Friday 18th September 2020

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Global top 40 miners stand up to pandemic but face further challenges, says PwC

July 24th, 2020

by Greg Klein | July 24, 2020

For all the tribulations facing mining, the industry has been faring well compared to others. That’s the verdict of the recent PwC report Mine 2020: Resilient and Resourceful. But the publication warns that caution, adaptation and innovation must continue to safeguard the future.

Global top 40 miners stand up to pandemic but face further challenges, says PwC

If the top 40’s performance reflects the wider industry,
mining will prevail over the pandemic, this report maintains.
(Photo: PwC)

The survey looks at the world’s top 40 listed miners by market cap as of December 31. For the third year in a row, six Canadian companies made the list.

The IMF predicts global economic contraction of 3% this year, only the third comparable event since 1944. Yet PwC maintains that mining’s top 40 “are in an excellent position to weather the storm.”

Although the companies’ 2019 EBITDA performance remained flat at US$168 billion, PwC foresees a 6% decline this year, with capital spending falling at least 20% due to reduced revenue as well as pandemic-related staffing and mobilization difficulties.

Still, the decline will be temporary as past performance puts the top 40 “in a strong financial position as they enter one of the more uncertain economic periods in living memory. Liquidity is improved, and solvency is consistent.”

The pandemic’s effect on commodity prices ranges from double-digit drops for copper, nickel and zinc, to record prices for gold. Iron ore has remained relatively steady and looks promising due to early recovery in China and strong GDP growth predicted for that country and India in coming years.

In a recommendation that itself presents challenges, however, PwC suggests miners seek greater diversification of customers to wean themselves off of the two Asian giants.

Mining companies may think they’re an unlikely target for cyberattacks, but as reliance on autonomous and digital technology grows, so too does the cybersecurity risk. And the consequences can be a matter of life or death.—PwC Mine 2020

As for gold’s steep ascent, “don’t expect this to continue.” With 2020 yellow metal M&A down 33% from the same period last year, “gold miners appear to have learnt their mistakes from the early 2010s and are avoiding the pitfalls of pursuing large cash and debt-backed deals in a rising price environment. We expect gold deals to be less frequent and smaller this year and next, with more transactions on a scrip-for-scrip basis.”

Under the circumstances smaller, local property acquisitions might prove more attractive to the top miners. Locally available resources, along with globally diverse deposits, would help strengthen critical supply chains too. Pointing to fragile links further weakened by COVID-19, PwC also called for improved inventory management. The measures “would not only de-risk mining companies against a similarly disruptive event but also help develop and build resilience in local communities,” the report states. “Many are already doing it; Anglo American, Nornickel and BHP among others, have announced initiatives to increase support for their domestic suppliers as a result of the pandemic.”

PwC also emphasized the need to strengthen cybersecurity, and to address environmental, social and governance accountability, calling for a global ESG standard.

For the third year running, six Canadian companies made the top 40 list with the present group including Barrick Gold TSX:ABX, Agnico Eagle Mines Group TSX:AEM, Teck Resources TSX:TECK.A/TSX:TECK.B, Kirkland Lake Gold TSX:KL, First Quantum Minerals TSX:FM and Kinross Gold TSX:K. Newcomer Kinross kept Canada’s half-dozen steady following the takeover of Goldcorp by Denver-headquartered Newmont TSX:NGT. Among companies poised to join next year is Vancouver-headquartered Pan American Silver TSX:PAAS.

Read the PwC report.

Robust or bust

May 7th, 2020

Will supply chain challenges culminate in a long-overdue crisis?

by Greg Klein | May 7, 2020

It might take premature complacency or enormously good fortune to look back and laugh at the Early 2020 Toilet Paper Panic. But from today’s viewpoint, bumwad might be the least of our worries. There won’t be much need for the stuff without enough food to sustain life. Or water. Medicine, heat and electricity come in handy too.

Sparsely stocked supermarket shelves have been blamed on hoarders who thwart the industry’s just-in-time system, a process credited with “robust” reliability when not challenged by irrational buying sprees. Consumer concern, on the other hand, might be understandable given the credibility of official positions such as Ottawa’s facemask flip-flop and initial arguments that closing borders would actually worsen the pandemic.

