Panama Gold

August 20, 2010

By David Bond, Editor
Silverminers.com

Molejon Manager Lazaro Rodriguez surveys the mine’s three main pits

Penonome & Panama City, Panama – In the 50 years following Christopher Columbus’s accidental discovery of the Americas, Spaniards hauled some 21 tonnes of gold out of the east-west isthmus of what is now called Panama. There ended, by AD 1550, Panama’s mining industry. Her dense jungles, populated by snakes and bugs and panthers, and overburdened with mud so slick and greasy you can bury a Land Cruiser in, forbade future prospecting.

Fast-forward 460 years, and Panama is back in the gold-mining game. Petaquilla Minerals, Ltd., (TSX: PTQ) entered gold production this year at its 2,200 tonne/day Molejon open-pit mine north of Penonome, the first of several new precious and strategic metals projects on Panama’s plate.

“Panama lies on a bed of copper and gold,” Robert Henriquez, Panama’s Minister of Commerce and Industry, told us in a recent interview in his Panama City office. “We feel that mining is an area of great potential for us.” He endorses Petaquilla’s Molejon mine as a model for future mining ventures in his country, including Inmet’s (TSX:IMN) nearby prospective $4 billion Cobre porphyry copper-gold deposit 20 km south of the Caribbean shore in Colon province. “They are doing a very nice job and we support their project.”

Forget what you think you know about Panama. Bananas, notes Henriquez, account for just $150 million of Panama’s $25 billion gross national product. The nation’s debt rating was upgraded to Investment Grade status earlier this year by Fitch, Moody, and S&P, joining Mexico, Brazil and Chile in the BBB-minus category. Panama grew its economy even in the depths of the global recession and its jobless rate peaked at 6.4 per cent, versus the 10 per cent in the U.S. and 20 per cent in Spain.

Ambitious public works projects are under way as well, including the $5.2 billion widening of the Panama Canal (under budget and ahead of schedule for its opening in 2014 – the new locks will handle ships with a beam of 200 feet, double the current width) and some $13.6 billion planned for infrastructure improvements, mainly in the areas of transportation, including a new international airport near Cocle to take some of the load off of Tocumen. If anything sucks about Panama, it’s the traffic in and around Panama City: included in the budget are an urban mass-transit system and replacing the city’s overcrowded and antiquated public buses. The country recently negotiated a free-trade agreement with Canada and is awaiting the U.S. Senate’s approval of a similar treaty. (For reasons unknown to this writer, the Obama Administration has held up free-trade deals with both Panama and Colombia that were negotiated during the Bush Administration.)

	Panama Commerce Minister Robert Henriquez (center) greets a reporter (left) and Petaquilla Gold President Rodrigo Esquivel

We digress. In 1968, the United Nations initiated a mineral survey of Central America and turned up multiple gold and copper findings the rivers and streams flowing through what is now the 842-square-kilometre Petaquilla Concession. Richard Fifer, a third-generation descendant of Panama ex-pats from Chehalis, Washington, is a player in Panama politics and business. Educated in geophysics, geology and finance, Fifer took an early interest in the Petaquilla district, as did Fifer’s father’s contemporary, the late Panamanian President Omar Torrijos, who saw Panama’s copper and gold deposits as a way out of the country’s chronic poverty. But mining was back-burnered in the aftermath of a chain of military dictators, culminating in Manuel Noriega’s fiasco in the late 1980s. Following Noriega’s removal from Panama by U.S. troops in 1989, Panama has conducted constitutional elections every five years, beginning in 1994.

The Petaquilla mining district returned to the front-burner status during the presidential tenure of Omar Torrijos’s son, Martin. When Martin Torrijos’s Democratic Revolutionary Party was turned out of office during the 2009 elections after a peaceful term (executives may not succeed themselves), it was replaced by the even more pro-mining Democratic Change Party, of which PTQ’s Richard Fifer was a founding member. As part of current President Ricardo Martinelli’s cabinet, Henriquez has been charged with making Panama the first Central American country to achieve First World status.

“Israel has done it, Brazil has done it. We will do it, too” he said.

Molejon is set to produce about 100,000 ounces of gold-equivalent ore annually over an 8-to-10-year mine life, which could be extended should preliminary laboratory successes in recovering gold from the muddy saprolite overburden prove up in the field. You can’t run gold-enriched mud through a jaw-crusher or a ball mill, but you can pelletize it with concrete and extract the yellow metal in a column with the right reagents. Mill capacity, currently at 2,200 tpd, is being expanded to 3,000 tpd, with a future second phase to 5,000 tpd from its existing foundations.

