Showing posts with label Commodities. Show all posts
Showing posts with label Commodities. Show all posts
Monday, 13 May 2013
Gold sales around Rs 150 cr on Akshaya Tritiya
the jewellers in the state have made a brisk business to the tune of Rs 150 crore on the occasion of Akhsaya Tritiya, trade sources said.
Gold weighing about 500 kg was sold on the auspicious day in the state.
Gold price, at present, is hovering a tad more than Rs 26,000 per 10 gm compared to about Rs 27,900 during the same period last year.
The jewellers have rolled out exciting offers to attract customers.
"In addition to discount on making charges, we are charging Rs 1 for each gram of silver purchased from May 12-15," said N K Das, chief general manager of city-based H M Jewellers.
The overall sales volume has increased by about 20 per cent compared to last year, he added.
Gold weighing about 500 kg was sold on the auspicious day in the state.
Gold price, at present, is hovering a tad more than Rs 26,000 per 10 gm compared to about Rs 27,900 during the same period last year.
The jewellers have rolled out exciting offers to attract customers.
"In addition to discount on making charges, we are charging Rs 1 for each gram of silver purchased from May 12-15," said N K Das, chief general manager of city-based H M Jewellers.
The overall sales volume has increased by about 20 per cent compared to last year, he added.
Monday, 6 May 2013
Gold futures rise on global cues
The yellow metal for delivery in August traded higher by Rs 139, or 0.51 per cent, to Rs 27,440 per 10 grams in 175 lots.
Analysts said speculators enlarged their positions, driven by firm global trend mainly led to rise in gold prices at futures trade.Gold rose 0.6 per cent to USD 1,479.08 an ounce in Singapore.
Gold prices rose by Rs 142 to Rs 27,104 Rs 27,104 per 10 grams in futures trade today as speculators enlarged their positions.
Wednesday, 12 December 2012
Gold prices recovered on firming global trend
Tracking a firming global trend, gold prices recovered by Rs 55 to Rs 31,680 per ten gram in the national capital today on retail customer purchases for the ongoing marriage season. Gold rates, which had lost Rs 25 in the previous session, bounced back on local buying for the marriage season and a firming trend in overseas markets as the US Fed concludes a two-day policy meeting that may see announcement of more stimulus measure.
Thursday, 13 September 2012
Gold get fresh high of Rs 32,590
Gold prices today climbed to fresh record high of Rs 32,590 per 10 grams in the bullion market here.
Gold of 99.9% and 99.5% purity climbed by Rs 110 each to Rs 32,590 and Rs 32,390 per 10 grams, respectively.Sovereign remained steady at Rs 25,500 per piece of eight grams.
Silver, however, lost Rs 300 to Rs 61,200 per kg on limited demand at prevailing higher levels.
Silver ready fell by Rs 300 to Rs 61,200 per kg and weekly-based delivery by Rs 660 to Rs 63,385 per kg.Silver coins also shed Rs 1,000 to Rs 77,000 for buying and Rs 78,000 for selling of 100 pieces.
Gold of 99.9% and 99.5% purity climbed by Rs 110 each to Rs 32,590 and Rs 32,390 per 10 grams, respectively.Sovereign remained steady at Rs 25,500 per piece of eight grams.
Silver, however, lost Rs 300 to Rs 61,200 per kg on limited demand at prevailing higher levels.
Silver ready fell by Rs 300 to Rs 61,200 per kg and weekly-based delivery by Rs 660 to Rs 63,385 per kg.Silver coins also shed Rs 1,000 to Rs 77,000 for buying and Rs 78,000 for selling of 100 pieces.
Saturday, 15 October 2011
Top 10 Gold Producers of the world
Global gold mine production increased by 3 percent over the third quarter of this year to approximately 659 tonnes, as a number of new operations either came online or increased production. Increased Australian production contributed to the majority of the output growth, although Mexico and Argentina also exhibited positive production on an annualized basis. Offsetting the impact of these developments was a decline in production in Indonesia, Russia and Peru. The decline in production in Indonesia should not be a point of concern for investors as its production totals in 2009 had increased almost 66 percent last year, the largest one year production increase of any country in the world. Last year the only other top 10 gold producing country in the world to demonstrate double digit growth in annual production was Ghana, with a 13 percent increase.
Mining Companies:
The world’s top ten gold mining companies include:
Barrick Gold Corp. (TSE: ABX), the world’s largest pure gold miner, operates 26 gold mines, in addition to projects in the pipeline across Australia, North America, South America and Africa. According to a report issued by the company last year, it established 139.8 million ounces of proven, probable gold reserves, amongst the largest amount of un-hedged reserves in the industry. Barrick Gold has an optimistic goal of reaching 7.6 to 8.0 million ounces of gold produced during the current fiscal year, at a total cash cost of $425 to $455 per ounce. Barrick’s objective is, “to be the world’s best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner.”
Newmont Mining Corporation (TSE:NMC) (NYSE:NEM) has operations around the globe, within eight countries in five continents—including North America, South America, Australia, Asia and Africa. Newmont’s most significant assets or operations are found in: the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. At the end of last year, Newmont had proven and probable gold reserves of 91.8 million equity ounces and an aggregate land position of roughly 39,000 square miles. Newmont’s 2008 acquisition of a large undeveloped Greenfield in North America, Hope Bay, could be followed by exploration projects into Peru and Ghana. Newmont has been focused on Australian production at Boddington, in addition to a recent private placement with Eurasian Minerals Inc. (CVE:EMX) providing additional exploration exposure to projects in Turkey, Eastern Europe, the Kyrgyz Republic, Haiti, United States, and Austral-East Asia. Newmount is the first gold company to be a part of the S&P 500 Index and Fortune 500 and endeavors to develop technological solutions for mining that improve the overall mining process. In 2007, the company became the first gold company to be selected as part of the Dow Jones Sustainability World Index.
AngloGold Ashanti (NYSE:AU) is a South Africa based top producing gold mining company with a total of 21 operations across four continents and ten countries—including the U.S., Tanzania, South Africa, Namibia, Mali, Guinea, Ghana, Brazil, Australia and Argentina. The company continues to support in-depth exploration activities as well in an attempt to identify new resource ounces of gold. Last year, AngloGold spent a total of $199.9 million for its exploration programs. At the end of 2009, the amount of both proved and probable ore reserves totalled 71.4 million ounces. AngloGold’s vision is to become the leading global gold mining company, while respecting natural environments, valuing its people and their safety and minimizing costs and maximizing profits for shareholders.
Gold Fields Limited (NYSE:GFI) is a producer of gold and holder of gold reserves in South Africa, Ghana, Australia and Peru. The majority of Gold Fields’ operations, based on gold production, are located in South Africa with operations in Driefontein, Kloof, Beatrix and South Deep. In Peru, Gold Fields is primarily involved in underground and surface gold and copper mining and related activities, including exploration, extraction, processing and smelting. Gold Fields also has an interest in a platinum group metal exploration project. The company reported 78 million ounces of gold equivalent reserves and enjoys a prominent position in the top 10 gold producing mining companies list with total mineral resources estimated of 281 million ounces.
