea has long threatened drastic military action against its many perceived adversaries, but has seldom, if ever, delivered this.  There is also no certainty that North Korea has developed small enough nuclear warheads to fit into its Intercontinental ballistic missiles (ICBMs) which it has been developing, nor if they really have the range to reach the U.S. mainland, or the accuracy of delivery to hit their targets with any precision.  Anti-missile defence systems are also likely to be deployed around potential targets by America and its regional allies, but their efficacy is also unproven.

The whole rhetoric game – from North Korean Supreme Leader Kim Jong Un on the one side and President Trump on the other – may thus be bluff on both sides, but with a U.S. President who is prone to shoot from the hip, it is still a very dangerous confrontational game.  While a conventional non-nuclear war between the two powers would be hugely costly in terms of lives (North Korea has a huge and well equipped military) – even if China was not to be drawn in on the North Korean side – it would also be enormously dangerous to the South Korean capital, Seoul, which is only 35 miles (60km) from the North Korean border and potentially within artillery range.  (North Korean capital Pyongyang is around 130 km (80 miles) from the border so would not be quite so vulnerable to artillery attack from the South).

The big question probably is whether President Trump is painting himself into a corner with the ever-expanding hostile rhetoric.  Kim Jong Un has a history of not following through on his more dire threats so may feel that Trump will also prove to be a paper tiger.  But is this a misjudgement?  The world just doesn’t know and there is a fear that the continuing provocations may just result in a shooting war.  While nuclear arms may not be deployed by either side, at least initially, were North Korea to see itself losing such a conflict, its seemingly unstable leadership might consider launching a nuclear strike and heaven knows what that would lead to.

China may also be drawn in to any military conflict as it would rather not see a potentially hostile regime on its border.  If a shooting war does start then the ultimate diplomatic solution would, assuming Kim Jong Un is actually defeated, perhaps give China control over whatever government would take the place of the current North Korean regime.

Gold supposedly thrives on uncertainty and while the hostile rhetoric between North Korea and the USA continues, the ensuing uncertainty will build.  Coupled with the U.S. economy not performing as the Fed would like, we could also see a further decline in the U.S. dollar which should, de facto, give a boost to the dollar price of gold, which could thus be seen to appreciate strongly in dollar terms as 2017 progresses, even if the gains are not mirrored in other key currencies.

At the moment the gold price seems to be hovering uncomfortably in the $1,280s.  Some seem to be trying to knock it back – U.S. trading on Friday for example saw the gold price pulled back sharply from a couple of brief forays into the $1,290s, but whether this was profit taking, or a case of once again the powers-that-be not wishing to see the psychological $1,300 level breached, remains to be seen.  Morning trade in Europe today has seen the yellow metal move a little weaker in price, but this week could be make-or-break in terms of a move into the $1,300s.  There are still a couple of weeks of the northern hemisphere holiday season yet to run when trading can be thin, although that hasn’t been the case in the past week, but we will probably have to wait until post U.S. Labor Day (Sept 4th) for any real trend to develop.

What will happen then will be very much dependent on the escalation, or de-escalation of the U.S.-North Korean militaristic rhetoric and on U.S. economic data, which has recently been gold supportive in showing weakness in the purported U.S. economic recovery, thus reducing the Fed’s interest rate raising options

Over the longer term, this observer remains on the side of the gold bulls.  Asian demand, which is soaking up virtually all the physical gold which is available, will continue to grow as the overall wealth trend in the region remains positive; New mined supply will remain flat, or trend downwards, albeit perhaps only marginally.  Should U.S. safe haven demand return – more likely the longer the Trump-Kim war of threats continues – then we could see a serious squeeze in physical gold availability and the diminution of the ability of paper gold transactions – real or spoofed – to control the price.  Interesting times!

Posts on Sharps Pixley: Tubthumping gold and; Chinese Gold Reserves: Playing the old game

I posted the two articles following on the Sharps Pixley website yesterday and are reproduced here in a lightly edited form:

Tubthumping gold

Those of us who remember 1990s pop music may well recall the Brit anarchic rock band Chumbawumba whose one major hit was called Tubthumping.  Its refrain, which actually comprised most of the song was the repeated over and over – ‘I get knocked down but I get up again.  You are never going to keep me down.’ which could well be the anthem for the gold price in recent months.

A gold ‘knockdown’ happened again yesterday (*th August) when gold appeared to be in freefall once more just after the New York market opened, but the extremely sharp drop, which took it down over $10, in a matter of minutes, managed to reverse itself yet again and the yellow metal managed to end the day just about where it had started – at a little over $1,260 and so far today (9th August) has moved upwards further – to close to $1,270 at the time of writing, although some of this overnight increase will have been due to increased geopolitical tensions involving North Korea.  Since then it has risen to breach $1,280 although this could be reversed once New York opens.

If these ‘knockdowns’ had happened just the once one could put that down to normal trading with data driven gold being spooked by occasional bouts of adverse news. But this keeps on occurring.  The drops and flash crashes have nearly all been very steep indeed, which does suggest some kind of external influence putting big paper transactions into play. But each time gold has made a recovery mostly back to prior levels, although the overall effect of the knockdowns may well have been to exert a kind of price control.

