Anglo Asian Mining Share Discussion Threads

[swanvesta] 03/3/2021 20:35

lefrene, I'm looking rather more deeply than your article I'm afraid. Of course it's absolutely clear the Fed buys debt in vast quantities, they're not exactly hiding it! And it's clear they've done it to bail out the financial system in the past. But the current reasons (which the Fed are more coy about) seem to be more about 1) keeping government borrowing costs low and 2) allowing the market to absorb fresh treasury issuance. IOW the underlying issue is the deficit.

The repo spike was partially related to this. Yes indeed, banks suddenly lost the ability or confidence to lend the usual quantity of excess reserves overnight, which they normally do to the tune of around $1T. It's a normal and necessary enabler for the settling of accounts with the Fed at the end of each day.

The reason for the spike (failure of interbank lending) seems to have been that reserves were actually low vs that $1T demand, especially after allowing for regulatory requirements. I've read that this was partly because the Fed had being tapering QE, partly because the treasury was still soaking up reserves and building up a cash balance. I seem to remember some other factors in confluence - a tax payment deadline for example.

You can't see repo as 'recapitalisation' in the way QE is. QE is outright purchase of assets, including those dodgy MBS, on a vast scale. Repo is very short term (typically overnight) SECURED lending, and you can only get to that $9T if you completely misunderstand it:

If I lend you a tenner every day and you pay it back the next day, and we carry on like this for 180 days, at the end of it do you owe me £1800 or £0? And have you ever owed me more than £10? From what I can see from the link supplied in the article, the Fed actually supplied $50-100bn of the normal $1T of overnight repo. Bad enough.

[wanobi] 03/3/2021 19:07

RMM -

Cheers
Wan :-)

[wanobi] 03/3/2021 19:04

AAZ does look like it's got a 120p test written all over it right now,,, amazing really,,, oh what a game,,, GLA Cheers Wan :-)

[thistimemaybe] 03/3/2021 19:03

2sp - I think all of that matches what I think - and definitely in a bit more detail than I could type off the top of my head. There is a lot of cross-over between the reasons why they wanted to enter PSAs with the oil industry and why they might want to do the same for mining.

Crazy as it sounds given the things AAZ has to be getting on with, I think I recall AAZ mentioning a potential bid for new CAs. It might have been in one of the interviews/ presentations from a couple of weeks ago. I'll have a look for the reference when I have a moment.

[wanobi] 03/3/2021 19:02

well, I suppose at least STCM, UOG & RBW made some progress, so not all bad :-)

Cheers
Wan :-)

[wanobi] 03/3/2021 19:00

bit of a down day today then, for me anyhow LOL,,, oh well, it happens,,,,, be nice if Gold bounced about now :-) fingers crossed, cheers Wan :-)


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[wanobi] 03/3/2021 18:56

LOL Bumpa :-) Cheers Wan :-)

[2sporrans] 03/3/2021 17:46

TTM

You likely know better than I as to the GoA line on Azergold and whether it will welcome competition/newcommers into metals industry.
There's at least a few others posting here I think have a shrewder insight on this than me.

Here's my simplistic take:
For several years now the GoA has sought to diversify its industrial base away from O&G; metals extraction and maybe processing is one of the few alternatives it possesses natural advantages in.
To maximise the growth potential, it will need to attract substantial foreign direct investment in the industry.
Really, this needs to extend to getting foreign companies fully engaged in exploration/dev./prod. and for them to be able to hire the necessary skilled workforce from outside Azerbaijan as the domestic pool of suitably trained labour is small and it will take at least a few years to train up.

The UK is well placed as a source of FDI.
Dint of BP, it's the largest provider of this to Azerbaijan.
The GoA will want to keep their relationship sweet.
AAZ should, logically, benefit from this mutually beneficial ambiance.
UK has sent high level representatives to Baku, visiting Gedabek along the way.....
My guess is that AAZ's participation in an expanding metals industry - making a very tidy contribution in tax and export revenues to GoA - has been discussed at the highest level.
Why would the GoA NOT wish to continue with and indeed nourish a mutually beneficial engagement with AAZ which has expanded its operations without any blemishes and there are more than enough prospects for Azergold, AAZ and indeed other new players to get stuck into without crowding another out?

In the similar vein as AAZ's BOD having interests very closely aligned with their other shareholders [aka zero dilution policy], it seems to me the interests of Azerbaijan and the GoA in particular are well aligned with a growing and flourishing AAZ.

Having said, I expect that wrt Kashen, the GoA will grab all of the Vellox plant; AAZ won't have that for free. After all the nation has made a huge sacrifice to regain its dispossessed territory; AAZ pretty much a free rider on that score.
Just to have the rights to mine there, as PSA, will be a huge boon as long as the access issues can be sorted.
And as for Zod/Sotk, well let's hope the terms of the PSA govern the way forward there.
Guess the way forward with Vejnaly will give a strong indication of the GoA posture wrt the 2 biggies.
Also hope that along with 5yr PSA extension for Gedabek, there is grant of the enlarged Ged.+Gosha CA that has been under negotiation the past year or so.

If all that lot goes well, will AAZ even want to take on a 7th CA?
Yes, will be good indicator if another new private Co does make successful tender.

[bonio10000] 03/3/2021 17:43

That is right.

