Friday, November 28, 2008

NR: New auditors, DD completed and documented

Century Appoints New Corporate Auditors

BLAINE, WA, Nov. 28 /CNW/ - Century Mining Corporation (CMM: TSX-V) announced today that it has appointed BDO Dunwoody LLP as the new auditors for the Company, subsequent to the resignation of Century's previous auditors, Deloitte and Touche LLP.

The Company also announced that Mr. Mark Lettes has resigned from the Board of Directors of Century, effective immediately.

Regarding financing initiatives, Century announced today that a bridge financing deal with Trafalgar Capital did not close. Century announced receipt of a term sheet from Trafalgar on September 17, 2008. Although no specific reasons were given by Trafalgar, management believes that the current global economic crisis and severe conditions in equity and credit markets caused Trafalgar to reevaluate the proposed transaction.

The Company is in the process of completing a significant project financing for its Lamaque Mine. The due diligence process has just been completed and documented, and the proposed debt facility will next be subject to review by the banking institution's internal Credit Committee. The proposed transaction is a project loan facility of up to $70 million (for further details see Century press release dated May 12, 2008).

Margaret Kent, President and CEO of Century, said, "We are pleased with the findings of the extensive due diligence that was carried out in connection with our senior secured financing, which confirms the excellent potential of the Lamaque Mine. While we seek other alternatives for short-term financing, the Company is meeting its immediate capital requirements through internal cash flow, the sale of redundant open pit mining equipment, salary deferrals of executive management and other streamlining efforts. Given the extremely difficult credit environment, we appreciate the patience of all Century stakeholders, and we are working diligently in the midst of very poor credit markets to complete the project financing."

Thursday, November 27, 2008

Citigroup says gold could rise above $2,000 next year as world unravels

Citigroup says gold could rise above $2,000 next year as world unravels

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

By Ambrose Evans-Pritchard
Last Updated: 7:29AM GMT 27 Nov 2008

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

"This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

"What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We're already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore," he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. "If true, this is a very material change," he said.

Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. "People have started to question the value of government debt," he said.

Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.

Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses.

Wednesday, November 26, 2008

A quick thought on syndicated vs non-syndicated deals

I think Q3 financials are be due at the end of this week. Hopefully the NR or the MD&A will provide some sorta update on things. It has been a while for any type of official update from the company (on anything at all). As such, it is completely unclear what the status is with the Fortis/BNP Paribas financing situation.

I was listening to an investment manager on tv today, and he was briefly describing synidcated financing deals. Basically, he was saying that a syndicated deal is when the primary bank raises the funds by getting several other banks to subscribe to the deal. This helped in confirming my own (limited) understanding of syndicated deals. He also said that syndicated deals became very difficult to put together post the recent credit crisis blow up.

That kinda reminded me of a note Century included in their September 2'08 NR (in explaining the Fortis deal), as follows:

"The drawdown is not conditional upon syndication;"

I'm not sure if other people noticed it as well. That note would suggest that Fortis/PNP Paribas was/is planning to fund all of the debt directly (through their own funds), without seeking out other banks.

If such is still the case then it makes a major difference in this environment. Actually, it's a huge difference.

I guess we can only hope that things are still progressing forward alright.

Friday, November 21, 2008

FWIW, we officially tapped the $1,000 Cdn gold price mark again

$778 US gold price / .7784 exchange rate = $1,000 Cdn

Who knows how long it will last, especially if they decide to hammer the price down on the COMEX (as they have done over the past couple of months, be it due to heavy deleveraging or people with agendas). Regardless, it's just good to see $1,000 Cdn gold again, especially with the oil price taking such a massive hit.

Tuesday, November 18, 2008

Belgian court rejects bid to suspend BNP Paribas buyout of Fortis

Tue Nov 18, 1:44 pm ET

BRUSSELS (AFP) – A Belgian court on Tuesday rejected a bid by Fortis shareholders to suspend the sale of the bank's Belgian activities to BNP Paribas, while ordering an enquiry into whether the sale price was high enough.

