Month: April 2014

By CentralBankNews.info
    Chile’s central bank held its policy rate steady at 4.0 percent, as expected, and reiterated that it will “consider the possibility of making additional cuts to the policy rate in line with the evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook.”
     The Central Bank of Chile, which last month cut its rate for the fourth time since October 2013 for total reduction of 100 basis points, added that recent data had confirmed the “low dynamism of output and demand,” in line with the bank’s projections from March.
    In its latest quarterly monetary policy report the central bank cut its 2014 growth forecast to between 3.0 and 4.0 percent from a previous 3.75 to 4.75 percent and yesterday the bank said its latest poll on bank credit showed that conditions for corporate loans became more restrictive in the first quarter and demand for consumer credit also tightened.
    Chile’s Gross Domestic Product contracted by 0.1 percent in the fourth quarter of 2013 from the third quarter for annual growth of 2.7 percent, down from 5.0 percent in the third quarter. The unemployment rate rose marginally to 6.13 percent in February from 6.12 percent in January.
    The International Monetary Fund projects 2014 growth of 3.6 percent and 4.1 percent in 2015, down from 4.2 percent in 2013.
    Chile’s inflation rate accelerated to 3.5 percent in March from 3.2 percent in February and 2.8 percent in January. The central bank attributed the March rise to higher prices of foods and fuel along with the depreciation of the peso, but inflation expectations remain around 3.0 percent.
    The central bank, which targets inflation of 3.0 percent, plus/minus one percentage point, has revised upwards its forecast for inflation to end 2014 around 3 percent, with a temporary rise to between 3.5 and 4.0 percent.
    In 2013 inflation averaged 1.8 percent and the IMF forecasts average 3.5 percent this year.
    The central bank said moderate growth in emerging markets is continuing, a point that is relevant for the prices of copper and other metals. Chile is the world’s largest copper exporter and has been affected by a slowdown in global demand, especially from China.
    Chile’s peso began depreciating in May last year, along with most other emerging market currencies, and continued to decline through early March. But since March 11 when it hit 575.5 to the U.S. dollar, it has rebounded, trading at 557.3 today. But for the year, the peso is still down 5.7 percent.

    http://ift.tt/1iP0FNb

Source: George S. Mack of The Life Sciences Report (4/17/14)

http://www.thelifesciencesreport.com/pub/na/four-hidden-australian-life-sciences-growth-stocks-revealed-scott-power

To find undiscovered stories, investors must venture into unfamiliar territory. In this interview with The Life Sciences Report, we go halfway around the world to speak with Scott Power of Morgans Financial Ltd. about companies under coverage in Australia. Power helps investors get comfortable with the idea of putting money into newfound names, and unveils four strong ideas that could invigorate adventuresome portfolios and investors hungering for excitement.

The Life Sciences Report: You are based in Brisbane, Australia, where your firm, Morgans Financial, is headquartered. All the names on your coverage list have traded on the Australian Securities Exchange (ASX). How would you compare investing in Australian biotech or medtech stocks to investing in those same types of stocks in the U.S. or Europe?

SP: The Australian market is well established, and the rules and controls around listed companies are clear and transparent. In terms of medtech and biotech, in particular, the limited pool of venture and development capital in Australia tends to make companies list at an earlier stage than they would in the U.S, which has its advantages and disadvantages.

But access to capital for early-stage companies is more readily available in Australia than in other parts of the world, in part because the resource market over here is fairly well established, and has some similar risk characteristics to biotech. Australian investors are more educated about putting small amounts of money into higher risk biotech and medtech investments.

The other point to make is about cycles: The window for raising capital opens at certain points, and closes at certain points. Certainly, in the last 12–18 months, with the activity in the U.S. biotech market, we’ve found increasing interest in Australia. It’s been a little bit patchier in 2014, but, again, what we’re finding is the better quality names in Australia are not having too much trouble finding the necessary cash at the moment.

TLSR: One thing you said really got my attention—that limited access to venture capital causes Australian biotech companies to go public a little earlier. By implication you are saying that companies go public when they are less mature than they might be in North America and Europe.

SP: Yes, that’s correct.

TLSR: In the U.S., small investors are unable to access the venture capital market. Is it plausible to say that an investor putting money into publicly traded Australian biotechs might be able to invest at levels similar to venture capital levels in the U.S.?

SP: Yes. A number of companies in Australia are at much earlier stages and have much lower valuations than is typical in the U.S. That’s just a function of the market. The point is that interest comes and goes. When things are running, there’s the opportunity to fund earlier-stage projects, but when the window closes, it’s pretty tough to get much interest.

TLSR: I want to ask you about how small life sciences companies interface with regulators. For reasons of proximity or regulatory leniency, do Australian biotechs and medtechs typically seek clearances in Europe, or Japan versus coming to the U.S.?