John Kapetas is an agreeable Australian who joined PTQ as exploration VP four years ago after a decade of jungle geology in Africa and Indonesia. He likes the odds of finding at least one more million-ounce gold deposit in the Petaquilla batholiths, and has spent his time with the company walking and canoeing its rivers and streams, collating data from the U.N.’s initial research with more modern sampling and mapping. Of special interest are gold anomalies along the Cocle del Norte River. Petaquilla has set up a 90-man camp and drilling station not far from the Atlantic coast to test Kapetas’ not terribly unconventional theory that where there’s gold in the river, there’s a gold mine waiting to be born  nearby.

The first phase of drilling at the Oro del Norte camp will be completed in Q3 2010, which could lead to a mine-construction decision next year following an N.I. 43-101 workup. The company recently announced discovery of a new epithermal gold vein system from its drill and trench program there; Oro del Norte is within trucking distance (20 km) of the Molejon mill.

PTQ geologist John Kapetas (right) inspects core at Oro del Norte

“Panama is an easy place to work in,” says Kapetas, who has charge of PTQ’s $200,000 per month exploration budget. “Molejon is a simple ore body in an andesite host.” Between Molejon’s two gold-bearing quartz veins is a vast quantity of aggregate waste rock that has a commercial potential for the road-building that will be necessary to Inmet’s Cobre mine, slated to enter production in 2014. Mud is so predominant in the Panamanian jungles that as much as a metre of aggregate must be overlaid before a road can be stabilized. Petaquilla paid more than $40 per ton for the stuff to build its roads. The company can produce similar aggregate from below its upper quartz zone for a fraction of that price, making Molejon’s lower gold zone much more cost-attractive.

Grade control is critical to Molejon. Lazaro Rodriguez, PTQ’s vice president of operations and manager of the mine, oversees a futuristic high-tech operation that computer-monitors output from the three pits and mill throughput down to the decimal point. Processes can be tweaked from there to maintain a constant 2.9 gram/tonne mine grade. Three ball mills digest feed from crushers, sending 74-micron muck to thickener tanks, then to leach tanks. The solution then passes through carbon pulp columns, then to the cell room. Tailings water is recirculated into the mill. Molejon produces a gold-silver Dore and Petaquilla controls the product’s marketing through to the end-user.

“I think we can get more than 10 years out of that mine,” says Chairman of the Board Fifer, given preliminary test results of Molejon’s saprolite gold returns. Built at a cost of $150 million, Molejon was financed by $69 million of debt, with the balance in equity. On 19 August, PTQ announced it had reached a forward gold sales agreement with Deutsche Bank for $42 million of the remaining debt. In essence, Petaquilla will commit to deliver 68,243 ounces of gold to the bank over the next five years – about 6.3 percent of the company’s total gold resource at Molejon.

“The lower payments that will now be due to the Company’s note holders will allow for an increase in funds to be directed towards the exploration of the Oro Del Norte region where significant gold mineralization has been discovered,” Fifer said. Also, the company is in the process of spinning off its considerable mine-building and infrastructure development capabilities into a new company, Panamanian Development and Infrastructure, Ltd. PTQ will retain a 47.78 percent interest in the new entity. Fifer will settle for a small portion of the $4 billion Inmet is expect to spend building the Cobre.

“Our track record should speak for itself, and for the future of mining in Panama,” Fifer says. “We have opened the door for the mining industry here.”

	PTQ Chairman Richard Fifer, at his finca in Panama. He works in his spare time to save Panamanian wildlife

Casimir Resource Advisors, LLC, of Cartersville, Georgia, put PTQ on its radar screen in March. Concluded Casimir President Eric T. Allison: “CRA’s review of the Molejon Gold Project has not revealed any fatal flaws. The geological modeling and interpretation is very good and the resource estimates and the Life of Mine Plan based upon them are sound. The mining activities are well planned and appear to be  professionally executed. The plant has successfully gone through its start-up and commissioning  phases and is currently fine tuning its processes and upgrading equipment as needed to fully achieve and maintain its design capacities. The careful attention to grade control coupled with the close interaction with Geovectra to continually revise the mining plan should allow the project to mine sufficient amounts of ore at high enough grades to meet its planned target of 6,000 ounces of gold per month. The exploration efforts are of high quality and are just beginning to tap into the significant potential of the balance of PTQ’s concessions. Additional growth and revenue generating projects are in the pipeline.”

