Month: December 2013

Source: George S. Mack of The Life Sciences Report (12/17/13)

http://www.thelifesciencesreport.com/pub/na/the-new-year-heralds-a-transition-in-stem-cell-development-jason-kolbert

The cell therapy industry has been mired in phase 1 and 2 studies for what seems like a lifetime. But 2014 is shaping up to be a banner year for share-moving phase 2 data and pivotal phase 3 activity. Jason Kolbert, managing director for biotechnology research at Maxim Group, leverages his deep understanding of the stem cell space to uncover viable therapies that double as excellent business models. In this interview with The Life Sciences Report, Kolbert guides investors to regenerative medicine companies that have evolved beyond great science projects into businesses capable of generating huge margins and disrupting the paradigm of medical practice.

The Life Sciences Report: Let me start you off with news from Japan. You’ve lived and worked there; you have special perspective on Japanese culture, healthcare and the country’s regulatory environment because you were with a big pharma there. The Japanese Diet (parliament) passed new regenerative medicine legislation on Nov. 20. The Japanese Pharmaceutical Affairs Law is now the Pharmaceuticals and Medical Devices Act, creating a Regenerative Medicine Products division. Now, the primary endpoint for proposed cell therapies in phase 2 will be safety, not efficacy. These programs have been, in essence, put on a fast track. What is your take on this?

Jason Kolbert: Japan is probably the fastest aging society in the world, and the Japanese government understands the huge cost of chronic disease in a nation with an excellent healthcare system. It’s a gigantic burden. The government has also scrutinized where economic value lies in that healthcare system, and has taken a look at new therapeutic modalities. Contrary to what some might think, new drugs lower the cost of healthcare. If a viable therapy can restore your health, so you can return home or to work, that’s a huge value. On the other hand, if there is no viable treatment, you know you will be dead in six months to five years, and all that can be done is alleviate your suffering, your viability as a productive member of society is dramatically reduced. Japan is dealing with this problem ahead of the rest of the world, and an outgrowth of this exercise has been to take a look at where the cost burdens in the society are.

TLSR: Jason, tie that in to regenerative medicine and loosening the regulatory environment.

JK: Japan has the highest incidence of stroke of any First World nation. It is probably is diet-related. A lot of salt and soy sauce is used in Japan today, which correlates to a lot of hypertension. These factors may tie in to the high incidence of stroke. But the incidence of cardiovascular disease is very low—although it’s rising with the westernization of the Japanese diet. There is a need for viable therapies for stroke beyond just palliative medicine.

If you have an ischemic stroke, you only have a few hours to receive tissue plasminogen activator (tPA), which can dissolve the clot and alleviate the blockage. But the reality is that because of the brief window, only 5% of stroke patients get tPA therapy. About 25% of patients will recover on their own. The balance have a poor outcome, and go on to have a very compromised quality of life. A high percentage of stroke patients are put into nursing homes. If they stay at home, a huge burden is placed on the family members who take care of them. The patient’s productivity in society is reduced.

When the Japanese government looks at cell therapy, and observes that a company like Athersys Inc. (ATHX:NASDAQ) has a phase 2 trial in ischemic stroke, you can bet that attracts its interest. The government has looked at the pragmatic side of cell therapy, and is saying, “If you can emphatically demonstrate safety and can show efficacy with a modest study—a bridging study done in Japanese patients—then we will essentially give you fast-track approval.”

Think of the new Japanese regulations as being similar to the breakthrough designation status that was recently created here in the U.S., but with an even faster accelerated pathway. Certainly, a company must have very clear safety data and a very strong scientific rationale for expected efficacy, and that must be proven in the Japanese patients. But if safety and efficacy can be shown in a relatively small number of patients, the Japanese government will allow a company to start commercializing its product with a combination of restraints that we would expect, like post-marketing surveillance.

I think the need for this legislation was borne out of economics: The Japanese government realized that this would be a method to attract products that can alleviate the cost burden of an aging population. The pathway might attract companies like Athersys, Pluristem Therapeutics Inc. (PSTI:NASDAQ) andMesoblast Ltd. (MSB:ASE; MBLTY:OTCPK) to Japan and, in fact, we know that Mesoblast and Athersys are rapidly moving to get more deeply involved in that country.

TLSR: Clearly, cell therapy for stroke falls into the category of need in an aging society. What else?

JK: Yes, stroke clearly falls into that category. So does cardiovascular disease. Mesoblast and Teva Pharmaceutical Industries Ltd. (TEVA:NASDAQ) are initiating a 1,700-patient phase 3 trial in chronic congestive heart failure (CHF) this month with Revascor (immunoselected, culture-expanded, nucleated, allogeneic adult mesenchymal precursor cells).

TLSR: Returning to Athersys, it has phase 2, 140-patient, double-blind trial ongoing for ischemic stroke, to demonstrate the anti-inflammatory action of its MultiStem (multipotent adult progenitor cells) product. The final data for this trial will be collected in or around June 2014. Then the company is probably faced with four more years of phase 3 studies under the U.S. Food and Drug Administration (FDA) before MultiStem can be marketed—that is, if it’s successful. With the data Athersys has accrued so far, and with the relationships it already has with regulators in Japan, is it possible to get conditional approval using data from the studies it’s already done in the U.S.?

JK: That’s a good question. The short answer is yes. The longer answer is, how good will the phase 2 data be? If the phase 2 data show a compelling result—and so far MultiStem has had zero safety signals—then what do the Japanese regulators have to lose?

What Japanese regulators are looking for is a small bridging study demonstrating that the results carry across in Japanese nationals. Too often there have been instances—more often in lines of traditional small molecule drugs—of variations in efficacy based on genotype, phenotype or race. The Japanese government is going to insist on a study that includes Japanese patients for that reason. Whether Athersys might be able to open up its phase 2 trial to include Japanese sites is a key question. I believe that if management could enroll a handful of Japanese patients, and they could be part of the current phase 2 trial, that could create an accelerated pathway to the marketplace. Based on phase 2 results that include Japanese nationals, which could be reported, let’s say, at the end of 2014, a product could potentially be commercialized in Japan in 2015.

TLSR: Jason, if a cell therapy is developed under the auspices of the Ministry of Health, Labor and Welfare in Japan, one could think of phase 2 studies as “late-stage,” considering that a product could possibly get conditional approval based on safety. Could this have an immediate effect on valuation, when companies start announcing their plans in Japan?

JK: I would like to believe that’s true. It may not be, however, as U.S. analysts and investors are still hesitant to factor in Japan because they just don’t understand the opportunity there. We all want to see well-controlled pivotal studies, with accepted endpoints and statistical significance, so we clearly know that these products actually work.