Ahead of the court ruling, trading in shares in Fortis bank was suspended on the Belgian and Dutch stock markets after the shares in the former Belgian-Dutch banking group plunged to 0.66 cents.

The company's shares were trading at about 30 euros in July 2007 before it became embroiled in the US-born bad loan crisis.

Small shareholders groups had brought the case to the Brussels trade court questioning the validity of last month's buyout, which was part of a broader deal organised to rescue the ailing bank.

Head judge Francine De Tandt ruled that the shareholders' complaint was admissible but solely based on price, hence the decision to set up an expert panel to look into that aspect of the deal.

She said that a suspension of the sale or asking a shareholders' meeting to validate it could jeopardise the whole deal and thus the survival of Fortis in any form.

The judge added that the company's 'code of conduct,' which foresees a general shareholders meeting for major decisions, did not have legal force under the firm's statutes.

Mischael Modrikanem, a lawyer for the plaintiffs, swiftly announced their intention to appeal the ruling.

"Obviously we are very disappointed by the fact that the court has validated all the operations," he said, while welcoming the establishment of the three-strong expert panel which will begin work next week on assessing the fairness of the sale price.

The judge did not explain the procedure if the panel decides the price paid was inadequate.

Earlier the Belgian regulator CBFA announced that "at Fortis's request" trading was being suspended in the afternoon for the rest of the day.

The Dutch markets authority AFM later confirmed its own suspension of Fortis trading following the Belgian move.

Under the deal announced last month, France's biggest bank agreed to take up to 75 percent of Fortis's Belgian banking operation leaving the other 25 percent, a blocking minority on strategic decisions, in the hands of the Belgian government.

BNP bosses announced last month that the deal would be financed by BNP Paribas shares, with the Belgian state taking a stake of "around 11.7 percent" in the French bank, making it the largest shareholder.

BNP Paribas put the value of the operation at 14.7 million euros (18.6 billion dollars).

The French bank also agreed to take over Fortis insurance activities for 5.7 billion euros.

The BNP Paribas deal in early October followed an original, hastily arranged rescue deal a week earlier, when Belgium, the Netherlands and Luxembourg announced a 11.2-billion-euro (15.5 billion-dollar) part-nationalisation of Fortis to prevent the US-driven financial crisis from claiming another victim in Europe.

Belgian Prime Minister Yves Leterme said last month his government was doing everything possible and was keen to reassure Fortis savers, clients and staff.

However, the Belgian leader had no such words of comfort for the bank's shareholders.

"A shareholder in a company takes risks," he said at the time.

Saturday, November 15, 2008

General info

Pakistan will receive a $7.6 billion bailout from the IMF. Pakistan’s inflation rate hit a 30 year high in October. It could become dangerous for everyone in the world, if Pakistan’s economic situation continues to destabilize. Pakistan is a nuclear armed nation, with terrorists infested within the country and region, including the group that didn’t have any issues with taking down the World Trade Center (twin) towers. An economically unstable Pakistan increases the chances of nuclear weapons moving into the hands of terrorists.

To make ends meet, Iran needs to see the oil price in the range of $70 – 100. They will be pushing for another 1 – 1.5 million barrel per day cut in OPEC oil production, at the upcoming emergency OPEC meeting later this month. OPEC nations continue to have discussions with non-OPEC nations, to have non-OPEC nations cut production also. Russia is one of the non-OPEC (major) oil producers they are in discussions with. In total, 50 million barrels are produced on a daily basis by non-OPEC members.

Over the last few months, Iran converted their financial reserves into gold.

There is talk that China is seriously considering a plan to diversify more of its foreign-exchange reserves into gold.

1) Pakistan agrees on $7.6 bln IMF loan

Sat Nov 15, 2008 10:05am EST

By Sahar Ahmed

KARACHI (Reuters) - Pakistan has agreed with the International Monetary Fund (IMF) on a $7.6 billion emergency loan to stave off a balance of payments crisis and pave the way for a broader economic rescue plan.

The IMF said on Saturday its executive board was expected to meet shortly on the 23-month standby credit, after IMF staff and Pakistan agreed on a reform program.
"This support is part of a broader package that includes financing from other multilateral institutions and regional development banks," IMF Managing Director Dominique Strauss-Kahn said in a statement.

