Avocet Mining Share Discussion Threads

[richgit] 30/8/2004 20:04

It moved into voluntary financial administration after finding that its mines might not have enough gold to meet contracted forward sales.

"That means that people that have the hedges will need to buy gold and present Gwalia with the bill," said the manager of a precious metals trading firm. "People don't want to be on the short side because of that and want to get this week out of the way because of the convention."

[richgit] 30/8/2004 19:55

THE ULTIMATE PENALTY WHEN GAMBLING MINERS,LOSE THEIR GAMBLE.........




Monday August 30, 6:03 PM
UPDATE: Sons Of Gwalia In Administration On Hedging Debt

By Stephen Bell
OF DOW JONES NEWSWIRES

PERTH (Dow Jones)--Sons of Gwalia Ltd. (SGW.AU), Australia's second-biggest gold producer, has fallen into administration over a A$348 million hedge book liability.


The Perth-based company said Monday that it appointed voluntary administrators over the weekend after identifying a "serious deterioration" in the status of its gold reserves.

In Australia, going into administration gives an insolvent or near-insolvent company breathing space to deal with its financial difficulties. The administrator investigates the company's affairs and gives creditors information to decide whether the company should be allowed to keep trading or wind up.

Sons of Gwalia's gold counterparties - nine banks and financial institutions - refused to accept a standstill agreement on the hedging debt.

Hedging, which is a form of risk management used by companies to reduce the chance of a loss from price movements, includes tools such as forward selling and options.

Citigroup Inc. (C) is understood to be the company's biggest hedging counterparty, with an exposure of between A$100 million and A$150 million.

Other counterparties include: BankWest, a unit of HBOS Plc (HBOS.LN); Goldman Sachs Group Inc. (GS); JP Morgan (JPM); Dresdner Bank AG (DRB.YY); Commonwealth Bank of Australia (CBA.AU); Australia & New Zealand Banking Group Ltd. (ANZ) and HSBC Holdings Plc (HBC).

As of June 30, Sons of Gwalia's 3.1 million-ounce gold hedge book had a negative mark-to-market value of A$348 million. It also had currency hedges that were A$75 million in the red.

Sons of Gwalia also owes US$170 million to U.S. pension funds, following a private note placement in 2000 arranged by JP Morgan.

The administration move has caught out some big North American companies, including long-term shareholders Teck Cominco (TEK.A.T) of Canada and U.S.-based Cabot Corp. (CBT).

California-based Franklin Resources Inc. (BEN) has been a major buyer of Sons of Gwalia shares in recent months, boosting its holding to 20.7 million shares or 11% of the company.

Analysts estimate that Franklin has invested more than A$50 million in Sons of Gwalia since it started buying shares in early 2003.

May Recapitalize Tantalum Business

The administration move surprised analysts, who expected the company to alleviate its financial problems via a strategic review that was due to finish this week.

Some analysts had expected the company to book a A$350 million writedown of its gold assets, and potentially close its Tarmoola gold mine north of Kalgoorlie.

But a loss of gold reserves uncovered during the review caused a breach of hedging covenants, making it uncertain whether Sons of Gwalia could meet its commitments.

The administrators - three partners at Ferrier Hodgson - will work with directors to develop a plan focused on selling the gold business and recapitalizing the tantalum business, the company said in a statement.

As well as being Australia's second-biggest gold producer behind Newcrest Mining Ltd. (NCM.AU), Sons of Gwalia is also the world's single biggest producer of tantalum, a metal used in cell phones.

Sons of Gwalia Chief Executive John Leevers said that several local and offshore parties had expressed an interest in buying the gold division in recent months.

"We're aware that there are people interested, but there have been no discussions yet," he told Dow Jones Newswires in an interview.

Leevers said that the out-of-the-money hedge book will make the proposed gold division disposal more difficult.

"The sale was never going to be easy as the hedge book is a significant liability," he said.

Leevers said that it is "very much business as usual" as directors and the administrator work on the restructuring proposals.

A former Pioneer International Group executive, Leevers took over management early this year from founding directors Peter and Chris Lalor, who have since left the company.

Creditors will decide the company's future at meetings to be held within a month.