Will supply chain challenges culminate in a long-overdue crisis?

A North Vancouver supermarket seen in mid-March. While
stockpiling has abated, supply lines show signs of stress.
(Photo: Steeve Raye/Shutterstock.com)

Meanwhile Canadian farmers worry about the supply of foreign labour needed to harvest crops, dairy farmers dump milk for lack of short-distance transport and deadly coronavirus outbreaks force widespread closures of meat and poultry plants across Canada and the U.S.

Highlighting the latter problem were full-page ads in American newspapers from meat-packing giant Tyson Foods. “The food supply chain is breaking,” the company warned in late April. “Millions of animals—chickens, pigs and cattle—will be depopulated because of the closure of our processing facilities.”

Within days the U.S. invoked the Defense Production Act, ordering meat plants to stay open despite fears of additional outbreaks. 

Just a few other pandemic-related food challenges in Canada include outbreaks at retail grocers, a shortage of packaging for a popular brand of flour and an Ontario supermarket warning customers to throw away bread in case it was tainted by an infected bakery worker.

Infrastructure supplying necessities like energy, fuel, water and communications faces pandemic-related challenges of its own, including availability of labour and expertise.

Supply chain complexity has been scrutinized in The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. One example from author David S. Abraham was the electric toothbrush, a utensil comprising something like 35 metals that are sourced, refined and used in manufacturing over six continents.

Dissecting a 2017 smartphone, the U.S. Geological Survey found 14 necessary but mostly obscure elements. As a source country, China led the world with nine mineral commodities essential to mobile devices, and that list included rare earths in a single category.

In a recent series of COVID-19 reports on the lithium-ion necessities graphite, cobalt, lithium and nickel, Benchmark Mineral Intelligence stated: “From the raw material foundations of the supply chain in the DRC, Australia, Chile and beyond, through to the battery cell production in China, Japan and Korea, it is likely that the cells used by the Teslas of the world have touched every continent (sometimes multiple times over) before they reach the Model 3 that is driven (or drives itself) off the showroom floor.”

Will supply chain challenges culminate in a long-overdue crisis?

Consumers might not realize the complex
international networks behind staple items.

Or consider something more prosaic—canned tuna.

That favourite of food hoarders might be caught in the mid-Pacific, processed and canned in Thailand following extraction of bauxite (considered a critical mineral in the U.S.) in Australia, China, Guinea or elsewhere, with ore shipped for smelting to places where electricity’s cheap (China accounted for over 56% of global aluminum production last year). Then the aluminum moves on to can manufacturers, and transportation has to be provided between each point and onward to warehouses, retailers and consumers. Additional supply chains provide additional manufactured parts, infrastructure, energy and labour to make each of those processes work.

Still another supply chain produces the can opener.

Daily briefings by Canada’s federal and provincial health czars express hope that this country might “flatten the curve,” a still-unattained goal that would hardly end the pandemic when and if it’s achieved. Meanwhile the virus gains momentum in poorer, more populous and more vulnerable parts of the world and threatens a second, more deadly wave coinciding with flu season.

And if one crisis can trigger another, social order might also be at risk. Canada’s pre-virus blockades demonstrated this country’s powerlessness against a force not of nature but of self-indulgence. Even a cohesive, competent society would have trouble surviving a general infrastructure collapse, a scenario dramatized in William R. Forstchen’s novel One Second After. When transportation, communications, infrastructure and the financial system break down, so do a lot of people. Dangerous enough as individuals, they can form mobs, gangs and cartels.

How seriously Washington considers apocalyptic scenarios isn’t known. But prior to the pandemic, the U.S. had already been taking measures to reduce its dependency on China and other risky sources for critical minerals. Now, Reuters reports, COVID-19 has broadened American concerns to include other supply chains and inspired plans for an Economic Prosperity Network with allied countries. Questions remain about the extent that the West can achieve self-sufficiency and, in the U.S., whether another administration might undo the current president’s efforts.

Certainly globalist confidence persists. The Conference Board of Canada, for example, expects a slow return of supply chain operations to pre-pandemic levels but a renewed international order just the same. “Global co-operation is needed not only to tackle the health crisis, but also to restore trust in global supply chains and maintain the benefits that the growth in global trade has brought over the last two decades.”