Once reopening occurs and velocity increases all that currency has to go somewhere and demand will outstrip supply.

Hence price rises.

The market is too stupid to see it.

[baddeal] 03/3/2021 17:33

Swan, totally agree, the article is just a classic example of ignorant journalism designed to drive a certain agenda. It displays complete ignorance over how CBs and creditor banks fund short term positions through interbank lending. They just band around big numbers because it looks impressive when in fact there is no real story to tell. Pointless

[katsy] 03/3/2021 17:32

If bond yields are increasing, surely that can only point to inflation. Inflation is good for gold, or have I misunderstood bond yields.

[doc_oj] 03/3/2021 17:29

step ladder down to 120 almost coming true - hate to say it but AAZ has well and truly become a dog of a share to own (dividends excluded :))

[bozzy_s] 03/3/2021 17:06

No surprises in the recent price action. Obviously gold has been very weak lately. And AAZ's earnings in 2021 looking like being about 10% lower due to the £/$ exchange rate. Same with dividend payout - about 10% less than at $1.26/£1.

Hopefully we'll be able to bed & ISA at £1.20 ish; roughly the same as last year.

[2sporrans] 03/3/2021 16:55

another 2k added at the close.

The rising longer bond yields putting downward pressure on POG anew.

Series of weak auctions for these bonds sales globally, ongoing for a week; seems to be
more of the cause than anything else.
Bond investors demanding lower prices, hence higher yields.
Unsurprisingly.

But if the speed/extent of this eases off, that ought to be enough to stabilise POG as then rising inflation expectations can at least nullify the impact of rising bond yields upon their real rates of return; i.e. keep them from rising further.

[lefrene] 03/3/2021 15:47

swanvesta, you need to look more deeply into the thing, and ask yourself why is it that the FED has been buying securities (via agents) directly in the market, at one point owning 22% of the entire market. The reason the repo-market seized up was because rates in minutes shot up from 1% to 10% on 17-9-19, and the rates shot up because the reserve banks that operate the market realised that about half the banks they fund every night were on the brink of going bust that very night. The banks are being recapitalised by the FED buying in securities. I would guess that most of that exercise is now over, and I now expect to see banks tightening their loan books.

mf, is gold being shorted so that reserve banks can buy in the physical metal at lower prices? JP Morgan has played that game with silver for years. When vast amounts of new dollars are being created faster than any press could print them, then falling gold makes no logic, other than it's being shorted to manipulate it.

[michaelfenton] 03/3/2021 15:38

yep Brasso Gold is still falling but eventually it will rally? Cannot say when.

[brasso3] 03/3/2021 14:59

Looks like gold is going to $1650.

[goldrush] 03/3/2021 14:58

At least TW cohorts are advising that AAZ is " a buy up to 150p"....

[donald pond] 03/3/2021 14:39

mad foetus - 27 Jul 2020 - 09:34:41 - 38120 of 44776
FWIW I am bullish on gold but wouldn’t be averse to AAZ hedging a little around here. If we could lock in 15-20k oz at 1940 that would be a safe move imo

Not the stupidest thing that idiot ever said. Copper looks likely to be up about 50% on last year, but we are going to struggle to match last years average FY gold price average of $1,777.
In many ways, its not hugely material to AAZ, as we don't have debt to repay and are a low cost producer. The current price volatility may, if it continues, make higher cost producers think about some of their projects. Rising oil plus falling gold isn't comfortable if you are planning a mine with an anticipated AISC above $1,200.
But let's be honest, we would all prefer gold to be stronger and right now it looks in trouble. I suspect a couple months of more weakness is to come.

[swanvesta] 03/3/2021 14:03

lefrene,

I looked at that wallstreetonparade article. Either they have no idea how banking operations work or they're selling a story to others who don't.

The $9T over 6 months refers to overnight repo operations. These all have to be repaid the next day! Thus the $9T is composed of an average of $50bn loaned and repaid every day for 180 days. The reality is not quite so sensational, is it?

And as for the 2% interest rate for these loans, well that was the Fed Funds Rate at the time. Which is the rate (similar to MLR or LIBOR) that the CB tries to control for banks to lend to each other. Shock horror.

I couldn't be bothered to read any further. There's plenty of things wrong with the financial system, and we need intelligent minds to shed light on it, but this kind of tosh is poisoning the well.

[cannonfodd3r] 03/3/2021 13:45

What’s going on with gold price? Is it that people are selling paper gold en masse and taking physical positions, the latter lagging or am I missing something? Seems odd that physical delivery is up hugely of late but price dropping constantly

[katsy] 03/3/2021 13:40

How can gold be around $200/oz cheaper now then 10 years ago when it peaked at $1920/oz.

[jbe81] 03/3/2021 12:49

Looks like a bounce on at cbx

[thistimemaybe] 03/3/2021 12:04

2sp - on your question of competition vs a benign scenario, what is your view? It will be interesting to see what happens with the upcoming auctions of the new CAs. If Azergold snaps them all up and pursues aspirations to become a major player then that points one way, but if other operators take even a few CAs then that it will be more reassuring.

I take the view that Azerbaijan may be a bit corrupt, but it is a small state surrounded by major players. The more international business takes place there the safer it will be. You know what they say about America having never invaded a country with a McDonalds.