Some analysts are skeptical of the group's plan to trade out of its difficulties by retaining tantalum and selling the gold mines.

"It is difficult to see a buyer for the gold business with the current hedge book in place," said Hayden Bairstow, an analyst at Patersons Securities.

"There is more inherent value in the tantalum business, and in our view it would make an easier trade sale," Bairstow said.

Patersons doesn't attribute any value to Sons of Gwalia's Tarmoola and Gwalia Deeps gold assets, leaving a valuation of around A$120 million for the remaining gold mines.

Founded in the early 1980s, Sons of Gwalia became a pioneer in the use of hedging to protect its gold revenue.

A merger in the late 1990s added tantalum to the company's mix.

This saw Sons of Gwalia become a market darling during the technology boom of 2000-01 when its shares peaked at nearly A$10 each. Its shares last traded Friday at A$1.30, compared with their 12-month high of A$3.99.

Demand for tantalum plummeted after the dot com crash, just as the company tried to absorb its PacMin Mining gold acquisition of 2001.

Some of the PacMin assets, including Tarmoola mine, proved disappointing.

Operating costs rose, but the company was pressured by the need to maintain production to meet its hedging commitments.

Problems surfaced in 2002 when Sons of Gwalia started cutting profits and dividends.

The problems worsened this year, with the gold and tantalum miner's shares halving in value since July 14 when it unveiled a profit downgrade.

Sons of Gwalia sold around 2.1 million pounds of tantalum in fiscal 2004.

The company produced 521,000 ounces of gold from its Western Australian mines in the same period.

By Stephen Bell, Dow Jones Newswires; 61-8-9245-6408; [e-mail]

-Edited by Melanie Botts

[richgit] 30/8/2004 19:52

NEW YORK (CBS.MW) -- Gold is back above $400 (again). Last week, it seemed to stall (again). But look below the surface.

John Brimelow...............................................


Peering closely, I see three factors at work:

First, India, the world's biggest gold importer, was unfalteringly a buyer right up to the high of $412 this past week. I gauge Indian off-take by looking at the local premiums. (Read related column.)

Previously, Indian buying has been choked off at these levels. And the busy season for gold purchases in India is only just beginning.

Inevitable outcome: A great deal of metal will go to live in India this fall -- unless world gold moves up sharply from the $400-plus level.

Second, the Middle East also appears to have become gold-hungry. It's more difficult to follow, but those local premiums I can access have started to suggest this.

So do recent reports of quantities traded. Turkey, for instance, imported a record weight of gold in July.

Conclusion: the physical demand for gold is ratcheting up to support the price.

Thirdly, and below the surface, the past two weeks have seen extraordinary increases in Comex (New York Commodities Exchange) open interest, which have accompanied gold price recent moves.

"Open Interest," is the total of futures contracts outstanding. An increase occurs when a buyer bids to acquire a contract -- a promise to deliver -- and is accommodated by a new seller. Or, when a short seller is accommodated by a new buyer.

Since Aug. 12, open interest has gone up 24.6 percent, 54,749 contracts, equivalent to 170 tonnes of net gold buying. This includes one day, Aug. 19, where the rise was apparently the second highest on record.

In other words, gold volume has been huge. It's just the price that has been boring.

The surge in open interest tells us good and bad news. Good: huge buyers have appeared. Bad: so has a huge seller(s).

Who are the buyers? The most popular theory among gold bears: a big mining house trying to eliminate a hedge position.

I think this is unlikely. No one producer is big enough.

My guess: Some U.S. hedge funds are buying gold because they think the geopolitical/economic is unstable. So are large operators from elsewhere, partly responding to the same anti-American sentiment which that is driving the retail Middle Eastern markets.

Next question: Who is the seller? After all, someone has to have taken the other side of the trades.

To me, it has to have been a central bank. There is simply no other long (or short) around with this kind of size, or courage.

There is increasing evidence that the gold market is being manages by the official sector. Imperative reading for serious gold followers is money manager John Embry's discussion of gold manipulation at Sprott.com.

Ultimately, central bank supplies will be exhausted. Revco Research, the adroit Chicago-based traders, bravely went long on Friday, reasoning that selling of this magnitude cannot persist.