Will supply chain challenges culminate in a long-overdue crisis?

New cars leave the manufacturing hub and disease
epicentre of Wuhan prior to the pandemic.
(Photo: humphery/Shutterstock.com)

One early COVID-19 casualty, the multi-continent diamond supply chain, already shows signs of gradual recovery according to Rapaport News. Despite mine suspensions, “there is more than enough rough and polished in the pipeline to satisfy demand as trading centres start to reopen. Belgium and Israel have eased lockdown restrictions, while India has allowed select manufacturing in Surat and special shipments to Hong Kong.”

Also struggling back to its feet is global automotive manufacturing. Writing in Metal Bulletin, Andrea Hotter outlines how the disease epicentre of Wuhan plays a vital role in making cars and supplying components to other factory centres. “If ever there was a masterclass in the need to disaster-proof a supply chain, then the COVID-19 pandemic has provided a harsh reminder to the automotive sector that it’s failing.”

So regardless of whether apocalyptic fears are overblown, there are lessons to be learned. As Benchmark points out, COVID-19 has disrupted “almost every global supply chain to such a profound extent that mechanisms for material sourcing, trade and distribution will likely never be the same again.”

In the meantime, a spare can opener or two might be prudent. Or maybe several, in case they become more valuable than bullion.

Mining resumes under COVID-19 but faces slow return: GlobalData

April 28th, 2020

by Greg Klein | April 28, 2020

Mining resumes under COVID-19 but faces slow return GlobalData

 

As of April 27 some 729 mines worldwide remain suspended, down from more than 1,600 shutdowns on April 3. The numbers, released by GlobalData, reflect government decisions to declare the industry an essential service, as well as implementation of new health standards and procedures. Those efforts, often involving staff reductions, contribute to “a slow return for the industry,” stated the data and analytics firm.

“Silver production is currently being severely damaged by lockdown measures,” pointed out GlobalData mining analyst Vinneth Bajaj. “As of 27 April, the equivalent of 65.8% of annual global silver production was on hold. Silver mining companies such as First Majestic, Hochschild, Hecla Mining and Endeavour Silver have all withdrawn their production guidance for 2020 in the wake of the outbreak.

Mining resumes under COVID-19 but faces slow return GlobalData

“Progress has also been halted on 23 mines under construction, including the US$5.3-billion Quellaveco copper mine in Peru, which is one of the world’s biggest copper mines currently under development…. In Chile, while a lockdown is not in force, Antofagasta has halted work on its Los Pelambres project and Teck Resources has suspended work on the Quebrada Blanca Phase II mine.”

Jurisdictions that have lifted suspensions include Quebec, India, Argentina, Zimbabwe and South Africa, GlobalData added. Countries with government-ordered lockdowns still in force include Bolivia (until April 30), Namibia (May 4), Peru (May 10) and Mexico (May 30).

At least one Mexico operator, Argonaut Gold TSX:AR, plans to re-open on May 18 under an exception for businesses operating in municipalities with few or no cases of COVID-19.

Quebec’s resumption of mining drew strong criticism from Makivik Corporation, which represents the Inuit of the province’s Nunavik region.

“Makivik will not entertain the opening of any mines at this time in Nunavik. This is very dangerous,” said corporation president Charlie Watt on April 17. “The Inuit-elected officials in the communities and in the different regional organizations need to be heard and need to make the decisions and call the shots.”

One day later production resumed at Glencore’s Raglan nickel mine. The company stated that Nunavik authorities have banned travel between the mine and regional villages to protect the local population. Local workers stay home with compensation, while the mine employs workers from the south, including Inuit who live in the south.

Without question this is taking a toll on all of our mines and service/supply companies.—Ken Armstrong, NWT and
Nunavut Chamber of Mines

Six mines still operating in Nunavut and the Northwest Territories use similar staffing precautions. “The mines are operating with reduced workforces which they must fly in by charter from as far away as eastern Canada,” said NWT and Nunavut Chamber of Mines president Ken Armstrong. “To protect vulnerable northern communities from the virus they have sent their local employees home with pay and they are maintaining costly and unplanned virus protection measures.”