Rodrigo Esquivel is a Panamanian attorney and President of Petaquilla Minerals’ wholly-owned subsidiary, Petaquilla Gold S.A. He negotiated the companies’ gold-export permits and also the so-called Petaquilla Law, by which the Panamanian National Assembly certified by law PTQ’s leases in the batholiths concession. Among its components:

- A 2 percent royalty once mine-building costs have been recouped;

- Monthly inspections holding PTQ to drinking-water standards for water discharges;

- Expenditures of $1.2 million annually on health centers, schools, road-building, agronomic activities, and chicken- and cattle-farming support.

Additionally, PTQ has agreed to re-vegetate 1,000 hectares of jungle for every 100 hectares it digs up and has a “gentleman’s agreement” to provide hot meals for the schools it has built. The anti-mining NGS can pound sand, or in Panama’s case, mud.

“It has been a wonderful experience for me to be involved in commercial mineral production. We are creating jobs and wealth in an area that was long forgotten,” Esquivel reflects. “Mining can be in a good harmony with the environment and it is the policy of Panama’s government to develop the mining industry.”

Commerce Minister Henriquez says miners and explorers are welcome in Panama so long as they play by the country’s very stringent environmental rules and establish good social contracts. “We are advancing mining projects that previously were only on paper. We welcome their state-of-the-art technologies, their commitment to international standards of environmental quality, and their willingness to support, and to get the support of, their local communities,” he said.

I like these guys. They know their country, they know their geology, and their federal government would like them to succeed. What a refreshing departure, on all fronts, from the U.S. government’s thuggery in the hard-rock western United States.

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Alex’s Notes: This is the reason the London Good Delivery system exists, regardless of what newsletter writers claim.

By VM Sathish

Several tons of gold imported into the UAE by traders and investors turned out to be fake on closer inspection, resulting in millions of dirhams in losses and high levels of stress to the victims.

Speaking to Emirates 24|7, Mohamad Shakarchi,, Managing Director of Emirates Gold, said: “A lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated.

We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them.

For importing pure dust or other metals with yellow colour, these traders have paid several million dirhams.”

Dubai Customs sources confirmed the incidence of fake gold imports, but did not reply to a questionnaire sent by Emirates 24|7 ten days ago.

“The concerned official is on leave,” said a spokesman.

Emirates Gold has stopped examining gold imported from Africa. “We send specialists to examine a gold consignment only if it is routed through a local company.

We don’t have time to waste because most of these so called gold imports are fake. The traders got greedy. They thought they were getting gold at a discounted rate.”

Mohammed said that at least five tonnes of fake yellow metal is lying with Dubai Customs.

A tonne of gold will cost approximately $40 million. Merchants estimated that the minimum loss of fake gold imported by local traders is nothing less than $200 million.

He said many clients and Dubai Customs have requested the use of company’s expertise to verify the purity of gold. “The fake gold issue has affected many people. Some of the traders got heart attack, after our inspectors said there is no gold in the tonnes of imports brought from Africa,” Mohammed said.

Recent media reports suggested that several million dollars worth of gold with the Ethiopian Central Bank turned out to be fake. These bars of gold turned out to be gold plated steel bars

African gold merchants claim to be in possession of large quantities of gold dust or gold bars, which they offer to sell at below market prices.

The would-be buyer is made to send money for travel of the seller, for insurance, for shipping and for refinery assays before they would receive anything of any value. Investors are shown samples, which may be original gold.

But when the consignment reaches the port, it will be only mud or sand. Once Dubai Customs tightened controls, fake gold imports started reaching the UAE through other ports.

The seller can walk away at any point with virtually no risk of being caught as all contacts are via anonymous free webmail accounts accessed from Internet cafes and via prepaid mobile phones.

After the real estate and stock market investments became dull, many local investors have turned to commodity, especially gold investment, said the Chief
Executive Officer of JRG Commodities, Sajith Kumar PK.

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Alex’s Notes: China’s economy continues to develop, with more and more people with discretionary income.

Combine this with the fact that Chinese tend to be a culture of savers instead of debtors, and China’s own experiences with hyperinflation, and it lays a pretty good argument as to why we can likely expect to see continued and increasing demand from both Chinese citizens as well as the government of China as they diversify out of USD based foreign reserves and into gold to solidify their position in the global economy.

China seeks to widen gold market

By Leslie Hook in Beijing

China has moved to liberalise its gold market further, increasing the number of banks allowed to trade bullion internationally and announcing measures that will encourage development of gold-linked investment products.

The move by Beijing’s central bank comes as the country’s investors pour record amounts of money into gold, in a trend that is becoming a significant factor on global prices.

Last year, Chinese investors bought 73 tonnes of bullion, up from 18 tonnes in 2007. The new policies were likely to increase liquidity in the domestic gold market and spur the development of gold financial products, analysts said.