The international community is concerned that an economic meltdown in the nuclear-armed state could play into the hands of al Qaeda and allied Islamist militant groups seeking to destabilize the Muslim nation of 170 million.

The eight-month-old civilian government is banking on good will toward Pakistan during its transition to democracy after more than eight years under former army chief Pervez Musharraf, who quit as president in August to avoid impeachment.
World leaders were meeting in Washington at the weekend to discuss the worst global economic turmoil since the 1930s and consider reforms to world financial institutions such as the IMF.

Shaukat Tarin, the recently appointed adviser to the prime minister, said the formalities should be concluded next week.

"We are expecting it this month," he told a news conference in Karachi when asked when the first tranche might arrive.

"We have requested IMF to give as much as they can."

The interest rate on the credit facility would vary between 3.51 and 4.51 percent with changes according to market conditions, and would be payable between fiscal 2011/12 and 2015/16, Tarin said.

The IMF did not disclose details. But it said the credit under its emergency funding facility would be tied to Pakistani economic reforms, including higher official interest rates and tighter fiscal policies, plus a well-funded social safety net to protect the poor.

Pakistan expects the World Bank and other lenders to step forward with several billion dollars of additional loans, and steadfast ally China to pitch in with $500 million. But other multilateral lenders and friendly governments were waiting for the IMF accord before acting, in order to bring some discipline to Pakistan's economic management, analysts said.

Other potential donors are gathering in Abu Dhabi on Monday for a "Friends of Pakistan" conference.

State Bank of Pakistan Governor Shamshad Akhtar said the IMF money would be used to build up the central bank's foreign currency reserves, which Tarin said should be equivalent to more than three months import cover.

The central bank's reserves stood at $3.5 billion on November 8, equivalent to just nine weeks worth of imports, and Pakistan faced defaulting on international debt obligations in February next year unless it received a multi-billion dollar infusion.

2) Iran wants new oil output cut, price of $70-100

Sat Nov 15, 2008 8:40pm IST

By Zahra Hosseinian

TEHRAN (Reuters) - Iran wants OPEC to cut oil output by a further 1 to 1.5 million barrels per day (bpd) when it meets in Cairo later this month, the Islamic Republic's representative to the cartel was quoted as saying on Saturday.

Iran's OPEC governor Mohammad Ali Khatibi also said talks were underway on cooperation with crude producers outside OPEC to reduce output, after the oil price fell by more than 60 percent from a peak of around $147 per barrel in July.

He told state television that members of the Organisation of the Petroleum Exporting Countries (OPEC), supplier of more than a third of the world's oil, needed a price of at least $70-100.

The market remained oversupplied, despite a move by OPEC to reduce production by 1.5 million bpd last month, he said.

"This is the minimum price that we believe should exist," he said in a live interview. "If prices are lower we believe the global oil industry chain will be faced with problems."

The oil price has tumbled in recent months as the global economic crisis hit demand in big consumer nations, with U.S. crude falling $1.20 to $57.04 on Friday.
OPEC countries, expected to meet in the Egyptian capital on Nov. 29, are calling for action to halt oil's slide as they face reduced revenues and a struggle to finance domestic projects.

The website of state broadcaster IRIB said Iran, the world's fourth-largest oil producer and seen as a price hawk, would propose that OPEC reduce its output again at the meeting in two weeks' time.

3) Iran switches reserves to gold - report

Sat Nov 15, 2008 1:29pm IST

TEHRAN, Nov 15 (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.
He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.

4) Gold Rush

Benjamin Scent

Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.
Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."

Friday, November 14, 2008

$917 Cdn gold price - Reflation occuring

It's interesting, gold stocks have been punished mercilessly, yet the Canadian gold price is probably higher now than at points earlier in the year. With the Cdn $ previously trading at par, a $900 US gold price only gave us $900 Cdn per oz. Now we still get $917 Cdn even though the US gold price has fallen to $742.30 US, due to the exchange rate now being .8095. In addition, some key components at the cash cost per oz level have moved in our favour:

1) 9 - 10% decrease in the Peruvian currency
2) much lower cost of consumables
3) much lower fuel prices

It's just unfortunate that share prices of gold miners haven't held up better. Clearly, it's an extemely emotional market evironment - all across the broard.