Meanwhile Labrador politicians expressed concern about renewed operations at Champion Iron’s (TSX:CIA) Bloom Lake mine on the Quebec side of the Labrador Trough. On April 28 VOCM radio reported that MP Yvonne Jones asked the company to avoid the Wabush airport in her riding and transport employees entirely through Quebec. Member of the House of Assembly Jordan Brown said contractors were making unnecessary trips to the Newfoundland and Labrador side.

Another pandemic-caused Quebec mining suspension will stay on care and maintenance due to market forces. Renard owner Stornoway Diamond stated, “Despite positive signs in the diamond market in early 2020, the recent COVID-19 pandemic has resulted in the entire marketing chain and diamond price collapse.”

Prior to the suspension, Renard operated only through creditor support.

Another diamond casualty has been the Northwest Territory’s Ekati mine, which suspended operations last month. Majority owner Dominion Diamond Mines received insolvency protection on April 22.

Discovered in 1991 and opened in 1998, Ekati “provided nearly 33,000 person-years of employment, and $9.3 billion in business spending, with over half the benefits (51% of jobs and 69% of spending) going to northern residents and businesses,” the Chamber stated. “Billions of dollars in various taxes and royalties have also been paid to public and indigenous governments by the mine.”

Rate cuts, bubble-like stock valuations and possible QE with “new non-traditional” interventions look good for gold: WGC

July 11th, 2019

by Greg Klein | July 11, 2019

Some recent dips below $1,400 notwithstanding, yellow metal’s forecast looks positive for the next six to 12 months, according to the World Gold Council. While long-term performance depends on jewelry, technology and savings, shorter-term prices respond to other factors that the WGC considers positive for its favourite element.

Chief among them are interest rates, reflecting an about-face in global monetary policy. Less than a year ago the U.S. Federal Reserve and investors alike expected continued rate increases, the council stated. “Now, the market expects the Fed to cut rates two or three times before the end of the year. And while statements by board members, including Chairman Powell, are signaling a wait-and-see approach, the market has barely changed its forecast. The Fed may not do what the market asks, but it generally doesn’t like to surprise it either.”

The WGC expects Europe’s and Japan’s central banks to follow suit in a global environment of competing tariffs, U.S.-Iran conflict and the ever-looming Brexit. But, the WGC emphasizes, low rates have “the perverse effect of fueling a decade-long stock market rally with only temporary pullbacks. This has pushed stock valuations to levels not seen since the dot-com bubble.”

Should recession strike, central banks might respond with strategies almost guaranteed to bolster goldbugs’ hoarding instincts: “quantitative easing and, possibly, new non-traditional measures to reinvigorate the global economy.”

With over $13 trillion of global debt now offering nominal negative yields, “our analysis shows that 70% of all developed market debt is trading with negative real yields, with the remaining 30% close to or below 1%.”

As for central bank purchases, they came to about $10 billion during the year’s first five months, with continued buying expected. But a 10-year average shows central banks responsible for only 10% of gold demand. Jewelry commands the lead with 51%, followed by 27% for bars and coins, 9% for technology, and 3% for ETFs and similar products.

Positive economic performance, especially in China and India, would likely enhance the top category.

With a mandate to “stimulate and sustain demand for gold,” the WGC represents some of the world’s biggest gold miners.

Download the WGC’s Mid-Year Gold Outlook 2019.

Visual Capitalist considers the hydrogen city: How hydrogen can help achieve zero emissions

May 14th, 2019

by Nicholas LePan | posted with permission of Visual Capitalist | May 14, 2019

In the modern context, cities create somewhat of a paradox.

While cities can improve the lives of people and entire nations, they also tend to be the main contributors of pollution and CO2 emissions.

How can we encourage this growth, while also making city energy use sustainable?

Resolving the paradox

This infographic comes to us from the Canadian Hydrogen and Fuel Cell Association and it outlines hydrogen technology as a sustainable fuel for keeping urban economic engines running effectively for the future.

The hydrogen city How hydrogen can help achieve zero emissions

 

The urban economic engine

Today, more than half of the world’s population lives in cities and, according to U.N. estimates, that number will grow to 6.7 billion by 2050—or about 68% of the global population.