Newcrest (ASX:NCM) (PINK:NCMGY) operates seven gold mines in Australia, Indonesia and Papua New Guinea. The company’s activities include six operating mines: Cadia Valley Operations, comprising Cadia Hill and Ridgeway (near Orange, New South Wales), Telfer Open Pit and Telfer Underground (Pilbara Region, Western Australia), Cracow (Gladstone Region Central Queensland) and Kencana (Indonesia). It has an extensive development pipeline of projects and exploration activities for gold and gold-copper deposits in Australia, Indonesia, Fiji, the United States, Canada and Peru.
Kinross (TSE:K) is based in Canada with eight operations in Brazil, Chile, Ecuador, Russia and the U.S. According to the annual report, “Fuelled by new output from Kupol, Kettle River-Buckhorn, and Paracatu, we recorded our highest production ever – 2.24 million attributable gold equivalent ounces, a 22 percent increase over 2008. We generated record revenues of $2.4 billion, up 49 percent over 2008. Our adjusted operating cash flow rose by 48 percent to $937 million. Adjusted operating cash flow per share reached $1.36, substantially above the previous record of $1.01 per share in 2008. Margins increased by 22 percent to $530 per ounce.” Last year Kinross reported a gold reserve base of approximately 46 million ounces and the company is committed to safety for its workers, as well as environmental awareness surrounding its operations.
Goldcorp Inc. (TSE:G), hosts operations located throughout North America, Central America and South America. According to last year’s annual report, the company “continues to be the growth leader among senior gold producers with a forecast production increase of 57 percent over the next five years.” Chuck Jeannes, President and Chief Executive Officer said, “We experienced another record-breaking year in 2009, increasing gold production to 2.42 million ounces on the strength of organic growth at most of our mines. We also achieved record cash margins due not only to a higher average realized gold price of $978 per ounce, but also to total cash costs that declined to $295 per ounce for the year from $305 in 2008. Cash flow from operations before changes in working capital totaled nearly $1.2 billion in 2009 while adjusted net earnings were $588.2 million in 2009 compared to $397.0 million in 2008.” Goldcorp saw rapid growth from a solid intermediate player in the gold mining industry, to one of the dominant senior gold producers in the world. Goldcorp’s objective is to be a low cost gold producer around the globe, with minimal environmental impact.
Yamana Gold (TSE:YRI) is a Canadian based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico and Colombia. The company has an estimated 19.4 million ounces of reserves with 46.4 million ounces of total mineral resource estimates. Earlier this month the company reported strong third quarter earnings with increased revenue growth of 36 percent to $454.0 million and 45 percent appreciation to $1.2 billion, respectively for the quarter and year to date.
Agnico-Eagle Mines (TSE:AEM) is a gold producer with mining operations in northwestern Quebec, northern Mexico, northern Finland and Nunavut. Exploration activities and operations are located in Canada, Europe, Latin America and the United States. The company aims to grow gold mineral reserves to between 20 million and 21 million ounces by the end of the current year through aggressive exploration of properties in Canada (Ontario, Quebec, the Yukon and Nunavut), the United States (Nevada), Finland and Mexico (Chihuahua).
Polyus Gold (MCX:PLZL) is a Moscow based Open Joint Stock Company (OJSC) as the leading gold producer in Russia and Kazakhstan operating mines and development/exploration projects located in 5 major gold mining regions of Russia – the Krasnoyarsk Territory, the Irkutsk, Magadan, Amur regions, the Republic of Sakha (Yakutia), as well as in the Republic of Kazakhstan, Romania and Kyrgyzstan. In 2009, Polyus Gold production in Russia totalled 1.3 million ounces. The company’s provable and probable reserves (JORC) are reported to be 74.1 million ounces, based on an Independent Expert’s Report made by Micon International.
Mining Companies:
The world’s top ten gold mining companies include:
Barrick Gold Corp. (TSE: ABX), the world’s largest pure gold miner, operates 26 gold mines, in addition to projects in the pipeline across Australia, North America, South America and Africa. According to a report issued by the company last year, it established 139.8 million ounces of proven, probable gold reserves, amongst the largest amount of un-hedged reserves in the industry. Barrick Gold has an optimistic goal of reaching 7.6 to 8.0 million ounces of gold produced during the current fiscal year, at a total cash cost of $425 to $455 per ounce. Barrick’s objective is, “to be the world’s best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner.”
Newmont Mining Corporation (TSE:NMC) (NYSE:NEM) has operations around the globe, within eight countries in five continents—including North America, South America, Australia, Asia and Africa. Newmont’s most significant assets or operations are found in: the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. At the end of last year, Newmont had proven and probable gold reserves of 91.8 million equity ounces and an aggregate land position of roughly 39,000 square miles. Newmont’s 2008 acquisition of a large undeveloped Greenfield in North America, Hope Bay, could be followed by exploration projects into Peru and Ghana. Newmont has been focused on Australian production at Boddington, in addition to a recent private placement with Eurasian Minerals Inc. (CVE:EMX) providing additional exploration exposure to projects in Turkey, Eastern Europe, the Kyrgyz Republic, Haiti, United States, and Austral-East Asia. Newmount is the first gold company to be a part of the S&P 500 Index and Fortune 500 and endeavors to develop technological solutions for mining that improve the overall mining process. In 2007, the company became the first gold company to be selected as part of the Dow Jones Sustainability World Index.
AngloGold Ashanti (NYSE:AU) is a South Africa based top producing gold mining company with a total of 21 operations across four continents and ten countries—including the U.S., Tanzania, South Africa, Namibia, Mali, Guinea, Ghana, Brazil, Australia and Argentina. The company continues to support in-depth exploration activities as well in an attempt to identify new resource ounces of gold. Last year, AngloGold spent a total of $199.9 million for its exploration programs. At the end of 2009, the amount of both proved and probable ore reserves totalled 71.4 million ounces. AngloGold’s vision is to become the leading global gold mining company, while respecting natural environments, valuing its people and their safety and minimizing costs and maximizing profits for shareholders.
Gold Fields Limited (NYSE:GFI) is a producer of gold and holder of gold reserves in South Africa, Ghana, Australia and Peru. The majority of Gold Fields’ operations, based on gold production, are located in South Africa with operations in Driefontein, Kloof, Beatrix and South Deep. In Peru, Gold Fields is primarily involved in underground and surface gold and copper mining and related activities, including exploration, extraction, processing and smelting. Gold Fields also has an interest in a platinum group metal exploration project. The company reported 78 million ounces of gold equivalent reserves and enjoys a prominent position in the top 10 gold producing mining companies list with total mineral resources estimated of 281 million ounces.
