The Conversation (1)
By Melissa Pistilli-Exclusive to Resource Investing News Diamond Investing News The global diamond industry is still hurting from the worldwide recession even as the critical holiday period begins. Not very many Americans will be asking Santa for diamonds this year, or any luxury items for that matter. I can’t be the only one who finds …
The global diamond industry is still hurting from the worldwide recession even as the critical holiday period begins. Not very many Americans will be asking Santa for diamonds this year, or any luxury items for that matter. I can’t be the only one who finds those car commercials absolutely ridiculous where some average middle-class wife wakes to find a new car with a big red bow in her driveway.
US consumers have become spendthrifts and that frugal vibe is bound to carry throughout the holiday season. Analysts are saying consumers are behaving more like they’re in the grips of a depression rather than a recession. And nobody is buying his wife diamonds in a depression, unless you work at Goldman Sachs or you’re Tiger Woods.
Next year is expected to be another challenging year for the diamond industry say analysts and much rests on improvements in the global economic situation.
Diamond miners this year have been cutting production in reaction to deep cuts in demand. Industry giant De Beers has curtailed production at mines in South Africa, Botswana and Canada after profits fell 99 per cent in the first half of 2009. Production reportedly dropped 40 per cent in the third quarter and 2009 full year production is expected to be down over 50 per cent from 2008. However, DeBeers Canada is planning to ramp up production at Snap Lake and expects the mine to reach full production near the end of 2012.
Gold started a $100 decline last Friday shaking the speculative money out of the market as hedge funds and other traders took end-of-year profits or turned to the perceived safety of the dollar. The yellow metal lost over $60 or one-seventh of its entire 2009 rally in one single trading day.
Tuesday, Gold miners suffered setbacks as well. Barrick Gold Gorp (TSX: ABX), the world’s biggest producer, fell 3.4 per cent. Goldcorp Inc (TSX: G), Canada’s second-largest producer, lost 3 per cent.
Gold ended its four-day decline Thursday finishing slightly higher at $1,126.20 an ounce on the COMEX only to incur further losses in early trading Friday falling as ow as $1,108.30 an ounce.
Other news placing downward pressure on gold included Barrick Gold’s shut down of its hedge book well ahead of schedule, which could have taken a substantial amount of gold off the market, allowing it to benefit from high gold prices and China’s central bank announced it would not be purchasing IMF Gold.
Gold’s investment value has come into question as some analysts ask: what is gold’s purpose? Perhaps we shall soon see. While the dollar may have made a slight recovery at gold’s expense, all signs are pointing to a possible collapse in the US economy (and in others around the globe) and the onset of hyperinflation, which may lead investors to seek the safety of gold once again.
The Environmental Protection Agency’s well-timed announcement ahead of President Obama’s trip to Copenhagen is good news for alternative-fuel automakers and lithium technology. The EPA’s statement warns that greenhouse gases are endangering American’s health. (Really? Can you imagine?) The government is moving toward imposing the first federal limits on pollution from cars, power plants and factories.
The US government is also offering automakers $25 billion to make more fuel-efficient cars and offering consumers a tax credit of up to $8,000 to buy them. Although there are some concerns that Americans might not catch on to the trend of alternative-fuel vehicles.
Several lithium battery makers are coming on the scene and raising money to fund big projects including: A123Systems (NASDAQ: AONE; $18.00), ActaCell, Boston-Power, CFX Battery, Envia Systems, and Mobius Power.
Pike Research forecasts that revenue from lithium ion batteries will represent 26 per cent of the $4.1 billion global stationary energy storage business by 2018. The global market for Li-ion batteries in utility-scale applications is expected to grow $1.1 billion by that same year.
Lithium spot price has been flat in 2009 with demand for the rare earth metal slumping in the third quarter. However, analysts expect recovery soon.
Thompson Creek Metals Company (TSX:TCM) has decided to upgrade and expand the Endako molybdenum mine west of Prince George for a cost of $124.4million. The mine is a joint-venture between Thompson Creek Metals (75 per cent stake) and its partner, Japan’s Sojitz Corp (25 per cent).
Thompson Creek has suffered from the drop in molybdenum prices over the last year; however, the Colorado-based firm is still on an aggressive expansion campaign and has its sights on projects approaching production.
Deutsche Bank has put forth “a positive view for molybdenum” going forward and has upgraded Thompson Creek’s stock from “Hold” to “Buy” causing the stock price to rise. However, several analysts have cut their price targets for the miner on its decision to increase its capital spending next year, which it has set at $298 million. On Friday, shares in Thompson Creek Metals on the TSX were trading at $11.65.
Vancouver-based Taseko Mines (TSX: TKO) has sold a 25 per cent interest in its Gibraltar copper-molybdenum mine to Sojitz Corp and the funds will help development at Taseko’s Prosperity gold-copper project. On Friday shares of Taseko on the TSX were trading at $4.12.
Silver suffered from a deep sell-off in precious metals as speculators and hedge funds looked to take profits before year’s end. A stronger dollar also helped to push prices lower as inflation fears have been quashed for now. Silver has fallen over $2.00 this week after barreling past $19 an ounce early last week dipping as low as $16.87 an ounce in early trading Friday.
The markets are rife with volatility at the moment and investors should exercise caution. There is a lot of uncertainty in global equities and commodities as investors ponder whether economic recovery is truly taking shape or if another financial catastrophe is looming. Several nations are facing huge debt problems that may cripple their economies and send shockwaves through a still reeling global economy.
Silver’s losses are as much an expected correction from overbought highs as a seasonal end-of-year position squaring by hedge funds. Its fundamentals remain healthy and many analysts are anticipating strong prices into 2010 with silver at $16.00 to $20.00 an ounce.
Over the short-term we can expect the volatility in the markets to continue as investors mull an uncertain economic future. For now, as is the case with such a complex market as silver, several factors will continue to influence price movements including concerns over economic recovery in the US and globally, the direction of the dollar, demand for industrial metals, and the appeal of safe-haven assets.
Russia, already advancing as a leader in the global nuclear and uranium sectors, may benefit more from climate change talks in Copenhagen where there is expected to be support for fossil fuel energy alternative’s like nuclear power.
Russia seems hell bent on displacing the “Big Three” (Canada, Australia and Kazakhstan) as the uranium hotspots for nuclear utilities companies. Moscow is also aggressively securing its position as the master developing nations turn to for help with their nuclear programs.
Russia has made headway into China, India, and the US with its nuclear know-how and uranium supplies. India and Russia signed agreements this week, that include Russian nuclear fuel exports to India and Moscow’s help building new nuclear reactors.
The Megatons to Megawatts program between the US and Russia is set to expire in 2013. Russia will instead begin selling directly to US utilities companies and already has six commercial contracts with US utilities including PG&E.
Moscow is also busy making plays for major uranium deposits in Mongolia, Kazakhstan and Namibia. Earlier this month Russia’s state-owned uranium miner ARMZ issued a hostile takeover bid for Canadian-based Khan Resources (TSX: KRI) to gain control over the Dornod deposit in Mongolia.
When one takes into consideration Russia’s pitbull mentality and steely determination as it puts its plans for dominance into action around the globe, it’s easy to see how quickly a Russian-ruled nuclear empire may become reality.