Simultaneously, it is projected that developing economies such as India, Nigeria, Indonesia, Brazil, China, Malaysia, Kenya, Egypt, Turkey and South Africa will drive global growth.

Development leads to urbanization, which leads to increased economic activity:

The difficulty in this will be achieving a balance between growth and sustainability.

Currently, cities consume over two-thirds of the world’s energy and account for more than 70% of global CO2 emissions to produce 80% of global GDP.

Furthermore, it’s projected by the McKinsey Global Institute that the economic output of the 600 largest cities and urban regions globally could grow $30 trillion by the year 2050, comprising two-thirds of all economic growth.

With this growth will come increased demand for energy and CO2 emissions.

The hydrogen-fueled city

Hydrogen, along with fuel cell technology, may provide a flexible energy solution that could replace the many ways fossil fuels are used today for heat, power and transportation.

When used, hydrogen and fuel cell technology creates water vapour and oxygen, instead of harmful smog in congested urban areas.

According to the Hydrogen Council, by 2050 hydrogen could generate annually:

  • 1,500 TWh of electricity

  • 10% of the heat and power required by households

  • Power for a fleet of 400 million cars

The infrastructure requirements for hydrogen make it easy to distribute at scale. Meanwhile, for heat and power, low concentrations of hydrogen can be blended into natural gas networks with ease.

Hydrogen can play a role in improving the resilience of renewable energy sources such as wind and solar, by being an energy carrier. By taking surplus electricity to generate hydrogen through electrolysis, energy can be stored for later use.

In short, hydrogen has the potential to provide the clean energy needed to keep cities running and growing while working towards zero emissions.

See Part 1 of this series: Evolution of hydrogen, from the Big Bang to fuel cells.

Posted with permission of Visual Capitalist.

‘The Asian century’

April 4th, 2019

East has surpassed West, whether the West knows it or not, says Peter Frankopan

by Greg Klein

East has surpassed West, whether we know it or not, says Peter Frankopan

“Silk roads” can refer to the process of connecting people and cultures
through trade, according to Peter Frankopan’s recently published book.

 

Less than two years ago tensions along an especially sensitive border area sparked fighting between Chinese and Indian troops. Outside Asia, who knew? “As most of the world focused on the Twitter account of the US president and the circus surrounding Brexit, the threat of the two most populous countries on earth going to war was not just a possibility, it looked like becoming a fact,” writes Peter Frankopan. An uneasy truce eventually stalled hostilities but the West’s ignorance of the wider world remains. That’s both symptom and cause of the West’s decline, the author says.

The decisions being made in today’s world that really matter are not being made in Paris, London, Berlin or Rome—as they were a hundred years ago—but in Beijing and Moscow, in Tehran and Riyadh, in Delhi and Islamabad, in Kabul and in Taliban-controlled areas of Afghanistan, in Ankara, Damascus and Jerusalem. The world’s past has been shaped by what happens along the Silk Roads; so too will its future.—Peter Frankopan

Relatively few Westerners realize the extent of China’s Belt and Road Initiative. Actually a complex suite of alliances concerning resources, infrastructure, trade, security and even culture, the BRI forms just part of an Asian awakening that’s shifting the planet’s centre of importance while strengthening Eastern influence beyond Asia and Africa to make inroads into Europe, the Americas, the Arctic, cyberspace and outer space.

That’s the message of historian Frankopan’s latest book, The New Silk Roads: The Present and Future of the World. While present and future aren’t normally the precinct of historians, it was historical perspective that brought Frankopan to the topic. In context, Western global supremacy has been a recent, short-lived development.

Since announcing the BRI in 2013, China has promised nearly $1 trillion, mostly in loans, for about 1,000 projects, Frankopan reports. That money could “multiply several times over, to create an interlinked world of train lines, highways, deep-water ports and airports that will enable trade links to grow ever stronger and faster.”

That would enhance China’s access to, and control over, resources ranging from oil and gas to mines and farmland; provide markets for Chinese exports including surplus steel, cement and metals, as well as manufactured goods; create projects for Chinese contractors; secure foreign ports and other strategic commercial and military locations; and build closer foreign alliances for geopolitical as well as economic benefits.

