EDITOR: | April 15th, 2013

The Pulse: Niobium opportunity missed; Gold tumbles in Asia but some still fighting its corner

| April 15, 2013 | No Comments
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Pulse_FinalFancy sitting on a critical metals deposit and letting the commodity boom pass you by.

Well, that seems to be the story with a niobium deposit in Tanzania, and one that has been known about since the 1950s. The saga emerged in a stock exchange announcement from Australian junior explorer Cradle Resources (ASX:CXX) that it had bought a 50% interest in the Panda Hill project, with an option to go to 100%.

This is what Cradle reported: “The project has been locked up by a single private owner for over seven years, missing the opportunity represented by the China-driven commodity price boom over that period”. The company that is selling the 50% now to Cradle bought the rights less than a year ago, arranged a maiden JORC resource and did a mine plan and development costing.

Nobium is an interesting market because it is still controlled by Brazil, which produces 63,000 tonnes of the 69,000 tonnes mined annually (2012 figures), with Canada providing another 5,000 tonnes. A Japanese-South Korean consortium and a Chinese consortium have each acquired a stake in the largest Brazilian mine.

The third largest producer is Niobec, owned by Canada’s IAMGold (TSX:IMG), an underground mine which Cradle says has a similar grade to Panda Hill. The Australian company says it has the advantage in that the Tanzania deposit can be mined by an open pit.

Ferro-niobium, which Niobec produces, is sold directly to global steel mills and is used as an alloy to harden steel products (especially aerospace applications).

But here’s the amazing fact: no new niobium projects have entered production since 1976 notwithstanding the favourable price and demand situation for the metal. Outside the three existing producers, says Cradle, “there are no new niobium projects currently financed or under construction, and none appear close”.

Panda Hill was explored and drilled by British companies between 1954 and 1963, then by a Yugoslav venture between 1978 and 1980.

Meanwhile, the Kanyika niobium deposit in Malawi has been subject to delays as the Australian listed but Chinese controlled Globe Metals & Mining (ASX:GBE) seeks to negotiate a development agreement with the government there.

GOLD: The yellow metal took a further battering when Asian markets opening on Monday and, at this writing, was sitting on $1451/oz.

Some analysts were quick to sink the boot in. Bloomberg quoted Georgette Boele from ABN Amro Group saying ‘‘The demise of gold is still at an early stage. Other assets will become increasingly more attractive as the growth outlook improves.’’

And then there was this from Peter Richardson of Morgan Stanley‘s Melbourne, Australia office: ‘‘Some of the key pillars of the gold bull market look like they’re suffering fatigue. The gold market’s probably started to price in the prospect that beleaguered members of the euro zone might be forced to sell gold to raise part of the funding, and there are much bigger holders in that category than Cyprus.’’

But this in the same Bloomberg article from the man who, long before Nouriel Roubini was accorded the title, was known as “Dr Doom”, Marc Faber, publisher of the Gloom, Boom & Doom report: ‘‘I love the fact that gold is finally breaking down because that will offer an excellent buying opportunity. The bull market in gold is not completed,” he told Bloomberg television

And on that point about other EU countries having to sell gold, Julian Jessop of Capital Economics in London makes a very interesting point. That is, the suggestion that Cyprus might be forced to sell gold to repay the emergency loans from Brussels would be a breach of the EU Treaty. As Jessop explains, “gold reserves are typically owned by national central banks which are forbidden (by EU Treaty) from directly financing government borrowing.”

And, he adds, of the troubled EU countries, only Italy and Portugal hold significant amounts of gold relative to their borrowing requirements (2,452 tonnes and 382 tonnes respectively).

And here’s a point your correspondent adds: if gold is such a crummy asset, as the anti-gold crowd would have us believe, why is it seen as the most respected asset these EU countries have? The one that, in the last resort, will save the day.

And, as for Boele’s “growth outlook”, that is looking less likely by the day to judge from the latest Chinese figures.


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Editor:

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