The strange recent big sales out of America’s GLD, the world’s largest gold ETF, when no similar sales seem to have been made out of IAU – America’s second largest gold ETF – also look as though they may have been designed to keep the gold price under control.  The fact that these appear to have had little impact in actually depressing gold prices, but may have well helped prevent price rises in the light of continuing strong Asian demand for physical gold, could well suggest that gold is building up strength for an upwards breakout.

The anticipated fall-off in Indian demand after the pre-GST restocking is reportedly not taking place – at least not to the extent analysts had expected – and Chinese demand appears to be holding up to, or slightly bettering, last year’s levels.  These facts, coupled with a small decrease in new mined supply, suggest the portents gold has the potential to again threaten the $1,300 level through the rest of what is normally a weak northern summer.  The American Labor Day holiday (Sept 4th this year), which is traditionally the end of the North American summer holiday period, often seems to be a game-changing date for the gold price.  It will be interesting to see what is in store for us in this respect this year.

For those interested here’s a link to youtube of Chumbawumba’s appearance on the David Letterman show: Chumbawamba – Tubthumping (Live at David Letterman Late Show)

Chinese gold reserves: Playing the old game

According to its reporting to the IMF, China has now not officially added to its gold reserves for nine months in a row.  Indeed these gold reserves have remained static, as far as official disclosures go, ever since the yuan (renminbi) was admitted as a constituent of the IMF’s Special Drawing Right in October last year.  Prior to that the country had been reporting monthly increases to its gold reserves from July 2015, apparently in the interests of transparency – but before that had only reported increases at five or six year intervals in the meantime keeping up the pretense of not adding to its reserves at all on a month-by-month basis.  It definitely looks as though, now that the yuan is a constituent part of the SDR any suggestion of even limited transparency in China’s gold reserve building process has again fallen by the wayside.  Secrecy reigns.

China achieves this by holding gold in accounts it says it does not need to report to the IMF rather than within its official Forex Reserve figures.  Given the nation’s often-stated affinity to gold’s role in any global financial restructuring which may lie ahead it indeed seems highly unlikely that the country is not again surreptitiously adding to its gold reserves.  Indeed it poses the question as to whether what it has been reporting as its total reserve figure is in reality in any way representative of what it truly holds in gold in terms of its total gold reserve.  Mind you this policy could well apply to other nations too as most national gold holdings are not audited on any kind of consistent basis.  The IMF relies totally on what its constituent nations tell it – it does not check their accuracy.

Many believe that China’s ultimate aim is to hold more gold than the USA does – officially reported at 8,133.6 tonnes.  China’s current reported total gold holding is 1,842.6 tonnes, but few believe that this is the true total with estimates out there of a realistic total of 4,000 tonnes or even higher.  If the 4,000 tonne estimate is correct then that would put China in second place among national holders of gold – more than Germany, currently in second place, which reports some 3,374 tonnes (For the latest reported world gold holdings click on WORLD OFFICIAL GOLD HOLDINGS).

For example – re. Chinese holdings, a recent note on that country’s www.globaltimes.cn website stated: ‘Although the People’s Bank of China (PBC), the country’s central bank, has not publicly disclosed plans to increase gold reserves since October 2016, some market analysts, based on calculations on domestic gold output and imports in recent years, estimated that the country’s above-ground gold reserves totaled 20,193 tons as of June, according to a report published by domestic industry website cnfol.com over the weekend.  While about 16,193 tons of gold are owned by Chinese citizens, the remaining 4,000 tons are held by the country’s central bank, said the report.’

While such figures are only analysts’ estimates, it does indeed seem likely that the nation’s gold reserves are higher than officially stated – almost certainly substantially so, but whether they are double the current figure , or several times this, remains conjecture until China comes clean with an  accurate figure.

There has been the suggestion that China is not announcing its true gold reserve figure, nor any monthly build-up, with a view towards not boosting the gold price, which might rise substantially if it were to do so, in order for it to keep on buying at what it sees as relatively low prices in an ongoing process of reducing the US dollar component of its forex holdings.

It may also, though, have an interest in not knocking the gold price back due to the reported holdings by Chinese citizens (see above) – it may well thus have an agenda to control the price on their behalf, but without letting it rise uncontrollably for the time being – but also not allowing it to fall back – as it continues to work towards a build-up in domestic demand as its main economic driver, rather than continue to rely on exports to keep the wheels of its manufacturing sector turning.

As a fully state-controlled economy, and as the world’s biggest known producer and importer of physical gold China does have the power to control the gold price if it so wishes to.  If it sees a potential domestic benefit in allowing the price to rise and thus boost the wealth and the spending power of its gold-holding citizens it is well capable of doing so.  Yet another possible factor in the gold price manipulation theories that abound.

