Month: August 2013

By MoneyMorning.com.au

The mainstream view is that China can smoothly transition its economy from construction to consumption. This is a dangerous illusion.

China’s rapid rise through the economic ranks was due to the twin drivers of infrastructure building and exports.

Stories abound on China’s ‘ghost cities’. The Chinese obsession with all things property has led to a possible credit bubble in the shadow banking system. The prospect of this bubble bursting is making cautious investors very worried.

And the anemic numbers on the Baltic Dry Index (which measures shipping rates) indicate the export business isn’t as robust as the Chinese authorities would like.

One of the stimulus measures touted by Beijing is the push for more urbanisation. That means moving citizens from rural areas to soak up the excessive supply in existing urban areas and to create fresh demand to justify more development.

An Unstable and Unsustainable Model

The transition to consumption will take time. So the authorities have resorted to the tried and true practice of building more ‘stuff’. This is an easy way to create the jobs needed to maintain social stability and retain their power base.

There is no question this formula has been successful in achieving this objective.

Over the past five years, the IMF estimates emerging economies (of which China is by far the largest) have accounted for three quarters of global growth. Little wonder the west is so keen for this ‘growth’ story to continue.

However, the economic platform China has built isn’t a stable or sustainable model for the future. At some point (and some argue this has already happened) they’ll reach saturation point – they won’t need any more train lines, shopping centres, skyscrapers etc.

Nouriel Roubini recently observed (emphasis mine):

‘China’s leaders face plenty of other enormously complicated challenges, like managing the risks created by a shrinking labor force, the increasingly free flow of information within the country’s borders, the degradation of its air and water, and the costs and complexities of providing for a rapidly ageing population. And given China’s outsize importance …its success and failures will be felt globally.‘

When thinking about the problems facing China, few analysts discuss its ageing population.

The fact is demographics are destiny. The gradual retirement of millions of baby boomers in the West is destined to reshape economic growth.

China faces a similar demographic time bomb. According to China’s Ministry of Education more than 13,600 schools closed in 2012. This is a result of the one child policy. Apparently the number of primary school students fell from 200 million to 145 million between 2011 and 2012. Remember, these school children are supposed to be the future taxpayers.

At the other end of the spectrum China has an impending social security crisis. The People’s Daily newspaper published an article recently warning the number of elderly could rise from 194 million in 2012 to 300 million by 2025.

A diminishing future tax base to support a growing future pension base. Does that sound familiar?

According to the article, Beijing is toying with changes to the one-child policy and lifting the retirement ages from 55 to 60 for women and 60 to 65 for men.

As always when politicians tinker, there are consequences.

There will be the obvious backlash to the prospect of increasing the retirement age. This is the first hurdle to cross. Assuming they do this, the policy really only buys time but doesn’t deliver a solution. The people are still in the system.

The other consequence is the impact on the rising level of unemployed university graduates. With older people staying in the workforce longer, this will only frustrate the employment prospects of the younger demographic.

The other thing is whether modern Chinese couples want to have more than one child or any children for that matter. Like their western counterparts, they too face the pressures of modern living. So the pitter patter of more Chinese feet isn’t a given.

China is facing a demographic problem similar to the West, but it doesn’t have the middle-class income to tap into. China’s demographic problem is its citizens are growing older faster than they are growing wealthier.

China: Vulnerable and in Trouble

China built its success on cheap labour. Ironically it needs to fund its future from a shrinking pool of more highly paid younger workers paying higher taxes.

Transitioning to a consumption based economy is a great theory but in reality it’s not easy with a rapidly ageing (and relatively poor) population.

Consider how much more difficult that situation would become if China experienced a hard landing from a property bubble bursting. Millions would hit the unemployment queues and take to the internet to vent their anger (similar to the Arab Spring). How do you tame 1.3 billion people? With great difficulty!

The bull in China is nothing to do with a raging market. It’s everything to do with the highly massaged economic data that the gullible West accepts. The West accepts it because they don’t want to think about the alternative.

No doubt China will become a much larger economic power. It could even surpass the US by the end of this decade.

However, no empire – Roman, British, US – has ever grown linearly. They all experience growing pains. China’s State-managed economy has been on a tear for two decades without pausing for breath.

The imbalances (property and credit bubbles) embedded in the system from this rapid growth and a demographic time bomb make China vulnerable to the contracting forces in the West.

You know the damage caused by the Bull in a China shop. So make sure you get your valuables out of the shop before the rampage begins.

Vern Gowdie+
Editor, Gowdie Family Wealth

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From the Archives…

Why Risky Stocks are Best in Risky Markets
23-08-2013 –  Kris Sayce

Why Al Gore Won’t Like Big Data
22-08-2013 –  Kris Sayce

Debt and the the Patient Investor
21-08-2013 – Vern Gowdie

How to Apply Reynold’s Law to Your Retirement Savings
20-08-2013 – Nick Hubble

Holding Cash is an Investment Strategy Too
19-08-2013 – Vern Gowdie

By www.CentralBankNews.info

Source: Peter Byrne of The Energy Report (8/27/13)

http://www.theenergyreport.com/pub/na/the-low-cost-high-yield-strategy-making-oil-investors-money-josh-young

Sometimes success is about making the most of what you’ve already got. The same holds true for North America’s shale plays: Companies are saving development dollars by reworking old wells. When it’s done right, the rates of return are astounding. That’s why Young Capital Management founder Josh Young is investing in redevelopment plays. In this interview with The Energy Report, Young explains redrilling economics and highlights off-the-radar shale basins outperforming those in the limelight.