In other words, what the industry lacks right now is pivotal studies. I have referenced Mesoblast, which is going to begin the largest phase 3 pivotal program in cell therapy for heart failure that we have ever seen. The data from that program will be very telling. However, we have to make a decision on Athersys based on a phase 2 program with MultiStem in stroke and a phase 2 program that it is running with Pfizer Inc. (PFE:NYSE) in ulcerative colitis. NeoStem Inc. (NBS:NASDAQ) will have phase 2 results from its ST-elevated myocardial infarction (STEMI) U.S. trial with AMR-001 (autologous bone marrow-derived CD34+/CXCR4+ enriched cells). I very much believe the results of that trial will be positive—and that will be positive for Mesoblast and for Cytori Therapeutics Inc. (CYTX:NASDAQ), which is also in a chronic myocardial ischemia phase 2 trial. Cytori operates its own subsidiary in Japan, and probably has the largest presence of any cell therapy company in that country.

But I don’t think U.S. investors are willing to acknowledge the commercial viability of cell therapies and ascribe valuation based on phase 2 data. By the way, that is not a new trend. That’s been in place in the world of biotech for a long time, because we’ve had too many surprises. Too often good phase 2 data fails to translate into phase 3 results.

TLSR: So you don’t think approval in Japan based on phase 2 studies will elevate share prices, even with conditional approval available?

JK: The real valuation shift has to be data-driven. We have to look toward what clinical data we will have in six, 12 or 24 months. We know that six months from now, Mesoblast will be in multiple pivotal trials, in everything from spinal fusion and degenerative disk disease to CHF. We know that the company will be reporting phase 3 results in Crohn’s disease using Prochymal (adult human mesenchymal stem cells), which it acquired from Osiris Therapeutics Inc. (OSIR:NASDAQ). We know Mesoblast will report phase 2 data from its STEMI trial, which Teva has expanded and which is being run in Australia. Data drives valuation.

TLSR: What should investors be looking for in the way of milestones in the cell therapy industry over the next year?

JK: I believe, as an analyst, that the way you bring the most value is by identifying a paradigm shift, and I believe that cell therapy represents such a shift. I’ll give you some highlights.

We have just seen results in oncology from ImmunoCellular Therapeutics Ltd.’s (IMUC:OTCBB)phase 2 glioblastoma trial with its therapeutic vaccine ICT-107 (autologous dendritic cells pulsed with immunogenic peptides from tumor antigens). Those results were disappointing to investors, who were hoping, myself included, for a dramatic result. The result was incremental. ICT-107 showed a two- to three-month advantage over standard of care, with p-value in progression-free survival but not in overall survival. The trial was originally powered for a nine-month advantage. A phase 3 will be powered for two- to three-months’ advantage. ICT-107 looks like an approvable drug, and we are excited for patients, but we recognize there are very rarely shortcuts in drug development.

In exactly the same light, we are watching for results from Agenus Inc.’s (AGEN:NASDAQ) andNorthwest Biotherapeutics Inc.’s (NWBO:OTC) respective glioblastoma trials. These companies represent second-generation and even third-generation therapies, using cells and cell-based medicine to treat cancer. The platforms and products are head and shoulders beyond where Dendreon Corp.’s (DNDN:NASDAQ) Provenge (sipuleucel-T; autologous cellular immunotherapy) is today. On the immunology side, Mesoblast is clearly making a huge bet with the acquisition of Prochymal. The company is saying Prochymal works, and that if it runs the proper clinical trials, Prochymal is an approvable product in the U.S. for graft-versus-host disease (GvHD). Athersys has been working on GvHD for years and is close to a phase 2/3 trial for prevention.

What I’m saying is that we are beginning to see a real race in the marketplace around multiple indications. What makes it difficult for investors is just how big some of these indications are, such as CHF, diabetes or degenerative disc disease. The dry age-related macular degeneration market is 10 times the size of the wet macular degeneration market, and we seeStemCells Inc. (STEM:NASDAQ) and Advanced Cell Technology Inc. (ACTC:OTCBB) in a race in the dry macular degeneration space. Remember, it was macular degeneration that put Regeneron Pharmaceuticals Inc. (REGN:NASDAQ) back on the map.

I think a major paradigm shift is going to be led by those companies that have good balance sheets, although there are very few of those currently in this space. It will also be led by companies that have partners with viable business models. Pluristem has a great partner in United Therapeutics Corp. (UTHR:NASDAQ). Mesoblast has Teva. Athersys has Pfizer. And in all cases, the business models of cells in a bottle, like pills in a bottle, are going to look attractive to big pharma.

TLSR: You’ve spoken to me previously about—and have written extensively in your research about—the differences in the business models of cell therapy companies. Generally, the allogeneic (cells or tissue from a donor of the same species), off-the-shelf or pills-in-a-bottle business models seem to make the most sense. The autologous (patient donates his/her own cells or tissues) models look to be much less profitable. Could you touch on this, please?

JK: The autologous model is not attractive, generally. If you’re going to be in the autologous setting, you need to have dramatic efficacy to justify the added complexity and costs. There are exceptions, such as the Cytori process on the regenerative side, where we have an autologous model with an allogeneic-like cost structure. We believe that to be the case for the dendritic approaches in cancer as well, such as ImmunoCellular’s ICT-107 and the Northwest Biotherapeutics’ approach, as well as Agenus’ heat shock protein, which is produced from the patient’s own tumor tissue. The latter three are in development for glioblastoma.

We do not believe that’s the case for all autologous companies. While I absolutely believe that NeoStem andBaxter International Inc.’s (BAX:NYSE) autologous cell therapy product, NeoStem’s AMR-001, is viable and will work, I don’t know that the business model is viable. The cells have to be harvested from the patient’s own bone marrow, processed, enriched and readministered to the patient within 24–72 hours. That’s a lot to put somebody through who’s just had a heart attack, versus administering a therapy that’s off-the-shelf, readily available. In the case of Dendreon’s Provenge, you have to do an apheresis (draw blood and then extract cells from the blood) for the patient every time he’s treated. That’s an arduous, difficult process, and an inconvenience for the patient as well. However, the technologies of ImmunoCellular and Northwest Biotherapeutics, even though they are autologous, allow cells to be cryopreserved, and therefore multiple doses can be made from a single apheresis.

TLSR: You like the autologous model on the oncology side because of the medical need and improving economics. Dendreon’s Provenge for prostate cancer is autologous, and you’re not that impressed with it. Is it more than just the patient’s convenience factor and cost?

JK: There are several reasons the autologous model is inefficient. From a business perspective you have to consider the cost of goods sold (COGS), which affects the income statement dramatically every quarter. Whenever you use an autologous process, costs tend to be 10–100 times higher than for an allogeneic process. In the case of Dendreon’s Provenge, we saw a true milestone in medicine. It’s a very successful product, running at between $300–400 million/year ($300–400M/year) in revenues. What’s wrong with the company then? Well, it has $600M in debt and no positive free cash flow; it’s spending a fortune promoting its product and the COGS is very high. Dendreon is emblematic of why I don’t like autologous products.