Gold’s resilience remarkable as GLD holding falls further

How much further can SPDR Gold Shares (GLD), the world’s largest gold ETF, continue to bleed gold without adversely affecting the metal price?  It has shed a hair over 75 tonnes since its 2017 peak some 6 weeks ago, 61.8 tonnes in the past month alone and over 162 tonnes in the past year.  It is now at a level not seen since March 2016 when its holdings were rising sharply, yet the gold price over the past week or so has been trending upwards.  This is a huge contradiction in the yellow metal’s normal price movement.  We are either heading for a very sharp price reversal – or if the current price level around $1,260 holds – a very significant turning point leading to significant gains if the current falls in the GLD holding are reversed.

What makes the GLD performance even more anomalous is that the other large U.S. gold ETF – the much smaller iShares Gold Trust (IAU) – has actually added around 2.5 tonnes of gold over the past month while GLD has been moving sharply in the other direction.  Year to date IAU has added 14.7 tonnes to its gold holdings, which stand at 210.87 tonnes, while the GLD holding, currently 791.88 tonnes, has dropped by a little over 30 tonnes over the same period.  The performance differences are hard to explain given they are both serving the same investor market.

Yesterday in an article on the www.sharpspixley.com website we included the following quote from Ted Butler in trying to explain the big fall in the GLD gold holdings “”The most plausible and, in fact, only explanation I can come up with is that some large entity is converting shares into physical metal for the purpose of preventing share ownership from rising to or above reporting levels. When a big shareholder converts shares of SLV or GLD into metal, the shares no longer exist and, therefore, don’t need to be reported to any regulator. Likewise, direct physical ownership of silver or gold needn’t be reported to anyone no matter how large the position may grow. (This is another major factor behind why JPMorgan decided to buy physical silver). Again, a large entity amassing a large physical position in silver or gold on the sly is not bearish for price.” (See: GLD bleeds 71.58 tonnes of gold in just over a month).

What else could be behind the fall in GLD gold?  We have also noted on the Sharps Pixley website that the major Swiss gold refiners, which dominate the global remelting and re-refining market are, anecdotally, struggling to source enough physical gold to meet demand as gold out of them continues to flow very heavily to Asia and the Middle East – See: June Swiss gold exports: 90% moving east).  They have to be sourcing their gold from somewhere and they exported some 162 tonnes of gold in June alone – 90% to Asia and the Middle East.  Now maybe there are enough ‘friendly’ holders of GLD gold shares to lean on to supply them with bullion when physical gold is in short supply. The UK was the biggest source of Swiss imported gold in May, although was superseded as the biggest exporter of gold to Switzerland in June by the USA, but most GLD gold is vaulted in London.  Perhaps we will see the UK as being again the biggest exporter of gold to Switzerland this month which is when most of the GLD falls have occurred when the next Swiss announcement comes out in late August?  Certainly bullion coming out of the world’s biggest gold ETF could well be a principal source for all this gold heading East.

Randgold ‘problem child’ gold mine coming right.

For any other mining company, the Tongon gold mine, owned and operated by Randgold Resources, might be deemed a great success.  But for Randgold, which likes to stick to its production projections for all its operations in West and Central Africa, it has been something of a problem child underperforming against its scheduled output targets due to a succession of technical issues.  But even so it has still been a significant producer of the yellow metal at the kind of levels that would still be the envy of many other mid-sized gold mining companies.

Randgold CEO, Mark Bristow, on the occasion of a visit to the mine and to its host country ahead of the company’s second quarter results, due out the first week of August, has told the media in Cote d’Ivoire’s capital, Abidjan, that Tongon  continues to ramp up production as it tracks its 2017 target of 285,000 ounces of gold, making it a globally significant gold producer, but with a relatively short four year life remaining.  But Bristow went on to say that with Tongon now operating to plan, its focus had shifted to finding additional reserves and resources to replace depleted ounces and extend the mine’s life beyond its four years remaining.  The chances are that Randgold will be able to achieve this as the area around Tongon is seen as highly prospective for smaller satellite orebodies – and the company has a good track record of eking extended lives out of its Malian gold operations – notably at Morila which is still producing gold despite originally being due for closure some years ago.

Bristow also confirmed his long held view of Cote d’Ivoire’s exceptional prospectivity and its positive attitude towards foreign investment in the gold mining sector.

Elsewhere in the West African nation, Bristow commented that Randgold’s exploration programmes have defined a large target at Boundiali in the Fonondara corridor, which he described as ‘potentially the most exciting gold prospect in West Africa’.  The company has just completed its annual review of its exploration targets, which Bristow said had also highlighted very positive results from its other holdings in the country.

As to Tongon itself, and its contribution to the Ivorian economy, Bristow commented that last quarter it declared its second dividend, of which the government’s share, including taxes, was US$20 million (FCFA 12 billion).  In total, Bristow claimed that the Tongon mine has contributed just under $1 billion (FCFA 520 billion) to the Ivorian economy in the form of royalties, taxes, dividends, salaries, payments to local suppliers and community investments since it started production in 2010.

We will presumably get a further update on Tongon when Randgold delivers its Q2 results on August 3rd when Bristow himself will also deliver an update to London analysts and media on the company’s overall performance so far this year and its future prospects.  Randgold has, unlike most of the other large global gold miners, managed to keep itself debt free and cashflow positive through maintaing some very strict new mine investment criteria.