I think the market from time to time is catching on that reflation is happening. I think they are starting to realize that the only way that governments are going to get the world out of this mess is to inject massive amounts of paper currency into the system. The only thing they care about right now is to avoid major deflation, which could lead to a severe depression. The governments will never let another great depression happen again. The governments fear deflation much more than they fear inflation. The window is very limited to subdue deflationary pressures, before it becomes out of control - it's a ticking time bomb. The governments will throw everything, including the kitchen sink, to inflate the world out of this situation. As we know, this will eventually lead to massive inflation, and potentially even hyperinflation. However, governments can't worry about inflation for now. They need to save the world first, and injecting massive paper liquidity is the only way to accomplish this. It will need to be a global effort, which we have already seen the early stages of: US ($3.5T, and counting), China ($600B), Russia (billions), France, UK, Canada, Australia, etc. Believe it or not, what we have seen thus far is just the first phase. The governments are saying they will do whatever it takes.

Today's gold rally is the first realization by the market of the above I just explained. This rally might not necessarily be sustainable, but we should see a lot more of these rallies over time, as the general public and money managers realize and accept the inevitable. Likely, today's rally was triggered from statements made by Bernanke.

Here is an article:

Gold, Silver Rally on Inflation Expectations; Platinum Advances

By Pham-Duy Nguyen

Nov. 14 (Bloomberg) -- Gold rose the most in eight weeks on speculation that central banks will add more liquidity to unfreeze credit markets, spurring inflation and boosting the appeal of the precious metal. Silver and platinum also gained.

Federal Reserve Chairman Ben S. Bernanke said the U.S. and other countries are ready to take more action to boost lending. The dollar declined against a basket of six major currencies after dropping 0.6 percent yesterday. More liquidity will devalue currencies and stoke inflation, said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago.

``Basically, the government needs and wants an inflationary spurt to turn this economy around,'' McGhee said. ``Gold is probably $100 to $150 too cheap, based on the amount of liquidity that's already been pumped into the system.''

Thursday, November 13, 2008

Bernanke being pressed to disclose details on the $2 trillion loan

This $2T loan is a large part of the $3.5T US bailout that was identified in the article I posted yesterday. The bailout is not just the $700B, but is far beyond what the general public thinks. This is massive amounts of new money being dumped into the system. We could see substantial devalution in the US dollar starting within the next 12 months - gold has amazing upside potential (in the not too distant future) especially for gold mining companies that are able to navigate through the short-term challenges. The Fed had to gain Congress approval for the $700B, but did not need to go to Congress for the $2T loan, hence the disclosure disconnect. Subsequently, the Fed has refused to provide details on $2T loan. You know, $2T is not exactly petty cash. One has to wonder what they are hiding. Bloomberg has filed a Federal lawsuit seeking to force disclosure.

Here is a part of the Bloomberg article:

Lawmakers, Investors Ask Fed for Lending Disclosure (Update2)

By Alison Fitzgerald

Nov. 13 (Bloomberg) -- Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.

At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.

``There cannot be accountability in government and in our financial institutions without transparency,'' Texas Senator John Cornyn said in a statement. ``Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.''

House Republican leader John Boehner and Republican Representatives Jeb Hensarling of Texas, Scott Garrett of New Jersey and Walter Jones of North Carolina also are pressing Fed Chairman Ben S. Bernanke to elaborate on the Fed's emergency lending. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in the separate $700 billion bailout of the banking system that was approved by Congress last month.