Autologous is also limited because it involves a lot of discomfort for patients, many of whom want to be treated, leave and not come back. Let me give you an example in cardiovascular medicine. A patient has a heart attack and goes to the emergency room. That patient may be revascularized with a stent placement where the blockage is, and that’s it. On the other hand, at the moment that the interventional cardiologist places the stent, he or she could screw a syringe onto the end of a catheter and administer the regenerative therapy at the same time the stent is placed. There is phenomenal value in this model, which could only be done with allogeneic cells. If that injection of allogeneic, off-the-shelf cells then prevents the progression to CHF, you’ve done a great service to society and, of course, to that patient. That’s why, in the Western world, it makes so much sense for cell therapy companies to be pursuing cardiovascular disease. That’s also why it makes so much sense for Athersys to be looking at stroke in Japan—because that’s the killer in Japan.

I’m not saying that autologous therapy as a business model is dead. If you have a glioblastoma patient with an expected survival time of 19 months, and a cell therapy can give that patient 24, 30 or 36 months of survival, you have a valuable product. If you can extend survival with one manufacturing process that yields 15 cryopreserved doses, which are used to vaccinate the patient every other month—and the therapy has no side effects—well, that’s a huge win for those patients.

Glioblastoma is an unmet medical need. That’s why I like ImmunoCellular, Northwest Biotherapeutics and Agenus. In the case of NeoStem, with its AMR-001, the problem is not that its therapy wouldn’t work, and not that it’s autologous, but that it puts the patient through additional procedures after a heart attack. But if NeoStem’s product works—and I believe it will—it suggests that Mesoblast’s and Athersys’ products work as well, and they are both allogeneic. They would be better business models.

TLSR: I see the value of the allogeneic model. Please compare its margins, versus autologous.

JK: If I’ve just had a massive heart attack, and I can get cells in a bottle delivered to me immediately—in one visit—that beats having to come back for a bone marrow aspirate, then having to come in two days later, after the cells are processed, for another procedure. If the COGS of the Mesoblast allogeneic product is $1,000/dose and the COGS of the NeoStem autologous product is $15,000/dose, and if both are charging $25,000/dose for their respective cells, then Mesoblast is pushing biotechlike margins of 95%, while NeoStem is at a 40% margin. Right out of the gate, if both therapies are equivalent on patient convenience and on COGS, allogeneic wins.

TLSR: Could you comment on DNA vaccines? These may offer greater advantages for some patients and investors.

JK: I’m glad you asked that question. There’s a connection. These DNA vaccines or plasmids—three-dimensional DNA circles with selected genes sequences engineered into them—are the ultimate cancer vaccine therapies. What’s Dendreon’s goal with Provenge? It’s to elicit a T-cell response that seeks and destroys the tumor cells. What are ImmunoCellular and Northwest doing? They are trying to create a T-cell response that will destroy the cancer. What is Agenus doing? It’s using heat shock proteins to train the immune system to fight the cancer. All of that makes perfect sense. But, what if you could elicit the desired immune response without having to involve the patient with a harvest of tissues or cells at all?

Inovio Pharmaceuticals Inc. (INO:NYSE.MKT) can manufacture a plasmid vaccine in the lab for literally a cost of pennies. This is devastating for the autologous cell model. This plasmid, combined with Inovio’s proprietary electroporation technology, allows the plasmid to pass through cell membranes and into cells, which then synthesize the antigens that create a T-cell response. With this technology, it may be possible to vaccinate people against cancer using a laboratory-engineered vector that costs pennies to produce and does not include expensive, time-consuming harvests of cells.

Inovio is currently working in cervical neoplasia caused by the human papillomavirus (HPV). When a woman has a Pap smear and it comes back from the pathology lab as cervical intraepithelial neoplasia grade II or III (CIN II/III), it’s showing that she is progressing toward cancer. Inovio’s idea is to vaccinate that patient with its engineered plasmid VGX-3100 (targeting E6 and E7 proteins of HPV subtypes 16 and 18) to elicit a T-cell response that would prevent that woman from progressing to full-blown cervical cancer. The primary endpoint of the ongoing phase 2 trial is for the CIN II/III lesion to regress to CIN 1 after nine months. That would be a huge value, because right now all we do is wait to see if the dysplasia progresses to cancer.

But what if you never let it get that far? It sounds futuristic, but we’re there now, and the reason we’re there is this little company, Inovio. By the way, Roche Holding AG (RHHBY:OTCQX) just signed a deal earning Inovio $10M upfront and $412M in potential milestones to develop plasmids that will target prostate cancer, as well as hepatitis B. This is an exciting time for Inovio.

TLSR: Jason, in mid-2014 we’re expecting to get a readout on Inovio’s phase 2 trial testing its VGX-3100 vaccine in 148 patients with cervical intraepithelial neoplasia. What will this event mean for investors?

JK: If those data are compelling, then investors will have to start valuing Inovio not just on the fact that Roche, a major global pharma, seems to be validating its science, but on the real commercial opportunity for its cervical cancer vaccine. The answer to your question is that it’s a very important event. Based on good data in summer 2014, there could be a bump up in valuation. In addition, I think the Roche partnership is probably the first of several to come, because what this little company has is a blueprint of how to manufacture antigens using plasmids. When you think about the number of opportunities that exist for a company like Inovio, it’s almost limitless.

TLSR: Preclinical development at Inovio is just a matter of engineering desired genes into plasmids to synthesize the antigens that will elicit the T-cell response you want. It’s a compact model compared to anything else we’ve seen, isn’t it?

JK: That’s all true. . .but remember, the company doesn’t “just engineer the plasmid.” You and I are taking a lifetime of work by Dr. Joseph Kim, the cofounder and CEO of Inovio, and boiling it down into a nutshell. Sure, if I gave you the recipe for the plasmid, you could go into the lab and make it. But Inovio has the recipe. It knows how to come up with the DNA sequence that will turn on the machinery of a cell to produce a specific antigen or antigens. The delivery platform, electroporation, is also a critical step for this therapy. OncoSec Medical Inc. (ONCS:OTCBB), which uses technology that was essentially spun out of Inovio’s, is reporting very strong data in melanoma. With the onset of checkpoint inhibitors and DNA vaccines, we may see new levels of efficacy and a complete paradigm shift in the way melanoma is treated.

TLSR: Do you have any summary thoughts?

JK: I think 2014 will be the year in which investors begin to focus on data and business models in the cell therapy space. We want to see great data from Athersys in stroke, from Athersys and Pfizer in ulcerative colitis and from Mesoblast with Prochymal in Crohn’s disease. We’d love to see Mesoblast launch a U.S. clinical trial with Prochymal in GvHD, where an approved therapy is so desperately needed. We want to see Teva initiate the 1,700-person clinical trial in CHF with Mesoblast’s Revascor. We want to see positive results from the NeoStem phase 2 PRESERVE trial for STEMI. If we get great data from Agenus’ heat shock protein vaccine, and great results from Northwest’s pivotal trial in GBM, the year will represent a milestone on the oncology side for cell therapy.

TLSR: Thank you very much.

JK: Great speaking with you, as always.

