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Week In Review: A Mining & Exploration Retrospect For October 27 To November 2, 2012

|Includes:Focus Graphite, Inc. (FCSMF)

No one ever said mining's risk-free

A Chinese gang leader has been sentenced to death for illegal mining and a number of assaults. A story covered by China Daily and Industrial Minerals on Wednesday reported that Pan Guangjuan and his gang had been running a rare earths operation in Guangdong province from November 2011 to February 2012. On conviction he was also fined $24,000 and deprived of his political rights for life. The death sentence comes with a two-year reprieve.

Other countries have been cracking down too-not only on illegal mining, but illegal mining by Chinese. On Monday prosecutors in the Philippines dropped charges against two Chinese after police and military raided gold dredging operations. According to Reuters, small-scale gold mining, legal and illegal, is widespread in the Philippines but up to 90% of production is smuggled to China via Hong Kong.

In Ghana over 90 Chinese were arrested last month during a crackdown in which a teenage boy died, the Financial Times reported. A previous Ghanaian raid on illegal miners resulted in 38 Chinese being deported last September. Chinese are playing an increasing role in illegal mining in Ghana, partly because of their access to Chinese dredging equipment, the FT stated. The story quoted an official for the Ghana Chamber of Mines, who said, "There are environmental issues, poor working conditions and child labour problems because they use Ghanaian children. They pay them whatever they want, and there are no contracts or safety standards."

Another government official quoted by the FT said, "Most of these Chinese illegal miners are heavily armed and shoot at anyone that gets near them."

Are gold reserves lent out, sold short or stored safely?

Over 60 countries store gold in underground vaults at New York's Federal Reserve Bank. Now a GATA-esque movement is growing in the country that is, theoretically, the world's second-largest gold owner. On Tuesday Spiegel reported that a member of Germany's governing coalition, Peter Gauweiler, has finally found limited success in his long campaign to repatriate his country's gold. The Frankfurt-based central bank will bring home 150 tons of gold over three years for inspection. The Bundesbank also plans to count and weigh the gold bars stored in New York.

The move responds to a damning indictment from Germany's Federal Audit Office, which criticized the Fed for refusing access to German auditors. Hardly reassured by the planned audit, politician Heinz-Peter Haustein told media that "all the gold has to be shipped back," Spiegel reported.

Not surprisingly, the Gold Anti-Trust Action Committee was all over the story this week. An article by Lars Schall covered a Thursday speech given by Bundesbank executive Andreas Dombret. He told his New York audience that Germany's "bizarre public discussion" will soon pass.

"We are confident that our gold is in safe hands with you," Schall quoted him. "The days in which Hollywood Germans such as Gert Frobe, better known as Goldfinger, and East German terrorist Simon Gruber masterminded gold heists in U.S. vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a U.S. Fed accounting clerk."

Another GATA post links to a Jan Skoyles article entitled "Five things repatriating gold bullion says about the country."

Germany's reserves should total 3,395.5 tonnes. Nearly half, 1,536 tonnes, has been entrusted to the Fed, according to Spiegel. But on October 24 the Telegraph reported different numbers: Roughly 66% with the Fed, 21% with the Bank of England and 8% with the Bank of France. The stuff was stored abroad to protect it from Soviet attack, the Telegraph stated.

Nine people missing as Russian gold freighter disappears

Should Germany first locate, then re-locate its bullion, security would be an obvious challenge. On Sunday a freighter carrying 700 tons of gold ore worth $800,000 went missing in the Sea of Okhotsk, off Russia's east coast, Bloomberg reported. A search failed to find the ship or any of its nine crew members.

Chinese coal miners' work permits investigated

Canada's federal government will review about 200 work permits issued to Chinese nationals to work for Chinese interests in Canadian mines. According to a Canadian Press story published by the Vancouver Sun on Tuesday, the department of Human Resources and Skills Development will determine whether HD Mining International met government requirements when it applied for the permits.

The 200 miners were expected to arrive soon to begin underground bulk sampling at the company's Murray River coal project in northeastern British Columbia. HD Mining said the permits were necessary because Canadians lack longwall mining experience and the project will use Chinese technology.

HD Mining is held 40% by Canadian Dehua International Mines Group and 55% by Huiyong Holdings. Canadian Dehua has three other coal projects in northeastern B.C. Should all four go into production, the company intends to employ approximately 2,000 Chinese underground workers.

To meet government requirements for the permits, the jobs were first posted in Canada. But Mandarin was required for at least 70 positions. The wages offered didn't meet Canadian standards. The most controversial aspect of the plan, however, involves safety concerns. On October 11 United Steelworkers communications officer Brad West told ResourceClips, "The Chinese coal mine industry is probably one of the most dangerous in the world. The U.S. Mine Rescue Association's numbers indicate that between 2001 and 2011, 50,000 coal miners have died in Chinese mines."

Canadian Press also reported that Canadian Labour Congress president Ken Georgetti called on the government to rescind the permits. "A large pool of unemployed workers with skills suited for the mining sector exist[s] in the province and across Canada," he said.

CP noted that the feds' inquiry is "confidential, meaning any findings of the investigation may not be made public."

Lay down your cards

With its TSXV entry on Tuesday, Mason Graphite challenged two better-known companies on two fronts. Mason's trading premiere brings to greater prominence a resource estimate released last summer, which steals Focus Graphite's (OTCQX:FCSMF) bragging rights to the highest-grade graphite resource. Mason also competes with Energizer Resources for the claim of having the world's largest known graphite deposit. That dispute will remain unsettled, however, until Energizer releases its first resource, scheduled for this month, and Mason releases its two updates, scheduled for December and Q1 2013.

Wall Street unoccupied

This week's NYSE news made history. This time the disaster had natural causes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: FCSMF