Numis Securities Debates How A Weak US Dollar Affects China And Its Trading

Analyst John Meyer has produced an interesting paper which claims that collapse of the US dollar effectively renders China more competitive, driving growth BUT will not force Chinese re-valuation. The State Council and Communist Party State Central Committee will meet over the next few weeks at the central economic work conference in China to decide on general policy in the coming year.

At the forefront of the agenda will be the objective of maintaining stable economic growth and political and social stability. China , after all, does not have to concern itself with elections which cause swings in economic policy in the West. The huge investment in dollar bonds will also come under scrutiny as there has recently been growing evidence of a preference for Euros rather than US dollars for the country’s currency reserves. The point has already been made by the deputy governor of the Bank of China that there is no intention to devaluing the currency despite pressure from the Bush government and international markets.

The brokers are of the view that China has set its own internal targets at a rate of around 7 per cent -9 per cent in terms of growth in gross domestic product, and that it will stick to this come what may. This could allow 10 per cent -20 per cent metals demand growth within China, much of which will need to be sourced internationally.

There is bound to be some scare mongering from metals traders in Asia over potential Chinese re-valuation and over Chinese consumption levels. But it is Numis’s view that China will continue to consume substantial and increasing quantities of raw materials, particularly copper and steel related raw materials such as iron ore, nickel, manganese and chromite ores. These commodities are effectively forming the foundations of China’s new economic era and development and China is unlikely to consider the demands of the rest of the world in its drive to develop its infrastructure and economy.

While China is happy to trade with the rest of the world, its stated policy is to manage a relatively small trade surplus/deficit and to remain as independent as possible from the rest of the world. Fortunately for western mining companies China is relatively short of a number of key raw materials which it continues to import. Chinese mining concerns have been slow to discover new prospects and their safety record has not been good, so much so that the authorities were reported to be closing many small coal mines.

Mining may be one of the world’s oldest professions, but China appears to have lagged the west in the development of large-scale mining and exploration organisations. This may be due to the unusual expertise required to discover and develop efficient mining projects. Alternatively it may also be due to the difficulty in discovering prospects in a geology where there is a lack of rock outcrop and where overlying sand cover effectively masks underlying prospects from many geophysical techniques.

There is little doubt that Chinese miners, who traditionally worked in mines in Cornwall, the US and Australia in the 18th and 19th centuries, may now discover more in their back yard but the prevailing geology of China may continue to retain its riches and new discoveries may take some years to bring to fruition.

John Meyer concludes that the Chinese may therefore remain a net importer of many key raw materials for some years and that Western mining concerns should continue to benefit from a continuing high level of demand within the region. Bulk shipping companies and recycling businesses should also continue to fare well from a continuing increase in this trade as will miners which are able to operate in US-dollar based currency zones where they benefit from its weakness..

African Eagle Has An Iron Oxide Copper Gold Deposit

By The Tail At Eagle Eye And A Possible Gold Mine At Miyab

What with an extended rainy season, lack of drills and a queue a mile long at the assay lab it is not surprising that news from AIM listed African Eagle has been a bit sparse over the last few months. The share price suffered as impatient investors tried to make a fortune elsewhere, but they will probably now be wishing that they had stayed put as the company has released very encouraging news from both its Miyabi gold project in Tanzania and the Eagle Eye copper and gold project in Zambia. In the event the company wrong footed one or two commentators as the biggest expectations had been built up for Eagle Eye, but it is Miyabi which now shows every indication of becoming a mine. As a result African Eagle has swiftly made the flight from pure explorer to developer and the share price has been trying to catch up.

The drilling that has taken place at Miyabi has been concentrating on the Faida area in the south east of the Miyabi mineralised corridor. The object was to gain an accurate view of the stratigraphy and occurrence and nature of the gold mineralisation for input into a new resource calculation. The results speak for themselves. One hole intersected 58.3 metres grading 4.03 g/t gold, including a higher grade zone of 22.5 metres at 7.11 g/t which itself included an even higher grade intersection of 12.8 metres at 11.54 g/t. Another hole to the north ntersected 60.7 metres at 1.57g/t, including a central zone of 32.0 metres at 2.09 g/t and a third to the to the northeast intersected 61.2 metres grading 1.63 g/t, including 28.8 metres at 2.22 g/t.