Six recent posts by Lawrie on sharpspixley.com

I’ve been a little lax about linking here to my articles published on the Sharps Pixley website but here are links to six I have published so far this month.  They look at the gold and silver markets as well as pgms.  Click on the titles to read the full articles.  To keep up with my thoughts on precious metals, and a whole host of other precious metals news stories from around the world, take a regular look at info.sharpspixley.com

Indian gold imports: High but ignore the hype!

13 Jul 2017 – Indian gold imports this year have already surpassed the full year 2016 level, but its probably best to ignore some of the year on year growth media hype given how low the figures were for H1 2016.

Implications for silver of Tahoe’s Escobal shutdown

12 Jul 2017 – Any impact on the supposedly temporary enforced closure of Tahoe Resources’ Escobal mine, the world’s second largest primary silver mine by Guatemala’s supreme court may only have a very limited impact on global silver fundamentals and the metal price.

Palladium closing gap on platinum – but neither great long term

11 Jul 2017 – In the past year the palladium price has moved up and platinum down and there is a real prospect of the former overtaking the latter in the near future.

So what’s happening to gold – and silver?

10 Jul 2017 – Gold, which had been showing signs of strength saw some huge trading volumes late last week which prompted a price slump, while silver fared even worse with the GSR rising to almost 80.

Gold overall H1 performance matches dollar index decline

04 Jul 2017 – H1 commodity price changes very positive for palladium while gold rise pretty well matches fall in dollar index. Silver disappoints. Iron ore worst performer.

 

Chinese gold demand up a little y-o-y but still well down on 2015

04 Jul 2017 – After a blip in May, Chinese gold demand as represented by Shanghai Gold Exchange withdrawals is now a little higher than at the same time a year ago, but still well down on the record 2015 figure.

 

 

Has Mineweb effectively disappeared as an international site?

Time was when Mineweb.com, based in South Africa and owned by South Africa’s Moneyweb, run by well known journalist Alec Hogg, was arguably the world’s top independent international mining industry website.  It was edited and managed by myself out of London and carried international mining sector coverage perhaps unequalled anywhere in the world at the time.  We had some great internationally-based writers and it was supported by advertising from mining and associated companies from several countries – and in at least one year its revenues were such that they were instrumental in keeping its parent company viable.  The bulk of its income came in in US and Canadian dollars which for a company domiciled in South Africa, with a depreciating domestic currency, was doubly valuable.

Recently, having been asked by several people what had happened to the site, I clicked on Mineweb.com to see how it was faring, to find it was nowadays only a subsection of its parent, Moneyweb.co.za, and was only publishing a handful of articles.  The first featured article on the Mineweb site’s homepage was a Reuters article on Anglo American’s 2016 performance, dated January 26th, almost 6 months earlier and the second featured article was also a Reuters story on Goldman Sachs’ copper price predictions for 2017 – which was even older!

Scrolling down through the site I did find a couple of articles written in the current month, both Reuters stories on Sibanye Gold’s Cooke Section problems, but it appears that original articles written by Mineweb reporters are nowadays effectively non-existent- or at least that is the way it appears.

So what happened to Mineweb?  The initial nail in its coffin was that Alec Hogg lost control of the parent company and was ousted from its board. (Alec has since set up, and runs, www.biznews.com – a direct competitor to Moneyweb in South Africa). I was still editor of Mineweb at the time, but was soon replaced in that position by Warren Dick in Johannesburg and became just a correspondent for the site.  Our key Reno-based writer, Dorothy Kosich was let go and my position gradually became untenable as the site became more and more South African focused and we agreed to part ways.  That left one directly employed internationally-based writer, Kip Keen in Canada, and eventually he was let go too.

Most of the mining based advertising had disappeared, along with our key advertising salesperson, Jan Chadwick, who resigned when she saw the direction the site was taking.  She is now semi-retired occasionally helping out her husband, John Chadwick on mining conferences for his own mining publication, International Mining, now probably the world’s top mining monthly magazine.

So Mineweb still exists, but only as a section on its Moneyweb parent site, and publishes little of its own material, relying primarily on the Reuters and Bloomberg services for its articles with occasional input from its parent company’s correspondents on South African mining matters – and even then, as with the Sibanye articles mentioned above it may well use one of the international wire services. That, in my opinion, is a great shame.  Its readership outside South Africa is a tiny fraction of what it used to be – there can now be few, if any, international readers who have Mineweb as their own initial go-to webpage, and its independent editorial coverage of the global mining sector is mostly long gone.  A cautionary tale about what happens to  a niche business when it is taken over by a much larger company which doesn’t see it as a core part of their operation!

Three gold articles just published on Sharps Pixley

Links to three of my articles published on the Sharps Pixley website over the past two days which readers of Lawrieongold may find of interest – particularly given the strong performance of the yellow metal over the past few days:

 Lewitt, Minsky, Williams and gold

06 Jun 2017 – Two very erudite newsletter writers give their uncompromising views on the direction of central bank policies and their conclusions are disturbing.