SP: No. Generally, the U.S. is seen as the largest market for Australian programs and products, and I think the European regulatory framework is becoming as strict as in the U.S. So proximity or the ease of getting through isn’t necessarily an issue anymore. Also, management teams are looking for where their products have the biggest markets and biggest potential. The U.S. is where Australian companies quite often have a lot of resources—both people and products.

TLSR: You have a lot of stocks under coverage that U.S. investors may never have heard of. Could you go ahead and talk about one?

SP: Sure. Let’s talk about Alchemia Ltd. (ACL:ASX), which first listed on the ASX more than 10 years ago. There are a couple of parts to this business. One is a revenue-generating generic drug being marketed by Dr. Reddy’s Laboratories Ltd. (RDY:NYSE) in the U.S. The drug is a generic version of fondaparinux, a synthetic heparin. Dr. Reddy’s has about 30% of the market share of that business.

Another part is that Alchemia is about to complete a Phase 3 trial with its HA-irinotecan (hyaluronic acid-irinotecan) for metastatic colorectal cancer. Those results are due to read out in the next couple of months.

In addition, the company has some newer shareholders on board, and attempted a NASDAQ listing in 2012, before the biotech boom started to pick up heat. The listing effort wasn’t successful; however Alchemia did raise some money back in Australia. Now, with any success in this clinical trial—which is what we’re expecting—Alchemia will be in a position to possibly license HA-irinotecan out. With its HyACT platform technology, the company is positioned such that if this particular trial works, the opportunity exists to use the technology in other solid tumors. Alchemia would then be able to run clinical programs for other drugs.

TLSR: Would you briefly describe the HyACT platform?

SP: HyACT refers to hyaluronic acid, which is wrapped around the existing chemotherapy treatment FOLFIRI (folinic acid + fluorouracil + irinotecan), the regimen of chemo drugs used in treatment of colorectal cancer. HyACT is essentially a drug delivery system that gets more of the drug into the tumor site.

TLSR: A known problem in treating solid tumors, unlike hematologic cancers, is getting the drug inside the tumor mass. Hyaluronic acid is a way to enzymatically get into the tumor—is that right?

SP: Yes. The pivotal trial includes almost 400 patients. The primary endpoint is six-weeks progression-free survival.

TLSR: Scott, you noted that Alchemia’s board has some very strong U.S. ties.

SP: Yes—most of the board is now U.S.-based. The new nonexecutive chairman is Santo Costa, who, among other things, was president and chief operating officer of Quintiles Transnational Holdings Inc. (Q:NYSE), the world’s largest contract research organization, which drug developers use to outsource clinical trials. There is also Susan Kelley, an oncologist, formerly with Bayer (BAYN:XETRA), where she was involved with global strategic development. Up until 2011 she was chief medical officer of the Multiple Myeloma Research Foundation/Consortium. The new CEO, Thomas Liquard, came on board in 2013. He spent the previous seven years with Pfizer Inc. (PFE:NYSE), where he had various commercial functions. Alchemia has a very U.S.-centric look about it.

TLSR: Another company?

SP: ImpediMed Ltd. (IPD:ASX) has an early-detection bioimpediance device system to detect early onset of lymphedema. It is working toward Category I CPT (current procedural terminology) coding, which it expects to see by Jan. 1, 2015. It currently has a Category III experimental code assigned to its test.

Moving from the experimental code to the mainstream Category I code will be a major step for the company. Right now the ImpediMed technology, called L-Dex, is being used primarily by breast cancer physicians and surgeons to detect lymphedema post-surgery. The product works by detecting small changes in the cellular fluid levels, which is far more accurate and can enable an earlier reading than the current method, which is simply to use a tape measure to determine changes in the arm circumference. For investors, moving to a new Category I code represents an opportunity to expand the market by a factor of three.

TLSR: Will the company have to seek clearance and do trials on the lower extremities?

SP: No. The expectation is that the device will have a broad claim. Once it has proven that it can detect lymphedema in the upper extremity—in the axilla of the arm—then a physician could use it for the lower extremities.

TLSR: How is the device used?

SP: Electrode sensors are placed onto the body. It takes 15 minutes or less to get the base reading, and that’s followed by a regular reading done every four months post-surgery. Semi-annual or annual tests are conducted thereafter. It is a very noninvasive test.

TLSR: Scott, another name you follow is QRxPharma Ltd. (QRX:ASX). Could you describe it and its value proposition?

SP: QRxPharma is a very simple story. The product is called Moxduo (Q8003; morphine sulfate + oxycodone HCl)—basically two opioids put together. The indication is for use in the hospital for acute pain after bunionectomy, knee replacement or hip replacement surgery—in other words, when a lot of pain is expected. The product has gone through all clinical trials, and it will be evaluated by a U.S. Food and Drug Administration (FDA) Advisory Committee on April 22. The Prescription Drug User Fee Act (PDUFA) date is May 25.