The Energy Report: Josh, political tension in the Middle East always prompts speculation over potentially rising oil process. What has the price action been since violence in Egypt intensified?

Josh Young: Prior to the turmoil in Egypt, oil was in the $90–95 per barrel ($90–95/bbl) range; it is now trading over $106/bbl. Prices will continue to rise if political instability spreads into the oil-producing neighbors of Egypt, or disrupts shipping on the Suez Canal.

TER: Do you see a potential for turmoil in Saudi Arabia?

JY: The possibility of protests turning violent is real across the Arab world. In the eastern part of Saudi Arabia, resistance by Shia has a taken on a violent undertone—nothing like the dramatic upswing in violence in Egypt, but it has the potential to fester and spread. Remember, the Arab Spring first got hot in Tunisia, and then spread like wildfire to Morocco and Libya. One of the big political factors that has destabilized the region of late has been a combination of a concentration of wealth generated by oil production along with inflation, particularly of food prices, which has made life a lot worse for the poor people in those countries.

TER: Turning to North America, are we looking at weaker earnings and higher interest rates for next year, as many economic pundits suggest? If so, will this trend affect oil and gas prices?

JY: There is a lot of price support for oil and natural gas. The marginal cost of production for oil continues to rise. Marginal oil is being produced in secondary areas in the Bakken and other peripheral shale plays where oil is economic above $100/bbl. Producers are drilling in the Arctic and in deepwater and ultra-deepwater, where offshore rigs and related facilities can cost billions of dollars. The trend is progressively higher production costs, and that requires higher oil prices. Worldwide rising marginal production costs indicate the price direction going forward.

TER: For investors who want to take advantage of a potentially large spike in oil and gas prices, can you explain what is meant by “contango” and “backwardation”?

JY: These terms describe the shape of the forward price curve of futures contracts for resource commodities. “Contango” is when the current price for oil is cheaper than the futures price for oil delivered in a year or two. “Backwardation” is the opposite: The current price for oil is higher than the price to buy oil later.

For example, if a trader wants to buy West Texas Intermediate (WTI) oil five years out, it costs roughly $85/bbl versus the current price of ~$106.50/bbl. I know commodity traders who profit from trading futures contracts based on analyzing the changing shape of these curves over time. But I prefer to invest in value-priced equities as there is a more clearly defined intrinsic value.

TER: What are the relative benefits of investing in oil and gas ETFs and master limited partnerships (MLPs) versus buying more stock in the majors or looking for solid juniors?

JY: Things don’t look great for Exxon (XOM:NYSE), Conoco (COP:NYSE) and other majors who are being hit hard by cost escalation, particularly in offshore exploration and development. These firms are aggressively buying and drilling around the globe, yet production is not increasing much—and in some cases it is declining—despite their unprecedented capital expenditures on drilling and production.

And with the ETFs, which are subject to contango and backwardation, the challenge is simply that you have no crystal ball. Most retail ETF investors are not able to understand the shape of the futures curve better than the commodity trading specialists who do this for a living. I look to the smaller, value-priced oil companies as the foundation of my investment strategy.

TER: You are a proponent of redeveloping mature basins. Why?

JY: There is less risk in redeveloping existing fields than in exploring for new fields, conventional or unconventional. Many exploratory wells, even shale wells, lose money. But there is good money—and less risk—in redeveloping fields in, say, Oklahoma.

TER: Which junior explorers and producers interest you in the mature basins?

JY: I like Gastar Exploration Ltd. (GST:NYSE). During the past year, the company has seriously reshaped itself. And it has cleaned up its balance sheet. It has signed onto accretive deals. Gastar is redeveloping the Hunton play in the Sooner Trend in Oklahoma and is drilling horizontal wells for $5 million ($5M). It had an excellent well come on-line with production at 200 barrels per day (200 b/d) and incline to more than 1,000 b/d for nearly 60 days before it started to decline, which is really exciting. The economics of that type of flow is unparalleled among the onshore resource plays.

TER: What is the rate of return on that particular well?

JY: Perhaps as high as 200%. And that means getting $10M back in the first year and maybe $3–4M in the second year. The net present value on that well is somewhere between $25M and $50M. The exact value depends on how rapidly the well declines and, obviously, the forward price for oil. But it is a phenomenal well by any measure.

TER: What makes the Hunton special?