Lawrence Williams

Gold – Scenarios from $700 to $5,000

05 Jun 2017 – The latest In Gold We Trust magnum opus comes up with pricing scenarios ranging from a low of $700 to a high of $5,000, and levels in between but the report’s authors put the probability at the higher levels.

Lawrence Williams

Could gold hit $1,300 this week?

05 Jun 2017 – Potential Black Swan events are lining up which could drive the gold price through $1,300. None of these are in any way certainties but in combination they could contribute to the kind of unease which could restimulate safe haven investment.

Lawrence Williams

Abitibi Royalties – A gold royalty company with unusual growth possibilities

In a presentation in London, Abitibi Royalties(TSXV:  President and CEO Ian Ball put forward an ambitious slogan – To Build the Best gold company – not the biggest, Abitibi Royalties will never be that, but the Best in terms of stock appreciation, and it has a good track record of so doing since its inception as a spin-off from Golden Valley Mines back in 2011, although has been mostly underperforming its peer, and larger, royalty companies in the current year.  It has a strong core asset in a 3% net smelter return (NSR) royalty on the eastern portion of the Canadian Malartic mine (owned and operated by Agnico Eagle and Yamana Gold), which includes the Barnat Extension and Jeffrey gold deposits. The NSR also includes the exciting new Odyssey North discovery that was announced in 2014 which gives it some good growth potential assuming these extensions to the Canadian Malartic property pan out as anticipated as the mine progresses from a large scale open pit to an equally large scale underground bulk mining operation as the pit section is depleted.

Ball describes the changes ahead as a ‘paradigm shift’ which may just be CEO talk, but with Agnico Eagle (which has some existing  bulk underground mining expertise) the main driving force behind the change could just be an apt description.  The new sections of Canadian Malartic, Canada‘s largest gold mine certainly have potential but whether they offer the paradigm shift Ball talks about is, as yet, unproven.

While the royalties in and around the Canadian Malartic property do underpin Abitibi Royalties’ earnings prospects, it also has an unusual (among royalty companies) policy of buying low cost royalties on ground held adjacent to known high potential deposits – mostly in Canada, but also a royalty in a big ground holding which almost surrounds Eldorado’s Efemcukuru gold mine in Turkey.  The Canadian near-mine royalties include ground close to the Red Lake and Rainy River deposits.  These royalties have been picked up at extremely low cost and even if only one of them comes good then that would be a potentially good investment.

Ball, a former associate of Rob McEwen, who himself is a major shareholder in Abitibi Royalties, says he does not take a salary from the company, but ploughs any earnings into buying additional stock, and also says he has no intention of widening the share base – currently around 11.3 million shares outstanding – indeed currently plans to reduce it by buying back stock with a target of bringing it down to 10 million shares outstanding over a three year buy back programme.  Abitibi Royalties has a strong balance sheet with Can$7.7 million in cash and no debt.  Its market cap is currently around Can$100 million, with a stock price of a little over Can$9 at the time of writing.

Royalty companies tend to be a relatively low risk way of investing in mining and Abitibi Royalties is no exception with its big underlying Canadian Malartic net smelter royalty underpinning earnings.  It does have potential in terms of improving shareholder value, but remains perhaps more speculative than most of its royalty company peers due to unknowns in the tenor of some of the areas for potential royalty growth.  A strong gold price should see it grow regardless, but there remains a downside risk from a weakening gold price – and if none of its prospective royalty growth areas pan out.  But adding an additional risk element to a royalty company with strong baseline earnings could well have an appeal to less risk averse investors.

SGE revises 2017 gold withdrawals downwards

We had previously noted some anomalies in the reported figures for China’s gold withdrawals from the Shanghai Gold Exchange (SGE) and are pleased to note that a recheck has shown that the monthly and cumulative figures as announced by the SGE have been revised and now tally.  Earlier the announced cumulative total appeared to have been substantially adrift from that suggested by the monyh-by-month reported figures.The principal change is a sharp downwards revision of the gold withdrawal figures for February – a month where figures tend to be somewhat anomalous anyway because of the Chinese New Year holiday.  February figures have been revised downwards sharply from 179.24 tonnes to 148.24 tonnes, while the initially reported April figure of 171.17 tonnes has been adjusted downwards to 165.78 tonnes.  This brings the cumulative total for the year to date to 690.68 tonnes –only marginally higher than at the same time a year ago, and well down on the record 2015 figure.

Table: Revised SGE Monthly Gold Withdrawals (Tonnes)

Month 2017 2016 2015 % change 2016-2017 % change 2015-2017
January 184.41 225.08 255.42 – 18.1%  -27.8%
February* 148.24 107.60 156.36 +37.8% -5.2%
March  192.25 183.24 213.35  +4.9%  -9.9%
April  165.78 171.40 195.45  -3.3%  -15.2%
May   147.28 162.15    
June   138.51 195.67    
July   117.58 285.50    
August   144.44 265.27    
September   170.90 259.98    
October    153.25 176.29    
November    214.72 202.71    
December    196.37 228.21    
Year to date 690.68 687.02 820.58 +0.5% – 15.8%
Full Year    1,970.37 2,596.37    

Source: Shanghai Gold Exchange, Lawrieongold.com

For additional comment click on:

China’s SGE revises gold withdrawals lower

121 Mining Investment Event to Hit New York in June

For those lawrieongold readers interested in the junior mining sector and within easy range of New York City, we would recommend attendance at the first North American 121 Mining Investment event.  This will be held at the Westin, Grand Central on June 6th and 7th.  Having personally attended events in Cape Town and London I can highly support the format, which comprises brief corporate presentations, interspersed with expert analysis and panel discussions – and then the opportunity to network with the presenting companies on a one-to-one basis so you can delve deeper into their operations, performance and potential.

