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Quantitive easing removes quality of money

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Dark clouds and a golden sky
▬ scenario is unfolding and it doesn’t look nice ▬

Henk J. Krasenberg - European Gold Centre

Henk J. Krasenberg

Although it seems that daily life is just proceeding as if there are not any problems around, it is becoming more and more obvious that in reality, the factors that determine the quality of our lives are further deteriorating. In almost every country, economic and fiscal restraint programs are implemented to cut spending, both on the government and the private levels. Companies are striving for more effective production and lay off parts of their employment force, all levels of government are reorganizing and also sacrifice people, the number of bankruptcies are rising by the day, creating more unemployment and just look around in your own environment, it is frightening how many offices and shops are closed and closing, the empty shops and for rent signs are all over the place.

That in itself is remarkable, on one hand the crises are the result of not having enough money around, on the other hand we know that Quantitative Easing is the new name for creating more and more money. A few months ago, I attended a presentation by our Dutch gold specialist Willem Middelkoop in which he clearly explained and showed slides that virtually every country in the world is increasing their money supply in almost identical curves. Obviously, the dust has come off the printing presses, they are running full steam, even in China where you would think they have no shortage of money whatsoever. His new book will come out this or next month, I hope there will be an English edition too so that you can learn about his always appreciated views.

On the economic front, Europe is still coping with its serious problems. It may seem that the politicians and the ECB have reached all kinds of agreements with individual countries that “solved” the worst of the monetary crises, but the truth of the reality shows that, as I said before, the solutions turn out to have been nothing more than putting some band-aids on the patients, rather than give them enough medicines to cure them. Greece and Spain continue to battle with difficulties on their country levels.

Greece succeeded to negotiate more than 11 billion euros in spending cuts which is not enough to fill their budget deficit of about € 20 billion…. The Greeks reacted with tens of thousands of protesters and a strike of doctors, teachers, tax workers, ferry operators and air traffic controllers to oppose the proposed spending cuts…. The EC, ECB and IMF report on Greece’s debt, which is the basis for decisions to grant Greece the next € 31 billion tranche of aid, may be delayed until after the U.S. presidential election to avoid too much commotion…. Unemployment reached 25.1% in July, up from 17.8% last year….

The Eurozone explained

Spain rejected Catalonia’s bid for fiscal independence and clearly stated this to be totally non-negotiable…. Instead, it will activate an € 18 billion liquidity fund to help regional governments finance their debts…. Catalonia reacted by calling for an early election in order to enforce its incremented autonomy wishes…. The Castilla-La Mancha region announced to seek € 800 million from the liquidity fund…. From August to September, the number of unemployed rose by 1.7% and now stands at 4.7 million. Since September 2011, unemployment has increased by 11.3%…. The Canarias region will seek € 757 million from the liquidity fund to repay maturing debt and finance its deficit…. and finally the most recent news: Standard and Poor’s downgraded Spain’s sovereign debt to one notch above junk status. The decision pushed yields on Spanish debt further down to near 6%….

But also in other European countries, the deteriorating circumstances lead to general worries and unrest. For instance, Sweden has said not to allow taxpayers to bail out “ill-managed” banks in other European countries, calling the structure of Europe’s proposed banking union “unreasonable” because it gives the ECB automatic majority…. Finland, the only Nordic Eurozone member, reported increased unemployment figures and an estimated 0.8% economic growth in 2013, lowering the previous forecast of 2.3%…. The United Kingdom’s Prime Minister David Cameron said he would not allow “outrageous” attempts to increase the EU budget during upcoming negotiations on EU spending for the 2014-2020 period and threatened to veto the budget if it was not in British interest. This clearly reflects the general anti-EU sentiment that has been apparent ever since the creation of the EU….

I can easily imagine that so many people within and outside of Europe are very much concerned whether we will ever get out of this situation and enjoy more prosperous times of economic strength and growth and financial and social well-being for the population. I am confident that will happen sometime in the future but it is very likely that the strenuous situation of today will last for several years to come and is almost sure to be bound for getting even worse. But of course, it is not only Europe that has to tighten the belts. Did we ever think that Japan would be in the situation that it is in today? And the United States, once the economic leader of the world with their bright minds, working and purchasing power, their not-to-crack optimism and its strong and world-recognized dollar. And not to forget, the nation with the world’s largest gold reserves! But, as to all good things do come to an end, that was once……