Gold's price breakthrough will be fortune-making. In the meantime, a modest rise to a level which will temporarily slow physical buying is very likely.

If gold passes its $431 March high, it will be at a level not seen since the mid-1980s.

John Brimelow

[corrientes] 30/8/2004 12:22

Wars fought over economics so portents not good for East or West. Just have to colonise Mars or go under water, literally.

[64bit] 29/8/2004 17:24

personally i believe the gata case has merit. i also believe it is a mere
drop in the ocean compared to the mass dillusions that exist in the west
with respect to wealth.

being based out in singapore i can see a marked difference in what constitutes
wealth to that of my UK homeland.
make no mistake, do not underestimate what the future will bring for the
'rich' westerners...
asia is growing, fast, very fast... the general view is that asians are
dependant on the west - dependant on the west to buy things, but this is
simply a distraction from the real story...
wages in asia are growing.
wages in the west are falling in inflation adjusted real terms.
i have no sympathy with the statement hectorp makes for the future generations
of the rich westerners. in life u generally get what u deserve. westerners
do not deserve to be the rich classes of the future. in the west wealth is
measured in terms of consumption - not production, not saving, not investing...
when i goto my local minimart and buy toothpaste, made in coventry UK, for less
than half the price it is in london i wonder why westerners consider themselves
so rich... i'm sure if u stripped out the debt based wealth (housing) the
figures wouldn't look as rosy.
when i need a programmer i can get one from india with a phd for less than 25%
of the rate i'd have to pay an illiterate from london. i think no need to ask
which national represents best value there. and when i see call centres open
in bangkok, using the same IT kit as u would in london, i wonder how the london
based company can get any business at all.

the classic example i often use to illustrate the shrinking gap between the
so called haves, and the have nots, is this...
many people in the UK have a mortgage on their home. if your monthly payment is
500 at an interest rate of 5%, then at an interest rate of 3% your monthly
payment is reduced. so.. when your interest rate is 3% u should be still paying
the 500 a month, to faster reduce your debt. but this is exactly the opposite
of what most mortgagees' do. instead they effectively short sell their homes
by taking out new equity (as cash). when i try to explain that effectively
short selling your house at the precise moment it is rising the fastest is a
stupid plan - westerners generally don't get it. blinded by some strange
dillusion that things always go up. that their house will become so valuable
that the debt never need be paid down. as the western countries grow less rich
the asset price inflation seen everywhere can only be driven by more debt.
how much would the average house be worth if there was no way of borrowing
money - not 6 times average wages that's for sure.
the chinese on the other hand - seem to understand this very well, they
understand that it's a better wealth creation plan to reduce debt than to buy
a new car or speculate, effectively on margin.

of course the chinese do love their S class mercs - but that's a different
story... ;)

so.. my long term view is to be a seller of western assets and currencies.
a buyer of gold/platinum/palladium/steel/zinc and yuan.

it pains me to say it - but - i think it's all down hill for the rich
westerners from now on, and why not, after all, some of us are not more equal
than others.

[hectorp] 29/8/2004 12:56

'Our wealth has hardly imroved' above? I believe the West's inhabitants are greatly richer in capital wealth by far than 30 years ago especially relative to the undeveloped world so-called.
THe average NON graduate wage in the UK is £16500 p/a. That buys an awful lot of full shopping baskets... at least 30% more than equivalent wage of 1972. ( And I was out shopping for canned south african pilchards, a poor student, at 3/6d a tin then ). I now pay just 90p for same can of glenryk pilchards when I want some... but my income ( in 2000 ad) was 9 times that of 1971 so the pilchards should cost around 210p. anyhow,
However as I like the rest of us here am a rapacious person who is happy to take gold zinc etc. as value from the land of foreigners, I'm not complaining. But in 20-40 years the boot will be on the Far East's foot and the West will beg for food aid.
Millions will starve in the West one day. These could include our own grandchildren, makes you think,
sadly, etc.
H

[hectorp] 29/8/2004 12:48

The idea that there is a 'gold supression conspiracy' is itself a bullish or ramping device in itself.
I'm always likely to dismiss conspiracy theories when - as in the case above - there are more than two conspirators. Three conspiritors is a tea party. More, and you have a party to which all are invited including the police.
There have to be dozens of major participants. It simply could not work IMO.
It suggests therefore that the writers are themselves frustrated bulls and are attempting to assuage their psychological angst at (maybe) some losses, by creating a fiction, one that will encourage bulls , albeit in a ramping manner.
H.