The group running the 121 events cut their teeth with the organisation for several years of the highly successful Mines & Money conferences in London and Hong Kong, before breaking away and launching the 121 series of events – initially in Hong Kong, and then Cape Town and London – back in 2014/2015.  Now 121 Mining Investment New York brings the tried and trusted 121 event format to what the group describes as the world’s leading mine finance centre, although others may argue with that description.

This investment series is thus organised by 121 Group applying a successful invitation only mode that focuses on pre-scheduled 1-to-1 investment meetings with mining management teams. Set over a two-day conference delegates will also gain insight through investor led panel discussions and analyst briefings on commodity trends.

By the date of the New York conference, 121 events will have featured more than 300 mining company presentations and brought together over 1200 investors to discuss the latest trends and opportunities in the sector.

What sets the 121 Mining Investment events apart from the competition?

  • Targeted networking– Two days of pre-arranged 1-2-1 meetings allowing miners to and capital providers to connect face-to-face in meetings relevant to their needs
  • Exclusivity – Entry is restricted to qualified investors, analysts, senior mining company executives and relevant mining investment professionals only
  • Market intelligence– Interactive two-day programme where presenters and panellists actively engage with the audience to create a two-way conversation
  • Convenience– Located in Midtown Manhattan within walking distance of many of the key mining investment houses

Mining corporates – Present project updates and meet with leading experts from New York’s mining and investment community –  Submit your interest in presenting at the 2017 summit here

Mining investment and finance experts – Share insights with your peers and receive project updates from the management teams of mining production, development and exploration companies gathered together in a convenient Midtown Manhattan location – Passes for institutional investors are free  – Click here to register

With limited space available, register now for this exclusive event.

121 Mining Investment New York is part of a highly successful global series, with events held in London, Cape Town and Hong Kong – Click here for more details

China and India step up to the gold demand plate

 My latest article on Sharpspixley.com

As always appears to be the case, statistics on gold demand can be contradictory which is perhaps why gold’s fundamentals are so difficult to tie down.  Take the World Gold Council (WGC)’s latest Gold Demand Trends report which suggests global gold demand fell by 18% (228 tonnes) during Q1, compared with the admittedly very high (record) figures achieved in Q1 2016.  But within the report there do appear to have been some major anomalies.

Firstly, the slump in assessed demand was largely for two reasons – sharply reduced gold ETF inflows and a fall in Central Bank gold reserve increases.  But, it should be noted, that gold inflows into the ETFs did remain positive over the quarter and the Central Bank figures were skewed by China’s non reporting of any gold reserve changes since its currency was accepted as part of the IMF’s Special Drawing Rights (SDR) in October last year.  In Q1 2016, China had announced additions of 35.2 tonnes to its official reserves – some 15% of the fall in assessed gold demand during the latest quarter.  If one takes China out of the equation other Central Bank gold additions came to a positive 7.4 tonnes – and on its reserve reporting track record China’s zero reserve addition figure has to be considered suspect.

Coming back to Central Bank shortfalls, can we believe the China figures at all?  One should recall that up until July 2015 China only reported any reserve increases at five of six year intervals maintaining the pretence that it was not adding to its reserves monthly, as it obviously was.  But, in the immediate run up to the IMF decision to re-jig its SDR make-up to include the yuan, the Asian nation began announcing monthly reserve increases.  Once the yuan officially became a part of the SDR, China has reported zero gold reserve increases.  Can this just be coincidence?

China is known to favour building its gold reserve as an important facet of securing its place in the global trade picture and its whole gold reserve adding policy has always been shrouded in secrecy.  Some China-watching  analysts will argue that, in fact, its real gold reserve is far higher than the officially stated figure of 1,842.6 tonnes.  After all it has been the world’s largest gold producer for some years now….

Randgold Q1 2017 Highlights

Generally the Q1 figures this year were better than Q1 2016 in terms of production, revenue and costs, but down on the record Q4 2016.  The quarterly highlights as reported by the company were as follows:

BUILDING ON LAST YEAR’S RECORD RESULTS, RANDGOLD MAKES STRONG START TO 2017 – Q1 results
KEY PERFORMANCE INDICATORS FOR THE Q1 ENDED 31 MARCH 2017• Gold production up 10% on corresponding quarter of prior year and down 15% on record Q4 2016
• Profit up 33% on corresponding quarter of prior year and down 10% quarter on quarter
• Total cash costs per ounce down 4% on corresponding quarter of prior year and up 13% quarter on quarter
• Cash increases 16% quarter on quarter to $600 million, with no debt
• Another solid operating quarter at Loulo-Gounkoto supported by high recoveries
• Morila tailings retreatment operation starts to deliver on plan and Domba project approved
• Tongon delivers steady performance with good cost control
• Kibali tracks guidance as it works to deliver on underground plan
• Group attributable reserves replaced at higher grade
• Busy quarter for greenfields exploration complemented by good progress on brownfields targets
• Shareholders approve 52% increase in annual dividend to $1.00 per share
Randgold Resources

Thus the company presents the figures in a positive light despite financials down on the previous quarter and cash costs up, although the latter will be partly due to the lower gold output. Net cash available increased to $600 million though which leaves the company well placed to take advantage of any M&A or new development and expansion opportunities without having to resort to borrowing.