Bloomberg News has sought records of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

Comments from a $790 billion money manager about the US $

Pimco, Co-CEO Mohamed El-Erian - Pimco is a leading global investment management firm with more than $790.3 billion in assets under management as of September 30, 2008 – El-Erian is highly respected and extremely visible on CNBC and Bloomberg in the US. This was what El-Erian had to say on CNBC Europe, on Wed, Nov. 12’08. It’s good to see a major US money manager (non-gold person) see the US dollar for what it is:

"We're seeing a cyclical rebound in the dollar that has more to do with other countries than with the US. It has to do with the re-pricing of European prospects. It has to do with the unwinding of the carry trade. For now, the dollar is the beneficiary of things happening elsewhere. Once that is over, which it will be, we expect the dollar to resume on a secular decline. Part of that is because the system has to absorb about 2 trillion dollars of issuance by the US government over the next 12 months, and that is a lot of issuance – about 4 times of the maximum that’s been done previously.”

Wednesday, November 12, 2008

Bailout Price Tag: $3.5T and counting

The US dollar gold price should remain at a decent level during the current deflationary period, due to the store of value aspect and the continued existence of geopolitical issues. Apparently, gold (and/or gold mining stocks) held up even during the great depression, but I haven't looked it up myself (to verify) - "The stock price of this gold mining company soared relentlessly upward during the entire bear market. Homestake Mining stock rose continuously from $80 in October 1929 to $495 per share in December 1935 - which represents a total return of 519% (excluding cash dividends) during the devastating bear market period." Who knows, maybe it's a bit more complex this time around, with hedge funds, severe credit crisis, post World War II economy (which is now focused on the US dollar as the world reserve currency), etc. Nevertheless, we are still doing well in regards to the Canadian gold price, at $883 Cdn per oz. At the rate of US bailout spending alone, if gold mining companies stay strong over the longer term they should benefit eventually from pending inflation or hyperinflation and debasement of the US dollar. Unfortunately, gold's US dollar performance has been extremely disappointing during this current period, due to the large sums of money flowing into the US dollar. The US dollar strength is killing everything right now.

Here is the article:

Bailout Price Tag: $3.5T So Far, But 'Real' Cost May Be Much Higher

Posted Nov 12, 2008 10:16am EST by Aaron Task in Newsmakers, Recession, Banking
Related: AIG, FNM, FRE, XLF, ^DJI, ^GSPC, C

While the government is clearly spending a lot of taxpayers' money to bail out financial firms, the tally is even bigger than most Americans (economists and pundits included) are probably aware or willing to admit.

The bailout bonanza has gotten so big and happened so fast it's the true cost often gets lost in the discussion. Maybe Hank Paulson and Ben Bernanke prefer it that way because the tally so far is nearly $3.5 trillion, and that's before a likely handout for the auto industry.

Yes, $3.45 trillion has already been spent, as details:

$2T Emergency Fed Loans (the ones the Fed won't discuss, as detailed here)

("The Fed refusing to reveal who received almost $2 trillion in non-TARP loans, or what collateral it has accepted from 'emergency' loans made to struggling firms, as Bloomberg reports.")

$700B TARP (designed to buy bad debt, the fund is rapidly transforming as we'll discuss in an upcoming segment)

$300B Hope Now (the government's year-old attempt at mortgage workouts)

$200B Fannie/Freddie

$140B Tax Breaks for Banks (WaPo has the details)

$110B: AIG (with it's new deal this week, the big insurer got $40B of TARP money, plus $110B in other relief)

Tallying up the "true" cost of the bailout is difficult, and won't be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.

At the very least, the possibility of the U.S. losing its vaunted Aaa credit rating -- which determines the Treasury's borrowing costs -- cannot be discounted.

Moody's has already said it's not in jeopardy of being lowered. But we really can't put much stock in what Moody's -- or S&P or Fitch -- say after the subprime debacle, can we? More importantly, the price of credit default swaps on U.S. government debt has been on the rise since the bailout train got rolling, as Barron's reports.

Sunday, November 9, 2008

China launches $600 billion stimulus plan

China moves to boost economy, G20 sees more action

By Kirby Chien and Anna Willard Kirby Chien And Anna Willard – 1 hr 34 mins ago

BEIJING/SAO PAULO (Reuters) – China launched a huge stimulus plan on Sunday worth nearly $600 billion, kicking off what could be a round of big spending or interest rate cuts by leading economies to stave off a recession in many countries.

