EDITOR: | April 23rd, 2013

The Pulse: Chinese clean out gold stocks; Uranium “never looked better”; Scandium scramble

| April 23, 2013 | No Comments
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The-Pulse-Robin-BrombyThis sign went up outside the Caishikou Department Store in Beijing last week: “No gold bars are available. Customers who have paid can pick up their bars in one week”.

That store is Beijing’s largest gold retailer, and last week it ran out of the yellow metal.

So not everyone is dumping gold. In fact, investors in China stampeded last week when the price fell well beneath $1400/oz. According to China Daily, one buyer emerging from the store said “I couldn’t wait to buy gold. Many of my colleagues and friends have already made their purchases”.

The newspaper said a local in Nanjing rushed into one gold store in that eastern China city and laid down the equivalent of $468,000 to buy a large amount of gold. It reported that queues had formed outside gold retailers in Nanjing.

Chinese investors last year bought 832 tonnes of gold, almost a third of annual world mine output.

Over in Hong Kong, at the Hang Seng Bank gold counter, The Maudlin Report spoke to one investor in the city who told of the queue of customers being out the door. “It took an hour wait to see a teller. When I asked if people were buying in the dip or selling in panic, she told me that they haven’t had one ounce of gold sold back to them all day. She told me they have sold more gold in 24 hours than they normally do in three months”.

Then Nigel Moffatt of the Perth Mint was interviewed on Bloomberg TV, and said: “Monday morning when we opened the gates of the Perth Mint at 9 o’clock, there was a large crowd of people waiting outside and as the gates were opened people ran across the courtyard to get into the retail operation.” He described the scene as “like the Christmas sale at your favourite department store”.

But, while some gold producers around the world might be seeing diminished margins due to the large slice taken off the gold price, explorers are not so badly affected. Their fortunes can be turned around just by announcing a discovery.

And it was significant that Reuters reports this week that South Africa-based miner Randgold Resources “sees any further fall in the price of gold as an opportunity to expand its exploration activities cheaply“.

Chief executive Mark Bristow, the company’s chief executive, said Randgold was looking to buy stakes in exploration projects run by smaller firms likely to be hit hard if the precious metal enters a downtrend after 12 years of gains. Bristow told Reuters the grim outlook for gold would likely affect small miners the most as financing dries up, forcing them to mothball exploration operations. But that could be an opportunity for established companies who could buy into projects at knock-down prices.

And ponder this: why, out of the blue, was 410 tonnes of June gold futures dumped on the New York market within two hours on Friday, April 12? That amount of gold represents about 15% of annual world mine output. No wonder there’s talk everywhere about manipulation.

URANIUM: There are reports out of Cairo that Russia will help Egypt develop its nuclear power program. Trade and Industry Minister Hatem Saleh has confirmed that atomic energy is back on the agenda, ending a moratorium ordered by Cairo in 1986 after the Chernobyl disaster. The previous government of Hosni Mubarak approved a bidding process in 2011 for a plant at Dabaa near the Mediterranean coast. Saleh is reported saying the Russians would help conduct studies on the Dabaa project and develop an experimental reactor.

Meanwhile, one of Australia’s most frequently quoted mining analysts, Warwick Grigor of Canaccord Genuity, sees uranium fundamentals getting stronger. “Although investors have been psychologically scarred by Fukushima, the outlook for the uranium market has never looked better,” he says.

Over the next decade, world nuclear capacity is expected to grow from 374,108MW capacity to 623,662MW, a rise of 66%.

With the wind-down of the recycling of weapons grade uranium expected to be completed in 2013, some 11,000 tonnes a year of uranium supply will be removed from the world market in 2014. If most of the Japanese reactors get back in business, that will see annual demand increase by 7,000 tonnes. That total 18,000 tonnes represents 26% of current world demand. At present, demand is running close to 70,000 tonnes a year but mine production is stuck at 55,000 tonnes.

RARE EARTHS: Drilling has begun on one of Australia’s scandium deposits. When I say “one of”, that underlines a point made here some months ago: that Australia (if not Australian companies) is shaping up to dominate the scandium market.

We have Metallica Minerals (ASX:MLM) hoping to be in production in Queensland by 2015, the Nyngan project in New South Wales now able to proceed following a settlement which gives EMC Metals (TSX:EMC) sole ownership, and now Platina Resources (ASX:PLM) has begun drilling at its Owendale platinum-scandium project, also in NSW.

Platina Resources last year released a scoping study that confirmed the economic and technical viability of a combined platinum and scandium mining operation at Owendale, New South Wales. The study shows a mine could produce 0.9 tonnes (or 28,935 ounces) of platinum a year for 3 years and 40 tonnes of scandium oxide a year for 41 years.


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