Company CEO Mark Bristow is due to present to analysts in London at midday today and undoubtedly we’ll learn more about what is expected for the rest of the year then.

Update on Africa’s biggest gold mine

Randgold Resources, the biggest London listed gold miner by market capitalisation and the 14th largest gold producing company in the world, currently operates the two biggest gold mines in Africa according to consultancy Metals Focus – the Loulo-Gounkoto complex in Mali and Kibali in the DRC – and both are among the world’s Top 20 gold producing operations – See: World Top 20 Gold Miners and Mines.

Last year Loulo-Gounkoto, at No. 13 on the global list, was the bigger producer, but Kibali was experiencing some technical and operational  difficulties which reduced its output a little, but still came in as the world’s 16th largest gold mine by production.  It is currently  putting the problems behind it as its underground operations build up to full output and it should regain its top spot among African gold mines by the end of the current year.

The mine is owned 45% by Randgold, 45% by Anglogold Ashanti, with the remaining 10% by DRC parastatal, Sokimo.  Randgold built the mine – located in one of the most remote areas of the African continent close to the DRC’s north eastern border with South Sudan – and operates it.

The company’s latest statement on the mine and its progress is published here in full, but note CEO Mark Bristow’s warning about possible DRC governmental goalpost-moving on the country’s mining code:

KIBALI HEADS FOR FULL PRODUCTION AS UNDERGROUND MINE NEARS COMPLETION AND SECOND HYDROPOWER STATION IS COMMISSIONED
The Kibali gold mine’s underground operation, which will significantly increase production, is on track to start commissioning in the third quarter of this year, Randgold Resources chief executive Mark Bristow said at a media briefing.

The mine is forecast to deliver approximately 610,000 ounces of gold this year, up from 585,000 ounces in 2016, but annual production is scheduled to rise to around 750,000 ounces from 2018, when the underground operation will make it fully functional.

Bristow noted that Kibali ended 2016 with a creditable performance after having to contend with a range of operational challenges as well as the constraints imposed by limited open pit mining flexibility.  In addition to dealing with these issues, the Kibali team succeeded in keeping the underground development on track, successfully constructing and commissioning four ultrafine grind mills in the metallurgy circuit, as well as progressing work on the mine’s second new hydropower station which was commissioned in February this year.  The third and last of the new hydropower stations is currently being built by an all-Congolese contracting group.

“Kibali has stayed on course to become one of the world’s great gold mines despite the challenges of last year and the volatile political climate in the DRC at present,” he said.

“Randgold remains committed to the DRC and is confident that its government, politicians and civil society have the will as well as the capacity to work together to secure the country’s future.  We therefore continue to invest in exploration here and to lead the way in developing the north eastern DRC as a major new gold mining region.  Our engagement with the country and its people is also evident in our substantial investment in local economic development and community upliftment programmes.  These include macro and micro agribusinesses designed not only to provide regional food security but to generate surplus produce for export.”

It was a source of concern, however, that the DRC government had once again signalled its intention of reviewing the country’s 2002 mining code with the clear intention of maximising state revenue, Bristow said.  This could have a very negative impact not only on the mining industry but also on the economy.

“Now more than ever the DRC should be focused on retaining its existing investors and attracting new ones.  It’s certainly not the time to harvest more from less for short term gain.  It’s my sincere hope that this time round the government will engage the mining sector fully in the proposed review to achieve an outcome that will be in the best interests of the Congolese economy as well as the country’s mining sector,” he said.

“The existing code is in fact a good one but it is not always being applied effectively and there are still many mining operations that do not operate under the code.  There are also a number of issues and challenges which mining companies are having to face which make operating in the DRC more challenging.  In Kibali’s case, these issues include more than $200 million in unpaid TVA and duty refunds.”

Correction and Update: Writing for US Gold Bureau

Corrected link to US Gold Bureau below.  Apparently the one I published originally won’t work.

Just to let readers know that I will be writing occasional original articles for Austin, TX based US Gold Bureau.  The articles, by agreement with US Gold Bureau, will not appear here.  The US Gold Bureau website https://invest.usgoldbureau.com is blocked from being viewed by computer users who do not have North American IP addresses as US Gold Bureau only provides its services in North America so isn’t interested in accesses from elsewhere.  However,  because lawrieongold has strong North American readership it may be worthwhile for my North American readers to log on to the US Gold Bureau site.  There is a work-around for those without North American IP addresses, if interested, through setting up and utilizing the Tor Browser which can be configured to make it appear you have an IP address anywhere in the world.