[carntyne] 27/8/2004 13:32

So what's wrong with seeing how mass humanity usually performs ? All we can ever do is to carry out acts of kindness as individuals, otherwise we might as well do ourselves in. Still ,AVM investors remain the chosen people until geology proves otherwise, and on that basis I will do my good deeds.

[richgit] 25/8/2004 16:40

lol,I dont think we need worry there.

[phillis] 25/8/2004 16:01

and the prospects for AVM???

[richgit] 25/8/2004 14:36

Maybe Biswell is going to be crushed to death by the weight of his shorts
trying to hold up his quivering Titanium Balls.

[jmobrien] 25/8/2004 11:18

The full report from John Embry can be downloaded free from Sprott's website.



A couple of years ago John Embry was the precious metals manager at the Royal Bank of Canada. He circulated a newsletter to RBC investors about the suppression of the gold price and promptly lost his job. He then joined Sprott Asset Management. I think this shows the extent to which the mainstream will try to suppress the truth of what is going on. I am hopeful that the rig will eventually be beaten as the gold cartel runs out of physical gold. Astute long term investors will then finally reap the benefits they deserve.

I have been invested in AVM now for several years (not all of them good!) and I believe it represents the best gold play available. The gold price rig is a wild card that could prove very beneficial when it is eventually defeated. It's a case of being patient and not being scared out of your positions by short term fluctuations. Easier said than done , but true nonetheless.

[richgit] 25/8/2004 10:01

THE ASHANTI PIECE IS WHAT I HAVE ALWAYS BELIEVED
Gold conspiracy



John Embry, chief investment strategist of Toronto based Sprott Asset Management, on Tuesday published a gold conspiracy compendium that he believes provides nearly irrefutable evidence of a global gold price suppression scheme.

In a covering note to clients, Embry and co-author, Andrew Hepburn, explain that anecdotal evidence such as "counterintuitive price action" is one indicator pointing to a gold market that is "not free" based on a decade of evidence. The report says initially disconnected activity by powerful gold market players has essentially synchronized. "A potentially highly dangerous situation developed which now requires expedient collaboration to stave off the inevitable bad ending."



The report says the market manipulation hurts all gold investors, but its true victims are communities that depend on gold mining. It says the beneficiaries are central banks intent on camouflaging "increasingly reckless monetary policies", whilst financial institutions are profiting by gulling investors who think the gold market is free.

Whilst previously employed by RBC Asset Management, Embry issued a brief that was closely aligned with the position of the Gold Anti-Trust Action Committee (Gata). RBC repudiated the June 2002 report almost immediately, telling investors that it was meant for internal consumption only.

Sources blamed the hasty repudiation on Gata chairman, Bill Murphy, for distributing the report without RBC's and Embry's permission. Murphy told Mineweb that he had merely passed on a document forwarded to him by an RBC private client. "As far as I was concerned, it was a public document that drew largely from specifics in Gata's own published research," Murphy said at the time.

The wheel has since turned. Embry parted ways with RBC, joining Sprott in March 2003 which has been an aggressive gold bull for some time. Ironically, just days before Embry's original report hit the Internet, Eric Sprott of the eponymous investment firm issued a public retraction about Barrick's [ABX] vulnerability to rising gold prices because of its hedge book.

Entitled: Not Free, Not Fair: The long term manipulation of the gold price, the report runs to 63 pages. It is notable that whilst Gata is acknowledged, Murphy receives no direct recognition although his name litters the footnotes. The primary sources are listed as Frank Veneroso, Reg Howe, Michael Bolser and James Turk, all of whom are in the Gata camp.