Jason Kolbert has worked extensively in the healthcare sector as product manager for a leading pharmaceutical company, as a fund manager and as an equity analyst. Prior to joining Maxim Group, where he is managing director, Kolbert spent seven years at Susquehanna International Group, where he managed a healthcare fund and founded SIG’s biotechnology team. Previously, Kolbert served as the healthcare strategist for Salomon Smith Barney. He is often quoted in the media and is a sought-out expert in the biotechnology field. Prior to beginning his Wall Street career, Kolbert served as a product manager for Schering-Plough in Osaka, Japan. He received a bachelor’s degree in chemistry from State University of New York, New Paltz, and a master’s degree in business administration from the University of New Haven.

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DISCLOSURE:

1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: Inovio Pharmaceuticals Inc.

2) The following companies mentioned in the interview are sponsors of The Life Sciences Report: Inovio Pharmaceuticals Inc., Cytori Therapeutics Inc., NeoStem Inc., Athersys Inc., Mesoblast Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Jason Kolbert: I or my family own shares of the following companies mentioned in this interview: None. 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: Mesoblast Ltd., ImmunoCellular Therapeutics Inc., Inovio Pharmaceuticals Inc., NeoStem Inc., Athersys Inc. 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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EURUSD continues its sideways movement in a narrow range between 1.3709 and 1.3810. Support is at the lower line of the price channel on 4-hour chart, as long as the channel support holds, the price action in the range could be treated as consolidation of the uptrend from 1.3296 (Nov 7 low), and one more rise to test 1.3832 (Oct 25 high) resistance is still possible. On the downside, a clear break below the channel support will indicate that uptrend from 1.3296 had completed at 1.3810 already, then the following downward movement could bring price back to 1.3400 zone.

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By CentralBankNews.info
    Albania’s central bank cut its benchmark repurchase rate by another 25 basis points to 3.0 percent along with its reverse repurchase rate that was also cut by 25 points to 3.0 percent.
    The Bank of Albania, which did not issue any statement in connection with the decision by the bank’s supervisory council on Dec. 16, has now cut rates by 100 basis points this year.
    Albania’s inflation rate fell to 1.0 percent in November from 1.7 percent in both October and September while annual growth in the country’s Gross Domestic Product fell to 1.1 percent in the second quarter from 1.8 percent in the first quarter.

    www.CentralBankNews.info

Source: Brian Sylvester of The Mining Report (12/17/13)

http://www.theaureport.com/pub/na/steve-yuzpe-and-maria-smirnova-why-sprott-resource-corp-sold-76m-in-bullion

Private equity firm Sprott Resource Corp. recently sold off nearly $76 million in gold bullion, but don’t count the firm out of precious metals yet. What is the firm shopping for with its new-found cash? In this interview with The Mining Report, new Sprott Resource Corp. President and CEO Steve Yuzpe discusses where the company will focus its capital, and Sprott Asset Management Associate Portfolio Manager Maria Smirnova shares her outlook for resource markets.

The Mining Report: Steve, first off, congratulations on your recent appointment as president and CEO of Sprott Resource Corp. In the last quarter, it sold roughly $76 million ($76M) in gold bullion. The company said about two-thirds of the proceeds will be used to pay down debt, while the other $24M would be used to pursue “new investment opportunities.” What type of assets is Sprott Resource Corp. seeking?

Steve Yuzpe: The main driver and the rationale in selling our remaining gold holdings was to improve our financial flexibility. Recent volatility in the gold price was making it challenging for us to maintain a capital plan that allowed us to support our existing portfolio companies and also make new investments. Now, we have about $24M in net cash, which we’ll use to pursue investments and support our investees. We see precious metals, energy and agriculture as the key themes at Sprott Resource Corp. that we want to pursue.

TMR: What will those investments look like and what will they have in common?

SY: It doesn’t matter whether its energy, agriculture or precious metals, we look to partner with proven and successful management teams. We want to operate in geopolitically safe and mining-friendly jurisdictions. We want to work on projects that will have something unique about the actual deposit or geological resource, whether it’s world-class scale or a low-cost producer and of course, we need to acquire the company at the right valuation.

TMR: Are energy equities perhaps borrowing the spotlight that once belonged to gold and silver at Sprott?

SY: Not necessarily. Today we have a large concentration in the energy sector and no exposure to the precious metals sector. That isn’t the way we expect to be positioned over the long term. It just happens to be where we are right now. I’d like to see Sprott Resource Corp. with a more balanced portfolio in the three sectors.

TMR: Are you bullish on precious metals in the long term?

SY: Yes.

TMR: One of Sprott Resource Corp.’s four core beliefs is that peak oil is real and that we’re on the downward side of that equation. Is that still the case despite all the success that fracking has had in the U.S.?

SY: Peak oil is still real because there’s a finite amount of everything. The success of fracking unconventional deposits and finding new hydrocarbon deposits in places that were unimaginable five years ago, like off the coast of Brazil underneath a mile of water and half a mile of salt, is certainly amazing. Peak oil will be, in all likelihood, pushed out on the timeline, but the era of cheap energy is receding. That’s changing the economics of the energy sector. It makes it all the more challenging to navigate as an asset class. But where there are challenges, there are investment opportunities with the potential to deliver good returns.

TMR: What percentage of Sprott Resource Corp.’s assets is in the energy space?

SY: If I include actual exploration and production companies (E&Ps), as well as the energy services sector, it’s about 60%. Our investments in the energy sector are primarily in light and heavy oil and natural gas, uranium and the services sector. We buy when commodities are cheap and we see opportunities over the next few years, meaning the commodity is likely to move back to its mean price or beyond and has the potential to create good returns. Those areas are natural gas, metallurgical coal and uranium. Those are the places where we see a lot of value right now.

TMR: Sprott has a 19.9% ownership stake in Virginia Energy Resources Inc. (VUI:TSX.V; VEGYF:OTCQX), which is developing the Coles Hills project in southern Virginia. But there’s a moratorium on uranium mining there. Why would you take such a large stake in a junior with that much risk?

SY: Due to the moratorium, we were able to buy a stake in a large uranium deposit at a huge discount to the project’s estimated net asset value (NAV). We believe that the U.S. is going to have to, at some point, develop domestic supplies of uranium. The U.S. already imports 90% of its uranium today and 20% of its energy is derived from nuclear power. Something’s got to give there. Buying into a deposit at a huge discount gives us the opportunity to make an outsized return as it goes through the stages of development. Obviously, if the mining law doesn’t change, we won’t make any money on the investment. But, if the mining law does change, I believe that Virginia Energy will get rerated. We can take a very long-term view in the development of these assets. The risk/reward was absolutely in our favor.

TMR: The Coles Hill project has 133 million pound (133 Mlb) Indicated resource. That makes it among the largest undeveloped uranium resources in the U.S. If that law changes, is it a takeover target?

SY: It’s more likely to be a takeover target if it can take the next step, which is getting permitted.

TMR: Should investors expect a dramatically different market environment for resource equities in the coming year?

SY: Our outlook is that it’s going to continue to be a tough market. We believe that will create opportunities for us to deploy capital into undervalued assets that will benefit when the various sectors recover.