China is the world’s largest gold producer and the second-largest consumer, after India, but its domestic market remains constrained by limited investment products.

“This is a positive sign for the gold market,” said James Steel, precious metals strategist at HSBC in New York.

“The Chinese statement reaffirms the vigour of the emerging markets’ demand for retail physical bullion.”

Gold prices rose in London, partly on the back of China’s announcement, but also on signs of robust buying from India’s jewellery sector.

Spot bullion traded at $1,190 a troy ounce, up from a three-month low of less than $1,160 an ounce last week.

GFMS, the London-based precious metals consultancy, said recently that Chinese investors, who are building wealth at an unprecedented rate, were diversifying their assets into gold to “protect themselves against inflation”.

The People’s Bank of China said “the need to perfect foreign exchange policies in the gold market is clear.”

It called for better financing services for bullion, opening the door for Chinese banks to hedge their gold risk overseas.

The central bank also hinted at changes in taxes on bullion. But it failed to endorse gold as an investment and to suggest it planned to increase the size of its bullion reserves, one of the world’s largest.

The new gold guidelines are part of the gradual internationalisation of the Chinese banking system. Restrictions on some renminbi-denominated investment products in Hong Kong have been lifted recently, and renminbi cross-border settlement programmes have been expanded this year.

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Well you dont see this every day.

Ben Davies of Hinde Capital “Gold is now the currency of first resort”

Key points:

1. Gold substantially undervalued compared to the amount of paper currency
2. Un-allocated positions are numerous, and dangerous
3. Central banks with more sophisticated managers are buying gold

by Louis Charbonneau

UNITED NATIONS (Reuters) – A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.

But several European officials attending a high-level meeting of the U.N. Economic and Social Council countered by saying that the market, not politicians, would determine what currencies countries would keep on hand for reserves.

“The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency,” the U.N. World Economic and Social Survey 2010 said.

The report says that developing countries have been hit by the U.S. dollar’s loss of value in recent years.

“Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s,” it said.

The report supports replacing the dollar with the International Monetary Fund’s special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies.

“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency,” the U.N. report said.

The report said a new reserve system “must not be based on a single currency or even multiple national currencies but instead, should permit the emission of international liquidity — such as SDRs — to create a more stable global financial system.”

“Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development,” it said.

MARKETS DECIDE

Jomo Kwame Sundaram, a Malaysian economist and the U.N. assistant secretary general for economic development, told a news conference that “there’s going to be resistance” to the idea.

“In the whole post-war period, we’ve essentially had a dollar-based system,” he said, adding that the gradual emission of SDRs could help countries phase out the dollar.

Nobel Prize-winning economist Joseph Stiglitz, who previously chaired a U.N. expert commission that considered ways of overhauling the global financial system, has advocated the creation of a new reserve currency system, possibly based on SDRs.

Russia and China have also supported the idea.

But Paavo Vayrynen, Finland’s Foreign Trade and Development Minister, told reporters that he doubted it was possible “to make any political or administrative decisions how to formulate the currency system in the world.”

“It is based on the markets,” he said. “I believe that the economic players in the market are going to have the decisive influence on that issue.”

European Union development commissioner Andris Piebalgs said it would be a bad idea to dictate what the reserve currency should be.

“It is markets that decide,” he said. “Any intervention would just create additional challenges and make things even less predictable.”

Article Source

by Louis Charbonneau

UNITED NATIONS (Reuters) – A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.

But several European officials attending a high-level meeting of the U.N. Economic and Social Council countered by saying that the market, not politicians, would determine what currencies countries would keep on hand for reserves.

“The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency,” the U.N. World Economic and Social Survey 2010 said.

The report says that developing countries have been hit by the U.S. dollar’s loss of value in recent years.

“Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s,” it said.

The report supports replacing the dollar with the International Monetary Fund’s special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies.

“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency,” the U.N. report said.

The report said a new reserve system “must not be based on a single currency or even multiple national currencies but instead, should permit the emission of international liquidity — such as SDRs — to create a more stable global financial system.”

“Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development,” it said.

MARKETS DECIDE

Jomo Kwame Sundaram, a Malaysian economist and the U.N. assistant secretary general for economic development, told a news conference that “there’s going to be resistance” to the idea.

“In the whole post-war period, we’ve essentially had a dollar-based system,” he said, adding that the gradual emission of SDRs could help countries phase out the dollar.

Nobel Prize-winning economist Joseph Stiglitz, who previously chaired a U.N. expert commission that considered ways of overhauling the global financial system, has advocated the creation of a new reserve currency system, possibly based on SDRs.

Russia and China have also supported the idea.