In Brazil, finance ministers and central bank governors representing 90 percent of the world's economy said they would take "all necessary measures" to get financial markets back to normal and counter the backlash of the credit crisis.

Many developed economies are now facing a contraction next year after lending from banks suddenly dried up, and newer powers such as China have been caught up in the domino effect.

World leaders meet next weekend to discuss precisely what measures they need to work out in coming months, and how much more say emerging economies will have over global finance.

China's official Xinhua news agency said the world's fourth-largest economy approved 4 trillion yuan ($586 billion) in new government spending between now and 2010, focused largely on infrastructure and social projects.

The move was hailed by the head of the International Monetary Fund, Dominique Strauss-Kahn, who said it would have a positive effect on the world economy.

China's cabinet also announced a shift to a "moderately easy" monetary policy, suggesting more rate cuts.

"'Easy' monetary policy could mean, quantitively speaking, more money supply and a looser market liquidity," the head of China's central bank, Zhou Xiaochuan, told reporters in Brazil. "It can also be reflected in prices, for example the bank lending interest rate could become lower."

China has cut rate cuts three times since mid-September.

"This is pretty major," said Arthur Kroeber, head of Dragonomics, a Beijing economic consultant. "It reflects the official view of how serious this problem is and shows that this is a government that can mobilize enormous resources to stimulate the economy when they put their minds to it."

By comparison, the United States sent out about $100 billion in tax rebate checks this summer, while Germany last week agreed to a 50 billion euro pump-priming plan.

China's Zhou, attending the meetings in Brazil, said on Saturday the Asian export powerhouse, which is one of the few remaining engines of global growth, expected growth of between 8 percent and 9 percent in 2009.

Some economists have predicted growth in China could slow to less than 8 percent in 2009, down from double-digit levels in the past five years until this year.

Thursday, November 6, 2008

Latest libor

3 mth libor = 2.39%
TED Spread = 2.05%

The 2.39% libor is even better than the 2.8% level (which was where it was at prior to the escalation in the crisis crisis, and the subsequent move up to the 4.8% level). The 2.39% clearly means that interbank lending has picked up significantly. The governments now need to forced their banks to increase lending to small businesses and the general public. France's government has threatened its banks to immediately increase lending to the public or the government will nationalize the banks (further nationalize in some cases, I guess) then fire bank top executives - BNP Paribas is headquartered in France.

The T-bill rate component of the TED Spread is way too low. It means foreign money managers are still moving large amounts of money into T-bills (as a safe haven), thus leading to the continued US dollar strength. They are only getting a .34%, which is basically nothing. Eventually (once things stabilize a bit) these money managers will feel the pressure to achieve bonus targets and to make money for their clients. That is the stage where we should see a substantial US dollar reversal, and protentially a stronger gold price. Also, the continuing forced redeptions is not helping the gold price either. Gold gets knocked down $30 - 40 at a time when these large paper contracts are sold on the COMEX. There has been some talk that these parties might have difficulties finding the physical gold to settle the December contracts.

Wednesday, November 5, 2008

Votorantim buys 68.1% of Atacocha

Hopefully this will allow our Poderosa legal case to be settled quicker, and with a more reasonable dollar settlement. I believe Votorantim if primarily focused on base metals. If they want to do anything with Atacocha's gold holding (Poderosa) then they will need to settle with Century in order to unfreeze the 50.1% Poderosa shares. We will see if Atacocha's new management takes a more fruitful approach for all parties involved. Here is the article:

Mining/Energy | 5 November, 2008 [ 09:36 ]

Brazil's Votorantim buys control of Peru's Atacocha zinc/lead miner

Brazilian metals manufacturer Votorantim Metais closed a deal with Peruvian zinc-lead miner Atacocha to acquire 68.1 percent of the latter's Class A shares for about US$117 million, the Peruvian miner announced.

Atacocha, one of Peru's leading zinc and lead miners, runs the Atacocha and Santa Bárbara mining units in Peru's central Pasco region.

In the first nine months of 2008 Atacocha sold 77,172t zinc, 12,155t lead and 3,688t copper for respective increases of 4%, 23% and 44% year-on-year. The company took a net loss of US$5.75mn in Q3 compared to a net profit of US$18.3mn in 3Q07.