But QRx has had a couple of slipups already—two complete response letters (CRLs) from the FDA. The company believes it has answered all questions raised by the FDA.

TLSR: What did the CRLs require? Was the new drug application (NDA) incomplete or sloppy?

SP: No. In one of the data sets, there was some confusion between time zones—a daylight savings time issue—that meant the data had to be rescrubbed. It was a small oversight that cost QRx some data integrity.

TLSR: What is the advantage of Moxduo versus other opioids?

SP: Lower side effects. In particular, the respiratory depression data are much better than for existing analgesics used in these indications, either morphine or oxycodone. Ironically, the combination of the two drugs results in fewer side effects than when the drugs are used individually or alone.

TLSR: Because of this safety/side-effect profile, do you foresee dramatic uptake of Moxduo if it is approved?

SP: Yes. Also, the company’s marketing partner will be Actavis Inc. (ACT:NYSE), so once the product is approved, it should be available for patient use within the next month or so.

TLSR: You are also following an in vitro fertilization (IVF) company. Can you tell me about it?

SP: Yes. The Australian IVF market is quite well corporatized, and the leading player is Virtus Health Ltd. (VRT:ASX), which listed on the exchange last year. The company has done very well since then. Right now Virtus is looking at the possibility of overseas destinations, where it can duplicate its successful corporatization model.

TLSR: Is the company business model like a physician practice management group?

SP: That’s exactly right. Basically, Virtus has 84 fertility specialists who provide IVF services for patients. It has a number of day hospitals and laboratories that perform all tests for a couple. It has a 35% market share in Australia, where it is the No. 1 operator.

TLSR: What is the value proposition here? Is it the fact that the company has a proven model, along with efficient use and economies of scale?

SP: All of that. Also, Virtus has a very attractive model for the fertility specialists to work under. It is able to offer flexibility to the physicians who are contracted, so that they also have the opportunity to maintain their own private practices.That’s a very attractive proposition for a number of these specialists, who also own equity in the company.

The incentive is attractive because it provides some upside potential to those relationships. The infrastructure is there. The flexibility is there. And Virtus is looking to duplicate what has been a very successful corporatization model in Australia in other geographies.

TLSR: Scott, Virtus has been weak for about six months, while some of the other stocks in your coverage have been quite strong. Are there any issues that have caused this phenomenon?

SP: That’s a good observation. Virtus has had a very strong run, so part of the weakness was that the stock may have gotten a bit expensive. Weakness in the market, plus the prospect of another player getting into the IVF market in Australia, has caused some uncertainty. The stock has since recovered. We are seeing a real buying opportunity right now.

TLSR: Would you think of Virtus as the least speculative of the four names we’ve talked about?

SP: Absolutely. It’s a revenue-generating, profitable business. The others are still very much in the development phase or, in ImpediMed’s case, the early sales phase.

TLSR: I’ve enjoyed talking with you. Thank you.

SP: Thanks to you too.

Scott Power has spent 20 years investing in and researching emerging companies, first in the venture capital industry and as portfolio manager with Queensland Industry Development Corp., and more recently with Morgans Financial Ltd., which he joined in 1997. He has a wide network of contacts across the healthcare and life sciences sectors, which help with identification of key trends and developments. He has a bachelor’s degree in commerce from the University of Queensland, and a graduate’s degree in applied finance (FINSIA). He is also a certified practicing accountant. Read Power’s blog for regular industry updates and assessments.

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

DISCLOSURE:

1) George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.

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

3) Scott Power: I own, or my family owns, shares of the following companies mentioned in this interview: Virtus Health Ltd., ImpediMed Ltd., Alchemia Ltd. 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 CentralBankNews.info
    Serbia’s central bank maintained its policy rate at 9.5 percent but said plans to cut the government deficit “will open up the scope for monetary easing, which should have a positive effect on the sustainability of economic growth.”
    The Bank of Serbia (NBS), which has been intervening in foreign exchange markets to limit the rise in the dinar currency since the Progressive Party won a parliamentary majority in last month’s election, said its decision to keep the rate on hold was “guided by instability in international financial markets and heightened uncertainties surrounding the current geopolitical tensions.”
    The central bank has maintained its rate since December despite a decline in inflation, citing the need to keep Serbian assets attractive to international investors.
    The instability in financial markets may affect Serbia through a drop in capital inflows and higher prices in global commodities markets, including energy and agriculture, the NBS said, warning that EU countries may experience lower economic growth, which would dampen demand for Serbian exports.
    The central bank has maintained its rate since December despite a decline in inflation, citing the need to keep Serbian assets attractive to international investors.

