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Thursday, October 27, 2011

The One Tonne Gold Coin

The Perth mint (Australia) has just unveiled the worlds most valuable gold coin.

At a massive one thousand and 12 kilograms, the 99.99 per cent pure gold coin weights over a tonne and there is very little small change out of the 54 million dollars you would have to pay for it.

This gives a new meaning to the cry, buy gold!

Weighing in at one thousand and 12 kilograms, it measures nearly 80 centimetres wide and over 12 centimetres thick. It has Australian legal tender status with a face value of one million dollars. And at one tonne (1,000kg), it's the biggest, heaviest, inherently most valuable gold bullion coin in the world.

It's worth just under 54 million dollars and features a bounding red kangaroo on one side, and the Queen's motif on the other.

"The giant coin is a magnificent Australian icon symbolising one of the Mint's most extraordinary accomplishments in its 112-year history. "Said Perth mints chief executive Ed Harbuz.

"To cast and handcraft a coin of this size and weight was an incredible challenge - one which few other mints would even consider," he said.

He went on to say the coin was a showpiece of the Australian kangaroo gold bullion coin program. It will coincide with the release of a number of smaller gold coins this week, the weight and purity of each being guaranteed by the West Australian government, and these will certainly be within the grasp of anyone wanting to buy gold coins.



Tuesday, October 25, 2011

GOLD ATM dispenser in India

Mumbai has become the first city to have a gold ATM dispenser in India. Not only that but it rolls out silver and Diamonds also. The ATM gives new meaning to the term buy gold in India.

The Gitanjali Group, opened the machine in a luxury shopping mall in the city recently and stated it had already served a "substantial number of customers". The Gitanjali Group is a modern integrated conglomerate, producing a diverse range of jewellery: gold, silver, platinum and stainless steel, studded with diamond and other gems.

It expects to roll out 75 more of the gold, silver and diamond dispensers in shopping malls, airports and even at Hindu temples.

The Gitanjali Group Chief Sanjeev Agarwal said: “The machine is a first of its kind anywhere in the world and will further revolutionise the processes by which precious metals and jewellery is bought.

"It has a particular significance in India, where usually such items are purchased as tokens to observe traditions on auspicious days."

"But it also offers choices for occasions like Valentine's Day, or to a husband who forgot an anniversary or his wife's birthday!"

Prices range from 1000 rupees ($20) to 30,000 rupees and customers can pay by cash or credit card for products ranging from gold coins etched with an image of Lakshmi, the Hindu goddess of wealth, to diamond-studded pendants in the shape of a swastika, in India a ancient religious symbol of unity.

Jammy Gagrat, a 47-year-old businessman, said: "This machine is going to be a problem for the gents. Ladies are going to keep on buying more and more every time they come here."
Buying gold in India just became easier.



Sunday, October 16, 2011

Hong Kong trading gold

Hong Kong's Chinese Gold and Silver exchange has officially started trading today. Gold denominated in renminbi can be used by Chinese to trade in and even redeem gold on the exchange.

Haywood Cheung, the president of the 101-year-old bullion exchange, said the so-called Renminbi Kilobar Gold contracts could boost trading volumes by up to 30%, or HK$40 billion a day, during the next six months. Growth has already been strong this year, with average daily electronic transactions reaching HK$136 billion after a full-year average of just HK$31 billion in 2010.

"By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalising the renminbi," said Cheung. "It also consolidates Hong Kong's position as an offshore renminbi centre by providing investors with a new alternative in leveraged trading of renminbi."

Cheung told Finance Asia that the ability to leverage by converting renminbi into new gold contracts will be able to gear up their exposure to the currency and put it to work.

Cheung argues that gold is half-way through a 10 to 15-year bull cycle and that renminbi will appreciate by 5% to 6% a year before it becomes freely convertible. A much better proposition than sluggish bank deposit returns.