But Paavo Vayrynen, Finland’s Foreign Trade and Development Minister, told reporters that he doubted it was possible “to make any political or administrative decisions how to formulate the currency system in the world.”

“It is based on the markets,” he said. “I believe that the economic players in the market are going to have the decisive influence on that issue.”

European Union development commissioner Andris Piebalgs said it would be a bad idea to dictate what the reserve currency should be.

“It is markets that decide,” he said. “Any intervention would just create additional challenges and make things even less predictable.”

Article Source

By Carolyn Cui

Amid all the market doom and gloom, the world’s largest gold fund is quietly celebrating another major milestone: SPDR Gold Shares, an exchange-traded fund backed by physical bullion, has recently surpassed $50 billion in assets.

Driven by concerns over the euro zone sovereign debt crisis and a double-dip recession, investors have plowed $5.4 billion of net cash into the fund during the first five months. At the same time, gold prices have continued to set records – gaining 13.4% so far this year – helping boost the fund’s size.

As of Monday’s close, the fund -  boasts total assets under management of $53.3 billion.

The fund –  known as GLD because of its ticker symbol – now hoards a total of 1,316.18 metric tons of gold and rivals most of the world’s central banks. If GLD were a central bank, it would rank fifth – just below France and above China.

Gold’s safe-haven trait was in evidence again on Tuesday, as stocks were hammered globally and commodity markets were mostly a sea of red. Gold futures for July delivery eked out a gain of $3.8, or 0.3%, to settle at $1,242 per troy ounce at the Comex division of the Nymex.

Now, investors are holding their breath to see whether the gold fund can pass out the $75.6 billion SPDR S&P 500 to become the world’s largest ETF. The gap between the two ETFs – both run by State Street Corp. — has contracted sharply this year from $44.7 billion to $21.3 billion as gold prices have gained and stocks faltered.

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Big push coming up for another massive injection of money into the system.

According to Shadowstats.com, we are clearly witnessing a massive collapse in credit and money:

Ben Bernanke needs fresh monetary blitz as US recovery falters

Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.

By Ambrose Evans-Pritchard, International Business Editor

Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

“We’re heading towards a double-dip recession,” said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. “The party is over from fiscal support. These hard-money men are fighting the last war: they don’t recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again.”

Mr Bernanke is so worried about the chemistry of the Fed’s voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post. Mr Kohn has been a key architect of the Fed’s emergency policies. He was due to step down this week after 40 years at the institution, depriving Mr Bernanke of a formidable ally in policy circles.

The Fed’s statement this week shows growing doubts about the health of the recovery. Growth is no longer “strengthening”: it is “proceeding”. Financial conditions are now “less supportive” due to Europe’s debt crisis.

The subtle tweaks in language have been enough to set bond markets alight. The yield on 10-year Treasuries has fallen to 3.08pc, the lowest since the gloom of April 2009. Futures contracts have ruled out tightening until well into next year.

Yet the statement may understate the level of angst at the Board. New home sales crashed 33pc in May to an all-time low of 300,000 after the homebuyer tax-credit expired, confirming fears that the housing market has been propped up by subsidies. Unemployment is stuck at 9.7pc. Manufacturing capacity use is at 71.9pc. The Fed’s “trimmed mean” index of core inflation is 0.6pc on a six-month basis, a record low.

“The US recovery is in imminent danger of stalling,” said Stephen Lewis, from Monument Securities. “Growth could be negative again as soon as the fourth quarter. There is no easy way out since fiscal stimulus has already been pushed as far as it can credibly go without endangering US credit-worthiness.”

Rob Carnell, global strategist at ING, said the Obama fiscal boost peaked in the first few months of this year. It will swing from a net stimulus of 2pc of GDP in 2010 to a net withdrawal of 2pc in 2011. “This is very substantial fiscal drag. On top of this the US Treasury is talking of a ‘Just War’ against the banks, which will further crimp lending. It is absolutely the wrong moment to do this.”

Kansas Fed chief Thomas Hoenig dissented from Fed calls for ultra-low rates to stay for an “extended period”, arguing that loose money risks asset bubbles and fresh imbalances. He recently called for interest rates to be raised to 1pc by the autumn.

While he has been the loudest critic, he is not alone. Philadelphia chief Charles Plosser says the Fed has blurred the lines of monetary and fiscal policy by purchasing bonds, acting as a Treasury without a legal mandate. Together with Richmond chief Jeffrey Lacker they represent a powerful block of opinion in the media and Congress.