     In 2013 the NBS cut its rate by 175 basis points as inflation declined in response to the bank’s 150-basis-point increase in rates in 2012. Inflation averaged 7.7 percent in 2013 but NBS expects it to fluctuate around the low end of its tolerance range of 2.5 to 5.5 percent in coming months.
    In March Serbia’s headline inflation rate fell to 2.3 percent from 2.6 percent in February but the central bank expects inflation to rise in coming months due to higher administered prices and the one-off impact of higher valued-added tax on some goods in January.
    The central bank targets inflation at midpoint of 4.0 percent and the IMF has forecast inflation of4.0 percent this year, 2015 and 2016.
    “The expected stepping up of fiscal consolidation and structural reforms will contribute to stabilizing inflation at low levels and preserving price and financial stability over the medium term, and will also reduce the exposure of the domestic economy to the exogenous risk,” the central bank said.
    Last week the Serbian central bank intervened for three consecutive days to limit the gains in the dinar against the euro, the sixth time it had intervened Prime Minister-elect Aleksandar Vucic won a majority in the parliament on March 16, according to dealers.
    On Wednesday Vucic, whose cabinet is expected to be confirmed on April 27, said he would cut spending by reducing public sector jobs and ending subsidies.
    The Serbian dinar has been relatively stable this year, trading at 115.5 to the euro today, down 0.8 percent since the start of the year.
    So far this year the central bank is reported to have spent a total of 70 million euros in managing the dinar and on March 31 the bank’s governor, Jorgovanka Tabakovic, said the NBS had enough reserves to defend the currency, noting foreign exchange reserves at 10.6 billion euros.
    Serbia’s economy has been improving in recent months after a recession in 2012. In 2013 Gross Domestic Product expanded by 2.5 percent and the central bank has forecasts growth of 1.5 percent this year. The IMF has forecast 1.0 percent growth this year, up to 1.5 percent in 2015.

    http://ift.tt/1iP0FNb

Technical Sentiment: Bullish

Key Takeaways

• EUR/AUD invalidated the triangle chart pattern boundaries;
• The pair is in a bullish trend configuration, with a higher low already in place and a higher swing high in the making;

EUR/AUD has slowly but surely developed a bullish technical sentiment. On Wednesday the pair tested the resistance trendline for the third time, retraced to 61.8% Fibonacci level, creating a higher low in the process. EUR/AUD has been steadily rising since then, invalidating the triangle, thus confirming the overall intentions to move even higher, towards 1.4955-1.4990.

Bullish Trend Scenario

The resistance trendline at 1.4817, which marked the triangle chart pattern, was also backed up by the 200-Day Moving Average and the 100 Simple Moving Average on the 4H timeframe.  By breaking above this area, EUR/AUD cleaned out a few stop losses held by traders who were shorting the pair while it was still priced within the range.

Wednesday’s correction to 1.4716, 61.8% Fibonacci Retracement between 1.4661 and 1.4818, is now the most recent higher low. While this support level remains intact EUR/AUD will continue to be bullish, even price dips below 1.4800 again.

The current swing should target 1.4850 and above. A higher high above 1.4850 suggests the pair will be marching towards 1.4955-1.4990 next week.

*********
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets

By Chris Vermeulen, www.TheGoldAndOilGuy.com

Back on April 9th I posted a short tutorial on how to momentum trade gold along with my short term gold forecast.

Today I wanted to do a follow up video for my gold market traders for three reasons:

1. I had lots of great feedback from traders taking advantage of what I showed to profit in the past week.

2. To show you how and why this strategy works better with gold stocks and silver stocks.

3. To provide my short term gold forecast so you are on the right side of the market for next week.

4. Also you should see my major long term Gold Forecast

Get My Gold Forecast & Gold Trade Alerts: www.TheGoldAndOilGuy.com

Chris Vermeulen

By WallStreetDaily.com

After the second year of a profit decline, multinational grocer and general retailer Tesco (TESO) attempts to redeem itself, but is its CEO’s master plan enough to win back its customers’ hearts?

The retail giant (the world’s third largest) has a 6% profit drop in 2014, so far. With trading slowing down over the past 12 months, most of its British stores had a 3% drop in Q4 2013. CEO, Philip Clarke, is definitely under fire – since this decline was preceded by a two-decade growth period (most of it under the previous Chief Executive). He has some big shoes to fill, and his solution to this dull season is a price cut. Clarke is hoping that chopping millions of pounds off of prices will do the trick.

Breakingviews’ Robert Cole argues that Tesco should consider how aggressive it wants to be with its strategy:

“The big question they need to ask themselves is how aggressively they get involved in the price war. Numbers out today show that the trading margin in Tesco business was 5% last year. That’s, inevitably, going to come down because of some of the initiatives they’ve already taken. But I think the question they really need to ask is: Do they go in really, really hard on prices and re-establish Tesco as a proper value proposition?”