In April, Votorantim, which is the world's third-largest zinc producer, tried, but failed to take control of Peruvian miner Milpo, in which it owns a minority stake.

Votorantim has steel, zinc and nickel operations in Brazil, in addition to a zinc refinery in Peru and a controlling stake in Colombian steelmaker Acerías Paz del Río.


3 mth libor = 2.51%
TED Spread = 2.06%

Tuesday, November 4, 2008

Latest Libor and TED Spread

3 mth libor = 2.71%
TED Spread = 2.22%

Monday, November 3, 2008

While we wait

As bad as the global credit market is right now, there still doesn't appear to be any visible signs that BNP Paribas/Fortis has abandoned us at this time. In addition, (although us little guys could never know 100% as to what is happening) chances might be decent that Century is still progressing through the process. It is likely that the technical report was submitted a while ago.

From the Sept. 2'08 NR:

"The Fortis facility due diligence is scheduled to be completed by the second week of September, at which time the bank will need three to four weeks to finalize submissions for credit approval. Upon credit approval the Company will need approximately six weeks to complete legal documentation."

My guess is that there would need to be a period for fine tuning the technical report, and perhaps to address recommendations that either the independent technical person and/or Fortis may come back with. This is actually a good thing, as it helps to make a stronger case prior to presenting it to the credit committee. I had previously heard that Century had been working on an underground mine plan for a while now, and they had been making really good progress with it. My guess is that the Fortis rep would want to see this in the package prior to meeting with the credit committee.

Also, there might have been a hint in the Sept 2'08 NR that Century was expecting a bit of additional technical info MIGHT be required:

"no assurance can be made at this time that other conditions precedent will not be requirements of drawdown. These conditions precedent could include the need to raise additional equity, permitting or additional technical information."

Perhaps the "additional technical information" is to dot the i(s) and cross the t(s), again, to make a better presentation to the credit committee.

With regards to the "raise additional equity" note, it sounds like this may not be the case of raising substantial equity. I vaguely remember there being a note in the last MD&A that stated something to the effect that they may be asked to raise capital to reduce a substantial portion of the outstanding accounts payable balance, prior to the Fortis drawdown. However, I believe that note might have been superseded by the following note included in the Sept 17'08 NR:

'The combination of these two financings will provide the immediate and near-term financing necessary to take Century to a position to draw the senior secured financing Century is arranging for its Lamaque Project from Fortis Bank.'

As a side note, Tamerlane (our sister company, with the same management team) issued a project update today. It included this note: "Tamerlane’s management is considering other avenues for project financing, including private equity firms."

We should probably keep an eye on how that develops. Maybe PK could try to secure a million or two for Century also, as part of a package deal. They obviously used the package deal approach previously with MRI, even though the deal didn't end up closing for either Century or Tamerlane. Looking back now, (IMO) it is clear that MRI kept delaying everything due to the rapidly falling zinc price, and were also waiting for Tamerlane's updated project economics profile to come out. The zinc production cost wasn't very favourable (relative to zinc spot price at the time) so MRI bolted. Century was a toss in for MRI, (so although Century is a gold miner, with gold holding up far better compared to zinc) they no longer had any use for us (especially with them being primarily a base metals trader). All in my view of course. By the way, Tamerlane managed to get their production cost down within the study, thus their project if more favourable now.

Libor update

* 3 mth libor is now 2.86% (almost fully back to where it was)

As a result, it appears as if interbank lending is flowing well again. The governments around the world need to now find a way of convincing the banks to lend to small businesses and to the general public, and not hoard the cash.

* the TED Spread is now down to 2.48%, but still has a ways to go to get back to the previous 1%

It means that a lot of money is still flowing into the US T-bills, thus allowing the US dollar to continue to show strength. It's just a matter of time before it pulls back significantly though. It has recently pulled back from an index level of almost 88, to now being 85.10. The gold price should have taken better advantage of this US dollar drop. It is disappointing to see gold not make a much stronger recovery move during this short pulli back in the US dollar.