JY: Consider this scenario: The stock of Goodrich Petroleum Corp. (GDP:NYSE) is shooting up because it is in a resource play that people are very excited about called the Tuscaloosa Marine Shale (TMS). The big difference between the Hunton and the TMS is that multiple well-known public companies are active in the TMS. The most prominent one is Goodrich, but Sanchez Energy Corp. (SN:NYSE)recently bought into the play. Devon Energy Corp. (DVN:NYSE) had a big position and recently sold out.EOG Resources Inc. (EOG:NYSE) has drilled a number of wells in the TMS.

At this point, investors are focused on the TMS and are generally unaware of what is really happening with Gastar’s redevelopment play in the Hunton. In the Hunton, about 50 horizontal wells with results have been drilled in the last three years. In the TMS, there have been about 20 results during the same time frame. In the Hunton, about 45 out of the 50 wells indicate a roughly 60% rate of return. But in the TMS, there are only about four wells that might be economic so far. The well announced by Goodrich is producing 1,500 b/d and cost about $14M. The Hunton wells are costing about $5M and some are producing more than 1,000 b/d. Gastar estimates that it will be able to get the cost per well down to $4.5M, which will drive returns even higher.

The Hunton is somewhat proven from an industry perspective. There is way more well data, way more outperformance, and the play shows a fundamentally lower risk profile than the TMS. Gastar has a good idea of where to drill, in other words. One would think that because the Hunton is working out so nicely, Gastar should be trading at a high multiple. But Gastar is trading at less than six times its 2013 enterprise value to EBITDA. Goodrich, on the other hand, trades at about 12 times its 2013 enterprise value to EBITDA. As people wake up to what is happening in the Hunton, there is the potential for Gastar’s stock to radically re-rate. I bought some Gastar stock today, and yesterday, and the day before—and I may just keep buying it!

TER: Gastar is also operating in the Marcellus.

JY: It is important to understand that Gastar has developed its main field in the Marcellus. Even if Gastar did not have the Hunton, its six times EBITDA is very cheap relative to the other Marcellus-focused companies with similar rates of return. Those companies include Rex Energy Corp. (REXX:NASDAQ),Cabot Oil & Gas Corp. (COG:NYSE), Range Resources Corp. (RRC:NYSE) and EQT Corp. (EQT:NYSE)—and they are trading at approximately 12 times enterprise value to 2013 EBITDA. Gastar’s CEO recently estimated that its Marcellus asset alone could be worth $7 per share, which highlights how cheap he thinks the stock could be at around $3 per share.

TER: What is the story with Range, Rex Energy, EQT and Cabot?

JY: They have all shown increasingly good results in the Marcellus and are trading at multiples. Their rates of return are reasonably high despite low natural gas prices. Range and EQT have massive inventory. Cabot has exceptionally high production from its dry gas well. Rex has some exposure to the Utica. Each of them is trading at a reasonably fair price. Each is run by good managers. They have beat expectations quarter after quarter. They are at or near being free cash flow positive, which is attracting generalist investors, because it is easier for a generalist to evaluate a company that is generating free cash flow, as opposed to a company, like Gastar, which is outspending its cash flow on capex for now. That should change by the end of 2014, which could further re-rate Gastar stock.

TER: What is the situation with Lucas Energy Inc. (LEI:NYSE.MKT)?

JY: I was on the board of directors of Lucas Energy for about six months, which restricts what I can say to a certain extent, but I can talk about the facts. Lucas recently secured new financing at about 11%, which is a higher interest rate than a typical bank loan, but lower than a typical mezzanine financing. Lucas has announced that it will use the loan to partially pay off short-term debt. That will improve its working capital situation. And it will deploy the cash to re-drill wells in known producing oil zones in its main fields. Generally, expenditures on workovers produce high rates of return by completing existing wells and opening wells into new zones.

TER: How does that work?

JY: Let us say that a company is producing oil from a well at a depth of 15,000 feet. It spends a relatively small amount of money to open up the nearer well. And if it produces even 10 or 20 b/d and the operator only spent $50,000 to open it, the rate of return can be well over 100%.

TER: Do you have an update on GeoMet Inc. (GMET:NASDAQ)?

JY: Geomet recently sold an asset, paid down debt and got back into compliance with its lending facility. Surprisingly, despite higher natural gas prices and a fully compliant debt facility, the equity and the preferred stock have not traded up since then. In particular, the preferred stock seems appealing with a 12.5% current payment in kind (PIK) yield and trading at a 25% discount to “par.” This could be an interesting way to get exposure to high yields with upside to natural gas prices, which could potentially recover over time.

TER: I noticed that EQT has joined other large and small oil and gas firms in the Center for Sustainable Shale Development (CSSD). And Range Resources has been releasing information about the chemical composition of its fracking liquid. Are there problems with water pollution in hydraulic fracturing that will bite investors sooner or later?

JY: Range has disclosed the contents of its frack fluid as 99.5% water and sand. It adds four chemicals to the fluid, which are all found in household cleaning supplies. Range’s view is that its fluid contains nothing in it to contaminate water. To my knowledge, there are no cases of fracking leading to water contamination. The cases that have been cited are related to water wells that were drilled into coal bed methane reservoirs. In the film Gasland, people were able to light their tap water on fire because there was natural gas mixed in with it. That water well was drilled 80 feet down into a coal seam, and as the water was used up, the pressure on the coal eased and allowed the release of natural gas.