TMR: When you became president of Sprott Resource Corp., Rick Rule became a managing director. What does someone like Rule add to the firm’s perspective on mining and resource equities?

SY: Rick is a gifted and brilliant investor who has seen hundreds, if not thousands, of transactions. He brings an enormous wealth of experience, not just in finding value, but in executing transactions. Rick is also plugged into the junior markets and deal flow, which will lead to better outcomes for our shareholders, junior resource companies and the Sprott group.

TMR: Is he involved in specific investments?

Maria Smirnova: Yes. Rick is very much involved. We interact on specific stocks on a regular basis. He’s very hands on.

TMR: Since the crash in 2008, Sprott Asset Management has participated in dozens of financings in junior precious metals companies. Some created shareholder value while others have fallen victim to the bear market. How has the investment strategy during this tumultuous market informed your investment strategy heading into 2014?

MS: In the mining sector specifically, we’ve become more focused on what we call “survivability.” We’re in a tough market environment. It’s tough for juniors to raise money. I specifically focus on companies that I think will survive the tough times.

In other words, we look at financial strength. We look at management teams and their ability to allocate capital. Have they cut costs? Have they rationalized production? Can they make the tough decisions to protect their shareholders? Our focus is on quality projects with higher grades and strong economics that will allow the company to succeed through this tough environment.

TMR: Do you expect another rise in all-in sustaining costs for gold producers?

MS: All the companies I look at are trying to reduce those costs. In the good times, people just looked at cash operating costs and didn’t pay much attention to the other costs that go on top of it, such as the sustaining development, exploration and so on. Now, because the gold price has come off, people have started focusing on these all-in sustaining costs. Yes, costs have risen in step with the gold price, but we’re hoping that going forward they will actually start to reduce as companies try to rationalize their cost structures, reduce exploration expenditures and ice unprofitable projects.

TMR: One of the other core beliefs at Sprott is that governments will continue to print money. Yet investors seem to dismiss the thesis that gold and silver will eventually rise given the proliferation of paper currencies. How do you respond to that?

SY: It’s hard for people to move beyond the current market dynamics and see the underlying structural weakness in global economies. At some point, the impacts of all this accommodative monetary policy, printing and quantitative easing (QE) are going to become evident through inflation. Once that happens, people will place their faith in gold and silver as stores of value and their value will rise. That’s why this is the right market to start making investments and for Sprott Resource Corp. to position our portfolio into undervalued asset classes so that when the markets change, be it one, three or five years, we’ll be positioned to take advantage of it.

TMR: Do you believe it will be closer to one or five years?

SY: My best guess would be in the middle. The price of gold and silver could start really moving up in three years. But I know that Maria will have a very different view on that.

MS: I actually agree. There’s been a lot of debating about QE and when or if the Federal Reserve will start tapering. We saw in the summer what happened at the mere mention of tapering—it sent markets into a tailspin.

We actually don’t believe that the Fed has a lot of room to taper. All this QE has not translated into expectations for higher inflation, but eventually, as this is worked through the system, it will happen. That’s when precious metals will benefit.

TMR: You’ve said before that you believe in investing in equities as a way to play a given commodity. What would your top-of-mind commodities be at this stage?

MS: We’re still bullish on precious metals—gold and silver—and we’re quite bullish on platinum and palladium.

TMR: Eric Sprott has said that some of the numbers being bandied about by gold prognosticators are flawed. He’s very bullish on gold and sees it going to above $2,000 per ounce ($2,000/oz). What’s your forecast for 2014?

MS: I don’t forecast specific prices. When I look at specific companies and forecast their earnings and cash flows, I use the spot price at the time. If today gold is at $1,230/oz, I will use that price for the next several years. That allows me to compare equities across the board on an equal footing without making assumptions on the gold price.

The case for gold remains one of fundamentals. Despite all the tapering and QE debates, certain areas of the world are still strong buyers. China has been an unbelievably strong buyer of the metal. India’s actually imposed import tariffs to try to reduce imports of gold, so a large portion of the demand has moved to silver, which does not carry the same import restrictions as gold.

TMR: Two examples of companies involved in the gold and silver space, respectively, are Unigold Inc. (UGD:TSX.V) and Silver Standard Resources Inc. (SSO:TSX; SSRI:NASDAQ). Can you comment on these stories?

MS: Of course. Unigold is an exploration story with a project in the Dominican Republic. The company has been active in the Dominican Republic for a decade now. It has just released a new resource estimate for part of its Neita concession, which came in at 2 million ounces (2 Moz) at 1.6 grams per ton. The market capitalization of the company is quite small at $15M, so it makes for an interesting exploration story.

Silver Standard Resources is focused on developing silver assets in the Americas. The company is currently operating a mine in Argentina with production north of 8 Moz per year. It also has a number of development projects in Mexico, Peru, Argentina and other countries. With over 1 billion ounces in resources, the company is trading at approximately $0.25 enterprise value per ounce in the ground.

TMR: What about platinum and palladium?

MS: Platinum and palladium is a two-prong story. Demand is being driven by their use in automobile catalytic converters. Countries like China and Europe are introducing progressively stronger environmental laws with higher emission standards that are prompting more use of the metals in cars. Supply, however, is being disrupted. South Africa is a big producer of platinum and palladium, but it is experiencing strikes and an inability to increase supply. The supply and demand picture in both platinum and palladium is quite strong. In fact, we project substantial market deficits in both metals for several years to come, which will be supportive of the metal prices.

TMR: You often deliver some compelling narratives on the commodity space. What trends to you expect to see unfold in 2014?

SY: I think resource investors will see 2014 as a tough year—a continuation of the very difficult market in 2013. But it’s also going to be a great opportunity to set yourself up and take positions that will lead to very compelling opportunities for strong returns beyond 2014.

MS: I actually think we might be surprised by what happens in 2014. Everyone is so negative on the equities and on these metals that we might be surprised by what a strong year it turns out to be. The equities have been beaten down. Some of them offer significant value and investors will step in and start buying them.

TMR: Which segments offer the best hope for investors?

MS: The midcaps—companies with production and growth—are the best bets. They will not necessarily require financing. They already have development projects that they’re building. They’re growing, whereas the large caps don’t necessarily offer growth. If investors return to the sector, it might be the midcaps that benefit the most.

TMR: Thanks for sharing your insights with us today, Maria and Steve.

MS: Thanks for having us.

SY: Yes. Thanks, Brian.

Steve Yuzpe was named President and Chief Executive Officer of Sprott Resource Corp. in 2013. He has over 15 years of executive and financial management experience with public and private corporations. Over his career, Yuzpe has developed specific expertise in financings, restructurings, financial and internal reporting, strategic development and business planning, corporate governance, investor relations, regulatory compliance and treasury management. Prior to being appointed President and Chief Executive Officer, he served as the Chief Financial Officer of Sprott Resource Corp. Yuzpe holds a Bachelor of Science in mechanical engineering from Queen’s University along with the Professional Engineering designation (P.Eng.) and a Masters in Business Administration from the Richard Ivey School of Business in London, Ontario. He is a CFA charter holder.