In a nutshell

Even though the gold price has risen some $150 per ounce since it bottomed in 2001, the report says market manipulation has capped those gains. Only when the claimed manipulation is ended, by intervention or accident, will gold soar to an equilibrium value which is seen as a four-digit number.

The report dates the gold price suppression conspiracy to the rescue of Long-Term Capital Management in 1998, thereafter commencing "in earnest after the post-Washington Agreement gold price explosion in 1999."

It is alleged that the 1999 blow up which crippled Ashanti, since acquired by AngloGold [AU], and Cambior [CBJ], unmasked a gold carry trade run amok.


Having borrowed gold nearly limitlessly to sell forward and invest the proceeds in higher interest bearing instruments, the parties and their de facto insurers, central banks, realized that the positions could not be easily unwound. LTCM's apparent gold short position of 300-400 tonnes, which is equivalent to nearly a whole year of South African new mine production, could not have been settled without causing a run on the gold price that might have triggered a collapse of the financial system.

The belief is that central banks and the primary financial institutions agreed on a scheme to manage down or conceal the risks without causing a panic. As part of this arrangement, the Bank of England agreed, on behalf of the UK Treasury, to sell a large quantity of gold through a series of bizarrely structured auctions.

Apparently aiding and abetting the Brits were the super-secretive US Exchange Stabilization Fund and the Federal Reserve. The IMF also provided cover by allowing governments to misreport the status of gold reserves and gold swaps.

Not Free, Not Fair repeatedly rejects the statistical compilations of GFMS Limited and other "consensus statisticians" such as Jessica Cross. It cites the work of Frank Veneroso as more reliable. "Given Veneroso's more reliable numbers, we also believe total gold loans to be on the order of 10,000-16,000 tonnes. By contrast, GFMS only reports approximately 4,000 tonnes of total central bank liquidity in the market," the report says. The Veneroso number suggests that central bank vaults are "one-third to one-half empty" of their reported gold.

Gold producer executives have generally shied away from endorsing a conspiracy theory. This is primarily because of the association with Gata's Bill Murphy, a former commodities trader, was fined and expelled by the CFTC over allegations of copper market rigging. He is also prone to incendiary statements and imprudent foretelling that have made a pariah of the activist organization in reasoned company. However, Embry and Hepburn say there is a "greater inclination [among executives] toward the manipulation hypothesis than most market observers may realize."

Embry and Hepburn also agree that global gold derivative figures contrasted with net producer dehedging indicate that central banks continue to lend their gold so that the associated carry trade dwarfs mine hedging.

Conclusions

Not Free, Not Fair concludes that there can be no other explanation for the apparently erratic behaviour of gold but "severe long-term manipulation."

"We find troubling the consistent unwillingness by mainstream gold analysts to debate, or even acknowledge, the manipulation viewpoint in any depth. Such market watchers pretend, not convincingly, that the people marshalling the price management thesis do not possess either the knowledge or research with which to make a strong case for price-fixing in the gold market," the authors write.

They are confident that when the scheme unravels, as it would have to, the gold price will explode. "Until then, we urge the news media, gold industry and relevant arms of government to further investigate and expose what appears to be price-fixing on a scale of truly epic proportions."

[banter] 24/8/2004 12:17

Bud
do you think next target 120p if we can break 80p but i guess it needs to consolidate at this level.

[budevenwiser] 24/8/2004 12:13

a little correction to get rid of loose holders and move us from overbought is very healthy after such a good move as you all know same for gold

[trader horne] 23/8/2004 16:13

I believe TA is not relevant to gold stocks. The price of Gold is.
Jumped from sub $400 to $410 ish, and the Dec Gold future is $415.
After various false starts we are on our way.

[budevenwiser] 23/8/2004 08:53

waited all friday to say this , " A new 6 and a half year intra day high for Avocet just been made " dont know how long it will last getting over bought short term but that does'nt matter if your not trading it

[budevenwiser] 22/8/2004 19:47

hmm indian gold imports up 30% and australian gold production down 16% for the qaurter can only be good for the price of gold

[zengas] 20/8/2004 22:53

It was just announced that the British Olympic White Water rafting team from
Boscastle just won a gold medal in a Ford Transit.

With Lanut coming on stream should be a lot closer to £1 before long!