Challenges confront TESO on every end: failed attempts in the United States and Japan, an expensive China expansion and vicious competition on the home front. Store improvements and new services are eating up another billion pounds, but, luckily, these changes will help (and not harm) the business.

What isn’t doing the company any good right now is the success of discounters Aldi and Lidl, as well as that of upmarket grocers Waitrose and Marks & Spencer.

In spite of being at a 10-year market share low, Kantar Worldpanel’s Edward Garner says TESO is still No. 1 is some sectors:

“There are areas where they are doing very strongly. Digital and omni channel. If you think about digital, they are the largest online grocer probably in the world, let alone this country. They have things like the Hudl, which is a tablet that takes you straight to Tesco and Blinkbox. So they have a very large digital footprint. And the idea being that you deal with Tesco in all sorts of environments. Large scale, small stores, online.”

Trading profits overseas are down in Asia and Europe by 5.6% and 28%, respectively. But this won’t deter the retail giant. In fact, TESO is leaping into the fashion industry – and it’s bringing F&F, its clothing brand, to the United States. Another shot at a game of “Sink or Swim,” and this time, Tesco needs to keep its head above water.

For a £23-billion company with 530,000 staff members to see such devastating results, people can only wonder if something is seriously off with the company’s direction or management.

The post Will Price Cuts at Tesco Restore Profits? appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Will Price Cuts at Tesco Restore Profits?

By Chris Vermeulen, www.TheGoldAndOilGuy.com

Gold Forecast: During the past year there has been very little talk about gold, silver or gold stocks in the media. Yet the year before it was all the media could talk about and they even had the price of gold streaming live all day in the corner of the tv monitor.

I am always amazed how the masses and media can be so off in their timing of the stock market and commodities in general. For example when Greece was having issues in 2012 and everyone was avoiding investments in that country like it was the plague. Looking back now, Greece is up huge and only recently investors are confident enough to put money into the Greek stock market again.

But the truth is that big move has already happend, and the US and global markets are in rotation (changing trends). Money is slowly shifting from what has been hot during the past year or two, to new investments which have a lot more room to rise in value. And this is leads us back to my gold forecast.

If you are at all familiar with Stan Weinstein’s work, then you understand the four market stages. If not, you can learn these four stages on my Stan Weinstein page. Through stage analysis we can predict the type of price action we should expected and have a rough idea just how long a move (new trend) is likely to last. It is important to know that Stan Weinstein’s stage analysis works on any time frame from a one minute chart to a monthly chart. If you do not know this then you are trading almost blind without a doubt.

Current stage analysis looks as though the US stock market may be starting to form a stage three top. There are several indicators and market behaviors which are screaming, telling us to trade with caution to the long side. But the masses do not see this or hear what is unfolding in front of their very own eyes, and that I fine. It actually reminds me of a funny old movie called “hear no evil, see no evil”.

In short, the market is showing some signs of distribution selling in stocks, and the once market leaders are now getting completely crushed with heavy selling volume like the biotech stocks, social media stocks and other momentum stocks and this is bad.

Gold on the other had has been forming a stage one basing pattern. This provides a very bullish long term gold forecast that investors could ride for several years.

———————–

Q: Where Will Investment Capital Go During The Next Bear Market In stocks?

A: One of the places will be precious metals. Click here for my gold forecast which shows the main reason why

———————–

Gold Forecast Coles Notes:

1. The US dollar index has setup a massive stage 3 topping pattern on the weekly chart. A falling dollar will send the price of gold higher naturally.

2. Bullish gold forecasts by the media have dropped substantially, meaning everyone is bearish on gold.

3. Gold stocks are already showing signs of massive accumulation. I always use the price and volume action of gold stocks to help create and time my gold forecasts which it starting to look bullish.

Gold Forecast Conclusion:

Gold market traders should understand that precious metals in general are still months away from breaking out to the upside and starting a new bull market. Do not be in a rush to buy gold or gold stocks yet. There will be plenty of time folks.

Get My Daily Video Gold Forecast & Gold Trading Alerts at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Article By RoboForex.com

Analysis for April 17^th, 2014

EUR USD, “Euro vs US Dollar”

Eurodollar is still being corrected; earlier pair rebounded from the group of upper fibo levels (at 1.3900). Right now, price is trying to rebound from level of 61.8% (1.3860). If bears succeed in doing it, market will start new descending movement.

As we can see at H1 chart, I’ve got two sell orders so far. If later pair breaks local level of 50% (1.3847) downwards, I’ll open several more orders with target close to the group of lower fibo levels (1.3760).