Mr Bernanke has fought off calls from FOMC hawks for moves to drain stimulus by selling some of the Fed’s $1.75 trillion of Treasuries, mortgage securities and agency bonds bought during the crisis. But there is little chance that he can secure their backing for further purchases at this point. “He just has to wait until everybody can see the economy is nearing the abyss,” said one Fed watcher.

Gabriel Stein, from Lombard Street Research, said the US is still stuck in a quagmire because Mr Bernanke has mismanaged the quantitative easing policy, purchasing the bonds from banks rather than from the non-bank private sector.

“This does nothing to expand the broad money supply. The trouble is that the Fed does not understand broad money and ascribes no importance to it,” he said. The result is a collapse of M3, which has contracted at an annual rate of 7.6pc over the last three months.

Mr Bernanke focuses instead on loan growth but this has failed to gain full traction in a cultural climate of debt repayment. The Fed is pushing on the proverbial string. The jury is out on whether or not his untested doctrine of “creditism” will work.

“We are now walking on deflationary quicksand,” said Albert Edwards from Societe Generale.

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By Rebecca Keenan and Elisabeth Behrmann

June 25 (Bloomberg) — BHP Billiton Ltd. and Rio Tinto Group financed a seven-week advertising campaign to end a mining tax in Australia. Instead, they got a new prime minister.

The ruling Labor party yesterday dumped Kevin Rudd, the architect of the tax, for Julia Gillard, who opened the door to talks on the proposed 40 percent tax that Morgan Stanley estimates would have taken A$85 billion ($74 billion) from the mining industry during the next decade.

“It’s amazing that one policy killed the prime minister,” Jason Teh, who helps manage $2.6 billion at Investors Mutual in Sydney. “The mining tax was a big thorn in the side for Rudd. I’m sure Gillard knows that and she will try to negotiate a better outcome to make herself look popular.”

Compromise may encourage producers to proceed with projects worth at least $21 billion that were stalled by Xstrata Plc and Fortescue Metals Group Ltd. By dropping the tax the government will need to cut spending to meet its goal of getting into budget surplus by 2013.

Gillard immediately ended the government’s A$38.5 million television and newspaper campaign backing the levy. BHP, the world’s biggest mining company, and Rio responded by suspending the advertising campaign against the tax, saying they are encouraged by Gillard’s invitation to talks.

“This looks to me like a circuit-breaker,” Owen Hegarty, vice-chairman of G-Resources Ltd. and a director at Fortescue, Australia’s third-largest iron ore exporter, said in an interview at Bloomberg’s Melbourne bureau. “The unpopularity of the previous prime minister was to do with introducing, slam- dunking, this penal resource super profit tax.”

Highest Rate

BHP dropped 2.1 percent to A$38.80 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Rio fell 3 percent, Fortescue slid 4 percent and Macarthur Coal Ltd. dropped 2 percent. The new leadership is more likely to alter than scrap the tax, Credit Suisse Group AG said today in a report, citing the influence of pro-levy unions.

“My priority is to deal with the mining tax, it has caused uncertainty,” Gillard, who has undertaken to call an election in coming months, told reporters today in Canberra. “I want to genuinely negotiate.”

She also met with Treasurer Wayne Swan, who has become her deputy, and Minister for Resources and Energy Martin Ferguson today to discuss talks with mining companies. Gillard, 48, said yesterday the parties need to reach a consensus on the tax.

Mining Row

“There is some prospect that she’ll drop the tax, which would effectively extinguish the row with miners,” said Rob Henderson, markets chief economist at National Australia Bank Ltd., the nation’s biggest corporate lender. “Or she may defer the tax until after the election with much greater consultation.”

Rudd, 52, stood down after refusing to relent on the tax, estimated to raise A$12 billion in the first two years from 2012, in the face of sliding support in the polls and mounting opposition within his own party.

“Mining is our strongest industry and it’s just been kicked in the guts,” said David Flanagan, chief executive officer of Atlas Iron Ltd., which is developing the A$3 billion Ridley iron ore project. “We are not going to get our mojo back until the government is prepared to negotiate all aspects of the tax.”

Under the Rudd proposal, miners will pay a 40 percent tax on all profits above a 6 percent return on investment on their projects in Australia, the world’s biggest shipper of iron ore and coal. The tax would give the nation the world’s highest tax rate for mining companies, according to the Minerals Council of Australia.

‘Positive Outcome’

Miners want the government to exclude existing projects, reconsider the trigger level and vary the rate for different minerals. Possible changes needed to make the tax work include an increase in the rate of return hurdle to a minimum of 10 percent and preferably 15 percent, as well as a reduction in the headline rate to 20 percent from 40 percent, Morgan Stanley said June 16.