My first article on the US Gold Bureau site, is titled: What the FBI Investigation Into the Trump Campaign Could Mean for Gold.  If you have a North American IP address you should be able to read it by clicking on the link.

A second article looking at the importance of Swiss gold imports and exports and their significance in terms of global gold flows is also up on the site:  Switzerland is Key to Global Gold.  Again you’ll need an american IP address  – or a work-around – to access it.

World Top 20 Gold: Countries, Companies and Mines

Herewith a series of tables, all gleaned from Metals Focus’ Gold Focus 2017 report released last week, which between them confirm that Peak Gold is not with us quite yet, although probably getting very close.

Table 1.  Top 20 Gold Producing Nations 2015/2016 (Tonnes)

Rank Country 2015 Output 20 16 Output %  Change
1 China 460.3 463.7 +1%
2 Australia 279.2 287.3 +3%
3 Russia 268.5 274.4 +2%
4 USA 215.5 225.7 +5%
5 Peru 170.6 166.0 -3%
6 South Africa 165.1 165.6
7 Canada 157.7 162.1 +3%
8 Mexico 131.7 128.4 -2%
9 Indonesia 114.2 109.5 -4%
10 Brazil 95.4 96.8 +1%
11 Ghana 95.4 95.6
12 Uzbekistan 85.5 86.7 +1%
13 Papua New Guinea 58.1 60.4 +4%
14 Argentina 63.8 59.6 -7%
15 Tanzania 53.2 55.3 +4%
16 Kazakhstan 51.0 52.6 +3%
17 Colombia 49.2 51.8 +5%
18 Mali 49.2 50.1 +2%
19 Burkina Faso 38.6 41.6 +8%
20 Chile 42.5 40.7 -4%
  Others 57.5 58.1 +1%
  Total 3,220.2 3,255.4 +1%

Source: Metals Focus

Table 2.  Top 20 Gold Producing Companies 2015/2016 (Tonnes) (1 tonne= 32150.7 troy ounces)

Rank Country 2015 Output 2016 Output %  Change
1 Barrick Gold 190.3 171.6 -10%
2 Newmont Mining 156.6 162.9 +4%
3 AngloGold Ashanti 122.8 112.8 -8%
4 Goldcorp 107.8 89.4 -17%
5 Kinross Gold 78.9 83.3 +6%
6 Newcrest Mining 77.4 76.7 -1%
7 Gold Fields 67.2 66.7 -1%
8 Polyus Gold 54.8 61.2 +12%
9 Navoi MMC (est) 61.0 61.0
10 Agnico Eagle Mines 52.0 51.7 -1%
11 Sibanye Gold 47.8 47.0 -2%
12 China National Gold 41.5 42.1 +1%
13 Yamana Gold 38.9 39.5 +2%
14 Randgold Resources 37.7 39.0 +3%
15 Shandong Gold 36.0 37.1 +3%
16 Zijin Mining 37.2 36.1 -3%
17 Harmony Gold 33.3 33.2
18 Glencore 30.0 31.9 +7%
19 Freeport McMoran 35.5 30.8 -13%
20 Fresnillo 23.7 29.1 +23%

Source: Metals Focus,

Table 3.  World’s 20 Largest Producing Gold Mines 2016 (tonnes of gold)

Rank Mine Name Country Operator 2015 Output 2016 Output %  Change
1 Muruntau Uzbekistan Uzbek Govt. 61.0 61.0
2 Pueblo Viejo Dominican Rep Barrick 29.7 36.3 +22%
3 Goldstrike USA Barrick 32.8 34.1 +4%
4 Grasberg Indonesia Freeport 38.3 33.0 -14%
5 Cortez USA Barrick 31.1 32.9 +6%
6 Carlin USA Newmont 27.6 29.4 +7%
7 Olimpiada Russia Polyus 23.6 29.3 +24%
8 Lihir PNG Newcrest 25.0 28.1 +12%
9 Batu Hijau Indonesia Amman Mineral 21.0 26.7 +27%
10 Boddington Australia Newmont 24.7 24.9 +1%
11 Cadia Valley Australia Newcrest 19.8 23.5 +19%
12 Super Pit Australia Newmont 19.9 23.3 +18%
13 Loulo-Gounkoto Mali Randgold 19.6 22.0 +12%
14 Kupol Russia Kinross 21.6 20.7 -4%
15 Yanacocha Peru Newmont 28.6 20.4 -29%
16 Kibali DRC Randgold 20.0 18.2 -9%
17 Canadian Malartic Canada Osisko 17.8 18.2 +2%
18 Tarkwa Ghana Gold Fields 18.2 17.7 -3%
19 Kumtor Kyrgyzstan Centerra 16.2 17.1 +6%
20 Sukari Egypt Centamin 13.7 17.1 +26%

Source: Metals Focus, Lawrieongold

To read additional comment on the above, Lawrieongold readers should click on the following links:

 Top 20 Gold Producing Nations See Small Gain in Output in 2016

World Top 20 Gold Miners and Mines