USD CHF, “US Dollar vs Swiss Franc”

Franc is consolidating and trying to find support from local level of 50% (0.8785). Earlier price rebounded from the group of fibo levels at 0.8745. Possibly, market may reach new maximums until the end of this trading week.

As we can see at H1 chart, price is getting closer to temporary fibo-zone. Possibly, pair may rebound from local level of 50% inside this zone. Later market is expected to start new ascending movement towards the group of fibo levels (0.8845 – 0.8855).

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Article By RoboForex.com

Analysis for April 17^th, 2014

DJIA Index

Probably, Index completed double three pattern inside wave [2]. On minor wave level, price is forming initial bullish impulse. After completing local correction, instrument is expected to start growing up inside the third wave.

More detailed wave structure is shown on H1 chart. Price is starting the fourth wave inside wave (1). In the near term, price may finish correction and start the fifth wave. As soon as it happens, I’m planning to open another buy order.

Crude Oil

It looks like Oil finished wave 2. Earlier, price formed bearish impulse inside wave 1. I’ve got only one sell order so far, but as soon as market start falling down I’m planning to open several buy orders.

As we can see at the H1 chart, after completing zigzag pattern inside wave [Y], Oil formed initial bearish impulse inside wave (1). Possibly, during the day price may break local minimum while forming the third wave. After that, I’ll move stop into the black.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Source: JT Long of The Gold Report (4/16/14)

http://www.theaureport.com/pub/na/salman-partners-raymond-goldie-copper-is-pathological-and-suffers-from-sad-but-it-has-value

Dr. Copper may be in a supercycle, but there are serious problems. In this interview with The Gold Report, Salman Partners’ Vice President of Commodity Economics Raymond Goldie explains why even though the base metal acts pathologically and has a bad case of seasonal affective disorder, these six equities are priced below their intrinsic value.

The Gold Report: You are giving a presentation at the Society for Mining, Metallurgy & Exploration Current Trends in Mining Finance Conference called Diagnosing the Doctor, which refers to assessing the supply and demand problems for Dr. Copper as a way to understand what is ailing all the mining products today. Are we in a supercycle? What is the meaning of a sustainable supercycle?

Raymond Goldie: I suppose it’s best to answer your second question first—What is the meaning of a sustainable supercycle?—because a lot of people use the word supercycle to describe the wonderful state that we had beginning in the early part of this century, when metal prices kept going up, commodity prices kept going up, seemingly forever. I’m a little less restrictive on what I define as a supercycle. I think a supercycle is any period in which we have commodity prices higher than their long-term average values. On that basis, even allowing for overall inflation, we’ve been in a supercycle since 2004. We’re still in it, although for a few months regrettably at the end of 2008 we popped out of it. But right now we are in a supercycle.

TGR: What are the fundamentals keeping us in your definition of a supercycle?

RG: The usual reason is China. It’s the biggest consumer of most of the commodities in the world and has the biggest growth in consumption of most of the commodities in the world. But what that analysis tends to overlook is that production of most commodities in China has been increasing at roughly the same rate as consumption in China. So, on balance, China may not be as big a contributor to the supercycle as we’ve imagined.

TGR: Does that mean that the Western world is playing a larger role in supporting the supercycle than we give it credit for?

RG: When it comes to assessing supply and demand from Asia, it is important to consider Chinese economic data, which a recent Bloomberg article equates to some of the meat served in low-cost restaurants. We don’t know where it comes from and don’t really know what it means. It’s not easy to put a lot of credence on Chinese economic numbers, so it’s hard to tell the extent to which China does affect supply and demand.

But one thing that we can count on is the diligence of people who sit at borders with clipboards looking at stuff crossing borders. They are paid to make sure that the right duties get paid and the ships are carrying what they’re supposed to be carrying. If we look at China’s trade with the rest of the world, those numbers are fairly reliable, even if the numbers for what’s going on inside China are not reliable. Since 2008, the dark days when the world seemed to have ended, China’s imports of copper from the rest of the world have grown 41% per annum.

TGR: And what about the supply side?

RG: I think the single most important reason that we’re in a sustainable supercycle is that we haven’t invested enough in finding more resources. The supply-side constraints are probably why prices are higher than the long-term trend in prices.

TGR: Why has it been so difficult to predict how much copper will be produced in a given year if it takes so long to bring a mine to production?

RG: Since about 2003 analysts have consistently overestimated the production of copper. My theory for the consistent shortfall is that before 2003, when strikes, landslides, earthquakes, storms, civil unrest, late trains and the like slowed down production, someone in the head office would send a cable calling for the mining of high-grade ore to make up the difference. But since 2003, there hasn’t been any high-grade ore to mine because of a lack of investment in new resources. And this happens year after year. About 7% less copper is produced each year than the mines predicted at the start of the year.

TGR: So why isn’t that inconsistency causing the price to go up?