Goldcorp Inc. (TSE:G), hosts operations located throughout North America, Central America and South America. According to last year’s annual report, the company “continues to be the growth leader among senior gold producers with a forecast production increase of 57 percent over the next five years.” Chuck Jeannes, President and Chief Executive Officer said, “We experienced another record-breaking year in 2009, increasing gold production to 2.42 million ounces on the strength of organic growth at most of our mines. We also achieved record cash margins due not only to a higher average realized gold price of $978 per ounce, but also to total cash costs that declined to $295 per ounce for the year from $305 in 2008. Cash flow from operations before changes in working capital totaled nearly $1.2 billion in 2009 while adjusted net earnings were $588.2 million in 2009 compared to $397.0 million in 2008.” Goldcorp saw rapid growth from a solid intermediate player in the gold mining industry, to one of the dominant senior gold producers in the world. Goldcorp’s objective is to be a low cost gold producer around the globe, with minimal environmental impact.
Yamana Gold (TSE:YRI) is a Canadian based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico and Colombia. The company has an estimated 19.4 million ounces of reserves with 46.4 million ounces of total mineral resource estimates. Earlier this month the company reported strong third quarter earnings with increased revenue growth of 36 percent to $454.0 million and 45 percent appreciation to $1.2 billion, respectively for the quarter and year to date.
Will Gold Hit $2000 by 2012?
Many a wide-eyed gold bug caught a glimpse of their favorite metal jumping over the psychologically (and technically) important $1,200 an ounce level Wednesday morning. I say a “glimpse” because those who blinked may have missed it.
But the blip still managed to register on the radar screen long enough to get every gold enthusiast hot and bothered about a possible return to the highs enjoyed earlier in the year, if not a jump into the stratosphere.
After a nearly 5 percent price loss last month, the gold market was understandably hungry for some good news. And this week offered plenty of nibbles large enough to feed double digit gains, with gold rising 2.2 percent in the five prior sessions. Wednesday’s gains put the yellow metal on track for its longest advance in nearly nine months.
Two of the most bullish factors at play in the gold market are the expectation the US Fed Reserve may lean on more inflation-stoking quantitative easing measures, and news that China is seeking to expand its gold market.
Earlier in the week, the Wall Street Journal, without naming sources, suggested the Fed was set to use the cash it will receive from its matured mortgage-bond holdings to purchase new mortgage or Treasury bonds. The report sparked fresh inflation fears, and sent the dollar down, which served gold prices well.
“The more debt the Fed buys, the lower interest rates will be and the more money there will be in circulation,” noted The Street’s Alix Steel. “Already the yield on the 10-year Treasury note, a benchmark, is less than 2.91%. One fear is that this move will lead to a devalued dollar, which hit an eight-month low against the yen on Tuesday, and a lack of confidence in the U.S. economy.”
The concern is the Fed will resort to such measures in the face of sure signs economic recovery has stalled. Many are holding their breath awaiting Friday’s unemployment numbers, which are expected to be rather weak.
The Peoples Bank of China announced this week it will allow more commercial banks to import and export gold as well as to participate in trading at the Shanghai Gold Exchange, which the market viewed as an indicator of rising Chinese demand.
“Suggestions from the PBOC that they would develop a gold loan market and indications that they have also decided to expand their physical gold market seems to give gold fresh credence as a financial instrument inside China,” said Jaime Greenough, futures representative at Global Securities, in a note.
“Behind India, China is the second-largest physical consumer, therefore any step to integrate, liberalize, and expand this market should, in time, foster a rising appetite for gold,” UBS analyst Edel Tully commented.
Price Forecasts
It’s safe to say that in no other market do the Bears and the Bulls butt heads as often as in the gold market, where interpretations of the events shaping prices vary widely from bare bones and boring technical analysis to the stuff of international spy novels dripping with dark cabals and wild conspiracy theories. So, it should be of no surprise that price forecasts from the market’s analysts can vary in ranges wider than the Grand Canyon.
London-based commodity brokerage firm Natixis believes gold’s supply/demand fundamentals are too poor to justify current price levels let alone much higher advances. In fact, it sees price levels dropping to around $1,050 an ounce in the fourth quarter with further drops to as low as $950 an ounce into 2011 with highs of $1,150 an ounce next year. Those with a more bearish take view fears over a world-wide financial armageddon abating as euro zone debt issues cool, taking away much of the impetus for the precious metal’s gains over the past year and to record highs in June.
From a long-term perspective, gold prices near $1,500, should we ever return to that level, $1,600, or even $1,700 an ounce will prove to be bargains"
My forecast, published here on NicholsOnGold and in other speeches and reports, of $1,700 gold by year-end 2011, now seems within easy reach.
And this is just the beginning of gold's next great leap upward, a leap that will carry the metal to $2,000 an ounce in 2012 - with prices heading still-higher, quite possibly to $3,000, $4,000 and maybe even $5,000 an ounce by the mid-to-late years of the decade.
From a long-term perspective, gold prices near $1,500, should we ever return to that level, $1,600, or even $1,700 an ounce will prove to be bargains.
As I have cautioned in the past, expect high two-way price volatility and periodic sharp corrections, corrections that some will mistake as the end of the bull market - but consider these opportunities for "scale-down" buying, opportunities to acquire additional metal at bargain-basement prices.
Rising some $300 an ounce from its January 2011 low point and more than $120 in just the past few weeks, gold has scored a series of successive all-time highs. Now, however, there is certainly some risk of a sharp short-term correction, particularly if the political-economic news on either side of the Atlantic looks less threatening to financial market stability.
A political compromise to raise the U.S. Treasury debt ceiling and agreement to narrow the Federal deficit in future years that avoids any downgrading of Treasury debt by the rating agencies would remove or reduce an important source of anxiety that has contributed to gold's recent strength. News of positive movement toward or actual completion of an agreement could trigger a swift - but temporary - gold-price retreat.
But the blip still managed to register on the radar screen long enough to get every gold enthusiast hot and bothered about a possible return to the highs enjoyed earlier in the year, if not a jump into the stratosphere.
After a nearly 5 percent price loss last month, the gold market was understandably hungry for some good news. And this week offered plenty of nibbles large enough to feed double digit gains, with gold rising 2.2 percent in the five prior sessions. Wednesday’s gains put the yellow metal on track for its longest advance in nearly nine months.
Two of the most bullish factors at play in the gold market are the expectation the US Fed Reserve may lean on more inflation-stoking quantitative easing measures, and news that China is seeking to expand its gold market.
Earlier in the week, the Wall Street Journal, without naming sources, suggested the Fed was set to use the cash it will receive from its matured mortgage-bond holdings to purchase new mortgage or Treasury bonds. The report sparked fresh inflation fears, and sent the dollar down, which served gold prices well.
“The more debt the Fed buys, the lower interest rates will be and the more money there will be in circulation,” noted The Street’s Alix Steel. “Already the yield on the 10-year Treasury note, a benchmark, is less than 2.91%. One fear is that this move will lead to a devalued dollar, which hit an eight-month low against the yen on Tuesday, and a lack of confidence in the U.S. economy.”
The concern is the Fed will resort to such measures in the face of sure signs economic recovery has stalled. Many are holding their breath awaiting Friday’s unemployment numbers, which are expected to be rather weak.