Backed by Chinese money and local sovereign debt, Chinese companies have pushed roads, railways, power plants, grids and pipelines through Africa and Asia at a much faster rate than ever seen through Western aid. Of course that can put the supposed beneficiaries at the mercy of their Chinese creditors.

East has surpassed West, whether we know it or not, says Peter Frankopan

In 2011, for example, China forgave neighbouring Tajikistan’s infrastructure-related debt in exchange for several hundred square kilometres of territory. A $7-billion rail line in Laos represents over 60% of the country’s GDP. A rail-building boom in Angola left citizens with a per capita debt to China of $754 out of a per capita income of $6,200. In 2017 a Chinese company got a 99-year lease in lieu of debt on the Sri Lankan port of Hambantota, a strategic site for both commercial and military reasons. Other ports in Maldives, Vanuatu, the Solomon Islands and Djibouti could face a similar fate.

Even so, something like 85% of BRI projects “have proceeded without difficulty,” Frankopan states. China conducts many of its most opportunistic acquisitions openly, like buying a controlling interest in Piraeus, the Athenian port since antiquity. Other seaport purchases have taken place in Spain, Italy and Belgium.

Strategic ports and an alliance with Pakistan help position China in the Indian Ocean, while China continues to expand its South China Sea presence by building artificial islands for military bases. This isn’t just “the crossroads of the global economy” but a ploy to extend military power thousands of miles farther, according to a U.S. Navy admiral. China’s ambitions continue in the disputed East China Sea, location of the 2010 Senkaku conflict, in which China’s rare earths tactics demonstrated yet another weapon in the country’s arsenal.

As an economic powerhouse as well as a “geopolitical alternative to the US,” China can profit from American sanctions on countries like Iran. Russia too challenges U.S. policies towards countries like Saudi Arabia and Turkey, while the latter shows its willingness to trade with Iran and buy arms from Moscow.

Military co-operation can create unlikely allies. Last summer, in Russian’s largest war games since 1981, Beijing contributed 30 fighter jets and helicopters along with more than 3,000 troops. Included in the exercises were simulated nuclear attacks.

While futurologists and networking pioneers often talk about how the exciting world of artificial intelligence, Big Earth Data and machine learning promise to change the way we live, work and think, few ever ask where the materials on which the digital new world [depends] come from—or what happens if supply either dries up or is used as a commercial or a political weapon by those who have a near-monopoly on global supply.—Peter Frankopan

Even India, America’s strongest Asian ally and the Asian country most wary of Chinese expansion, stands to undermine U.S. influence with proposed transportation connections and free trade with Iran and Afghanistan.

Yet obvious perils weaken any notion of a united Asia working harmoniously towards a common goal. Russian-Chinese military co-operation doesn’t preclude Moscow stationing its 29th Army 3rd Missile Brigade, with nuclear missile capabilities, near the Chinese border.

Time will tell whether other countries can overcome the Eurasian chaos that inspired this maxim of Canadian miners: “Never invest in a country with a name ending in ‘stan’.”

Then there’s extremist Islam. Uighurs from western China have fought in Syria for the Islamic State in numbers estimated “from several thousand to many times that number.” China risks wider Muslim anger by running a gulag archipelago for Muslims. The country’s Xinjiang Uygur Autonomous Region hosts “the largest mass incarceration of a minority population in the world today.”

Oddly enough for someone who knocks Western insularity, Frankopan seems to share the current preoccupation with the U.S. president. Among Frankopan’s criticisms of the West is its supposed opposition to immigration, even though that’s a marginal position within liberal countries but official policy in most of the East.

Nor does Frankopan mention the weird ideological zealotry that threatens to destabilize if not destroy the West from within.

Still, history’s greatest value might be perspective on the present. This historian’s view of the present and future can help Westerners understand their not-so-esteemed status in the Asian century.

Visual Capitalist: A brief history of jewelry through the ages

March 21st, 2019

by Iman Ghosh | posted with permission of Visual Capitalist

A brief history of jewelry through the ages

 

Jewelry has been an integral aspect of human civilization for centuries, but it was the discovery and subsequent spread of precious metals and gemstones that really changed the game.