As Shanghai currently hosts online trading of gold contracts and a new gold exchange is set to start up in China in June next year, this will only increase healthy competition and contribute to a healthy increase in the gold price.
It is reported that Chinese investors have increased their share of trading on the CGSE to 50% to 60%, up from around 30% at the start of the year.

As both exchanges have the same standards of purity it is possible that more cooperation between the exchanges is possible in the future. I. "When they open up, I think we can be very good associates," said Cheung.

According to Finance Asia, "Trading of the Renminbi Kilobar Gold contracts will start with 25 of the exchange's member firms from various sectors, including banking and gold dealing, with Wing Hang Bank and Bank of China acting as settlement banks. The spot gold contracts are traded under the revamped electronic trading system established by the CGSE and quoted and settled in renminbi. Starting from today, members can take physical delivery of the gold upon settlement."

Seems millions more Chinese will be buying gold in the coming months and years.



Reading a Gold Mining Company Prospectus

Reading a gold mining company prospectus can be a little daunting if one does not understand the terms or the importance of various factors relating to gold mining and in order to invest in a gold mining company it is important to understand the prospectus issued by the gold company. It is the main document on which one bases a decision to buy or not buy shares in the company and so should be looked at with care and understanding.

A gold mining company prospectus should be professionally presented and clearly written. It should contain a number of sections including:


A Chairman's Letter
The Details of the Offer
The Capital Structure
Information on the board and management
Usually a director’s view of the project or projects
Exploration budgets and programs
An independent geologist's report
A solicitor's report (or sometimes called an independent review of the tenements)
An independent account's report
Information on the corporate governance
The risk factors listed
A glossary of terms and a corporate directory, as well as the application for shares in the company.

A Chairman's Letter
Usually a welcome and introduction to the prospectus with some information about the prospectus, who the company is and what they are doing and so forth.

The Details of the Offer
This should list how many shares are on offer and what the starting price is. Usually a company is seeking to raise a certain amount of capital and this is the favourite way of do so. By offering shares a company can obtain the capital it requires to fund its projects and the shares holders get a share of the profits obtained thereby.

Usually there is a minimum and a maximum number of shares which can be subscribed to and all the shares are what are called fully paid ordinary shares.

There is also an opening date and closing date for the purchase of shares.

Here should be shown the purpose of the share issue. This is normally to raise funds for a number of or a specific project relating to either exploration or mining or both. Specifics should be written. An example of a specific here might be, "To convert gold prospects within the specified tenement (tenement: a specific block of land the company has rights to mine on and in) into advanced mineralised projects with defined mineral resources."

The application must show what the minimum number of shares an individual or company can purchase and a how to apply section should detail this and refer to the application form elsewhere in the prospectus.

Some information regarding types of investors, overseas, local, and some disclaimers regarding taxation and legislation regarding shares and share ownership is often included in this section.

The Capital Structure
The Capital Structure is simply a basic listing of the number of shares after issue. This can include over subscriptions. Here is an example:

Source: Silver City Minerals Limited Prospectus

Board and Management
This should list the board members and any important management figures. There should be a name including any letters after the name. a title such as CEO or managing Director, or director for example.

A short bio of each board member's history such as their profession and where they have worked before should be included. In the gold mining industry you would expect to see at least one experienced geologist. Often there will be more than one.

Also a company secretary financially experienced, preferable in the mining industry although this is not necessary, and certainly should have extensive experience in being a company secretary of listed companies.

A Directors Review of the Project or Projects
This is likely to be the largest section of the prospectus. This should contain extensive detail regarding the actual exploration/mining done and proposed.
Usually it starts off with a company profile. Some information about the company, how it started, its history and so forth. Its rationale and strategy should also be included.

Detailed information about the tenements including the name, title number, how long it lasts if it is a lease. The area of the tenement(s) and the annual commitment in dollars to the tenement. Usually there will be varying types of maps that show the area and tenement in detail in terms of the deposits, lode and other information. The information here should be extensive and detailed and sufficient for a reader to make a good assessment of the potential of the mine in terms of profitability and duration.