There are cases where chemicals found in drinking water were related to truck crashes. Unfortunately, in parts of the Marcellus it is hilly. Occasionally, trucks transporting chemicals crash and those chemicals spill into the water. That is not different from any other industrial activity. Our ability to live modern lifestyles is contingent on certain levels of manufacturing activity and industrial activity that leads to some level of pollution of the environment.

TER: Thanks for sharing your perspective, Josh.

JY: Anytime.

Josh Young is the founder and portfolio manager of Young Capital Management, LLC. He is also a board member of Lucas Energy Inc. He previously served as an analyst at a multi billion-dollar single-family office in Los Angeles. Prior to that, he was an investment analyst at Triton Pacific Capital Partners. He was also a corporate strategy consultant at Mercer Management Consulting and DiamondCluster. He holds a Bachelor of Arts in economics from the University of Chicago.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE:

1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Josh Young: I or my family own shares of the following companies mentioned in this interview: Gastar Exploration, Lucas Energy and Geomet. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By The Sizemore Letter

Last month, I ran a screen of “Magic Formula” stocks from hedge fund guru Joel Greenblatt’s screener.

I recommend you read the original piece because I explain what the Magic Formula is and how it works.  But for the sake of simplicity, I can summarize it like this:  the Magic Formula is a list of highly-profitable companies trading at cheap valuations. 

The list isn’t fool-proof, of course, and it is subject to lag times in information.  For example, profitability (based on Greenblatt’s favorite metric, return on capital) is based on the most recent quarterly filings, and a lot can change from quarter to quarter.

So, the Magic Formula screen should be viewed as a great starting point for your investment research and as a great fishing pond for potential value plays.  But you shouldn’t assume that every stock on the list is a bargain.

With that said, I re-ran the screen for August with the same parameters as July: top 30 Magic Formula stocks with a market cap of $1 billion or more.

We have several familiar names that have been on the list off and on for the past several years—Microsoft (MSFT), Cisco (CSCO) and Lorillard (LO), for example.  Dell (DELL), which—as I noted last month—is tied up in a fight for control of the company between founder Michael Dell and a group of sharesholders led by Carl Icahn, also made the cut.

On a list of 30 names, 25 were unchanged from July.  But we did have five subtractions and five new additions:

Of the five stocks bounced from the list from last month, it’s worth noting that all but Abbott Labs (ABT) and Weight Watchers (WTW) still made the cut on the expanded 50-stock list (I encourage you to play with the list here.  Adjusting the portfolio size and minimum market cap can produce almost infinite numbers of portfolios.)

It’s also worth noting the stock price performance over the past month.  Weight Watchers is down by nearly a quarter from its August 2 highs while Questcor Pharmaceuticals (QCOR) is up almost 40% in the past month, and GameStop (GME) is up about 12%.

The new additions for August will have a few familiar names.  Coach (COH) has been off and on the Magic Formula list for years.  Coach is a monstrously profitable company with a return on equity of 47%.  Yet the success of upstart rival Michael Kors (KORS) has dampened enthusiasm for the stock, which is down by over 30% from its old 2012 highs.

Fashion retailer Express (EXPR) also made the cut, as did firearm maker Sturm Ruger (RGR).  With President Obama—perceived by many to be “anti-gun”—now in office for nearly five years and with the tragic Newton school shooting fading from the headlines, the possibility of immediate and comprehensive gun control is receding.  Perversely, this is actually bad for handgun makers, which have enjoyed a windfall from panicked gun owners fearing that their window of opportunity to buy a gun was closing.  Handgun makers like Sturm Ruger should not expect to see the kinds of revenue gains they’ve enjoyed for the past several years.

Still, Sturm Ruger is attractively priced at 11 times earnings and sports a 4.6% dividend yield.

And lastly, online marketing company ValueClick (VCLK) and biotechnology firm PDL BioPharma made the cut in August as well.

Disclosures: Sizemore Capital is long MSFT, CSCO and ABT

This article first appeared on Sizemore Insights as Magic Formula Stocks for August

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Article by Investazor.com

The conflicts taking place in Syria combined with the turmoil in Egipt lead to important movements in the price of oil. Besides this situation, United States intervened and wants to held responsible Syria for using chemical weapons against civilians. This intervention betrayed the U.S.’s intention to step in the arab issues which provokes so many turbulences so far. Even if Syria isn’t an important player in the oil industries, the biggest fears are realted to the possibility of arousing a conflict which would cover the entire Middle East zone. An important ally of United States in this matter is United Kingdom. British Prime Minister David Cameron will indicate its position tomorrow after meeting with the Britain’s National Security Council. In its view, this problem requires a group involvment and collaboration in order to avoid any international conflicts.