In this infographic from Menē TSXV:MENE, we visualize how the uses and symbolism of jewelry have evolved across time and space to become the industry we’re familiar with today.

Antique, yet ageless

There isn’t a single corner of the world that’s untouched by the influence of jewelry.

Ancient Egypt
Gold accompanied the affluent into the afterlife—the famous 1922 discovery of King Tutankhamun’s tomb was filled to the brim with gold jewelry.

Ancient Greece and Rome
Jewelry was used practically and as a protection against evil. The gold olive wreath design was highly popular during this time.

Mesopotamia
Both men and women in the Sumer civilization wore intricate pieces of jewelry, incorporating bright gems like agate, jasper or lapis lazuli.

Meso-America
The aristocracy in Aztec culture wore gold jewelry with gemstones to demonstrate rank. The jewelry also doubled up as godly sacrifices.

Ancient India
The Mughal Empire introduced the combination of gemstones with gold and silver. Today pure gold jewelry is often gifted to new brides for financial security.

Ancient China
Both rich and poor wore jade jewelry for its durable and protective properties. Pure gold jewelry is making a fashion comeback, doubling as a form of investment.

Modern jewelry: At a crossroads

Today jewelry is at once the very same and vastly different from what it used to be.

The industry is worth upwards of $348 billion per year and it’s not hard to see why. As an alternative asset, jewelry has grown 138% in value over the last decade—only outperformed by classic cars, rare coins and fine wine.

However, perceptions of jewelry vastly differ. It’s not a stretch to say that Western jewelry buyers are enamoured with diamonds, given their enduring association with special occasions—but it’s interesting to note how that ideal was fabricated.

The invention of diamonds

The De Beers Group is well known for making diamonds great again. In the early 1900s, the company had already monopolized the diamond trade and stabilized the market, but they faced the challenge of marketing diamonds to consumers at all income levels.

The average American considered diamonds an extravagance, preferring to spend money on cars and appliances instead. The concept of engagement rings existed but they weren’t widely adopted. The #1 slogan of the century—“A Diamond is Forever”— transformed all that.

Even as more companies like Tiffany and Cartier entered the playing field, De Beers had set a successful industry standard. But there’s a catch—diamonds are actually:

  • Not all that rare in nature

  • Intrinsically low in value

  • Easily replicated in a lab

  • Decreasing in sales

Despite these caveats, the popularity of diamonds illustrates how Western consumers do not approach jewelry in the same way as Eastern economies, where its function as a store of wealth persists.

The Eastern gold standard

In Eastern economies, jewelry often takes the form of pure gold. The reasons behind this difference are surprisingly pragmatic: gold is considered a secure and innate store of wealth that maintains its purchasing value over decades, allowing families to pass wealth from generation to generation.

The rich history of the precious metal has made it a sought-after commodity for centuries, and China and India drive more than half of global gold jewelry demand every year:

Year Share of demand (India + China) Total global jewelry demand (tonnes)
2014 57% 2,510 tonnes
2015 58% 2,426 tonnes
2016 55% 2,068 tonnes
2017 57% 2,201 tonnes
2018 58% 2,200 tonnes

Source: Gold Hub. Values have been rounded up to the nearest tonne.

Why are Eastern cultures so attracted to the properties of pure gold?

Part 2 of this series will show why gold is the world’s most incredible metal and why it’s coveted by billions of people.

Posted with permission of Visual Capitalist.

The World Gold Council bases its 2019 optimism partly on progress in China and India

February 25th, 2019

…Read more

World Gold Council hedges its forecasts for 2019

January 11th, 2019

by Greg Klein | January 11, 2019

Both financial market instability and structural economic improvements bode well for its favourite metal, the World Gold Council reports. The WGC’s Outlook 2019 attributes an optimistic price outlook to an interplay of those two factors along with U.S. interest rates and the dollar.

Bullion and gold-backed ETFs would benefit as savings, investments, jewelry and technology drive up demand. The prognosis also sees central bank demand continuing to rise. Last year’s sovereign purchases reached the highest level since 2015 “as a wider set of countries added gold to their foreign reserves for diversification and safety.”

Accentuating gold’s safe haven status would be the financial market uncertainty apparent in higher volatility, European instability, protectionist policies and “an increased likelihood of a global recession,” the report states.

