Iron ore hottest sector, but gold and silver also still favored - Coxe (2010)

Respected investment advisor, Don Coxe, advocates well-chosen commodity stocks with iron ore top of his list, then precious metals
Author: Dorothy Kosich

RENO, NV -

Coxe Advisors Chairman Don Coxe is rebalancing his recommended asset mix for U.S. pension funds and sector weightings for commodity stocks. A new portfolio will be introduced for Canadian pension funds and a new category of "commodities and commodity equities" for all pension funds.

In his most recent analysis, "Basic Points, A Slow Boat to China," Coxe said, "What we are doing now is expanding the cyclical component of our investment portfolio strategy with the 12% allocation to commodities and commodity stocks."

Coxe believes "well-chosen commodity stocks will solidly outperform the traditional commodity funds-most important and obviously-as long as contangos are in force for key commodities such as oil."

"When one owns the shares of well-managed commodity producers with unhedged reserves in the ground in politically-secure areas of the world, one benefits more from a sustained commodity price increase than passive owners of that commodity."

Coxe suggested the commodity bull market in this decade "will be driven by (1) industrial demand for raw materials; (2) sustained demand for petroleum; (3) continued protein upgrades in diets in emerging and emergent economic, and (4) greater reliance on precious metals as stores of value-not necessarily as hedges against actual inflation."

And, the hottest of all major commodities is the most basic of all metals-iron ore, Coxe noted. "When we came into the business we got to know a veteran geologist who gave us one of the most useful maxims we ever learned: ‘An iron ore deposit is like a belly button-everybody has one.'"

The decision to make the transition from annual contract prices set in negotiations to quarterly preferences set with reference to the spot market is a "momentous event," in Coxe's opinion.

"That a product never traded on any exchange is the new Wonder of the World argues against the conspiracy theorists who dismiss soaring prices in metals traded on public exchanges, such as copper, nickel, zinc and aluminum," he remarked. "All those investigations into price manipulations through futures markets should soon become irrelevant."

Coxe recommended "clients write tickets on slow boats to China," noting Stage #2 of the Great Commodity Bull Market has begun as China and India remain stronger exporters but become even greater commodity importers.

Finally, in his investment recommendations, Coxe advised investors to remain overweighted in precious metals because "gold and silver have held up well in the face of strength in the dollar."

"The royalty and streaming stocks offer special attractions because relatively few investors understand the companies' beautiful business models and the excellent execution of those models by shrewd managements," Coxe concluded.
Description: Iron ore hottest sector, but gold and silver also still favored - Coxe (2010) Rating: 5 Reviewer: Admin ItemReviewed: Iron ore hottest sector, but gold and silver also still favored - Coxe (2010)

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Tuesday, April 20, 2010

World's top 100 Mining Companies: Coal, iron ore & platinum rule the roost

Demand for mining stocks is strong, and broad, but still relatively selective.
Most stock and commodity indices are at or around 12-month highs; well known exceptions include Greece, Spain and Portugal. China is perhaps a lesser known exception of sorts; there stocks have been tripping along for months with equity investors remaining nervous over changes in domestic policy, and ongoing relative weakness in export markets.


From MineWeb:

The overall equation is increasingly ameliorated by China's growing internal consumer markets, which continue to grow as a "shock absorber", at least cushioning export demand softness. At the same time, demand in China's real economy remains firm, and continues to drive global demand for most commodities. At this fundamental level, China's economy remains robust, easily retaining its status as epicentre of the world economy.

SELECTED INDICES AND SPOTS








From


From



Points


high*


low*

MSCI world equities USD


1213.33


-0.6%


47.2%

MSCI emerging markets USD


1042.99


-0.3%


73.9%

Dow Jones Industrial


10897.52


-0.8%


40.6%

S+P 500


1182.45


-0.8%


45.1%

DJ Stoxx 600


265.87


-1.4%


47.4%

CSI 300


3346.74


-12.0%


36.2%

Shanghai Composite


3118.71


-10.3%


33.7%

Micex Russia


1472.53


-2.2%


79.3%

India Nifty


5304.45


-1.8%


68.4%

Reuters/Jefferies CRB


277.59


-5.5%


29.0%

Dow Jones AIG Commodity


135.09


-6.9%


26.5%

Baltic Dry Shipping


2947.00


-36.8%


101.4%

Baltic Capesize Shipping


3233.00


-60.8%


62.2%

Dollar Index Spot


81.70


-6.0%


10.1%

KBW banks


54.53


-1.7%


98.4%

Gold spot USD/oz


1146.60


-6.5%


32.6%

* 12-month






Among commodity markets, coal and iron ore continue to stand out as exceptional global subsectors. China has long been, and remains, the world's biggest miner of coal and iron ore, but for years has also ranked as a net importer of iron ore, and as of last year, of coal as well. Coking coal, a vital constituent in iron ore reduction, has done particularly well.

BHP Billiton, the world's biggest diversified resources group, and No 1 producer of seaborne coking coal, last month announced that it had settled contracts "with a range of customers throughout Europe, China, India and Japan", without confirming numbers, but probably around USD 200.00/tonne, 55% higher than prevailing contract rates applicable to 31 March 2010.