The conclusions reached by the African Eagle team is that the holes drilled so far show that the gold mineralised zone has a true thickness of between 27 and 60 metres, a strike length of at least 300 metres and extends to a vertical depth of at least 120 metres. Geophysical surveys and soil geochemistry suggest that the mineralisation extends over at least 500 metres. Mark Parker, managing director, points to the results from the first hole as being significant as they appear to reveal a higher grade ‘ore shoot’ within the Faida gold zone. He goes on to point out that shoots of this type can add greatly to the total resource ounces of gold in a project but they may be only 100 to 200 metres long and 20 to 50 metres thick, which makes them difficult to find except by sustained and systematic drilling

Early in 2005 the company will complete the new resource estimate and it will obviously be whole lot bigger than the 140,000 ozs presently ascribed to Miyabi as it includes nothing from Faida. This is only the beginning, however, as Mark Parker believes that the gold-bearing corridor at Miyabi, which is 7kms in length and 2 kms wide, has the potential to host other important gold structures of the Faida type. A comprehensive database of geophysical, geological and geochemical data has been built up which will now be used to identify and target other possible gold structures for drilling. More work will also be carried out at Faida which is open at depth and to the east and may also be open to the west. These latest results also suggest that the gold mineralisation increases with depth and may plunge to the east.

The announcement about progress at the Eagle Eye project in Zambia actually contains the words ‘Iron Oxide Copper Gold deposits’ and the eyes of analysts will have been drawn to this very swiftly. The basic news is that the continuing geochemical, geophysical and other surveys show that zones of copper mineralisation and geochemically anomalous soils are considerably more extensive than previously considered. Newly defined zones identified from recent geochemical analysis of soils correspond to a major fold structure seen on the aeromagnetics and in the geological mapping. This fold structure is believed to be a favourable trap-site for potential mineralisation and the hinge of the fold is defined by a magnetic high on the airborne imagery suggesting a large zone of iron alteration characteristic of Iron Oxide Copper Gold Deposits.

Such deposits tend to be big and there are only about half a dozen in the world; Australia has two of them and Africa none. Olympic Dam has a resource of around 1 billion tonnes of copper and gold and Ernest Henry 170 million tonnes. People close to African Eagle see geological similarities with Ernest Henry which is a dipping breccia style deposit. To give an idea of scale it extracts 10 million tonnes/year of ore from an open pit operation and produces around 360,000 tonnes of concentrate containing 100,000 tonnes of copper and 125,000 ounces of gold a year..

Investors should not get over-excited as it is still early days. Eagle Eye has yet to determine priority targets over the fold hinge for drilling in 2005, but it is encouraging that first pass trenching along the northern limb of the fold structure near the hinge zone has returned 1.07% copper over 6 metres. As to size, well the new zones of copper mineralisation and anomalous soil geochemistry define the entire fold structure, which extends for some 13kms from the Eagle Eye/Mweze prospects on the north-western portion of the fold limb to the historic Sasare Gold Mine on the margin of the south-eastern limb. Chris Davies, operations director, reckons that the copper mineralisation in the soils extends for 25 kms. Time and Dr Drill will tell, but Eagle Eye has now moved up a league..

Trans-Siberian Gold Joins The Queue To List On AIM In October

So the Moscow Times was right and Trans-Siberian Gold is going to list on AIM in October. The broker and nominated adviser will be Collins Stewart who did a great job with Monterrico Metals and they will be assisted on the technical side by Loeb Aron. As the name suggests Trans-Siberian operates in Russia and acquired a number of projects a couple of years ago in the centre and far east of the country on attractive terms. As a private company it has raised US$12.5 million so far to advance these projects and is hoping to raise around £10 million at the time of listing according to managing director Jocelyn Waller.

After the problems mining companies have been encountering with titles of all sorts there is no doubt that investors will go through the prospectus with a tooth comb. Celtic Resources is now soaring ahead after sorting out its interest in the Nezhdaninskoye mine in Yakutia, but went through a long, dark period of intense legal and political battling to get to this stage. Now Highland Gold finds itself in a problem over the ownership of fixed assets in the Mnogovershinnoe gold mine which is Russia’s fourth largest producer. At the time of the listing questions were asked about title to certain assets, but assurances were given that everything was under control.

Now, more than six months later, a little announcement was put out over RNS that ‘Highland Gold has been in discussions with the Khabarovsk Administration for some time to acquire certain mining assets at the MNV mine, currently leased under a 15 year agreement, signed in 1998 with the Khabarovsk Administration.’ The fact that this minimalist statement was only put on RNS and not distributed as a press release raises concerns with cynical old journos that things are less than rosey. This is a spin tactic and Lord Daresbury, the chairman of Highland Gold, should have stamped on it as soon as it was suggested. Openness is always the best policy.

Doubtless Trans -Siberian will avoid such problems and it is interesting to note that it has no Russian partners in its projects. In Kamchatka, which is a sort of appendix that drops off the far eastern end of Russia towards Japan, the vendors still have a 10 per cent interest in the Asacha project covering 24 sq kms, but Trans-Siberian hopes to get full control at a later date. And it has certainly got 100 per cent of the nearby Rodnikova project to its south. Both are accessible by an all weather road and the Mutnovskoye power station, which attracted US$100 million of funding from the EBRD, sits between them.