Details of exploration activities and the results of these should be specified and any other information, such as other minerals or precious metals found should be mentioned.

How much gold or metal that is expected to be obtained should be clearly stated. That is how much in grams per tone is expected form the ore. How big the lode or lodes are and how much in total is expected to be dug annually and over the life of the mine.

Spread sheets should present all this information in a readable form so that anyone can understand it.

In short, this section should provide all the information about what the company is mining and how and what can be expected as a result.

Exploration budgets and programs
This section should detail how much is to be spent in the various activities, drilling, geophysics (The physics of the earth and its environment), any other exploration and the cost of the IPO, administration costs and working capital for each tenement. There should be a breakdown in spreadsheet form and it should be projected over two or three years.

An independent geologist's report
An independent geologist should report on their findings on the technical information contained in the prospectus. This is to ensure that the prospectus is found to be accurate when it comes to the gold or other metal or mineral mining. The report should be primarily non technical and simply show in detail what was found in the tenement or tenements if there is more than one which is often the case.

A solicitor's report (or sometimes called An Independent Review of the Tenements)
A solicitor's report may or may not be included and is simply to verify the legal authenticity of the company and the legality of the tenements. Does the company actually have rights to mine in the area and so on? Sometimes there are provisions or issues regarding native title and it should be shown that the company has legal rights in relation to mining where these exist.

Detailed information regarding legal issues, titles, renewals of leases etc should be specified here. You want to be certain that the company has full rights to explore, mine and remove ore and minerals from the tenement.

In some countries, such as the African countries, there are also risks in that governments can arbitrarily impose regulations after the company has started production. Zambia is an example where the government has decreed that foreign companies mining in Zambia must relinquish over 50 percent of the shareholding to native Zimbabweans.

An independent accountant's report
The independent accountant's report should detail the financial position of the company as determined on a specific date.

The minimum information that should be offered is, the assets and liabilities of the company in some detail should be outlined with the total equity over a period of years shown. This should include a historical consolidated as well as the scenario for minimum and a maximum subscription.

There should be a statement of the income and the issued capital on the basis of minimum and maximum share issue as well as a pro forma statement of the financial position with the proposed number of shares issued.

If finance is not your strong point it is a good idea to consult with your financial advisor to better understand the financial reports of a company. In any event one should not participate in any share offering without consulting with ones financial advisors.

Information on the corporate governance
Corporate governance is often overlooked in a gold mining company prospectus but it is just as important as the rest of the information given. It concerns how the company is run in terms of strategy, ethics, competence and purpose. This can affect the share price just as much as the profitability of the company or the gold price. What if the company embarks on a different strategy and gives up gold mining? Or is found to be not as competent as was first thought? Or issues with ethics or remuneration, for example.

There should be clear statements regarding the Board structure. How it is laid out, how many directors are there and their duties.

A code of conduct as regards ethics and responsible decision making should be included.

Integrity in financial and board direction reporting is vital and a statement on that should be present.

Having a committed disclosure regime. I.e. if there is anything the shareholders need to know the board has a responsibility to ensure that information is disclosed. Of course this includes respecting the rights of shareholders.

Recognising and managing risk. This is important in a mining company. Health and safety and costs are the two major risk areas and these, poorly executed, can cause additional expense and legal issues for a company.

These are all factors that can affect the share price in the market and need to be well understood by all parties involved.

The risk factors listed
This brings us to risk. General risks encompass exploration and development, development and acquisition opportunities. Also valuation of tenements, Exploration License, Health and Safety and environmental risks to name but a few. The important issue is that the company is aware of such risks and can make and show a good risk assessment and has the capability of handling and reducing the consequences of such risks.

That covers most of the information you will find in a gold mining prospectus. Of course there should also be a glossary of terms and a corporate directory, as well as the application for shares in the company.

