South African Dilemma!

URGENT UPDATE. SEE MINING NEWS IN THE SIDE BAR The ANC has been in power for 23 years with out any serious rivalry from other parties. No...

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Retired but always looking for new challenges.

Sunday, January 24, 2010

Update no 8

After the American market reaching its highest point on 18 January 2010 a decline set in for many reasons.Shortly a pull back ,released  some of the pressure of  the market  price running too far ahead.The catylist was the  increasing jobless numbers,envisaged stricter control of banks in America and China trying to reign in credit.

Now to PLATINUM in particular.First let me point out that there is a genuine need for the white metal which will grow as the years go by.Let me explain why.It is used in catalytic converters for hotter burning petrol engines.Palladium usually found in the same seam can be used in cooler burning diesel engines.Platinum is also used in the glass manufacturing industry,as well as for FUEL CELLS which is the likely future of completely clean air,when at a later stage petrol engines are phased out.This might still take another twenty years or so.Then it is popular in jewellery in the Far East and it is considered the same as GOLD BULLION,worth hoarding as an alternative to paper money.

Now this is the reason platinum share prices  have come off with other resource shares,but in the case of AMPLATS of which ANGLO AMERICAN  holds 79% has come off more sharply is the fact that the AMPLATS announced that they are expecting to do 75  % worse than their previous result last year.This took the market by surprise and led to the share falling faster and further than the other platinum shares.I was surprised by this as AMPLATS have never kept it a secret that with the platinum price plunging from above two thousand Dollars an ounce to just eight hundred Dollars that they were heavily in debt,it is rumoured of about 30 billion Rand.Subsequently the price has gone up to above one thousand five hundred Dollars an ounce.The mother company is now likely to turn  this loan into script which will help AMPLATS return to profitably much sooner.

I believe one will never be able to obtain AMPLATS at this price again and by next year might turn into  the large dividend producing machine it was in the past. 

IMPALA also fell but not nearly so badly and LONMIN also retreated.Impala is likely to sort out its problems with unstable Zimbabwe in the next couple of years. Impala and Lonmin  are no. two and no. three producers each will no doubt provide an increasing stream of dividends in the years ahead.

South Africa produces about 75 percent of the worlds platinum.

Then there are the smaller producers which are mostly in the ramp up phase and although some are producing platinum are far from profitable at present.The most promising IN MY OPINION are AQUARIUS,ANOORAQ,EASTERN PLATS and JUBILEE.There many other plat mines that might have to amalgamate with the bigger mines in time.The only other mine that is likely to make a name for itself is NORTHAM which is now nearly worked out but has bought into new areas. Remember to read some of the older posts  as they also contain interesting facts

This sell off is an ideal opportunity to climb in on the top produces in my opinion.Ever since the market reached  the bottom  last year there have been sell-offs on the upward path between four and seven percent.,but the upward momentum has almost recoversd 50% of past prices.Of course a stronger American Dollar  is good for producer countries such as South Africa as we receive more for our products in Rand terms!

As far as GOLD goes there are different ways of of investing for the long term;
One; Is to  buy  gold shares,which have not performed well of late as the prices keep churning.Just in passing ,in my opinion the first new gold share which has a reasonable chance of making a name for itself in the future is GREAT BASIN GOLD (GBG) in new areas that have not been mined before but reasonably shallow.(Do your own research).

Two; Is to buy an Exchange Traded Fund(ETF) which tracks the gold price

Three; Is to buy gold coins which is perfectly acceptable and is better than buying gold bars ,as coins are more transportable and are usually easier to sell and safer to hold.
South Africa was the first to start the ball rolling with Kruger Rands around 1968.Each coin was excatly one ounce of gold.The idea caught on later and Canada made theitr Maple Leaf  and America their Eagles in greater quantity.