In the United States the situation seems to agitate as in the Middle East. Tensions were caused by the tapering of the Quantitative Easing program and the pressures on the Congress, which may be bound to act and to raise debt limit again, even if the economy became very sensitive to this change. The last news about U.S. indicated a decrease in the consumers’ orders of core durable goods -0.6% which indicates a awareness of the production. On the other side, the consumer’s confidence keep improving and stabilizing in this area (last release of the confidence index of Conference Board indicated 81.5 points ).

For the next period it is important to closely watch the data coming from the labor market in U.S. ( unemployment claims on Thursday) and the NFP next week. These two indicators may give important hints concerning the future evolution of QE3.

The post A Nervous Day Today appeared first on investazor.com.

Article by Investazor.com

Syria is the main subject at the current moment. United States are holding the Syrian government accountable for killing their own citizens with chemical weapons last week. Not only the United States, but also UK and France are blaming Assad for the killings in Ghouta and all of them are willing to intervene.

It didn’t take long for protestants to appear. The protests in Libya had a negative impact on the oil production. A shortage in the oil offer brought higher prices for both WTI and Brent oils. But this is just the beginning. Syria itself produces around 164000 barrels a day, so it is not that important for the oil market. But if United States will intervene, here, to get rid of the Bashar al-Assad, the conflict will be ramified and the entire Middle East will be engulfed in a war.

While USA has allies like U.K. and France, the Syrians have their own allies. Iran is a longtime Syrian ally and they warned the US that they will back them up, and they are not alone because Russia is also backing up the Syrians. If only of these two allies would enter a war the price of oil would rally at a fast pace and could touch new highs.

Chart: Brent Oil, WTI Oil (Daily)

For the moment Brent Oil, lower part of the chart, has broken today the rejection line of an up channel and rallied almost 3 percent today, touching the highest level in the past 6 months at 114.42$ per barrel. If today the closing price will be around this level and the United States, U.K. and France would still want to intervene in Syria, we might see the Brent oil going towards 119$ per barrel, since there are no other visible resistance until there.

The WTI has broken the upper line of a symmetrical triangle, which was drawn during the last month. A close of the day above the upper line of the triangle as well as a continuation of this conflict could easily push its price towards the target of the triangle at 113.40$ per barrel.

The probability for the US to intervene in Syrian and to try to get rid of Assad is big. It matters now when and how they will do this.

The post Syria, an Oil Bomb Ready to Explode appeared first on investazor.com.

Article by Investazor.com

These days we are attacked by a lot of news about the conflicts in Syria. Of course, the United States of America are this time, again, one of the main characters. Is it new, this whole situation of conflict?

Let’s go to the roots…

Syria is a small country in the Western Asia. Not rich, but enjoining its fertile plains and geographical diversity from high mountains to deserts, it had (or not) the opportunity to be the birthplace for many population, such as: Armenians, Turks, Kurds, Assyrians and some other more. Of course, the religious diversity is also a characteristic of the country: Christians, Muslims, Druze, Alawite Shias or Arab Sunnis are sharing the territory.

Which is the main cause of conflict in the area? The response is simple: behind any political reasons pretended by the elites or economical reasons claimed by the whole world but denied by the US, there is religion. We are not going to enter into details regarding each and every Islamic branch (Sunnites, Shiites, extremists, fanatics, or simply opponents of something) but we want to emphasize the fact that nowadays we are made to believe that a new world war can break out because of some civil wars, ethnic and religious misunderstandings; and that a quick intervention of external military powers will finally (God knows when) be able to re-establish peace in the area. But the interests are hidden behind clichés like “world peace” or “fight against terrorism”.

From ancient times, Syria has both Christian and Islamic history. Under the Islamic rulers, starting in the 7th century, the country passed through totalitarian political regimes, revolutions, oppressions, Crusades (Christian missions due to liberate the Holy Lands) and massacres. Later on, in the 16th century it was invaded by the Ottoman Empire and incorporated into it, period that brought peace because of system adopted by the ottoman administration. However, a peaceful coexistence between so various nations and religions is hard to be maintained, given the concept of Holly War (Jihad) that is misunderstood and misinterpreted by extremist groups, and other practices derived from the Islamic teachings of Koran. After World War I Syria was put under a French mandate, which lead to new conflicts between Sultan al-Atrash and French administration. Since its independence in 1936 Syria always tried to keep close the local allies, struggling to face internal conflicts.

 Why is the West involved in all these ethnic and religious conflicts? It has always been like that, because in this world there are hidden interests, strategic views, unknown distribution of the natural resources of the planet, between the so called powerful countries, and hidden purposes of solving as old as mankind conflicts. After World War 2, Arab countries become more and more interesting for the Western powers, such as US and UK. However, Syria kept close some powerful traditional allies like Russia, Venezuela, China and Iran, which have supported the Syrian government during the civil war.

