China may have stockpiled up to 6,000 tonnes gold; Laos potash push; Canadian miner buys into Aussie phosphate
Back in 2009 China updated its central bank holdings of gold. They stood at 1,054 tonnes, said the People’s Bank of China (PBoC) then. Earlier this year a senior official was quoted by China Daily affirming there were still only 1,054 tonnes of the yellow one in the bank’s vaults.
That strained credulity given (a) so much gold had been imported by China, mainly through Hong Kong in the past few years and (b) so many other central banks were buying.
They don’t buy the Chinese line in Liechtenstein, either. Ronald-Peter Stoeferle used to author the annual In Gold We Trust report for Austria’s Erste Bank. He remains a consultant to that bank but now works at Incrementum Advisors in Vaduz, the capital of Liechtenstein’s and preferred domicile for many a billionaire looking to make sure their money stays safe.
His latest In Gold We Trust report is out. And Stoeferle believes “it is realistic that China by now has 4,000 – 6,000 tonnes, and with that the second largest gold reserves in the world”. That puts it second to the U.S. and replacing Germany (3,391 tonnes) as the second runner.
Stoeferle says what’s behind the Beijing policy is to have international acceptance of the renminbi; the Chinese currency in 2011 was already accounting for 11% of the world’s cross-border trade settlements. The PBoC now has agreements with 18 other central banks (including Australia and Great Britain) which allows settlements without using the medium of the US dollar. More than 10 Asian central banks hold renminbi reserves and the PBoC is encouraging banks in South America, Africa, Europe and the Middle East to follow suit. The big deal announced last week which will see Russia export huge quantities of oil to China allowed for payment in renminbi.
China wants to establish the renminbi as the dominant currency among emerging markets, but this can be done only if its exchange value is strong and confidence in its future purchasing power is high. Writes Stoeferle: “We believe that gold will be one of the pillars of China’s strategy. Specifically, we believe that China’s central bank continues to accumulate gold covertly and believe that it is possible that gold-backing of renminbi is planned. A gold-backed renminbi would increase its international acceptance in one fell swoop”.
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After all, he reminds us, one of the reasons the U.S. dollar became the reserve currency was the enormous gold reserves held by that country.
Last year, too, gold imports to the mainland from Hong Kong rose by 47% to nearly 560 tonnes; that is on top of the 350 or so tonnes produced each year by Chinese mines, none of which can be exported.
POTASH: China and Belarus are working to get large slices of the Laotian potash action. A Belarusian news agency reports Belarus and Laos have set up a joint trans-national corporation. The Laotians, according to the report, want to tap into Belarus potash know-how. China is also interested in the potential for Laos to supply it muriate of potash and the government in Vientiane says it will not exclude Chinese participation in developing its potash industry.
Just six months ago industry research firm Fertecon released a 120-page report on Laos potash. It noted the mines developed in the country were small in scale and have no connection with the potash majors, having been financed by small local companies and Chinese interests. However, several large projects are now in the planning process and the country could be producing at the annual rate of 5 million tonnes of MOP by 2018, and exceeding 8 million tonnes a year by 2025.
“The key reason that Laos potash mines have been quicker — and cheaper — to develop has been that, compared to most other potash projects, the Laos deposits are relatively shallow,” said Fertecon. “Although in terms of ore quality the deposits do not compare with the major deposits in Canada and Russia, the ore quality in sufficient to produce a commercially acceptable project.”
Moreover, Laos is close to key markets: China, Vietnam, Malaysia, Thailand and Indonesia. Availability from Laos is also likely to stir potash demand in Cambodia and Burma. With all these, Laos will have a substantial freight advantage over suppliers from other parts of the world.
PHOSPHATE: Canada’s Monument Mining (TSX.V:MMY) has entered a joint venture to develop a phosphate project in Australia’s Northern Territory, the local partner being Central Australian Phosphate (ASX: CEN). Monument can earn up to 51% of the projects for a total investment of A$8.8 million.
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