The last word on a gold mining company prospectus
One should be aware that the projections of gold mining companies are estimates only and offer no guarantee of profitability regardless of how bright the company and its potentials are expressed. If one has any hesitancy about buying shares in gold mining companies one should stick, instead, to buying gold from gold dealers. There is a wealth of information on buying gold on this website.

Understanding the above will help one to read a gold mining company prospectus and understand what the company is about and if it is a viable proposition for an individual to invest in the company through the buying of shares.



Saturday, October 15, 2011

Gold Exploration & Mining

Gold exploration and mining is something that every gold investor should be familiar with. Some of the terms and information can be rather technical and daunting for some making it difficult to assess if they should be investing in a particular gold exploration and mining company or not.

We are talking here mostly about companies listed on the various stock exchanges (although the information here can apply to private gold mining companies also). These are public companies and, although there are variations from country to country, the essentials are the same. All are public listed companies. All have a share price that varies from day to day depending on various factors, such their management style, production, future prospects and so forth, and all are involved either in exploration, mining or both.

It is a good idea to establish which a company is. Some are exploration only. Some are mining only and some; many in fact, are a combination of the two. Mining companies can also invest in each other and have shares in another mining company or exploration company. Some mining companies are even offshoots of others.

It is a good idea, before one buys gold investments or shares in any public company in the gold mining sector, to really understand all the aspects of a company, who is running it, what style of management is used, what they actually do, what are their prospects, what are their assets, the balance sheet, etc. As in any type of financial arrangement, one should consult with ones financial advisors before embarking on any investment adventure.

Having said that, let's find out what sort of activities we can expect from a gold exploration and mining company.

Prospecting and Exploration
It all starts with the prospecting.
Initial prospecting is done to determine if a full exploration is warranted. A full exploration can cost many thousands, even millions so before such expense is undertaken a full prospecting including sampling of the surface and possibly some small distance down from the surface is done. It is commonly thought that any gold underground will show some traces on the surface and this is what mining prospectors look for initially.

These days, for serious gold mining, one is not looking for gold nuggets on the surface say in streams for example. That is panning for gold and is covered in the Prospecting Section.

For serious gold mining one is looking for a concentration of gold within minerals, usually of a type of rock. The concentration is measured in grams of gold per tone of ore. The more grams of gold per tone the better of course. Having 100 grams of gold per tone, although it does not seem very much, is considered a good find and would be well worth further exploration to see how far that ‘lode’ goes. If it is only a couple of feet then it would not be worth the expense of major mining equipment. But if the lode extends for some miles or kilometres then it would be well worth spending a lot of money mining the gold.

In short, it is not just a matter of how many grams or ounces in each tone of ore one can recover, it is also how big is the lode or lodes and how many thousands of ounces of gold can one recover.

Mining
Mining of gold is usually either open cut or underground. Most gold on the surface these days has been already located and mined although some pockets do get found on occasion. Most gold is mined from under the earth and this can be either a few feet down or even up to many hundreds of feet. Of course underground mining is generally more expensive than open cut as more energy and equipment has to be expended to shore up the mines and bring the ore to the surface. Not only that but more safety measures are required and more equipment is needed.

This all has to be taken into account when assessing the cost of extracting the gold and there needs to be sufficient gold available to be extracted to make it worth while for the mining company to go forth and continue with the mining. It can be noted here that, the higher the value of gold in the market place, the more viable it becomes to mine gold that is more difficultly and costly to mine and the lower grams per tone of ore can be mined. With the price of gold 10 years ago, lower grams of gold ore would not have been viable due to the cost of mining and processing. These days, as the price of gold continues to rise, mines containing a lower amount of gold per tone of ore become more viable to mine.

More on Gold Mining
Generally when a mining or exploration company discovers a viable and worth while lode they will apply for a licence. How this is done various from country to country and even state to state in some cases and is not really of much interest to investors of mining companies other than the fact that all mining companies do need to have all the relevant licenses and lease agreements required by law. This is something that should be listed in any mining company’s prospectus and should be looked for to establish the authenticity of the company. A company with no licence and or leasing agreements would not be able to mine and is probably not a bona fide mining company at all.