President Obama and president-elect Romney both want us to believe that they can steer America back to their previous position of the strongest economic, political and monetary driver of the world. We already know that politics are mainly resting on promises which sounds strong in times of election but which turn out to be hollow and without merit when the elections are over. This time, it will be the same as ever. The proud wish of Obama to revive the image of “Made in America” will mainly be applicable to the huge debt situation and all those obscure financial products that were invented by Lehman Brothers and their Wall Street pals and which were so greedily welcomed by their European counterparts. And then you have to consider that many of the persons responsible for that financial tsunami, are still serving in the Obama government. I do like Obama as a person and stimulator, despite everything I favour him as a President but I have to add that I usually say that he has a heart but he didn’t have the balls to get rid of the Wall Street gang…. And about Romney, yes what can I say about Romney, he doesn’t seem to have a clue about what is going on in the world and certainly not about what it needs to get the world in quieter, safer and better waters. No matter who will be the next President, the precarious economic and financial future will also be difficult for the United States with its debt-ridden society and quantitative easings…..

Of course, the above are not the only problems of the world. With all the wars, conflicts and international threats, in and from the Middle East, Asia and between the religions (love thy neighbour seems to be outdated too…..), the world is facing more fires to come with no proper and reasonable solutions in sight.

Now, what does this all for our world of resources, metals, exploration and mining? The search for metals and minerals has not diminished or weakened. On the contrary, the search to find and win them, has spread virtually over the whole world and despite all economic perils, the world’s metals and mineral prices have risen to very viable and economically feasible levels. The producing companies are reporting record production figures and profits, exploration companies report very encouraging drill results although in general no new world class discoveries are made.

My regular readers know that I have been consequently positive about the development of the gold price since 2002. I am still positive about the gold price as I think it will develop over the next few years. But as I often mention in my writings, personal conversations and presentations at mining investment conferences, I am not advocating that investors should invest in the metals and even better, in mining and exploration shares, just because the metal prices will go higher. The current prices are good enough where they currently are, to justify applying a solid part of almost every investor’s portfolio in resource stocks. The industry is enjoying healthy margins but what is more important, is the distinct possibility that other industries don’t have, seeing the prevailing profit margins increase significantly and possibly even multiplying!

Don’t ask me how high the price of gold will go. I just don’t know, like everybody else. In several past issues, I wrote about several of my appreciated colleagues and friends who predicted higher gold prices like $3,000, $5,000 and $8,000, to be topped in December 2011 when I told you about Shayne McGuire who was the first one to mention the possibility of $10,000 gold. I always said, until very recently, that I would not be in favour of such a price level because it would mean that we would be living in very bad and concerning living circumstances.

But in the last few weeks, the scenario as it is unfolding now and pretty rapidly too, is worrying me. Murphy’s law says that when it turns bad, all things will go bad. If that would indeed happen in the next two years, I think that the function of gold will become different and more special than most of us expect. Then, where the gold price will go, will be as good as anyone’s guess. The quantitative easings, the worldwide money printing, are affecting and ultimately removing the quality of money. Which other standard of value than gold will be there to come to rescue?

To me, the case for gold is clear. And when I say gold, I do mean all the PGM’s and silver too. But as I have explained and stressed before, the most flexible way to participate in the metals, is to invest in mining and exploration shares. They are ridiculously undervalued at the moment! Many good investment candidates can be found. In last month’s issue, I gave many names that would look fine in your portfolio. But start by studying the SUPPORTING COMPANIES. Several of them have reached the production status and look forward to impressive growth over the next two years, others are in decisive stages of development to come into production in due time, and the explorers can come to surprise us any moment with their discoveries. In the forthcoming issues of GOLDVIEW, MINING IN AFRICA, MINING IN EUROPE and MINING IN MEXICO, I will review these companies. As I said in my most recent presentation in Nairobi, Kenya two weeks ago, you cannot afford not to be in the resources markets!

Henk J. Krasenberg

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European Gold Centre

European Gold Centre analyzes and comments on gold, other metals & minerals and international mining and exploration companies in perspective to the rapidly changing world of economics, finance and investments. Through its publications, The Centre informs international investors, both institutional and private, primarily in Europe but also worldwide, who have an interest in natural resources and investing in resource companies.

The Centre also provides assistance to international mining and exploration companies in building and expanding their European investor following and shareholdership.