The Peoples Bank of China announced this week it will allow more commercial banks to import and export gold as well as to participate in trading at the Shanghai Gold Exchange, which the market viewed as an indicator of rising Chinese demand.
“Suggestions from the PBOC that they would develop a gold loan market and indications that they have also decided to expand their physical gold market seems to give gold fresh credence as a financial instrument inside China,” said Jaime Greenough, futures representative at Global Securities, in a note.
“Behind India, China is the second-largest physical consumer, therefore any step to integrate, liberalize, and expand this market should, in time, foster a rising appetite for gold,” UBS analyst Edel Tully commented.
Price Forecasts
It’s safe to say that in no other market do the Bears and the Bulls butt heads as often as in the gold market, where interpretations of the events shaping prices vary widely from bare bones and boring technical analysis to the stuff of international spy novels dripping with dark cabals and wild conspiracy theories. So, it should be of no surprise that price forecasts from the market’s analysts can vary in ranges wider than the Grand Canyon.
London-based commodity brokerage firm Natixis believes gold’s supply/demand fundamentals are too poor to justify current price levels let alone much higher advances. In fact, it sees price levels dropping to around $1,050 an ounce in the fourth quarter with further drops to as low as $950 an ounce into 2011 with highs of $1,150 an ounce next year. Those with a more bearish take view fears over a world-wide financial armageddon abating as euro zone debt issues cool, taking away much of the impetus for the precious metal’s gains over the past year and to record highs in June.
From a long-term perspective, gold prices near $1,500, should we ever return to that level, $1,600, or even $1,700 an ounce will prove to be bargains"My forecast, published here on NicholsOnGold and in other speeches and reports, of $1,700 gold by year-end 2011, now seems within easy reach.
And this is just the beginning of gold's next great leap upward, a leap that will carry the metal to $2,000 an ounce in 2012 - with prices heading still-higher, quite possibly to $3,000, $4,000 and maybe even $5,000 an ounce by the mid-to-late years of the decade.
From a long-term perspective, gold prices near $1,500, should we ever return to that level, $1,600, or even $1,700 an ounce will prove to be bargains.
As I have cautioned in the past, expect high two-way price volatility and periodic sharp corrections, corrections that some will mistake as the end of the bull market - but consider these opportunities for "scale-down" buying, opportunities to acquire additional metal at bargain-basement prices.
Rising some $300 an ounce from its January 2011 low point and more than $120 in just the past few weeks, gold has scored a series of successive all-time highs. Now, however, there is certainly some risk of a sharp short-term correction, particularly if the political-economic news on either side of the Atlantic looks less threatening to financial market stability.
A political compromise to raise the U.S. Treasury debt ceiling and agreement to narrow the Federal deficit in future years that avoids any downgrading of Treasury debt by the rating agencies would remove or reduce an important source of anxiety that has contributed to gold's recent strength. News of positive movement toward or actual completion of an agreement could trigger a swift - but temporary - gold-price retreat.
Gold Price Upside Potential
The gold price saw its biggest decline in nearly three years last month as considerable stock market losses resulted in the liquidation of gold positions bringing gold prices down more than 20 percent from a record high of $1920.30 per troy ounce and provoking a period of intense volatility for gold prices.
Spot market gold price
Gold prices climbed slightly to close at $1,641.60 per troy ounce, a gain of 1.6 percent on the basis that some renewed confidence of the European debt situation can be resolved, combined with relatively bullish economic data from the United States. The European Central Bank (ECB) maintained its benchmark rate levels, saying it will proceed with buying covered bonds again. The ECB President Jean-Claude Trichet indicated the intention to spend 40 billion euros over a 12 month period from November.
Within the precious metals category, prices on futures climbed, as silver for December delivery appreciated to $32.00 per troy ounce, an increase of 5.5 percent from the previous close. Palladium for December delivery rose to $598.80 per troy ounce, up 5.0 percent and platinum for January delivery increased to $1,508.10 per troy ounce, an increase of 1.7 percent from the previous trading session.
Investors will now await the release of the employment situation on Friday as a set of labor market indicators based on two separate surveys. Analysts and traders will be looking to this key data release as the unemployment rate is typically seen as a lagging indicator of general economic activity.
Economist outlook
On an interview with Business News Network, Martin Murenbeeld, Chief Economist at Dundee Wealth, explains that the gold price has been volatile, based on global economic uncertainty; however, there is still plenty of room for upside. Speaking specifically about a medium and long term gold price catalysts, “The ECB has to take a page out of the Federal Reserve and push its balance sheet up quite dramatically. The Federal Reserve blew up its balance sheet from something like $800 billion to $2.8 trillion and that is the sort of thing the ECB will have to do.”
Recapitalizing banks
A large number of news headlines have shared Murenbeeld’s sentiments about the necessity to recapitalize the European banks, “Gold [prices] thrive on policies that are designed to get you out of the problems into which you have fallen. One of the classic problems that Europe is facing is a bank run. We are seeing it at the margins, individuals and corporations are moving their money out of the banking system. If this goes on unchecked we are going to have a huge bank run. The classic response on the part of the Central Bank is to come in with massive amounts of liquidity to basically stabilize the situation. Historically this has been extremely bullish for gold [prices] and I don’t see why that would not be the case now.”
Portfolio diversification
Murenbeeld discussed his philosophy on obtaining positions of physical gold compared with gold equities favoring the Dynamic Precious Metals Fund, “at different times the different components are firing. When you have market stress like we are having now, gold equities do not fire that well, but gold bullion does. On the other hand, you could have situations where the equity market starts to rise, and gold bullion might not, but then gold equities will rise. So you are kind of playing both sides a little bit with that sort of fund. I think that’s the right kind of fund to have.”
Spot market gold price
Gold prices climbed slightly to close at $1,641.60 per troy ounce, a gain of 1.6 percent on the basis that some renewed confidence of the European debt situation can be resolved, combined with relatively bullish economic data from the United States. The European Central Bank (ECB) maintained its benchmark rate levels, saying it will proceed with buying covered bonds again. The ECB President Jean-Claude Trichet indicated the intention to spend 40 billion euros over a 12 month period from November.
Investors will now await the release of the employment situation on Friday as a set of labor market indicators based on two separate surveys. Analysts and traders will be looking to this key data release as the unemployment rate is typically seen as a lagging indicator of general economic activity.
Economist outlook
On an interview with Business News Network, Martin Murenbeeld, Chief Economist at Dundee Wealth, explains that the gold price has been volatile, based on global economic uncertainty; however, there is still plenty of room for upside. Speaking specifically about a medium and long term gold price catalysts, “The ECB has to take a page out of the Federal Reserve and push its balance sheet up quite dramatically. The Federal Reserve blew up its balance sheet from something like $800 billion to $2.8 trillion and that is the sort of thing the ECB will have to do.”