RG: Maybe it is. There has certainly been what I’ve called a pathological situation in the copper markets because typically the relationship between copper inventories—the stuff that’s sitting around in warehouses—and prices is that the lower the inventories, the higher the price. But since 2005, in the Western world—we don’t know what’s going on in China—inventories have gone up 185%. Typically, that would mean prices go down, right? But, no, prices have gone up 95%. That may be one of the reasons that we’re consistently producing less of the stuff than we thought we could.

TGR: You have said that the pitch-point™ curve* for supply and demand compared to prices is pathological. Is that because of the role of recycling in meeting some of the demand?

RG: I think it could be because it used to be that every pound that was in inventory was backed by all the copper that the mines would produce and all the copper that scrap yards would produce. The amount that the scrap yards produce has been declining, in large part because Asians have been very diligent about taking scrap from North America and refining it into good usable copper again. But, again, it’s hard to get good figures for how much copper there is in scrap yards so that answer is probably yes, the declining use of copper in recycling is probably one of the reasons why we’ve seen prices go up even though inventories have also gone up. But it’s hard to be more precise than that.

TGR: You have also said that copper has seasonal affective disorder (SAD). What causes that?

RG: That’s right, it does. I can tell you what SAD is, but I can’t tell you exactly what causes it. In the good old days of the London Metal Exchange (LME), the saying was “sell in May and go away.” And that was always a wonderful excuse to take an English summer holiday and not bother coming back to trade copper until September or October. Now, the peak seems to be around the end of February and the end of June tends to be the bottom in copper prices. It’s pretty consistent. Year after year we see that effect, but what causes it, I don’t know.

TGR: Because copper is so important for growth, is it feasible that it could be used as the world reserve currency instead of gold or the dollar? What would that look like?

RG: Copper is being used as a reserve currency in China right now. Some of the importers will use the copper that they hold as collateral for loans that they make from various banks in China. One of the advantages of copper as collateral is that unlike wheat, silver or potash, you can store it outside. Even in the rain, copper will keep its value, and there’s always a use for the stuff.

But to talk about copper as a reserve currency for the whole world is not practical. If a country is holding reserves of $1 trillion, it would have to have 150 million tons on reserve. That is about eight and a half years of copper consumption just sitting there. But certainly copper is being used as a currency on a small scale, as it’s being used now in China.

TGR: What prices are you using for copper going forward in the rest of 2014?

RG: Since 2003 when the fundamentals of the copper business changed so significantly, the forward prices on the LME have been a much better forecaster of copper prices than we analysts. This afternoon, the LME is telling me that if I buy copper now for delivery in 10 years, I would have to pay $3.02/pound ($3.02/lb). That’s as good as any forecast I have for the long-term price of copper. If you were to buy a pound of copper for delivery tomorrow, it’s pretty much the same as where the price of copper is today.

TGR: If copper prices look to be fairly flat going forward, why do copper equities tend to outperform the metal?

RG: This gets back to the unwieldy nature of copper as a store of value. Let’s say you were thinking of retiring and decided to make off with all of your fortune, say $3 million ($3M), and drive away into the sunset. Now, if you put that in the form of gold, $3M would weigh less than 200 lb; it would fit in the trunk of your car. But $3M worth of copper would weigh 450 tons. That is why when people get enthusiastic about buying gold, they often buy gold bullion. But when they’re thinking of buying copper, the unwieldy nature of buying copper metal means they are better off with the equities. That’s why the equities have done about the same or even a little better than the price of copper itself. That certainly has not been the case with gold.

TGR: Are the copper companies less risky than some of the gold companies?

RG: Riskiness is a feature of the things that Mother Nature can fling at us or the surprises that come with the election of a government that no one expected and that government nationalizes some of its assets. Most of the companies that I follow are managed by a lot of gray hairs; they’ve seen all the unpleasant things that can happen. Most of the ones that I tend to look at are well managed, and they include the big producers, like Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE), whose biggest growth comes from the Democratic Republic of Congo, where there are political risks, but Freeport is skilled enough and experienced enough in operating in parts of the world where there is high political risk that it has so far been able to stave off most political concerns.

Another company that has also done well in that part of the world is First Quantum Minerals Ltd. (FM:TSX; FQM:LSE), a Canadian company that just bought Inmet Mining Corp. and, through its acquisition of Inmet, is building a new copper mine in Panama. Of the companies I cover, First Quantum stands out for being relatively low risk and high return.

TGR: Does First Quantum’s acquisition make it stronger because it is diversified?

RG: Certainly, it’s diversifying geographically. Before the acquisition most of its assets were in Zambia, which has been a good address for a mine, but that may not always be the case. Having assets in Panama, Finland and Turkey is not a bad idea.

TGR: What about some smaller companies that you cover in the copper space?