Henk J. Krasenberg

After my professional career in security analysis, investment advisory, porfolio management and investment banking, I made the decision to concentrate on and specialize in the world of metals, minerals and mining finance. From 1983 to 1992, I have been writing and consulting about gold, other metals and minerals and resource companies.

The depressed metal markets of the early 1990’s led me to a temporary shift. I pursued one of my other hobbies and started an art gallery in contemporary abstracts, awaiting a new cycle in metals and mining. That started to come in the early 2000’s and I returned to metals and mining in 2002 with the European Gold Centre.

With my GOLDVIEW reports, I have built an extensive institutional investor following in Europe and more of a private investor following in the rest of the world. In 2007, I introduced my MINING IN AFRICA publication, to be followed by MINING IN EUROPE in 2010 and MINING IN MEXICO in 2012.

For more information: www.europeangoldcentre.com

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Fortum och Vargön Alloys tecknar femårigt avtal om kärnkraftsel

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Vargön Alloys producerar

En framgångsrik omställning kräver stora mängder pålitlig och prisvärd fossilfri el skriver Fortum. Företaget har nu skrivit ett femårigt avtal om att leverera kärnkraftsel till Vargön Alloys.

”Vår uppgift är att se till att elen finns tillgänglig precis när våra kunder behöver den. Långsiktiga partnerskap spelar här en viktig roll.”

Avtalet omfattar elleveranser på 0,4 TWh per år och inkluderar ursprungsgarantier för kärnkraft i SE3 för hela volymen. Leveranserna börjar i december 2024. Vargön Alloys AB, beläget vid Göta Älv i Vänersborg, är en av Europas största tillverkare av ferrokrom, den legering som ger stålet dess hårdhet och motståndskraft mot korrosion.

– Jag är mycket förväntansfull inför de möjligheter som avtalet med Fortum ger oss som företag. Vårt partnerskap representerar en gemensam vilja att ta ett hållbarhetsansvar och vi ser att detta kommer ha en positiv påverkan för vår verksamhet, det säger Anders Lehman, vd Vargön Alloys.

Avtalet bidrar till Fortums strategiska mål om att ha minst 20 procent av sin produktion, under en rullande tioårsperiod, prissäkrad.

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Kärnkraftreaktorutvecklaren Blykalla har gjort en kapitalanskaffning på 80 Mkr

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Närbild på en del av Blykallas kärnkraftsreaktor

Blykalla har genomfört en kapitalanskaffning om 80 miljoner kronor. Rundan leddes av Norrsken Launcher tillsammans med Nucleation Capital, med deltagande från Earth Venture Capital, Farvatn och flera privata investerare.

Det tillförda kapitalet kommer att vara avgörande för Blykallas industrialisering av sin avancerade kärnreaktor, SEALER (Swedish Advanced Lead-cooled Reactor). SEALER är konstruerad för kommersiell kraftproduktion i ett mycket kompakt format, med unika säkerhetsfunktioner som möjliggörs av ett antal egenutvecklade innovationer.

En av dessa viktiga innovationer är Blykallas korrosionstoleranta stållegeringar, som möjliggör effektiv kylning av reaktorer med flytande bly. Med detta tekniska genombrott säger Blykalla att de kan uppnå effektiv serieproduktion, vilket leder till snabbare driftsättning och lägre kostnader än konventionell kärnkraft. SEALER gör det också möjligt att använda kärnkraft för att minska koldioxidutsläppen i industriella tillämpningar genom produktion av vätgas, biokol och biobränsle, utöver lokal elproduktion. Slutligen bidrar denna teknik till att förverkliga en cirkulär avfallsmodell. Jämfört med konventionell kärnkraft kan SEALERs bränslecykel utvinna upp till 140 gånger mer energi ur uranmalm, vilket endast ger en bråkdel av avfallet, som behöver lagras under endast 1 % av deponeringstiden.

Rod Adams, Managing partner på Nucleation Capital, säger: ”Vi är mycket glada över att kunna investera i Blykalla, en grupp med unik och mycket konkurrenskraftig korrosionsskyddsteknik för användning i deras relativt mogna blykylda reaktorkonstruktion. Denna teknik kommer att göra det möjligt för dessa reaktorer att överträffa sig själva som en avancerad kärnkraftsdesign, som kan ge tillförlitlig och koldioxidfri kraft till energiköpare runt om i världen.”