Asacha has been explored extensively in Soviet times between 1973 and 1990 with trenching, diamond drilling and underground exploration by means of a 1,120 metre adit along the main vein. Since being acquired by Trans Siberian the resource has been measured to JORC standards and totals 1.74 million ounces of gold in the measured and indicated categories after silver credits and 2.58 million ounces of inferred gold resources. A feasibility study is in progress and the plan is to raise funding to develop an underground mine at Asacha by 2005 as it is on a hill and involves only a simple decline to access the free milling high grade ore. Based on the feasibility study the throughput would be 200,000 tones/year to produce 98,000 ounces of gold equivalent at a cash cost of US$160/oz.. Rodniskoye could then be developed as an open pit ancillary operation later on.

In the Krasnoyarsk region, which is to the north east of Kazakhstan, Trans -Siberian also has full control of the Veduga project where a feasibility for an open pit should be completed next year. The measured and indicated resource is 10.7 million tones grading 4.94 g/t gold to give 1.71 million ounces and metallurgical testing is in progress on the ore which is 52 per cent free gold and 45 per cent refractory. It appears to be amenable to flotation and tests on pressure oxidation have proved positive. This is a bigger project as 1.5 million tonnes of ore would be mined a year to produce just under 190,000 ounces of gold at a cash cost of around US$110/ounce.At a later date it would continue as an underground mine producing around 100,000 ounces of gold a year.

Full details of these projects and of the exploration potential of the ground surrounding them will be available in the prospectus. By that time also the application for the Nyuektaminskoye prospect in Yakutia, the same region in the far east. of Russia that contains Celtic’s Nezhdaninskoye mine, should have been granted. Again it appears that Trans- Siberian is going for full ownership and not a partnership with a Russian entity. Jocelyn Waller argues that there are effectively partnerships with local governments in Krasnoyarsk and Kamchatka through royalty payments, but this is not the same thing as the partnerships formed by peer companies such as Peter Hambro Mining and High River Gold. What Trans -Siberian does have is full control over interesting projects and a team of young Russian managers.

October is going to be a busy month as far as the mining sector of the AIM market is concerned.

Western World Would Be Unwise To Ignore Proposal For Gold Dinar Currency Among Islamic Countries

Just before the Organisation of Islamic Conference which is due to take place in Kuala Lumpur in October 2003 a number of Muslim countries, led by Malaysia, propose to introduce an electronic unit of value called a gold dinar to settle bilateral trade among themselves. The plan will be rubbished by members of the Bush administration who were brought up from birth to believe in the power of the almighty dollar, but the White House should reflect on the fact that there are 1.3 billion Muslims in the world and very few of them share America’s view of the dollar. Moreover Asia was developing as an economic power house in its own right until the financial crisis of 1997/8 and many leaders in these countries believe that they were destabilised by an overly strong dollar.

Nor Mohamed Yakcop, the economic adviser to Malaysia’s Prime Minister Mahathir Mohamad, announced the plan to an international conference in the last few days and the intention is to introduce it half way through next year. The idea may be in its infancy at the moment, but as Mao Tse Tung said, “A long journey starts with a single step.” The great appeal, not only in Asia but in the Middle East as well, is that it would offer Islamic countries a means of by- passing western currencies by using gold to settle bilateral trade. All these countries still retain the concept of gold as a store of value as evidenced by Indian wedding rites, purchases of gold by Thai farmers after good harvests and the number of shops selling bullion in Dubai.

America finds it hard to comprehend the resentment in these countries against the sheer power it wields in the world and this is exemplified in the dollar. If the conspiracy theorists are to be believed immense efforts have been made during the 90s by US banks and other institutions to detach gold from the global financial system and spin it off as a barbaric relic. Now the dollar is under pressure and the scales are falling from the eyes of those who put total faith in the paper IOUs of governments. Islam could not have chosen a better moment to offer an alternative currency.

The Malaysian Prime Minister views matters in a fairly simplistic way. Currently most world trade is settled using major currencies. The dollar has predominated and it has been followed by the pound sterling, yen and euro. The economies of the countries of the Middle East and Asia have been vulnerable to the exchange rate between their local currencies and these majors. “The gold dinar could be an important facilitating mechanism to help the smaller countries of the world move away from an inherently unstable and ultimately unjust global monetary system,” he said.

Central to the proposed plan is the requirement that central banks in member countries would settle dinar trade balances every three months by transferring the beneficial ownership of gold held in a custodian bank, such as the Bank of England. These central banks would then settle with exporters and importers in the local currency. According to Islamic law, the dinar is a specific weight of gold equivalent to 4.22 grams of pure gold (0.135 ounces) and its value is based on world demand for gold which would give it a value of US$42 at the moment..