“Gillard’s appointment is a positive outcome because the tax was too high at 40 percent,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $10 billion, said in an interview with Bloomberg television. “Gillard will water down the tax, maybe to even lower than 20 percent.”

Gillard, who draws support from the Labor Party’s left wing faction, signaled the government won’t scrap the tax, saying “Australians are entitled to a fairer share of our inheritance, the mineral wealth that lies in our grounds.”

Felling Rudd

Morgan Stanley strategist Gerard Minack said Gillard was still likely to introduce a tax on resources profits after a negotiation process with the industry, given her close connection to Rudd’s policy decisions. “We will still get a super profits tax on the mining sector,” said Minack. “You can’t assume that a change in prime minister means that the tax gets dropped.”

Support for Rudd began to slide after he shelved the government’s carbon-trading plans in April, a key campaign pledge when he won office in November 2007. His popularity dropped further after the mining tax was announced May 2, retreating to 41 percent from 60 percent two months earlier, a Nielsen survey published June 7 showed.

“It was without a doubt the mining tax that felled Rudd – that people didn’t want it,” said Clive Palmer, Australia’s third-richest mining magnate with a A$3.92 billion fortune, according to BRW magazine. “The real issue is whether or not you should have a tax. That’s what we need to discuss, not the terms and conditions and how it’s supposed to be implemented.”

–With reporting by Rishaad Salamat in Hong Kong, Jacob Greber in Sydney and Kan Nishizawa in Tokyo. Editors: Keith Gosman, John Viljoen

Article Source

By goldstockmania.com

I had originally received a request from a GoldStockMania.com reader who goes by the user name, “SW”, to do a review on Anglo Far East Bullion and weigh in on if I thought they are a legitimate option for buying and storing allocated gold and silver bullion. I complied to the request and posted a review on Anglo Far East (AFE) on February 28th, 2010. Since then I have taken the liberty to open up an account and personally talk with the folks over at AFE. I have more information I would like to bring you up to speed on in my Anglo Far East Review, Part 2.

It took a while to get this second review together because I wanted to take some time to open an account and get some more experience with Anglo Far East before posting a follow-up review. I am glad I got the opportunity to do this because, it has given me the opportunity to get more familiar with the folks over at AFE and their services. The thing I like the most about AFE is that they believe what I believe about the physical gold market. What I mean by this is that, they are not providing custodial storage services just to make money or just because gold so popular these days. They are providing their services because they believe the in the fundamentals of gold and want to provide a safe and secure service to like-minded clients.

Before reading Part 2 of my review on Anglo Far East Bullion, you may want read my original Anglo Far East Review as I don’t want to repeat the same information I posted there.

Why use AFE or A Bullion Custodial Company?

Also, if you are wondering why anyone would want to buy and store their gold and silver with a bullion custodial company, then see my list of reasons why I use custodial services to hold my precious metals by clicking here.

If you are like me, then you realize there are risk if you personally hold all of your precious metals or let a professional company do this for you. I have come to reason, that it is better not to have all of your eggs in one basket, be it at home or with a professional storage company. I believe that if you pick the best bullion custodial companies to store some of your metals with, it is a much safer strategy than storing it all at home. You will have to decide on the percentages that make sense for you.

For example, you could split up your precious metals holdings into 3 different places; at home, AFE, and GoldMoney.com. If your crazy broke government decides gold confiscation is a good idea again and comes to your house and cleans you out, you still would have 60% stored over seas. So you would lose 30% versus all of it. This scenario also works out well if a thief breaks into your house and cleans you out too. I don’t want to worry every time I leave the house that the majority of my savings could be gone by time I return home. I rather have the piece of mine knowing my wealth is safely stored in multiple locations.

Another primary concern of mine is mobility, or lack of it. If I want to get out of the States quickly, I don’t see how I can do it with a bunch of physical metal in my possession. I can see them holding me up at the airport and not letting me through. If my metals are stored safely over seas, I can pick up and go quickly while still having access to my precious metals.

This really is no difference than trusting your current bank or banks to hold your money in an account. Someone may say, well the banks are insured. Guess what, so is AFE and GoldMoney.com. Also, I would not count on the FDIC too much, as they are out funds and are now tapping the US Treasury cover cost of failing banks. And of course the US Treasury, is borrowing money to pay for that and just about everything else from foreign investors and their magical printing press.

Now let’s get down to the business of this review.

Unadvertised Accounts:

It is free to open an account with AFE. In Part I of my review I discussed how AFE is primarily interested in servicing higher end clients which typically make large bullion purchases. While this is still true, what is not widely known is AFE’s unadvertised account programs. You can start a monthly Silver Savings and/or Gold Savings account for as little as $50/month for the silver savings account and $500/month for the gold savings account.