Maria Smirnova joined Sprott Asset Management as a research associate in May 2005, and was appointed associate portfolio manager in February 2010. She currently co-manages the Sprott Silver Equities Class with Eric Sprott and Charles Oliver. She is also responsible for supporting the portfolio management team in the precious metals and mining space. Smirnova has over 12 years of experience in the financial services industry; she began her career at Excel Funds Management as operations manager, and subsequently worked in product development at Fidelity Investments. Smirnova graduated with distinction from the University of Toronto with a Bachelor of Commerce degree and obtained her CFA charter in 2002. She graduated as a Bregman Scholar from the University of Toronto’s MBA program in 2005.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Mining Report and provides services to The Mining 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 Mining Report: Virginia Energy Resources Inc., Silver Standard Resources Inc. and Unigold Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Steve Yuzpe: I or my family own shares of the following companies mentioned in this interview: Sprott Resource Corp. and Sprott Inc. I personally am or my family is paid by the following companies mentioned in this interview: Sprott Resource Corp. and Sprott Inc. My company has a financial relationship with the following companies mentioned in this interview: Sprott Resource Corp., Sprott Inc. and Virginia Energy Resources Inc. 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) Maria Smirnova: I or my family own shares of the following companies mentioned in this interview: Sprott Inc. I personally am or my family is paid by the following companies mentioned in this interview: Sprott Asset Management. My company has a financial relationship with the following companies mentioned in this interview: Silver Standard Resources Inc. and Unigold Inc. 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.

5) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

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By MoneyMorning.com.au

What do Lindsay Ellingson, a five-foot-eleven, 29-year-old Victoria’s Secret supermodel, and a pizza, have in common? I promise you this isn’t an attempt at a bad Christmas joke. It’s not like those little paper gags you’ll be sure to find in your bonbons next week.

The model and the pizza have one thing specifically in common. Despite the fact the model has probably never eaten a whole pizza in her life.

Their common thread is a piece of technology whose origins go back to the early 80′s, before Lindsay was even born. In fact the one thing that binds (not literally) Lindsay and the pizza together is one of the most advanced technologies the world has seen in the last few decades.

2013 in particular has been a year that seen this technology gather more momentum than any other. And it’s set to continue well into 2014 and beyond. It is literally changing the way we think about design and manufacturing.

Since I joined Port Phillip Publishing earlier this year I’ve been harping on about how influential this technology is going to be.

I’m absolutely certain that every home with a computer in it will have one of these parked alongside.  Actually there’s every chance over the next few years you might end up with two, or even three.

Because this technology is multi-purpose. And it’s potential is only just starting to be realised. The design and production of household goods, making clothes and shoes, are just a couple of its potential uses. And soon enough you might have one in your kitchen to make dinner.

Of course by now you’ll have probably figured out I’m talking about 3D printing.

Revolution is Not a Dirty Word

When talking about new technology the word ‘revolutionary’ is often used. And we’ve used it when talking about 3D printing.

We were very careful when deciding to call 3D printing revolutionary because all too often technology like this can burn out as fast as it came to light.

But 3D printing is different. It’s not some whiz-bang overnight success. Decades in the making, it’s only just now getting real momentum.

3D printing has hit the mainstream media with force in 2013. Even so, there’s still doubt in people’s minds about its potential. I’d say that’s likely because they haven’t experienced it first hand yet. However there’s no doubt in my mind about the potential of 3D printing.

I’m so excited about it we actually bought one for the Melbourne office a few months ago. We’ll be showing you what it’s like in the flesh at our World War D conference in March for those of you that have got a ticket.

But it’s not just about cool consumer devices you can have around the home.

Because what’s also important to know is that it’s not too late to invest in possibly the most important technology of the next decade. There are a number of investable companies. But you really need to understand the ins-and-outs of how it all comes together to really pick a winner.

You see 3D printing has been around for some time, it’s actually not that new a technology. But what is new is its availability and affordability for the average consumer.

Manufacturing businesses have used 3D printers to make parts and equipment for years. They’ve called it additive manufacturing. But really only within the last few years has your average person off the street been able to get their hands on one.

These 3D printers used to cost hundreds of thousands of dollars. Some still do. But a simple consumer based 3D printer can be yours for less than $1,000. And the direction the technology is headed in means the cost is only going to come down further.

It’s much the same as when document printers entered the home. An expensive laser printer would set you back a few thousand dollars. So most people opted for an ink-jet printer, or something similar. It was affordable and did the job.

But then of course as the technology advanced, once expensive machines became cheaper. In becoming cheaper they become more accessible to people. Now you can pick up a laser printer for a couple hundred dollars.

Of course many people still say to me, ‘I don’t have a need for a 3D printer. What good is it to me?’

And they’ve got a good point. Because making an iPhone case or scaled model of Doctor Who’s Tardis probably isn’t all that useful.

Now If Only We Could 3D Print A Victoria’s Secret Model…

But that’s where our Victoria Secret Model and the Pizza start to explain the real benefits of 3D printing in the home.

You know the technology has hit mainstream when 29-year-old Lindsay Ellingson struts down the Victoria’s Secret runway in lingerie partly made with a 3D printer.

And then to back it up a Spanish company, Natural Machines, says they’ve got plans to release a food 3D printer in 2014 for about £835 ($1,520AUD).

And just when you thought the sub-heading above was insane, another pioneering company is involved in the 3D printing of human organs.

It’s like this. In the near future the 3D printer is going to be much more than just something to print of plastic models…one day we might be able to print off real ones.

You’ll be able to use a 3D printer to make dinner. You’ll be able to create new clothes, shoes or accessories for yourself and you family. You’ll even be able to use one to make parts and equipment for around the home.

The possibilities for the 3D printer are expanding into new territory. The thing is there are only a few investable companies right now that you can use to actually put your money where the action is.

Of course with any expanding industry like this you’ll get a lot of new companies come to market. Some will be gone in 12 months, some will be worth a billion dollars. And that is why Kris and I have worked insanely hard to find the best companies involved in this exhilarating industry. It’s taken me across the world to see examples of 3D printing in action in places like London and Paris.

Having first hand contact and experience with the players in this industry, with the pioneers, the inventors and the companies we’re talking about has given me an inside edge.

And on Friday we’ll show you what that edge could mean for you. Kris is preparing a presentation that will reveal two companies we’ve discovered in the last months. Both are pioneers in the 3D print field. And both have made impressive gains in that short time. One is up 65% in six months…the other is up around 47% in just four.

But I believe this only the beginning of an exciting 2014.

3D printing really is the dawn of a new industrial revolution. There’s no doubting the impact it will have over the coming five and 10 years. You might not see it now. But that’s okay, that’s what we’re here for. Now is not just a great time to get involved with 3D printing, but it’s the perfect time to invest in it. Keep an eye out for our report on Friday, where we will show you how.

Sam Volkering,
Technology Analyst

Special Report: The ‘Wonder Weld’ That Could Triple Your Money  

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By MoneyMorning.com.au

By MoneyMorning.com.au

‘We intend to achieve the 2 per cent inflation target and maintain that in a stable manner.’