Prime Minister Mahathir’s plan coincided with an announcement from the World Gold Council that Asia’s reserve-rich central banks are potential buyers of gold to diversify their reserve assets. At the moment , according to Ralston Thiedeman, head of the WGC’s Asia Pacific sector, Asia holds over half of the world’s near US$2.0 trillion of foreign exchange reserves and it is mostly held in low-yield U.S. dollar assets, and generally less than five percent in gold. Thiedeman said volatility in global financial markets, a weakening U.S. dollar and low U.S. interest rates were reasons for Asian central banks to diversify their portfolios. He might almost have been reading from the same hymn sheet as Mahathir Mohamad and it might therefore be realistic to suppose that these countries might be gearing up their gold reserves to support the dinar.

One can see the world weary veterans of the derivative markets who thought the bear market in gold would go on for ever shrugging their shoulders at such an idea, but they forget the wild card – China. Its basic industries such as steel are going gangbusters while the western world is in recession and the Bank of China is steadily increasing its gold reserves which still only amount to around 2 per cent of total reserves. Just suppose it decided to hook into the gold dinar idea. The balance of economic power might then shift from the west to the east. Such a move would take time, but it is a thought worth mulling over on the beaches this summer. As the man said, “Post September 11th things will never be the same again.”.

Financial PR Adviser To AIM Listed Mining Companies Accused Of Insider Trading

As Minews has pointed out, August is the silly season for news in the northern hemisphere as most of the movers and shakers are off to the beaches or, since last week, shooting grouse on the moors of the north of England and Scotland. The news that the Department of Trade and Industry has decided to charge the first person with insider trading in connection with shares tipped in the Daily Mirror financial columns is therefore of interest as the accused runs a financial PR company which advises a number of junior mining companies listed on AIM.

Step forward Tim Blackstone, an erstwhile scholar at Rugby School where the great game with an oblong ball was invented. Indeed the Media Diary of the Observer newspaper claimed a few months back that he had been invited back to the old school to give a lecture on the fine art of financial public relations. One wonders if any of his audience had brushed up on his past , as described in the said Media Diary, as it included a stint as a porn star and this would have been of much more interest to his listeners than a homile about spin doctoring.

The Sunday papers had a field day with descriptions of this interlude in his career which is said to have been brought about by his lack of luck at the card table with people who had considerably more cash than him. According to those who seem to know he starred in three films, Titus Erectus, I Am Not Feeling Myself Tonight, and The Man With The Golden Arse. He acted in these films, and possibly more, under the pseudonym Dick Bangwell and when he was not performing he was said also to have written a few porn novels. Doubtless this combination kept the wolf from the door and gave him some useful practice in writing as he then moved on to being a financial journalist at the Evening Standard and the Sunday Times.

As far as can be ascertained he started his financial PR operations as a one man band two or three years ago and named it Blackstone Business Communications, doubtless in the hope that simple folk might vest its output with the same importance as that rather larger organisation with the same initials, the British Broadcasting Corporation. The trouble was that the technical expertise of the smaller bbc was not up to that of the larger and it was only in recent months that poor old Tim got round to sending out press releases by e-mail rather than fax.

The great mainstay of his business was the Matt Sutcliffe/Denny Chambers team which left stockbrokers Williams de Broe last year to join what is now called Evolution Beeson Gregory when riding high after a series of successes with Aquarius Platinum, Murchison United and European Diamonds. Since joining the new firm they have also acted in the AIM listings of Dwyka Diamonds and St Barbara Mines. The strange thing was that bbc became financial pr consultant to all these companies without any of its competitors getting a look in, or so they say. As far as can be ascertained it was Denny Chambers who was Blackstone’s patron and Denny himself had a pretty interesting career before catching hold of Sutcliffe’s shirt tails.

Apparently Mr Blackstone’s problems go back to 1999 and focus on the share performance of a company called Murray Financial. The interesting thing is that the DTI is giving this case a high profile as all the Sunday papers were well briefed and were door stepping the offices of bbc when Blackstone arrived there “on a rickety motor scooter “ after being summoned to appear at Marylebone magistrates court to face four charges of contravening Section 52 of the 1993 Criminal Justice Act which forbids insider dealing. The high profile may be something to do with the fact that his sister is Tony Blair’s minister for the arts and revels in the title of Baroness Blackstone given for her services to the Labour Party.

Fortunately for the mining companies involved with bbc – which also include Golden Prospect and Kenmare – Alan Piper and Roger Pope who joined Blackstone in the last year or so are taking the business on under the new banner of First City Financial. Piper has a masters degree in geophysics so should know a fair bit about mining companies, probably more than poor old Tim.