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  • Platnium Deficit To Last Four Years


    A labor dispute that all but shut platinum mines in South Africa since January is extending the longest shortfall in global production since 2005, which Morgan Stanley predicts will take at least four years to fix.

    For a third straight year, makers of auto parts and jewelry will use more of the metal than is mined. Credit Suisse Group AG on March 31 raised its deficit forecast for this year by 25 percent to 836,000 ounces, after concluding the strike in South Africa, the world's top producer, will prevent more than 1 million ounces from being retrieved in 2014.


    Lonmin Chief Executive Officer Ben Magara said earlier this month it would buy metal on the open market "as a last resort." The company runs operations from Johannesburg. Impala, the second-biggest producer, said it is losing 2,800 ounces a day after work was halted at the Rustenburg Lease mines, which accounted for 58 percent of mined output.

    "We are getting to the stage where we will not be able to meet the normal requirements of our customers," Johan Theron, a spokesman for Impala, said yesterday from Johannesburg. "We have been supplementing deliveries from the inventory, but soon that may not be possible if the strike continues.

    The problem is that if the companies agree to the unions demands than the mines will not be profitable and will have to be shut. The price would rise in that situation but the companies would be hesitant to reopen the mines until a long period of high prices ensued. Long story short platinum group metals will be going higher.

    Disclosure: I am long SAPLF.

    Tags: SAPLF, Platnium
    Apr 19 11:06 AM | Link | Comment!
  • Mongolian Prime Minister Writes Letter To Rio Tinto Regarding Oyu Tolgoi Mine


    Dear Mr. Walsh,

    I, as Prime Minister of Mongolia, would like to note that the Government of Mongolia is making solid endeavors to move our joint Oyu Tolgoi project to next stage with the introduction of new team and new approaches for the last one and half years. Even though we are making progresses through our mutual efforts, there are further accomplishments still needed for a successful Oyu Tolgoi.

    Thus I am addressing you directly as we are reaching a significant stage to strengthen the relationship between your company and Mongolia. While the start of production of Oyu Tolgoi in 2013 was a great achievement and an important milestone, it is of the utmost importance for my Government and for Mongolian people that Oyu Tolgoi proceed as soon as possible with the underground mine development. We are thus most supportive of the Project Financing needed for next stage of this most important project.

    Through the both parties' constructive discussions, there are only a very limited number of issues that remain outstanding between the Rio Tinto (RT) and Erdenes Oyu Tolgoi (EOT). We are confident that these issues can be readily solved in accordance with normal international business practices as was stated in the EOT letter to RT of 19 February, 2014.

    We stressed the importance of RT maintaining positive stance in addressing public, but instead of that we have received a press release proposal from Mr. Jean Sebastian Jacques, which was insisting for request to extend lenders' commitment to 31st December 2014. It is unfortunate that we are acknowledged the doubtful approach for finalizing the project financing in such extended period of time.

    Even though the updated Feasibility study will be delivered in Q2 2014, we are willing to complete the discussions immediately in Ulaanbaatar or London, with the full mandate to finalize the project financing before the lenders' commitment deadline of March 31, 2014.

    The Government of Mongolia remains fully committed to the continued and successful operation of the open pit mine, the financing and development of the underground mine.

    The Oyu Tolgoi project is of utmost importance to Mongolia and so is our partnership with Rio Tinto. I believe that now is the time to open a new chapter in our relationship and work in harmony to develop the Oyu Tolgoi project for the benefit of all stakeholders and of the Mongolian people.

    It appears that the government of Mongolia is beginning to get a bit desperate as they are now almost pleading with Rio Tinto to re-start the phase 2 construction on the OT mine. They need this issue resolved so that it will send a message that Mongolia is not adverse to foreign investment. In addition pressure is mounting on the central bank and the currency. FDI has to pick up or the Mongolian economy is going to suffer later this year.

    Disclosure: I am long MNGGF.

    Tags: MNGGF, RIO, Mongolia
    Apr 18 5:47 PM | Link | Comment!
  • Chinese To Build Cross Border Rail Link To Mongolian Coal Field

    World Coal:

    Chinese state-owned mining group Shenhua, which operates 1765 km of coal railway in China, has signed a joint venture agreement to develop a cross-border rail link to serve the Tavan Tolgoi coalfield in the South Gobi region of Mongolia.

    Under an agreement signed in Ulaanbaatar on 7 April 2014, Shenhua will hold a 49% interest in a joint venture being formed to progress the project. A consortium of Mongolian firms, including Erdenes Tavan Tolgoi, Energy Resources LLC and Tavan Tolgoi, will hold the remaining 51% stake.

    Gashuunsukhait Railway Company will invest in the construction of a railway project at the Sino-Mongolian border crossing, which will be a standard gauge (1435 mm) cross-boundary cargo transportation railway with approximately 20 km in length connecting the Gashuunsukhait boundary control point in Mongolia and the Ganqimaodu boundary control point in China.

    This is something that would not have occurred a couple of years ago. Remember the whole fall off in foreign direct investment into Mongolia was due to the Mongolian governments adverse reaction to Chalco's attempted takeover of SouthGobi Resources. Behind the scenes and below the radar deals like this keep happening and are a reason I am still bullish on Mongolia and Mongolia stocks. Of course the media and most people are fixated on resolution of the OT impasse but slowly but surely the situation is turning in Mongolia.

    Disclosure: I am long MNGGF.

    Tags: MNGGF
    Apr 14 7:58 PM | Link | Comment!
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