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Mini update 2/Febuary/ 2010

The COAL price has advanced to $124 per ton and is expected to reach  $200 per ton by December at the latest.South Africa has a strategic advantage over other countries in supplying India and China.Both are experiencing a shortage even in these recessionary times,just think how their needs will baloon in better times!South Africa has rapidly got to the position of sending 75% of our exports to these counties. A good share in which Anglo American has a majority share is Exxaro (EXX) which is likely to benefit as soon as our railways can be upgraded. Then there is CZA which has coal fields in Mozambique as well and the added advantage of an extra port,although this share is still in the ramp up phase of its life.Other smaller  newer operations that  will benefit are KEH and SNU
Mini Update 8 Febuary 2010

A couple of conflicting forces have hit the market this week.On the one hand ,the USA underestimated  the jobless numbers by 600,000 and then again there are signs that more jobs are being created.The second event was that there might have been a likeyhood of defaults occuring in Spain and Greece and the opposition in Spain preventing action from being taken to prevent such action sent a wobble through the world markets,helped on by  sensationalism  causing quite a panic.Nothing of the sort is likely to happen and the only thing is that the recovery is likely to take longer than thought and the market is showing signs of returning to a quieter period.

In this scerenio gold did not shoot up in price,which it would have if  things were really that bad. Gold mines did very badly during this  "crisis" this week and as the American Dollar firmed and gold actually went down in price.

All this does not mean that one should not keep some as a surrogate for paper currencies.After all every reserve bank of every country in the world does keep gold in their reserve.It is a metal that can be sold always at a given price.

A good way to  to buy gold is either through an exchange traded fund,as then you do not have to worry with the vagaries of mining  and storing the bullion or through buying of gold coins.

Actually COINS have an advantage as the intrinsic value of the coins is also influenced by other features such as the impressions printed there on ,such the age of the coin ,the amount struck  and of course the amount of the precious metal there in.Coins in mint condition would also be worth more than those in poorer condition. Gold,silver ,platinum and palladium coins and medallions are also worth holding.

Mini update 12 Feb 2010

Aquarius  after starting to mine platinum again at Everest has made a profit of U.S $3.9 million ,this despite the start up costs for the first  period after the closure.they expect to do even better in the second six months as the platinum price continues to improve.A note of caution is the Mimosa mine in neighbouring Zimbabwe where Mugabe threatens to take majority control of his countries assets.Luckily their government would not be able to run it on their own and if the worst happens Aquarius can delay and close the operation there.CNN's Millennium Boxed Set [VHS]
MINI UPDATE 15 /fEB 2010
Do remember to check out the web-site http://money.cnn.com/ daily for the latest updates .Also remember to click between the other pages,such as Commodities and also Pre-market. In South African time, the USA market starts at 4.30 South African  time.As our market closes at 5 pm  this does not give us a very long time to trade,with both markets open. At least from the about  the middle of next month the  time when both markets are open is longer as a result of the USA daylight saving time as their market then starts at 3.30 pm local time. Do also check out http://www.cnn.com/      as CNNThe Inauguration of Barack Obama on CNN carries up to the minute world news also remember the main page of  CNN Money Magazine (ISSN: 0149-4953) (December 2009 - Cover: "Make Money In 2010", Volume 38 / Number 12)MONEY.CNN has a live ticker of how their market is faring,useful TO WATCH AT THE START OF THEIR TRADING. 

Mini update 15 Feb 2010
 Shares that are in the news at the moment are  the small  worked out gold mine Village (VIL) under Bernard Swanepoel who was instrumental in bringing Harmony back to life before leaving that firm,has now bought  into a potential small cap platinum mine.I feel that is an opportunity to get in cheap as long as the price is below R3.00.The price seems to be climbing every day. 
 The other mine whose shares are suspended in South Africa ,but not I think overseas, is RANDGOLD which Mark Johnstone in Fortune 500 thinks is a good buy.He has not been wrong in the past so buy it again when it relists.RANDGOLD RESOURCES LTD.: International Competitive Benchmarks and Financial Gap Analysis