Mining companies lease tenements or blocks. These have been established to contain lodes, mineral rock in which the metal is contained. Sometimes you see mentioned Mother Lode. A mother load is an ore deposit from which a placer is derived; the mother rock of a placer (Placer: A deposit of sand or gravel that contains particles of gold, gemstones, or other heavy minerals of value. They are commonly stream gravels and beach sands).

Mining Company Structure
Important to consider also the mining company itself. Is it a public company already floated on the stock exchange? Is it a private company looking to initiate an IPO (Initial Public Offering) and list on the exchange?

Who runs the company? Are they experienced in management, geology and, importantly finance?

What are the governance policies of the company? What is the offer to shareholders? The history of the company. All these factors should be taken into consideration. Just finding a large deposit of gold is not enough. It has to be managed well, correctly assessed and the finances should be in place to extract the gold satisfactory and at a profit otherwise the company could go bust, regardless of how much gold they have. They could lose their license to mine or the lease hold and the gold could well end up in someone else's hands.

Future Prospects
Of course the future of the company is dependent on how much gold they expect to dig up over a period of time. If they expect to dig up, say 20,000 ounces a year for twenty years then that sounds quite viable. But if the gold they have discovered runs out after two years then the share price is going to drop and the company go bust. So how long the gold will last is an important question. The gold price has a bearing also as that can determine the viability of extracting the gold.

In future articles we will take up in more detail some of the aspects of gold exploration and mining such as how to read a gold mining prospectus for example and how mining companies deal with a fluctuating gold price.



Friday, October 14, 2011

Mines and Money Sydney Conference, October 2011

First day of the Mines and Money Sydney Conference, October 2011, kicked off with Doug Casey, Chairman of Casey Research predicting some gloom and doom for the financial future and some emphasis on gold. From then on it was generally a more positive affair with speakers and panels answering many questions from the floor.

The conference was a rolling conference with speakers and panellists going none stop. One simply attended what ever speaker one was interested in and other times browsed among the booths. Other speakers included:

James Turk, Chairman, GOLD MONEY (pictured)
Tad Watroba, Executive Director, HANCOCK PROSPECTING
Zeng Chen, President & CEO, CITIC RESOURCES HOLDINGS
Trevor Rowe, Executive Chairman, ROTHSCHILD AUSTRALIA
Bernard J. Guarnera, President & CEO, BEHRE DOLBEAR & COMPANY
Chris Baker, Investment Manager, CALEDONIA
Clive Donner, Managing Director, LINQ RESOURES
Louis Rozman, Investment Director, PACIFIC ROAD CAPITAL MANAGEMENT
Jason Chesters, Head of Equities, PATERSONS ASSET MANAGEMENT
Ross Henderson, Managing Director, Australia, AMERICAN APPRAISAL
Robin Chambers, Senior Partner, CHAMBERS & COMPANY
Richard Karn, Managing Director, THE EMERGING TRENDS REPORT
Philip Klapwijk, Executive Chairman, GFMS
Mickey Fulp, Founder, THE MERCENARY GEOLOGIST
Gavin Wendt, Founding Director & Senior Resource Analyst, MINELIFE

On the second day of the conference, James Turk of GoldMoney spoke about the value of using gold as money rather than fiat currency.

He succinctly pointed out with graphs and statistics how currency is deteriorating around the world while gold has continued to hold its value.

He also pointed out the importance of understand that gold is not an investment but is liquidity and rather than keep liquidity in cash, which is being devalued on a constant basis, to keep it in gold which does not devalue but retains its value as it has always done for many years.

Turning to the booths, there was a wide variety of companies represented with many sharing booths to keep their costs down. These included gold and other mining companies, both listed and non-listed. Banks, curiously some overseas stock exchanges were represented and consultancy companies were also in attendance drumming up business and showing a presence at the conference.