Haruhiko Kuroda, Bank of Japan

‘We will now work with our suppliers, key stakeholders and the government to determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia.’ 

Toyota spokesman, yesterday

About the only thing that can save car manufacturing in Australia now is an Aussie dollar crash. And even that may not be enough. The dollar is doing its best (see chart below). It traded below 90 cents this morning. Glenn Stevens from the Reserve Bank of Australia unleashed another verbal broadside against the local currency.

Here’s an important point about where we are in economic history: the middle class of the developed world now sees that globalisation is inherently deflationary for wages. And with monetary policy designed to benefit the owners of capital and financial assets, the middle class is getting squeezed good and hard.

The decline of manufacturing in Australia is a prime example. First Ford, then Holden, and probably next Toyota. But what can you expect when several billion people are added to the global workforce? Cheap jobs are part of globalisation just as much as cheap goods are.

Click to enlarge

For most of the last two decades, we’ve enjoyed the benefits of globalisation in the form of lower prices for consumer goods. That cost jobs in the textile and electronics industries. But most consumers were happy with lower prices. Who cares if your trainers are made by kids in Asia? At least they’re cheap!

Now people are starting to wonder if there are any high-paying jobs that are truly safe from the forces unleashed by globalisation. And it’s not just globalisation. It’s technology. The more machines replace people, the harder it is for people to find work that pays just as well (or work that is as meaningful). Technology is deflationary too, to the extent that labour-saving machines lower prices.

My point is that the job losses at Holden this week aren’t just an Australian story. It’s part of a global trend. Countries in the industrialised and developed world enjoyed a huge advantage in manufacturing for the last 100 years. They’re losing it now, and in some cases, like here in Australia, there’s nothing to replace it with.

In the meantime, the affluent developed world has also built a generous cradle-to-grave Welfare State on top of its old economic model. Now it’s a simple math problem.  There’s not enough money to pay for the promises that have been made. The middle class gets bashed on two fronts. Real wages decline even as entitlement spending increases, driven by demographics. This whole scenario is why I’m convinced that economic problems will eventually become political and social problems.

Societies become unstable with too much income inequality. It’s not that people are too rich. It’s that the financial system has been hijacked by the interests of the financial class. They manipulate markets to profit from the gain in asset values made possible by interest rate manipulation and currency devaluation. Then, they scoop up productive assets after a crash. People on wages are out of luck.

It’s not capitalism at fault here. It’s the banking and finance industries gaining control of the agencies that regulate them and then writing rules to favour their interests. More people will start to see it that way when stocks stop going up. And when they do see it, it won’t be pretty. It will be violent.

The Battle for Altona is going to be lost. Toyota will likely pack up and leave, too. No amount of government money is going to make the Australian car industry competitive in a globalised world. The battle for the rest of Australia — what industries can survive and prosper for the next 100 years — that’s raging as well.

Greenback strength but QE failure

Let’s get back to the markets for a moment. The US dollar rallied overnight. One reason why is that the US House of Representatives passed a budget by a vote of 332-94. It’s a two-year budget deal. It now goes to the Senate, which is expected to pass it.

On the surface, this would seem to take some of the uncertainty out of the US fiscal picture. The deal isn’t done and dusted yet, but it’s a deal with bi-partisan support. That fact was enough to cheer markets.

Then there’s the ‘taper’ issue. With some benign US macro data out this week, plus the budget agreement, the consensus view is that the Fed is now more likely to ease up on its bond purchases. That might be bad for stocks (the S&P 500 has been down four days in a row). But it clearly makes the dollar look better because it means US interest rates may rise. But check out the chart below.

Click to enlarge

The dirty little secret of Quantitative Easing is that every time the Fed says it will do more, interest rates rise! You can see above that 10-year US bond yields (on which the 30-year fixed mortgage rates are based) have been rising since the middle of July. In other words, Fed bond purchases aren’t keeping interest rates down at all. The Fed is really only keeping stock prices up.

And consider this number: $85 billion. Everyone knows that’s what the Fed spends, combined, on Treasury bonds and mortgage backed securities as part of its QE program. But $85 billion is also the amount of money that will be shaved off the US deficit, according to proponents of the budget passed yesterday…over ten years.

That’s right. The budget deal that passed with bi-partisan support locks in $1 trillion in spending over each of the next two years. And its grand ambition is to reduce the $17 trillion US deficit by exactly $85 billion over the next ten years. What a complete bi-partisan joke!

Click to enlarge

The chart above from the US Congressional Budget Office (CBO) shows you just how serious American politicians are about cutting spending and forcing the government to live within its means. They have no intention of reducing spending in order to reduce the deficit as a percentage of GDP.

This is an American chart. But it’s a cautionary tale for Australia, too. Once you get into the habit of spending more than you earn, it’s a hard habit to break. Politicians will carry on with it until they destroy the currency by printing money to pay off debts. That’s where this is headed, eventually.

Ironically, though, the greenback may be the big winner in 2014. This is Vern Gowdie’s prediction. Vern reckons that the US will rout emerging markets next year, as money flows from the edges of the global economy back to the US core. He reckons this will be accompanied by a rather large correction in stock prices. Stay tuned for more on that next week.

Self-termination of the bears

How anyone could look at the chart above and NOT see that we’re headed for a wealth-destroying global share market crash is beyond me. But right now, the 25% rise in the S&P 500 this year is claiming more scalps. Eric Sprott will no longer be making investment decisions at the company he founded and that bears his name, according to the Wall Street Journal. Gold’s first down year in the last 12 has cost him.

And then there’s Hugh Hendry. The manager of the Eclectica hedge fund and a noted bear has thrown in the towel. He said late last month that ‘I can no longer say I’m bearish….When markets become parabolic, the people who exist within them are trend followers, because the guys who are qualitative have got taken out.’

That’s an extended way of saying  there aren’t any investors in the market anymore. It’s all speculation and no valuation. And if a man knows his limitations and is a value investor, he’ll stop arguing about what things should be worth and get out of the way of the raging bull.

These capitulations usually mark extremes in the market. When high profile bears go public and eat ashes and wear sack cloth and plead forgiveness for being wrong, you’d think the end of the bull is nigh.

Dan Denning+
Contributing Editor, Money Morning

Ed Note: The above article is an extract from an update originally published in The Denning Report.

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By MoneyMorning.com.au

By CentralBankNews.info
    The Czech National Bank (CNB) held its key interest rates steady and said it would “continue to use the exchange rate as an additional instrument for easing the monetary conditions and confirmed the CNB’s commitment to intervene on the FX market to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27.”
    Last month the CNB’s board agreed after months of deliberation to start intervening in the foreign exchange market to ensure that the koruna would remain low in a move to boost economic growth by making exports competitive and push up inflation that has remained below the central bank’s 2 percent midpoint target all year.
    In November inflation in the Czech Republic rose to 1.1 percent from 0.9 percent in October.
    “A sustained weakening of the exchange rate close to CZK 27/EUR is needed to eliminate the threat of longer-term deflation and accelerate the return of inflation towards the target amid zero interest rates,” the central bank said, adding that latest data confirm the bank’s message that it intends to keep this exchange rate target at least until early 2015.