Recapitalizing banks
A large number of news headlines have shared Murenbeeld’s sentiments about the necessity to recapitalize the European banks, “Gold [prices] thrive on policies that are designed to get you out of the problems into which you have fallen. One of the classic problems that Europe is facing is a bank run. We are seeing it at the margins, individuals and corporations are moving their money out of the banking system. If this goes on unchecked we are going to have a huge bank run. The classic response on the part of the Central Bank is to come in with massive amounts of liquidity to basically stabilize the situation. Historically this has been extremely bullish for gold [prices] and I don’t see why that would not be the case now.”
Portfolio diversification
Murenbeeld discussed his philosophy on obtaining positions of physical gold compared with gold equities favoring the Dynamic Precious Metals Fund, “at different times the different components are firing. When you have market stress like we are having now, gold equities do not fire that well, but gold bullion does. On the other hand, you could have situations where the equity market starts to rise, and gold bullion might not, but then gold equities will rise. So you are kind of playing both sides a little bit with that sort of fund. I think that’s the right kind of fund to have.”
Gold Prices May Peak in 2013
Gold price forecasts for 2011 through 2013 were recently reduced by troubled French Bank, BNP Paribas, following the recent volatility in gold price valuations. In the near term, a further correction in the gold price may be warranted with physical gold sales and investment redemptions being realized to offset losses in other asset classes. Over a medium to longer term investment horizon, Precious Metals Research Analyst Anne-Laure Tremblay remains optimistic, “We see the gold price peaking in 2013, as the market starts to anticipate monetary tightening in the United States, but do not expect a sharp fall thereafter.” BNP Paribas reduced its near term outlook on gold prices to average $1,730 per troy ounce in the fourth quarter, down from its earlier estimate of $2,170 per troy ounce and further reducing its target 2012 gold price forecast to $1,950 per troy ounce.
Investment demand may continue
Precious metals consultancy GFMS has suggested that central banks could obtain approximately 500 tonnes of gold by the end of December, which raised its forecast almost 49 percent from 336 tonnes last month. In reviewing the results of a recent survey, Global Head of Metals Analytics, Philip Klapwijk indicated, “We are seeing central banks now operating very much on the buy side of the market. The selling we had seen from Europe has dried up and that’s left those buyers of choice really the only active players in the market. And that has led to central bank demand now becoming another important pillar for the advance of gold prices. We have seen names such as Mexico, South Korea coming into the market on the buy side and I would not be surprised if we see some further new names in the future.”
During a recent interview on BNN, Credit Suisse Head of Commodities Research, Rick Devereaux supported a strengthening of gold prices, “the western economies in particular are going to be weak for some time. There will be continued concerns about the banks and the financial system, my guess is that for some time gold [prices] continues to trend higher, so in our forecasts we have it going up for at least the next year and maybe two.”
Spot market gold price movement
The spot market gold price fell slightly to the range of $1668.10 per troy ounce, as a confluence of weaker US equity markets and disappointing economic data from China and lower sentiment created a movement to strengthening of the dollar. Investors will note the potential of market volatility with several market moving announcements including the retail sales number from September, consumer sentiment, business inventories and import and export price reports all expected on Friday.
Silver prices declined to $31.65 per troy ounce, a reduction of 2.8 percent, moving in tandem with a broader base metal complex as platinum fell 1.3 percent to a range of $1,523.75 per troy ounce. Palladium contracted to $597.47 per troy ounce which is equivalent to a 1.2 percent drop from its previous trading session after having earlier experienced a correction to its lowest valuation in nearly 2 years.
Precious metals consultancy GFMS has suggested that central banks could obtain approximately 500 tonnes of gold by the end of December, which raised its forecast almost 49 percent from 336 tonnes last month. In reviewing the results of a recent survey, Global Head of Metals Analytics, Philip Klapwijk indicated, “We are seeing central banks now operating very much on the buy side of the market. The selling we had seen from Europe has dried up and that’s left those buyers of choice really the only active players in the market. And that has led to central bank demand now becoming another important pillar for the advance of gold prices. We have seen names such as Mexico, South Korea coming into the market on the buy side and I would not be surprised if we see some further new names in the future.”
During a recent interview on BNN, Credit Suisse Head of Commodities Research, Rick Devereaux supported a strengthening of gold prices, “the western economies in particular are going to be weak for some time. There will be continued concerns about the banks and the financial system, my guess is that for some time gold [prices] continues to trend higher, so in our forecasts we have it going up for at least the next year and maybe two.”
Spot market gold price movement
The spot market gold price fell slightly to the range of $1668.10 per troy ounce, as a confluence of weaker US equity markets and disappointing economic data from China and lower sentiment created a movement to strengthening of the dollar. Investors will note the potential of market volatility with several market moving announcements including the retail sales number from September, consumer sentiment, business inventories and import and export price reports all expected on Friday.
Silver prices declined to $31.65 per troy ounce, a reduction of 2.8 percent, moving in tandem with a broader base metal complex as platinum fell 1.3 percent to a range of $1,523.75 per troy ounce. Palladium contracted to $597.47 per troy ounce which is equivalent to a 1.2 percent drop from its previous trading session after having earlier experienced a correction to its lowest valuation in nearly 2 years.
Gold Equity Funds Vs Gold ETFs
The demand for investment products has significantly increased over the past decade with the number of funds available to a retail investor interested in exposure to gold and precious metals providing numerous international opportunities. One primary consideration for any investor is whether they would prefer to own an actively managed fund or if they prefer to minimize investing fees and to limit the security or market timing risks of failing to correctly anticipate the future. An obvious follow up option is whether they would prefer a fund that owns gold equities or whether they would prefer exposure to the price volatility of physical gold. There are gold ETFs that track the physical price of gold and there are also gold ETFs that have exposure to a variety of gold mining and exploration stocks. With the tremendous abundance and variety of products available, a fundamental answer could involve the initial reason for adding the asset class to a portfolio.
Growing market and investment risk
As the market in gold ETFs has grown in size, so has the level of complexity and diversity of ETF products.
Many ETFs work by replicating the index they are linked to by simply reconstituting the basket of physical securities underlying the index. A number of gold ETFs track an index such as the Dow Jones North America Select Junior Gold Index or the FTSE Gold Mines Index can be an attractive investment due to low costs, tax efficiency and share-like characteristics. These ETFs can provide a relatively inexpensive and effective way to track an asset class; they have proved to be increasingly popular, and have established a successful track record with ample liquidity and traded volume.
Synthetic gold ETFs, work through entering into asset swap, such as an OTC derivative, with a counterparty, rather than physically replicating the index. Synthetic ETFs of this variety allow the underlying investment to enter into a greater number of transactions and present the opportunity of investing in assets where physical holding of the asset is not possible.
The rapid development of synthetic ETFs in Europe has seen them capture a considerable market share of the demand and the numbers are growing. Fueling this growth, according to the Financial Stability Board (FSB), are the cost synergies demonstrated between banking interests. In some instances, the ETFs can employ financial correlations using derivatives and leveraging which has generated some concern and opposition that they may be creating a new form of systemic risk. With derivative trading desks acting as swap counterparty to the bank’s proprietary asset management arm, it can become relatively cost effective and easy for investment banks to produce synthetic ETFs. Further, while U.S. regulators consider restrictions on the use of derivatives in ETFs, European ETF regulation has been minimal.
