Gold miners rorting shareholders: Baker

ALTERNATE financing models, such as bank financing, royalty deals and streaming, are allocating gold to everyone apart from shareholders - and they've reached breaking point, it was revealed at Mines and Money Hong Kong.

Baker Steel Capital Managers managing partner David Baker served a stern warning that management should focus on how to increase shareholder gold, not only in the ground but in the vault.

He noted that if you'd have given the world's top gold producers Barrick Gold, Goldcorp, Newmont, Newcrest and AngloGold 100 ounces of gold 10 years ago, today you'd have around 36oz - "a dismal investment".

"If you'd done the same with a gold [exchange-traded fund], you'd have around 96oz," he said.

"Shareholders are getting a smaller piece of the gold pie."

While miners pursue bank financing to avoid diluting shareholders to maximise their returns and minimise risk, Baker said it inevitably meant risk was being transferred to shareholders while returns were transferred to the banks.

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US is falling like Rome

THE fall of Rome holds valuable lessons for what the United States is doing today to try to prop up its economy, Tice Capital principal David Tice told Mines and Money Hong Kong this week.

After a recurring theme throughout the conference of speaker after speaker bagging exchanged traded funds (ETFs) while spruiking the value of gold and being bullish about it, Dallas-based Tice fleshed out historical evidence of why gold underpins not just currencies, but countries themselves.

Tangent Capital managing director James Rickards, Matterhorn Asset Management founder Egon von Greyerz, Singapore Precious Metals Exchange executive chairman James Sinclair and Gold Anti-Trust Action Committee secretary Chris Powell all voiced their optimism for gold prior to Tice.

However, Tice seemed to deem it necessary for some re-education, especially when someone of the standing of Warren Buffett, who Tice described as "a mouthpiece for those who want to cast doubt on gold's utility", said: "Gold gets dug out of the ground in Africa, or some place, then we melt it down, dig another hole, bury it and pay people to stand around guarding it. It has no utility. Any martian watching from Mars would be scratching their head confused."

While conceding its relative non-practicality - almost 80% of gold is used for ornamentation - and all the gold mined in history would fit into 3.6 Olympic-sized swimming pools, Tice said gold's rarity and the effort it took to produce it, as well as its historical precedent, gave gold its value.

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Financial war games hint at coming gold surge

GOLD prices are tipped to soar in the next few years on instability in global financial systems and geopolitical tensions recalling Cold War-era brinkmanship.

In a keynote this morning at Mines and Money Hong Kong, Tangent Capital managing director James Rickards evoked the Cold War model of mutually assured destruction in an economic context, saying sanctions against Russia, among other factors, could contribute to a massive move in gold.

"I'm expecting $7000-9000 [per ounce] gold in the next three to five years as a result of a liquidity crisis of the kind we went through in 2008 but much, much worse," he said.

Rickards described gold in terms of money rather than a commodity, noting that Russia and China were surging their reserves, although the exact numbers were kept state secrets.

"I say to investors, either China is really stupid or they know something you don't and I don't think the Chinese are stupid.," he said.

Rickards began his presentation recalling a financial war game he contributed to in 2009, in which China was declared the victor.

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Junior market in need of a culling

A FURTHER substantial cull of pure exploration plays needs to occur across a number of bourses before the bull market can begin in earnest, despite analysts citing supply shortages across a number of key commodities, a Mines & Money Hong Kong panel has revealed.

On day two of the conference, a panel analysing whether the time was right to buy differed as to whether a supply shortfall was coming, but agreed that commodity prices would not "jump up" any time soon.

Some mid-tier company asset gold discoveries being made in Australia and similar positive signs out of North America could re-inject some confidence into the market, but there were still way too many stocks that needed to go, Australian panellist Hedley Widdup, Lion Selection Group manager, said.

Hong Kong-based panellist Rod Nichol, managing director of Lionsgate Capital, told Miningnews.net on the sidelines of the conference that up to 500-600 junior stocks needed to be purged from the TSX Venture exchange alone, and a similar cull across boards such as the ASX and AIM, before a serious bull run could start.

"Certainly there are demand issues coming: China is restructuring, and necessarily so; US Federal Reserve tapering will come off at some point so interest rates go up, hopefully sooner rather than later so we can start looking at real asset prices as they should be," he told MNN.

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The ultimate dominance of urbanisation

ROBERT Friedland says a Chinese battle against air pollution and a revolution in medical equipment will have a bigger impact on metals than current political newsmakers.

The Ivanhoe Mines executive chairman told Mines and Money Hong Kong delegates today that the urbanisation of China and the developing world would be the strongest global trend driving resources and mining related issues.

"The fundamental human and infrastructural phenomenon of this age is urbanisation, and it has very profound implications for metal markets and miners," he said.

"It does not care about Mr Putin going into Ukraine. It does not care about Shia versus Sunni. It does not care about anything you're reading in the newspapers about a lost airplane.

"Urbanisation is doubling the number of gigacities in the world."

Friedland tied this trend to a massive imperative in China to reduce air pollution, because it dominates world car production, as well as demand for metals required for implementation of the proposed clean air technologies such as hydrogen-fuel cell cars.

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