 The fact that the US, closely sustained by the UK and France, are trying these days to bring peace by making war in the area is a nonsense. The Jihad is defined in the Koran as being both internal and external struggle of the Muslim to be in peace with God, to preach God’s word and Muhammad’s teachings. The so called Terrorism, against which US and its allies are fighting, is not a product of the Islamic religion, but their own propaganda product behind which they cover untold purposes of dominating the world. How could the US dominate the world is they did not dominate world’s natural resources…?

 In other words, Syria is just a new victim of the US struggle to dominate the world, economically speaking, whose internal, older than the US history conflicts are not going to be resolved by a quick or slow intervention of the Western- bringing- peace countries.

The post Political, Religious and Economical Problems Invade Syria appeared first on investazor.com.

Source: Brian Sylvester of The Metals Report (8/27/13)

http://www.theaureport.com/pub/na/anthony-mariano-calling-next-generation-ree-investors

If you thought you had rare earth element mining all figured out, think again. Dr. Anthony Mariano and his son, Anthony Jr., work as geological consultants to many rare earth companies, and say even they have more to learn. But if you’re looking for a sector that will nurture your inner nerd, rare earth elements may be the play for you. In this interview with The Metals Report, geek out with the Marianos as they talk rare earths and igneous, metamorphic and sedimentary rocks.

The Metals Report: Without heavy rare earth elements (REEs), can the worlds’ chemists and engineers develop metal alloys sufficient to meet the demands of today’s high-tech devices? If not, why not?

Anthony Mariano: My son and I are neither chemists nor engineers—our expertise lies in the area of geology and mineralogy of REE deposits, which are much more complicated than that of other commodities, such as base metals or precious metals.

However, we do believe REEs have unique properties that may be difficult to obtain from other elements.

TMR: How has the REE space changed for investors?

AM: The buzz of the high-demand years was a result of political or economical implications surrounding REEs, which were largely controlled by China. Investors then became interested in REEs. Now the drop in REE prices has changed the game. At this point, investors are not getting as involved, so companies that were attempting to explore potential deposits can’t. You need a budget for that. But a lot of our technology requires the use of REEs. The demand is going to be there. There’s been a period of quiescence because people have been acquiring REEs from stockpiles, but when those stockpiles are diminished, REE demand is going to pick up again.

TMR: Tony Jr., anything to add at this point?

Tony Mariano Jr.: I am certainly not a market analyst, but we have seen ups and downs in the REE market, as with any commodity. I suspect investors may have also realized that the development of REE deposits often happens at a slower pace than other commodities. The beneficiation of REEs can be very complex. REEs occur in many varied mineral hosts. Complex rock textures, complex mineralogy and mineral chemistry, and varied lanthanide distribution in the REE minerals all contribute to complexities in physical concentration and chemical processing. Many companies are developing innovative techniques to concentrate and process REEs. This takes time and can slow progress toward taking these commodities to the marketplace. Investors may be developing a better awareness of these complexities.

TMR: Apart from money, what’s the single biggest hurdle to the development of HREE deposits outside of China?

AM: First and foremost, miners have to understand the type of igneous, metamorphic or sedimentary rock they’re dealing with in order to determine if the geology and mineralogy are amenable to economic processing. Some deposits may not even occur within rocks, but soils, sands or river placers. The mineralogy will decide whether you have something with potential. On top of that, miners have to pay attention to permitting, environmental restrictions, the cost of energy and the cost of reagents.

TMR: How would you rank the various mineral sources for REEs, like bastnaesite?

AM: Bastnaesite has historically been a source of light lanthanides or light rare earth elements (LREEs), and it will probably continue to be the best source for LREEs. HREEs and yittrium can be obtained from other REE deposits in North America, such as Kipawa, Quebec; Pajarito, New Mexico; Mineville, New York; and Bokan Mountain, Alaska. Some will be very costly. These are not bastnäsite deposits but contain various HREE minerals. No development has been conducted on Pajarito or Mineville, whereasMatamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) has conducted a considerable amount of exploration work at Kipawa, as has Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) at Bokan Mountain.

TMR: And monazite?

AM: Monazite could be an even more important source than bastnaesite for LREEs. It could also be a low source for HREEs and yittrium if it’s mined on a large level. It occurs in many places in the world, but there is a problem associated with it—the presence of thorium. From the ’50s to the early ’80s, there was a lot of environmental leniency, and you could transport monazite in ships even though it was radioactive. That’s no longer the case. Much of it was brought to La Rochelle in France, and they ended up with a large accumulation of radioactive thorium. They finally decided they could no longer pursue this direction and switched from monazite to bastnaesite. Monazite is an LREE phosphate. It runs around 70% rare earth oxide (REO), whereas bastnaesite runs at around 75% REO.

TMR: What about fergusonite?

AM: A beautiful and relatively rare mineral. If you have a garden or a plant on your fire escape and get your fingernails dirty and analyze what’s under them, you may run into fergusonite. You may find fergusonite in many places using the current advanced technology. Although fergusonite occurrences are being investigated in a few areas in the world, we’ve never established a deposit that could provide a sustained source to the marketplace. Fergusonite is an oxide mineral rich in yittrium, HREEs and niobium.