Coking coal prices rocketed to USD 300.00/tonne for the 2008-2009 season, and were then slashed to USD 129.00/tonne, the contract price applying to the end of last month. In the iron ore arena, seaborne prices have moved up, on a contract basis, to around USD 140.00/tonne, roughly 100% higher that the previous annual contract, and much in line with spot prices. Iron ore contracts have now been shortened from the long-established 12-month term.

Many other commodity and metal prices are running hard, with a good number up around 12-month highs, and some even at multi-year highs. Platinum has been a particular interest of late, underpinning very strong performances among platinum stocks, especially those ranked as well-established producers....MUCH MORE, including price action on the top 100.
Description: World's top 100 Mining Companies: Coal, iron ore & platinum rule the roost Rating: 5 Reviewer: Admin ItemReviewed: World's top 100 Mining Companies: Coal, iron ore & platinum rule the roost

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Karara Iron Ore Kine, Australia

Key Data
Location
Western Australia
Ownership
Gindalbie Metals and Ansteel
Geology type
Magnetite banded ironstone formation
Mine life
More than 30 years
Reserves
Indicated reserves of1417Mt, Inferred reserves of 437Mt
Production start date
2011

Full specifications

The Karara mine is located in Western Australia, approximately 225km east of the Geraldton Port. The mine is one of the few magnetite projects currently under development in Australia. It forms part of the development of a Mungada haematite project located approximately 15km from the Karara magnetite deposit. The project is jointly owned by Gindalbie Metals and Ansteel, a major Chinese steel and iron ore company.

The mine will begin production in 2011. Economic and technical viability of the mine was established in a bankable feasibility study conducted in September 2007. Exploration and resource definition drilling of the mine has also been completed.



Reserves

The Karara mine contains approximately 1.4 billion metric tons of recoverable and over two billion tons of estimated reserves.

Indicated reserves in the magnetite phase of the project total 1,417Mt at 35.5% of Fe, 43.2% SiO2, 1.25% Al2O3, 0.09% P and -0.58% LOI. Inferred reserves total 437Mt at 35.1% of Fe, 43.9% SiO2, 1.44% Al2O3, 0.09% P and -0.71% LOI.

Geology

The Karara mine is hosted within the Yalgoo-Singleton Archaean greenstone belt. The belt is characterised by a huge magnetite banded ironstone formation (BIF) unit that extends over a strike length of more than 3km.
"The Karara mine is located in Western Australia, approximately 225km east of the Geraldton Port."

The western branch of the unit is over 400m wide and more than 350m deep. The eastern limb is comparatively narrower and outcrops as a chain of 100m-wide haematite-enriched hills along an adjacent north-south trending fault.

The BIFs create a series of isolated peaks and ridges in an otherwise plain landscape. Iron is hosted within the Windanning Formation as a sequence of several jasperlitic BIF and grey-white chert units that lay above the Gabanintha Formation. The deposit is up to 150m thick and is substantially dominated by interbedded layers of shales and BIF. Dolerite and kaolinite clays are also found in irregular areas within the deposit.

Production

The mine will produce annually in excess of 30Mt of iron products over its life of more than 30 years. Production will be carried out in a phased manner. Phase I, scheduled for the first half of 2011, will produce 2Mt of haematite per annum. Phase II will begin in August 2011 and will include the production of around 8Mt per annum.

Mining

The mine will be mined through conventional open-pit methods including drilling, blasting, loading and haulage. The open-cast pit will be nearly 3,400m long, 1,300m wide and 300m deep. The pit will be gradually stripped of topsoil and overburden to get access to the ore. Drilling will be carried out using hydraulic hammer drills. Mixed explosives will be supplied directly to the drill holes via purpose-built trucks.
"The mine will be mined through conventional open-pit methods including drilling, blasting, loading and haulage."

Blasting will be carried out using ammonium nitrate-based explosives. To support a mining rate of nearly 45Mt/y, explosives in the order of 12kt/y will be used. Excavated ore and waste will be loaded using hydraulic excavators into rear dump off-highway haul trucks. Loading will be carried out on 4m benches. Haul trucks will transport the loaded ore along the pit ramp directly to the processing plant.

The first year of mining will largely oversee removal of overburden and mineralised waste rock with minimum ore excavation. Following this, magnetite ore will be excavated simultaneously from different depths within the pit. The pit will be gradually extended northwards. To optimise the development of the pit and ensure that ores of consistent grade are sent to the processing plant, mining will take place at several levels and in assorted ore grades.

Once operational, mining will take place throughout the day. The mine will have a 0.5:1 waste to ore stripping ratio.

Processing

The ore will be processed in an on-site facility. Processing will include crushing, grinding, magnetic separation, reverse flotation and thickening to produce 12Mt/y of magnetite concentrate. Approximately 85% of ore will be delivered to the crusher. The remaining 15% will be stockpiled in a ROM pad for subsequent crushing.

Around 18Mt of tailings produced from the processing will be stored in an on-site dry-stack tailings storage facility. Waste rock will be stored in a waste rock dump adjacent to the pit.
Description: Karara Iron Ore Kine, Australia Rating: 5 Reviewer: Admin ItemReviewed: Karara Iron Ore Kine, Australia

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Sunday, April 4, 2010