RG: It’s pretty hard to find a small copper producer. The only one I cover is Amerigo Resources Ltd. (ARG:TSX). It operates a “mine” in one of the best addresses in the world for a copper mine, and that’s Chile. But instead of mining the stuff, it processes the tailings from one of the world’s biggest copper mines, El Teniente. It is profitable and it is expanding its operations.

TGR: Do you evaluate a company in the tailing business very differently than a company like First Quantum?

RG: I don’t actually. I generally use the standard textbook discounted cash flow valuation method. For a mine in production, like Amerigo’s operations, I use a low discount rate. For potential expansion, I use a higher discount rate because this is an unproven technology there. For First Quantum, the same thing. For First Quantum’s existing operations, I use a lower discount rate than for valuing the operations that it hopes to bring onstream in a few years in Panama or Zambia. I use an even higher discount rate on something that isn’t in production yet, simply because of the technological, political and community risks associated with that prospect.

TGR: Do you follow any explorers?

RG: The explorers I cover are NovaCopper Inc. (NCQ:TSX.V; NCQ:NYSE.MKT), Curis Resources Ltd. (CUV:TSX.V; PCCRF:OTCPK) and Nautilus Minerals Inc. (NUS:TSX).

NovaCopper is a company that has one of the world’s highest-grade copper deposits, but it’s in a part of Alaska that requires a road to be built. Until that road is built, probably around 2021, the mine is going to sit there. So the risk in that case, even though it’s in the U.S., is a political risk.

TGR: Does NovaCopper’s resource make the risk worthwhile?

RG: I assume that it’s not until about 2025 when it comes into production, and I discount that back to the present. Every year you discount it, you make it worth a little less or you value it at a little less. If NovaCopper were in production today, it might be worth $10/share, but because it’s so far in the future, I think it’s worth about $5/share. The company is trading under $2/share, so there is upside.

TGR: What about the risk-reward story for Curis? It is in the U.S. as well, a fairly safe jurisdiction.

RG: Curis is also a political risk story. The company hopes to use a fairly new method of extracting copper, which is pumping fluids into the ground, dissolving the copper and bringing it up to the surface. No shovels and excavators required. It looks like an oil well field. It surrounds the town of Florence, Arizona, which does not allow mining, but the half of the deposit surrounding the town has state approval.

Curis has been waiting more than a year and a half for the federal Environmental Protection Agency’s (EPA) approval. I don’t know how long it’s going to take for the EPA to act, but when it does give its comment, it is likely to be approval. One of the lessons I have learned is that if any mining company tells you it thinks the government will approve its project in such and such a time, you can usually be confident in adding another year. Companies always tend to underestimate how long it takes governments to get around to doing anything.

TGR: How about the risk and reward for the last one you mentioned, Nautilus?

RG: That’s another government story. It’s also a new technology story. It’s the most exciting and interesting of all the companies I cover because it has identified high-grade copper, zinc, gold and silver-bearing deposits right at the surface of the sea floor a couple of miles under the ocean off Papua New Guinea. It has just completed the first of the three machines it needs to dig the stuff up from the sea floor. The government has a legal dispute with the company, which hasn’t been resolved yet. So there are both technological and political risks. And it also is a cheap stock.

TGR: What’s the timeline on these? Are these all long-term investments?

RG: NovaCopper could be up and running by 2025. Amerigo is in production right now with expansion dependent on government approval. Once that has happened, it is probably two or three years before that comes into production. Once Curis gets EPA approval, it should be in production in about 18 months. First Quantum’s Panama project should be in production around 2016. Nautilus is two or three years away from production once it resolves its differences with the government.

TGR: With all of these great ideas, what advice do you have for resource investors who are looking to keep their portfolios healthy during the next two or three years while they wait for some of these things to happen?

RG: There are two questions that investors should ask about any investment they make: Is the value there? When should I seize on that value? Most copper mining stocks are trading as if the price of copper were $2/lb and is going to be about $2/lb forever. But copper on the LME 10 years out is actually $3/lb. That means the equities are definitely a value story. As to when to buy it, given the SAD cycle we mentioned earlier, investors might want to wait until the end of June.

TGR: Thank you for your advice.

RG: Thank you.

*”Pitch-point curve™” is a term trademarked by Raymond Goldie.

Raymond Goldie, vice-president of commodity economics and senior mining analyst at Salman Partners, has extensive experience in the investment business, including more than 20 years as a mining analyst covering non-precious-non-ferrous and precious minerals (gold, silver, PGEs, diamonds) and fertilizer companies. In geology, Goldie holds a Bachelor of Science from Victoria University in Wellington, New Zealand; a Master of Science from McGill University; a Ph.D. from Queens University; and a Diploma in Business Administration from the University of Toronto.

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