    In the third quarter, the Czech economy contracted by an annual 1.3 percent, the seventh consecutive quarter of shrinkage, worse than the central bank had expected.
    “The October data suggest a recovery in some industrial branches amid a continuing downturn in construction and retail sales,” the CNB said.
    The central bank held its two-week repo rate steady at 0.05 percent, the discount rate at 0.05 percent and the Lombard rate at 0.25 percent.

    www.CentralBankNews.info

By CentralBankNews.info
    Morocco’s central bank held its policy rate steady at 3.0 percent and revised upwards its forecast for inflation in 2014 to 2.5 percent from September’s forecast of 1.7 percent.
    But by the end of next year or in the first quarter of 2015, the Bank of Morocco said it expects inflation to ease to 2.0 percent. The forecast for inflation this year was revised down to 2.1 percent from 2.2 percent.
     The Bank of Morocco, which has held rates steady since March 2012, said inflation was forecast to average 2.3 percent over the entire forecast horizon. In October Morocco’s inflation rate eased to 1.5 percent from 1.7 percent the previous month for 2.1 percent for the first 10 months.
    Morocco’s Gross Domestic Product rose by an annual rate of 4.5 percent in the third quarter, down from 5.1 percent for 4.4 percent growth.
    For the second half, the central bank forecast growth of 5.0 percent, up from 4.4 percent in the first half, due to a sharp rise in the agricultural output and an improvement in non-agricultural activities.
    For 2013 the central bank forecast growth of between 4.5 and 5.0 percent, declining to 2.5-3.5 percent in 2014, “suggesting overall low pressure on prices in the short term,” the bank said.
    Due to a 2.4 percent decline in imports, Morocco’s trade deficit narrowed by 3.4 percent in October while exports fell 1.4 percent due to lower sales of phosphates and derivatives.
    The current account deficit is projected at 7.4 percent at the end of 2013 compared with a 10 percent deficit in 2012, the central bank added.

    www.CentralBankNews.info

By CentralBankNews.info
    Turkey’s central bank maintained its policy stance, keeping its key rates unchanged, saying the current stance was appropriate to contain inflationary risks but “emphasized that any new data or information may lead the Committee to revise its stance.”
    The Central Bank of the Republic of Turkey (CBRT), which has tightened policy since May to protect its currency and contain inflation, said interbank money market rates would remain close to 7.75 percent while the weighted average cost of funding would be at 6.75 percent or above.
    Turkey’s central bank conducts a slightly unorthodox monetary policy and in November, for example, it dropped the reference to its one-week repo rate as a policy rate and started putting more emphasis on the overnight lending rate, which acts as a ceiling in it interest rate corridor.
    The overnight lending rate was maintained at 7.75 percent while the borrowing rate, the floor in the corridor, was held at 3.5 percent along with the rate of borrowing facilities for primary dealers at 6.75 percent. The one-week repo rate was held at 4.5 percent.
    Turkey’s inflation rate, which has been boosted by a depreciation of its lira since the U.S. Federal Reserve warned it May that it was considering tapering its asset purchases, has declined in recent months and fell further to 7.3 percent in November from 7.71 percent in October.
    “Inflation is expected to fall further in the forthcoming period,” the central bank said, adding that core inflation may hover above the bank’s 5.0 percent target “for some time.”
    In its latest inflation forecast from this month, the central bank revised upward its inflation forecast to 6.8 percent by end-2013 and 5.3 percent end-2014, partly due to exchange rate changes and higher oil price assumptions.
    “The Committee stated that the cautious monetary policy stance should be maintained until the inflation outlook is in line with the medium term targets,” the bank said.
    But the bank also said that domestic demand and exports were continuing to grow at a moderate pace and the “moderate decline in the current account deficit excluding gold trade is expected to continue.”
    Turkey’s Gross Domestic Product rose by 0.9 percent in the third quarter from the second quarter for annual growth of 4.4 percent while the current account narrowed to US$ 2.89 billion in October from $3.37 billion in September.

    www.CentralBankNews.info
 

By CentralBankNews.info
    Hungary’s central bank cut its base rate by 20 basis points to 3.0 percent, its 17th rate cut in a row, and said “further easing of monetary policy may follow, but a reduction in the increment is likely to be warranted in the future” in light of stronger economic growth and a possible rise in financial markets’ view of the risk of investing in the country.
    But the National Bank of Hungary, which has cut rates by 275 basis points this year and 400 points since August 2012, is clearly approaching the end of its easing cycle and aware that cutting rates too much could make international investors nervous and lead to an outflow of capital.
    “A marked and sustained shift in perceptions of the risks associated with the Hungarian economy may influence the room for manoeuvre in monetary policy,” the bank said.
    Hungary, like many other emerging market countries, saw capital flow out and their currencies decline earlier this year when the U.S. Federal Reserve first raised the possibility of a tapering of its asset purchases, and the central bank is concerned this may re-occur once the decision to taper is taken.
    But at this point financial markets appear comfortable investing in Hungarian assets and the central bank said the rate cut was “justified by the low inflation environment, subdued inflationary pressures over the medium term and a degree of spare capacity in the economy.”

    “On the whole, the global financial environment has been supportive in the past quarter. However, sentiment has been volatile, due to uncertainty about the future of unconventional measures used by global central banks, which warranted an even more cautious approach to domestic monetary policy,” the bank said.
    Hungary’s forint has risen about 1.0 percent this month and rose further today on the central bank’s decision to 298.8 to the euro, but is down 2.6 percent since the start of the year, a relatively low fall compared with some other emerging market currencies, such as Indonesia and India’s currencies.
    Hungary’s inflation rate stabilized in November at 0.9 percent, the same as in October, and the central bank expects inflationary pressures to remain muted in the medium term due to weak domestic demand and low international inflation before gradually moving toward the bank’s 3.0 percent target.
    “Looking forward, loose labour market conditions and the adjustment of inflation expectations are likely to lead to moderate wage growth, which in turn may contribute to the maintenance of the low inflation environment,” the bank said.
    Hungary’s economy has been picking up speed in recent months and the central bank said rising exports were likely to play an important role as a source of growth while domestic demand was also expected to strengthen in coming years though household consumption is likely to grow only gradually despite higher incomes.
    “Propensity to save is expected to remain high, reflecting the ongoing reduction in debt built up during the years prior to the crises and the slow improvement in credit conditions,” the bank said.
   Hungary’s Gross Domestic Product grew by 0.9 percent in the third quarter from the second for annual growth of 1.8 percent, the second quarter of positive growth after the economy shrank for five consecutive quarters from the start of 2012 to the second quarter of this year.
    Last month the OECD raised its growth outlook for Hungary to 1.2 percent for 2013 and to 2.0 percent for 2.0 percent. In 2012 the economy shrank by 1.7 percent.

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