I opened up a monthly savings account to start a savings program for my 3 boys. AFE debits your debit/credit card once a month for the amount you specify. Just set it and forget it.

All Accounts Are Allocated:

One of the best things about Anglo Far East, is that they are in no way associated with the Banking Industry. None of AFE’s vaulting partners or other strategic providers are controlled or majority-owned by banks. This is by design, not by accident. AFE is completely insulated from banking industry risk. Why is this important?  As a client of AFE, you don’t have to worry that your precious metals are exposed to any encumbrances due to bullion bank lease agreements or from pooled accounts. Better yet, you can rest assured that your metals are owned only by you, as it should be.

AFE does not deal with “paper gold.” With Anglo Far East, you get 100% allocated gold and silver bars. AFE will not only provide you with the individual bar numbers of the bullion bars you own, but you can also rest safely in the knowledge that each bar is sight-verified by a top Swiss auditor and annually checked off against AFE accounts to ensure that your metal is locked away safely. If at any time you wish to take delivery of your metal, AFE will arrange to have bars shipped to you anywhere in the world.

End To End Good Delivery Status:

By now you may of heard about the fake tungsten filled gold bars that were discovered at a very large german gold refiner. Professionals can catch this type of fraud quite easily as the german refiner did. Fake gold has probably been around for almost as long as gold has been of value to man. If you are concerned about fake tungsten bars ending up in your hands, then pay attention to what follows. I don’t know about you, but I do want to own real gold! However, I don’t want to worry about buying fake gold as I don’t have the background or experience to probably catch every fake. Fortunately, there are people who do have the background, experience, and get paid to make sure my gold is real! Say hello to the professional LBMA circuit.

Anglo Far East has access to the LBMA system of refineries, vaults, and security providers. This allows AFE clients to maintain London “Good Delivery” status on your precious metals which ensures the authenticity of them as well. Anglo Far East purchases gold and silver directly from an LBMA refinery! This means that your metals are guaranteed to be real, since the gold & silver are directly poured, securely transferred to their LBMA vaults, and third party audited throughout the whole process. Real gold is poured gold, right. Your precious metals never leave the trusted LBMA circuit. Very few bullion custodial companies can make this claim.

Other AFE Benefits:

Time Tested: AFE is the oldest private bullion custodial company around. They have stood the test of time, while others have come and gone. “Anglo Far-East Bullion has been providing select international clientel the highest degree of privacy, security, and access to buy, hold, and sell allocated gold and silver bars.”

Privacy: I know many of my readers are very much privacy oriented as we all have a right to our privacy. I can’t of a better area to be concerned about your privacy, than where your you store your precious metals. AFE accounts are managed as numbered accounts in the Swiss private banking tradition. At no time does identifying information such as name and address appear on any account statement or your account documents.

Guaranteed market access and liquidity: “AFE buys and sells directly with LBMA-certified metal refineries only. In bypassing the commodities market exchanges such as the Comex and bullion banks, AFE provides clients a means of access to the global physical precious metals markets that may not be available to others should systemic issues in the bullion markets arise.”

Iron-clad governance: “By contract with AFE’s vaulting provider, no access may be made to the vaults without the attendance of an agent of the vault as well as an agent of the third-party signatory trustee, in this case top Swiss auditor Grant Thornton. All metal going into and — more importantly — coming out of the vaults requires the approval of a third-party signatory trustee as well as a detailed, sight-verified report of each bar and serial number by the auditor.”

What I Don’t Like About AFE:

I have talked a bit about what I like about Anglo Fare East. Now let’s look at what I don’t like about them.

This is not particular to just AFE, but to all bullion storage companies. You have to get use to the idea that your gold is safely stored miles and miles away from where you live. This is a great advantage and disadvantage. It is very similar to using a bank to hold your cash, but somewhat different.

I don’t want to sound nick picky, but AFE’s account panel seems a bit dated. It is functional and everything works, but it just seems a bit out of date an disjointed. This does not stop me from doing anything I need to do, but I would like to see the customer account panel updated to provide a better or more polished experience for customers.

Summary:

After talking with and personally dealing with Anglo Far East (aff) I have come away really impressed with their over all company, operation, and involvement with the gold and silver bullion industry. I feel that they are running a very private, safe, and secure operation. You always own 100% of what you purchase as it should be. AFE accounts are allocated, so your metals are real, accounted for, and belongs to no one but you.

You can get more information or open a free account at Anglo Far East by clicking here (aff).

If you have any questions or would like to share your experiences with Anglo Far East for the benefit of other readers, please leave a comment below.