TMJ: Another mineral source worth mentioning is xenotime. Xenotime is an yttrium, HREE phosphate, rich in HREEs. The techniques for chemical processing to extract the yttrium and HREEs have already been established. The problem is finding a deposit with enough xenotime to be economic. There are a few potential xenotime deposits being evaluated now outside of North America.

In addition, eudialyte is a silicate mineral and has not traditionally been a resource for providing HREEs to the marketplace. In the past, there were problems in the chemical processing to extract the REEs, but several companies claim to have resolved these issues. In North America, eudialyte is known to exist at the Kipawa, Quebec deposit, at Pajarito Mountain, New Mexico, at the Red Wine deposit in Labrador and at Dora Bay, Alaska.

There are many other potential REE mineral sources, but for the HREEs, the minerals we have mentioned are those that are being most actively pursued.

TMR: If you were an investor looking at companies with various types of mineral sources, what would be your top names?

AM: The best source for a sustained quantity of HREEs is Matamec Exploration Inc.’s HREE mineral-bearing deposit in Kipawa, Quebec. And the best bastnaesite deposit in the world outside of China isMolycorp Inc.’s (MCP:NYSE) Mountain Pass facility, which is a tremendous source of LREEs, although problems may exist there around permitting, environmental restrictions and energy and reagents costs.

TMR: Matamec is about to come out with a feasibility study. Would your mineralogy studies on the Kipawa deposit be included in that study?

AM: I imagine much of it may be based on that. I can speak for the REE industry when I say that we are anxiously awaiting the results of this study, which will be released September 4. This deposit is the best source for the heavy lanthanides and is one for which we’re able to obtain the quickest results.

TMR: Can Matamec make money just making a concentrate and not creating oxides?

AM: That’s something it has to figure out. I’m not an insider on Matamec, though I did commence the first REE exploration in Kipawa, Quebec, in 1985.

TMR: Tony Jr., can you comment further on Kipawa project economics?

TMJ: I am not knowledgeable on the Kipawa project economics but I agree with my father that geologically, the Kipawa deposit is very impressive. The textural properties of the Kipawa rocks and the abundance of several HREE minerals make Kipawa uniquely attractive.

TMR: If there were a crisis tomorrow―if, for example, China completely eliminated REE exports, what projects could reach production quickly?

AM: North America would need a domestic source. Although deposits outside of North America could be suppliers, that could be a problem in that a ship carrying critical source concentrate across the ocean may not make it to North American shores. But if we’re in critical need, economics are no longer as important. If you need it, you pay for it. We’ve got sources in the United States, and we’ve got sources in Canada. To draw a historical parallel, during the beginning of World War II, the U.S. desperately needed quartz, which was used in military submarines. North America was getting all of its quartz crystals from Brazil. Brazil had always transported quartz crystals to the U.S. by ship, until U-boats began to bombard the ships. So the U.S. government supported Bell Labs in developing an immediate technique to synthesize high-purity, optical-quality quartz. That became the basis of all the quartz that’s used nowadays.

TMR: Tony Jr., to expand on this scenario, which companies other than Matamec are currently furthest along in developing North American REE projects?

TMJ: The companies furthest along in developing North American REE projects are clearly led by Molycorp. Molycorp holds an existing REE mine in Mountain Pass, CA and, as I understand it, is currently working on process developments and permitting to move toward production. Also, Rare Element Resources Ltd. (RES:TSX; REE:NYSE.MKT) is well on its way toward developing its Bear Lodge, Wyoming deposit. But, these projects are chiefly dominated by the LREEs. For HREE’s, other than Matamec, Ucore is probably the furthest along in developing its Bokan Mountain, Alaska deposit.

TMR: What do you make of Ucore Rare Metals Inc.’s Bokan Mountain project?

AM: It’s made up of very interesting minerals. Many are fine grain and complex, made up of several different minerals that cannot be concentrated independently; a multi-mineral concentrate must be treated chemically in order to process the multi-mineral concentrate. The chemical treatment and the costs involved at the final stages of chemical processing are important factors.

TMR: Does Ucore’s relationship with the Department of Defense give it a leg up?

AM: It should, because the project is in the U.S. There are some very interesting heavy lanthanide minerals at that site. They’re fine grain, inextricably associated with quartz and other gang material that has to be removed. Crushing costs will be expensive, and it will be difficult to come up with an independent mineral concentrate. Ucore could probably do a good job by chemically processing a multimineral concentrate. And Bokan Mountain’s logistics are excellent. The deposit is less than a kilometer uphill from the shores. You could fill up a ship with concentrate with ease.

TMR: Some analysts estimate that, at current rates of consumption, China’s supply of HREEs could evaporate within 15 years. Does that seem realistic to you?

AM: It’s hard to tell. China has a tremendous source in the Bayan Obo mining district. It also has a good source of LREEs in Mianning, Sichuan. I did a detailed field and laboratory study there in 1994, so I’m very familiar with this bastnaesite deposit. I can tell you a lot about the nature of the South China clays in the laboratory but not about how long they’re going to last. Are they going to be allowed to mine South China clays and put up with the problems that exist? Will any other continent be allowed to process South China clay-type deposits without affecting the environment and while keeping the prices down?