Short term year to date analysis
Upon initial screening, this year’s performance attribution seems to indicate the strongest appreciation for ETFs tracking the price of gold with SPDR Gold Shares, the biggest ETF up 7.1 percent; while according to Morningstar Inc. the average equity fund in the category has declined 7.7 percent.
This may represent a lag time, where the market is discounting the value of gold mining companies while insatiable demand for the yellow metal as a hedge against market risks and currency depreciation is a premium; however, in general a disparity in returns is often because gold mining equities are a leveraged play on gold.
Hypothetical case study
In an overly simplified example, if it costs a mining company $800 to produce a troy ounce of gold, and gold is $1,500 per troy ounce, the profit for the company is $700. If gold rises to $2,000, the profit becomes $1200. The marginal difference is equivalent to a 42 percent increase in profits generated from a 25 percent rise in the price of physical gold. As a result, gold stocks have, over time, demonstrated greater volatility compared with the price of gold.
Investors will realize that there are numerous other complicating issues and variables when it comes to gold mining companies and the funds that invest in them. Individual companies can face production and operational problems, geopolitical considerations and multifaceted financial, interest rate, and currency exchange complications.
Growing market and investment risk
As the market in gold ETFs has grown in size, so has the level of complexity and diversity of ETF products.
Many ETFs work by replicating the index they are linked to by simply reconstituting the basket of physical securities underlying the index. A number of gold ETFs track an index such as the Dow Jones North America Select Junior Gold Index or the FTSE Gold Mines Index can be an attractive investment due to low costs, tax efficiency and share-like characteristics. These ETFs can provide a relatively inexpensive and effective way to track an asset class; they have proved to be increasingly popular, and have established a successful track record with ample liquidity and traded volume.
Synthetic gold ETFs, work through entering into asset swap, such as an OTC derivative, with a counterparty, rather than physically replicating the index. Synthetic ETFs of this variety allow the underlying investment to enter into a greater number of transactions and present the opportunity of investing in assets where physical holding of the asset is not possible.
Short term year to date analysis
Upon initial screening, this year’s performance attribution seems to indicate the strongest appreciation for ETFs tracking the price of gold with SPDR Gold Shares, the biggest ETF up 7.1 percent; while according to Morningstar Inc. the average equity fund in the category has declined 7.7 percent.
This may represent a lag time, where the market is discounting the value of gold mining companies while insatiable demand for the yellow metal as a hedge against market risks and currency depreciation is a premium; however, in general a disparity in returns is often because gold mining equities are a leveraged play on gold.
Hypothetical case study
In an overly simplified example, if it costs a mining company $800 to produce a troy ounce of gold, and gold is $1,500 per troy ounce, the profit for the company is $700. If gold rises to $2,000, the profit becomes $1200. The marginal difference is equivalent to a 42 percent increase in profits generated from a 25 percent rise in the price of physical gold. As a result, gold stocks have, over time, demonstrated greater volatility compared with the price of gold.
Investors will realize that there are numerous other complicating issues and variables when it comes to gold mining companies and the funds that invest in them. Individual companies can face production and operational problems, geopolitical considerations and multifaceted financial, interest rate, and currency exchange complications.
Four years for gold (ETFs) to get past the Rs 4,000-crore mark in (AUM)
gold funds, its much younger sibling, which invests in gold ETFs, have grown at frenetic pace and have accumulated net assets of over Rs 1,800 crore in just six months. The category itself came into existence only in the early part of 2011.
Gold funds have emerged as a favoured investment choice for those taking exposure to the yellow metal largely due to the convenience it offers . While investors must have a demat account to invest in gold ETFs, there is no such requirement for gold funds. Moreover, investors can do a SIP (systematic investment plan) with gold funds.
"It has become a huge hit with retail investors. Gold funds are acting as a catalyst for gold ETFs," says Lakshmi Iyer, head, fixed income and products, Kotak Mahindra MF. "The trend shows that investors have warmed up to gold funds," says Dhruva Raj Chatterji, senior research analyst , Morningstar India, an investment research firm.
Gold funds have emerged as a favoured investment choice for those taking exposure to the yellow metal largely due to the convenience it offers . While investors must have a demat account to invest in gold ETFs, there is no such requirement for gold funds. Moreover, investors can do a SIP (systematic investment plan) with gold funds.
Thursday, 29 September 2011
GOLD EXPECTING DOWN SIDE CORRECTION-DOUBLE TOP FORMED IN GOLD CHART(1889.70 &1873.70)
the chart below shows an Adam & Eve double top. The first top is sharp and spiky, and the second is more rounded, depicting a labored attempt to reach the previous highs.
A neckline is drawn across the July price low, showing the support level that needs to be penetrated in order for the formation to "execute" (trigger expectations of lower prices). If it does execute, the minimum downside target would be about 1520 -1550. This target is estimated by measuring the distance between the first top and the neckline, and then projecting the same distance from below the neckline. It is interesting to note that the less accelerated rising trend line drawn across the January and July lows is rising at a rate that could provide support around 1550 if the correction proceeds. A steep rising trend line has been penetrated, increasing our expectation of further decline.
Friday, 16 September 2011
20 per cent crop is likely to be damaged in Punjab
Heavy rainfall in Punjab yesterday, 20 per cent crop is likely to be damaged in the state while the destruction may be limited to 5 per cent each in Haryana and Rajasthan.
Traders said that the total production may be less than expected due to rainfall and water logging. Earlier, total output was expected at 52 lakh bales which will now is anticipated to reduce to 45-46 lakh bales. Crop will also get delayed.
Traders are of the opinion that with limited stock of old crop and a delay in the arrival of new crop, supply will be tight in the near future thereby resulting in a hike in price. It seemed that prices will move down after September but late arrival will make the trend bullish in October too as millers will be buying amid tight supply.
The unsold stock of old crop in north India is 28,000 bales only and the good arrival will start after October 1.
Cotton traded up Rs 100-150 a maund in north India markets Friday amid the anticipation of crop damage. However, there are no sellers at these quotes. Total arrival in the country was 5,600 bales.
Demand for cotton yarn is reported to be strong. Traders said that the exporters are in panic eyeing the soon ending DEPB scheme. A weak INR is also supporting the exports.
Millers are quoting the export price at USD 4.15 per kg. In domestic market, 30 count combed yarn is being traded at Rs 195 a kg while PC single 30 count at Rs 185 a kg.
In Punjab, ready delivery S-G cotton traded at Rs 4,500- 4,525 a maund. In Haryana, it offered at Rs 4,400- 4,425 while in Rajasthan, ready delivery cotton quoted at Rs 4,400- 4,425 a maund.
In Punjab, October first week delivery quoted at Rs 4,200- 4225 a maund.
Traders said that the total production may be less than expected due to rainfall and water logging. Earlier, total output was expected at 52 lakh bales which will now is anticipated to reduce to 45-46 lakh bales. Crop will also get delayed.