“Stubbornly low” bond yields offer poor protection against uncertainty, the WGC notes. Meanwhile Europe’s economy lags behind the U.S. as the continent faces Brexit, social unrest in France and separatism in Spain, among other challenges. Increasing protectionism and trade war rhetoric threaten economies with inflation and restrictions to “the flow of capital, goods and labour.”

Comprising 70% of consumer gold demand, emerging markets remain “very relevant” to gold’s long-term performance. China’s Belt and Road projects boost regional economic and infrastructure development. India’s economic modernization should continue last year’s 7.5% growth into 2019, “outpacing most global economies and showing resilience to geopolitical uncertainty.

“Given its unequivocal link to wealth and economic expansion, we believe gold is well poised to benefit from these initiatives. We also believe that gold jewellery demand will strengthen in 2019 if sentiment is positive, while increase marginally should uncertainty remain.”

To the allure of gold, the WGC attributes its returns on investment and its liquidity. Additionally, the metal provides an almost unique hedge that often correlates with the market in good times but detaches itself during negative periods, the council states.

While a stronger U.S. economy and dollar could stall gold, the last two months have shown a correction in equities along with weaknesses in other assets, said Joseph Cavatoni, WGC managing director for the U.S. and ETFs. With political uncertainty also troubling investors “we’re going to see gold start to have a much more relevant role to play in people’s investment portfolios.”

Not without skin in the game itself, the WGC represents some of the world’s top gold miners.

Download Outlook 2019: Global economic trends and their impact on gold.

Old Testament turf begets newly identified mineral

January 7th, 2019

by Greg Klein | January 7, 2019

Northern Israel’s Mount Carmel is known for a more miraculous event, but that’s where a company exploring Biblical lands for material riches has made a novel discovery. On January 7 London-listed Shefa Yamim announced a new mineral named carmeltazite won official recognition from the International Mineralogical Association.

Old Testament turf begets newly identified mineral

Imperfections within the unique Carmel
sapphire can hold a newly discovered mineral.

The new entity came to light within the company’s trademarked Carmel sapphire. Made up of titanium, aluminum and zirconium, carmeltazite “is part of the remarkable mineral assemblage” found as tiny inclusions or impurities in the gemstone, the company stated. While not exactly the most compact abbreviation, carmeltazite can be denoted as ZrAl2Ti4O11.

Shefa Yamim also claims distinction for the Carmel sapphire itself, described as “a newly discovered type of corundum… unlike any other sapphire found in the world.” Typically black, blue-to-green or orange-brown in colour, it has so far manifested its largest size at 33.3 carats. That stone came from an area proximal to the River Kishon, associated with Old Testament stories of the Canaanites’ defeat.

Nearby Mount Carmel gained fame when a miraculous fire helped the prophet Elijah upstage Ahab and the idolatrous worshippers of Baal. Shefa Yamim’s exploration focuses on the mountain’s volcanic sources and the river’s alluvial prospects. The company expects to begin trial mining at its Kishon Mid-Reach project this year, targeting diamonds, rubies, moissanite and hibonite, in addition to its proprietary sapphire.

While the Carmel stone has yet to prove itself among buyers of bling, other sapphires have prompted pecuniary appreciation. A late November Christie’s auction achieved its maximum pre-sale estimate of $15 million for a necklace comprised of 21 Kashmir sapphires that outshone the accompanying 23 cushion-shaped diamonds. Originating in a mine that closed in 1887, the exceptionally rare sapphires were collected over a period of more than 100 years prior to the necklace’s creation.

As for rubies, the gems “have seen a more-than-fourfold price increase per carat in the past four years, with the finest rubies fetching $1 million per carat for the first time, as much as top-tier diamonds,” Bloomberg reported in November.

Buying rubies a decade ago would be “like someone who bought Google stock in Year 3 versus buying it now,” Seth Holehouse of the Fortuna auction house told the news agency. Chinese demand has helped push prices, especially for red rubies and other gems in red.

Driven largely by previous ownership, a pearl and diamond pendant that once belonged to Marie Antoinette sold for $36.16 million at a November Sotheby’s event. The auctioneer had hoped for a mere $2 million.