Norrsken, som ledde bolagets såddrunda tillsammans med Uniper 2022, säger: ”Blykalla bygger ett team i världsklass för att ta företagets unika IP mot snabb industrialisering. Denna teknik kommer att vara avgörande för den europeiska övergången till grön, säker baskraft som så desperat behövs för att minska koldioxidutsläppen i industrin, säkra nätets tillförlitlighet och leverera på de enorma behoven av att driva AI”, enligt Erik Engellau-Nilsson, partner på Norrsken Launcher.

Tien Nguyen, grundande partner på Earth Venture Capital, kommenterar: ”Vår investering i Blykalla understryker vår fasta tro på deep-tech vid en tidpunkt då Sydostasiens behov av ren, hållbar energi är obestridligt. Med Indonesien, Singapore, Filippinerna och Thailand i spetsen beräknas efterfrågan på SMR-driven energi överstiga 10 GW år 2035. Detta återspeglar ett akut behov av energilösningar som kan driva på den ekonomiska tillväxten och samtidigt säkerställa ett hållbart klimat. Blykallas innovativa tillvägagångssätt är perfekt anpassat för att hantera denna utmaning och erbjuder en skalbar, effektiv energilösning.”

Blykalla är för närvarande i förberedande arbete för att licensiera tekniken i Sverige, en regulatorisk miljö som snabbt anpassas till utvecklingen av ny kärnkraft. Ett viktigt steg för att industrialisera och kvalificera tekniken är att bygga den elektriska testreaktorn i Oskarshamn, som utvecklas tillsammans med OKG (Unipers svenska dotterbolag) och KTH (Kungliga Tekniska Högskolan). Parallellt för företaget diskussioner med industriella partners för att stödja byggandet av kärnreaktorer för off-grid värme- och elproduktion. Blykalla har hittills mött marknadsintresse från aktörer inom gruv-, stål- och andra energiintensiva industrier.

Jacob Stedman, Blykallas VD, kommenterar: ”Det är fantastiskt att vara en del av denna kärnkraftsrenässans, och att se hur stort intresset för kärnkraft är från företag i takt med att de regulatoriska förutsättningarna faller på plats. SEALERs funktioner, kostnad och effekt gör den perfekt lämpad för industriella användare som vill minska koldioxidutsläppen och bli enda avnämare, eller till och med ägare, av SMR. Det speglar det starka och brådskande behovet från industrin att säkra tillgången till ren och konkurrenskraftig energi. Detta kommer trots allt att vara avgörande för branschens gröna omställning och fortsatta tillväxt.”

Blykalla på 1 minut
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Mexikos sockerproduktion den lägsta på ett decennium

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Sockerbitar i närbild

Mexiko beräknas att producera 4,7 miljoner ton socker i år, den lägsta sockerproduktionen under det senaste decenniet. Sockerproduktionen fortsätter att ligga under de senaste två säsongerna på grund av minskande industriella skördar på grund av långvarig torka.

Både den veckovisa sockerproduktionen och sockerrörskrossen ligger betydligt under de senaste två säsongerna.

Vi har sett en ökning av sockerrörsarealen den här säsongen jämfört med förra året. Hittills ligger ton sockerrör per ha över de senaste två säsongerna.

Mexiko fortsätter att se låga mängder nederbörd. Eftersom Mexiko inte har ordentliga bevattningssystem, beror landets sockerrörsproduktion strikt på nederbörd. Än så länge fortsätter den ackumulerade nederbörden att ligga under de senaste två åren samtidigt som den också ligger under tioårsgenomsnittet.

Med en inhemsk produktion på 4,7 miljoner ton kommer Mexiko att behöva importera socker för att fortsätta exportera socker till USA.

Hur mycket socker kommer Mexiko att importera?

Även med lägre sockerproduktion kommer Mexiko att leta efter socker från sina grannar för att kunna uppfylla så mycket av sin amerikanska kvot som möjligt. För att möta amerikanska exportvolymer bedömer analytikerna att Mexiko kommer att importera cirka 500 000 ton. Hittills har Mexiko importerat cirka 168 000 ton vilket gör att landet över 300 000 ton kvar att importera. Importen kommer sannolikt att komma från Centralamerika och Brasilien.

Eftersom USA inte producerar tillräckligt med socker för att möta den inhemska efterfrågan måste de importera socker. Större delen av USAs importerade socker kommer från Mexiko på grund av deras nära handelsrelation och geografiska närhet.

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