Traders are of the opinion that with limited stock of old crop and a delay in the arrival of new crop, supply will be tight in the near future thereby resulting in a hike in price. It seemed that prices will move down after September but late arrival will make the trend bullish in October too as millers will be buying amid tight supply.
The unsold stock of old crop in north India is 28,000 bales only and the good arrival will start after October 1.
Cotton traded up Rs 100-150 a maund in north India markets Friday amid the anticipation of crop damage. However, there are no sellers at these quotes. Total arrival in the country was 5,600 bales.
Demand for cotton yarn is reported to be strong. Traders said that the exporters are in panic eyeing the soon ending DEPB scheme. A weak INR is also supporting the exports.
Millers are quoting the export price at USD 4.15 per kg. In domestic market, 30 count combed yarn is being traded at Rs 195 a kg while PC single 30 count at Rs 185 a kg.
In Punjab, ready delivery S-G cotton traded at Rs 4,500- 4,525 a maund. In Haryana, it offered at Rs 4,400- 4,425 while in Rajasthan, ready delivery cotton quoted at Rs 4,400- 4,425 a maund.
In Punjab, October first week delivery quoted at Rs 4,200- 4225 a maund.
Tuesday, 13 September 2011
Gold & Silver ETF Short Term Positive Inflows - 13 September 2011
As of Friday's(09.09.2011) close the metal held in trust for GLD was worth about $73.9 billion.
All five of the gold ETFs sponsored by the World Gold Council also reported an increase, of 9.6 tonnes to a collective 1,543.66 tonnes of gold metal (about 49.6 million ounces worth $91.9 billion).
GLD and most physical-backed gold ETFs add metal and increase the number of shares in the trading float in response to periods of aggressive buying pressure – when there is more positive liquidity than negative liquidity. The reverse is also true.
iShares COMEX Gold Trust (IAU), now our preferred gold ETF, also reported positive money flow, adding 1.12 tonnes to their metal holdings, to show 168.06 tonnes of good-delivery gold bars. IAU's expense ratio is lower than GLD's (0.25% vs 0.40%), but liquidity and option depth is better with GLD.
Metal holdings for BlackRock's iShares Silver Trust (NYSE:SLV) increased this past week as SLV authorized market participants issued new shares in return for adding 65.13 tonnes of allocated, LBMA-approved commercial good-delivery silver bars, held by SLV's custodian in London (JP Morgan Chase, London). Note that we saw positive money flow into both gold and silver ETFs even though the USD price of the metals was lower.
All five of the gold ETFs sponsored by the World Gold Council also reported an increase, of 9.6 tonnes to a collective 1,543.66 tonnes of gold metal (about 49.6 million ounces worth $91.9 billion).
GLD and most physical-backed gold ETFs add metal and increase the number of shares in the trading float in response to periods of aggressive buying pressure – when there is more positive liquidity than negative liquidity. The reverse is also true.
iShares COMEX Gold Trust (IAU), now our preferred gold ETF, also reported positive money flow, adding 1.12 tonnes to their metal holdings, to show 168.06 tonnes of good-delivery gold bars. IAU's expense ratio is lower than GLD's (0.25% vs 0.40%), but liquidity and option depth is better with GLD.
Metal holdings for BlackRock's iShares Silver Trust (NYSE:SLV) increased this past week as SLV authorized market participants issued new shares in return for adding 65.13 tonnes of allocated, LBMA-approved commercial good-delivery silver bars, held by SLV's custodian in London (JP Morgan Chase, London). Note that we saw positive money flow into both gold and silver ETFs even though the USD price of the metals was lower.
Thursday, 18 August 2011
Gold miners’ diminishing return on asset (ROA) could indicate flagging demand for the precious metal.
Gold miners’ diminishing return on asset (ROA) could indicate flagging demand for the precious metal.
It really struck me when I saw the rank of the Market Vectors Gold Miners ETF (GDX) dropped an unprecedented 10 points in one week in late April. The rank came from our ETF ranking system that has predictive power to tell which ETF is likely to outperform or underperform the market.
Indeed, our recommendations (click here and here) based on the ranking system delivered better returns than did the S&P 500. Initially I thought the sharp drop was some sort of data error. But three months later the rank still stuck at the same level. Even worse, now the rank is 15 points below its peak. As we will explain later, a 15-point drop means a big chunk of investment return will evaporate.
For a brief understanding of our ranking system please read “ETF Ranking: A New Fundamental Approach That Drives Short-Term Return". In short, the ranking system is based on valuation, financial condition, and return on capital. We observed that stocks with higher ranks had a strong tendency to outperform those with lower ranks over a period of one week.
The data show that moving up 10 rank points translates to an extra annualized return of 1.7% in the past 10 years, if ranks range from 0 to 100. Therefore GDX’s 15-point drop translates to a loss of an annualized 2.6% (1.7% x 15 / 10 = 2.6%). 2.6% may not sound like a big deal, but the S&P 500 Index returned an annualized 2.5% in the past 10 years. So 2.6% is really more than the market return.
It really struck me when I saw the rank of the Market Vectors Gold Miners ETF (GDX) dropped an unprecedented 10 points in one week in late April. The rank came from our ETF ranking system that has predictive power to tell which ETF is likely to outperform or underperform the market.
Indeed, our recommendations (click here and here) based on the ranking system delivered better returns than did the S&P 500. Initially I thought the sharp drop was some sort of data error. But three months later the rank still stuck at the same level. Even worse, now the rank is 15 points below its peak. As we will explain later, a 15-point drop means a big chunk of investment return will evaporate.
For a brief understanding of our ranking system please read “ETF Ranking: A New Fundamental Approach That Drives Short-Term Return". In short, the ranking system is based on valuation, financial condition, and return on capital. We observed that stocks with higher ranks had a strong tendency to outperform those with lower ranks over a period of one week.
The data show that moving up 10 rank points translates to an extra annualized return of 1.7% in the past 10 years, if ranks range from 0 to 100. Therefore GDX’s 15-point drop translates to a loss of an annualized 2.6% (1.7% x 15 / 10 = 2.6%). 2.6% may not sound like a big deal, but the S&P 500 Index returned an annualized 2.5% in the past 10 years. So 2.6% is really more than the market return.
Gold to Acquire Remaining 49% of Africa Mining
Compass announced that it had received a proposal for the acquisition by Compass of a total of 49% of the issued shares (the "Shares") of Africa Mining, subject to Compass completing its then existing option to acquire a total 51% interest in Africa Mining. At that time, the Company formed a special committee of independent directors (the "Independent Committee"), consisting of Messrs. Malcolm Carson and Marshall Auerback, to consider the acquisition of the Shares and advise the board of Compass whether the acquisition of the Shares would be in the best interests of the Company and its shareholders.
Effective July 12, 2011, pursuant to an Option Agreement dated December 3, 2009 among the Company, Africa Mining and the Sellers (as defined below), Compass acquired an additional 31% interest, for a total 51% interest, in Africa Mining through the exercise of an option requiring the completion of additional exploration expenditures of $1.5 million on Africa Mining's properties and the issuance of 3,333,333 units of Compass at a deemed price of $0.15 per unit. Refer to Compass's news release dated July 12, 2011 for further details of this option exercise.