TMR: Is permitting strictly an environmental issue?

AM: No, not strictly. For example, there are some very interesting monazite deposits in the United States, but they’re situated in places where people have nice homes, so exploration and development are out of the question. What if you found a beautiful deposit right in New York City? Forget about it. But it’s true that some very interesting deposits in the United States and Canada are in conservation areas and national parks. In those cases, permitting hurdles exist for environmental and other restriction reasons.

TMR: What can you tell investors based on your experience in this space?

AM: Investors need to get information from people who are familiar with the nature of REE mineralization that has fed the marketplace. Early in the game, I was told that if I wanted to evaluate a deposit on a world level, I needed to get lots of experience in deposits that actually feed the marketplace. I did that, and it made a huge difference in my ability to make evaluations. Academics may have written excellent papers outlining a particular deposit’s geology, but the challenges miners face in approaching exploration or, later down the road, processing—are critical factors academic work doesn’t necessarily address.

TMR: Do you see it as part of your job to explain REE mineralization for non-experts?

AM: We try to do that to the extent that we can. It’s still very complicated even among experts. It’s sometimes difficult to simplify economic geology even for academics who specialize in mineralogy, petrology and geochemistry. It’s not enough to run out to Mountain Pass and come back and say, “We went to Mountain Pass. We understand everything.” Good luck. I’ve been working extensively at Mountain Pass since 1965, and I still have a lot to learn.

Anthony N. (Tony) Mariano, PhD, is a geological consultant on rare earths and other rare metals. For decades, he has been the go-to expert on the geology and mineralogy on rare earths, niobium-tantalum and other rare metals. Companies around the world depend on his professional opinions on the potential economic viability of deposits based on mineralogical examination, lab work and field visits.

Tony Mariano Jr. is a geological consultant on rare earths and other rare metals. He also spent several years as an environmental geologist/consultant. He currently works exclusively in conjunction with his father, Anthony N. (Tony) Mariano, consulting on rare earth mineral exploration and evaluation worldwide.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an employee or as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Metals Report: Matamec Explorations Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Anthony Mariano: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is am paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Tony Mariano Jr.: I or my family own shares of the following companies mentioned in this interview: Matamec Explorations Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By www.CentralBankNews.info     Hungary’s central bank, which earlier today trimmed its base rate by 20 basis points, said the rate of inflation and growth gave it “scope to ease monetary conditions further” but a slower pace of easing is warranted given the significant reduction in rates so far and financial market’s perception of risks associated with the country’s economy.
    The National Bank of Hungary, which earlier today cut its rate for the 13th time in a row to 3.80 percent, said there were no significant inflationary pressures and the risks to inflation should remain moderate in the medium term, which will help anchor inflation expectations.
    “In the current environment, monetary conditions can contribute to meeting the inflation target over the medium term by maintaining accommodative monetary conditions,” the bank said.
    The central bank’s reference to a slower pace of future monetary easing signals that the bank is getting closer to a more neutral policy stance. Last month the bank said it would change the pace or extent of future easing, the first major shift since the bank embarked on its easing cycle in August last year. Since then, it has cut rates by 320 basis points, including 195 points this year alone.
    The central bank said it still expects Hungary’s economy to recover gradually this year but the level of output remains below its potential and unemployment exceeds it long-term levels.

    “The council expects weak demand conditions to persist, which ensures that inflationary pressures in the economy remain muted in the medium term,” the bank said.
    Hungary’s inflation rate eased to 1.8 percent in July from 1.9 percent in June, reflecting the strong downward pressure of weak domestic demand on prices, the bank said. The central bank targets inflation of 3.0 percent.
    Hungary’s Gross Domestic Product expanded by 0.1 percent in the second quarter from the first for annual growth of 0.5 percent, up from a contraction in the previous five quarters.
    But the central bank said it expects an improvement in domestic demand to be slow and gradual due to ongoing deleveraging and cautious behaviour by households while activity in external demand is showing signs of a revival despite the slowdown in growth in emerging regions.
    Like other emerging markets, Hungary has been hit by an outflow of capital and currency depreciation and after a temporary stabilisation, global financial markets have become volatile again.
    “Perceptions of the risks associated with the Hungarian economy have increased slightly in the uncertain global financial environment,” the bank said, adding the volatile sentiment continues to pose a risk and this calls for a cautious approach in monetary policy.
    After weakening in early 2011, Hunary’s forint depreciated in late 2011 and the rose during most of 2012. But in the second half of last year through late March this year, the forint weakened. It then strengthened until market sentiment changed in May when investors started to shift their portfolios ahead of stronger growth in advanced economies and a wind down of asset purchases by the U.S. Federal Reserve.
    Since the start of the year, the forint has depreciated by 3.4 percent against the euro, trading at 301.6 to the euro today.

    www.CentralBankNews.info