Just a few of the gold mining companies represented with which we spoke included:

Archean Star Resources. Exploring for gold at its 170+ sq/km Gnaweeda Gold Project in the highly prolific Murchison Gold Belt at Meekatharra, W.A.

Ausgold Limited. An ASX listed gold/copper explorer utilising latest innovation in geosciences within emerging mineral provinces across Australia.

Cortona. Is an emerging Australian gold company which is focussed on the development of its 100%-owned Majors Creek Project, located 60km east of Canberra in New South Wales

Dampier Gold. Advanced exploration gold junior focused on near term development. Dampier listed on the ASX in August 2010 raising $20m at IPO

De Grey Mining Limited. Is a West Australian based public company exploring for gold and base metals over 7,172 square kilometres of prospective ground in Western Australia’s Pilbara region.

Gold Road. Is a gold exploration company developing the Yamarna Belt, a major new high-grade gold region in Western Australia covering 5,000km2

Hill End Gold. Has a combined gold resource of near 600,000oz at its Hill End and Hargraves Gold Projects in an historically gold-rich region in central New South Wales, Australia.

Invictus Gold. A spin off by Impact Minerals as a vehicle to house its Queensland gold assets. Invictus has a portfolio of five projects, all 100% owned.

Kalgoorlie Mining Company Limited (KMC). A rapidly developing resource development and exploration Company based in Perth, Western Australia and with regional offices in Kalgoorlie, Western Australia

Kula Gold. Is currently developing a 100 per cent owned advanced stage gold project on Woodlark Island, located approximately 250 kilometres from the Papua New Guinean mainland

Morning Star Gold (MCO). Is Australia’s newest gold producer. MCO aims to produce between 50Kozs – 100Kozs per annum in 2012-2016 from its high grade tenements at Woods Point

Mungana Goldmines.
Listed on the Australian Securities Exchange in June 2010 following a $57 million IPO to fully realise the value of the North Queensland gold assets.

Navaho Gold. Is an Australian-based exploration company focused on the discovery of world-class gold deposits in Nevada, USA and Queensland, Australia.

Regis. A standout mid tier Australian gold producer with total resources of 5.8 million ounces and reserves of 2.4 million ounces located in the Laverton region of Western Australia.

The delegates were kept supplied with refreshments on an ongoing basis including, for the early birds, breakfast and of course lunch was provided. The conference was well attended with over 800 delegates.

The Awards dinner on the last night was an excellent affair with several awards issued and a local TV presenter and comedian to lighten the mood.

Overall It was a very successful first Australian conference for the Mines and Money Sydney Conference, October 2011.



Tuesday, October 04, 2011

Norwegians buying more gold

Another example of gold buying is in Norway where Norwegians are buying more gold than ever. This according to Martin Mesicek of goldsource.no, the largest gold bullion dealer in Norway,

According to Mesicek, "What I can report from Norway, and as you know we are not part of the euro system, we are experiencing an extreme increase in physical demand for bullion, both in silver and also in gold."

He continued. "As an example, I am experiencing longer than normal lead times for Silver American Eagles. Clients are now waiting three or four weeks to get them. Simultaneously, we are experiencing a shift in purchasing behavior. It used to be that our clients bought on the way up in fear of losing their chances to buy. Now we see the opposite. People are reluctant to buy on the big increases, but once we see the dips, we see huge orders. This is a major shift."

"You have to take into consideration that Norway is a very fiscally prudent country. We have a positive trade balance, we have one of the greatest sovereign wealth funds in the world, we are an oil exporter, we have a strong currency and only 3% unemployment." He said.

Norway is one of the few countries with a positive trade balance and just 3 percent unemployment. They are also an oil exporter and have one of the best sovereign wealth funds in the world. Despite this gold is more and more seen as a important asset A dramatic shift in financial thinking as more Norwegians buy gold.