The Shares are currently owned by Madani Diallo and Transocean Finance Pty Ltd. ("Transocean", and together with Madani Diallo, the "Sellers"). Dr. Diallo is a director of the Company. Transocean is a company controlled by James Henderson, who is a director and the Chairman, President and CEO of the Company.
Following its review of the proposed Acquisition, the Independent Committee has recommended to the board, and the board has approved and entered into a share purchase agreement dated August 17, 2011 between the Company, Compass Gold (BVI) Mali Corp. (an indirect, wholly-owned subsidiary of the Company) (the "Subsidiary"), the Sellers and Africa Mining (the "Share Purchase Agreement") to acquire the Shares.
The Company has positioned itself as an emerging mineral exploration company in the highly prospective gold producing areas in South and Western Mali. Mali is the third largest gold producer in Africa. The Acquisition will result in 100% (rather than 51%) control over the assets, including the significant land-holdings, of Africa Mining. Africa Mining currently has permits covering 881 square kilometers located within Mali's Birimian Greenstone Belt, the fastest growing gold production and exploration area in the world. The Company believes that acquisition of 100% of these assets will better position the Company to develop the existing Africa Mining projects and create opportunities to grow through focused acquisition and/or increased land holdings in Mali.
Acquisition Terms
Pursuant to the terms of the Share Purchase Agreement, the Company has agreed to purchase (through the Subsidiary), and the Sellers have agreed to sell, the Shares in consideration for the issuance by the Company of 30,000,000 units (the "Consideration Units"). Each Consideration Unit is comprised of one common share of the Company and one-third of one common share purchase warrant (each whole warrant, a "Warrant") of the Company. Each Warrant will entitle the holder thereof to acquire one common share of Compass at an exercise price of $0.30 per share at any time within four (4) years following the date of issuance of the Warrant.
The Consideration Units will be allocated to the Sellers in proportion to their beneficial holdings of the Shares, as set out below:
-----------------------------------------------------------------------------
Sellers Number of Shares Number of Consideration Units
-----------------------------------------------------------------------------
Transocean 75 22,500,000
Dr. Diallo 25 7,500,000
-----------------------------------------------------------------------------
Total: 100(1) 30,000,000
-----------------------------------------------------------------------------
Representing 49% of the issued and outstanding shares of Africa Mining.Compass (through the Subsidiary) currently holds 51% of theissued and outstanding shares of Africa Mining.
The Sellers hold a 2% net smelter return royalty over Africa Mining's Yanfolila, Dandoko and Kolondieba properties. Under the Share Purchase Agreement, as a condition of closing the Sellers are required to grant Compass the right to acquire 50% of this royalty (thereby reducing the royalty from 2% to 1%) for the payment of $1,000,000 at any time during a period of 5 years following the closing of the Acquisition (the "Royalty Transaction").
From the period commencing July 12, 2011 (being the date Compass completed the acquisition of its current 51% interest in Africa Mining) to the closing date of the Acquisition, Compass and the Sellers will, unless otherwise agreed, continue to fund Africa Mining in proportion to their current respective shareholdings in Africa Mining (51% Compass; 49% Sellers). Compass has agreed to reimburse the Sellers, at the closing of the Acquisition, for any such amounts funded by the Sellers.
Effective July 12, 2011, pursuant to an Option Agreement dated December 3, 2009 among the Company, Africa Mining and the Sellers (as defined below), Compass acquired an additional 31% interest, for a total 51% interest, in Africa Mining through the exercise of an option requiring the completion of additional exploration expenditures of $1.5 million on Africa Mining's properties and the issuance of 3,333,333 units of Compass at a deemed price of $0.15 per unit. Refer to Compass's news release dated July 12, 2011 for further details of this option exercise.
The Shares are currently owned by Madani Diallo and Transocean Finance Pty Ltd. ("Transocean", and together with Madani Diallo, the "Sellers"). Dr. Diallo is a director of the Company. Transocean is a company controlled by James Henderson, who is a director and the Chairman, President and CEO of the Company.
Following its review of the proposed Acquisition, the Independent Committee has recommended to the board, and the board has approved and entered into a share purchase agreement dated August 17, 2011 between the Company, Compass Gold (BVI) Mali Corp. (an indirect, wholly-owned subsidiary of the Company) (the "Subsidiary"), the Sellers and Africa Mining (the "Share Purchase Agreement") to acquire the Shares.
The Company has positioned itself as an emerging mineral exploration company in the highly prospective gold producing areas in South and Western Mali. Mali is the third largest gold producer in Africa. The Acquisition will result in 100% (rather than 51%) control over the assets, including the significant land-holdings, of Africa Mining. Africa Mining currently has permits covering 881 square kilometers located within Mali's Birimian Greenstone Belt, the fastest growing gold production and exploration area in the world. The Company believes that acquisition of 100% of these assets will better position the Company to develop the existing Africa Mining projects and create opportunities to grow through focused acquisition and/or increased land holdings in Mali.
Acquisition Terms
Pursuant to the terms of the Share Purchase Agreement, the Company has agreed to purchase (through the Subsidiary), and the Sellers have agreed to sell, the Shares in consideration for the issuance by the Company of 30,000,000 units (the "Consideration Units"). Each Consideration Unit is comprised of one common share of the Company and one-third of one common share purchase warrant (each whole warrant, a "Warrant") of the Company. Each Warrant will entitle the holder thereof to acquire one common share of Compass at an exercise price of $0.30 per share at any time within four (4) years following the date of issuance of the Warrant.
The Consideration Units will be allocated to the Sellers in proportion to their beneficial holdings of the Shares, as set out below:
-----------------------------------------------------------------------------
Sellers Number of Shares Number of Consideration Units
-----------------------------------------------------------------------------
Transocean 75 22,500,000
Dr. Diallo 25 7,500,000
-----------------------------------------------------------------------------
Total: 100(1) 30,000,000
-----------------------------------------------------------------------------
Representing 49% of the issued and outstanding shares of Africa Mining.Compass (through the Subsidiary) currently holds 51% of theissued and outstanding shares of Africa Mining.
The Sellers hold a 2% net smelter return royalty over Africa Mining's Yanfolila, Dandoko and Kolondieba properties. Under the Share Purchase Agreement, as a condition of closing the Sellers are required to grant Compass the right to acquire 50% of this royalty (thereby reducing the royalty from 2% to 1%) for the payment of $1,000,000 at any time during a period of 5 years following the closing of the Acquisition (the "Royalty Transaction").
From the period commencing July 12, 2011 (being the date Compass completed the acquisition of its current 51% interest in Africa Mining) to the closing date of the Acquisition, Compass and the Sellers will, unless otherwise agreed, continue to fund Africa Mining in proportion to their current respective shareholdings in Africa Mining (51% Compass; 49% Sellers). Compass has agreed to reimburse the Sellers, at the closing of the Acquisition, for any such amounts funded by the Sellers.
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